Cavium Networks Announces Financial Results for Q3 2008
Cavium announces record quarterly revenue in Q3 2008. Revenue increased 14% sequentially and 73% year-over-year
MOUNTAIN VIEW, Calif., October 20, 2008– Cavium Networks (NASDAQ: CAVM), a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications, storage, wireless and security applications, today announced financial results for the third quarter of 2008 ended September 30, 2008.
Revenue in the third quarter of 2008 was $24.5 million, a 14% sequential increase from the $21.6 million reported for the second quarter of 2008 and an increase of 73% from the $14.2 million reported for the third quarter of last year.
Generally Accepted Accounting Principles (GAAP) Results
Net income for the third quarter of 2008, on a GAAP basis, was $1.8 million, or $0.04 per share (diluted), compared to net income of $2.1 million, or $0.05 per diluted share in the second quarter of 2008, and net income of $1.3 million, or $0.03 per share in the third quarter of last year. Gross margins were 58.8% in the third quarter of 2008 compared to 63.8% in the second quarter of this year. Total cash and cash equivalents were $91.9 million at September 30, 2008.
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 the third quarter of 2008 exclude $2.8 million in stock-based compensation and related payroll tax expense, amortization of acquired intangible assets and adjustments related to the acquisition of Star Semiconductor. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.
Net income for the third quarter of 2008, on a non-GAAP basis, was $4.6 million, or $0.11 per share (diluted), compared with $3.8 million, or $0.09 per share (diluted) in the second quarter of the year and $2.1 million, or $0.05 per share (diluted) in the third quarter of last year. Gross margins, on a non-GAAP basis, were 62.8% in the third quarter of 2008 compared to 64.2% in the second quarter of this year.
“The third quarter was yet another strong quarter for us across all key metrics. We continue to deliver strong sequential and year-over-year growth along with robust expansion in operating margins,” said Syed Ali, president and CEO of Cavium Networks. “Non-GAAP operating margins have increased from 12.6% in the first quarter of 2008 to 16.8% in the second quarter of 2008, to 19.2% in the third quarter of 2008. Furthermore, non-GAAP income from operations increased 30.3% sequentially from Q2 2008 to Q3 2008, due to the strength in our business and leverage in our business model. We also continue to experience record design win rates with traction across all markets that we serve”.
Conference Call
Cavium Networks will broadcast its third quarter 2008 financial results conference call today, October 20, 2008 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 athttp://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 in networking, communications, storage, wireless and security applications. Cavium Networks offers a broad portfolio of integrated, software compatible processors ranging in performance from 10 Mbps to 10 Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access & service provider equipment. Cavium Networks processors are supported by ecosystem partners that provide operating systems, tool support, reference designs and other services. Cavium Networks principal offices are in Mountain View, California 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 that if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. 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 existing or new competition, the rate of new design wins, the rate at which existing design wins go into production, technological advances, pricing pressures; general economic conditions; development of new products and technologies; manufacturing difficulties; whether Cavium Networks is successful in marketing its products; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. In addition, there can be no assurance that the company will be able to continue to expand non-GAAP operating margins for the foreseeable future. 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 March 10, 2008 and our latest Form 10Q filed on August 8, 2008. 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.
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CAVIUM NETWORKS, INC. Unaudited GAAP Consolidated Statements of Operations (In thousands, except per share amounts)
Three Months Ended
September 30, 2008
June 30, 2008
Net Revenue
$
24,525
$
21,562
Cost of revenue (1)
10,099
7,808
Gross profit
14,426
13,754
Operating expenses:
Research and development (2)
6,593
6,461
Sales, general and administrative (3)
5,944
5,454
Total operating expenses
12,537
11,915
Income from operations
1,889
1,839
Other income, net:
Interest expense
(115
)
(135
)
Interest income and other
499
609
Total other income, net
384
474
Income before income tax
2,273
2,313
Income tax expense
454
240
Net income
$
1,819
$
2,073
Net income per common share, basic
$
0.04
$
0.05
Shares used in computing basic net income per common share
40,578
40,300
Net income per common share, diluted
$
0.04
$
0.05
Shares used in computing diluted net income per common share
42,628
42,992
(1) Cost of revenue includes:
Amortization of acquired intangibles
$
814
$
32
Fair value adjustment of acquired inventory
153
—
Stock-based compensation and related taxes
20
55
(2) Research and development expense includes:
Stock-based compensation and related taxes
810
821
(3) Sales, general and administrative includes:
Stock-based compensation and related taxes
1,016
866
Amortization of acquired intangibles
7
—
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CAVIUM NETWORKS, INC. Unaudited Reconciliation of Non-GAAP Adjustments (In thousands, except per share amounts)
Three Months Ended
Reconciliation of GAAP gross profit & margin to non-GAAP:
September 30,2008
June 30, 2008
Net revenue
$
24,525
$
21,562
GAAP gross profit
14,426
13,754
GAAP gross margin
58.8
%
63.8
%
Amortization of acquired intangibles:
Cost of revenue
814
32
Stock-based compensation and related taxes:
Cost of revenue
20
55
Fair value adjustment of acquired inventory
153
—
Non-GAAP gross profit
$
15,413
$
13,841
Non-GAAP gross margin
62.8
%
64.2
%
Three Months Ended
Reconciliation of GAAP income from operations to non-GAAP:
September 30, 2008
June 30, 2008
GAAP income from operations
$
1,889
$
1,839
Amortization of acquired intangibles
821
32
Stock-based compensation and related taxes
1,846
1,742
Fair value adjustment of acquired inventory
153
—
Non-GAAP income from operations
$
4,709
$
3,613
Non-GAAP income from operations as a percentage of revenue
19.2
%
16.8
%
Three Months Ended
Reconciliation of GAAP net income to non-GAAP:
September 30, 2008
June 30, 2008
GAAP net income
$
1,819
$
2,073
Non-GAAP adjustments:
Stock-based compensation and related taxes:
Cost of revenue
20
55
Research and development
810
821
Sales, general and administrative
1,016
866
Amortization of acquired intangibles:
Cost of revenue
814
32
Sales, general and administrative
7
—
Fair value adjustment of acquired inventory
153
—
Total of non-GAAP adjustments
2,820
1,774
Non-GAAP net income
$
4,639
$
3,847
GAAP net income per share (diluted)
$
0.04
$
0.05
Non-GAAP adjustments detailed above
0.07
0.04
Non-GAAP net income per share (diluted)
$
0.11
$
0.09
GAAP weighted average shares (diluted)
42,628
42,992
Non-GAAP adjustment
920
775
Non-GAAP weighted average shares (diluted)
43,548
43,767
CAVIUM NETWORKS, INC. Unaudited GAAP Condensed Consolidated Balance Sheets (In thousands)
Assets
September 30, 2008
June 30, 2008
Current assets:
Cash and cash equivalents
$
91,918
$
99,284
Accounts receivable, net
13,483
10,867
Inventories
15,301
12,913
Prepaid expenses and other current assets
1,276
1,287
Total current assets
121,978
124,351
Property and equipment, net
10,836
11,041
Intangible assets, net
8,212
3,963
Goodwill
4,186
807
Other assets
385
410
Total assets
$
145,597
$
140,572
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
7,116
$
5,444
Accrued expenses and other current liabilities
3,447
2,700
Deferred revenue
1,685
1,980
Capital lease and technology license obligations, current
2,666
3,120
Total current liabilities
14,914
13,244
Capital lease and technology license obligations, net of current
2,255
2,792
Other non-current liabilities
616
508
Total liabilities
17,785
16,544
Stockholders’ equity
Common stock
41
41
Additional paid-in capital
180,637
178,672
Accumulated deficit
(52,866
)
(54,685
)
Total stockholders' equity
127,812
124,028
Total liabilities and stockholders' equity
$
145,597
$
140,572
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