Riverbed Technology Reports Record Fourth Quarter and 2012 Revenue Annual revenue grows 15% Business Wire SAN FRANCISCO -- February 7, 2013 Riverbed Technology, Inc. (NASDAQ:RVBD), the performance company, today reported record revenue for its fourth quarter (Q4'12) and fiscal year ended December 31, 2012 (FY’12). Total GAAP revenue for Q4’12 was $237 million, up 9% compared to the third quarter of fiscal year 2012 (Q3’12) and 17% compared to the fourth quarter of fiscal year 2011 (Q4’11). For the full year 2012, GAAP revenue was $837 million, up 15% compared to 2011. Non-GAAP revenue for Q4'12 was $239 million, an increase of 9% compared to Q3'12 and an increase of 17% compared to Q4'11. Non-GAAP revenue for 2012 was $840 million, an increase of 15% compared to 2011. GAAP net income for Q4’12 was $5 million, or $0.03 per diluted share. This compares to $25 million, or $0.15 per diluted share, in Q3’12 and $20 million, or $0.12 per diluted share, in Q4’11. GAAP net income for 2012 was $55 million, or $0.33 per diluted share. Non-GAAP net income for Q4'12 was $46 million, or $0.29 per diluted share. This compares to $46 million, or $0.28 per diluted share, in Q3'12 and $41 million, or $0.25 per diluted share, in Q4'11. Non-GAAP net income for 2012 was $163 million, or $0.99 per diluted share. The acquisition of OPNET Technologies, Inc., closed December 18, 2012, contributed $6 million to GAAP revenue and $7 million to non-GAAP revenue in the fourth quarter. Excluding any revenue or costs associated with OPNET, non-GAAP net income was $0.29 per diluted share in the fourth quarter. “In 2012, we expanded our addressable market through organic innovation, new partnerships and strategic acquisitions,” said Jerry M. Kennelly, Chairman and CEO. “Revenue dollars grew more than $111 million for the full year, with most of that growth from WAN optimization. Performance management was the fastest growing product line, underpinning our strategic decision to acquire OPNET. Looking ahead, we will benefit from continued growth in our WAN optimization business and performance management product suite. I am very optimistic as we enter our first year as a billion-dollar-plus revenue company.” “Our integration of OPNET is proceeding as planned and we intend to introduce the first phase of an integrated application and network performance management product line in the second half of this year,” said Eric Wolford, president of products and marketing. “OPNET complements a broad lineup of new products introduced throughout 2012 and uniquely positions us for the future of performance management.” “We saw revenue expansion in all major regions, with solid growth in enterprise sales,” said Randy S. Gottfried, COO and CFO. “The company continued to execute well and generated more than $217 million of free cash flow in 2012.” 2012 Business Highlights *Completed the acquisition of OPNET Technologies, Inc. making Riverbed Performance Management, (RPM) a leader in the converging application and network performance management segments *Positioned by Gartner in the Leaders quadrant of the 2012 "Magic Quadrant for WAN Optimization Controllers" report authored by Joe Skorupa and Severine Real and published January 12, 2012 *Captured more than 52% share of the worldwide Advanced Platform WAN optimization market share based on vendor revenue for the third quarter of 2012 per Gartner’s report titled “Market Share: Application Acceleration Equipment, Worldwide 3Q12” authored by Joe Skorupa and Nhat Pham, December 2012 *Positioned by Gartner in the Visionaries quadrant of the 2012 "Magic Quadrant for Application Delivery Controllers (ADC)" report authored by Joe Skorupa, Neil Rickard, and Bjarne Munch and published October 30, 2012 *Positioned by Gartner in the Leaders quadrant of the 2012 “Magic Quadrant for Application Performance Monitoring” report authored by Jonah Kowall and Will Capelli and published August 16, 2012 *Enhanced strategic relationship and product interoperability with VMware across Riverbed Steelhead®, Granite™, Performance Management and Stingray™ product solutions *Entered into a technology partnership with Juniper Networks in application delivery, WAN optimization and mobility to deliver market-leading technologies to more customers *Introduced multiple new appliance and virtual products within WAN optimization and performance management expanding the addressable market opportunity *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 for the second consecutive year *Named a top three Best Place to Work for 2013 in the Glassdoor Employees’ Choice Award. Riverbed ranked third out of close to a quarter of a million global companies rated by their employees, and second overall among technology companies. Conference Call Riverbed will host a conference call today, February 7, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its fourth quarter and full year 2012 results and outlook for 2013. 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 basic and 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 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. 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 incur 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. Forward-Looking Statements This press release contains forward-looking statements, including statements relating to our strategic and competitive position, growth in our WAN optimization business, growth from new products, the timing of introduction and benefits of our integrated application and network performance management product suite, and expansion of our addressable markets. 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 and to timely 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 disclaim any 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 Technology 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. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. Riverbed Technology GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Three months ended Twelve months ended December 31, December 31, 2012 2011 2012 2011 Revenue: Product $ 157,133 $ 140,303 $ 548,141 $ 501,376 Support and 80,249 62,532 288,719 225,100 services Total revenue 237,382 202,835 836,860 726,476 Cost of revenue: Cost of product 34,994 30,764 124,406 105,150 Cost of support and 23,300 19,292 80,412 68,925 services Total cost of 58,294 50,056 204,818 174,075 revenue Gross profit 179,088 152,779 632,042 552,401 Operating expenses: Sales and marketing 95,542 77,606 328,657 272,635 Research and 40,056 33,714 146,108 122,964 development General and 16,584 15,750 60,594 59,699 administrative Acquisition-related 13,231 1,087 726 5,211 costs Total operating 165,413 128,157 536,085 460,509 expenses Operating profit 13,675 24,622 95,957 91,892 Other income (683 ) (534 ) (1,924 ) 154 (expense), net Income before provision for 12,992 24,088 94,033 92,046 income taxes Provision for 8,208 3,934 39,436 28,239 income taxes Net income $ 4,784 $ 20,154 $ 54,597 $ 63,807 Net income per $ 0.03 $ 0.13 $ 0.35 $ 0.41 share, basic Net income per $ 0.03 $ 0.12 $ 0.33 $ 0.38 share, diluted Shares used in computing basic net 155,879 155,699 156,205 154,411 income per share Shares used in computing diluted 163,638 166,838 164,570 166,900 net income per share Riverbed Technology Condensed Consolidated Balance Sheets In thousands December 31, 2012 December 31, 2011 ASSETS Current assets: Cash and cash equivalents $ 280,509 $ 215,476 Short-term investments 170,605 254,753 Trade receivables, net 113,190 78,016 Inventory 24,175 11,437 Deferred tax assets 11,185 16,783 Prepaid expenses and other 50,245 35,078 current assets Total current assets 649,909 611,543 Long-term investments 78,476 123,134 Fixed assets, net 49,244 29,277 Goodwill 699,785 117,474 Intangible assets, net 506,842 68,274 Deferred tax assets, non-current 6,457 56,708 Other assets 33,626 24,789 Total assets $ 2,024,339 $ 1,031,199 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 50,417 $ 35,341 Accrued compensation and related 60,501 61,256 benefits Other accrued liabilities 41,472 42,959 Current maturities of long-term 5,327 — borrowings Deferred revenue 182,219 121,131 Total current liabilities 339,936 260,687 Deferred revenue, non-current 88,393 36,248 Long-term borrowings, net of 566,814 — current maturities Deferred tax liability, 109,311 103 non-current Other long-term liabilities 25,663 23,097 Total long-term liabilities 790,181 59,448 Stockholders' equity: Common stock 757,777 631,921 Retained earnings 137,713 83,116 Accumulated other comprehensive (1,268 ) (3,973 ) loss Total stockholders' equity 894,222 711,064 Total liabilities and $ 2,024,339 $ 1,031,199 stockholders' equity Riverbed Technology Condensed Consolidated Statements of Cash Flows In thousands Unaudited Twelve months ended December 31, 2012 2011 Operating activities: Net income $ 54,597 $ 63,807 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 40,010 24,474 Stock-based compensation 89,294 89,734 Deferred taxes 10,239 (24,693 ) Excess tax benefit from employee stock (23,883 ) (50,673 ) plans Changes in operating assets and liabilities: Trade receivables (13,386 ) (23,294 ) Inventory (6,238 ) 3,742 Prepaid expenses and other assets (5,734 ) (21,900 ) Accounts payable 4,567 7,259 Accruals and other liabilities (5,894 ) 46,293 Acquisition-related contingent (15,882 ) 1,323 consideration Income taxes payable 20,176 50,993 Deferred revenue 91,397 41,843 Net cash provided by operating 239,263 208,908 activities Investing activities: Capital expenditures (21,956 ) (18,059 ) Purchase of available for sale (444,472 ) (616,592 ) securities Proceeds from maturities of available 344,353 401,795 for sale securities Proceeds from sales of available for 257,961 169,123 sale securities Acquisitions, net of cash acquired (790,269 ) (120,537 ) Net cash used in investing activities (654,383 ) (184,270 ) Financing activities: Proceeds from issuance of common stock under employee stock plans, net of 47,606 55,830 repurchases Cash used to net share settle equity (27,309 ) (47,648 ) awards Payments for repurchases of common (127,144 ) (35,040 ) stock Debt borrowing, net of issuance costs 560,371 — Excess tax benefit from employee stock 23,883 50,673 plans Net cash provided by financing 477,407 23,815 activities Effect of exchange rate changes on 2,746 1,297 cash and cash equivalents Net increase in cash and cash 65,033 49,750 equivalents Cash and cash equivalents at beginning 215,476 165,726 of period Cash and cash equivalents at end of $ 280,509 $ 215,476 period Riverbed Technology Supplemental Financial Information In thousands Unaudited Three months ended Twelve months ended December September December December December 31, 30, 31, 31, 31, 2012 2012 2011 2012 2011 Revenue by Geography Americas $ 140,059 $ 133,656 $ 117,367 $ 494,907 $ 437,945 Europe, Middle 66,450 56,992 58,501 225,652 187,425 East and Africa Asia 30,873 27,949 26,967 116,301 101,106 Pacific Total $ 237,382 $ 218,597 $ 202,835 $ 836,860 $ 726,476 revenue As a percentage of total revenues: Americas 59 % 61 % 58 % 59 % 60 % Europe, Middle 28 % 26 % 29 % 27 % 26 % East and Africa Asia 13 % 13 % 13 % 14 % 14 % Pacific Total 100 % 100 % 100 % 100 % 100 % revenue Revenue by Sales Channel Direct $ 16,477 $ 6,625 $ 7,599 $ 43,526 $ 32,627 Indirect 220,905 211,972 195,236 793,334 693,849 Total $ 237,382 $ 218,597 $ 202,835 $ 836,860 $ 726,476 revenue As a percentage of total revenues: Direct 7 % 3 % 4 % 5 % 4 % Indirect 93 % 97 % 96 % 95 % 96 % Total 100 % 100 % 100 % 100 % 100 % revenue Riverbed Technology GAAP to Non-GAAP Reconciliation In thousands, except per share amounts Unaudited Three months ended Twelve months ended December September December December December GAAP to Non-GAAP 31, 30, 31, 31, 31, Reconciliations: 2012 2012 2011 2012 2011 Reconciliation of Total revenue: U.S. GAAP as $ 237,382 $ 218,597 $ 202,835 $ 836,860 $ 726,476 reported Adjustments: Deferred revenue 1,292 199 1,189 2,818 2,002 adjustment (6) As adjusted $ 238,674 $ 218,796 $ 204,024 $ 839,678 $ 728,478 Reconciliation of Net income: U.S. GAAP as $ 4,784 $ 24,730 $ 20,154 $ 54,597 $ 63,807 reported Adjustments: Stock-based 23,124 20,252 21,734 89,294 89,734 compensation (1) Payroll tax on stock-based 1,523 230 3,565 3,177 7,465 compensation (2) Amortization on 9,553 5,474 4,858 25,888 13,120 intangibles (3) Acquisition-related 13,484 (2,371 ) 2,789 3,469 9,761 costs (credits) (5) Inventory fair value adjustment 699 — — 699 359 (4) Deferred revenue 1,292 199 1,189 2,818 2,002 adjustment (6) Other income 6 525 611 2,618 1,092 (expense), net (8) Income tax (8,006 ) (2,958 ) (13,787 ) (19,224 ) (37,375 ) adjustments (7) As adjusted $ 46,459 $ 46,081 $ 41,113 $ 163,336 $ 149,965 Reconciliation of Net income per share, diluted: U.S. GAAP as $ 0.03 $ 0.15 $ 0.12 $ 0.33 $ 0.38 reported Adjustments: Stock-based 0.15 0.13 0.13 0.54 0.54 compensation (1) Payroll tax on stock-based 0.01 0.00 0.02 0.02 0.04 compensation (2) Amortization on 0.06 0.03 0.03 0.16 0.08 intangibles (3) Acquisition-related 0.08 (0.01 ) 0.02 0.02 0.06 costs (credits) (5) Deferred revenue 0.01 0.00 0.01 0.02 0.01 adjustment (6) Other income 0.00 0.00 0.00 0.02 0.01 (expense), net (8) Income tax (0.05 ) (0.02 ) (0.08 ) (0.12 ) (0.22 ) adjustments (7) As adjusted $ 0.29 $ 0.28 $ 0.25 $ 0.99 $ 0.90 Non-GAAP Net income $ 0.30 $ 0.30 $ 0.26 $ 1.05 $ 0.97 per share, basic Non-GAAP Net income $ 0.29 $ 0.28 $ 0.25 $ 0.99 $ 0.90 per share, diluted Shares used in computing basic net 154,818 153,823 155,699 155,940 154,411 income per share (9) Shares used in computing diluted 162,578 161,877 166,838 164,305 166,900 net income per share (9) Non-GAAP adjustments: Support and $ 1,292 $ 199 $ 1,189 $ 2,818 $ 2,002 services revenue Cost of product 5,840 3,858 3,781 17,422 10,991 Cost of support and 2,059 1,660 1,793 7,205 7,001 services Sales and marketing 14,344 10,547 12,063 47,603 43,478 Research and 8,264 7,079 8,688 31,541 32,457 development General and 4,645 3,306 5,534 18,030 21,301 administrative Acquisition-related 13,231 (2,865 ) 1,087 726 5,211 costs (credits) Other income 6 525 611 2,618 1,092 (expense), net (8) Provision for (8,006 ) (2,958 ) (13,787 ) (19,224 ) (37,375 ) income taxes Total Non-GAAP $ 41,675 $ 21,351 $ 20,959 $ 108,739 $ 86,158 adjustments (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) 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. (9) Shares used in computing basic and diluted net income per share for the December 31, 2012 periods exclude shares issued in connection with the OPNET acquisition. Contact: Riverbed Technology Renee Lyall, 415-247-6353 firstname.lastname@example.org
Riverbed Technology Reports Record Fourth Quarter and 2012 Revenue
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