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Riverbed Reports Third Quarter Fiscal Year 2014 Results(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 24 October 2014 Release date- 23102014 - SAN FRANCISCO- Riverbed Technology (NASDAQ:RVBD), the leader in application performance infrastructure, today reported financial results for its third quarter fiscal 2014 (Q3'14) ended September 30, 2014. Q3'14 GAAP Financials GAAP revenue for Q3'14 was $276 million, compared to $262 million in the third quarter of 2013 (Q3'13), representing 6% year-over-year growth. GAAP net income for Q3'14 was $11.5 million, or $0.07 per diluted share, compared to GAAP net income of $3.8 million, or $0.02 per diluted share, in Q3'13. (Dollars in millions, except EPS) Q3'14 Q2'14 Q3'13 Change Q/Q Change Y/Y Revenue $276 $264 $262 5% 6% Net Income $11.5 $6.8 $3.8 $4.7 $7.7 Diluted EPS $0.07 $0.04 $0.02 $0.03 $0.05 Q3'14 Non-GAAP Financials Non-GAAP revenue for Q3'14 was $277 million, an increase of 4% compared to $265 million in Q3'13. Non-GAAP net income for Q3'14 was $48.7 million compared to non-GAAP net income of $43.3 million in Q3'13. Non-GAAP earnings were $0.30 per diluted share for Q3'14 compared with $0.26 per diluted share in Q3'13, representing a 15% increase year-over-year. (Dollars in millions, except EPS) Q3'14 Q2'14 Q3'13 Change Q/Q Change Y/Y Revenue $277 $264 $265 5% 4% Net Income $48.7 $42.6 $43.3 $6.1 $5.4 Diluted EPS $0.30 $0.26 $0.26 $0.04 $0.04 'Our third quarter financial results were in-line with our revised guidance. While we are not satisfied with our top line performance, we are pleased to see steady growth in our SteelFusion and SteelCentral businesses,' said Jerry M. Kennelly, chairman and CEO. 'Our ongoing focus to gain increased operating leverage is evident in our Q3 results, delivering earnings per share in-line with our expectations. We've started to execute our previously announced restructuring plans to drive further operational improvements and remain committed to delivering profitable growth and enhancing shareholder value,' continued Kennelly. Q3'14 Business Highlights Strengthened VMware partnership by achieving VMware Ready - vCloud Air status on Riverbed SteelApp Traffic Manager, Riverbed SteelCentral Services Controller for SteelApp and Riverbed SteelHead CX application performance solutions. Named an inaugural member of the Microsoft Azure Certified Program and announced Riverbed SteelHead CX for IaaS (Infrastructure-as-a-Service) which can accelerate data and applications hosted by Azure up to 33x faster, while using up to 97% less bandwidth. Gained customer traction with Riverbed SteelFusion branch converged infrastructure solution: Deployed by Canadian based mining company, Alamos Gold, to centralize server, storage, and network infrastructure into a single branch appliance, improving data protection and increasing business performance. Deployed by WAMGROUP, industrial equipment manufacturer and longstanding SteelHead customer, to strengthen its disaster-recovery capabilities and provide resilient IT support for branch offices located in a seismic zone. Riverbed SteelCentral enabled Allianz, a global insurance provider, to resolve network performance issues up to 50% faster, resulting in improved productivity and a better customer experience. Appointed new board members and key executives: Mike Nefkens, Board of Directors; currently serves as Executive Vice President of Hewlett-Packard Enterprise Services Steffan Tomlinson, Board of Directors; currently serves as Chief Financial Officer of Palo Alto Networks Paul Mountford, Senior Vice President and Chief Sales Officer; seasoned industry veteran with 30 years of leadership experience in the technology sector, including 16 years with Cisco Q4'14 Outlook The Company provides the following financial guidance for the fourth quarter of fiscal year 2014, which reflects the partial quarter impact of the planned Q4 restructuring: Non-GAAP revenues are expected to be in the range of $285 million and $290 million Non-GAAP earnings per share are expected to be in the range of $0.31 to $0.33 per share Riverbed will host a conference call today, October 23, 2014 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its third quarter 2014 results and outlook for the fourth quarter of 2014. The call will be broadcast live over the Internet at http://www.riverbed.com/investors and a replay of the webcast will also be available for 12 months. Use of Non-GAAP Financial Information To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP revenue, non-GAAP net income and non-GAAP net income per share, which we believe are helpful in understanding our past financial performance and future results. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, 'GAAP to Non-GAAP Reconciliations.' Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods; as such, we believe it is useful for investors to understand the effects of these items on our total operating expenses. Our non-GAAP financial measures include adjustments based on the following items, as well as the related income tax effects, adjustments related to our tax valuation allowance and the interim tax cost of the one-time transfer of intellectual property rights between Riverbed legal entities: Support and services deferred revenue: Business combination accounting rules require us to account for the fair value of support and service contracts assumed in connection with our acquisitions. The book value of the acquisition deferred support and services revenue related to OPNET was reduced by $19 million in the adjustment to fair value. Because these are typically one to five year contracts, our GAAP revenues for the periods subsequent to the acquisition of a business do not reflect the full amount of service revenues on assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such revenues. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be certain that customers will renew these contracts. Inventory and cost of product revenue: Business combination accounting rules require us to account for the fair value of inventory acquired in connection with our acquisitions. The fair value of inventory is estimated as the selling price minus the estimated cost to sell. In the period subsequent to the acquisition, the cost of product revenue includes the higher fair value of the acquired inventory that would not have otherwise been recorded by the acquired entity. Stock-based compensation expenses: We have excluded the effect of stock-based compensation and related payroll tax expenses from our non-GAAP operating expenses and net income measures. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods. Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP net income. Amortization of intangible assets is a non-cash expense, and it is not part of our core operations. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future revenues as well. Acquisition related expenses: We incur significant expenses in connection with our acquisitions. Acquisition related expenses consist of transaction costs, costs for transitional employees, other acquired employee related retention costs, facilities consolidation and exit costs, integration related professional services, adjustments to the fair value of the acquisition related contingent consideration, the write-down of certain acquired in-progress research and development intangibles, and foreign exchange losses on the acquisition related contingent consideration. Other expenses are those which we would not otherwise have incurred in the periods presented as a part of our ongoing expenses. In the periods presented, Other expenses included: Operating lease not in service - We entered into an operating lease on a new corporate headquarters in San Francisco. The lease accounting rules require that rent expense begin on a straight line basis starting in the period that we have the right to access the new facility. We gained the right to access the facility in November 2013 to begin constructing our leasehold improvements. We occupied the new facility in the second quarter of 2014. We believe that the duplicate rent of the new facility during the construction period is not representative of the ongoing operating costs of the company. Non-routine corporate governance and shareholder matters - Beginning in the fourth quarter of 2013, we began incurring professional service fees related to non-routine corporate governance and shareholder matters. We believe these fees are not representative of the ongoing operating costs of the company. Forward Looking Statements This press release contains forward-looking statements, including statements relating to revenue and earnings growth, including guidance for the fourth quarter of fiscal 2014, restructuring plans to drive further operational improvements, and other forward opportunities. 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 our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; customer adoption rate of our products and our Application Performance Platform; our ability to establish and maintain successful relationships with our distribution partners; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to timely and effectively implement our restructuring plans; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; 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 Riverbed's business are set forth in our Form 10-K filed with the SEC for the period ended December 31, 2013, and our subsequent quarterly reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. Any future product, feature or related specification that may be referenced in this release are for information purposes only and are not commitments to deliver any technology or enhancement. Riverbed reserves the right to modify future product plans at any time. Riverbed Technology GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Three months ended Nine months ended September 30, September 30, 2014 2013 2014 2013 Revenue: Product $ 153,383 $ 153,167 $ 448,458 $ 444,690 Support and services 122,991 108,556 357,358 313,082 Total revenue 276,374 261,723 805,816 757,772 Cost of revenue: Cost of product 36,945 41,772 111,614 123,135 Cost of support and services 33,393 29,085 97,657 87,020 Total cost of revenue 70,338 70,857 209,271 210,155 Gross profit 206,036 190,866 596,545 547,617 Operating expenses: Sales and marketing 113,100 116,257 338,535 345,351 Research and development 53,354 49,461 155,299 149,440 General and administrative 18,698 17,729 58,102 55,164 Acquisition-related costs 1,866 4,882 4,806 16,085 Total operating expenses 187,018 188,329 556,742 566,040 Operating profit (loss) 19,018 2,537 39,803 (18,423 ) Interest and other expense, net (2,773 ) (5,063 ) (8,199 ) (17,336 ) Income (loss) before provision for income taxes 16,245 (2,526 ) 31,604 (35,759 ) Provision for (benefit from) income taxes 4,761 (6,344 ) 10,067 (14,946 ) Net income (loss) $ 11,484 $ 3,818 $ 21,537 $ (20,813 ) Net income (loss) per share, basic $ 0.07 $ 0.02 $ 0.14 $ (0.13 ) Net income (loss) per share, diluted $ 0.07 $ 0.02 $ 0.13 $ (0.13 ) Shares used in computing basic net income (loss) per share 157,575 162,929 159,448 163,430 Shares used in computing diluted net income (loss) per share 162,323 167,692 164,096 163,430 Riverbed Technology Condensed Consolidated Balance Sheets In thousands Unaudited September 30, December 31, 2014 2013 ASSETS Current assets: Cash and cash equivalents $ 207,782 $ 208,022 Short-term investments 189,938 251,339 Trade receivables, net 114,411 93,836 Inventory 17,517 25,025 Deferred tax assets 17,807 7,222 Prepaid expenses and other current assets 58,793 49,016 Total current assets 606,248 634,460 Long-term investments 78,948 72,675 Fixed assets, net 74,133 57,810 Goodwill 704,305 704,305 Intangible assets, net 340,007 404,467 Other assets 20,928 23,881 Total assets $ 1,824,569 $ 1,897,598 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 41,611 $ 45,518 Accrued compensation and related benefits 47,813 51,988 Other accrued liabilities 56,214 36,520 Current maturities of long-term borrowings 15,000 15,000 Deferred revenue 228,038 217,131 Total current liabilities 388,676 366,157 Deferred revenue, non-current 84,041 95,344 Borrowings, non-current, net of current maturities 498,750 510,000 Deferred tax liability, non-current 38,939 48,548 Other long-term liabilities 47,896 48,910 Total long-term liabilities 669,626 702,802 Stockholders' equity: Common stock 622,920 702,928 Retained earnings 146,832 125,295 Accumulated other comprehensive income (loss) (3,485 ) 416 Total stockholders' equity 766,267 828,639 Total liabilities and stockholders' equity $ 1,824,569 $ 1,897,598 Riverbed Technology Condensed Consolidated Statements of Cash Flows In thousands Unaudited Nine months ended September 30, 9/30/2014 9/30/2013 Operating activities: Net income (loss) $ 21,537 $ (20,813 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 85,564 94,617 Stock-based compensation 67,929 75,159 Deferred taxes (19,962 ) (43,985 ) Excess tax benefit from employee stock plans (5,893 ) (5,507 ) Amortization of deferred debt issuance costs 683 1,736 Changes in operating assets and liabilities: Trade receivables (20,575 ) 12,396 Inventory 7,508 (7,512 ) Prepaid expenses and other assets (5,457 ) (5,690 ) Accounts payable 1,980 (10,038 ) Accruals and other liabilities 14,505 1,561 Income taxes payable 2,362 (1,714 ) Deferred revenue (396 ) 38,179 Net cash provided by operating activities 149,785 128,389 Investing activities: Capital expenditures (43,314 ) (18,284 ) Purchase of available for sale securities (241,263 ) (317,399 ) Proceeds from maturities of available for sale securities 237,706 236,562 Proceeds from sales of available for sale securities 57,245 15,045 Acquisitions, net of cash and cash equivalents acquired (679 ) (1,000 ) Net cash provided by (used in) investing activities 9,695 (85,076 ) Financing activities: Proceeds from issuance of common stock under employee stock plans 53,413 56,293 Cash used related to net shares settlement of equity awards (8,141 ) (4,289 ) Payments for repurchases of common stock (195,571 ) (125,081 ) Payment of borrowings (11,250 ) (50,015 ) Excess tax benefit from employee stock plans 5,893 5,507 Net cash used in financing activities (155,656 ) (117,585 ) Effect of exchange rate changes on cash and cash equivalents (4,064 ) 1,574 Net decrease in cash and cash equivalents (240 ) (72,698 ) Cash and cash equivalents at beginning of period 208,022 280,509 Cash and cash equivalents at end of period $ 207,782 $ 207,811 Riverbed Technology Supplemental Financial Information In thousands Unaudited Three months ended Nine months ended September 30, June 30, September 30, September 30, September 30, 2014 2014 2013 2014 2013 Revenue by Geography Americas United States $ 166,397 $ 145,223 $ 154,843 $ 464,580 $ 452,812 Other 8,153 9,521 9,172 25,531 26,244 Total Americas 174,550 154,744 164,015 490,111 479,056 Europe, Middle East and Africa 71,185 69,421 64,179 209,637 181,445 Asia Pacific 30,639 39,861 33,529 106,068 97,271 Total revenue $ 276,374 $ 264,026 $ 261,723 $ 805,816 $ 757,772 As a percentage of total revenues: Americas United States 60 % 55 % 59 % 58 % 60 % Other 3 % 4 % 4 % 3 % 3 % Total Americas 63 % 59 % 63 % 61 % 63 % Europe, Middle East and Africa 26 % 26 % 25 % 26 % 24 % Asia Pacific 11 % 15 % 12 % 13 % 13 % Total revenue 100 % 100 % 100 % 100 % 100 % Revenue by Sales Channel Direct $ 26,060 $ 22,519 $ 28,654 $ 79,979 $ 120,611 Indirect 250,314 241,507 233,069 725,837 637,161 Total revenue $ 276,374 $ 264,026 $ 261,723 $ 805,816 $ 757,772 As a percentage of total revenues: Direct 9 % 9 % 11 % 10 % 16 % Indirect 91 % 91 % 89 % 90 % 84 % Total revenue 100 % 100 % 100 % 100 % 100 % Riverbed Technology GAAP to Non-GAAP Reconciliation In thousands, except per share amounts Unaudited Three months ended Nine months ended September 30, June 30, September 30, September 30, September 30, GAAP to Non-GAAP Reconciliations: 2014 2014 2013 2014 2013 Reconciliation of Total revenue: U.S. GAAP as reported $ 276,374 $ 264,026 $ 261,723 $ 805,816 $ 757,772 Adjustments: Deferred revenue adjustment (6) 325 374 3,250 1,208 14,571 As adjusted $ 276,699 $ 264,400 $ 264,973 $ 807,024 $ 772,343 Reconciliation of Net income (loss): U.S. GAAP as reported $ 11,484 $ 6,765 $ 3,818 $ 21,537 $ (20,813 ) Adjustments: Stock-based compensation (1) 24,608 21,572 25,104 67,929 75,159 Payroll tax on stock-based compensation (2) (247 ) 1,196 63 1,247 1,532 Amortization on intangibles (3) 21,122 21,328 25,817 64,460 77,945 Acquisition-related costs (5) 1,877 292 4,902 4,899 17,217 Inventory fair value adjustment (4) - - - - 1,700 Deferred revenue adjustment (6) 325 374 3,250 1,208 14,571 Other expense (7) 626 3,065 - 6,087 - Income tax adjustments (8) (11,055 ) (11,983 ) (19,698 ) (35,612 ) (48,839 ) As adjusted $ 48,740 $ 42,609 $ 43,256 $ 131,755 $ 118,472 Reconciliation of Net income (loss) per share, diluted: U.S. GAAP as reported $ 0.07 $ 0.04 $ 0.02 $ 0.13 $ (0.13 ) Adjustments: Stock-based compensation (1) 0.15 0.13 0.15 0.41 0.45 Payroll tax on stock-based compensation (2) - 0.01 - 0.01 0.01 Amortization on intangibles (3) 0.13 0.13 0.15 0.39 0.46 Acquisition-related costs (credits) (5) 0.01 - 0.03 0.03 0.10 Inventory fair value adjustment (4) - - - - 0.01 Deferred revenue adjustment (6) - - 0.03 0.01 0.09 Other expense (7) - 0.02 - 0.04 - Income tax adjustments (8) (0.06 ) (0.07 ) (0.12 ) (0.22 ) (0.29 ) As adjusted $ 0.30 $ 0.26 $ 0.26 $ 0.80 $ 0.70 Non-GAAP Net income per share, basic $ 0.31 $ 0.27 $ 0.27 $ 0.83 $ 0.72 Non-GAAP Net income per share, diluted $ 0.30 $ 0.26 $ 0.26 $ 0.80 $ 0.70 Shares used in computing basic net income per share 157,575 160,580 162,929 159,448 163,430 Shares used in computing diluted net income per share 162,323 164,650 167,692 164,096 168,411 Non-GAAP adjustments: Product revenue $ 24 $ 24 $ 87 $ 81 $ 87 Support and services revenue 301 350 3,163 1,127 14,484 Cost of product 10,868 11,021 12,201 33,326 38,226 Cost of support and services 1,954 2,488 2,209 6,808 6,576 Sales and marketing 20,357 19,478 24,236 61,104 74,536 Research and development 8,029 7,856 8,697 23,567 26,103 General and administrative 4,912 6,338 3,661 15,011 12,027 Acquisition-related costs 1,866 272 4,882 4,806 16,085 Provision for income taxes (11,055 ) (11,983 ) (19,698 ) (35,612 ) (48,839 ) Total Non-GAAP adjustments $ 37,256 $ 35,844 $ 39,438 $ 110,218 $ 139,285 _____________ (1) Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, Compensation - Stock Compensation effective January 1, 2006. (2) Payroll tax on stock-based compensation represents the incremental cost for employer payroll taxes on stock option exercises and restricted stock units vested and released. (3) The intangible assets recorded at fair value as a result of our acquisition are amortized over the estimated useful life of the respective asset. (4) The inventory fair value adjustment recorded pursuant to our acquisition is excluded from our non-GAAP operating expenses as this cost would not have otherwise occurred in the period presented. (5) We incurred expenses in connection with our acquisitions, which would not have otherwise occurred in the period presented as part of our operating expenses; therefore, these costs, including transaction costs, integration costs, employee retention and severance costs, restructuring costs, write-down of certain acquired in-process research and development intangibles, and revaluation of the fair value of contingent consideration, are excluded from our non-GAAP operating expenses. (6) Business combination accounting rules require us to account for the fair value of deferred revenue assumed in connection with an acquisition. The non-GAAP adjustment is intended to reflect the full amount of support and service revenue that would have otherwise been recorded by the acquired entity. (7) Other expense, net, includes expenses associated with non-routine corporate governance and shareholder matters and rent expense related to the new corporate headquarters, which is the amount of straight-line rent expense incurred from the date we gained the right to access to the facility for construction purposes prior to the date of occupancy in May 2014. (8) The non-GAAP tax rate excludes the income tax effects of non-GAAP adjustments. Additionally, the non-GAAP tax rate includes adjustments to our tax valuation allowance on deferred tax assets and excludes the interim tax cost of the one-time transfer of intellectual property rights between our legal entities. About Riverbed Riverbed, at more than $1 billion in annual revenue, is the leader in Application Performance Infrastructure, delivering the most complete platform for Location-Independent Computing. Location-Independent Computing turns location and distance into a competitive advantage by allowing IT to have the flexibility to host applications and data in the most optimal locations while ensuring applications perform as expected, data is always available when needed, and performance issues are detected and fixed before end users notice. Riverbed's 25,000+ customers include 97% of both the Fortune 100 and the Forbes Global 100. Learn more at www.riverbed.com. Riverbed and any Riverbed product or service name or logo used herein are trademarks of Riverbed Technology, Inc. All other trademarks used herein belong to their respective owners. (c) 2014 Electronic News Publishing - |