Cavium Networks Announces Financial Results for Q1 2011MOUNTAIN VIEW, CA -- (Marketwire - April 28, 2011) - Cavium Networks, 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 first quarter of 2011 ended March 31, 2011.
Revenue in the first quarter of 2011 was $63.6 million, a 6% sequential increase from the $59.8 million reported for the fourth quarter of 2010 and an increase of 53% from the $41.6 million reported for the first quarter of last year.
Generally Accepted Accounting Principles (GAAP) Results
Net income for the first quarter of 2011, on a GAAP basis, was $1.5 million, or $0.03 per diluted share, compared to net income of $34.6 million, or $0.70 per diluted share in the fourth quarter of 2010, and a net loss of $3.1 million, or $0.07 per diluted share in the first quarter of last year. Gross margins were 60.9% in the first quarter of 2011 compared to 62.7% in the fourth quarter of 2010 and 59.6% in the first quarter of last year. Total cash and cash equivalents were $69.4 million at March 31, 2011.
Non-GAAP Results
Cavium Networks believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. Non-GAAP financial measures in first quarter of 2011 exclude expenses totaling $15.0 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related expenses. Non-GAAP financial measures in the fourth quarter of 2010 exclude a one-time net tax benefit of $28.2 million. In addition, Non-GAAP financial measures in the fourth quarter of 2010 exclude expenses totaling $8.5 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related expenses. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.
Non-GAAP net income for the first quarter of 2011 was $16.5 million, or $0.32 per diluted share, compared with non-GAAP net income of $14.9 million, or $0.29 per diluted share in the fourth quarter of 2010. Gross margins, on a non-GAAP basis, was 65.0% and operating margins (non-GAAP income from operations as a percentage of revenue), on a non-GAAP basis, was 25.4% in the first quarter of 2011.
"This was our eighth quarter of sequential sales growth, driven by strong growth in our core enterprise and service provider business. We generated record quarterly sales, strong non-GAAP gross and operating margins, and record non-GAAP net income during the first quarter. Furthermore, we experienced record design win momentum among a broad array of existing, as well as new, Tier-1 customers across our entire family of products," said Syed Ali, president and CEO of Cavium Networks.
Recent News Highlights
-- April 28, 2011 - Cavium Networks announced that it has delivered its
flagship 32-core OCTEON II CN6880 processor to multiple Tier 1
customers building a wide range of wireless and wired infrastructure
networking applications. In OEM benchmarks, the OCTEON II CN6880
provides the industry's highest performance across many networking,
security, deep packet inspection (DPI) and compute intensive solutions
based on their own real customer applications. OCTEON II is the first
64 bit processor to provide 48GHz of compute power on a single chip
-- March 9, 2011 - Cavium Networks Completes Acquisition of Celestial
Semiconductor
-- March 2, 2011 - Yocto Project Aligns Technology with OpenEmbedded and
Gains Corporate Collaborators
-- February 16, 2011 - Cavium Networks ranked number 5 from America's
25 Fastest-Growing Tech Companies According to Forbes
-- February 15, 2011 - Airspan Selects Cavium Networks OCTEON®
Processors to Power its Next Generation 4G LTE Products
-- February 14, 2011 - Cavium Networks to Showcase Next Generation
Security Solutions for Enterprise, Data Center and Cloud Computing at
RSA 2011
-- February 14, 2011 - Cavium Networks Demonstrates Market-Leading,
Comprehensive Solutions for 2.5/3G, WiMax and LTE Applications at
Mobile World Congress 2011
-- February 14, 2011 - Cavium Networks and Picochip partner to Showcase
Industry's First End-To-End LTE Femtocell at 2011 Mobile World Congress
in Barcelona
-- February 9, 2011 - Cavium Networks, Kontron and Tata Elxsi Partner to
Demonstrate Market Leading LTE eNodeB Solution at MWC 2011
-- February 8, 2011 - Cavium Networks Introduces First 40 Gbps
"Bump-in-the-Wire" Deep Packet Inspection / Application Recognition
Processor Family
-- January 31, 2011 - Cavium Networks Signs Definitive Agreement to
Acquire China-Based Celestial Semiconductor
Cavium Networks, Inc. will broadcast its first quarter 2011 financial results conference call today, April 28, 2011, 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 Networks website at http://www.caviumnetworks.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 web site for a limited period of time.
About Cavium Networks
Cavium Networks is a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications and the digital home. Cavium Networks offers a broad portfolio of integrated, software-compatible processors ranging in performance from 10 Mbps to 40+ Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access and service provider equipment. Cavium Networks processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium Network's principal offices are in Mountain View, CA with design team locations in California, Massachusetts, India and Taiwan. For more information, please visit: http://www.caviumnetworks.com.
Note on Forward-Looking Statements
This press release may contain forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. These forward-looking statements involve risks and uncertainties, as well as assumptions and current expectations. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks, uncertainties and assumptions. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to the rate of new design wins, acceptance by customers of Cavium's new product introductions, whether or not the company can continue to expand gross margins and operating margins, the rate at which existing design wins go into production, pricing pressures; general economic conditions; manufacturing difficulties; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact Cavium's business are set forth in the "Risk Factors" section of our Form 10K filed with the Securities and Exchange Commission on February 28, 2011. All forward-looking statements in this press release are based on information available to us as of the date hereof and qualified in their entirety by this cautionary statement, and we assume no obligation to revise or update these forward-looking statements.
CAVIUM NETWORKS, INC.
Unaudited GAAP Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
--------------------------
March 31, December 31,
2011 2010
------------ ------------
Net revenue $ 63,570 $ 59,803
Cost of revenue 24,825 22,315
------------ ------------
Gross profit 38,745 37,488
------------ ------------
Operating expenses:
Research and development 20,722 15,914
Sales, general and administrative 16,903 14,751
------------ ------------
Total operating expenses 37,625 30,665
------------ ------------
Income from operations 1,120 6,823
------------ ------------
Other income, net:
Interest expense (73) (83)
Interest income and other, net (38) 111
------------ ------------
Total other income, net (111) 28
------------ ------------
Income before provision for income taxes 1,009 6,851
Income tax benefit (483) (27,770)
------------ ------------
Net income $ 1,492 $ 34,621
============ ============
Net income per common share, basic $ 0.03 $ 0.76
Shares used in computing basic net income per
common share 47,091 45,817
Net income per common share, diluted $ 0.03 $ 0.70
Shares used in computing diluted net income per
common share 49,799 49,611
CAVIUM NETWORKS, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands)
Reconciliation of GAAP research and development
expenses to non-GAAP:
GAAP research and development expenses $ 20,722 $ 15,914
Stock-based compensation and related
payroll taxes (3,203) (2,940)
Acquisition-related expenses (1,044) -
Acquisition-related compensation
expenses (2,140) -
------------ ------------
Non-GAAP research and development expenses $ 14,335 $ 12,974
============ ============
Reconciliation of GAAP sales, general and
administrative expenses to non-GAAP
GAAP sales, general and administrative
expenses $ 16,903 $ 14,751
Stock-based compensation and related
payroll taxes (3,289) (2,924)
Amortization of acquired intangibles (237) (183)
Acquisition-related expenses (1,949) (454)
Acquisition-related compensation
expenses (588) (494)
------------ ------------
Non-GAAP sales, general and administrative
expenses $ 10,840 $ 10,696
============ ============
CAVIUM NETWORKS, INC.
Unaudited Reconciliation of Non-GAAP Adjustments
(In thousands, except per share data and percentages)
Three Months Ended
--------------------------
Reconciliation of GAAP gross profit & margin to March 31, December 31,
non-GAAP: 2011 2010
------------ ------------
Net revenue $ 63,570 $ 59,803
GAAP gross profit 38,745 37,488
GAAP gross margin 60.9% 62.7%
Acquisition-related expenses:
Cost of revenue 566 -
Amortization of acquired intangibles:
Cost of revenue 1,603 1,174
Stock-based compensation and related payroll
taxes:
Cost of revenue 393 348
------------ ------------
Non-GAAP gross profit $ 41,307 $ 39,010
============ ============
Non-GAAP gross margin 65.0% 65.2%
============ ============
Three Months Ended
--------------------------
Reconciliation of GAAP income from operations March 31, December 31,
to non-GAAP: 2011 2010
------------ ------------
GAAP income from operations 1,120 $ 6,823
Amortization of acquired intangibles 1,840 1,357
Stock-based compensation and related payroll
taxes 6,885 6,212
Acquisition-related expenses 3,559 454
Acquisition-related compensation expenses 2,728 494
------------ ------------
Non-GAAP income from operations $ 16,132 $ 15,340
============ ============
Non-GAAP income from operations as a percentage
of revenue 25.4% 25.7%
============ ============
Three Months Ended
--------------------------
March 31, December 31,
Reconciliation of GAAP net income to non-GAAP: 2011 2010
------------ ------------
GAAP net income $ 1,492 $ 34,621
Non-GAAP adjustments:
Stock-based compensation and related
payroll taxes:
Cost of revenue 393 348
Research and development 3,203 2,940
Sales, general and administrative 3,289 2,925
Amortization of acquired intangibles:
Cost of revenue 1,603 1,174
Sales, general and administrative 237 183
Acquisition-related expenses 3,559 454
Acquisition-related compensation expenses 2,728 494
Release of tax valuation allowance, net of
unrecognized tax benefit - (28,239)
------------ ------------
Total of non-GAAP adjustments 15,012 (19,721)
------------ ------------
Non-GAAP net income $ 16,504 $ 14,900
============ ============
GAAP net income per share, diluted $ 0.03 $ 0.70
============ ============
Non-GAAP adjustments detailed above 0.29 (0.41)
Non-GAAP net income per share, diluted $ 0.32 $ 0.29
============ ============
GAAP weighted average shares, diluted 49,799 49,611
Non-GAAP share adjustment 2,375 1,600
------------ ------------
Non-GAAP weighted average shares, diluted 52,174 51,211
CAVIUM NETWORKS, INC.
Unaudited GAAP Condensed Consolidated Balance Sheets
(in thousands)
As of As of
------------ ------------
March 31, December 31,
2011 2010
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 69,431 $ 90,673
Accounts receivable, net 35,605 29,912
Inventories 28,680 31,556
Prepaid expenses and other current assets 2,658 2,423
Deferred income taxes 9,039 9,053
------------ ------------
Total current assets 145,413 163,617
Property and equipment, net 14,624 14,162
Intangible assets, net 53,691 29,226
Goodwill 103,207 57,230
Deferred income taxes 26,667 26,020
Other non-current assets 1,785 1,365
------------ ------------
Total assets $ 345,387 $ 291,620
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 16,246 $ 14,160
Accrued expenses and other current
liabilities 13,652 8,136
Deferred revenue 15,078 15,361
Capital lease and technology license
obligations, current 5,538 8,088
------------ ------------
Total current liabilities 50,514 45,745
Capital lease and technology license
obligations, net of current 2,182 2,956
Deferred tax liability 5,917 5,917
Other non-current liabilities 2,208 2,392
------------ ------------
Total liabilities 60,821 57,010
------------ ------------
Stockholders' equity
Common stock 48 46
Additional paid-in capital 324,519 276,057
Accumulated deficit (40,001) (41,493)
------------ ------------
Total stockholders' equity 284,566 234,610
------------ ------------
Total liabilities and stockholders'
equity $ 345,387 $ 291,620
============ ============
Cavium Networks Contact:
Art Chadwick
Vice President of Finance and Administration
and Chief Financial Officer
Tel: (650) 623-7063
Email: art.chadwick@caviumnetworks.com
Angel Atondo
Marketing Communications Manager
Tel: (650) 623-7033
Email: angel.atondo@caviumnetworks.com
