Exhibit 99.1
BLUE COAT REPORTS FINANCIAL RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2006
SUNNYVALE, Calif., May 24 /PRNewswire-FirstCall/ -- Blue Coat(R) Systems,
Inc. (Nasdaq: BCSI), the leader in secure content and application delivery,
today announced financial results for its fourth fiscal quarter and fiscal year
ended April 30, 2006. Net revenue for the fourth quarter was $35.9 million, an
increase of 26.5% compared to net revenue of $28.4 million for the same quarter
last year and a slight increase compared to net revenue of $35.5 million in the
prior quarter. For the fiscal year ended April 30, 2006, net revenue was $141.5
million, an increase of 47.1% compared to net revenue of $96.2 million in the
fiscal year ended April 30, 2005.
On a GAAP basis, the Company reported a net loss of $2.6 million, or $0.19
per diluted share, in the fourth quarter of fiscal 2006 compared to net income
of $2.8 million, or $0.21 per diluted share, in the same quarter last year and
net income of $3.0 million, or $0.20 per diluted share, in the prior quarter.
The net loss in the fourth quarter of fiscal 2006 includes a charge for acquired
in-process R&D of $3.3 million related to the acquisition of Permeo
Technologies, Inc. ("Permeo"), the amortization of intangible assets of
approximately $0.4 million, and approximately $24,000 of stock-based
compensation expense, offset by approximately $0.2 million related to the
reversal of restructuring reserves.
GAAP net income for the fiscal year ended April 30, 2006 was $8.0 million,
or $0.54 per diluted share, compared to GAAP net income of $5.4 million, or
$0.41 per diluted share, for the fiscal year ended April 30, 2005.
On a non-GAAP basis, the Company reported net income of $1.0 million, or
$0.07 per diluted share, in the fourth quarter of fiscal 2006 compared to non-
GAAP net income of $2.3 million, or $0.17 per diluted share, in the same quarter
last year and non-GAAP net income of $3.2 million, or $0.21 per diluted share,
in the prior quarter.
Non-GAAP net income for the fiscal year ended April 30, 2006 was $12.6
million, or $0.86 per diluted share, compared to $7.2 million, or $0.55 per
diluted share, for the fiscal year ended April 30, 2005.
The non-GAAP financial measures presented above for the fourth quarter of
fiscal 2006 exclude the amortization of intangible assets, stock-based
compensation expense, the reversal of restructuring reserves, and a charge for
acquired in-process R&D. The non-GAAP financial measures for the fiscal year
ended April 30, 2006 also exclude the write-off net of recovery of capitalized
software costs associated with the failed implementation of a forecast system.
For the fourth quarter of fiscal 2005 and the fiscal year ended April 30, 2005,
the non-GAAP financial measures exclude the amortization of intangible assets,
stock-based compensation expense, and the reversal of restructuring reserves.
Blue Coat ended the quarter with cash, cash equivalents, short-term
investments, and restricted investments totaling $58.5 million, a decrease of
$13.4 million from the prior quarter due primarily to the acquisition of Permeo,
partially offset by cash flow from operations.
"Our fourth quarter results reflect the slower growth in the proxy appliance
market that we began to see in the previous quarter," said Brian NeSmith,
president and chief executive officer of Blue Coat. "We remain confident in our
ability to maintain leadership in the market for secure content and application
delivery, particularly with the latest addition of MACH5 application
acceleration to our SG platform and the rapid integration of technology from
Permeo."
Financial Outlook
For the first fiscal quarter ending July 31, 2006, the Company currently
anticipates net revenue in the range of $36.1 - $36.6 million. GAAP net loss is
expected to be in the range of $2.2 - $2.6 million, or $0.15 - $0.17 per diluted
share. On a non-GAAP basis, which is expected to exclude the amortization of
intangible assets and stock-based compensation expense related to the adoption
of FAS 123R, net income is expected to be between $0.6 - $1.0 million, or
$0.04 - $0.06 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 amortization
of intangible assets, the write-off and recovery of capitalized software
associated with the failed implementation of a forecast system, a charge for
acquired in-process R&D, stock-based compensation expense, and the reversal of
restructuring reserves. 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 amortization of intangible assets, the write-off and recovery
of capitalized software associated with the failed implementation of a forecast
system, a charge for acquired in-process R&D, stock-based compensation, and the
reversal of restructuring reserves 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 financial
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) to discuss the quarterly results of its fourth fiscal
quarter and fiscal year ended April 30, 2006. Participants should call (612)
332-1213 with the passcode: 829443. A replay of the call will be available
starting May 24, 2006 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: 829443. An audio
Webcast of the call will also be available at
http://www.bluecoat.com/aboutus/investor_relations.
About Blue Coat Systems
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 for
all users and applications. Blue Coat has installed more than 25,000 proxy
appliances worldwide and is ranked #1 by IDC in the Secure Content and
Application Delivery market. Blue Coat is headquartered in Sunnyvale,
California, and can be reached at (408) 220-2200 or 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 our expectations, beliefs, intentions, assumptions or
strategies regarding the future; the financial outlook for the first fiscal
quarter of 2007; and our ability to expand our market share and leadership
position in the market for secure content and application delivery. All
forward-looking statements included in this press release are based upon
information available to us as of the date hereof, and we assume no obligation
to update any such forward-looking statements. These forward-looking statements
may differ materially from actual events or results due to numerous risks and
uncertainties, including increasing competition and slower growth in the proxy
appliance market; limitations in our ability to forecast quarterly operating
results, which have been and may continue to be volatile; variations in the
amounts and timing of sales through our channel partners and to other customers;
difficulties in generating significant sales in international markets;
manufacturing and sourcing risks; variations in customer demand for our product
mix and services; our reliance on third party partners; product defects; rapid
technological changes or other changes in the competitive environment; our
ability to protect our proprietary technology; our ability to integrate and
operate acquired businesses and technologies successfully; additional costs and
resources necessary to address SEC investigations, litigation, or product
liability claims; currency fluctuations and other international factors; and
macroeconomic conditions. These and other risks relating to our business are set
forth in our most recently filed Form 10-Q for the fiscal quarter ended January
31, 2006, and other reports filed from time to time with the Securities and
Exchange Commission.
NOTE: All trademarks, trade names or service marks used or mentioned herein
belong to their respective owners.
BLUE COAT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30, April 30,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 46,990 $ 47,264
Short-term investments 10,200 --
Restricted investments - short-term 996 --
Accounts receivable, net 22,047 11,541
Inventories 1,206 350
Prepaid expenses and other current assets 3,895 3,460
Total current assets 85,334 62,615
Property and equipment, net 8,096 3,763
Restricted investments - long-term 361 1,855
Goodwill 62,694 24,753
Identifiable intangible assets, net 7,758 3,993
Other assets 723 883
Total assets $ 164,966 $ 97,862
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,437 $ 3,743
Accrued payroll and related benefits 5,442 3,468
Deferred revenue 25,946 13,592
Accrued restructuring 604 2,729
Other accrued liabilities 3,971 3,849
Total current liabilities 41,400 27,381
Deferred revenue, less current portion 7,844 3,318
Deferred rent, less current portion 1,997 --
Accrued restructuring, less current portion 188 914
Total liabilities 51,429 31,613
Commitments and Contingencies
Stockholders' equity:
Preferred stock -- --
Common stock 2 1
Additional paid-in capital 966,868 927,184
Treasury stock (903) (903)
Deferred stock compensation (357) (10)
Accumulated deficit (852,072) (860,024)
Accumulated other comprehensive income (loss) (1) 1
Total stockholders' equity 113,537 66,249
Total liabilities and stockholders' equity $ 164,966 $ 97,862
BLUE COAT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Years Ended
------------------------------------------ April 30,
April 30, January 31, April 30, ---------------------------
2006 2006 2005 2006 2005
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $ 28,295 $ 28,986 $ 23,316 $ 115,845 $ 78,495
Service 7,602 6,531 5,069 25,639 17,691
Total net revenue 35,897 35,517 28,385 141,484 96,186
Cost of revenue:
Product 7,700 7,732 7,238 32,165 25,589
Service 3,027 2,587 1,691 9,954 5,721
Total cost of revenue 10,727 10,319 8,929 42,119 31,310
Gross profit 25,170 25,198 19,456 99,365 64,876
Operating expenses:
Research and development 7,754 6,403 4,637 25,450 16,549
Sales and marketing 14,199 13,202 10,336 52,007 33,882
General and administrative 3,010 2,940 1,771 11,723 9,075
In-process research and
development 3,300 -- -- 3,300 --
Restructuring (reversal) (150) -- (96) (150) (96)
Amortization of
intangible assets 184 174 174 706 648
Total operating expenses 28,297 22,719 16,822 93,036 60,058
Operating income/(loss) (3,127) 2,479 2,634 6,329 4,818
Interest income 655 635 250 2,115 700
Other income (expense) (116) (91) (7) (217) (26)
Income/(loss) before
income taxes (2,588) 3,023 2,877 8,227 5,492
Provision for income taxes 18 9 56 275 117
Net income/(loss) $ (2,606) $ 3,014 $ 2,821 $ 7,952 $ 5,375
Basic net income/
(loss) per common share $ (0.19) $ 0.23 $ 0.23 $ 0.61 $ 0.46
Diluted net income/
(loss) per common share $ (0.19) $ 0.20 $ 0.21 $ 0.54 $ 0.41
Shares used in computing basic
net income/(loss)
per common share 13,839 12,962 12,259 12,965 11,628
Shares used in computing diluted
net income/(loss)
per common share 13,839 14,845 13,565 14,709 12,977
BLUE COAT SYSTEMS, INC.
RECONCILIATION OF NON-GAAP TO GAAP NET INCOME AND EPS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
------------------------------------------ April 30,
April 30, January 31, April 30, ---------------------------
2006 2006 2005 2006 2005
------------ ------------ ------------ ------------ ------------
Net income excluding
certain charges and
benefits (Non-GAAP) $ 996 $ 3,160 $ 2,283 $ 12,582 $ 7,155
Amortization of
intangible assets
(Cost of revenue)(1) (241) (129) (129) (630) (237)
Amortization of intangible
assets (Opex)(1) (184) (174) (174) (706) (648)
Recovery/(write-off)
of capitalized software(2) -- 157 -- (115) --
Stock-based compensation(3) (27) -- 745 (29) (991)
In-process research
and development(4) (3,300) -- -- (3,300) --
Restructuring reversal(5) 150 -- 96 150 96
Net income/(loss) $ (2,606) $ 3,014 $ 2,821 $ 7,952 $ 5,375
Diluted net income per common
share excluding certain
charges and benefits (Non-GAAP) $ 0.07 $ 0.21 $ 0.17 $ 0.86 $ 0.55
Amortization of intangible
assets (Cost of revenue) $ (0.02) (0.01) (0.01) (0.05) (0.02)
Amortization of
intangible assets (Opex) (0.01) (0.01) (0.01) (0.05) (0.05)
Recovery/(write-off)
of capitalized software -- 0.01 -- (0.01) --
Stock-based compensation (0.01) -- 0.05 (0.01) (0.08)
In-process research
and development (0.21) -- -- (0.21) --
Restructuring reversal 0.01 -- 0.01 0.01 0.01
Anti-dilution adjustment for
GAAP-based net loss (0.02) -- -- -- --
Diluted net income/
(loss) per share $ (0.19) $ 0.20 $ 0.21 $ 0.54 $ 0.41
Shares used in computing basic
net income/(loss)
per common share 13,839 12,962 12,259 12,965 11,628
Shares used in computing diluted
net income/(loss)
per common share(6) 15,037 14,845 13,565 14,709 12,977
(1) Amortization of intangible assets associated with the acquisitions of
Permeo Technologies, Inc., Cerberian, Inc., and Ositis Software, Inc. in
March 2006, November 2004 and November 2003, respectively.
(2) 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.
(3) In fiscal Q3 2005 the Company recorded a $1.0 million charge due to a
stock option modification in a severance agreement with the Company's
then departing chief financial officer where the exercise period was
extended beyond the original terms and the vesting of certain options
was accelerated upon termination. For the twelve months ended April 30,
2005 stock-based compensation was approximately $991,000, which
consisted of the $1.0 million charge associated with the aforementioned
stock modification in fiscal Q3 2005 and expense of approximately
$736,000 primarily relating to shares issued to former employees of
Ositis who remained with the Company after the acquisition of Ositis,
reduced by a benefit of approximately $745,000 in fiscal Q4 2005
resulting from the partial reversal of the aforementioned stock
compensation recorded in fiscal Q3 2005 associated with the Company's
then departing chief financial officer due to the modification of the
severance agreement. For the quarter and year ended April 30, 2006,
stock-based compensation primarily related to the amortization of
deferred compensation associated with the acquisition of Permeo.
(4) Charge for acquired in-process research and development associated with
the acquisition of Permeo in March 2006.
(5) The Company reversed certain restructuring reserves in Q4 of both fiscal
2005 and 2006 related to decreases in the estimated costs required to
restore leased facilities to the condition stipulated in the related
lease agreements.
(6) 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.
SOURCE Blue Coat Systems, Inc.
-0- 05/24/2006
/CONTACT: investors, Carla Chun, +1-408-220-2318, or
carla.chun@bluecoat.com, or media, Steve Schick, +1-408-220-2076, or
steve.schick@bluecoat.com, both of Blue Coat Systems, Inc./
/Web site: http://www.bluecoat.com/