Science & Technology 
Science and Technology
Science and Technology 
Thu, January 29, 2009
Wed, January 28, 2009
Cavium Networks, Inc.: Cavium Networks Announces Financial Results for Q4 2008
MOUNTAIN VIEW, CA--(Marketwire - January 28, 2009) - Cavium Networks (
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 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, 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.
CAVIUM NETWORKS, INC. Unaudited GAAP Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended ------------------------ December 31, September 30, 2008 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 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 CAVIUM NETWORKS, INC. Unaudited Reconciliation of Non-GAAP Adjustments (In thousands, except per share amounts) Three Months Ended -------------------------- Reconciliation of GAAP gross profit & margin December 31, September 30, to non-GAAP: 2008 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 December 31, September 30, to non-GAAP: 2008 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, September 30, 2008 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(loss) 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) December 31, September 30, 2008 2008 ------------ ------------ Assets 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 ============ ============