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| 8-K - FORM 8-K - Riverbed Technology, Inc. | a2014q3earningsdoc.htm |
Exhibit 99.1
Riverbed Reports Third Quarter Fiscal Year 2014 Results
October 23, 2014--Riverbed Technology (NASDAQ:RVBD), the leader in application performance infrastructure, today reported financial results for its third quarter fiscal 2014 (Q3'14) ended September 30, 2014.
Q3'14 GAAP Financials
GAAP revenue for Q3'14 was $276 million, compared to $262 million in the third quarter of 2013 (Q3'13), representing 6% year-over-year growth. GAAP net income for Q3'14 was $11.5 million, or $0.07 per diluted share, compared to net income of $3.8 million, or $0.02 per diluted share, in Q3'13.
(Dollars in millions, except EPS) | |||||||||||||||
Q3'14 | Q2'14 | Q3'13 | Change Q/Q | Change Y/Y | |||||||||||
Revenue | $ | 276 | $ | 264 | $ | 262 | 5 | % | 6 | % | |||||
Net Income | $ | 11.5 | $ | 6.8 | $ | 3.8 | $ | 4.7 | $ | 7.7 | |||||
Diluted EPS | $ | 0.07 | $ | 0.04 | $ | 0.02 | $ | 0.03 | $ | 0.05 | |||||
Q3'14 Non-GAAP Financials
Non-GAAP revenue for Q3'14 was $277 million, an increase of 4% compared to $265 million in Q3'13. Non-GAAP net income for Q3'14 was $48.7 million compared to non-GAAP net income of $43.3 million in Q3'13. Non-GAAP earnings were $0.30 per diluted share for Q3'14 compared to $0.26 per diluted share in Q3'13, representing a 15% increase year-over-year.
(Dollars in millions, except EPS) | |||||||||||||||
Q3'14 | Q2'14 | Q3'13 | Change Q/Q | Change Y/Y | |||||||||||
Revenue | $ | 277 | $ | 264 | $ | 265 | 5 | % | 4 | % | |||||
Net Income | $ | 48.7 | $ | 42.6 | $ | 43.3 | $ | 6.1 | $ | 5.4 | |||||
Diluted EPS | $ | 0.30 | $ | 0.26 | $ | 0.26 | $ | 0.04 | $ | 0.04 | |||||
"Our third quarter financial results were in-line with our revised guidance. While we are not satisfied with our top line performance, we are pleased to see steady growth in our SteelFusion and SteelCentral businesses,” said Jerry M. Kennelly, chairman and CEO. “Our ongoing focus to gain increased operating leverage is evident in our Q3 results, delivering earnings per share in-line with our expectations. We’ve started to execute our previously announced restructuring plans to drive further operational improvements and remain committed to delivering profitable growth and enhancing shareholder value,” continued Kennelly.
Q3'14 Business Highlights
• | Strengthened VMware partnership by achieving VMware Ready® - vCloud® Air™ status on Riverbed® SteelApp™ Traffic Manager, Riverbed® SteelCentral™ Services Controller for SteelApp and Riverbed® SteelHead™ CX application performance solutions. |
• | Named an inaugural member of the Microsoft Azure Certified Program and announced Riverbed SteelHead CX for IaaS (Infrastructure-as-a-Service) which can accelerate data and applications hosted by Azure up to 33x faster, while using up to 97% less bandwidth. |
• | Gained customer traction with Riverbed® SteelFusion™ branch converged infrastructure solution: |
◦ | Deployed by Canadian based mining company, Alamos Gold, to centralize server, storage, and network infrastructure into a single branch appliance, improving data protection and increasing business performance. |
◦ | Deployed by WAMGROUP, industrial equipment manufacturer and longstanding SteelHead customer, to strengthen its disaster-recovery capabilities and provide resilient IT support for branch offices located in a seismic zone. |
• | Riverbed SteelCentral enabled Allianz, a global insurance provider, to resolve network performance issues up to 50% faster, resulting in improved productivity and a better customer experience. |
• | Appointed new board members and key executives: |
◦ | Mike Nefkens, Board of Directors; currently serves as Executive Vice President of Hewlett-Packard Enterprise Services |
◦ | Steffan Tomlinson, Board of Directors; currently serves as Chief Financial Officer of Palo Alto Networks |
◦ | Paul Mountford, Senior Vice President and Chief Sales Officer; seasoned industry veteran with 30 years of leadership experience in the technology sector, including 16 years with Cisco |
Q4'14 Outlook
The Company provides the following financial guidance for the fourth quarter of fiscal year 2014, which reflects the partial quarter impact of the planned Q4 restructuring:
• | Non-GAAP revenues are expected to be in the range of $285 to $290 million |
• | Non-GAAP earnings per share are expected to be in the range of $0.31 to $0.33 per share |
Riverbed will host a conference call today, October 23, 2014 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its third quarter 2014 results and outlook for the fourth quarter of 2014. The call will be broadcast live over the Internet at http://www.riverbed.com/investors and a replay of the webcast will also 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 net income and non-GAAP net income per 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; as such, we believe it is useful for investors to understand the effects of these items on our total operating expenses. 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 and services deferred revenue: Business combination accounting rules require us to account for the fair value of support and service contracts assumed in connection with our acquisitions. The book value of the acquisition deferred support and services revenue related to OPNET was reduced by $19 million in the adjustment to fair value. Because these are typically one to five year contracts, our GAAP revenues for the periods 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.
Inventory and cost of product revenue: Business combination accounting rules require us to account for the fair value of inventory acquired in connection with our acquisitions. The fair value of inventory is estimated as the selling price minus the estimated cost to sell. In the period subsequent to the acquisition, the cost of product revenue includes the higher fair value of the acquired inventory that would not have otherwise been recorded by the acquired entity.
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 revenues as well.
Acquisition related expenses: We incur significant expenses in connection with our acquisitions. Acquisition related expenses consist of transaction costs, costs for transitional employees, other acquired employee related retention costs, facilities consolidation and exit 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.
Other expenses are those which we would not otherwise have incurred in the periods presented as a part of our ongoing expenses. In the periods presented, Other expenses included:
Operating lease not in service - We entered into an operating lease on a new corporate headquarters in San Francisco. The lease accounting rules require that rent expense begin on a straight line basis starting in the period that we have the right to access the new facility. We gained the right to access the facility in November 2013 to begin constructing our leasehold improvements. We occupied the new facility in the second quarter of 2014. We believe that the duplicate rent of the new facility during the construction period is not representative of the ongoing operating costs of the company.
Non-routine corporate governance and shareholder matters - Beginning in the fourth quarter of 2013, we began incurring professional service fees related to non-routine corporate governance and shareholder matters. We believe these fees are not representative of the ongoing operating costs of the company.
Forward Looking Statements
This press release contains forward-looking statements, including statements relating to revenue and earnings growth, including guidance for the fourth quarter of fiscal 2014, restructuring plans to drive further operational improvements, and other forward opportunities. 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; customer adoption rate of our products and our Application Performance Platform; 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; our ability to timely and effectively implement our restructuring plans; 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-K filed with the SEC for the period ended December 31, 2013, and our subsequent quarterly reports 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, at more than $1 billion in annual revenue, is the leader in Application Performance Infrastructure, delivering the most complete platform for Location-Independent Computing. Location-Independent Computing turns location and distance into a competitive advantage by allowing IT to have the flexibility to host applications and data in the most optimal locations while ensuring applications perform as expected, data is always available when needed, and performance issues are detected and fixed before end users notice. Riverbed’s 25,000+ customers include 97% of both the Fortune 100 and the Forbes Global 100. Learn more 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.
COMPANY CONTACTS
INVESTOR RELATIONS CONTACT
Riverbed Technology
Shanye Hudson, 415-527-4709
shanye.hudson@riverbed.com
MEDIA CONTACT
Riverbed Technology
Shawn Dainas, 415-527-4537
shawn.dainas@riverbed.com
###
Riverbed Technology
GAAP Condensed Consolidated Statements of Operations
In thousands, except per share amounts
Unaudited
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue: | ||||||||||||||||
Product | $ | 153,383 | $ | 153,167 | $ | 448,458 | $ | 444,690 | ||||||||
Support and services | 122,991 | 108,556 | 357,358 | 313,082 | ||||||||||||
Total revenue | 276,374 | 261,723 | 805,816 | 757,772 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Cost of product | 36,945 | 41,772 | 111,614 | 123,135 | ||||||||||||
Cost of support and services | 33,393 | 29,085 | 97,657 | 87,020 | ||||||||||||
Total cost of revenue | 70,338 | 70,857 | 209,271 | 210,155 | ||||||||||||
Gross profit | 206,036 | 190,866 | 596,545 | 547,617 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 113,100 | 116,257 | 338,535 | 345,351 | ||||||||||||
Research and development | 53,354 | 49,461 | 155,299 | 149,440 | ||||||||||||
General and administrative | 18,698 | 17,729 | 58,102 | 55,164 | ||||||||||||
Acquisition-related costs | 1,866 | 4,882 | 4,806 | 16,085 | ||||||||||||
Total operating expenses | 187,018 | 188,329 | 556,742 | 566,040 | ||||||||||||
Operating profit | 19,018 | 2,537 | 39,803 | (18,423 | ) | |||||||||||
Interest expense and other, net | (2,773 | ) | (5,063 | ) | (8,199 | ) | (17,336 | ) | ||||||||
Income (loss) before provision for income taxes | 16,245 | (2,526 | ) | 31,604 | (35,759 | ) | ||||||||||
Provision for (benefit from) income taxes | 4,761 | (6,344 | ) | 10,067 | (14,946 | ) | ||||||||||
Net income (loss) | $ | 11,484 | $ | 3,818 | $ | 21,537 | $ | (20,813 | ) | |||||||
Net income (loss) per share, basic | $ | 0.07 | $ | 0.02 | $ | 0.14 | $ | (0.13 | ) | |||||||
Net income (loss) per share, diluted | $ | 0.07 | $ | 0.02 | $ | 0.13 | $ | (0.13 | ) | |||||||
Shares used in computing basic net income (loss) per share | 157,575 | 162,929 | 159,448 | 163,430 | ||||||||||||
Shares used in computing diluted net income (loss) per share | 162,323 | 167,692 | 164,096 | 163,430 | ||||||||||||
Riverbed Technology
Condensed Consolidated Balance Sheets
In thousands
Unaudited
September 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 207,782 | $ | 208,022 | |||
Short-term investments | 189,938 | 251,339 | |||||
Trade receivables, net | 114,411 | 93,836 | |||||
Inventory | 17,517 | 25,025 | |||||
Deferred tax assets | 17,807 | 7,222 | |||||
Prepaid expenses and other current assets | 58,793 | 49,016 | |||||
Total current assets | 606,248 | 634,460 | |||||
Long-term investments | 78,948 | 72,675 | |||||
Fixed assets, net | 74,133 | 57,810 | |||||
Goodwill | 704,305 | 704,305 | |||||
Intangible assets, net | 340,007 | 404,467 | |||||
Other assets | 20,928 | 23,881 | |||||
Total assets | $ | 1,824,569 | $ | 1,897,598 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 41,611 | $ | 45,518 | |||
Accrued compensation and benefits | 47,813 | 51,988 | |||||
Other accrued liabilities | 56,214 | 36,520 | |||||
Current maturities of long-term borrowings | 15,000 | 15,000 | |||||
Deferred revenue | 228,038 | 217,131 | |||||
Total current liabilities | 388,676 | 366,157 | |||||
Deferred revenue, non-current | 84,041 | 95,344 | |||||
Borrowings, non-current, net of current maturities | 498,750 | 510,000 | |||||
Deferred tax liability, non-current | 38,939 | 48,548 | |||||
Other long-term liabilities | 47,896 | 48,910 | |||||
Total long-term liabilities | 669,626 | 702,802 | |||||
Stockholders' equity: | |||||||
Common stock | 622,920 | 702,928 | |||||
Retained earnings | 146,832 | 125,295 | |||||
Accumulated other comprehensive income (loss) | (3,485 | ) | 416 | ||||
Total stockholders' equity | 766,267 | 828,639 | |||||
Total liabilities and stockholders' equity | $ | 1,824,569 | $ | 1,897,598 | |||
Riverbed Technology
Condensed Consolidated Statements of Cash Flows
In thousands
Unaudited
Nine months ended September 30, | |||||||
2014 | 2013 | ||||||
Operating activities: | |||||||
Net income (loss) | $ | 21,537 | $ | (20,813 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 85,564 | 94,617 | |||||
Stock-based compensation | 67,929 | 75,159 | |||||
Deferred taxes | (19,962 | ) | (43,985 | ) | |||
Excess tax benefit from employee stock plans | (5,893 | ) | (5,507 | ) | |||
Amortization of deferred debt issuance costs | 683 | 1,736 | |||||
Changes in operating assets and liabilities: | |||||||
Trade receivables | (20,575 | ) | 12,396 | ||||
Inventory | 7,508 | (7,512 | ) | ||||
Prepaid expenses and other assets | (5,457 | ) | (5,690 | ) | |||
Accounts payable | 1,980 | (10,038 | ) | ||||
Accruals and other liabilities | 14,505 | 1,561 | |||||
Income taxes payable | 2,362 | (1,714 | ) | ||||
Deferred revenue | (396 | ) | 38,179 | ||||
Net cash provided by operating activities | 149,785 | 128,389 | |||||
Investing activities: | |||||||
Capital expenditures | (43,314 | ) | (18,284 | ) | |||
Purchase of available for sale securities | (241,263 | ) | (317,399 | ) | |||
Proceeds from maturities of available for sale securities | 237,706 | 236,562 | |||||
Proceeds from sales of available for sale securities | 57,245 | 15,045 | |||||
Acquisitions and equity investments, net of cash acquired | (679 | ) | (1,000 | ) | |||
Net cash provided by (used in) investing activities | 9,695 | (85,076 | ) | ||||
Financing activities: | |||||||
Proceeds from issuance of common stock under employee stock plans | 53,413 | 56,293 | |||||
Taxes paid related to net shares settlement of equity awards | (8,141 | ) | (4,289 | ) | |||
Payments for repurchases of common stock | (195,571 | ) | (125,081 | ) | |||
Payment of borrowings | (11,250 | ) | (50,015 | ) | |||
Excess tax benefit from employee stock plans | 5,893 | 5,507 | |||||
Net cash used in financing activities | (155,656 | ) | (117,585 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (4,064 | ) | 1,574 | ||||
Net decrease in cash and cash equivalents | (240 | ) | (72,698 | ) | |||
Cash and cash equivalents at beginning of period | 208,022 | 280,509 | |||||
Cash and cash equivalents at end of period | $ | 207,782 | $ | 207,811 | |||
Riverbed Technology
Supplemental Financial Information
In thousands
Unaudited
Three months ended | Nine months ended | ||||||||||||||||||
September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
Revenue by Geography | |||||||||||||||||||
Americas | $ | 174,550 | $ | 154,744 | $ | 164,015 | $ | 490,111 | $ | 479,056 | |||||||||
Europe, Middle East and Africa | 71,185 | 69,421 | 64,179 | 209,637 | 181,445 | ||||||||||||||
Asia Pacific | 30,639 | 39,861 | 33,529 | 106,068 | 97,271 | ||||||||||||||
Total revenue | $ | 276,374 | $ | 264,026 | $ | 261,723 | $ | 805,816 | $ | 757,772 | |||||||||
As a percentage of total revenues: | |||||||||||||||||||
Americas | 63 | % | 59 | % | 63 | % | 61 | % | 63 | % | |||||||||
Europe, Middle East and Africa | 26 | % | 26 | % | 25 | % | 26 | % | 24 | % | |||||||||
Asia Pacific | 11 | % | 15 | % | 12 | % | 13 | % | 13 | % | |||||||||
Total revenue | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
Revenue by Sales Channel | |||||||||||||||||||
Direct | $ | 26,060 | $ | 22,519 | $ | 28,654 | $ | 79,979 | $ | 120,611 | |||||||||
Indirect | 250,314 | 241,507 | 233,069 | 725,837 | 637,161 | ||||||||||||||
Total revenue | $ | 276,374 | $ | 264,026 | $ | 261,723 | $ | 805,816 | $ | 757,772 | |||||||||
As a percentage of total revenues: | |||||||||||||||||||
Direct | 9 | % | 9 | % | 11 | % | 10 | % | 16 | % | |||||||||
Indirect | 91 | % | 91 | % | 89 | % | 90 | % | 84 | % | |||||||||
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, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | ||||||||||||||
Reconciliation of Total revenue: | |||||||||||||||||||
U.S. GAAP as reported | $ | 276,374 | $ | 264,026 | $ | 261,723 | $ | 805,816 | $ | 757,772 | |||||||||
Adjustments: | |||||||||||||||||||
Deferred revenue adjustment (6) | 325 | 374 | 3,250 | 1,208 | 14,571 | ||||||||||||||
As adjusted | $ | 276,699 | $ | 264,400 | $ | 264,973 | $ | 807,024 | $ | 772,343 | |||||||||
Reconciliation of Net income (loss): | |||||||||||||||||||
U.S. GAAP as reported | $ | 11,484 | $ | 6,765 | $ | 3,818 | $ | 21,537 | $ | (20,813 | ) | ||||||||
Adjustments: | |||||||||||||||||||
Stock-based compensation (1) | 24,608 | 21,572 | 25,104 | 67,929 | 75,159 | ||||||||||||||
Payroll tax on stock-based compensation (2) | (247 | ) | 1,196 | 63 | 1,247 | 1,532 | |||||||||||||
Amortization of intangibles (3) | 21,122 | 21,328 | 25,817 | 64,460 | 77,945 | ||||||||||||||
Acquisition-related costs (5) | 1,877 | 292 | 4,902 | 4,899 | 17,217 | ||||||||||||||
Inventory fair value adjustment (4) | — | — | — | — | 1,700 | ||||||||||||||
Deferred revenue adjustment (6) | 325 | 374 | 3,250 | 1,208 | 14,571 | ||||||||||||||
Other expense (7) | 626 | 3,065 | — | 6,087 | — | ||||||||||||||
Income tax adjustments (8) | (11,055 | ) | (11,983 | ) | (19,698 | ) | (35,612 | ) | (48,839 | ) | |||||||||
As adjusted | $ | 48,740 | $ | 42,609 | $ | 43,256 | $ | 131,755 | $ | 118,472 | |||||||||
Reconciliation of Net income (loss) per share, diluted: | |||||||||||||||||||
U.S. GAAP as reported | $ | 0.07 | $ | 0.04 | $ | 0.02 | $ | 0.13 | $ | (0.13 | ) | ||||||||
Adjustments: | |||||||||||||||||||
Stock-based compensation (1) | 0.15 | 0.13 | 0.15 | 0.41 | 0.45 | ||||||||||||||
Payroll tax on stock-based compensation (2) | — | 0.01 | — | 0.01 | 0.01 | ||||||||||||||
Amortization of intangibles (3) | 0.13 | 0.13 | 0.15 | 0.39 | 0.46 | ||||||||||||||
Acquisition-related costs (5) | 0.01 | — | 0.03 | 0.03 | 0.10 | ||||||||||||||
Inventory fair value adjustment (4) | — | — | — | — | 0.01 | ||||||||||||||
Deferred revenue adjustment (6) | — | — | 0.03 | 0.01 | 0.09 | ||||||||||||||
Other expense (7) | — | 0.02 | — | 0.04 | — | ||||||||||||||
Income tax adjustments (8) | (0.06 | ) | (0.07 | ) | (0.12 | ) | (0.22 | ) | (0.29 | ) | |||||||||
As adjusted | $ | 0.30 | $ | 0.26 | $ | 0.26 | $ | 0.80 | $ | 0.70 | |||||||||
Non-GAAP Net income per share, basic | $ | 0.31 | $ | 0.27 | $ | 0.27 | $ | 0.83 | $ | 0.72 | |||||||||
Non-GAAP Net income per share, diluted | $ | 0.30 | $ | 0.26 | $ | 0.26 | $ | 0.80 | $ | 0.70 | |||||||||
Shares used in computing basic net income per share | 157,575 | 160,580 | 162,929 | 159,448 | 163,430 | ||||||||||||||
Shares used in computing diluted net income per share | 162,323 | 164,650 | 167,692 | 164,096 | 168,411 | ||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||
Product revenue | $ | 24 | $ | 24 | $ | 87 | $ | 81 | $ | 87 | |||||||||
Support and services revenue | 301 | 350 | 3,163 | 1,127 | 14,484 | ||||||||||||||
Cost of product | 10,868 | 11,021 | 12,201 | 33,326 | 38,226 | ||||||||||||||
Cost of support and services | 1,954 | 2,488 | 2,209 | 6,808 | 6,576 | ||||||||||||||
Sales and marketing | 20,357 | 19,478 | 24,236 | 61,104 | 74,536 | ||||||||||||||
Research and development | 8,029 | 7,856 | 8,697 | 23,567 | 26,103 | ||||||||||||||
General and administrative | 4,912 | 6,338 | 3,661 | 15,011 | 12,027 | ||||||||||||||
Acquisition-related costs | 1,866 | 272 | 4,882 | 4,806 | 16,085 | ||||||||||||||
Provision for income taxes | (11,055 | ) | (11,983 | ) | (19,698 | ) | (35,612 | ) | (48,839 | ) | |||||||||
Total Non-GAAP adjustments | $ | 37,256 | $ | 35,844 | $ | 39,438 | $ | 110,218 | $ | 139,285 | |||||||||
_______________________
(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 acquisitions are amortized over the estimated useful life of the respective asset.
(4) The inventory fair value adjustment recorded pursuant to our acquisitions 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, including transaction costs, integration costs, employee retention and severance costs, restructuring costs, write-down of certain acquired in-process research and development intangibles, and revaluation of the fair value of contingent consideration, 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) Other expense, net, includes expenses associated with non-routine corporate governance and shareholder matters and rent expense related to the new corporate headquarters, which is the amount of straight-line rent expense incurred from the date we gained the right to access to the facility for construction purposes prior to the date of occupancy in May 2014.
(8) 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.