Cavium Networks Inc. (CAVM, Financial) filed Quarterly Report for the period ended 2010-06-30.
Cavium Networks Inc. has a market cap of $1.19 billion; its shares were traded at around $26.83 with and P/S ratio of 11.8. CAVM is in the portfolios of RS Investment Management.
Since inception, we have invested heavily in new product development and our net revenue has grown from $19.4 million in 2005 to $34.2 million in 2006, $54.2 million in 2007, $86.6 million in 2008, $101.2 million in 2009 and $49.9 million in the six months ended June 30, 2010, driven primarily by demand in the enterprise network and data center markets, and more recently in 2009 the revenue growth was mainly due to increased demand in the broadband and consumer markets. We expect sales of our products for use in the enterprise network and data center markets to continue to represent a significant portion of our revenue in the foreseeable future, however, we do expect growth in the broadband and consumer as well as the access and servicer provider markets.
Our distributors, other than Avnet are used primarily to support international sale logistics in Asia, including importation and credit management. Total net revenue through distributors was $17.2 million and $8.5 million for the three months ended June 30, 2010 and 2009 respectively, which accounted for 34.5% and 37.3% of net revenue, respectively, and $31.3 million and $15.2 million for the six months ended June 30, 2010 and 2009, respectively, which accounted for 34.2% and 35.2% of net revenue, respectively. While we have purchase agreements with our distributors, the distributors do not have long-term contracts with any of the equipment providers. Our distributor agreements limit the distributors ability to return product up to a portion of purchases in the preceding quarter. Given our experience, along with our distributors limited contractual return rights, we believe we can reasonably estimate expected returns from our distributors. Accordingly, we recognize sales through distributors at the time of shipment, reduced by our estimate of expected returns.
Three and Six Months Ended June 30, 2010 Compared to the Three and Six Months Ended June 30, 2009: Sales, general and administrative expenses increased $7.0 million and $14.9 million, or 107.4% and 117.7% to $13.5 million and $27.6 million, respectively, in the three and six months ended June 30, 2010 from $6.5 million and $ 12.7 million, respectively in the three and six months ended June 30, 2009. Of the $7.0 million and $14.9 million increase in the three and six months ended June 30, 2010, respectively, salaries, benefits and commissions accounted for $3.8 million and $8.9 million, respectively, and stock-based compensation expense accounted for $1.3 million, and $2.5 million, respectively, in each case due to increased headcount. Professional services, trade shows and other miscellaneous expenses accounted for $1.9 million and $3.5 million of the increase in the three and six months ended June 30, 2010, respectively. Sales, general and administrative headcount increased to 151 at the end of June 2010 from 79 at the end of June 2009.
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Cavium Networks Inc. has a market cap of $1.19 billion; its shares were traded at around $26.83 with and P/S ratio of 11.8. CAVM is in the portfolios of RS Investment Management.
Highlight of Business Operations:
In the fourth quarter of 2009, we acquired MontaVista for a total purchase price of approximately $45.2 million. In addition, per the merger agreement, we paid approximately $6.0 million, consisting of a mix of shares of our common stock and cash to certain individuals in connection with the termination of MontaVistas 2006 Retention Compensation Plan. This acquisition complements our broad portfolio of multi-core processors to deliver integrated and optimized embedded solutions to the market.Since inception, we have invested heavily in new product development and our net revenue has grown from $19.4 million in 2005 to $34.2 million in 2006, $54.2 million in 2007, $86.6 million in 2008, $101.2 million in 2009 and $49.9 million in the six months ended June 30, 2010, driven primarily by demand in the enterprise network and data center markets, and more recently in 2009 the revenue growth was mainly due to increased demand in the broadband and consumer markets. We expect sales of our products for use in the enterprise network and data center markets to continue to represent a significant portion of our revenue in the foreseeable future, however, we do expect growth in the broadband and consumer as well as the access and servicer provider markets.
Our distributors, other than Avnet are used primarily to support international sale logistics in Asia, including importation and credit management. Total net revenue through distributors was $17.2 million and $8.5 million for the three months ended June 30, 2010 and 2009 respectively, which accounted for 34.5% and 37.3% of net revenue, respectively, and $31.3 million and $15.2 million for the six months ended June 30, 2010 and 2009, respectively, which accounted for 34.2% and 35.2% of net revenue, respectively. While we have purchase agreements with our distributors, the distributors do not have long-term contracts with any of the equipment providers. Our distributor agreements limit the distributors ability to return product up to a portion of purchases in the preceding quarter. Given our experience, along with our distributors limited contractual return rights, we believe we can reasonably estimate expected returns from our distributors. Accordingly, we recognize sales through distributors at the time of shipment, reduced by our estimate of expected returns.
Three and Six Months Ended June 30, 2010 Compared to the Three and Six Months Ended June 30, 2009: Sales, general and administrative expenses increased $7.0 million and $14.9 million, or 107.4% and 117.7% to $13.5 million and $27.6 million, respectively, in the three and six months ended June 30, 2010 from $6.5 million and $ 12.7 million, respectively in the three and six months ended June 30, 2009. Of the $7.0 million and $14.9 million increase in the three and six months ended June 30, 2010, respectively, salaries, benefits and commissions accounted for $3.8 million and $8.9 million, respectively, and stock-based compensation expense accounted for $1.3 million, and $2.5 million, respectively, in each case due to increased headcount. Professional services, trade shows and other miscellaneous expenses accounted for $1.9 million and $3.5 million of the increase in the three and six months ended June 30, 2010, respectively. Sales, general and administrative headcount increased to 151 at the end of June 2010 from 79 at the end of June 2009.
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