Riverbed Technology, Inc. : Riverbed Technology Reports Record Fourth Quarter and 2012 Revenue
02/07/2013| 04:10pm US/Eastern
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Annual revenue grows 15%
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 services
80,249
62,532
288,719
225,100
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 services
23,300
19,292
80,412
68,925
Total cost of revenue
58,294
50,056
204,818
174,075
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 development
40,056
33,714
146,108
122,964
General and administrative
16,584
15,750
60,594
59,699
Acquisition-related costs
13,231
1,087
726
5,211
Total operating expenses
165,413
128,157
536,085
460,509
Operating profit
13,675
24,622
95,957
91,892
Other income (expense), net
(683
)
(534
)
(1,924
)
154
Income before provision for income taxes
12,992
24,088
94,033
92,046
Provision for income taxes
8,208
3,934
39,436
28,239
Net income
$
4,784
$
20,154
$
54,597
$
63,807
Net income per share, basic
$
0.03
$
0.13
$
0.35
$
0.41
Net income per share, diluted
$
0.03
$
0.12
$
0.33
$
0.38
Shares used in computing basic net income per share
155,879
155,699
156,205
154,411
Shares used in computing diluted net income per share
163,638
166,838
164,570
166,900
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 current assets
50,245
35,078
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 benefits
60,501
61,256
Other accrued liabilities
41,472
42,959
Current maturities of long-term borrowings
5,327
--
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 current maturities
566,814
--
Deferred tax liability, non-current
109,311
103
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 loss
(1,268
)
(3,973
)
Total stockholders' equity
894,222
711,064
Total liabilities and stockholders' equity
$
2,024,339
$
1,031,199
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 plans
(23,883
)
(50,673
)
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 consideration
(15,882
)
1,323
Income taxes payable
20,176
50,993
Deferred revenue
91,397
41,843
Net cash provided by operating activities
239,263
208,908
Investing activities:
Capital expenditures
(21,956
)
(18,059
)
Purchase of available for sale securities
(444,472
)
(616,592
)
Proceeds from maturities of available for sale securities
344,353
401,795
Proceeds from sales of available for sale securities
257,961
169,123
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 repurchases
47,606
55,830
Cash used to net share settle equity awards
(27,309
)
(47,648
)
Payments for repurchases of common stock
(127,144
)
(35,040
)
Debt borrowing, net of issuance costs
560,371
--
Excess tax benefit from employee stock plans
23,883
50,673
Net cash provided by financing activities
477,407
23,815
Effect of exchange rate changes on cash and cash equivalents
2,746
1,297
Net increase in cash and cash equivalents
65,033
49,750
Cash and cash equivalents at beginning of period
215,476
165,726
Cash and cash equivalents at end of period
$
280,509
$
215,476
Riverbed Technology
Supplemental Financial Information
In thousands
Unaudited
Three months ended
Twelve months ended
December 31,
September 30,
December 31,
December 31,
December 31,
2012
2012
2011
2012
2011
Revenue by Geography
Americas
$
140,059
$
133,656
$
117,367
$
494,907
$
437,945
Europe, Middle East and Africa
66,450
56,992
58,501
225,652
187,425
Asia Pacific
30,873
27,949
26,967
116,301
101,106
Total revenue
$
237,382
$
218,597
$
202,835
$
836,860
$
726,476
As a percentage of total revenues:
Americas
59 %
61 %
58 %
59 %
60 %
Europe, Middle East and Africa
28 %
26 %
29 %
27 %
26 %
Asia Pacific
13 %
13 %
13 %
14 %
14 %
Total revenue
100 %
100 %
100 %
100 %
100 %
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 revenue
$
237,382
$
218,597
$
202,835
$
836,860
$
726,476
As a percentage of total revenues:
Direct
7 %
3 %
4 %
5 %
4 %
Indirect
93 %
97 %
96 %
95 %
96 %
Total revenue
100 %
100 %
100 %
100 %
100 %
Riverbed Technology
GAAP to Non-GAAP Reconciliation
In thousands, except per share amounts
Unaudited
GAAP to Non-GAAP Reconciliations:
Three months ended
Twelve months ended
December 31,
September 30,
December 31,
December 31,
December 31,
2012
2012
2011
2012
2011
Reconciliation of Total revenue:
U.S. GAAP as reported
$
237,382
$
218,597
$
202,835
$
836,860
$
726,476
Adjustments:
Deferred revenue adjustment (6)
1,292
199
1,189
2,818
2,002
As adjusted
$
238,674
$
218,796
$
204,024
$
839,678
$
728,478
Reconciliation of Net income:
U.S. GAAP as reported
$
4,784
$
24,730
$
20,154
$
54,597
$
63,807
Adjustments:
Stock-based compensation (1)
23,124
20,252
21,734
89,294
89,734
Payroll tax on stock-based compensation (2)
1,523
230
3,565
3,177
7,465
Amortization on intangibles (3)
9,553
5,474
4,858
25,888
13,120
Acquisition-related costs (credits) (5)
13,484
(2,371
)
2,789
3,469
9,761
Inventory fair value adjustment (4)
699
--
--
699
359
Deferred revenue adjustment (6)
1,292
199
1,189
2,818
2,002
Other income (expense), net (8)
6
525
611
2,618
1,092
Income tax adjustments (7)
(8,006
)
(2,958
)
(13,787
)
(19,224
)
(37,375
)
As adjusted
$
46,459
$
46,081
$
41,113
$
163,336
$
149,965
Reconciliation of Net income per share, diluted:
U.S. GAAP as reported
$
0.03
$
0.15
$
0.12
$
0.33
$
0.38
Adjustments:
Stock-based compensation (1)
0.15
0.13
0.13
0.54
0.54
Payroll tax on stock-based compensation (2)
0.01
0.00
0.02
0.02
0.04
Amortization on intangibles (3)
0.06
0.03
0.03
0.16
0.08
Acquisition-related costs (credits) (5)
0.08
(0.01
)
0.02
0.02
0.06
Deferred revenue adjustment (6)
0.01
0.00
0.01
0.02
0.01
Other income (expense), net (8)
0.00
0.00
0.00
0.02
0.01
Income tax adjustments (7)
(0.05
)
(0.02
)
(0.08
)
(0.12
)
(0.22
)
As adjusted
$
0.29
$
0.28
$
0.25
$
0.99
$
0.90
Non-GAAP Net income per share, basic
$
0.30
$
0.30
$
0.26
$
1.05
$
0.97
Non-GAAP Net income per share, diluted
$
0.29
$
0.28
$
0.25
$
0.99
$
0.90
Shares used in computing basic net income per share (9)
154,818
153,823
155,699
155,940
154,411
Shares used in computing diluted net income per share (9)
162,578
161,877
166,838
164,305
166,900
Non-GAAP adjustments:
Support and services revenue
$
1,292
$
199
$
1,189
$
2,818
$
2,002
Cost of product
5,840
3,858
3,781
17,422
10,991
Cost of support and services
2,059
1,660
1,793
7,205
7,001
Sales and marketing
14,344
10,547
12,063
47,603
43,478
Research and development
8,264
7,079
8,688
31,541
32,457
General and administrative
4,645
3,306
5,534
18,030
21,301
Acquisition-related costs (credits)
13,231
(2,865
)
1,087
726
5,211
Other income (expense), net (8)
6
525
611
2,618
1,092
Provision for income taxes
(8,006
)
(2,958
)
(13,787
)
(19,224
)
(37,375
)
Total Non-GAAP adjustments
$
41,675
$
21,351
$
20,959
$
108,739
$
86,158
(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.
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