SOURCE: Cavium Networks, Inc.

April 16, 2008 16:00 ET

Cavium Networks Announces Financial Results for Q1 2008

Cavium Announces Record Quarterly Revenue in Q1 2008; Revenue Increased 13% Sequentially and 65% Year-Over-Year

MOUNTAIN VIEW, CA--(Marketwire - April 16, 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 first quarter of 2008 ended March 31, 2008.

Revenue in the first quarter of 2008 was $18.3 million, a 13% sequential increase from the $16.2 million reported for the fourth quarter of 2007 and an increase of 65% from the $11.1 million reported for the first quarter of last year.

Generally Accepted Accounting Principles (GAAP) Results

Net income for the first quarter of 2008, on a GAAP basis, was $2.0 million, or $0.05 per share (diluted), compared to net income of $2.0 million, or $0.05 per diluted share in the fourth quarter of 2007, and a net loss of $1.0 million, or $0.12 per share (diluted) in the first quarter of last year. Gross margins were 64.1% in the first quarter of 2008 compared to 64.2% in the fourth quarter of 2007. Total cash and cash equivalents were $95.6 million at March 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. Non-GAAP financial measures in the first quarter of 2008 exclude $0.8 million in stock-based compensation and related payroll tax expense and $0.1 million in amortization of acquired intangible assets. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.

Net income for the first quarter of 2008, on a non-GAAP basis, was $2.9 million, or $0.07 per share (diluted), compared with $2.9 million, or $0.07 per share (diluted) in the fourth quarter of 2007, and loss of $0.4 million, or $0.04 loss per share (diluted) in the first quarter of last year. Gross margins, on a non-GAAP basis, were 64.7% in the first quarter of 2008 compared to 64.9% in the fourth quarter of 2007.

Company Highlights

"We had record quarterly sales this quarter showing strong sequential and year-over-year growth," said Syed Ali, president and CEO of Cavium Networks. "We are experiencing strong design win traction and growth across all markets that we serve. In addition, we have continued to expand non-GAAP operating margins every quarter since our IPO. Non-GAAP operating margins have increased from just above breakeven in the first quarter of 2007 to 12.6% in the first quarter of 2008. Furthermore, non-GAAP operating income, which we consider to be an important measure of the health of our business, increased by 42% from Q4 2007 to Q1 2008 due to the strength in our business and leverage in our business model."


First Quarter 2008 Highlights:

--  April 9, 2008 - Kaspersky Lab extended their support for Cavium
    Networks' OCTEON Multi-core Processors with integration of complete
    Antivirus Protection that can be used across a wide range of networking
    equipment including routers, switches, access gateways, wireless access
    points and unified threat management equipment.
    
--  April 7, 2008 - Cavium Networks showcased over 20 OCTEON powered
    customer products and ecosystem partner solutions at the RSA Conference
    2008, April 8th-11th.
    
--  April 7, 2008 - Movidis announced the availability of their Universal
    Networked Storage (UNS) system that leverages Cavium Networks' OCTEON™
    CN38xx and CN58xx 16-core MIPS network processors.
    
--  March 12, 2008 - GE Fanuc Intelligent Platforms and Cavium Networks
    announced a strategic relationship for the development of next generation
    AdvancedMC™, PCI-X, PCI Express and AdvancedTCA™ platforms based on
    Cavium Networks' OCTEON™ family of products.
    
--  February 11, 2008 - Cavium Networks announces a new family of OCTEON
    based wireless products -- the OCTEON Plus CN52XX wireless dual-core and
    quad-core processor family for a wide range of wireless applications
    including 3G Transport, 4G Transport or LTE (Long Term Evolution), Wireless
    LAN Aggregation, WiMAX Basestation and WiMAX Transport.
    
--  February 11, 2008 - Cavium Networks announced a new family of OCTEON
    based storage processors -- the OCTEON Plus CN52XX networking and storage
    services processor family. These products provide high performance at
    aggressive price points for next generation secure routers, switches,
    security appliances, storage disk arrays and iSCSI to Fiber Channel
    bridges.
    
--  January 29, 2008 - Cavium Networks and Wind River announce an Advanced
    Multicore Device Debugging Solution that couples Wind River's Debugging and
    Compiler with Cavium Networks' OCTEON multicore processor family.
    
--  January 29, 2008 - RadiSys Corporation, a leading global provider of
    advanced embedded solutions, introduced their Promentum™ ATCA-7220 Dual
    OCTEON™ PLUS Packet Processing Module, designed with a Cavium Networks
    OCTEON Plus multi-core MIPS64 processor. The ATCA module enables a complete
    solution for packet processing applications such as Radio Network
    Controllers, session border control (SBC), security gateways, edge routers
    and media gateways.
    
--  January 21, 2008 - TRANGO Virtual Processors announced support for
    Cavium Networks' OCTEON processor customers, with user-data security,
    adaptive resource allocation, IO virtualization and power reduction by
    creating on-demand Virtual Processors across up to 16 Cavium Networks
    cnMIPS cores.
    

Conference Call

Cavium Networks will broadcast its first quarter 2008 financial results conference call today, April 16, 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 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 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 and India. 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. 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 Consolidated Statements of Operations
                 (In thousands, except per share amounts)

                                                    Three Months Ended
                                                  March 31,   December 31,
                                                ------------  ------------
                                                    2008          2007
                                                ------------  ------------

Revenue                                         $     18,342  $     16,231
Cost of revenue (1)                                    6,587         5,812
                                                ------------  ------------
Gross profit                                          11,755        10,419
                                                ------------  ------------
Operating expenses:
   Research and development (2)                        5,820         5,704
   Sales, general and administrative (3)               4,555         4,021
                                                ------------  ------------
      Total operating expenses                        10,375         9,725
                                                ------------  ------------
Income from operations                                 1,380           694
                                                ------------  ------------

Other income, net:
   Interest expense                                     (153)          (50)
   Interest income and other                             992         1,266
                                                ------------  ------------
Total other income, net                                  839         1,216
                                                ------------  ------------
   Income before income tax                            2,219         1,910
   Income tax (benefit) expense                          247           (59)
                                                ------------  ------------
Net income                                      $      1,972  $      1,969
                                                ============  ============
Net income per common share, basic              $       0.05  $       0.05
Shares used in computing basic net income per
 common share                                         39,966        39,522
Net income per common share, diluted            $       0.05  $       0.05
Shares used in computing diluted net income per
 common share                                         42,135        42,789


(1) Cost of revenue:
      Amortization of acquired technology       $         88  $         88
      Stock-based compensation and related
       taxes                                    $         29  $         19
(2) Research and development expense
      Stock-based compensation and related
       taxes                                    $        372  $        488
(3) Sales, general and administrative
      Stock-based compensation and related
       taxes                                    $        446  $        337



                          CAVIUM NETWORKS, INC.
             Unaudited Reconciliation of Non-GAAP Adjustments
                 (In thousands, except per share amounts)


                                                    Three Months Ended
                                                  March 31,   December 31,
                                                ------------  ------------
Reconciliation of GAAP gross profit & margin        2008          2007
 to non-GAAP:                                   ------------  ------------

Revenue                                         $     18,342  $     16,231
GAAP gross profit                                     11,755        10,419
GAAP gross margin                                       64.1%         64.2%
      Amortization of acquired technology:
         Cost of revenue                                  88            88
      Stock-based compensation and related taxes:
         Cost of revenue                                  29            19
                                                ------------  ------------
Non-GAAP gross profit                           $     11,872  $     10,526
                                                ============  ============
Non-GAAP gross margin                                   64.7%         64.9%
                                                ============  ============

                                                    Three Months Ended
                                                  March 31,   December 31,
                                                ------------  ------------
Reconciliation of GAAP income from operations       2008          2007
 to non-GAAP:                                   ------------  ------------
GAAP income from operations                     $      1,380  $        694
      Amortization of acquired technology                 88            88
      Stock-based compensation and related
       taxes                                             847           844
                                                ------------  ------------
Non-GAAP income from operations                 $      2,315  $      1,626
                                                ============  ============
Non-GAAP income from operations as a percentage
 of revenue                                             12.6%         10.0%
                                                ============  ============

                                                    Three Months Ended
                                                  March 31,   December 31,
                                                ------------  ------------
Reconciliation of GAAP net income to non-GAAP:      2008          2007
                                                ------------  ------------

GAAP net income                                 $      1,972  $      1,969
Non-GAAP adjustments:
      Stock-based compensation and related
       taxes:
         Cost of revenue                                  29            19
         Research and development                        372           488
         Sales, general and administrative               446           337
      Amortization of acquired technology:
         Cost of revenue                                  88            88
                                                ------------  ------------
      Total of non-GAAP adjustments                      935           932
                                                ------------  ------------
Non-GAAP net income                             $      2,907  $      2,901
                                                ============  ============

GAAP net income per share (diluted)             $       0.05  $       0.05
                                                ============  ============
   Non-GAAP adjustments detailed above                  0.02          0.02
Non-GAAP net income per share (diluted)         $       0.07  $       0.07
                                                ============  ============

GAAP weighted average shares (diluted)                42,135        42,789
   Non-GAAP adjustment                                   534           188
Non-GAAP weighted average shares (diluted)            42,669        42,977



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


                                                  March 31,   December 31,
                                                ------------  ------------
                                                    2008          2007
                                                ------------  ------------
Assets
Current assets:
   Cash and cash equivalents                    $     95,612  $     98,462
   Accounts receivable, net                           13,747         9,768
   Inventories                                        10,767         9,573
   Prepaid expenses and other current assets             952           946
                                                ------------  ------------
      Total current assets                           121,078       118,749
Property and equipment, net                           11,498        11,608
Intangible assets, net                                 3,774         4,096
Other assets                                             295           157
                                                ------------  ------------
      Total assets                              $    136,645  $    134,610
                                                ============  ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                             $      4,985  $      5,311
   Accrued expenses and other current
    liabilities                                        2,449         2,253
   Deferred revenue                                    2,506         1,666
   Capital lease and technology license
    obligations, current                               3,501         4,471
                                                ------------  ------------
      Total current liabilities                       13,441        13,701
Capital lease and technology license
 obligations, net of current                           3,432         4,059
                                                ------------  ------------
      Total liabilities                               16,873        17,760
                                                ------------  ------------

Stockholders' equity
   Common stock                                           40            40
   Additional paid-in capital                        176,490       175,540
   Accumulated deficit                               (56,758)      (58,730)
                                                ------------  ------------
      Total stockholders' equity                     119,772       116,850
                                                ------------  ------------
      Total liabilities and stockholders'
       equity                                   $    136,645  $    134,610
                                                ============  ============

Contact Information

  • Cavium Networks Contacts:

    Art Chadwick
    VP and Chief Financial Officer
    Tel: (650) 623-7033
    Email: Email Contact

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