SOURCE: Cavium Networks, Inc.

Cavium Networks, Inc.

January 28, 2010 16:00 ET

Cavium Networks Announces Financial Results for Q4 2009

MOUNTAIN VIEW, CA--(Marketwire - January 28, 2010) - Cavium Networks, Inc. (NASDAQ: CAVM), a leading provider of semiconductor products that enable intelligent processing for networking, communications and the connected home, today announced financial results for the fourth quarter of 2009 ended December 31, 2009.

Revenue in the fourth quarter of 2009 was $32.1 million, a 24% sequential increase from the $25.9 million reported for the third quarter of 2009 and an increase of 45% from the $22.2 million reported for the fourth quarter of last year. Our results for the fourth quarter were slightly favorable to the positive pre-announcement we made on December 17, 2009 regarding expectations for the quarter.

Generally Accepted Accounting Principles (GAAP) Results

Net loss for the fourth quarter of 2009, on a GAAP basis, was $4.5 million, or $0.11 per share, compared to a net loss of $4.2 million, or $0.10 per share in the third quarter of 2009, and net loss of $4.4 million, or $0.11 per diluted share in the fourth quarter of last year. Gross margins were 51.5% in the fourth quarter of 2009 compared to 51.5% in the third quarter of 2009 and 49.8% in the fourth quarter of 2008. Total cash and cash equivalents were $58.9 million at December 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 fourth quarter of 2009 exclude expenses totaling $8.3 million related to stock-based compensation and related payroll expense, amortization of acquired intangible assets and acquisition related compensation expense and other acquisition related expenses. 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 2009, on a non-GAAP basis, was $3.8 million, or $0.08 per diluted share, compared with non-GAAP net income of $0.8 million, or $0.02 per share in the third quarter of 2009 and net income of $0.7 million, or $0.02 per diluted share in the fourth quarter of last year. Gross margins, on a non-GAAP basis, were 58.9% in the fourth quarter of 2009 compared to 55.7% in the third quarter of 2009.

"We had record sales this quarter due to growth across multiple markets, especially in the enterprise and data center markets. We had record bookings and design wins during the quarter. New product ramps are in early stages at a number of tier-1 customers and this is driving higher revenue and growth rates for us. Non-GAAP gross margins have continued to expand continuing the trend of last few quarters, and increased 320 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. Non-GAAP operating margins increased from 4% in the third quarter to 12% this quarter, showing the leverage in our operating model," 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 1 to 32 cores), our NITROX DPI Family of Layer 7 Content Processors, as well as our new ECONA ARM-based processors network for the connected home and office applications and the PureVu family of products for highly interactive video applications and display. We demonstrated the ECONA and PureVu products at the CES show in January and customer response has been extremely positive."

Recent News Highlights:

--  Oct 12, 2009 -- Cavium Networks announced the demonstration of OCTEON™
    multi-core MIPS64 storage processors at the Storage Networking World
    Conference in Phoenix, Arizona.
--  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.
--  Nov 9, 2009 -- Cavium Networks demonstrates netHD™ (Networked High
    Definition) Wi-Fi Reference Design for In-Home Networked Video Distribution
    at TelcoTV 2009.
--  Nov 10, 2009 -- Cavium Networks signs a definitive agreement to acquire
    MontaVista Software.  The acquisition enables delivery of complete
    solutions for embedded device manufacturers and drives entry into high-
    growth commercial grade embedded Linux software market.
--  Nov 17, 2009 -- Cavium Networks announces the world's fastest FIPS 140-2
    Level 3 Certified Hardware Security Modules for government, healthcare &
    financial applications.
--  Dec 17, 2009 -- Cavium Networks announces positive upside guidance for Q4
    2009.
--  Dec 18, 2009 -- Cavium Completes acquisition MontaVista Software.
--  Jan 6, 2010 -- Cavium Networks announces a new family of PureVu™
    single chip processors for mass market adoption in wireless displays, home
    video distribution, and video conferencing. The PureVu™ CNW5XXX family
    combines Cavium's Super-Low-Latency (SLL) H.264 video processor, high
    performance NITROX security technology, and intelligent networking and
    packet processing capabilities in a fully integrated SoC. The high degree
    of integration will provide OEMs with a single chip solution to enable mass
    market adoption in devices such as flat panel TVs, Blu-ray players,
    notebook PCs and netbooks, gaming consoles, as well as SMB and SOHO video
    communication systems.
--  Jan 6, 2010 -- Cavium Networks announces an ultra compact Display
    MiniCard (DMC) for low power, high performance, and low latency wireless
    display capability for Notebook PCs and Netbooks.
--  Jan 7, 2010 -- Quanta Microsystems selects Cavium's PureVu™ video
    processor for display MiniCard Modules targeting Notebook PCs and wireless
    displays.
--  Jan 7, 2010 -- Cavium Networks announced that D-Link, Compal Electronics,
    Accton, Zinwell, and others had selected Cavium's PureVu™ video
    processors to offer wireless display and home video distribution products.
    

Conference Call

Cavium Networks, Inc. will broadcast its fourth quarter 2009 financial results conference call today, January 28th, 2010, 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 semiconductor products that enable intelligent processing for networking, communications and the connected home. Cavium Networks offers a broad portfolio of integrated, software-compatible processors ranging in performance from 10 Mbps to 40 Gbps that enable secure, intelligent functionality in enterprise, data-center, broadband/consumer and access and 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, CA 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, acceptance by customers of Cavium's new product introductions, whether or not the company can continue to expand gross margins and operating margins, 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.


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


                                               Three Months Ended
                                      ------------------------------------
                                        December 31,       September 30,
                                            2009                2009
                                      -----------------  -----------------

Net revenue                           $          32,134  $          25,894
Cost of revenue                                  15,592             12,567
                                      -----------------  -----------------
Gross profit                                     16,542             13,327
                                      -----------------  -----------------
Operating expenses:
  Research and development                       11,788             10,629
  Sales, general and
   administrative                                 9,341              6,647
                                      -----------------  -----------------
    Total operating expenses                     21,129             17,276
                                      -----------------  -----------------
Loss from operations                             (4,587)            (3,949)
                                      -----------------  -----------------
Other income (expense), net:
  Interest expense                                  (44)               (54)
  Interest income and other, net                    102                  4
                                      -----------------  -----------------
Total other income (expense), net                    58                (50)
                                      -----------------  -----------------
  Loss before provision (benefit)
   for income taxes                              (4,529)            (3,999)
  Provision (benefit) for income
   taxes                                             (2)               167
                                      -----------------  -----------------
Net loss                              $          (4,527) $          (4,166)
                                      =================  =================
Net loss per common share, basic and
 diluted                              $           (0.11) $           (0.10)

Shares used in computing basic and
 diluted net loss per common share               41,984             41,447




                                  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                           $          11,788  $          10,629
    Stock-based compensation
     and related payroll taxes                   (1,575)            (1,522)
    Acquisition related
     compensation expense                          (696)              (754)
    Acquisition-related
     expenses                                      (208)                 -
                                      -----------------  -----------------
  Non-GAAP research and
   development expenses               $           9,309  $           8,353
                                      =================  =================
Reconciliation of GAAP sales,
 general and administrative
 expenses to non-GAAP
  GAAP sales, general and
   administrative expenses            $           9,341  $           6,647
    Stock-based compensation
     and related payroll taxes                   (1,606)            (1,491)
    Acquisition-related expenses                 (1,009)                 -
    Amortization of acquired
     intangibles                                    (51)               (35)
    Acquisition related
     compensation expense                          (768)               (18)
                                      -----------------  -----------------
  Non-GAAP sales, general and
   administrative expenses            $           5,907  $           5,103
                                      -----------------  -----------------





                             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 to non-GAAP:               December 31, 2009   September 30, 2009
                                    ------------------  ------------------
Net revenue                         $           32,134  $           25,894
GAAP gross profit                               16,542              13,327
GAAP gross margin                                 51.5%               51.5%
    Amortization of acquired
     intangibles:
      Cost of revenue                            2,281               1,008
    Stock-based compensation and
     related payroll taxes:
      Cost of revenue                              103                  96
                                    ------------------  ------------------
Non-GAAP gross profit               $           18,926  $           14,431
                                    ==================  ==================
Non-GAAP gross margin                             58.9%               55.7%
                                    ==================  ==================
                                              Three Months Ended
Reconciliation of GAAP loss from    --------------------------------------
operations to non-GAAP:              December 31, 2009  September 30, 2009
                                    ------------------  ------------------
GAAP loss from operations           $           (4,587) $           (3,949)
    Amortization of acquired
     intangibles                                 2,332               1,043
    Stock-based compensation and
     related payroll taxes                       3,284               3,109
    Acquisition-related expenses                 1,217                   -
    Acquisition related
     compensation expense                        1,464                 772
                                    ------------------  ------------------
Non-GAAP income  from operations    $            3,710  $              975
                                    ==================  ==================
Non-GAAP income from operations as
 a percentage of revenue                          11.5%                3.8%
                                    ==================  ==================
                                              Three Months Ended
Reconciliation of GAAP net loss to  --------------------------------------
non-GAAP:                           December 31, 2009  September 30, 2009
                                    ------------------  ------------------
GAAP net loss                       $           (4,527) $           (4,166)
Non-GAAP adjustments:
  Stock-based compensation and
   related payroll taxes:
    Cost of revenue                                103                  96
    Research and development                     1,575               1,522
    Sales, general and
     administrative                              1,606               1,491
  Amortization of acquired
   intangibles:
    Cost of revenue                              2,281               1,008
    Sales, general and
     administrative                                 51                  35
  Acquisition-related expenses                   1,217                   -
  Acquisition related
   compensation expense                          1,464                 772
                                    ------------------  ------------------
  Total of non-GAAP adjustments                  8,297               4,924
                                    ------------------  ------------------
Non-GAAP net income                 $            3,770  $              758
                                    ==================  ==================


GAAP net loss per share (diluted)   $            (0.11) $            (0.10)
                                    ==================  ==================
  Non-GAAP adjustments detailed
   above                                          0.19                0.12
Non-GAAP net income per share
 (diluted)                          $             0.08  $             0.02
                                    ==================  ==================

GAAP weighted average shares
 (diluted)                                      41,984              41,447
  Non-GAAP share adjustment                      4,673               4,528
                                    ------------------  ------------------
Non-GAAP weighted average shares
 (diluted)                                      46,657              45,975





                          CAVIUM NETWORKS, INC.
            Unaudited GAAP Condensed Consolidated Balance Sheets
                            (In thousands)
                                                           As of
                                                 --------------------------
                                                 December 31, September 30,
                                                      2009       2009
                                                 ------------- ------------
Assets
Current assets:
  Cash and cash equivalents                      $     58,918 $     70,693
  Accounts receivable, net                             21,958       11,717
  Inventories                                          17,965       18,313
  Prepaid expenses and other current assets             2,168        2,941
                                                 ------------ ------------
    Total current assets                              101,009      103,664
Property and equipment, net                            14,972        8,404
Intangible assets, net                                 25,388       13,120
Goodwill                                               56,607       13,027
Other assets                                            1,819          433
                                                 ------------ ------------
    Total assets                                 $    199,795 $    138,648
                                                 ============ ============

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                               $     10,784 $      7,102
  Accrued expenses and other current liabilities        8,445        3,081
  Deferred revenue                                     12,612        1,444
  Capital lease and technology license
   obligations, current                                 3,271        2,886
                                                 ------------ ------------
    Total current liabilities                          35,112       14,513
Capital lease and technology license obligations,
 net of current                                         5,741          449
Other non-current liabilities                           2,569        1,665
                                                 ------------ ------------
    Total liabilities                                  43,422       16,627
                                                 ------------ ------------

Stockholders' equity
  Common stock                                             44           42
  Additional paid-in capital                          234,946      196,069
  Accumulated deficit                                 (78,617)     (74,090)
                                                 ------------ ------------
    Total stockholders' equity                        156,373      122,021
                                                 ------------ ------------
    Total liabilities and stockholders' equity   $    199,795 $    138,648
                                                 ------------ ------------

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