Blue Coat Reports Record Net Revenue for Fourth Quarter Ended April 30, 2007
SUNNYVALE, Calif., May 29 /PRNewswire-FirstCall/ -- Blue Coat Systems, Inc.
(Nasdaq: BCSI), a leader in secure content and application delivery, today
reported its financial results for its fourth quarter and fiscal year ended
April 30, 2007. Net revenue for the fourth fiscal quarter of 2007 was $54.5
million, an increase of 51% compared to net revenue of $36.1 million for the
same quarter last year and a 16% increase compared to net revenue of $47.1
million in the prior quarter. For the fiscal year ended April 30, 2007, net
sales were $177.7 million, compared to net sales of $141.7 million in the fiscal
year ended April 30, 2006.
"The record revenue we achieved in the fourth quarter reflects continued
strength in our core market and growth in the WAN application delivery
infrastructure market," said Brian NeSmith, president and chief executive
officer. "Although we are pleased with our recent growth, we continue to invest
in our sales and marketing organization in an effort to expand our market
share."
On a GAAP basis, the Company reported a net loss of $759,000, or $0.05 per
diluted share, in the fourth quarter of fiscal 2007, compared to net income of
$42,000, or break-even on a diluted share basis, in the third quarter of fiscal
2007. The net loss in the fourth quarter of fiscal 2007 includes $2.5 million in
legal and accounting expenses associated with the stock option investigation and
related restatement of the Company's consolidated financial statements, $1.9
million in stock-based compensation expense, $1.7 million related to payroll
taxes, interest and penalties on stock options, and $0.4 million in amortization
of intangible assets. In the third quarter of fiscal 2007, net income includes
$3.2 million in legal and accounting expenses related to the stock option
investigation and restatement of financial statements, $0.4 million in
amortization of intangible assets, and $2.1 million in stock-based compensation
expense.
GAAP net loss for the fiscal year ended April 30, 2007 was $7.2 million, or
$0.49 per diluted share, compared to a GAAP net income of $2.9 million, or $0.20
per diluted share, for the fiscal year ended April 30, 2006.
The Company reported non-GAAP net income of $5.7 million, or $0.31 per
diluted share, in the fourth quarter of fiscal 2007, compared to non-GAAP net
income of $5.7 million, or $0.32 per diluted share, in the third quarter of
fiscal 2007.
Non-GAAP net income for the fiscal year ended April 30, 2007 was $18.8
million, or $1.08 per diluted share, compared to $12.1 million, or $0.83 per
diluted share, for the fiscal year ended April 30, 2006.
Blue Coat ended the quarter on April 30, 2007 with cash, cash equivalents,
short-term investments, and restricted investments totaling $98.9 million, an
increase of $9.4 million from the prior quarter.
The non-GAAP financial measures presented above exclude the amortization of
intangible assets, expenses associated with the stock option investigation and
related restatement, stock-based compensation expense, expenses associated with
payroll taxes, interest and penalties on stock options, and restructuring
charges. Refer to the accompanying tables for a detailed reconciliation of GAAP
to non-GAAP net income and earnings per share.
Financial Outlook
For the fiscal quarter ending July 31, 2007, the Company currently
anticipates net revenue in the range of $57 - $60 million. On a non-GAAP basis,
which excludes the amortization of intangible assets, expenses associated with
the stock option investigation and related restatement, and stock-based
compensation expense, net income is expected to be between $5.2 - $7.1 million,
or $0.27 - $0.38 per diluted share.
About Non-GAAP Financial Measures
Blue Coat uses the non-GAAP financial measures of income discussed above for
internal evaluation and to report the results of its business. These non-GAAP
financial measures include non-GAAP cost of revenue, non-GAAP gross profit,
non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and
non-GAAP net income per share data. These measures are not in accordance with,
or an alternative to, GAAP. The measures are intended to supplement GAAP
financial information, and may be different from non-GAAP financial measures
used by other companies. Blue Coat believes that these measures provide useful
information to its management, board of directors and investors regarding its
ongoing operating activities and business trends related to its financial
condition and results of operations. Blue Coat believes that it is useful to
provide investors with information to understand how specific line items in the
statement of operations are affected by certain items, such as the legal and
accounting expenses related to the stock option investigation and restatement of
the Company's consolidated financial statements, stock-based compensation
expense, payroll taxes, penalties and interest related to the disqualification
of stock options due to revised measurement dates, restructuring charges, and
amortization of intangible assets. In addition, the Company's management and
board of directors use certain non-GAAP financial measures in developing
operating budgets and in reviewing the Company's financial results of operations
since items such as the legal and accounting expenses related to the stock
option investigation and related restatement of the Company's consolidated
financial statements, stock-based compensation expense, payroll taxes, penalties
and interest related to the disqualification of stock options due to revised
measurement dates, restructuring charges, and amortization of intangible assets
are not considered to impact current resource allocation decisions. The Company
believes that inclusion of these non-GAAP financial measures provides
consistency and comparability with past reports of financial results. However,
investors should be aware that non-GAAP measures have inherent limitations and
should be read in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
Conference Call & Webcast
The Company will host a conference call today at 2:00 p.m. Pacific Time
(5:00 p.m. Eastern Time). Participants should call (612) 332-0932 with the
passcode: 874376. A replay of the call will be available starting Tuesday, May
29, 2007 at 5:30 p.m. Pacific Time (8:30 p.m. Eastern Time), and can be accessed
by calling (320) 365-3844 with the passcode: 874376. An audio Webcast of the
call will also be available at
http://www.bluecoat.com/aboutus/investor_relations.
About Blue Coat Systems, Inc.
Blue Coat secures Web communications and accelerates business applications
across the distributed enterprise. Blue Coat's family of appliances and
client-based solutions - deployed in branch offices, Internet gateways, end
points, and data centers - provide intelligent points of policy-based control
enabling IT organizations to optimize security and accelerate performance
between users and applications. Blue Coat has installed more than 30,000
appliances worldwide and is ranked #1 by IDC in the Secure Content and
Application Delivery segment. Blue Coat is headquartered in Sunnyvale,
California, and can be reached at (408) 220-2200 or http://www.bluecoat.com.
FORWARD LOOKING STATEMENTS: The statements contained in this press release
that are not purely historical are forward-looking statements, including
statements regarding the Company's expected net revenue, non-GAAP net income and
non-GAAP earnings per share in the first fiscal quarter of 2008, growth in the
core and application delivery infrastructure markets, increase in market share,
and statements regarding Blue Coat Systems' expectations, beliefs, intentions or
strategies regarding the future. All forward-looking statements included in this
press release are based upon information available to Blue Coat Systems as of
the date hereof, and Blue Coat Systems assumes no obligation to update any such
forward-looking statements. Actual results may differ materially from those
projected in such statements due to various factors, including but not limited
to other risks described in the "Risk Factors" section of the Company's annual
report on Form 10-K for the fiscal year ended April 30, 2006 and quarterly
report on Form 10-Q for the fiscal quarter ended January 31, 2007.
BLUE COAT SYSTEMS, INC.
Table 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Years Ended
April 30, January 31, April 30, April 30,
2007 2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $43,227 $35,976 $28,533 $136,770 $116,083
Service 11,245 11,132 7,602 40,930 25,639
Total net revenue 54,472 47,108 36,135 177,700 141,722
Cost of net
revenue:
Product 9,350 8,183 8,685 31,779 33,207
Service 3,786 4,057 2,857 13,969 9,841
Total cost of net
revenue 13,136 12,240 11,542 45,748 43,048
Gross profit 41,336 34,868 24,593 131,952 98,674
Operating expenses:
Research and
development 11,453 9,711 8,073 39,882 26,785
Sales and
marketing 24,586 18,634 14,421 73,083 52,829
General and
administrative 6,466 6,894 2,085 28,072 13,593
In-process
research and
development - - 3,300 - 3,300
Restructuring
(reversal) - - (48) (19) (48)
Amortization of
intangible assets 113 112 184 619 706
Total operating
expenses 42,618 35,351 28,015 141,637 97,165
Operating
income/(loss) (1,282) (483) (3,422) (9,685) 1,509
Interest income,
net 968 965 640 3,922 2,055
Other income
(expense) 39 (82) (149) (311) (349)
Income/(loss)
before income
taxes (275) 400 (2,931) (6,074) 3,215
Provision for
income taxes 484 358 18 1,124 275
Net income/(loss) $(759) $42 $(2,949) $(7,198) $2,940
Basic net
income/(loss)
per common share $(0.05) $0.00 $(0.21) $(0.49) $0.23
Diluted net
income/(loss) per
common share $(0.05) $0.00 $(0.21) $(0.49) $0.20
Shares used in
computing basic
net income/(loss)
per common share 14,808 14,704 13,839 14,594 12,965
Shares used in
computing diluted
net income/(loss)
per common share 14,808 18,177 13,839 14,594 14,642
BLUE COAT SYSTEMS, INC.
Table 2
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding Amortization of Intangible Assets, In-process
Research and Development, Restructuring Charges,
Stock-Based Compensation and Expenses Associated with the Stock Option
Investigation
(In thousands, except per share amounts)
Three Months Ended Years Ended
April 30, January 31, April 30, April 30,
2007 2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $43,227 $35,976 $28,533 $136,770 $116,083
Service 11,245 11,132 7,602 40,930 25,639
Total net
revenue 54,472 47,108 36,135 177,700 141,722
Cost of net
revenue:
Product 8,950 7,778 8,431 30,110 32,492
Service 3,654 3,952 2,844 13,498 9,765
Total cost of
net revenue 12,604 11,730 11,275 43,608 42,257
Gross profit 41,868 35,378 24,860 134,092 99,465
Operating
expenses:
Research and
development 9,243 8,901 7,859 35,048 25,432
Sales and
marketing 23,946 17,997 14,303 69,914 51,906
General and
administra-
tive 3,614 3,272 3,025 12,985 11,609
Total operating
expenses 36,803 30,170 25,187 117,947 88,947
Operating
income/(loss) 5,065 5,208 (327) 16,145 10,518
Interest income 1,127 965 640 4,081 2,115
Other income
(expense) 39 (82) (149) (311) (217)
Income before
income taxes 6,231 6,091 164 19,915 12,416
Provision for
income taxes 484 358 18 1,124 275
Net income $5,747 $5,733 $146 $18,791 $12,141
Basic net income
per common
share $0.39 $0.39 $0.01 $1.29 $0.94
Diluted net
income per
common share $0.31 $0.32 $0.01 $1.08 $0.83
Shares used in
computing basic
net income
per common
share 14,808 14,704 13,839 14,594 12,965
Shares used in
computing
diluted net
income per
common share 18,582 18,177 14,969 17,453 14,642
BLUE COAT SYSTEMS, INC.
Table 3
RECONCILIATION OF NON-GAAP TO GAAP NET INCOME AND EPS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
April 30, January 31, April 30, April 30,
2007 2007 2006 2007 2006
Net income
excluding
certain
charges and
benefits
(Non-GAAP) $5,747 $5,733 $146 $18,791 $12,141
Amortization
of intangible
assets
(Cost of
revenue) (1) (311) (297) (241) (1,202) (630)
Amortization
of intangible
assets (Opex)(1) (113) (112) (184) (619) (706)
Stock-based
(compensation)
reversal (2) (1,890) (2,085) 582 (9,500) (3,380)
Payroll taxes,
penalties and
interest (3) (1,668) - - (1,668) (1,118)
Expenses
related to
stock option
investigation
and
restatement (4) (2,524) (3,197) - (13,019) -
Restructuring
reversal (5) - - 48 19 48
In-process
research and
development (6) - - (3,300) - (3,300)
Recovery
(write-off)
of
capitalized
software (7) - - - - (115)
Net income/(loss) $(759) $42 $(2,949) $(7,198) $2,940
Diluted net income
per common share
excluding certain
charges and
benefits
(Non-GAAP) $0.31 $0.32 $0.01 $1.08 $0.83
Amortization of
intangible
assets
(Cost of
revenue) (0.02) (0.02) (0.02) (0.07) (0.04)
Amortization of
intangible
assets (Opex) (0.01) (0.01) (0.01) (0.04) (0.05)
Stock-based
(compensation)
reversal (0.10) (0.11) 0.04 (0.54) (0.23)
Payroll taxes,
penalties and
interest (0.09) - - (0.10) (0.07)
Expenses related
to stock option
investigation
and restatement (0.14) (0.18) - (0.75) -
Restructuring
reversal - - - - -
In-process
research and
development - - (0.22) - (0.23)
Recovery
(write-off) of capitalized
software - - - - (0.01)
Anti-dilution
adjustment for
GAAP-based net
loss - - (0.01) (0.07) -
Diluted net income
(loss) per share $(0.05) $(0.00) $(0.21) $(0.49) $0.20
Shares used in
computing basic
net income (loss)
per common share 14,808 14,704 13,839 14,594 12,965
Shares used in
computing diluted
net income(loss)
per common
share (8) 18,582 18,177 14,969 17,453 14,642
(1) Amortization of intangible assets associated with the
acquisitions of NetCache assets, Permeo Technologies, Inc.,
Cerberian, Inc., and Ositis Software, Inc., in September 2006,
March 2006, November 2004 and November 2003, respectively.
(2) Includes stock-based (compensation) reversal as follows:
Cost of product $(89) $(108) $(13) $(467) $(32)
Cost of service (132) (105) (13) (471) (57)
Research and development (701) (810) (214) (3,325) (866)
Sales and marketing (640) (637) (118) (3,169) (617)
General and administration (328) (425) 940 (2,068) (1,808)
Total stock-based
(compensation) reversal $(1,890) $(2,085) $582 $(9,500) $(3,380)
(3) Payroll taxes and associated penalties and interest related to the
disqualification of stock options due to revised measurement dates.
(4) Professional services associated with the Company's stock option
investigation and related restatement.
(5) In Q4 2006, the Company reversed certain restructuring reserves related
to decreases in the estimated costs required to restore leased
facilities to the condition stipulated in the related lease agreements.
(6) Charge for acquired in-process research and development associated with
the acquisition of Permeo in March 2006.
(7) In fiscal Q2 2006, the company wrote-off $272,000 of capitalized
software associated with a planning and budgeting system due to the
software vendor's inability to deliver a functioning product. In fiscal
Q3 2006, $157,000 was recovered from the software vendor and recognized
as a benefit resulting in a net write-off for fiscal 2006 of $115,000.
Both the write-off and recovery are included in general and
administrative expense in the respective quarter.
(8) For fiscal Q4 2006, diluted EPS for the purpose of reconciling non-GAAP
to GAAP net income and EPS differs from shares used to calculate diluted
EPS in our GAAP financial statements since the inclusion of certain
instruments on a GAAP basis would have been anti-dilutive.
BLUE COAT SYSTEMS, INC.
Table 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30, April 30,
2007 2006
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $50,013 $46,990
Short-term investments 43,874 10,200
Restricted cash equivalents - short-term 4,120 996
Accounts receivable, net 32,079 22,285
Inventories 489 435
Prepaid expenses and other current assets 7,536 3,895
Total current assets 138,111 84,801
Property and equipment, net 9,309 8,059
Restricted cash - long-term 861 361
Goodwill 92,243 62,462
Identifiable intangible assets, net 7,674 7,758
Other assets 476 723
Total assets $248,674 $164,164
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $12,051 $5,437
Accrued payroll and related benefits 11,710 7,451
Deferred revenue 41,910 25,946
Accrued restructuring 238 604
Other accrued liabilities 5,808 4,638
Total current liabilities 71,717 44,076
Deferred revenue, less current portion 13,858 7,844
Deferred rent, less current portion 1,585 1,996
Deferred income taxes 483 -
Accrued restructuring, less current portion - 290
Other long-term liabilities 563 -
Commitments and contingencies
Series A redeemable convertible preferred
stock 41,879 -
Stockholders' equity:
Preferred stock - -
Common stock 2 2
Additional paid-in capital 1,028,409 1,014,493
Treasury stock (903) (903)
Deferred stock compensation - (1,901)
Accumulated deficit (908,930) (901,732)
Accumulated other comprehensive
income (loss) 11 (1)
Total stockholders' equity 118,589 109,958
Total liabilities, redeemable convertible
preferred stock and stockholders' equity $248,674 $164,164
SOURCE Blue Coat Systems, Inc.
-0- 05/29/2007
/CONTACT: Media, Steve Schick, +1-408-220-2076,
steve.schick@bluecoat.com, or Investors, Carla Chun,
+1-408-220-2318, carla.chun@bluecoat.com, both of Blue Coat Systems/
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.bluecoat.com /
(BCSI)
CO: Blue Coat Systems, Inc.
ST: California
IN: CPR STW MLM HTS NET ITE TLS
SU: ERN CCA ERP