CAVIUM INC 
By 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.
