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8-K - FORM 8-K - Riverbed Technology, Inc.d288480d8k.htm

Exhibit 99.1

Riverbed Technology Reports Record Fourth Quarter and Full Year 2011 Revenue and

Profits

Q4’11 revenue increases 23% year-over-year and 7% sequentially

Riverbed Technology (NASDAQ:RVBD), the IT performance company, today reported financial results for its fourth quarter (Q4’11) and fiscal year ended December 31, 2011.

Total GAAP revenue for Q4’11 was $203 million, an increase of 7% from $190 million reported in the third quarter of fiscal year 2011 (Q3’11) and an increase of 23% from $165 million reported in the fourth quarter of fiscal year 2010 (Q4’10). For fiscal year 2011, GAAP revenue was $726 million, up 32% from $552 million in fiscal year 2010. GAAP net income for Q4’11 was $20 million, or $0.12 per diluted share. This compares to GAAP net income of $19 million, or $0.12 per share, in Q3’11 and $13 million, or $0.08 per share, in Q4’10. GAAP net income for 2011 was $64 million, or $0.38 per diluted share, compared to GAAP net income of $34 million, or $0.22 per diluted share, in 2010.

Non-GAAP revenue for Q4’11 was $204 million, an increase of 7% from $191 million reported in Q3’11, and an increase of 23% from $165 million reported in Q4’10. For fiscal year 2011, non-GAAP revenue was $728 million, up 32% from $552 million in fiscal year 2010. Non-GAAP net income for Q4’11 was $41 million, or $0.25 per diluted share. This compares to non-GAAP net income for Q3’11 of $40 million, or $0.24 per diluted share, and non-GAAP net income for Q4’10 of $32 million, or $0.19 per diluted share. Non-GAAP net income for 2011 was $150 million, or $0.90 per diluted share, which compares to non-GAAP net income of $92 million, or $0.59 per diluted share in 2010.

“2011 was a year of tremendous achievement for Riverbed® and a year in which we expanded our addressable market through new innovations, strategic acquisitions and partnerships. For the full year, revenue increased 32% while our non-GAAP net income grew 62% over 2010,” said Jerry M. Kennelly, Riverbed president and CEO. “We believe we are in the strongest strategic and competitive position in our history. Adding to that, early in 2012 we will be entering what we believe will be Riverbed’s most exciting and important product cycle yet.”

“The business has been executing well and fourth quarter revenue growth was fueled by strong enterprise sales in both the U.S. and EMEA,” added Randy S. Gottfried, Riverbed Chief Financial Officer. “Despite higher disk drive costs resulting from recent Thai floods, we reported strong gross and operating margins in the fourth quarter. We believe our past investments in our core and new products will continue to yield solid revenue and profit growth in 2012.”


2011 Business Highlights

 

   

Awarded IDG’s InfoWorld 2011 Technology of the Year Award in the Best WAN Accelerator category for the sixth consecutive time.

 

   

Received certification under the J.D. Power and Associates Certified Technology Service & Support (CTSS) program and the Technology Service Industry Association’s (TSIA) Excellence in Service Operations. Riverbed is one of a select few companies to receive this distinction for global certification under both the J.D. Power and Associates CTSS and the TSIA Excellence in Service Operations program in the same year.

 

   

Announced with Akamai the intention to develop a joint application acceleration solution for hybrid cloud networks and SAAS applications.

 

   

Introduced Riverbed Stingray(TM), a new portfolio of asymmetric software- and virtual-based offerings, including application delivery controllers, web content optimization and Web application firewalls based on technologies acquired from Zeus Technology and Aptimize Limited.

 

   

Launched Riverbed Optimization System (RiOS®) 7.0, expanding optimizations to include native support for HTTP video, UDP, and IPv6. Also included enhanced optimizations for virtual desktop infrastructure, Quality of Service, and integrated Cascade® Shark functionality into the Steelhead® appliance to deliver on-demand packet capture and analysis.

 

   

Introduced Cascade 9.0, providing customers with fine-grained classification of traffic, including advanced Layer-7 awareness and a single business-level performance view of applications and services.

 

   

Integrated the application-aware functionality of Cascade Profiler(TM) with the Cascade Shark(TM) network traffic recording appliance and Cascade Pilot(TM) network analysis software.

 

   

Expanded the ecosystem for Riverbed Whitewater® to include more than 15 cloud storage, backup software, and critical database protection solutions.

 

   

Extended the Riverbed solutions available through the EMC Select Program to include all Steelhead Appliance models, Steelhead Mobile, Riverbed Services Platform, Central Management Controller, Interceptor®, and all Cascade products.

Conference Call

Riverbed will host a conference call today, January 26, 2012, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its fourth quarter and full year 2011 results and outlook for 2012. 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.


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, including non-GAAP support and service revenue, non-GAAP revenue, non-GAAP gross profit, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net income and net income per share, non-GAAP gross margin and non-GAAP operating margin, 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, 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, adjustments to the fair value of inventory, 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, our upcoming product cycle, and our expectations regarding revenue and profit growth in 2012. 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, 2010, and our subsequent Forms 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.

About Riverbed

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.

INVESTOR RELATIONS CONTACT

Renee Lyall

Riverbed Technology

415-247-6353

renee.lyall@riverbed.com

###


Riverbed Technology, Inc.

GAAP Condensed Consolidated Statements of Operations

In thousands, except per share amounts

Unaudited

 

     Three months ended
December 31,
     Twelve months ended
December 31,
 
     2011     2010      2011      2010  

Revenue:

          

Product

   $ 140,303      $ 118,194       $ 501,376       $ 380,277   

Support and services

     62,532        47,239         225,100         171,612   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total revenue

     202,835        165,433         726,476         551,889   

Cost of revenue:

          

Cost of product

     30,764        24,865         105,150         81,998   

Cost of support and services

     19,292        14,274         68,925         50,750   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total cost of revenue

     50,056        39,139         174,075         132,748   
  

 

 

   

 

 

    

 

 

    

 

 

 

Gross profit

     152,779        126,294         552,401         419,141   

Operating expenses:

          

Sales and marketing

     77,606        66,477         272,635         225,052   

Research and development

     33,714        25,617         122,964         87,117   

General and administrative

     15,750        12,989         59,699         47,382   

Acquisition-related costs

     1,087        618         5,211         3,343   
  

 

 

   

 

 

    

 

 

    

 

 

 

Total operating expenses

     128,157        105,701         460,509         362,894   
  

 

 

   

 

 

    

 

 

    

 

 

 

Operating profit

     24,622        20,593         91,892         56,247   

Other income (expense), net

     (534     41         154         724   
  

 

 

   

 

 

    

 

 

    

 

 

 

Income before provision for income taxes

     24,088        20,634         92,046         56,971   

Provision for income taxes

     3,934        8,023         28,239         22,813   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income

   $ 20,154      $ 12,611       $ 63,807       $ 34,158   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income per share, basic

   $ 0.13      $ 0.08       $ 0.41       $ 0.24   

Net income per share, diluted

   $ 0.12      $ 0.08       $ 0.38       $ 0.22   

Shares used in computing basic net income per share

     155,699        149,058         154,411         145,012   

Shares used in computing diluted net income per share

     166,838        163,359         166,900         155,999   


Riverbed Technology, Inc.

Condensed Consolidated Balance Sheets

In thousands

 

     December 31,     December 31,  
     2011     2010  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 215,476      $ 165,726   

Short-term investments

     254,753        259,245   

Trade receivables, net

     78,016        50,726   

Inventory

     11,437        15,180   

Deferred tax assets

     16,783        20,832   

Prepaid expenses and other current assets

     35,078        30,958   
  

 

 

   

 

 

 

Total current assets

     611,543        542,667   
  

 

 

   

 

 

 

Long-term investments

     123,134        76,169   

Fixed assets, net

     29,277        21,522   

Goodwill

     117,474        25,653   

Intangible assets, net

     68,274        30,789   

Deferred tax assets, non-current

     56,708        35,775   

Other assets

     24,789        3,506   
  

 

 

   

 

 

 

Total assets

   $ 1,031,199      $ 736,081   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 35,341      $ 27,015   

Accrued compensation and related benefits

     61,256        32,915   

Other accrued liabilities

     42,959        18,813   

Deferred revenue

     121,131        89,026   
  

 

 

   

 

 

 

Total current liabilities

     260,687        167,769   
  

 

 

   

 

 

 

Deferred revenue, non-current

     36,248        26,511   

Other long-term liabilities

     23,200        4,381   
  

 

 

   

 

 

 

Total long-term liabilities

     59,448        30,892   
  

 

 

   

 

 

 

Stockholders’ equity:

    

Common stock

     631,921        518,052   

Retained earnings

     83,116        19,309   

Accumulated other comprehensive income (loss)

     (3,973     59   
  

 

 

   

 

 

 

Total stockholders’ equity

     711,064        537,420   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,031,199      $ 736,081   
  

 

 

   

 

 

 


Riverbed Technology, Inc.

Condensed Consolidated Statements of Cash Flows

In thousands

Unaudited

 

     Twelve months ended
December 31,
 
     2011     2010  

Operating activities:

    

Net income

   $ 63,807      $ 34,158   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     24,474        15,855   

Stock-based compensation

     89,734        70,801   

Deferred taxes

     (24,693     (11,851

Excess tax benefit from employee stock plans

     (50,673     (27,538

Changes in operating assets and liabilities:

    

Trade receivables

     (23,294     (1,026

Inventory

     3,742        (4,414

Prepaid expenses and other assets

     (21,900     (13,515

Accounts payable

     7,259        8,392   

Accruals and other liabilities

     46,293        23,379   

Acquisition-related contingent consideration

     1,323        (5,249

Income taxes payable

     50,993        27,436   

Deferred revenue

     41,843        29,087   
  

 

 

   

 

 

 

Net cash provided by operating activities

     208,908        145,515   

Investing activities:

    

Capital expenditures

     (18,059     (10,690

Purchase of available for sale securities

     (616,592     (526,051

Proceeds from maturities of available for sale securities

     401,795        404,767   

Proceeds from sales of available for sale securities

     169,123        43,862   

Acquisitions, net of cash acquired

     (120,537     (26,885
  

 

 

   

 

 

 

Net cash used in investing activities

     (184,270     (114,997

Financing activities:

    

Acquisition-related contingent consideration

     —          (9,909

Proceeds from issuance of common stock under employee stock plans, net of repurchases

     55,830        64,295   

Cash used to net share settle equity awards

     (47,648     (12,331

Payments for repurchases of common stock

     (35,040     —     

Payment of debt assumed in acquisition

     —          (2,244

Excess tax benefit from employee stock plans

     50,673        27,538   
  

 

 

   

 

 

 

Net cash provided by financing activities

     23,815        67,349   

Effect of exchange rate changes on cash and cash equivalents

     1,297        110   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     49,750        97,977   

Cash and cash equivalents at beginning of period

     165,726        67,749   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 215,476      $ 165,726   
  

 

 

   

 

 

 


Riverbed Technology, Inc.

Supplemental Financial Information

In thousands

Unaudited

 

     Three months ended      Twelve months ended  
    

December 31,

     September 30,      December 31,      December 31,  
     2011      2011      2010      2011      2010  

Revenue by Geography

              

United States

     $108,976         $106,326         $91,661         $402,157         $294,631   

Europe, Middle East and Africa

     58,501         49,847         42,987         187,425         149,647   

Rest of the world

     35,358         33,610         30,785         136,894         107,611   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     $202,835         $189,783         $165,433         $726,476         $551,889   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As a percentage of total revenues:

              

United States

     54%         56%         55%         55%         53%   

Europe, Middle East and Africa

     29%         26%         26%         26%         27%   

Rest of the world

     17%         18%         19%         19%         20%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     100%         100%         100%         100%         100%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenue by Sales Channel

              

Direct

     $7,599         $7,068         $7,526         $32,627         $31,525   

Indirect

     195,236         182,715         157,907         693,849         520,364   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     $202,835         $189,783         $165,433         $726,476         $551,889   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As a percentage of total revenues:

              

Direct

     4%         4%         5%         4%         6%   

Indirect

     96%         96%         95%         96%         94%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     100%         100%         100%         100%         100%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


Riverbed Technology, Inc.

GAAP to Non-GAAP Reconciliation

In thousands, except per share amounts

Unaudited

 

     Three months ended     Twelve months ended  
GAAP to Non-GAAP Reconciliations:    December 31,     September 30,     December 31,     December 31,  
     2011     2011     2010     2011     2010  

Reconciliation of Total revenue:

          

U.S. GAAP as reported

   $ 202,835      $ 189,783      $ 165,433      $ 726,476      $ 551,889   

Adjustments:

          

Deferred revenue adjustment (6)

     1,189        813        —          2,002        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As adjusted

   $ 204,024      $ 190,596      $ 165,433      $ 728,478      $ 551,889   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Net income:

          

U.S. GAAP as reported

   $ 20,154      $ 19,325      $ 12,611      $ 63,807      $ 34,158   

Adjustments:

          

Stock-based compensation (1)

     21,734        22,504        20,305        89,734        70,801   

Payroll tax on stock-based compensation (2)

     3,565        234        1,634        7,465        3,147   

Amortization on intangibles (3)

     4,858        3,968        1,815        13,120        5,400   

Acquisition-related costs (5)

     3,400        4,681        1,104        10,853        5,260   

Inventory fair value adjustment (4)

     —          120        376        359        376   

Deferred revenue adjustment (6)

     1,189        813        —          2,002        —     

Income tax adjustments (7)

     (13,787     (11,565     (6,114     (37,375     (26,758
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As adjusted

   $ 41,113      $ 40,080      $ 31,731      $ 149,965      $ 92,384   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Reconciliation of Net income per share, diluted:

          

U.S. GAAP as reported

   $ 0.12      $ 0.12      $ 0.08      $ 0.38      $ 0.22   

Adjustments:

          

Stock-based compensation (1)

     0.13        0.14        0.12        0.54        0.46   

Payroll tax on stock-based compensation (2)

     0.02        —          0.01        0.04        0.02   

Amortization on intangibles (3)

     0.03        0.02        0.01        0.08        0.03   

Acquisition-related costs (5)

     0.02        0.03        0.01        0.07        0.03   

Deferred revenue adjustment (6)

     0.01        —          —          0.01        —     

Income tax adjustments (7)

     (0.08     (0.07     (0.04     (0.22     (0.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As adjusted

   $ 0.25      $ 0.24      $ 0.19      $ 0.90      $ 0.59   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Net income per share, basic

   $ 0.26      $ 0.26      $ 0.21      $ 0.97      $ 0.64   

Non-GAAP Net income per share, diluted

   $ 0.25      $ 0.24      $ 0.19      $ 0.90      $ 0.59   

Shares used in computing basic net income per share (8)

     155,699        155,367        149,058        154,411        145,012   

Shares used in computing diluted net income per share (8)

     166,838        167,031        163,359        166,900        155,999   

Non-GAAP adjustments:

          

Support and services revenue

   $ 1,189      $ 813      $ —        $ 2,002      $ —     

Cost of product

     3,781        3,250        1,838        10,991        4,461   

Cost of support and services

     1,793        1,604        1,719        7,001        5,805   

Sales and marketing

     12,063        10,593        9,287        43,478        33,010   

Research and development

     8,688        7,699        6,846        32,457        21,621   

General and administrative

     5,534        5,148        4,926        21,301        16,744   

Other acquisition costs

     1,087        2,732        618        5,211        3,343   

Other expense (9)

     611        481        —          1,092        —     

Provision for income taxes

     (13,787     (11,565     (6,114     (37,375     (26,758
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Non-GAAP adjustments

   $ 20,959      $ 20,755      $ 19,120      $ 86,158      $ 58,226   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

(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 or credits 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) Shares used in computing basic and diluted net income per share is reflective of the stock split for all periods presented.
(9) 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 other income (expense).