MOUNTAIN VIEW, Calif., April 29, 2009– Cavium Networks, Inc. (NASDAQ: CAVM), a leading provider of highly integrated semiconductor products that enable intelligent processing for networking, communications, storage, wireless, video, and security applications, today announced financial results for the first quarter of 2009 ended March 31, 2009.
Revenue in the first quarter of 2009 was $20.4 million, an 8% sequential decrease from the $22.2 million reported for the fourth quarter of 2008 and an increase of 11% from the $18.3 million reported for the first quarter of last year.
Generally Accepted Accounting Principles (GAAP) Results
Net loss for the first quarter of 2009, on a GAAP basis, was $6.5 million, or $0.16 per share, compared to a net loss of $4.4 million, or $0.11 per share in the fourth quarter of 2008, and net income of $2.0 million, or $0.05 per share in the first quarter of last year. Gross margins were 46.9% in the first quarter of 2009 compared to 49.8% in the fourth quarter of 2008 and 64.1% in the first quarter of 2008. Total cash and cash equivalents were $65.6 million at March 31, 2009.
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 first quarter of 2009 exclude expenses totaling $4.8 million related to stock-based compensation, amortization of acquired intangible assets, acquisition related compensation expense and adjustments related to past acquisitions and related tax effects. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.
Net loss for the first quarter of 2009, on a non-GAAP basis, was $1.7 million, or $0.04 per share, compared with non-GAAP net income of $0.7 million, or $0.02 per share net income in the fourth quarter of 2008 and net income of $2.9 million, or $0.07 per share in the first quarter of last year. Gross margins, on a non-GAAP basis, were 53.7% in the first quarter of 2009 compared to 55.1% in the fourth quarter of last year.
“Sales during the first quarter were negatively impacted by the continuing weakness in the Enterprise and Data Center segments,” said Syed Ali, president and CEO of Cavium Networks. “Although overall sales in Q1 were sequentially down, new customer orders were sequentially higher, which we consider to be an encouraging sign that markets for our products are improving. Furthermore, we continue to experience record levels of design win activity at Tier 1 customers, across multiple market segments, which positions us well for the long term.”
Recent News Highlights:
•
February 11, 2009 —Continuous Computing and Cavium Networks Collaborate to Deliver Performance-Optimized Wireless Solutions for LTE Networks.
•
February 16, 2009- Cavium Networks’ OCTEON Processors fuel array of New Wireless Products showcased at 2009 Mobile World Congress in Barcelona, Spain.
•
March 24, 2009 —Entropic Communications collaborates with Cavium to enable Multimedia over Coax Alliance (MoCA®) based home networking solutions.
•
April 1, 2009 —Cavium Networks Demonstrates Full 1080p60 HD Video and Gaming over MoCA® Home Networks.
•
April 14, 2009- Cavium Networks Announces Next Generation OCTEON™ II Internet Application Processor (IAP) family of multi-core MIPS64® processors, with one to 32 cores. The OCTEON II IAP offers up to 4x performance over the existing OCTEON Plus processor family, with more than twice the performance/watt and performance/dollar. The new product family adds revolutionary new application acceleration engines, and is designed to address the voice, video and data convergence driven by cloud computing, virtualization, HD video over IP, Web 2.0 and mobile 3G/4G applications, all of which require significantly increased packet processing, secure application delivery and quality of service (QoS) performance.
•
April 14, 2009- 20+ leading ecosystem partners announce support for Cavium Networks’ OCTEON II Processor Family, including: RadiSys, Wind River, 6Wind, Advantech, ATS, Bayside, Continuous Computing, D2 Technologies, embedUR, Enea, Fulcrum, GDA, Interphase, Kaspersky, Kontron, Lanner, Lauterbach, MIPS, MontaVista, NetLogic, PLX, Qosmos, QNX and Zarlink.
•
April 20, 2009- Cavium Networks Introduces Low Latency Full-HD H.264 Micro-Module for Real-Time A/V Applications at NAB Show 2009.
Conference Call
Cavium Networks, Inc. will broadcast its first quarter 2009 financial results conference call today, April 29, 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, Inc. 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 the rate of new design wins, 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 March 2, 2009. 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.
1
CAVIUM NETWORKS, INC. Unaudited GAAP Consolidated Statements of Operations (In thousands, except per share amounts)
Three Months Ended
March 31, 2009
December 31, 2008
Net Revenue
$
20,382
$
22,180
Cost of revenue (1)
10,814
11,145
Gross profit
9,568
11,035
Operating expenses:
Research and development (2)
9,991
8,306
Sales, general and administrative (3)
6,137
6,158
In-process research and development
—
1,319
Total operating expenses
16,128
15,783
Loss from operations
(6,560
)
(4,748
)
Other income, net:
Interest expense
(79
)
(96
)
Interest income and other
134
476
Total other income, net
55
380
Loss before income tax
(6,505
)
(4,368
)
Income tax expense (benefit)
28
(11
)
Net loss
$
(6,533
)
$
(4,357
)
Net loss per common share, basic
$
(0.16
)
$
(0.11
)
Shares used in computing basic net income per common share
41,083
40,685
(1) Cost of revenue includes:
Amortization of acquired intangibles
$
1,070
$
803
Fair value adjustment of acquired inventory
228
317
Stock-based compensation and related payroll taxes
87
76
(2) Research and development expense includes:
Stock-based compensation and related payroll taxes
1,235
894
Acquisition related compensation expense and related payroll taxes
812
—
Amortization of acquired intangibles
—
673
(3) Sales, general and administrative includes:
Stock-based compensation and related payroll taxes
1,300
976
Amortization of acquired intangibles
35
13
Acquisition related compensation expense and related payroll taxes
$
19
$
—
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:
March 31, 2009
December 31, 2008
Net revenue
$
20,382
$
22,180
GAAP gross profit
9,568
11,035
GAAP gross margin
46.9
%
49.8
%
Amortization of acquired intangibles:
Cost of revenue
1,070
803
Stock-based compensation and related payroll taxes:
Cost of revenue
87
76
Fair value adjustment of acquired inventory
228
317
Non-GAAP gross profit
$
10,953
$
12,231
Non-GAAP gross margin
53.7
%
55.1
%
Three Months Ended
Reconciliation of GAAP loss from operations to non-GAAP:
March 31, 2009
December 31, 2008
GAAP loss from operations
$
(6,560
)
$
(4,748
)
Amortization of acquired intangibles
1,105
1,489
Stock-based compensation and related payroll taxes
2,622
1,946
In-process research and development
—
1,319
Acquisition related compensation expenses and related payroll taxes
831
—
Fair value adjustment of acquired inventory
228
317
Non-GAAP income (loss) from operations
$
(1,774
)
$
323
Non-GAAP income (loss) from operations as a percentage of revenue
-8.7
%
1.5
%
Three Months Ended
Reconciliation of GAAP net loss to non-GAAP:
March 31, 2009
December 31, 2008
GAAP loss
$
( 6,533
)
$
( 4,357
)
Non-GAAP adjustments:
Stock-based compensation and related payroll taxes:
Cost of revenue
87
76
Research and development
1,235
894
Sales, general and administrative
1,300
976
Amortization of acquired intangibles:
Cost of revenue
1,070
803
Sales, general and administrative
35
13
Research and development
—
673
Fair value adjustment of acquired inventory
228
317
Acquisition related compensation expenses and related payroll taxes
831
—
In-process research and development
—
1,319
Total of non-GAAP adjustments
4,786
5,071
Non-GAAP net income (loss)
$
(1,747
)
$
714
GAAP net loss per share (diluted)
$
(0.16
)
$
(0.11
)
Non-GAAP adjustments detailed above
0.12
0.13
Non-GAAP net income (loss) per share (diluted)
$
(0.04
)
$
0.02
GAAP weighted average shares (diluted)
41,083
40,685
Non-GAAP share adjustment
—
2,661
Non-GAAP weighted average shares (diluted)
41,083
43,346
CAVIUM NETWORKS, INC. Unaudited GAAP Condensed Consolidated Balance Sheets (In thousands)
As of
Assets
March 31, 2009
December 31, 2008
Current assets:
Cash and cash equivalents
$
65,618
$
77,027
Accounts receivable, net
14,681
14,054
Inventories
16,171
17,281
Prepaid expenses and other current assets
4,446
1,298
Total current assets
100,916
109,660
Property and equipment, net
10,304
11,115
Intangible assets, net
15,659
16,958
Goodwill
13,092
12,925
Other assets
443
506
Total assets
$
140,414
$
151,164
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
4,600
$
7,309
Accrued expenses and other current liabilities
4,137
7,697
Deferred revenue
1,322
1,700
Capital lease and technology license obligations, current
2,545
2,619
Total current liabilities
12,604
19,325
Capital lease and technology license obligations, net of current
1,507
2,116
Other non-current liabilities
1,617
1,162
Total liabilities
15,728
22,603
Stockholders' equity
Common stock
41
41
Additional paid-in capital
188,401
185,743
Accumulated deficit
(63,756
)
(57,223
)
Total stockholders’ equity
124,686
128,561
Total liabilities and stockholders’ equity
$
140,414
$
151,164
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