Cavium Networks Announces Financial Results for Q4 2008
MOUNTAIN VIEW, Calif., January 28, 2009– 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 fourth quarter of 2008 ended December 31, 2008.
Revenue in the fourth quarter of 2008 was $22.2 million, a 9.6% sequential decrease from the $24.5 million reported for the third quarter of 2008 and an increase of 37.0% from the $16.2 million reported for the fourth quarter of last year.
Generally Accepted Accounting Principles (GAAP) Results
Net loss for the fourth quarter of 2008, on a GAAP basis, was a loss of $4.4 million, or $0.11 per share (diluted), compared to net income of $1.8 million, or $0.04 per diluted share in the third quarter of 2008, and net income of $2.0 million, or $0.05 per share in the fourth quarter of last year. Gross margins were 49.8% in the fourth quarter of 2008 compared to 58.8% in the third quarter of this year. Total cash and cash equivalents were $77.0 million at December 31, 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 fourth quarter of 2008 exclude $5.1 million in stock-based compensation, amortization of acquired intangible assets, in-process R&D expense and adjustments related to the acquisitions. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.
Net income for the fourth quarter of 2008, on a non-GAAP basis, was $0.7 million, or $0.02 per share (diluted), compared with $4.6 million, or $0.11 per share (diluted) in the third quarter of 2008 and $2.9 million, or $0.07 per share (diluted) in the fourth quarter of last year. Gross margins, on a non-GAAP basis, were 55.1% in the fourth quarter of 2008 compared to 62.8% in the third quarter of this year.
“Customer demand for our products was weaker than originally expected this quarter, primarily in higher margin Enterprise and Data Center segments,” said Syed Ali, president and CEO of Cavium Networks. “The deteriorating global economic climate is clearly having an impact on our business, as our customers slow down orders and minimize inventory. Gross margins were also negatively impacted by product mix and lower sales. However, we continue to experience record levels of design win activity at Tier 1 customers, and are confident we are well positioned for the long term.”
Recent Highlights
•
November 5, 2008- Cavium Networks was selected as a Deloitte’s Technology Fast 50 Winner.
•
November 18, 2008- Cavium Networks was ranked among the Fastest Growing Companies in North America on Deloitte’s 2008 Technology Fast 500
•
December 16, 2008- Cavium Networks won GSA’s 2008 Most Respected Emerging Public Semiconductor Company Award.
•
December 24, 2008- Cavium Networks completes acquisition of W&W Communications, Inc.
•
January 6, 2009– Cavium Networks demonstrates wireless HD video display at CES with multiple partners
•
January 12, 2009- NETGEAR® PROSAFE® Security Router with 802.11n selects OCTEON
•
January 20, 2009- French Service Provider SFR selects OCTEON™ for Fiber to the Home Service
Conference Call
Cavium Networks will broadcast its fourth quarter 2008 financial results conference call today, January 28, 2009 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 video, and security applications. Cavium Networks offers a broad portfolio of integrated, software compatible processors ranging in performance from 10 Mbps to 20 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. 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 November 12, 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
December 31, 2008
September 30, 2008
Net Revenue
$
22,180
$
24,525
Cost of revenue (1)
11,145
10,099
Gross profit
11,035
14,426
Operating expenses:
Research and development (2)
8,306
6,593
Sales, general and administrative (3)
6,158
5,944
In-process research and development
1,319
—
Total operating expenses
15,783
12,537
Income (loss) from operations
(4,748
)
1,889
Other income, net:
Interest expense
(96
)
(115
)
Interest income and other
476
499
Total other income, net
380
384
Income (loss) before income tax
(4,368
)
2,273
Income tax expense (benefit)
(11
)
454
Net income (loss)
$
(4,357
)
$
1,819
Net income (loss) per common share, basic
$
(0.11
)
$
0.04
Shares used in computing basic net income per common share
40,685
40,578
Net income (loss) per common share, diluted
$
(0.11
)
$
0.04
Shares used in computing diluted net income per common share
40,685
42,628
(1) Cost of revenue includes:
Amortization of acquired intangibles
$
803
$
814
Fair value adjustment of acquired inventory
317
153
Stock-based compensation and related taxes
76
20
(2) Research and development expense includes:
Stock-based compensation and related taxes
894
810
Amortization of acquired intangibles
673
—
(3) Sales, general and administrative includes:
Stock-based compensation and related taxes
976
1,016
Amortization of acquired intangibles
$
13
$
7
2
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:
December 31, 2008
September 30, 2008
Net revenue
$
22,180
$
24,525
GAAP gross profit
11,035
14,426
GAAP gross margin
49.8
%
58.8
%
Amortization of acquired intangibles:
Cost of revenue
803
814
Stock-based compensation and related taxes:
Cost of revenue
76
20
Fair value adjustment of acquired inventory
317
153
Non-GAAP gross profit
$
12,231
$
15,413
Non-GAAP gross margin
55.1
%
62.8
%
Three Months Ended
Reconciliation of GAAP income from operations to non-GAAP:
December 31, 2008
September 30, 2008
GAAP income (loss) from operations
$
(4,748
)
$
1,889
Amortization of acquired intangibles
1,489
821
Stock-based compensation and related taxes
1,946
1,846
In-process research and development
1,319
—
Fair value adjustment of acquired inventory
317
153
Non-GAAP income from operations
$
323
$
4,709
Non-GAAP income from operations as a percentage of revenue
1.5
%
19.2
%
Three Months Ended
Reconciliation of GAAP net income to non-GAAP:
December 31, 2008
September 30, 2008
GAAP net income (loss)
$
( 4,357
)
$
1,819
Non-GAAP adjustments:
Stock-based compensation and related taxes:
Cost of revenue
76
20
Research and development
894
810
Sales, general and administrative
976
1,016
Amortization of acquired intangibles:
Cost of revenue
803
814
Sales, general and administrative
13
7
Research and development
673
—
Fair value adjustment of acquired inventory
317
153
In-process research and development
1,319
—
Total of non-GAAP adjustments
5,071
2,820
Non-GAAP net income
$
714
$
4,639
GAAP net income per share (diluted)
$
(0.11
)
$
0.04
Non-GAAP adjustments detailed above
(0.13
)
0.07
Non-GAAP net income per share (diluted)
$
0.02
$
0.11
GAAP weighted average shares (diluted)
40,685
42,628
Non-GAAP adjustment
2,661
920
Non-GAAP weighted average shares (diluted)
43,346
43,548
CAVIUM NETWORKS, INC. Unaudited GAAP Condensed Consolidated Balance Sheets (In thousands)
Assets
December 31, 2008
September 30, 2008
Current assets:
Cash and cash equivalents
$
77,027
$
91,918
Accounts receivable, net
14,054
13,483
Inventories
17,281
15,301
Prepaid expenses and other current assets
1,298
1,276
Total current assets
109,660
121,978
Property and equipment, net
11,115
10,836
Intangible assets, net
17,073
8,212
Goodwill
12,810
4,186
Other assets
506
385
Total assets
$
151,164
$
145,597
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
7,309
$
7,116
Accrued expenses and other current liabilities
7,697
3,447
Deferred revenue
1,700
1,685
Capital lease and technology license obligations, current
2,619
2,666
Total current liabilities
19,325
14,914
Capital lease and technology license obligations, net of current
2,116
2,255
Other non-current liabilities
1,162
616
Total liabilities
22,603
17,785
Stockholders’ equity
Common stock
41
41
Additional paid-in capital
185,743
180,637
Accumulated deficit
(57,223
)
(52,866
)
Total stockholders' equity
128,561
127,812
Total liabilities and stockholders' equity
$
151,164
$
145,597
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