SAN JOSE, CA--(Marketwired - May 21, 2015) - Brocade® (NASDAQ: BRCD) today reported financial results for its second fiscal quarter ended May 2, 2015. Brocade reported second quarter revenue of $547 million, up 2% year over year and down 5% sequentially. The Company reported GAAP diluted Earnings Per Share (EPS) of $0.18, up from a loss of $0.03 per share in Q2 2014 and down from $0.20 in Q1 2015. The Q2 2014 GAAP loss was due to a non-cash goodwill impairment charge associated with the strategic repositioning of the Brocade ADX® product family. Non-GAAP diluted EPS was $0.22 for Q2 2015, up from $0.19 in Q2 2014 and down from $0.27 in Q1 2015.

"We significantly grew our IP Networking revenue year over year and closed the acquisitions of Connectem and the SteelApp assets, expanding our strong portfolio of virtual IP networking services," said Lloyd Carney, CEO of Brocade. "These next-gen software-based technologies, together with our hardware products, allow us to build more strategic solutions for our customers and underscore our vision for the New IP."

Key Financial Metrics:

                   
 Q2 2015  Q1 2015  Q2 2014  Q2 2015 vs. Q1 2015  Q2 2015 vs. Q2 2014
Revenue $ 547 M   $ 576 M   $ 537 M   (5 %)   2 %
GAAP EPS--diluted $ 0.18     $ 0.20     $ (0.03 )   (11 %)   NMF*
Non-GAAP EPS--diluted $ 0.22     $ 0.27     $ 0.19     (19 %)   14 %
GAAP gross margin   68.1 %     67.6 %     66.0 %   0.5 pts   2.1 pts
Non-GAAP gross margin   68.8 %     68.4 %     66.7 %   0.4 pts   2.1 pts
GAAP operating margin   20.9 %     24.2 %     3.8 %   (3.3 ) pts   17.1 pts
Non-GAAP operating margin   24.6 %     28.5 %     23.2 %   (3.9 ) pts   1.4 pts
                                   

*NMF = not meaningful

Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

Highlights:

  • SAN product revenue was $314 million, down 2% year over year. The decline was primarily the result of softer storage demand and operational issues at certain OEM partners. The sequential revenue decline of 11% was at the low end of the Company's outlook for the quarter and consistent with the last two years, where the fiscal second quarters have seen sequential revenue declines of 10% to 12%.

  • IP Networking product revenue was $145 million, up 19% year over year. The growth was primarily due to higher sales of routers (up 40%) and Ethernet switches (up 8%), as well as higher software networking revenue, which now includes SteelApp revenue from the date of closing of the acquisition in early March. The increased sales year over year were primarily due to service provider and U.S. federal customers. Sequentially, IP Networking revenue increased 9% due to higher routing and switching sales, as well as higher software networking revenue.

  • Global Services revenue was $88 million, down 7% year over year primarily due to the additional week of support revenue recognized in Q2 2014, which was a 14-week fiscal quarter for Brocade. Global Services revenue was down 2% sequentially due to the timing of certain large support renewal orders.

  • During the quarter, Brocade completed the previously announced acquisitions of Connectem Inc., a pioneer in the LTE virtual evolved packet core market, and the SteelApp assets from Riverbed Technology, Inc.

Board Declares Dividend:

  • Consistent with the Company's philosophy of returning cash to shareholders, the Brocade Board of Directors has declared a quarterly cash dividend of $0.045 per share of the Company's common stock, a 29% increase from the prior dividend of $0.035 per share. The dividend payment will be made on July 2, 2015, to stockholders of record at the close of market on June 10, 2015.

Brocade management will host a conference call to discuss the fiscal second quarter results and the fiscal third quarter outlook today at 2:30 p.m. PT (5:30 p.m. ET). To access the webcast, please go to www.brcd.com/events.cfm. A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at www.brcd.com.

Other Q2 2015 product, customer, and partner announcements are available at http://newsroom.brocade.com/.

Brocade (www.brocade.com)
130 Holger Way, San Jose, CA 95134
T. 408.333.8000 F. 408.333.8101

Financial Highlights and Additional Financial Information

                 
 Q2 2015    Q1 2015    Q2 2014  
Routes to market as a % of total net revenues:                
  OEM revenues 63 %   67 %   68 %
  Channel/Direct revenues 37 %   33 %   32 %
  10% or greater customer revenues 49 %   44 %   56 %
Geographic split as a % of total net revenues (1):                
  Domestic revenues 56 %   58 %   59 %
  International revenues 44 %   42 %   41 %
Segment split as a % of total net revenues:                
  SAN product revenues 57 %   61 %   60 %
  IP Networking product revenues 27 %   23 %   22 %
  Global Services revenues 16 %   16 %   18 %
  SAN business revenues (2) 67 %   71 %   71 %
  IP Networking business revenues (2) 33 %   29 %   29 %
IP Networking product revenues by use category (3):                
  Data Center (4) 62 %   53 %   57 %
  Enterprise Campus 30 %   34 %   37 %
  Carrier Network (MAN/WAN) 8 %   13 %   6 %
           
Additional information:Q2 2015  Q1 2015  Q2 2014
  GAAP net income (loss) $ 77 M   $ 87 M   $ (14 )M
  Non-GAAP net income $ 95 M   $ 118 M   $ 87 M
  GAAP operating income $ 114 M   $ 139 M   $ 20 M
  Non-GAAP operating income $ 134 M   $ 164 M   $ 124 M
  EBITDA $ 135 M   $ 159 M   $ 41 M
  Effective GAAP tax provision rate   26.0 %     23.1 %     225.1 %
  Effective Non-GAAP tax provision rate   25.7 %     23.1 %     24.6 %
  Cash and cash equivalents $ 1,367 M   $ 1,359 M   $ 1,138 M
  Restricted cash (5) $ --     $ 312 M   $ --  
  Deferred revenues $ 306 M   $ 310 M   $ 304 M
  Capital expenditures $ 18 M   $ 17 M   $ 14 M
  Total debt, net of discount (6) $ 788 M   $ 1,084 M   $ 598 M
  Cash, net of senior debt, convertible debt and capitalized leases (7) $ 491 M   $ 483 M   $ 535 M
  Cash provided by operations $ 202 M   $ 10 M   $ 168 M
  Days sales outstanding   31 days     38 days     35 days
  Employees at end of period   4,553     4,305     4,061
  SAN port shipments   0.9 M     1.1 M     1.1 M
  Share repurchases (8) $ 77.1 M   $ 132.4 M   $ 50.1 M
                         

Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

(1) Revenues are attributed to geographic areas based on product delivery location. Since some OEM partners take delivery of Brocade products domestically and then ship internationally to their end users, the percentage of international revenues based on end-user location would likely be higher.

(2) SAN and IP Networking business revenues include hardware and software product, support, and services revenues.

(3) Product revenue by use category is estimated based on analysis of the information the Company collects in its sales management system. The estimated percentage of revenue by use category may fluctuate quarter-to-quarter due to seasonality and the timing of large customer orders.

(4) Data Center includes enterprise, service provider, and government data center revenues.

(5) Q1 2015 restricted cash was used to redeem the $300 million principal of the 2020 senior secured notes and pay for the associated call premium and interest earned on February 13, 2015.

(6) Q2 2015 and Q1 2015 total debt, net of discount, includes the debt discount recorded for the conversion feature that is required to be separately accounted for as equity for the $575 million convertible debt, thereby reducing the carrying value of the debt. The unamortized debt discount for the conversion feature was $77 million as of May 2, 2015, and $80 million as of January 31, 2015.

(7) Q1 2015 cash, net of senior debt, convertible debt and capitalized leases excludes restricted cash of $312 million and the 2020 senior secured notes of $300 million that were redeemed on February 13, 2015.

(8) $1.3 million of the $77.1 million in shares repurchased in Q2 2015 were pending cash settlement as of May 2, 2015.

Non-GAAP Financial Measures

To supplement financial information presented on a GAAP basis, Brocade provides information presented on a non-GAAP basis. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, financial information presented on a GAAP basis. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. The most directly comparable GAAP information and a reconciliation between the GAAP and non-GAAP amounts is provided in the tables at the end of this press release.

Management believes that the non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade's comparative operating performance, both from period to period and relative to its competitors. Management also believes these non-GAAP financial measures help with the determination of Brocade's baseline performance before gains, losses or charges that are considered by management to be outside of ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations and the allocation of resources.

Management believes these non-GAAP financial measures, when read in conjunction with Brocade's GAAP financials, provide useful information to investors by offering:

  • the ability to make more meaningful period-to-period comparisons of Brocade's ongoing operating results;

  • the ability to make more meaningful comparisons of Brocade's operating performance relative to its competitors;

  • the ability to better identify trends in Brocade's underlying business and to perform related trend analyses; and

  • a better understanding of how management plans and measures Brocade's underlying business.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP financial measures that are the result of infrequent events or events that arise outside the ordinary course of Brocade's continuing operations. Management believes that it is appropriate to evaluate Brocade's operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include, but are not limited to: (i) call premium cost and write-off of debt discount and debt issuance costs related to lenders that did not participate in our Q1 2015 debt refinancing; (ii) acquisition and integration costs; (iii) restructuring, goodwill impairment and other related costs (benefits); and (iv) specific non-cash and non-recurring tax benefits or detriments.

Management also excludes the following non-cash charges in determining non-GAAP financial measures (i) stock-based compensation expense, (ii) amortization of purchased intangible assets, and (iii) non-cash interest expense related to the convertible debt.

Management believes that the exclusion of stock-based compensation allows for more accurate comparisons of Brocade's operating results to Brocade's peer companies because of the varying use of valuation methodologies and subjective assumptions and the variety of award types. Management also believes that the exclusion of the expense associated with the amortization of acquisition-related intangible assets is appropriate because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and the exclusion of amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses. In connection with the convertible debt, under the relevant accounting guidance, a non-cash interest expense is recognized for the convertible debt as an imputed interest expense for the conversion feature. Management believes excluding the non-cash interest expense related to the convertible debt from its non-GAAP financial measures is useful for investors because the expense does not represent a cash outflow and is not indicative of ongoing operating performance.

Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Limitations: These non-GAAP financial measures have limitations because they do not include all items of income and expense that impact the company. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies. Management compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. Management also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure, and management encourages investors to review carefully those reconciliations.

Forward-Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Brocade's financial results, goals, plans, strategy, business outlook and prospects. These statements are based on current expectations as of the date of this presentation and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; Brocade's ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade's ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade's international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments. These and other risks are set forth in more detail in Brocade's Form 10-Q for the fiscal quarter ended January 31, 2015, and in Brocade's Annual Report on Form 10-K for the fiscal year ended November 1, 2014. Brocade expressly assumes no obligation to update any such forward-looking statements whether as the result of new developments or otherwise.

About Brocade

Brocade (NASDAQ: BRCD) networking solutions help the world's leading organizations transition smoothly to a world where applications and information reside anywhere. (www.brocade.com)

ADX, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, HyperEdge, ICX, MLX, MyBrocade, OpenScript, The Effortless Network, VCS, VDX, Vplane, and Vyatta are registered trademarks, and Fabric Vision and vADX are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned may be trademarks of others.

© 2015 Brocade Communications Systems, Inc. All Rights Reserved.

   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
 Three Months Ended    Six Months Ended  
 May 2,
2015		    May 3,
2014		    May 2,
2015		    May 3,
2014		  
 (In thousands, except per share amounts)  
Net revenues:                              
  Product $ 458,243     $ 442,280     $ 944,481     $ 917,485  
  Service   88,332       94,630       178,333       183,960  
    Total net revenues   546,575       536,910       1,122,814       1,101,445  
Cost of revenues:                              
  Product   137,612       142,271       287,538       295,898  
  Service   36,754       40,347       73,384       78,585  
    Total cost of revenues   174,366       182,618       360,922       374,483  
Gross margin   372,209       354,292       761,892       726,962  
Operating expenses:                              
  Research and development   91,870       90,554       177,101       177,710  
  Sales and marketing   143,078       139,597       283,316       272,262  
  General and administrative   20,722       21,112       45,393       41,255  
  Amortization of intangible assets   627       131       765       10,014  
  Acquisition and integration costs   2,344       --       2,344       --  
  Restructuring, goodwill impairment, and other related costs (benefits)   (637 )     82,703       (637 )     88,920  
  Gain on sale of network adapter business   --       --       --       (4,884 )
    Total operating expenses   258,004       334,097       508,282       585,277  
Income from operations   114,205       20,195       253,610       141,685  
Interest expense   (10,552 )     (9,234 )     (35,976 )     (18,430 )
Interest and other income (loss), net   466       (20 )     (93 )     (1,356 )
Income before income tax   104,119       10,941       217,541       121,899  
Income tax expense   27,079       24,625       53,234       54,699  
Net income (loss) $ 77,040     $ (13,684 )   $ 164,307     $ 67,200  
Net income (loss) per share--basic $ 0.18     $ (0.03 )   $ 0.39     $ 0.15  
Net income (loss) per share--diluted $ 0.18     $ (0.03 )   $ 0.38     $ 0.15  
Shares used in per share calculation--basic   420,718       436,167       424,627       438,370  
Shares used in per share calculation--diluted   433,234       436,167       436,195       451,999  
                               
Cash dividends declared per share $ 0.035     $ --     $ 0.07     $ --  
                               
                               
                               
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 Three Months Ended    Six Months Ended
 May 2,
2015		    May 3,
2014		    May 2,
2015		    May 3,
2014
 (In thousands)
Net income (loss) $ 77,040     $ (13,684 )   $ 164,307     $ 67,200
Other comprehensive income and loss, net of tax:                            
  Unrealized gains (losses) on cash flow hedges:                            
    Change in unrealized gains and losses   (143 )     1,094       (1,918 )     170
    Net gains and losses reclassified into earnings   1,109       32       1,713       1
  Net unrealized gains (losses) on cash flow hedges   966       1,126       (205 )     171
  Foreign currency translation adjustments   (1,068 )     1,298       (5,289 )     475
Total other comprehensive income (loss)   (102 )     2,424       (5,494 )     646
Total comprehensive income (loss) $ 76,938     $ (11,260 )   $ 158,813     $ 67,846
                             
                             
                             
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited)  
   
 May 2,
2015		    November 1,
2014		  
 (In thousands, except par value)  
ASSETS              
Current assets:              
  Cash and cash equivalents $ 1,366,812     $ 1,255,017  
  Accounts receivable, net of allowances for doubtful accounts of $1,676 and $80 at May 2, 2015, and November 1, 2014, respectively   185,136       224,913  
  Inventories   41,379       38,718  
  Deferred tax assets   103,501       92,692  
  Prepaid expenses and other current assets   54,501       46,665  
    Total current assets   1,751,329       1,658,005  
Property and equipment, net   439,789       445,433  
Goodwill   1,617,171       1,567,723  
Intangible assets, net   83,118       26,658  
Other assets   49,217       35,856  
    Total assets $ 3,940,624     $ 3,733,675  
LIABILITIES AND STOCKHOLDERS' EQUITY              
Current liabilities:              
  Accounts payable $ 91,900     $ 93,705  
  Accrued employee compensation   135,906       169,018  
  Deferred revenue   234,110       239,993  
  Other accrued liabilities   82,198       84,592  
    Total current liabilities   544,114       587,308  
Long-term debt, net of current portion   787,554       595,450  
Non-current deferred revenue   72,084       71,746  
Non-current income tax liability   48,156       39,647  
Non-current deferred tax liabilities   24,047       27,153  
Other non-current liabilities   3,748       4,310  
    Total liabilities   1,479,703       1,325,614  
Commitments and contingencies              
Stockholders' equity:              
  Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued and outstanding   --       --  
  Common stock, $0.001 par value, 800,000 shares authorized:              
    Issued and outstanding: 417,886 and 431,470 shares at May 2, 2015, and November 1, 2014, respectively   418       431  
  Additional paid-in capital   1,698,111       1,774,197  
  Accumulated other comprehensive loss   (24,308 )     (18,814 )
  Retained earnings   786,700       652,247  
    Total stockholders' equity   2,460,921       2,408,061  
    Total liabilities and stockholders' equity $ 3,940,624     $ 3,733,675  
                   
                   
                   
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
 Three Months Ended  
 May 2,
2015		    May 3,
2014		  
 (In thousands)  
Cash flows from operating activities:              
  Net income (loss) $ 77,040     $ (13,684 )
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
    Excess tax benefits from stock-based compensation   (13,468 )     (13,080 )
    Depreciation and amortization   20,672       21,173  
    Loss on disposal of property and equipment   797       830  
    Amortization of debt issuance costs and debt discount   4,168       285  
    Call premium cost related to lenders that did not participate in refinancing   (10,314 )     --  
    Provision for doubtful accounts receivable and sales allowances   2,291       1,961  
    Non-cash stock-based compensation expense   16,075       21,052  
    Goodwill impairment charge   --       83,382  
  Changes in assets and liabilities, net of acquisitions:              
    Restricted cash   11,918       --  
    Accounts receivable   52,493       22,495  
    Inventories   1,853       2,473  
    Prepaid expenses and other assets   (19,956 )     (11,857 )
    Deferred tax assets   9       (38 )
    Accounts payable   2,616       951  
    Accrued employee compensation   37,036       27,470  
    Deferred revenue   (6,959 )     5,987  
    Other accrued liabilities   26,708       22,869  
    Restructuring liabilities   (1,105 )     (4,025 )
      Net cash provided by operating activities   201,874       168,244  
Cash flows from investing activities:              
  Purchases of non-marketable equity and debt investments   (150 )     (223 )
  Purchases of property and equipment   (17,577 )     (14,429 )
  Net cash paid in connection with acquisitions   (95,278 )     --  
      Net cash used in investing activities   (113,005 )     (14,652 )
Cash flows from financing activities:              
  Decrease in restricted cash   300,000       --  
  Payment of principal related to senior secured notes   (300,000 )     --  
  Payment of debt issuance costs   (1,252 )     --  
  Payment of principal related to capital leases   (113 )     (1,141 )
  Common stock repurchases   (79,278 )     (50,052 )
  Proceeds from issuance of common stock   939       22,120  
  Payment of cash dividends to stockholders   (14,748 )     --  
  Excess tax benefits from stock-based compensation   13,468       13,080  
      Net cash used in financing activities   (80,984 )     (15,993 )
  Effect of exchange rate fluctuations on cash and cash equivalents   (438 )     1,327  
  Net increase in cash and cash equivalents   7,447       138,926  
  Cash and cash equivalents, beginning of period   1,359,365       998,687  
  Cash and cash equivalents, end of period $ 1,366,812     $ 1,137,613  
                 
                 
                 
BROCADE COMMUNICATIONS SYSTEMS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
 Six Months Ended  
 May 2,
2015		    May 3,
2014		  
 (In thousands)  
Cash flows from operating activities:              
  Net income $ 164,307     $ 67,200  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Excess tax benefits from stock-based compensation   (29,570 )     (27,415 )
    Depreciation and amortization   40,247       59,927  
    Loss on disposal of property and equipment   1,241       3,178  
    Gain on sale of network adapter business   --       (4,884 )
    Amortization of debt issuance costs and debt discount   5,224       566  
    Write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing   4,808       --  
    Provision for doubtful accounts receivable and sales allowances   4,694       3,528  
    Non-cash stock-based compensation expense   40,157       39,640  
    Goodwill impairment charge   --       83,382  
  Changes in assets and liabilities, net of acquisitions:              
    Accounts receivable   35,237       52,266  
    Inventories   3,008       4,570  
    Prepaid expenses and other assets   (25,702 )     (8,371 )
    Deferred tax assets   503       57  
    Accounts payable   (6,160 )     (7,126 )
    Accrued employee compensation   (39,997 )     (11,738 )
    Deferred revenue   (9,149 )     573  
    Other accrued liabilities   25,285       33,324  
    Restructuring liabilities   (1,866 )     (10,964 )
      Net cash provided by operating activities   212,267       277,713  
Cash flows from investing activities:              
  Purchases of non-marketable equity and debt investments   (150 )     (223 )
  Purchases of property and equipment   (34,091 )     (27,395 )
  Purchase of intangible assets   (7,750 )     --  
  Net cash paid in connection with acquisitions   (95,278 )     --  
  Proceeds from collection of note receivable   250       250  
  Proceeds from sale of network adapter business   --       9,995  
      Net cash used in investing activities   (137,019 )     (17,373 )
Cash flows from financing activities:              
  Payment of principal related to senior secured notes   (300,000 )     --  
  Payment of debt issuance costs   (1,661 )     --  
  Payment of principal related to capital leases   (1,267 )     (1,749 )
  Common stock repurchases   (208,244 )     (190,432 )
  Proceeds from issuance of common stock   21,975       54,530  
  Payment of cash dividends to stockholders   (29,854 )     --  
  Proceeds from convertible notes   565,656       --  
  Purchase of convertible hedge   (86,135 )     --  
  Proceeds from issuance of warrants   51,175       --  
  Excess tax benefits from stock-based compensation   29,570       27,415  
      Net cash provided by (used in) financing activities   41,215       (110,236 )
  Effect of exchange rate fluctuations on cash and cash equivalents   (4,668 )     512  
  Net increase in cash and cash equivalents   111,795       150,616  
  Cash and cash equivalents, beginning of period   1,255,017       986,997  
  Cash and cash equivalents, end of period $ 1,366,812     $ 1,137,613  
                 
                 
                 
BROCADE COMMUNICATIONS SYSTEMS, INC.  
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES  
(Unaudited)  
   
 Three Months Ended  
 May 2,
2015		    January 31,
2015		    May 3,
2014		  
 (In thousands, except per share amounts)  
Non-GAAP adjustments                      
  Stock-based compensation expense included in cost of revenues $ 1,986     $ 3,816     $ 3,474  
  Amortization of intangible assets expense included in cost of revenues   1,857       637       396  
    Total gross margin impact from non-GAAP adjustments   3,843       4,453       3,870  
                       
  Stock-based compensation expense included in research and development   3,080       4,933       4,422  
  Stock-based compensation expense included in sales and marketing   7,207       9,843       8,462  
  Stock-based compensation expense included in general and administrative   3,802       5,490       4,694  
  Amortization of intangible assets expense included in operating expenses   627       138       131  
  Acquisition and integration costs   2,344       --       --  
  Restructuring, goodwill impairment, and other related costs (benefits)   (637 )     --       82,703  
    Total operating income impact from non-GAAP adjustments   20,266       24,857       104,282  
                       
  Call premium cost and write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing   --       15,122       --  
  Convertible debt interest   3,639       678       --  
  Income tax effect of non-tax adjustments   (5,823 )     (9,499 )     (3,685 )
    Total net income impact from non-GAAP adjustments $ 18,082     $ 31,158     $ 100,597  
                       
Gross margin reconciliation                      
  GAAP gross margin $ 372,209     $ 389,683     $ 354,292  
  Total gross margin impact from non-GAAP adjustments   3,843       4,453       3,870  
    Non-GAAP gross margin $ 376,052     $ 394,136     $ 358,162  
  GAAP gross margin, as a percentage of total net revenues   68.1 %     67.6 %     66.0 %
  Non-GAAP gross margin, as a percentage of total net revenues   68.8 %     68.4 %     66.7 %
                       
Operating income reconciliation                      
  GAAP operating income $ 114,205     $ 139,405     $ 20,195  
  Total operating income impact from non-GAAP adjustments   20,266       24,857       104,282  
    Non-GAAP operating income $ 134,471     $ 164,262     $ 124,477  
  GAAP operating income, as a percentage of total net revenues   20.9 %     24.2 %     3.8 %
  Non-GAAP operating income, as a percentage of total net revenues   24.6 %     28.5 %     23.2 %
                       
Net income (loss) and net income (loss) per share reconciliation                      
  Net income (loss) on a GAAP basis $ 77,040     $ 87,267     $ (13,684 )
  Total net income impact from non-GAAP adjustments   18,082       31,158       100,597  
    Non-GAAP net income $ 95,122     $ 118,425     $ 86,913  
  Non-GAAP net income per share--basic $ 0.23     $ 0.28     $ 0.20  
  Non-GAAP net income per share--diluted $ 0.22     $ 0.27     $ 0.19  
  Shares used in non-GAAP per share calculation--basic   420,718       428,536       436,167  
  Shares used in non-GAAP per share calculation--diluted   433,234       439,156       450,449