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Cavium Announces Financial Results for Q4 2012

January 31, 2013

SAN JOSE, Calif., Jan. 31, 2013 /PRNewswire/ — Cavium, Inc. (NASDAQ: CAVM), a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications, and the digital home, today announced financial results for the fourth quarter of 2012 ended December 31, 2012.

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Revenue in the fourth quarter of 2012 was $66.4 million, an 8.7% sequential increase from the $61.1 million reported in the third quarter of 2012.

Generally Accepted Accounting Principles (GAAP) Results
Net loss for the fourth quarter of 2012, on GAAP basis was $78.8 million, or $(1.56) per diluted share compared to $8.1 million, or $(0.16) per diluted share in the third quarter of 2012. Net loss for the fourth quarter of 2012 included a non-cash charge of $43.5 million to provide for a valuation allowance for US net deferred tax assets, and a $33.3 million non-cash charge related to goodwill and other intangible asset impairment. Gross margins were 62.3% in the fourth quarter of 2012 compared to 59.4% in the third quarter of 2012. Total cash and cash equivalents were $76.8 million at December 31, 2012.

Cavium established a full valuation allowance against its US net deferred tax assets, which resulted in a one-time, non-cash charge of $43.5 million in the fourth quarter of 2012. Had Cavium not established the valuation allowance, it would have recognized a tax benefit of $2.1 million. This tax benefit along with the $43.5 million valuation allowance, produced a net tax expense of $41.4 million in the fourth quarter of 2012. The decision to establish the valuation allowance was based on an assessment made at year-end that considered factors such as 2012 actual results as well as projected US income, and does not preclude Cavium from using its loss carry-forwards or other deferred tax assets in the future.

Cavium recently restructured its Software and Services group. As a result of performing an annual goodwill impairment test in the fourth quarter of 2012, and the impact of the Software and Services group restructuring, Cavium determined that Software and Services goodwill and certain intangible assets were impaired and recorded a $33.3 million, non-cash, goodwill and intangible asset charge in the fourth quarter of 2012.

Non-GAAP Results
Cavium believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Cavium’s financial condition and results of operations. These measures should only be used to evaluate Cavium’s results of operations in conjunction with the corresponding GAAP measures. Non-GAAP financial measures in the fourth quarter of 2012 exclude expenses totaling $89.5 million related to: valuation allowance on deferred tax assets of $43.5 million; goodwill and intangible impairment of $33.3 million; $8.6 million related to stock-based compensation and related payroll taxes; and $4.1 million related to amortization of acquired intangible assets, acquisition and other expenses as detailed in the reconciliation between GAAP and non-GAAP financial results provided in the financial statements portion of this release.

Non-GAAP net income for the fourth quarter of 2012 was $10.6 million or $0.20 per diluted share, compared with non-GAAP net income of $7.8 million or $0.15 per diluted share in the third quarter of 2012. Gross margins, on a non-GAAP basis, were 64.5% and operating margins (non-GAAP income from operations as a percentage of revenue), on a non-GAAP basis, were 13.8% in the fourth quarter of 2012.

Recent News Highlights

  • January 7, 2013 - Cavium’s PureVu® Powers Samsung’s Wireless Streaming Adapter for the Latest Galaxy Smartphones
  • January 7, 2013 - Cavium to Showcase Complete Cloud-to-Home Solutions with its State-of- the Art Media Streaming and Wi-Fi CERTIFIED Miracast(TM) Products at International CES 2013
  • January 2, 2013 - Cavium PureVu®-based Miracast(TM) Solutions to Be Included in Wi-Fi Alliance® Demo at CES 2013
  • December 6, 2012 – Latest Release of MIPS® Architecture Includes Virtualization and SIMD
  • December 3, 2012 – Cavium to Demonstrate Industry-Leading LTE Small Cell Technology at Small Cells Americas 2012
  • November 14, 2012 – Cavium Ranked Among Fastest Growing Companies in North America on Deloitte’s 2012 Technology Fast 500(TM)
  • November 14, 2012 – Cavium and Symmetricom Partner to Enable IEEE 1588 Precision Timing for Small Cell Base Stations
  • November 1, 2012 – Industry Leaders Collaborate to Accelerate Software Ecosystem for ARM Servers, and Join Linaro
  • October 29, 2012 – Cavium Ships Game Changing NEURON Search(TM) Processor Family
  • October 29, 2012 – Cavium to Demonstrate Industry-Leading LTE Small Cell And TurboDPI Deep Packet Inspection Technology at 4G World
  • October 29, 2012 – Cavium’s Wireless Display Adapters Deliver Enhanced and Optimized Functionality for the Latest Android 4.2 Release for Smartphones and Tablets
  • October 29, 2012 – Cavium’s PureVu® to Power LG’s New Wireless Display Adapter for the Latest Optimus G and Nexus 4 Smartphones

Cavium, Inc. will broadcast its fourth quarter 2012 financial results conference call today, January 31, 2013, at 2 p.m. Pacific time (5 p.m. Eastern time). The conference call will be available via a live web cast on the investor relations section of the Cavium website at http://www.cavium.com. Please access the website at least a few minutes prior to the start of the call in order to download and install any necessary audio software. An archived web cast replay of the call will be available on the website for a limited period of time.

About Cavium
Cavium is a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications and the digital home. Cavium offers a broad portfolio of integrated, software-compatible processors ranging in performance from 10 Mbps to 100 Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access and service provider equipment. Cavium processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium’s principal office is in San Jose, CA with design team locations in California, Massachusetts, India and China. For more information, please visit: http://www.cavium.com.

                                                                            CAVIUM, INC.
                                                   Unaudited GAAP Condensed Consolidated Statements of Operations
                                                              (in thousands, except per share amounts)
                                                       Three Months Ended
                                                       ------------------
                                                       December 31, 2012                                         September 30, 2012
                                                       -----------------                                         ------------------
    Net revenue                                                                $66,369                                               $61,081
    Cost of revenue                                                             25,049                                                24,796
                                                                                ------                                                ------
    Gross profit                                                                41,320                                                36,285
                                                                                ------                                                ------
    Operating expenses:
         Research and
          development                                                           29,318                                                27,444  (a)
         Sales, general and
          administrative                                                        21,608                                                19,213
         Goodwill impairment                                                    27,680                                                     -
            Total operating
             expenses                                                           78,606                                                46,657
                                                                                ------                                                ------
    Loss from operations
     before other income
     (expense), income
     taxes and non-
     controlling
     interest                                                                  (37,286)                                              (10,372)
                                                                               -------                                               -------
    Other income (expense), net:
        Interest expense                                                          (581)                                                  (11)
        Other, net                                                                (164)                                                  115  (a)
                                                                                  ----                                                   ---  ---
    Total other income
     (expense), net                                                               (745)                                                  104
                                                                                  ----                                                   ---
         Loss before income
          taxes and non-
          controlliong
          interest                                                             (38,031)                                              (10,268)
         Provision for
          (benefit from)
          income taxes                                                          41,415                                                (1,719)
                                                                                ------                                                ------
    Net loss                                                                   (79,446)                                               (8,549)
    Net loss
     attributable to
     non-controlling
     interest                                                                     (607)                                                 (424) (a)
    Net loss
     attributable to the
     Company                                                                  $(78,839)                                              $(8,125)
                                                                              ========                                               =======
    Net loss
     attributable to the
     Company per common
     share, basic                                                               $(1.56)                                               $(0.16)
    Shares used in
     computing basic net
     loss per common
     share                                                                      50,490                                                50,060
    Net loss
     attributable to the
     Company per common
     share, diluted                                                             $(1.56)                                               $(0.16)
    Shares used in
     computing diluted
     net loss per common
     share                                                                      50,490                                                50,060

    (a) Certain reclassifications were made from the reported statements of operations in the Form 10-Q filed on November 7, 2012 to
     properly account for the consolidation of a variable interest entity

                                                                         CAVIUM, INC.
                                                       Unaudited Reconciliation of Non-GAAP Adjustments
                                                                        (in thousands)
                                                       Three Months Ended
                                                       ------------------
    Reconciliation of
     GAAP research and
     development
     expenses to non-
     GAAP:                                             December 31, 2012                                         September 30, 2012
                                                       -----------------                                         ------------------

        GAAP research and
         development
         expenses                                                              $29,318                                               $27,444
              Stock-based
               compensation and
               related payroll
               taxes                                                            (4,070)                                               (4,420)
              Acquisition and
               restructuring
               related expenses                                                    (98)                                                 (406)
              Acquisition and
               restructuring
               related
               compensation
               expenses                                                           (249)                                                  (76)
              Expenses associated
               from a variable
               interest entity                                                  (2,880)                                               (1,259)
         Non-GAAP research
          and development
          expenses                                                             $22,021                                               $21,283
                                                                               =======                                               =======
    Reconciliation of GAAP sales, general and administrative expenses
     to non-GAAP

        GAAP sales, general
         and administrative
         expenses                                                              $21,608                                               $19,213
              Stock-based
               compensation and
               related payroll
               taxes                                                            (4,091)                                               (4,326)
              Amortization of
               acquired intangible
               assets                                                             (200)                                                 (292)
              Acquisition and
               restructuring
               related expenses                                                    (95)                                                 (425)
              Acquisition and
               restructuring
               related
               compensation
               expenses                                                            (40)                                                 (119)
              Write-down of
               intangible assets                                                (5,570)                                                    -
              Loss on disposition
               of certain consumer
               product assets                                                        -                                                (2,728)
         Non-GAAP sales,
          general and
          administrative
          expenses                                                             $11,612                                               $11,323
                                                                               =======                                               =======

                                                         CAVIUM, INC.
                                       Unaudited Reconciliation of Non-GAAP Adjustments
                                    (In thousands, except per share data and percentages)

                                       Three Months Ended
                                       ------------------
                                       December 31, 2012                                  September 30, 2012
                                       -----------------                                  ------------------
    Reconciliation of
     GAAP gross profit &
     margin to non-
     GAAP:
    Net revenue                                                  $66,369                                      $61,081
    GAAP gross profit                                             41,320                                       36,285
    GAAP gross margin                                               62.3%                                        59.4%
              Acquisition and
               restructuring
               related expenses:
                    Cost of revenue                                 (571)                                        (183)
              Amortization of
               acquired intangible
               assets:
                    Cost of revenue                                1,625                                        2,001
              Stock-based
               compensation and
               related payroll
               taxes:
                    Cost of revenue                                  432                                          491
    Non-GAAP gross
     profit                                                      $42,806                                      $38,594
                                                                 =======                                      =======
    Non-GAAP gross
     margin                                                         64.5%                                        63.2%
                                                                    ====                                         ====

                                       Three Months Ended
                                       ------------------
                                       December 31, 2012                                  September 30, 2012
                                       -----------------                                  ------------------
    Reconciliation of
     GAAP loss from
     operations to non-
     GAAP income from
     operations:
    GAAP loss from
     operations                                                 $(37,286)                                    $(10,372)
              Amortization of
               acquired intangible
               assets                                              1,825                                        2,293
              Stock-based
               compensation and
               related payroll
               taxes                                               8,593                                        9,237
              Acquisition and
               restructuring
               related expenses                                     (378)                                         648
              Acquisition and
               restructuring
               related
               compensation
               expenses                                              289                                          195
              Write-down of
               intangible assets                                   5,570                                            -
              Goodwill impairment                                 27,680                                            -
              Loss on disposition
               of certain consumer
               product assets                                          -                                        2,728
              Loss from operations
               of a variable
               interest entity                                     2,880                                        1,259
    Non-GAAP income
     from operations                                              $9,173                                       $5,988
                                                                  ======                                       ======
    Non-GAAP income
     from operations as
     a percentage of
     revenue                                                        13.8%                                         9.8%
                                                                    ====                                          ===

                                       Three Months Ended
                                       ------------------
                                       December 31, 2012                                  September 30, 2012
                                       -----------------                                  ------------------
    Reconciliation of
     GAAP net loss to
     non-GAAP net
     income:
    GAAP net loss
     attributable to the
     Company                                                    $(78,839)                                     $(8,125)
    Non-GAAP
     adjustments:
          Stock-based
           compensation and
           related payroll
           taxes:
              Cost of revenue                                        432                                          491
              Research and
               development                                         4,070                                        4,420
              Sales, general and
               administrative                                      4,091                                        4,326
          Amortization of
           acquired intangible
           assets:
              Cost of revenue                                      1,625                                        2,001
              Sales, general and
               administrative                                        200                                          292
          Acquisition and
           restructuring
           related expenses                                         (378)                                         648
          Acquisition and
           restructuring
           related
           compensation
           expenses                                                  289                                          195
          Write-down of
           intangible assets                                       5,570                                            -
          Goodwill impairment                                     27,680                                            -
          Loss on disposition
           of certain consumer
           product assets                                              -                                        2,728
          Net loss of a
           variable interest
           entity attributable
           to the Company                                          2,396                                          835
         Valuation allowance
          on deferred tax
          assets                                                  43,505                                            -
         Total of non-GAAP
          adjustments                                             89,480                                       15,936
    Non-GAAP net income                                          $10,641                                       $7,811
                                                                 =======                                       ======

    GAAP net loss
     attributable to the
     Company per share,
     diluted                                                      $(1.56)                                      $(0.16)
                                                                  ======                                       ======
       Non-GAAP
        adjustments
        detailed above                                              1.76                                         0.31
    Non-GAAP net income
     per share, diluted                                            $0.20                                        $0.15
                                                                   =====                                        =====

    GAAP weighted
     average shares,
     diluted                                                      50,490                                       50,060
       Non-GAAP share
        adjustment                                                 3,974                                        3,076
                                                                   -----                                        -----
    Non-GAAP weighted
     average shares,
     diluted                                                      54,464                                       53,136

                                                          CAVIUM, INC.
                                      Unaudited GAAP Condensed Consolidated Balance Sheets
                                                         (in thousands)

                                                                            As of
                                                                            -----
                                                                      December 31, 2012            September 30, 2012
                                                                      -----------------            ------------------
    Assets
    Current assets:
                               Cash and cash
                               equivalents                                           $76,784                       $67,290
                               Accounts
                               receivable, net                                        33,567                        32,964
                              Inventories                                             46,508                        44,089
                               Prepaid expenses
                               and other current
                               assets                                                  4,865                         3,979
                               Assets held for
                               sale                                                    2,609                             -
                               Deferred tax
                               assets                                                    568                         5,604
                              ----------                                                 ---
                              Total current assets                                   164,901                       153,926
    Property and equipment, net                                                       30,692                        20,929
    Intangible assets, net                                                            62,888                        71,058
    Goodwill                                                                          71,478                       101,329
    Deferred tax assets, net of current                                                  449                        39,969
    Other non-current assets                                                           1,096                         1,156
                              Total assets                                          $331,504                      $388,367
                                                                                    ========                      ========

    Liabilities and Stockholders' Equity
    Current liabilities:
                              Accounts payable                                       $16,083                       $16,208
                               Accrued expenses
                               and other current
                               liabilities                                             8,680                         6,642
                              Deferred revenue                                        12,944                        13,864
                              Notes payable                                            1,012                             -
                               Capital lease and
                               technology
                               license
                               obligations,
                               current                                                16,500                        10,163
                              Total current liabilities                               55,219                        46,877
    Notes payable, net of current portion                                              4,000                             -
    Capital lease and technology license obligations, net of
     current                                                                          24,832                        20,733
    Deferred tax liability                                                             2,421                         5,946
    Other non-current liabilities                                                      1,970                         2,379
                              Total liabilities                                       88,442                        75,935
                                                                                      ------                        ------

    Stockholders' equity
                              Common stock                                                51                            50
                               Additional paid-
                               in capital                                            398,132                       388,044           (a)
                               Accumulated
                               deficit                                              (154,092)                      (75,253)
                               Total stockholders' equity
                               attributable to the Company                           244,091                       312,841
                              Non-controlling interest                                (1,029)                         (409)          (a)
                              Total equity                                           243,062                       312,432
                               Total liabilities and
                               stockholders' equity                                 $331,504                      $388,367
                                                                                    ========                      ========

    (a) Certain reclassifications were made from the reported condensed balance sheet in the Form 10-Q filed on
     November 7, 2012 to properly account for the consolidation of a variable interest entity

SOURCE Cavium, Inc.


Source: PR Newswire