SOURCE: Cavium Networks, Inc.

Cavium Networks, Inc.

October 27, 2009 16:00 ET

Cavium Networks Announces Financial Results for Q3 2009

MOUNTAIN VIEW, CA--(Marketwire - October 27, 2009) - Cavium Networks, Inc. (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 2009 ended September 30, 2009.

Revenue in the third quarter of 2009 was $25.9 million, a 14% sequential increase from the $22.8 million reported for the second quarter of 2009 and an increase of 6% from the $24.5 million reported for the third quarter of last year.

Generally Accepted Accounting Principles (GAAP) Results

Net loss for the third quarter of 2009, on a GAAP basis, was $4.2 million, or $0.10 per share, compared to a net loss of $6.2 million, or $0.15 per share in the second quarter of 2009, and net income of $1.8 million, or $0.04 per diluted share in the third quarter of last year. Gross margins were 51.5% in the third quarter of 2009 compared to 46.8% in the second quarter of 2009 and 58.8% in the third quarter of 2008. Total cash and cash equivalents were $70.7 million at September 30, 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 third quarter of 2009 exclude expenses totaling $4.9 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related compensation expense and related payroll taxes. 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 2009, on a non-GAAP basis, was $0.8 million, or $0.02 per diluted share, compared with non-GAAP net loss of $1.0 million, or $0.02 per share in the second quarter of 2009 and net income of $4.6 million, or $0.11 per diluted share in the third quarter of last year. Gross margins, on a non-GAAP basis, were 55.7% in the third quarter of 2009 compared to 52.0% in the second quarter of 2009.

"We had record sales this quarter, due to primarily strong growth in our Enterprise and Data Center business driven by several new product ramps and a continuing recovery in the run rate business. In addition, non-GAAP gross margins expanded 370 basis points sequentially, due to improved product mix, reduced product costs as well as improved manufacturing overhead absorption. The increased sales along with expanding gross margins significantly improved sequential operating performance this quarter," said Syed Ali, president and CEO of Cavium Networks. "We have recently introduced a number of new products, including our Next Generation OCTEON™ II family of multi-core processors (from one to 32 cores), our NITROX DPI Family of Layer 7 Content Processors, as well as our new ECONA ARM-Based processors for the connected home and office applications and the PureVu family of products for highly interactive video applications and display which helped drive extremely robust design win rates during the quarter."

Recent News Highlights:

--  July 20, 2009 -- Cavium Networks Introduces NITROX DPI Family of Layer
    7 Content Processors.  This family incorporates 3rd generation Cavium
    Networks Deep Packet Inspection technology that targets a wide range of
    applications including firewalls, intrusion prevention (IPS), gateway anti-
    virus, unified threat management and content-based QoS in routers,
    switches, and services blades for the Enterprise, Datacenter and Service
    Provider markets.
    
--  July 24, 2009 -- Sanjay Mehrotra, president and chief operating
    officer of SanDisk Corp. (NASDAQ: SNDK) joined Cavium Networks' Board of
    Directors.
    
--  September 8, 2009 -- Cavium Networks' ecosystem partners, D2
    Technologies, Entropic, TeamF1, SoftAtHome, Tuxera, and Wind River announce
    support for ECONA™ Family of Super Energy Efficient ARM®-Based System-
    on-Chip processors.
    
--  September 8, 2009 -- Cavium Networks Introduces ECONA Family of Super
    Energy Efficient ARM®-Based System-on-Chip (SoC) Processors for the
    Digital Home.
    
--  September 8, 2009 -- Sumitomo Electric Networks Inc. selects the new
    Super Energy Efficient ECONA™ processors to power their next generation
    Fiber to the Home (FTTH) Gateways.
    
--  September 16, 2009 -- Aricent and Cavium Networks collaborate to
    provide LTE Evolved Packet Core Solutions.  The companies offer pre-
    optimized, performance-enhanced and highly-scalable EPC Serving Gateway
    (SGW), PDN Gateway (PGW) and Mobility Management Entity (MME) ready-to-use
    software frameworks for Cavium's OCTEON™ Multi-core MIPS64® processor
    family.
    
--  September 22, 2009 -- GE Fanuc Intelligent Platforms and Cavium
    Networks collaborate to bring low power multicore solutions to military and
    aerospace customers.
    
--  October 7, 2009 -- Hitachi, Ltd. integrated the Cavium Networks'
    NITROX PX Security Adapters in the recently introduced BladeSymphony® 320
    Server family to deliver record crypto performance.
    
--  Oct. 12, 2009 -- Cavium Networks announced the demonstration of
    OCTEON™ multi-core MIPS64 storage processors at the Storage Networking
    World Conference in Phoenix, Arizona. OCTEON's Intelligent Storage Service
    Processors (SSP) are being designed into and targeted for an array of
    storage applications in the cloud infrastructure.
    
--  October 19th, 2009 -- MontaVista® Software, Inc., the leader in
    embedded Linux® commercialization, announced the next release of their
    market leading Carrier Grade Edition (CGE) Linux, which supports the
    OCTEON® Multi-core MIPS64® processors.
    
--  Oct. 22, 2009 -- Cavium Networks announced that it had been ranked
    among the fastest growing companies in North America on Deloitte's
    Technology Fast 500™ list. Rankings are based on percentage of fiscal
    year revenue growth during the five year period from 2004-2008, during
    which time Cavium Networks grew revenue 1,069 percent.
    

Conference Call

Cavium Networks, Inc. will broadcast its third quarter 2009 financial results conference call today, October 27th, 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 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 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 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.

                          CAVIUM NETWORKS, INC.
           Unaudited GAAP Consolidated Statements of Operations
                 (In thousands, except per share amounts)

                                                     Three Months Ended
                                                  ------------------------
                                                 September 30,  June 30,
                                                     2009         2009
                                                  -----------  -----------

Net revenue                                       $    25,894  $    22,804
Cost of revenue                                        12,567       12,139
                                                  -----------  -----------
Gross profit                                           13,327       10,665
                                                  -----------  -----------
Operating expenses:
   Research and development                            10,629       10,274
   Sales, general and administrative                    6,647        6,526
                                                  -----------  -----------
      Total operating expenses                         17,276       16,800
                                                  -----------  -----------
Loss from operations                                   (3,949)      (6,135)
                                                  -----------  -----------
Other income (expense), net:
   Interest expense                                       (54)         (67)
   Interest income and other                                4           90
                                                  -----------  -----------
Total other income (expense), net                         (50)          23
                                                  -----------  -----------
    Loss before provision for income taxes             (3,999)      (6,112)
    Provision for income taxes                            167           56
                                                  -----------  -----------
Net loss                                          $    (4,166) $    (6,168)
                                                  ===========  ===========
Net loss per common share, basic and diluted      $     (0.10) $     (0.15)
Shares used in computing basic and diluted net
 loss per common share                                 41,447       41,212

                          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         $    10,629  $    10,274
      Stock-based compensation and related
       payroll taxes                                   (1,522)      (1,441)
      Acquisition related compensation
       expense and related payroll taxes                 (754)        (754)
      Restructuring                                         -         (221)
                                                  -----------  -----------
   Non-GAAP research and development expenses     $     8,353  $     7,858
                                                  ===========  ===========
Reconciliation of GAAP sales, general and
 administrative expenses to non-GAAP
   GAAP sales, general and administrative
    expenses                                      $     6,647  $     6,526
      Stock-based compensation and related
       payroll taxes                                   (1,491)      (1,461)
      Restructuring                                         -          (95)
      Amortization of acquired intangibles                (35)         (35)
      Acquisition related compensation
       expense and related payroll taxes                  (18)         (18)
                                                  -----------  -----------
   Non-GAAP sales, general and administrative
    expenses                                      $     5,103  $     4,917
                                                  -----------  -----------




                          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      September 30,  June 30,
 to non-GAAP:                                         2009         2009
                                                  -----------  -----------
Net revenue                                       $    25,894  $    22,804
GAAP gross profit                                      13,327       10,665
GAAP gross margin                                        51.5%        46.8%
   Amortization of acquired intangibles:
      Cost of revenue                                   1,008        1,021
   Stock-based compensation and related
    payroll taxes:
      Cost of revenue                                      96           80
   Fair value adjustment of acquired inventory              -           87
                                                  -----------  -----------
Non-GAAP gross profit                             $    14,431  $    11,853
                                                  ===========  ===========
Non-GAAP gross margin                                    55.7%        52.0%
                                                  ===========  ===========

                                                     Three Months Ended
                                                  ------------------------
Reconciliation of GAAP loss from operations       September 30,  June 30,
 to non-GAAP:                                        2009          2009
                                                  -----------  -----------
GAAP loss from operations                         $    (3,949) $    (6,135)
   Amortization of acquired intangibles                 1,043        1,056
   Stock-based compensation and related
    payroll taxes                                       3,109        2,982
   Restructuring                                            -          316
   Acquisition related compensation expense
    and related payroll taxes                             772          772
   Fair value adjustment of acquired inventory              -           87
                                                  -----------  -----------
Non-GAAP income (loss) from operations            $       975  $      (922)
                                                  ===========  ===========
Non-GAAP income (loss) from operations as a
 percentage of revenue                                    3.8%        -4.0%
                                                  ===========  ===========

                                                     Three Months Ended
                                                  ------------------------
Reconciliation of GAAP net loss to non-GAAP:      September 30,  June 30,
                                                     2009         2009
                                                  -----------  -----------
GAAP net loss                                     $    (4,166) $    (6,168)
Non-GAAP adjustments:
   Stock-based compensation and related
    payroll taxes:
      Cost of revenue                                      96           80
      Research and development                          1,522        1,441
      Sales, general and administrative                 1,491        1,461
   Amortization of acquired intangibles:
      Cost of revenue                                   1,008        1,021
      Sales, general and administrative                    35           35
   Fair value adjustment of acquired inventory              -           87
   Restructuring                                            -          316
   Acquisition related compensation expense
    and related payroll taxes                             772          772
                                                  -----------  -----------
   Total of non-GAAP adjustments                        4,924        5,213
                                                  -----------  -----------
Non-GAAP net income (loss)                        $       758  $      (955)
                                                  ===========  ===========

GAAP net loss per share (diluted)                 $     (0.10) $     (0.15)
                                                  ===========  ===========
   Non-GAAP adjustments detailed above                   0.12         0.13
Non-GAAP net income (loss) per share (diluted)    $      0.02  $     (0.02)
                                                  ===========  ===========

GAAP weighted average shares (diluted)                 41,447       41,212
   Non-GAAP share adjustment                            4,528            -
                                                  -----------  -----------
Non-GAAP weighted average shares (diluted)             45,975       41,212




                          CAVIUM NETWORKS, INC.
           Unaudited GAAP Condensed Consolidated Balance Sheets
                              (In thousands)

                                                           As of
                                                  ------------------------
                                                 September 30,   June 30,
                                                     2009          2009
                                                  -----------  -----------
Assets
Current assets:
   Cash and cash equivalents                      $    70,693  $    66,747
   Accounts receivable, net                            11,717       15,292
   Inventories                                         18,313       16,484
   Prepaid expenses and other current assets            2,941        3,149
                                                  -----------  -----------
      Total current assets                            103,664      101,672
Property and equipment, net                             8,404        8,853
Intangible assets, net                                 13,120       14,433
Goodwill                                               13,027       13,047
Other assets                                              433          447
                                                  -----------  -----------
      Total assets                                $   138,648  $   138,452
                                                  ===========  ===========

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                               $     7,102  $     7,473
   Accrued expenses and other current
    liabilities                                         3,081        2,706
   Deferred revenue                                     1,444        1,676
   Capital lease and technology license
    obligations, current                                2,886        2,476
                                                  -----------  -----------
      Total current liabilities                        14,513       14,331
Capital lease and technology license
 obligations, net of current                              449          892
Other non-current liabilities                           1,665        1,430
                                                  -----------  -----------
      Total liabilities                                16,627       16,653
                                                  -----------  -----------

Stockholders' equity
   Common stock                                            42           41
   Additional paid-in capital                         196,069      191,682
   Accumulated deficit                                (74,090)     (69,924)
                                                  -----------  -----------
      Total stockholders' equity                      122,021      121,799
                                                  -----------  -----------
      Total liabilities and stockholders' equity  $   138,648  $   138,452
                                                  -----------  -----------

Contact Information

  • Cavium Networks Contact:

    Art Chadwick
    Vice President of Finance and Administration and Chief Financial Officer
    Tel: (650) 623-7063
    Email: Email Contact

    Angel Atondo
    Marketing Communications Manager
    Tel: (650) 623-7033
    Email: Email Contact