• Revenue increases 12% over prior year
• Cumulative customer count exceeds 6,500
• $269 million in cash and marketable securities and no debt

SAN FRANCISCO--(BUSINESS WIRE)--Riverbed Technology (NASDAQ:RVBD), the IT infrastructure performance company for networks, applications and storage, today reported financial results for its second quarter ended June 30, 2009 (Q2’09).

Total GAAP revenue for Q2'09 was $91.0 million, an increase of 12% from $81.6 million of GAAP revenue reported in the second quarter of fiscal year 2008 (Q2'08). The GAAP net loss for Q2'09 was $290,000, or $0.00 per diluted share. This compares to a GAAP net loss of $869,000, or $0.01 per diluted share, in Q2'08.

Non-GAAP revenue for Q2'09 was $91.6 million, an increase of 12% from $81.6 million of revenue reported in Q2'08. Non-GAAP net income for Q2'09 was $10.3 million, or $0.14 per diluted share, as compared to non-GAAP net income for Q2'08 of $9.9 million, or $0.13 per diluted share.

"Riverbed has continued to deliver revenue growth in a persistently challenging global economic environment, and the second quarter marks our 14th consecutive quarter of year-over-year top line expansion," said Jerry M. Kennelly, Riverbed® president and CEO. "We experienced another strong quarter of new customer additions, ending the second quarter with more than 6,500 customers. As we look forward, we believe that Riverbed is well positioned to capture the full opportunity of the WAN optimization market. Our competitive position remains strong, our pipeline is healthy, and we are targeting revenue and profit growth in the third quarter."

Q2'09 Financial Highlights

• Revenue increased 12% year-over-year
• Non-GAAP gross margins increased to 76.1%
• Non-GAAP operating profit increased 11% year over year
• Deferred revenue increased to $70 million
• Cash, cash equivalents, and marketable securities of $269 million and
  no debt

Q2'09 Business Highlights

• Identified as both the WAN optimization controller (WOC) Advanced Platform and WOC worldwide market share leader for Q1'09 based on revenue in the Gartner report, "Market Share: Application Acceleration Equipment, Worldwide, Q1'09"
• Positioned by Gartner in the leaders quadrant in the "Magic Quadrant for WAN Optimization Controllers 2009"
• Introduced Cascade 8.3, providing 'out-of-the-box' WAN optimization intelligence, with an enhanced level of automation, ease-of-use, and consolidated enterprise visibility
• Partnered with Check Point Software Technologies to offer Check Point Security Gateway R70™ on the Riverbed Services Platform, providing customers a comprehensive set of centrally managed security protections
• Partnered with Websense to deliver Websense Web Security on the Riverbed Services Platform, enabling organizations to consolidate WAN and Web security deployments, making their IT infrastructure faster, less expensive, and more secure
• Extended relationship with Microsoft and will support Microsoft Windows Server 2008 R2 and BranchCache on the Riverbed Services Platform
• Awarded the 2009 STAR Award for Best Practices in Emerging Company Support by the Service & Support Professionals Association

Conference Call

Riverbed will host a conference call today, July 23, 2009, at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time) to discuss its second quarter fiscal year 2009 results and outlook for the third quarter of 2009. The call will be broadcast live over the Internet at www.riverbed.com/investors. A replay of the conference call will also be available via webcast at www.riverbed.com/investors for 12 months.

Forward Looking Statements

This press release contains forward-looking statements, including statements relating to revenue and profit growth in the third quarter, the expected demand for Riverbed's products and services and statements relating to Riverbed's ability to meet the needs of distributed organizations. 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; 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-Q filed for the quarter ended March 31, 2009. 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.

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 and the related earnings conference call contain certain non-GAAP financial measures that 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 and adjustments related to our tax valuation allowance:

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 our deferred support revenue was reduced by approximately $2.0 million in the adjustment to fair value. Because these are typically one-year contracts, our GAAP revenues for the 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 stock-based payroll 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 incurred significant expenses in connection with our acquisition of Mazu 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 costs, integration related professional services, and adjustments to the fair value of the acquisition related contingent consideration. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

About Riverbed

Riverbed Technology is the IT infrastructure performance company. The Riverbed family of wide area network (WAN) optimization solutions liberates businesses from common IT constraints by increasing application performance, enabling consolidation, and providing enterprise-wide network and application visibility – all while eliminating the need to increase bandwidth, storage or servers. Thousands of companies with distributed operations use Riverbed to make their IT infrastructure faster, less expensive and more responsive. Additional information about Riverbed (NASDAQ: RVBD) is available at www.riverbed.com.

About the Magic Quadrant

The Magic Quadrant is copyrighted 2009 by Gartner, Inc. and is reused with permission. The Magic Quadrant is a graphical representation of a marketplace at and for a specific time period. It depicts Gartner's analysis of how certain vendors measure against criteria for that marketplace, as defined by Gartner. Gartner does not endorse any vendor, product or service depicted in the Magic Quadrant, and does not advise technology users to select only those vendors placed in the "Leaders" quadrant. The Magic Quadrant is intended solely as a research tool, and is not meant to be a specific guide to action. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Riverbed Technology, Riverbed, Steelhead, RiOS, Interceptor, Think Fast, the Riverbed logo, Mazu, Profiler and Cascade are trademarks or registered trademarks of Riverbed Technology All other trademarks used or mentioned herein belong to their respective owners.

Riverbed Technology
GAAP Condensed Consolidated Statements of Operations
In thousands, except per share amounts
Unaudited
			Three months ended								Six months ended
			June 30,								June 30,
				2009				2008				2009				2008
Revenue:
	Product		$	60,314			$	62,607			$	120,779			$	120,336
	Support and services			30,673				18,985				58,419				34,238
	Total revenue			90,987				81,592				179,198				154,574
Cost of revenue:
	Cost of product			14,389				14,564				28,794				28,500
	Cost of support and services			9,466				6,967				17,975				12,977
	Total cost of revenue			23,855				21,531				46,769				41,477
Gross profit				67,132				60,061				132,429				113,097
Operating expenses:
	Sales and marketing			42,025				34,930				82,811				66,137
	Research and development			17,028				15,088				33,066				28,696
	General and administrative			9,092				10,133				18,085				19,506
	Acquisition-related costs			(2,959	)			-				(1,439	)			-
	Total operating expenses			65,186				60,151				132,523				114,339
Operating income (loss)				1,946				(90	)			(94	)			(1,242	)
Other income, net				45				1,472				683				3,772
	Income before provision for income taxes			1,991				1,382				589				2,530
	Provision (benefit) for income taxes			2,281				2,251				(95	)			2,761
Net income (loss)			$	(290	)		$	(869	)		$	684			$	(231	)
Net income (loss) per share, basic			$	-			$	(0.01	)		$	0.01			$	-
Net income (loss) per share, diluted			$	-			$	(0.01	)		$	0.01			$	-
Shares used in computing basic net income (loss) per share				69,007				71,143				68,868				70,870
Shares used in computing diluted net income (loss) per share				69,007				71,143				70,576				70,870

Riverbed Technology
GAAP to Non-GAAP Reconciliation
In thousands, except per share amounts
Unaudited
					Three months ended													Six months ended
GAAP to Non-GAAP Reconciliations:					June 30,				March 31,					June 30,				June 30,
						2009				2009					2008				2009				2008
Reconciliation of Total Revenue:
		U.S. GAAP as reported			$	90,987			$	88,211				$	81,592			$	179,198			$	154,574
		Adjustments:
			Deferred revenue adjustment (5)			658				316					-				974				-
		As Adjusted			$	91,645			$	88,527				$	81,592			$	180,172			$	154,574
Reconciliation of Gross Profit:
		U.S. GAAP as reported			$	67,132			$	65,297				$	60,061			$	132,429			$	113,097
		Adjustments:
			Stock-based compensation (1)			1,237				1,118					1,356				2,355				2,422
			Payroll taxes on option exercises (2)			17				-					5				17				5
			Amortization on intangibles (3)			740				326					-				1,066				-
			Deferred revenue adjustment (5)			658				316					-				974				-
		As Adjusted			$	69,784			$	67,057				$	61,422			$	136,841			$	115,524
Reconciliation of Gross Margin:
		U.S. GAAP as reported				73.8	%			74.0	%				73.6	%			73.9	%			73.2	%
		Adjustments:
			Stock-based compensation (1)			1.4	%			1.3	%				1.7	%			1.3	%			1.5	%
			Amortization on intangibles (3)			0.8	%			0.4	%				0.0	%			0.6	%			0.0	%
			Deferred revenue adjustment (5)			0.1	%			0.0	%				0.0	%			0.2	%			0.0	%
		As Adjusted				76.1	%			75.7	%				75.3	%			76.0	%			74.7	%
Reconciliation of Operating Income (Loss):
		U.S. GAAP as reported			$	1,946			$	(2,040	)			$	(90	)		$	(94	)		$	(1,242	)
		Adjustments:
			Stock-based compensation (1)			13,738				12,782					13,918				26,520				25,126
			Payroll taxes on option exercises (2)			252				26					44				278				105
			Amortization on intangibles (3)			1,195				526					-				1,721				-
			Acquisition-related costs (4)			(2,459	)			1,887					-				(572	)			-
			Deferred revenue adjustment (5)			658				316					-				974				-
		As Adjusted			$	15,330			$	13,497				$	13,872			$	28,827			$	23,989
Reconciliation of Net Income (Loss):
		U.S. GAAP as reported			$	(290	)		$	974				$	(869	)		$	684			$	(231	)
		Adjustments:
			Stock-based compensation (1)			13,738				12,782					13,918				26,520				25,126
			Payroll taxes on option exercises (2)			252				26					44				278				105
			Amortization on intangibles (3)			1,195				526					-				1,721				-
			Acquisition-related costs (4)			(2,459	)			1,887					-				(572	)			-
			Deferred revenue adjustment (5)			658				316					-				974				-
			Income tax adjustments (6)			(2,808	)			(7,295	)				(3,166	)			(10,103	)			(7,176	)
		As Adjusted			$	10,286			$	9,216				$	9,927			$	19,502			$	17,824
Non-GAAP Net income per share, basic					$	0.15			$	0.13				$	0.14			$	0.28			$	0.25
Non-GAAP Net income per share, diluted (7)					$	0.14			$	0.13				$	0.13			$	0.27			$	0.24
Shares used in computing basic net income per share						69,007				68,728					71,143				68,868				70,870
Shares used in computing diluted net income per share (7)						73,611				71,306					74,610				72,458				74,518
		Non-GAAP adjustments:
			Support and services revenue			658				316					-				974				-
			Cost of product			855				421					42				1,276				77
			Cost of support and services			1,139				1,023					1,319				2,162				2,350
			Sales and marketing			6,768				6,338					6,576				13,106				11,981
			Research and development			3,747				3,303					3,576				7,050				6,519
			General and administrative			3,176				2,616					2,449				5,792				4,304
			Other acquisition costs			(2,959	)			1,520					-				(1,439	)			-
			Provision (benefit) for income taxes			(2,808	)			(7,295	)				(3,166	)			(10,103	)			(7,176	)
		Total Non-GAAP Adjustments			$	10,576			$	8,242				$	10,796			$	18,818			$	18,055
(1)		Stock-based compensation expense is calculated in accordance with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (R) effective January 1, 2006.
(2)		Payroll tax on stock option exercises represents the incremental cost for employer payroll taxes on stock option exercises.
(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)		We incurred expenses in connection with our acquisition, 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.
(5)		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.
(6)		The non-GAAP tax rate excludes the income tax effects of non-GAAP adjustments. Additionally, the non-GAAP tax rate does not assume a valuation allowance on our deferred tax assets.
(7)		Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under SFAS 123(R).

Riverbed Technology
Condensed Consolidated Balance Sheets
In thousands
			June 30,				December 31,
				2009				2008
ASSETS
Current assets:
	Cash and cash equivalents		$	50,643			$	95,378
	Marketable securities			218,525				172,398
	Trade receivables, net			49,061				46,839
	Inventory			9,176				10,637
	Deferred tax assets			7,751				6,185
	Prepaid expenses and other current assets			13,129				12,605
	Total current assets			348,285				344,042
Fixed assets, net				22,357				21,993
Goodwill				11,711				-
Intangible assets, net				21,779				-
Deferred tax assets, non-current				32,818				27,033
Other assets				5,144				5,449
	Total assets		$	442,094			$	398,517
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	16,342			$	18,290
	Accrued compensation and related benefits			14,677				13,137
	Other accrued liabilities			21,443				13,342
	Deferred revenue			54,024				45,194
	Total current liabilities			106,486				89,963
Deferred revenue, non-current				15,865				12,967
Other long-term liabilities				2,283				1,758
	Total long-term liabilities			18,148				14,725
Stockholders' equity:
	Common stock			338,750				315,882
	Accumulated deficit			(21,250	)			(21,934	)
	Accumulated other comprehensive loss			(40	)			(119	)
	Total stockholders' equity			317,460				293,829
	Total liabilities and stockholders' equity		$	442,094			$	398,517

Riverbed Technology
Condensed Consolidated Statements of Cash Flows
In thousands
Unaudited
		Six months ended
		June 30,
			2009				2008
Operating activities:
	Net income (loss)	$	684			$	(231	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization		6,647				3,574
	Stock-based compensation		26,520				25,126
	Deferred taxes		(6,508	)			-
	Excess tax benefit from employee stock plans		(1,340	)			(1,427	)
	Changes in operating assets and liabilities:
	Trade receivables		(166	)			4,107
	Inventory		1,907				(5,900	)
	Prepaid expenses and other assets		(122	)			(1,004	)
	Accounts payable		(2,159	)			(3,278	)
	Accruals and other liabilities		1,472				3,821
	Acquisition-related contingent consideration		(2,454	)			-
	Deferred revenue		10,740				11,108
	Net cash provided by operating activities		35,221				35,896
Investing activities:
	Capital expenditures		(5,560	)			(8,120	)
	Purchase of available for sale securities		(178,446	)			(197,023	)
	Proceeds from maturities of available for sale securities		118,599				102,382
	Proceeds from sales of available for sale securities		13,500				24,003
	Acquisitions, net of cash acquired		(20,469	)			-
	Net cash used in investing activities		(72,376	)			(78,758	)
Financing activities:
	Proceeds from issuance of common stock under employee stock plans, net of repurchases		12,675				6,540
	Payments for repurchases of common stock		(16,806	)			(12,484	)
	Payment of debt		(5,004	)			-
	Excess tax benefit from employee stock plans		1,340				1,427
	Net cash used in financing activities		(7,795	)			(4,517	)
Effect of exchange rate changes on cash and cash equivalents			215				79
Net decrease in cash and cash equivalents			(44,735	)			(47,300	)
Cash and cash equivalents at beginning of period			95,378				162,979
Cash and cash equivalents at end of period		$	50,643			$	115,679

Riverbed Technology
Supplemental Financial Information
In thousands
Unaudited
Revenue by Geography
			Q2-08			Q3-08			Q4-08			Q1-09			Q2-09
	United States		$	47,596		$	54,289		$	50,803		$	48,304		$	49,640
	Europe, Middle East and Africa			19,270			20,476			28,077			24,338			24,934
	Rest of the world			14,726			11,782			13,348			15,569			16,413
	Total revenue		$	81,592		$	86,547		$	92,228		$	88,211		$	90,987
	As a percentage of total revenues:
	United States			58%			63%			55%			55%			55%
	Europe, Middle East and Africa			24%			24%			30%			28%			27%
	Rest of the world			18%			13%			15%			17%			18%
	Total revenue			100%			100%			100%			100%			100%
Revenue by Sales Channel
			Q2-08			Q3-08			Q4-08			Q1-09			Q2-09
	Direct		$	7,290		$	5,649		$	6,701		$	7,765		$	8,232
	Indirect			74,302			80,898			85,527			80,446			82,755
	Total revenue		$	81,592		$	86,547		$	92,228		$	88,211		$	90,987
	As a percentage of total revenues:
	Direct			9%			7%			7%			9%			9%
	Indirect			91%			93%			93%			91%			91%
	Total revenue			100%			100%			100%			100%			100%

MEDIA CONTACT
Kristalle Ward
Riverbed Technology
415-247-8140
kristalle.ward@riverbed.com

INVESTOR RELATIONS CONTACT
Renee Lyall
Riverbed Technology
415-247-6353
Renee.Lyall@riverbed.com

 

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