Riverbed Technology Reports Record Second Fiscal Quarter 2010 Financial Results

• Record revenue and operating profit
• Cash and investments exceed $422 million
• Cumulative customer count exceeds 8,300

(BUSINESS WIRE)-- Riverbed Technology (NASDAQ:RVBD), the IT performance company, today reported financial results for its second fiscal quarter ended June 30, 2010 (Q2'10). Revenues for Q2'10 were $126.2 million, up 12.3% compared to the first fiscal quarter of 2010 (Q1'10), and up 38.7% compared to the second quarter of fiscal year 2009 (Q2'09).

Reporting on a GAAP basis, net income for Q2'10 was $6.6 million, or $0.09 per diluted share. This compares to GAAP net income of $1.1 million, or $0.01 per share, in Q1'10 and a GAAP net loss of $0.3 million, or $0.00 per share, in Q2'09.

Non-GAAP net income for Q2'10 was $19.2 million, or $0.25 per diluted share, as compared to non-GAAP net income for Q1'10 of $14.8 million, or $0.20 per diluted share, and non-GAAP net income of $10.3 million, or $0.14 per diluted share, in Q2'09. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"Riverbed® reported a record breaking second quarter as WAN optimization continues to be a strategic priority investment for businesses and governments around the world," said Jerry M. Kennelly, Riverbed president and CEO. "We executed well, achieving 39 percent year-over-year revenue growth with product sales increasing more than 40 percent over the prior year, marking our fourth consecutive quarter of product revenue acceleration." Kennelly added, "We also achieved significant operating leverage with our non-GAAP operating profit doubling over the prior year."

Q2'10 Financial Highlights

• Total revenue increased 12% sequentially and 39% year-over-year
• Product revenue increased 13% sequentially and 40% year-over-year
• Non-GAAP gross margin increased to 77.3%, compared to 77.1% in Q1'10 and 76.1% in Q2'09
• Non-GAAP operating margin increased to 24.2% compared to 20.8% in Q1'10 and 16.7% in Q2'09
• Non-GAAP net income increased 30% sequentially and 87% year-over-year
• Days sales outstanding decreased to 32 days from 34 in Q1'10
• Cash and investments grew to $422 million compared to $387 million in Q1'10 and $269 million in Q2'09

Q2'10 Business Highlights

• Identified as the Advanced Platform WAN optimization controller worldwide market share leader for Q1'10 based on revenue in the June 2010 Gartner report, "Market Share Analysis: Application Acceleration Equipment, Worldwide, 1Q10".
• Further enhanced competitive position with launch of the Riverbed Optimization System (RiOS®) version 6.1 making Riverbed the only WAN optimization vendor to offer optimizations for Microsoft Exchange Server 2010, Microsoft SharePoint 2010, Microsoft Online Services for both Exchange and SharePoint, Lotus Notes 8.5, EMC® SRDF® at both the network and application layers, auto configuration for EMC SRDF, and storage networking optimizations for FCIP traffic over the Brocade 7500 and Cisco MDS gateways.
• Added five qualified solutions to the Riverbed Services Platform (RSP) including HP Client Automation (HPCA), McAfee Firewall Enterprise, Microsoft Forefront Threat Management Gateway, Polycom Video Edge, and Vyatta Subscription Edition router, firewall and VPN software.
• Verizon added Riverbed WAN optimization and new consulting services to Verizon Managed WAN Optimization Services, available in 142 countries.
• Awarded the 2009 EMC Partner Solution Award: Offering of the Year – Symmetrix®.
• Awarded the 2010 Asia Pacific Frost & Sullivan Application Networking Vendor of the Year Award in recognition of outstanding performance in the Asia Pacific information and communications technology industry. Frost and Sullivan also highlighted Riverbed as the market share leader in the Asia Pacific WAN Optimization Controller Market, CY 2009.
• Won two Technology Services Industry Association (TSIA) STAR Awards for Best Practices, in the categories of Emerging Company Support and SMB Service Delivery Optimization.
• Highlighted in Everything Channel's 16th annual 2010 Partner Program Guide as one of North America's top IT vendors for its Riverbed Partner Network (RPN) program.
• Recognized by the San Francisco Business Times as one of the 2010 Best Places to Work in the San Francisco Bay Area.

Conference Call
Riverbed will host a conference call today, July 22, 2010, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its second quarter 2010 results and outlook for the third quarter of 2010. 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 for 12 months.

Forward Looking Statements
This press release contains forward-looking statements, including statements related to WAN optimization as an IT spending priority. 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, 2010. 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 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 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 the business needs of the organization. Additional information about Riverbed (NASDAQ: 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.