SAN FRANCISCO—July 24, 2012— GAAP revenue for Q2’12 was $198 million, an increase of 9% compared to $182 million in the first quarter 2012 (Q1’12) and an increase of 17% compared to $170 million in the second quarter 2011 (Q2’11). GAAP net income for Q2’12 was $18 million, or $0.11 per diluted share, compared to $7 million, or $0.04 per diluted share, in Q1’12 and $11 million, or $0.07 per diluted share, in Q2’11.
Non-GAAP revenue for Q2’12 was $199 million, an increase of 9% compared to $183 million in Q1’12 and an increase of 17% compared to $170 million in Q2’11. Non-GAAP net income for Q2’12 was $37 million, or $0.23 per diluted share, compared to $33 million, or $0.20 per diluted share, in Q1’12 and $35 million, or $0.21 per diluted share in Q2’11.
“We executed well in the second quarter, driving stronger sales of our new Steelhead and Cascade platforms, demonstrating continued demand for performance-improvement technologies,” said Jerry M. Kennelly, Riverbed president and CEO. “Revenue grew across all major geographies and revenue growth accelerated across our core product offerings. Looking forward, we believe our expanded product offerings and partnerships will further extend our reach to new customers and market segments.”
Separately, Riverbed announced today a new technology partnership with Juniper Networks in wide area network (WAN) optimization, application delivery and mobility to deliver market-leading technologies for enterprises looking to increase the efficiency of their IT infrastructures and securely deliver better performance of applications across mobile devices, networks and clouds. More information here.
Riverbed will host a conference call today, July 24, 2012, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its second quarter 2012 results. The call will be broadcast live over the Internet at http://www.riverbed.com/investors. A replay of the conference call will also be available via webcast at http://www.riverbed.com/investors 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 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 (credits): 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.
This press release contains forward-looking statements, including statements relating to our strategic and competitive position and the effects of our expanded product offerings and partnerships. 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 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.
Über Riverbed Technology, Inc.
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 (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.
|GAAP Condensed Consolidated Statements of Operations|
|In thousands, except per share amounts|
|Three months ended
|Six months ended
|Support and services||69,099||53,435||134,478||104,846|
|Cost of revenue:|
|Cost of product||30,538||23,683||58,427||47,418|
|Cost of support and services||19,258||16,415||38,040||31,635|
|Total cost of revenue||49,796||40,098||96,467||79,053|
|Vertrieb und Marketing||77,366||63,737||151,181||124,821|
|Research and development||35,802||29,942||69,913||58,251|
|General and administrative||15,492||14,913||30,126||28,596|
|Acquisition-related costs (credits)||(10,196||)||1,392||(9,640||)||1,392|
|Total operating expenses||118,464||109,984||241,580||213,060|
|Other income (expense), net||259||341||(1,246||)||839|
|Income before provision for income taxes||30,467||20,554||41,588||42,584|
|Provision for income taxes||12,333||9,271||16,505||18,256|
|Net income per share, basic||$||0.12||$||0.07||$||0.16||$||0.16|
|Net income per share, diluted||$||0.11||$||0.07||$||0.15||$||0.15|
|Shares used in computing basic net income per share||157,261||154,543||157,559||153,288|
|Shares used in computing diluted net income per share||165,253||167,270||166,381||166,865|
|Condensed Consolidated Balance Sheets|
|Cash and cash equivalents||$||185,019||$||215,476|
|Trade receivables, net||85,142||78,016|
|Deferred tax assets||15,499||16,783|
|Prepaid expenses and other current assets||38,874||35,078|
|Total current assets||585,257||611,543|
|Fixed assets, net||32,732||29,277|
|Intangible assets, net||62,810||68,274|
|Deferred tax assets, non-current||56,485||56,708|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accrued compensation and related benefits||29,269||61,256|
|Other accrued liabilities||27,319||42,959|
|Total current liabilities||224,265||260,687|
|Deferred revenue, non-current||39,308||36,248|
|Other long-term liabilities||24,612||23,200|
|Total long-term liabilities||63,920||59,448|
|Accumulated other comprehensive loss||(2,324||)||(3,973||)|
|Total stockholders' equity||713,765||711,064|
|Total liabilities and stockholders' equity||$||1,001,950||$||1,031,199|
|Condensed Consolidated Statements of Cash Flows|
Six months ended
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||18,455||9,718|
|Excess tax benefit from employee stock plans||(12,170||)||(34,221||)|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||(838||)||(24,899||)|
|Accruals and other liabilities||(34,729||)||2,995|
|Acquisition-related contingent consideration||(11,682||)||—|
|Income taxes payable||12,125||34,807|
|Net cash provided by operating activities||45,410||56,720|
|Purchase of available for sale securities||(297,154||)||(351,905||)|
|Proceeds from maturities of available for sale securities||225,202||162,993|
|Proceeds from sales of available for sale securities||82,051||91,783|
|Acquisitions, net of cash acquired||(6,458||)||—|
|Net cash used in investing activities||(7,664||)||(104,139||)|
|Proceeds from issuance of common stock under employee stock plans, net of repurchases||23,613||38,024|
|Taxes paid related to net shares settlement of equity awards||(4,278||)||(10,088||)|
|Payments for repurchases of common stock||(101,408||)||—|
|Excess tax benefit from employee stock plans||12,170||34,221|
|Net cash (used in) provided by financing activities||(69,903||)||62,157|
|Effect of exchange rate changes on cash and cash equivalents||1,700||434|
|Net (decrease) increase in cash and cash equivalents||(30,457||)||15,172|
|Cash and cash equivalents at beginning of period||215,476||165,726|
|Cash and cash equivalents at end of period||$||185,019||$||180,898|
|Supplemental Financial Information|
|Three months ended||Six months ended|
|June 30, 2012||March 31, 2012||June 30, 2011||June 30, 2012||June 30, 2011|
|Revenue by Geography|
|Europa | Naher Osten | Afrika (EMEA)||51,672||50,538||40,028||102,210||79,077|
As a percentage of total revenues:
|Europa | Naher Osten | Afrika (EMEA)||26||%||28||%||23||%||27||%||24||%|
|Revenue by Sales Channel|
|As a percentage of total revenues:|
|GAAP to Non-GAAP Reconciliation|
|In thousands, except per share amounts|
|Three months ended||Six months ended|
|GAAP to Non-GAAP Reconciliations:||June 30, 2012||March 31, 2012||June 30, 2011||June 30, 2012||June 30, 2011|
|Reconciliation of Total revenue:|
|U.S. GAAP as reported||$||198,468||$||182,413||$||170,295||$||380,881||$||333,858|
|Deferred revenue adjustment (6)||498||829||—||1,327||—|
|Reconciliation of Net income:|
|U.S. GAAP as reported||$||18,134||$||6,949||$||11,283||$||25,083||$||24,328|
|Stock-based compensation (1)||22,943||22,975||23,555||45,918||45,496|
|Payroll tax on stock-based compensation (2)||737||687||1,507||1,424||3,666|
|Amortization on intangibles (3)||5,417||5,444||2,171||10,861||4,294|
|Acquisition-related costs (credits) (5)||(9,593||)||1,949||2,772||(7,644||)||2,772|
|Inventory fair value adjustment (4)||—||—||125||—||239|
|Deferred revenue adjustment (6)||498||829||—||1,327||—|
|Other income (expense), net (8)||(51||)||2,138||—||2,087||—|
|Income tax adjustments (7)||(740||)||(7,520||)||(6,527||)||(8,260||)||(12,023||)|
|Reconciliation of Net income per share, diluted:|
|U.S. GAAP as reported||$||0.11||$||0.04||$||0.07||$||0.15||$||0.15|
|Stock-based compensation (1)||0.15||0.14||0.14||0.28||0.26|
|Payroll tax on stock-based compensation (2)||—||—||0.01||0.01||0.02|
|Amortization on intangibles (3)||0.03||0.03||0.01||0.07||0.03|
|Acquisition-related costs (credits) (5)||(0.06||)||0.01||0.02||(0.05||)||0.02|
|Deferred revenue adjustment (6)||—||0.01||—||0.01||—|
|Other income (expense), net (8)||—||0.01||—||0.01||—|
|Income tax adjustments (7)||—||(0.04||)||(0.04||)||(0.05||)||(0.07||)|
|Non-GAAP Net income per share, basic||$||0.24||$||0.21||$||0.23||$||0.45||$||0.45|
|Non-GAAP Net income per share, diluted||$||0.23||$||0.20||$||0.21||$||0.43||$||0.41|
|Shares used in computing basic net income per share||157,261||157,856||154,543||157,559||153,288|
|Shares used in computing diluted net income per share||165,253||167,510||167,270||166,381||166,865|
|Support and services revenue||$||498||$||829||$||—||$||1,327||$||—|
|Cost of product||3,857||3,867||2,018||7,724||3,960|
|Cost of support and services||1,843||1,643||1,892||3,486||3,604|
|Vertrieb und Marketing||10,705||12,007||10,699||22,712||20,822|
|Research and development||8,107||8,091||8,764||16,198||16,070|
|General and administrative||5,188||4,891||5,365||10,079||10,619|
|Acquisition-related costs (credits)||(10,196||)||556||1,392||(9,640||)||1,392|
|Other income (expense), net||(51||)||2,138||—||2,087||—|
|Provision for income taxes||(740||)||(7,520||)||(6,527||)||(8,260||)||(12,023||)|
|Total Non-GAAP adjustments||$||19,211||$||26,502||$||23,603||$||45,713||$||44,444|
(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.