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Riverbed Technology, Inc. (RVBD), the performance company, today
reported financial results for its third quarter ended September 30,
2012 (Q3’12).
GAAP revenue for Q3’12 was $219 million, an increase of 10% compared to
$198 million in the second quarter 2012 (Q2’12) and an increase of 15%
compared to $190 million in the third quarter 2011 (Q3’11). GAAP net
income for Q3’12 was $25 million, or $0.15 per diluted share, compared
to $18 million, or $0.11 per diluted share, in Q2’12 and $19 million, or
$0.12 per diluted share, in Q3’11.
Non-GAAP revenue for Q3’12 was $219 million, an increase of 10% compared
to $199 million in Q2’12 and an increase of 15% compared to $191 million
in Q3’11. Non-GAAP net income for Q3’12 was $46 million, or $0.28 per
diluted share, compared to $37 million, or $0.23 per diluted share, in
Q2’12 and $40 million, or $0.24 per diluted share, in Q3’11.
"The results we are announcing today reflect Riverbed’s position as a
leader in the evolution to the software defined data center," said Jerry
M. Kennelly, President and CEO. "Sales of new products continued to ramp
in the third quarter, and we saw strong enterprise growth as customers
embrace Riverbed as a strategic vendor whose products deliver the best
performance and highest availability."
"Healthy revenue growth and good cost control generated record profits,"
added Randy S. Gottfried, Chief Financial Officer. "Cash and investments
grew by more than $100 million and totaled more than $670 million at
September 30, 2012."
Financial Highlights
--
Total revenue increased 10% sequentially and 15% year-over-year to
record $219 million
--
Product revenue increased 12% sequentially and 9% year-over-year to
record $145 million
--
Record Non-GAAP gross margin of 79.6%, compared to 77.8% in Q2’12
--
Non-GAAP operating profit increased 26% sequentially and 10%
year-over-year to record $63 million
--
Non-GAAP net income increased 23% sequentially and 15% year-over-year
to record $46 million
--
Total cash and investments of $670 million at September 30, 2012,
compared to $550 million at June 30, 2012, and $559 million at
September 30, 2011
Business Highlights
--
Upgraded Riverbed(R) Optimization System (RiOS(R)), the software that
powers the Steelhead(R) appliance, with the addition of inbound quality
of service (QoS). Inbound QoS provides the control needed over all
incoming traffic to guarantee stable bandwidth with predictable levels
of performance.
--
Enhanced strategic relationship with VMware across all Riverbed
product solutions
--
Riverbed Cloud Steelhead will be further integrated with VMware
vCloud Director to simplify deployment, configuration, and
management of wide area network optimization-as-a-service for the
Virtual Data Center
--
Previewed a solution leveraging Riverbed Granite(TM) edge virtual
server infrastructure (edge-VSI) to deliver higher performance for
distributed VMware View environments
--
Riverbed Cascade(R) will support VMware VXLAN providing IT
organizations with an application-aware network performance
management solution for software defined networking
--
Integrated Riverbed Stingray(TM) Traffic Manager with VMware vFabric
Application Director to allow customers to create application
blueprints that can be used to provision and scale multi-tier
applications, faster and smarter in a hybrid cloud environment
--
Steelhead Cloud Accelerator received the Best of TechEd Award in the
Cloud Computing category
--
Launched Cascade 9.6 reinforcing commitment to the Federal market
--
Met the testing requirements of the Joint Interoperability Test
Command (JITC), a military organization under the Defense
Information Systems Agency (DISA)
--
Achieved Federal Information Processing Standard (FIPS) and the
Security Technical Implementation Guide (STIG) validations
--
Reached EAL3+ Evaluation Status under the Common Criteria for
Information Technology Security Evaluation and Certification
Scheme (CCS)
--
Introduced new Whitewater(R) 3010 cloud storage gateway model appliance
that offers four times the local storage capacity of previous models
to handle larger backup data workloads for large scale enterprise
requirements
--
Named one of the Top Workplaces for 2012, according to a survey
published by the Bay Area Newspaper Group, which includes the Contra
Costa Times, InsideBayArea.com, the Oakland Tribune and the San Jose
Mercury News
Conference Call
Riverbed will host a conference call today, October 18, 2012, at 1:30
p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its third quarter
2012 results. The call will be broadcast live over the Internet at http://www.riverbed.com/investors
and a replay of the webcast will 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 gross margin, non-GAAP operating
profit, non-GAAP net income and non-GAAP net income per diluted 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. 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 deferred revenue: Business
combination accounting rules require us to account for the fair value of
support contracts assumed in connection with our acquisitions. The book
value of the acquisition deferred support revenue was reduced by $4
million in the adjustment to fair value. Because these are typically
one-year contracts, our GAAP revenues for an one year period 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.
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 period
revenues as well.
Acquisition related and other expenses: We
incur significant expenses in connection with our acquisitions and also
incurred certain other operating expenses, which we would not have
otherwise incurred in the periods presented as a part of our continuing
operations. Acquisition related and other expenses consist of
transaction costs, costs for transitional employees, other acquired
employee related retention 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. We believe it is useful
for investors to understand the effects of these items on our total
operating expenses.
Forward-Looking Statements
This press release contains forward-looking statements, including
statements relating to our strategic and competitive position and the
growth of our addressable markets. 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; the adoption rate of our products; 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; shortages
or price fluctuations in our supply chain; our ability to protect our
intellectual property rights; general political, economic and market
conditions and events; difficulties encountered in integrating new or
acquired businesses and technologies; the inability to identify and
realize the anticipated benefits of acquisitions; the expense and impact
of legal proceedings; 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, 2011, and our subsequent
quarterly reports on Form 10-Q 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 disclaim any 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.
About Riverbed Technology
Riverbed delivers performance for the globally connected enterprise.
With Riverbed, enterprises can successfully and intelligently implement
strategic initiatives such as virtualization, consolidation, cloud
computing, and disaster recovery without fear of compromising
performance. By giving enterprises the platform they need to understand,
optimize and consolidate their IT, Riverbed helps enterprises to build a
fast, fluid and dynamic IT architecture that aligns with the business
needs of the organization. Additional information about Riverbed
(RVBD) is available 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.
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,
------------------------ ----------------------
2012 2011 2012 2011
--------------- --------------- --------------- ------------
Revenue:
Product $ 144,605 $ 132,061 $ 391,008 $ 361,073
Support and services 73,992 57,722 208,470 162,568
------------ ------------ ------------ ------------
Total revenue 218,597 189,783 599,478 523,641
Cost of revenue:
Cost of product 30,985 26,968 89,412 74,386
Cost of support and services 19,072 17,998 57,112 49,633
------------ ------------ ------------ ------------
Total cost of revenue 50,057 44,966 146,524 124,019
------------ ------------ ------------ ------------
Gross profit 168,540 144,817 452,954 399,622
Operating expenses:
Sales and marketing 81,934 70,208 233,115 195,029
Research and development 36,139 30,999 106,052 89,250
General and administrative 13,884 15,353 44,010 43,949
Acquisition-related costs (credits) (2,865 ) 2,732 (12,505 ) 4,124
-------------- ------------ -------------- ------------
Total operating expenses 129,092 119,292 370,672 332,352
------------ ------------ ------------ ------------
Operating profit 39,448 25,525 82,282 67,270
Other income (expense), net 5 (151 ) (1,241 ) 688
------------ -------------- -------------- ------------
Income before provision for income taxes 39,453 25,374 81,041 67,958
Provision for income taxes 14,723 6,049 31,228 24,305
------------ ------------ ------------ ------------
Net income $ 24,730 $ 19,325 $ 49,813 $ 43,653
=== ======= === ======= === ======= === =======
Net income per share, basic $ 0.16 $ 0.12 $ 0.32 $ 0.28
Net income per share, diluted $ 0.15 $ 0.12 $ 0.30 $ 0.26
Shares used in computing basic net income per share 153,823 155,367 156,313 153,981
Shares used in computing diluted net income per share 161,877 167,031 164,880 166,920
Riverbed Technology
Condensed Consolidated Balance Sheets
In thousands
September 30, December 31,
2012 2011
-------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 279,281 $ 215,476
Short-term investments 253,770 254,753
Trade receivables, net 86,413 78,016
Inventory 18,840 11,437
Deferred tax assets 16,856 16,783
Prepaid expenses and other current assets 36,385 35,078
--------------- ---------------
Total current assets 691,545 611,543
--------------- ---------------
Long-term investments 137,053 123,134
Fixed assets, net 35,842 29,277
Goodwill 117,626 117,474
Intangible assets, net 57,895 68,274
Deferred tax assets, non-current 52,159 56,708
Other assets 23,263 24,789
--------------- ---------------
Total assets $ 1,115,383 $ 1,031,199
==== ========= ==== =========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 38,816 $ 35,341
Accrued compensation and related benefits 37,853 61,256
Other accrued liabilities 27,704 42,959
Deferred revenue 152,956 121,131
--------------- ---------------
Total current liabilities 257,329 260,687
--------------- ---------------
Deferred revenue, non-current 87,641 36,248
Other long-term liabilities 25,026 23,200
--------------- ---------------
Total long-term liabilities 112,667 59,448
--------------- ---------------
Stockholders’ equity:
Common stock 613,889 631,921
Retained earnings 132,929 83,116
Accumulated other comprehensive loss (1,431 ) (3,973 )
------------------- -------------------
Total stockholders’ equity 745,387 711,064
--------------- ---------------
Total liabilities and stockholders’ equity $ 1,115,383 $ 1,031,199
==== ========= ==== =========
Riverbed Technology
Condensed Consolidated Statements of Cash Flows
In thousands
Unaudited
Nine months ended
September 30,
--------------------------------------
2012 2011
------------------ ------------------
Operating activities:
Net income $ 49,813 $ 43,653
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 27,743 16,477
Stock-based compensation 66,170 68,000
Deferred taxes 4,655 (6,463 )
Excess tax benefit from employee stock plans (14,532 ) (34,482 )
Changes in operating assets and liabilities:
Trade receivables (8,397 ) (15,892 )
Inventory (7,293 ) (219 )
Prepaid expenses and other assets 3,637 (14,405 )
Accounts payable 3,563 7,982
Accruals and other liabilities (23,579 ) 6,354
Acquisition-related contingent consideration (15,882 ) 1,552
Income taxes payable 16,895 42,546
Deferred revenue 82,518 32,184
------------- -------------
Net cash provided by operating activities 185,311 147,287
Investing activities:
Capital expenditures (17,121 ) (12,017 )
Purchase of available for sale securities (403,482 ) (504,074 )
Proceeds from maturities of available for sale securities 274,428 294,511
Proceeds from sales of available for sale securities 112,760 135,926
Acquisitions, net of cash acquired (6,458 ) (120,179 )
----------------- -----------------
Net cash used in investing activities (39,873 ) (205,833 )
Financing activities:
Proceeds from issuance of common stock under employee stock plans, 32,751 41,996
net of repurchases
Taxes paid related to net shares settlement of equity awards (4,278 ) (10,088 )
Payments for repurchases of common stock (127,144 ) (20,017 )
Excess tax benefit from employee stock plans 14,532 34,482
------------- -------------
Net cash (used in) provided by financing activities (84,139 ) 46,373
Effect of exchange rate changes on cash and cash equivalents 2,506 303
------------- -------------
Net increase (decrease) in cash and cash equivalents 63,805 (11,870 )
Cash and cash equivalents at beginning of period 215,476 165,726
------------- -------------
Cash and cash equivalents at end of period $ 279,281 $ 153,856
==== ======= ==== =======
Riverbed Technology
Supplemental Financial Information
In thousands
Unaudited
Three months ended Nine months ended
----------------------------------------------------- -------------------------------------
September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
--------------- ------------ --------------- --------------- ---------------
Revenue by Geography
Americas $ 133,656 $ 117,536 $ 113,239 $ 354,848 $ 320,578
Europe, Middle East and Africa 56,992 51,672 49,847 159,202 128,924
Asia Pacific 27,949 29,260 26,697 85,428 74,139
------------- ------------ ------------- ------------- -------------
Total revenue $ 218,597 $ 198,468 $ 189,783 $ 599,478 $ 523,641
==== ======= === ======= ==== ======= ==== ======= ==== =======
As a percentage of total revenues:
Americas 61 % 59 % 60 % 59 % 61 %
Europe, Middle East and Africa 26 % 26 % 26 % 27 % 25 %
Asia Pacific 13 % 15 % 14 % 14 % 14 %
----------------- -------------- ----------------- ----------------- -----------------
Total revenue 100 % 100 % 100 % 100 % 100 %
================= ============== ================= ================= =================
Revenue by Sales Channel
Direct $ 10,626 $ 9,609 $ 7,068 $ 31,050 $ 25,028
Indirect 207,971 188,859 182,715 568,428 498,613
------------- ------------ ------------- ------------- -------------
Total revenue $ 218,597 $ 198,468 $ 189,783 $ 599,478 $ 523,641
==== ======= === ======= ==== ======= ==== ======= ==== =======
As a percentage of total revenues:
Direct 5 % 5 % 4 % 5 % 5 %
Indirect 95 % 95 % 96 % 95 % 95 %
----------------- -------------- ----------------- ----------------- -----------------
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
--------------------------------------------------------------- -------------------------------------------
GAAP to Non-GAAP Reconciliations: September 30, June 30, September 30, September 30, September 30,
2012 2012 2011 2012 2011
------------------ ---------------- ------------------ ------------------ ------------------
Reconciliation of Total revenue:
U.S. GAAP as reported $ 218,597 $ 198,468 $ 189,783 $ 599,478 $ 523,641
Adjustments:
Deferred revenue adjustment (6) 199 498 813 1,526 813
---------------- ---------------- ---------------- ---------------- ----------------
As adjusted $ 218,796 $ 198,966 $ 190,596 $ 601,004 $ 524,454
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Reconciliation of Gross margin:
U.S. GAAP as reported 77.1 % 74.9 % 76.3 % 75.6 % 76.3 %
Adjustments:
Stock-based compensation (1) 0.8 % 1.0 % 1.0 % 0.9 % 1.0 %
Payroll tax on stock-based compensation (2) 0.0 % 0.0 % 0.0 % 0.0 % 0.1 %
Amortization on intangibles (3) 1.7 % 1.8 % 1.5 % 1.8 % 1.2 %
Inventory fair value adjustment (4) 0.0 % 0.0 % 0.1 % 0.0 % 0.1 %
Deferred revenue adjustment (6) 0.0 % 0.1 % 0.1 % 0.1 % 0.0 %
-------------------- ------------------ -------------------- -------------------- --------------------
As adjusted 79.6 % 77.8 % 79.0 % 78.4 % 78.7 %
==================== ================== ==================== ==================== ====================
Reconciliation of Operating profit:
U.S. GAAP as reported $ 39,448 $ 30,208 $ 25,525 $ 82,282 $ 67,270
Adjustments:
Stock-based compensation (1) 20,252 22,943 22,504 66,170 68,000
Payroll tax on stock-based compensation (2) 230 737 234 1,654 3,900
Amortization on intangibles (3) 5,474 5,417 3,968 16,335 8,262
Acquisition-related costs (credits) (5) (2,371 ) (9,593 ) 4,200 (10,015 ) 6,972
Inventory fair value adjustment (4) -- -- 120 -- 359
Deferred revenue adjustment (6) 199 498 813 1,526 813
---------------- ---------------- ---------------- ---------------- ----------------
As adjusted $ 63,232 $ 50,210 $ 57,364 $ 157,952 $ 155,576
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Reconciliation of Net income:
U.S. GAAP as reported $ 24,730 $ 18,134 $ 19,325 $ 49,813 $ 43,653
Adjustments:
Stock-based compensation (1) 20,252 22,943 22,504 66,170 68,000
Payroll tax on stock-based compensation (2) 230 737 234 1,654 3,900
Amortization on intangibles (3) 5,474 5,417 3,968 16,335 8,262
Acquisition-related costs (credits) (5) (2,371 ) (9,593 ) 4,200 (10,015 ) 6,972
Inventory fair value adjustment (4) -- -- 120 -- 359
Deferred revenue adjustment (6) 199 498 813 1,526 813
Other income (expense), net (8) 525 (51 ) 481 2,612 481
Income tax adjustments (7) (2,958 ) (740 ) (11,565 ) (11,218 ) (23,588 )
-------------------- ------------------ -------------------- -------------------- --------------------
As adjusted $ 46,081 $ 37,345 $ 40,080 $ 116,877 $ 108,852
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Reconciliation of Net income per share, diluted:
U.S. GAAP as reported $ 0.15 $ 0.11 $ 0.12 $ 0.30 $ 0.26
Adjustments:
Stock-based compensation (1) 0.13 0.15 0.14 0.40 0.42
Payroll tax on stock-based compensation (2) -- -- -- 0.01 0.02
Amortization on intangibles (3) 0.03 0.03 0.02 0.10 0.05
Acquisition-related costs (credits) (5) (0.01 ) (0.06 ) 0.03 (0.06 ) 0.04
Deferred revenue adjustment (6) -- -- -- 0.01 --
Other income (expense), net (8) -- -- -- 0.02 --
Income tax adjustments (7) (0.02 ) -- (0.07 ) (0.07 ) (0.14 )
-------------------- ---------------- -------------------- -------------------- --------------------
As adjusted $ 0.28 $ 0.23 $ 0.24 $ 0.71 $ 0.65
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Non-GAAP Net income per share, basic $ 0.30 $ 0.24 $ 0.26 $ 0.75 $ 0.71
Non-GAAP Net income per share, diluted $ 0.28 $ 0.23 $ 0.24 $ 0.71 $ 0.65
Shares used in computing basic net income per share 153,823 157,261 155,367 156,313 153,981
Shares used in computing diluted net income per share 161,877 165,253 167,031 164,880 166,920
Non-GAAP adjustments:
Support and services revenue $ 199 $ 498 $ 813 $ 1,526 $ 813
Cost of product 3,858 3,857 3,250 11,582 7,210
Cost of support and services 1,660 1,843 1,604 5,146 5,208
Sales and marketing 10,547 10,705 10,593 33,259 31,415
Research and development 7,079 8,107 7,699 23,277 23,769
General and administrative 3,306 5,188 5,148 13,385 15,767
Acquisition-related costs (credits) (2,865 ) (10,196 ) 2,732 (12,505 ) 4,124
Other income (expense), net 525 (51 ) 481 2,612 481
Provision for income taxes (2,958 ) (740 ) (11,565 ) (11,218 ) (23,588 )
-------------------- ------------------ -------------------- -------------------- --------------------
Total Non-GAAP adjustments $ 21,351 $ 19,211 $ 20,755 $ 67,064 $ 65,199
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
_______________________
(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 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) 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.
(8) We incurred expenses, including revaluation of the contingent
consideration, in connection with our acquisitions, which would not have
otherwise occurred in the period presented as part of our other income
(expense); therefore, these costs are excluded from our non-GAAP
operating expenses.
SOURCE: Riverbed Technology, Inc.
Riverbed Technology
Renee Lyall, 415-247-6353 (Investor Relations)
renee.lyall@riverbed.com
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