| [October 23, 2007] |
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Riverbed Technology, Inc. Reports Third Quarter 2007 Financial Results
SAN FRANCISCO --(Business Wire)-- Riverbed Technology, Inc. (Nasdaq:RVBD), the technology and market leader in wide-area data services (WDS), today released financial results for the third quarter ended September 30, 2007.
Revenues for the third quarter of 2007 were $63.3 million, which represents an increase of 157% from the third quarter of last year. Riverbed(R) posted GAAP net income of $2.8 million, or $0.04 per diluted share, compared to a net loss of $3.1 million, or a loss of $0.16 per share, in the third quarter of 2006. Riverbed's third quarter of 2007 GAAP results included $9.7 million of stock-based compensation expenses and stock-based payroll taxes.
Excluding the impact of stock-based compensation and related payroll taxes in all periods, the non-GAAP net income for the third quarter of 2007 was $12.4 million, or $0.17 per diluted share, compared to a non-GAAP net loss of $1.0 million, or $0.02 per share, in the third quarter of 2006.
"Strong broad-based demand led to another record quarter with year-over-year revenue growth of 157%," noted Jerry Kennelly, Riverbed president and chief executive officer. "Our leadership position in the WDS market is clearly evident in our rapid revenue growth and our high rate of new customer acquisition. Our cumulative customers now total more than 3,000, including over 100 of the Fortune 500. This week, we further added to our competitive differentiation with the announcement of RiOS(TM) 4.1, which delivers enhanced speed, scalability and security. We are also pleased with the initial reception to our Steelhead Mobile product which we introduced at the end of the third quarter. Riverbed has the most comprehensive WDS solution addressing the needs of mobile workers, remote offices and data centers. Many potential customers have cited Steelhead Mobile as another key differentiator for Riverbed."
"GAAP gross margins improved from 69.7% in the June quarter to a record 71.3% in the third quarter. This improvement, combined with our rapid revenue growth, led to record non-GAAP net income despite a higher tax rate and even as we rapidly added personnel and invested in our infrastructure to facilitate anticipated future growth. Over the coming year, we will continue to invest in our technology, sales, marketing and infrastructure to capitalize on what we believe is a tremendous market opportunity," said Randy Gottfried, Riverbed chief financial officer.
Conference Call Information
Riverbed will host a conference call for analysts and investors to discuss its third quarter results today at 5:30 p.m. Eastern Time (2:30 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at www.riverbed.com. Following the webcast, an archived version will be available on the website for 30 days. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter passcode 11098947. International parties can access the replay at 303-590-3000 and should enter passcode 11098947.
About Riverbed
Riverbed Technology is the technology and market leader in wide-area data services (WDS) solutions for companies worldwide. By enabling application performance over the wide area network (WAN) that is orders of magnitude faster than what users experience today, Riverbed is changing the way people work, and enabling a distributed workforce that can collaborate as if they were local. Additional information about Riverbed (Nasdaq:RVBD) is available at www.riverbed.com.
Forward Looking Statements
This press release contains forward-looking statements, including statements relating to the expected demand for Riverbed's products and services, the growth prospects of the WDS market, and statements relating to Riverbed's ability to meet the needs of distributed organizations, grow market share or grow the market as a whole. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our distribution partners; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed with the SEC on July 30, 2007, as well as subsequent 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.
Non-GAAP Financial Measures
In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled "Use of Non-GAAP Financial Information" as well as the related tables that follow it. We anticipate disclosing forward-looking non-GAAP financial information in our conference call to discuss our third quarter results, including an estimate of non-GAAP earnings for 2007 that excludes stock-based compensation expenses related to employee stock options, purchases of common stock under our Employee Stock Purchase Plan, and related payroll taxes. We cannot readily estimate these expenses because they depend on such factors as our future stock price for purposes of computing such expenses.
A copy of this press release can be found on the investor relations page of Riverbed's website at www.riverbed.com.
Riverbed Technology, Riverbed, Steelhead, RiOS, Interceptor, and the Riverbed logo are trademarks or registered trademarks of Riverbed Technology, Inc. All other trademarks used or mentioned herein belong to their respective owners.
Riverbed Technology, Inc.
GAAP Condensed Consolidated Statements of Operations
In thousands, except per share amounts
Unaudited
Three months ended Nine months ended
September 30 September 30
------------------ ------------------
2007 2006 2007 2006
-------- --------- -------- ---------
Revenue:
Product $ 50,847 $ 19,303 $127,876 $ 44,169
Support and services 10,460 3,595 25,772 7,385
Ratable product and related
support and services 2,003 1,720 6,448 4,828
-------- --------- -------- ---------
Total revenue 63,310 24,618 160,096 56,382
Cost of revenue:
Cost of product 13,533 6,211 35,542 14,576
Cost of support and services 3,994 1,304 9,697 2,851
Cost of ratable product and
related support and services 613 390 1,813 1,446
-------- --------- -------- ---------
Total cost of revenue 18,140 7,905 47,052 18,873
-------- --------- -------- ---------
Gross profit 45,170 16,713 113,044 37,509
Operating expenses:
Sales and marketing 25,139 12,181 63,035 31,768
Research and development 10,890 4,930 27,384 12,712
General and administrative 7,177 2,347 16,814 6,014
-------- --------- -------- ---------
Total operating expenses 43,206 19,458 107,233 50,494
-------- --------- -------- ---------
Operating income (loss) 1,964 (2,745) 5,811 (12,985)
Other income (expense) net 2,754 (275) 7,028 (294)
-------- --------- -------- ---------
Income (loss) before provision
for income taxes 4,718 (3,020) 12,839 (13,279)
Provision for income taxes 1,950 77 2,868 155
-------- --------- -------- ---------
Net income (loss) $ 2,768 $ (3,097) $ 9,971 $(13,434)
======== ========= ======== =========
Net income (loss) per share,
basic $ 0.04 $ (0.16) $ 0.15 $ (0.91)
Net income (loss) per share,
diluted $ 0.04 $ (0.16) $ 0.14 $ (0.91)
Shares used in computing basic
net income (loss) per share 69,069 19,034 67,397 14,705
Shares used in computing diluted
net income (loss) per share 74,360 19,034 72,934 14,705
Stock-based compensation expense
included in above:
Cost of product $ 27 $ - $ 68 $ -
Cost of support and services 806 93 1,798 198
Sales and marketing 4,455 1,055 10,741 2,189
Research and development 2,511 551 5,958 1,178
General and administrative 1,564 381 3,614 867
-------- --------- -------- ---------
Total stock-based
compensation expense $ 9,363 $ 2,080 $ 22,179 $ 4,432
======== ========= ======== =========
Riverbed Technology, Inc.
GAAP to Non-GAAP Reconciliation
In thousands, except per share amounts
Unaudited
-----------------------------------
Three months ended
September 30, 2007
-----------------------------------
GAAP Adjustments Non-GAAP
------------- ----------- ---------
Reconciliation of gross profit
Total revenue $ 63,310 $ - $ 63,310
Total cost of revenue 18,140 (834) 17,306
------------- ----------- ---------
Gross profit $ 45,170 $ 834 $ 46,004
============= =========== =========
Reconciliation of operating
expenses:
Sales and marketing $ 25,139 $ (4,621) $ 20,518
Research and development 10,890 (2,610) 8,280
General and administrative 7,177 (1,608) 5,569
------------- ----------- ---------
Total operating expenses $ 43,206 $ (8,839) $ 34,367
============= =========== =========
Reconciliation of operating
income, net income and net income
per share:
Operating income $ 1,964 $ 9,673 $ 11,637
Net income $ 2,768 $ 9,673 $ 12,441
Net income per share, basic $ 0.04 $ 0.18
Net income per share, diluted $ 0.04 $ 0.17
Shares used in computing basic
net income per share 69,069 69,069
Shares used in computing
diluted net income per share 74,360 74,360
---------------------------------------------------------------
-------
Reconciliation of GAAP to Non- Payroll Tax
GAAP Adjustments: Stock based on Stock
compensation Option
expense (a) Exercises Total
------------- ----------- ---------
Cost of revenue $ 833 $ 1 $ 834
Sales and marketing 4,455 166 4,621
Research and development 2,511 99 2,610
General and administrative 1,564 44 1,608
------------- ----------- ---------
$ 9,363 $ 310 $ 9,673
============= =========== =========
------------------------------------------------------------
----------
-----------------------------------
Nine months ended
September 30, 2007
-----------------------------------
GAAP Adjustments Non-GAAP
------------- ----------- ---------
Reconciliation of gross profit
Total revenue $ 160,096 $ - $160,096
Total cost of revenue 47,052 (1,868) 45,184
------------- ----------- ---------
Gross profit $ 113,044 $ 1,868 $114,912
============= =========== =========
Reconciliation of operating
expenses:
Sales and marketing $ 63,035 $ (11,052) $ 51,983
Research and development 27,384 (6,144) 21,240
General and administrative 16,814 (3,711) 13,103
------------- ----------- ---------
Total operating expenses $ 107,233 $ (20,907) $ 86,326
============= =========== =========
Reconciliation of operating
income, net income and net income
per share:
Operating income $ 5,811 $ 22,775 $ 28,586
Net income $ 9,971 $ 22,775 $ 32,746
Net income per share, basic $ 0.15 $ 0.49
Net income per share, diluted $ 0.14 $ 0.45
Shares used in computing basic
net income per share 67,397 67,397
Shares used in computing
diluted net income per share 72,934 72,934
---------------------------------------------------------------
-------
Reconciliation of GAAP to Non- Payroll Tax
GAAP Adjustments: Stock based on Stock
compensation Option
expense (a) Exercises Total
------------- ----------- ---------
Cost of revenue $ 1,866 $ 2 $ 1,868
Sales and marketing 10,741 311 $ 11,052
Research and development 5,958 186 $ 6,144
General and administrative 3,614 97 $ 3,711
------------- ----------- ---------
$ 22,179 $ 596 $ 22,775
============= =========== =========
------------------------------------------------------------
----------
Use of Non-GAAP Financial Information:
To supplement our condensed consolidated financial statements
presented on a GAAP basis, Riverbed uses non-GAAP measures of
operating results, net income and net income per share, which are
adjusted to exclude stock-based compensation expense and payroll
tax expense related to stock option exercises, and to include
dilutive shares where applicable. We believe these adjustments
are appropriate to enhance an overall understanding of our past
financial performance and also our prospects for the future.
These adjustments to our current period GAAP results are made
with the intent of providing both management and investors a more
complete understanding of Riverbed's underlying operating results
and trends and our marketplace performance. The non-GAAP results
are an indication of our baseline performance that are considered
by management for purpose of making operational decisions. In
addition, these adjusted non-GAAP results are the primary
indicators management uses as a basis for our planning and
forecasting of future periods. The presentation of this
additional information is not meant to be considered in isolation
or as a substitute for net income or basic and diluted net income
per share prepared in accordance with generally accepted
accounting principles in the United States. Non-GAAP financial
measures are not based on a comprehensive set of accounting rules
or principles and are subject to limitations.
(a) Stock-based compensation is a non-cash expense accounted for in
accordance with the intrinsic value method under Accounting
Principles Board No. 25 through December 31, 2005 and with the
fair value recognition provisions of Statement of Financial
Accounting Standards No. 123R effective January 1, 2006. While a
large component of our expense, we believe investors want to
exclude the effects of stock-based compensation expense and
payroll taxes related to stock option exercises in order to
compare our financial performance with that of other companies
and between time periods.
Riverbed Technology, Inc.
GAAP to Non-GAAP Reconciliation
In thousands, except per share amounts
Unaudited
--------------------------------------
Three months ended
September 30, 2006
--------------------------------------
GAAP Adjustments Non-GAAP
------------- ----------- --------
Reconciliation of gross profit:
Total revenue $ 24,618 $ - $24,618
Total cost of revenue 7,905 (93) 7,812
------------- ----------- --------
Gross profit $ 16,713 $ 93 $16,806
============= =========== ========
Reconciliation of operating
expenses:
Sales and marketing $ 12,181 $ (1,055) $11,126
Research and development 4,930 (551) 4,379
General and administrative 2,347 (381) 1,966
------------- ----------- --------
Total operating expenses $ 19,458 $ (1,987) $17,471
============= =========== ========
Reconciliation of operating
loss, net loss and net loss
per share:
Operating loss $ (2,745) $ 2,080 $ (665)
Net loss $ (3,097) $ 2,080 $(1,017)
Net loss per share, basic
and diluted $ (0.16) $ (0.02)
Shares used in computing
basic and diluted net loss
per share 19,034 35,060 (a) 54,094
---------------------------------------------------------------
-------
Reconciliation of GAAP to Payroll Tax
Non-GAAP Adjustments: on Stock
Stock based Option
compensation Exercises
expense (b) (c) Total
--------------------------------------
Cost of revenue $ 93 $ - $ 93
Sales and marketing 1,055 - 1,055
Research and development 551 - 551
General and administrative 381 - 381
------------- ----------- --------
$ 2,080 $ - $ 2,080
============= =========== ========
-------------------------------------------------------------
---------
--------------------------------------
Nine months ended
September 30, 2006
--------------------------------------
GAAP Adjustments Non-GAAP
------------- ----------- --------
Reconciliation of gross profit:
Total revenue $ 56,382 $ - $56,382
Total cost of revenue 18,873 (198) 18,675
------------- ----------- --------
Gross profit $ 37,509 $ 198 $37,707
============= =========== ========
Reconciliation of operating
expenses:
Sales and marketing $ 31,768 $ (2,189) $29,579
Research and development 12,712 (1,178) 11,534
General and administrative 6,014 (867) 5,147
------------- ----------- --------
Total operating expenses $ 50,494 $ (4,234) $46,260
============= =========== ========
Reconciliation of operating
loss, net loss and net loss
per share:
Operating loss $ (12,985) $ 4,432 $(8,553)
Net loss $ (13,434) $ 4,432 $(9,002)
Net loss per share, basic
and diluted $ (0.91) $ (0.17)
Shares used in computing
basic and diluted net loss
per share 14,705 37,413 (a) 52,118
---------------------------------------------------------------
-------
Reconciliation of GAAP to Payroll Tax
Non-GAAP Adjustments: on Stock
Stock based Option
compensation Exercises
expense (b) (c) Total
--------------------------------------
Cost of revenue $ 198 $ - $ 198
Sales and marketing 2,189 - 2,189
Research and development 1,178 - 1,178
General and administrative 867 - 867
------------- ----------- --------
$ 4,432 $ - $ 4,432
============= =========== ========
-------------------------------------------------------------
---------
(a) Represents common shares from the conversion of convertible
preferred shares as if the shares were converted as of the later
of their issuance or the beginning of the applicable period.
Convertible preferred shares were converted into common shares as
of September 20, 2006, the effective date of our IPO. We believe
investors want to give effect to the conversion for prior periods
in order to compare our financial performance with that of other
companies and between time periods.
(b) Stock-based compensation is a non-cash expense accounted for in
accordance with the intrinsic value method under Accounting
Principles Board No. 25 through December 31, 2005 and with the
fair value recognition provisions of Statement of Financial
Accounting Standards No. 123R effective January 1, 2006. While a
large component of our expense, we believe investors want to
exclude the effects of stock-based compensation expense and
payroll taxes related to stock option exercises in order to
compare our financial performance with that of other companies
and between time periods.
(c) No payroll tax expense related to employee stock option exercises
was incurred during 2006.
Riverbed Technology, Inc.
Condensed Consolidated Balance Sheets
In thousands
September 30, December 31,
2007 2006
------------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 169,345 $ 105,330
Marketable securities 62,192 3,999
Trade receivables, net 37,604 18,148
Other receivables 779 118
Inventory 9,946 7,452
Prepaid expenses and other current
assets 4,418 5,438
------------- ------------
Total current assets 284,284 140,485
------------- ------------
Fixed assets, net 12,498 7,718
Other assets 5,727 2,566
------------- ------------
Total assets $ 302,509 $ 150,769
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,540 $ 11,113
Accrued compensation and related
benefits 11,940 8,285
Other accrued liabilities 10,828 2,931
Deferred revenue 22,502 16,837
------------- ------------
Total current liabilities 60,810 39,166
------------- ------------
Deferred revenue non-current 5,182 2,245
Other long-term liabilities 257 378
------------- ------------
Total long-term liabilities 5,439 2,623
------------- ------------
Stockholders' equity:
Common stock and additional paid-in-
capital 277,389 162,033
Deferred stock-based compensation (3,862) (5,704)
Accumulated deficit (37,362) (47,333)
Accumulated other comprehensive income
(loss) 95 (16)
------------- ------------
Total stockholders' equity 236,260 108,980
------------- ------------
------------- ------------
Total liabilities and stockholders'
equity $ 302,509 $ 150,769
============= ============
Riverbed Technology, Inc.
Condensed Consolidated Statements of Cash Flows
In thousands
Unaudited
Nine months ended
September 30,
-------------------
2007 2006
--------- ---------
Operating activities:
Net income (loss) $ 9,971 $(13,434)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 3,418 1,261
Stock-based compensation 22,179 4,432
Revaluation and amortization of warrants - 658
Provision of trade receivable allowances 243 271
Changes in operating assets and liabilities
(Increase) in trade receivables (19,888) (6,235)
(Increase) in inventory (4,459) (3,305)
(Increase) in prepaid expenses and other
assets (174) (2,438)
Increase in accounts payable and other current
liabilities 12,139 5,549
Increase in income taxes payable 2,645 123
Increase in deferred revenue 9,051 9,483
--------- ---------
Net cash provided by (used in) operating
activities 35,125 (3,635)
Investing activities:
Capital expenditures (5,707) (3,690)
Purchase of available for sale securities, net
of maturities (58,152) -
Increase in other assets (2,100) (1,400)
--------- ---------
Net cash used in investing activities (65,959) (5,090)
Financing activities:
Proceeds from issuance of convertible preferred
stock, net of issuance costs - 19,915
Proceeds from public offerings, net of issuance
costs 87,681 87,412
Proceeds from issuance of common stock, net of
repurchases 7,094 167
Payments of debt - (938)
--------- ---------
Net cash provided by financing activities 94,775 106,556
Effect of exchange rate changes on cash and cash
equivalents 74 19
--------- ---------
Net increase in cash and cash equivalents 64,015 97,850
Cash and cash equivalents at beginning of period 105,330 10,410
--------- ---------
Cash and cash equivalents at end of period $169,345 $108,260
========= =========
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