Riverbed: Fiscal 1Q10 Financial Results

(in US$ millions)	1Q09	1Q10
Revenues	88.2	112.4
*Growth*		37%
Net income (loss)	1.0	1.1

Riverbed Technology, Inc. reported financial results for its first quarter ended March 31, 2010 (Q1’10). Revenues for Q1’10 were $112.4 million, up 27% compared to the first quarter of fiscal year 2009 (Q1’09).

Key Figures:

24th consecutive quarter of year-over-year revenue growth
$50 million in cash from operations
Cumulative customer count exceeds 7,800

Reporting on a GAAP basis, net income for Q1’10 was $1.1 million, or $0.01 per diluted share. This compares to GAAP net income of $1.0 million, or $0.01 per share, in Q1’09.

Non-GAAP net income for Q1’10 was $14.8 million, or $0.20 per diluted share, as compared to non-GAAP net income for Q1’09 of $9.2 million, or $0.13 per share. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

“We are pleased with the strong results we generated in the first quarter,” said Jerry M. Kennelly, Riverbed president and CEO. “We executed well, achieving 27 percent year-over-year revenue growth and a 73 percent increase in non-GAAP operating profit. Product sales increased 24 percent over the prior year led by solid growth in enterprise sales.” Kennelly added: “WAN optimization continues to be a spending priority as organizations consolidate and virtualize their IT infrastructure, while maintaining a focus on cost efficiency.”

Q1’10 Financial Highlights

Revenue increased 27% year-over-year
Non-GAAP net income increased 61% year-over-year
Non-GAAP gross margin increased to 77.1% from 75.7% in Q1’09
Non-GAAP operating margin increased to 20.8% from 15.2% in Q1’09
Days sales outstanding decreased to 34 days from 44 in Q1’09
Deferred revenue increased 17% sequentially to $101 million
Cash flow from operations increased to $50 million
Cash, short-term and long-term investments grew to $387 million
Total assets increased to $561 million

Q1’10 Business Highlights

Identified as the WAN optimization controller Advanced Platform worldwide market share leader for Q4’09 and calendar year 2009 based on revenue in the Gartner report, Market Share: Application Acceleration Equipment, Worldwide, 4Q’09 and 2009 published by Joe Skorupa, Nhat Pham on March 19, 2010.
Announced highest marks from TheInfoPro in its Networking Study Vendor Performance Report Wave 6. Riverbed received a score of ‘Excellent’ in five categories – strategic vision, technical vision, product quality, product performance and delivery as promised to customers.
Implemented a two-tier distribution strategy in North America, with the announcement of Arrow Enterprise Computing Solutions and Avnet Technology Solutions as Riverbed value added distributors (VADs).
Introduced the Steelhead 7050, the largest, most scalable data center to data center box in the market.
Launched Cascade 8.4 to offer the first fully integrated WAN optimization and application performance management solution in the market, enabling organizations to better analyze and accelerate network performance.
Became the first WAN optimization vendor to achieve SVVP validation for Windows Server 2008 R2.

Comments

The only negative point: revenues decreased slightly sequentially, from $112.9 million in 4Q09 to $112.4 million in 1Q10.

Abstracts of the earnings call transcript:

Randy Gottfried, CFO

"Turning to distribution, in Q1, 92% of our revenue came from indirect channels, with the remaining 8% coming from direct sales. Sales tied to the systems integrator and service provider channel grew both sequentially and year-over-year and represented more than a third of our revenue.

"Geographically, U.S. sales increased 20% over Q1 2009. EMEA revenue was up 29% and sales to the rest of the world grew 46% year-over-year. U.S. revenue contributed 52% to total revenue compared to 58% in the fourth quarter and 55% one year ago. As we expected, sales to the federal government declined sequentially in Q1, but that seasonality was offset by sequential and year-over-year growth in the U.S. enterprise market where we are seeing solid momentum.

"EMEA was 28% of total revenue compared to 26% in Q4 and 28% a year ago. In the EMEA region, northern Europe was strong, particularly the U.K. Rest of world contributed 20% to total revenue compared to 16% in Q4 and 17% one year ago. Canada and Australia continue to be solid contributors and we saw positive growth in Brazil.

"We exited the first quarter with 1,068 employees, a net increase of 55 compared to the fourth quarter.

"Our second quarter guidance is non-GAAP. We expect 28% to 31% year-over-year revenue growth in the second quarter with total revenue of approximately $117 million to $120 million. Gross margins are expected to be within our targeted 76% to 78% range and roughly flat with Q1, though we may experience a fractional point decline, driven by the continued ramp of our two-tier distribution model in North America."