Exhibit 99.1
BLUE COAT COMPLETES FINANCIAL RESTATEMENT
REPORTS REVENUE AND EARNINGS FOR FIRST, SECOND AND THIRD QUARTERS OF FISCAL
2007
SUNNYVALE, Calif., March 28 /PRNewswire-FirstCall/ -- Blue Coat(R) Systems
(Nasdaq: BCSI), a leader in secure content and application delivery, announced
that it is filing today with the Securities and Exchange Commission its Annual
Report on Form 10-K for the fiscal year ended April 30, 2006, and its Quarterly
Reports on Form 10-Q for the first, second and third fiscal quarters of 2007,
ended July 31, 2006, October 31, 2006, and January 31, 2007, respectively. These
filings will contain financial statements that were restated as a result of Blue
Coat's internal review of its historical financial statements as well as the
determinations of the independent committee of its Board of Directors, assisted
by independent legal counsel and accounting experts, which was formed in July
2006 to conduct an internal investigation into the Company's historical stock
option granting practices. With these filings, Blue Coat will have filed with
the Securities and Exchange Commission all required and delinquent periodic
filings. For fiscal years 2000 through 2006, the total net decrease to net
income due to the accounting adjustments is $49.0 million. Details of the
restatement may be found in the Annual Report on Form 10-K for fiscal year 2006
that will be filed today.
"We are pleased that the financial restatement is complete, and our SEC
periodic filings are now current, and we look forward to putting this matter
behind us," said Brian NeSmith, chief executive officer, Blue Coat Systems. "We
are in the process of significantly strengthening our stock option granting
practices and implementing rigorous processes to prevent and detect any future
instances of improper accounting for stock options."
As previously announced, Blue Coat's continued listing on Nasdaq is subject
to review by the Nasdaq Listing and Hearing Review Council. Although Blue Coat
believes based upon the filings made today with the Securities and Exchange
Commission and additional information previously submitted to the Listing
Council that it has regained compliance with the requirements for continued
listing on Nasdaq, there can be no assurance that the Listing Council will
agree.
First Quarter Fiscal 2007
Net revenue for the first fiscal quarter of 2007 was $36.4 million, a slight
increase compared to net revenue of $36.1 million in the prior quarter.
On a GAAP basis, Blue Coat reported a net loss of $3.1 million, or $0.22 per
diluted share, in the first quarter of fiscal 2007, compared to a net loss of
$2.9 million, or $0.21 per diluted share, in the fourth quarter of fiscal 2006.
The net loss in the first quarter of fiscal 2007 includes $2.2 million in legal
and accounting expenses related to the stock option investigation and
restatement of financial statements, $0.5 million in amortization of intangible
assets, and $2.9 million in stock-based compensation expense. In the fourth
quarter of fiscal 2006, the net loss includes $3.3 million of charges for
in-process R&D associated with the acquisition of Permeo, $0.4 million in
amortization of intangible assets, and a $0.6 million benefit from stock-based
compensation adjustments.
Blue Coat reported non-GAAP net income of $2.5 million, or $0.15 per diluted
share, in the first quarter of fiscal 2007, compared to non-GAAP net income of
$0.1 million, or $0.01 per diluted share, in the fourth quarter of fiscal 2006.
Blue Coat ended the quarter on July 31, 2006 with cash, cash equivalents,
short-term investments, and restricted investments totaling $100.4 million, an
increase of $41.9 million from the prior quarter. The increase in cash, cash
equivalents, short-term investments, and restricted investments was attributable
to Blue Coat's closing its Series A financing in June 2006, pursuant to which it
raised approximately $42.1 million.
Second Quarter Fiscal 2007
Net revenue for the second fiscal quarter of 2007 was $39.7 million, an
increase of 9.0% compared to net revenue of $36.4 million in the prior quarter.
On a GAAP basis, Blue Coat reported a net loss of $3.3 million, or $0.23 per
diluted share, in the second quarter of fiscal 2007, compared to a net loss of
$3.1 million, or $0.22 per diluted share, in the first quarter of fiscal 2007.
The net loss in the second quarter of fiscal 2007 includes $5.1 million in legal
and accounting expenses related to the stock option investigation and
restatement of financial statements, $0.5 million in amortization of intangible
assets, and $2.6 million in stock-based compensation.
Blue Coat reported non-GAAP net income of $4.8 million, or $0.27 per diluted
share, in the second quarter of fiscal 2007, compared to non-GAAP net income of
$2.5 million, or $0.15 per diluted share, in the first quarter of fiscal 2007.
Blue Coat ended the quarter on October 31, 2006 with cash, cash equivalents,
short-term investments, and restricted investments totaling $79.6 million, a
decrease of $20.8 million from the prior quarter due to a net use of $24.6
million for the acquisition of the NetCache assets.
Third Quarter Fiscal 2007
Net revenue for the third fiscal quarter of 2007 was $47.1 million, an
increase of 18.6% compared to net revenue of $39.7 million in the prior quarter.
On a GAAP basis, Blue Coat reported a net profit of $42,000, or break-even
on a diluted share basis, in the third quarter of fiscal 2007, compared to a net
loss of $3.3 million, or $0.23 per diluted share, in the second quarter of
fiscal 2007. The net profit in the third quarter of fiscal 2007 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.
Blue Coat reported non-GAAP net income of $5.7 million, or $0.32 per diluted
share, in the third quarter of fiscal 2007, compared to non-GAAP net income of
$4.8 million, or $0.27 per diluted share, in the second quarter of fiscal 2007.
Blue Coat ended the quarter on January 31, 2007 with cash, cash equivalents,
short-term investments, and restricted investments totaling $89.5 million, an
increase of $9.9 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
restatements, stock-based compensation expense and restructuring charges. Please
refer to table 3 for a detailed itemization reconciling GAAP and non- GAAP net
income (loss) results.
For comparison reference purposes, the quarterly income statements for the
fiscal year ended April 30, 2006 are provided in Tables 5 and 6 below, revising
the unaudited financial data which was published in earnings press releases on
August 16, 2005, November 15, 2005, February 14, 2006, and May 24, 2006. Please
refer to table 7 for a detailed itemization reconciling GAAP and non-GAAP net
income (loss) results.
Financial Outlook
For the fourth fiscal quarter ending April 30, 2007, Blue Coat currently
anticipates net revenue in the range of $51 - $54 million. On a non-GAAP basis,
which excludes the amortization of intangible assets, expenses associated with
the stock option investigation and restatements, and stock- based compensation
expense, net income is expected to be between $3.8 - $5.6 million, or $0.21 -
$0.30 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,
stock-based compensation expense, and non- recurring expenses such as the
expenses associated with the stock option investigation. In addition, the
Company's management and board of directors use certain non-GAAP financial
measures in developing operating budgets and in reviewing Blue Coat's financial
results of operations since items such as the amortization of intangible assets,
the write-off and recovery of capitalized software, and stock-based compensation
resulting from acquisitions in prior periods 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
Blue Coat will host a conference call today at 3:00 P.M. Pacific Time
(6:00 P.M. Eastern Time). Participants should call (612) 332-0107 with the
passcode: 868707. A replay of the call will be available starting Wednesday,
March 28, 2007 at 6:30 P.M. Pacific Time (9:30 P.M. Eastern Time), and can be
accessed by calling (320) 365-3844 with the passcode: 868707. 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
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 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 Blue Coat's expected results in the fourth fiscal quarter
of 2007. 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 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 ongoing litigation and
governmental investigations, litigation, or product liability claims; currency
fluctuations and other international factors; and macroeconomic conditions.
These and other risks are more fully described in the "Risk Factors" section of
the Company's annual report on Form 10-K for the year ended April 30, 2006 and
quarterly report on Form 10-Q for the year ended January 31, 2007.
Note: All trademarks, trade names or service marks used or mentioned herein
belong to their respective owners.
BLUE COAT SYSTEMS, INC.
Table 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Q1, Q2 & Q3 FISCAL YEAR 2007
(In thousands, except per share amounts)
Three Months Ended
----------------------------------------------
July 31, October 31, January 31,
2006 2006 2007
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $ 27,260 $ 30,307 $ 35,976
Service 9,155 9,398 11,132
Total net revenue 36,415 39,705 47,108
Cost of revenue:
Product 7,217 7,029 8,183
Service 3,033 3,093 4,057
Total cost of revenue 10,250 10,122 12,240
Gross profit 26,165 29,583 34,868
gross profit margin 71.9% 74.5% 74.0%
Operating expenses:
Research and development 9,180 9,538 9,711
Sales and marketing 14,419 15,444 18,634
General and administrative 6,174 8,538 6,894
Amortization of other intangibles 188 206 112
Restructuring costs - (19) -
Total operating expenses 29,961 33,707 35,351
Operating income/(loss) (3,796) (4,124) (483)
Interest income, net 897 1,092 965
Other income (expense) (120) (148) (82)
Income/(loss) before income taxes (3,019) (3,180) 400
Provision for income taxes 118 164 358
Net income/(loss) $ (3,137) $ (3,344) $ 42
Basic net income/(loss) per common
share $ (0.22) $ (0.23) $ 0.00
Diluted net income/(loss) per common
share $ (0.22) $ (0.23) $ 0.00
Shares used in computing basic net
income/(loss) per common share 14,340 14,524 14,704
Shares used in computing diluted net
income/(loss) per common share 14,340 14,524 18,177
BLUE COAT SYSTEMS, INC.
Table 2
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
Q1, Q2 & Q3 FISCAL YEAR 2007
Excluding Amortization of Intangible Assets, Restructuring Charges,
Stock-Based Compensation and Expenses Related to the Stock Option
Investigation
(In thousands, except per share amounts)
Three Months Ended
----------------------------------------------
July 31, October 31, January 31,
2006 2006 2007
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $ 27,260 $ 30,307 $ 35,976
Service 9,155 9,398 11,132
Total net revenue 36,415 39,705 47,108
Cost of revenue:
Product 6,786 6,595 7,777
Service 2,896 2,996 3,952
Total cost of revenue 9,682 9,591 11,729
Gross profit 26,733 30,114 35,379
gross profit margin 73.4% 75.8% 75.1%
Operating expenses:
Research and development 8,241 8,664 8,901
Sales and marketing 13,396 14,574 17,997
General and administrative 3,268 2,832 3,272
Total operating expenses 24,905 26,070 30,170
Operating income/(loss) 1,828 4,044 5,209
Interest income, net 898 1,092 965
Other income (expense) (120) (148) (82)
Income/(loss) before income taxes 2,606 4,988 6,092
Provision for income taxes 118 164 358
Net income/(loss) $ 2,487 $ 4,824 $ 5,734
Basic net income/(loss) per common
share $ 0.17 $ 0.33 $ 0.39
Diluted net income/(loss) per common
share $ 0.15 $ 0.27 $ 0.32
Shares used in computing basic net
income/(loss) per common share 14,340 14,524 14,703
Shares used in computing diluted net
income/(loss) per common share 16,269 17,748 18,177
BLUE COAT SYSTEMS, INC.
Table 3
RECONCILIATION OF GAAP AND NON-GAAP NET INCOME AND EPS
FOR Q1, Q2 & Q3 FISCAL YEAR 2007
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
------------------------------------------
July 31, October 31, January 31,
2006 2006 2007
------------ ------------ ------------
Net income/(loss) GAAP $ (3,137) $ (3,344) $ 42
Amortization of intangible
assets - cost of goods sold (1) 297 297 297
Amortization of intangible
assets - operating expense (1) 188 206 112
Restructuring costs (2) - (19) -
Expenses related to stock options
investigation and restatements 2,195 5,103 3,197
Stock based compensation - cost of
goods sold 271 234 213
Stock based compensation - research
and development 939 875 810
Stock based compensation - sales
and marketing 1,023 869 637
Stock based compensation - general
and administration 712 603 425
Net income/(loss) excluding certain
charges and benefits (Non-GAAP) $ 2,487 $ 4,824 $ 5,734
(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) The Company reversed certain restructuring reserves in Q2 of fiscal 2007
related to decreases in the estimated costs required to restore leased
facilities to the condition stipulated in the related lease agreements.
BLUE COAT SYSTEMS, INC.
Table 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
January 31, April 30,
2007 2006
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 42,844 $ 46,990
Short-term investments 41,748 10,200
Restricted investments - short-term 4,057 996
Accounts receivable, net 29,007 22,285
Inventories 597 435
Prepaid expenses and other current
assets 7,235 3,895
Total current assets 125,488 84,801
Property and equipment, net 9,228 8,059
Restricted investments - long-term 861 361
Goodwill 92,323 62,462
Identifiable intangible assets, net 7,059 7,758
Other assets 576 723
Total assets $ 235,535 $ 164,164
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,503 $ 5,437
Accrued payroll and related
benefits 7,555 7,451
Deferred revenue 39,242 25,946
Accrued restructuring 339 604
Other accrued liabilities 6,249 4,638
Total current liabilities 61,888 44,076
Deferred revenue, less current
portion 12,914 7,844
Deferred rent, less current portion 1,721 1,996
Long-term deferred income taxes 299 -
Accrued restructuring, less current
portion - 290
Series A redeemable convertible
preferred stock 41,879 -
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 1,025,904 1,014,493
Treasury sock (903) (903)
Deferred stock compensation - (1,901)
Accumulated deficit (908,171) (901,732)
Accumulated other comprehensive
income (loss) 2 (1)
Total stockholders' equity 116,834 109,958
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity $ 235,535 $ 164,164
BLUE COAT SYSTEMS, INC.
Table 5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEAR 2006, BY QUARTER
(In thousands, except per share amounts)
Three Months Ended
---------------------------------------------------------
July 31, October 31, January 31, April 30,
2005 2005 2006 2006
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $ 27,890 $ 30,674 $ 28,986 $ 28,533
Service 5,478 6,028 6,531 7,602
3rd party service royalty - - - -
Total net revenue 33,368 36,702 35,517 36,135
Cost of revenue:
Product 8,599 8,186 7,737 8,685
Service 1,884 2,495 2,605 2,857
Total cost of revenue 10,483 10,681 10,342 11,542
Gross profit 22,885 26,021 25,175 24,593
gross profit margin 68.6% 70.9% 70.9% 68.1%
Operating expenses:
Research and development 5,707 6,276 6,729 8,073
Sales and marketing 11,795 13,183 13,430 14,421
General and administrative 4,366 4,515 2,627 2,085
In-process technology - - - 3,300
Amortization of other intangibles 174 174 174 184
Restructuring cost (reversal) - - - (48)
Total operating expenses 22,042 24,148 22,960 28,015
Operating income/(loss) 843 1,873 2,215 (3,422)
Interest income, net 351 444 620 640
Other income (expense) 25 (101) (124) (149)
Income/(loss) before income taxes 1,219 2,216 2,711 (2,931)
Provision for income taxes 90 158 9 18
Net income/(loss) $ 1,129 $ 2,058 $ 2,702 $ (2,949)
Basic net income/(loss) per common
share $ 0.09 $ 0.16 $ 0.21 $ (0.21)
Diluted net income/(loss) per
common share $ 0.08 $ 0.14 $ 0.18 $ (0.21)
Shares used in computing basic net
income/(loss) per common share 12,353 12,705 12,962 13,839
Shares used in computing diluted net
income/(loss) per common share 13,815 14,624 14,845 13,839
BLUE COAT SYSTEMS, INC.
Table 6
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL YEAR 2006, BY QUARTER
Excluding Amortization of Intangible Assets, Restructuring Charges,
Stock-Based Compensation, and Acquired In-Process R&D
(In thousands, except per share amounts)
Three Months Ended
------------------------------------------------------------
July 31, October 31, January 31, April 30,
2005 2005 2006 2006
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $ 27,890 $ 30,674 $ 28,986 $ 28,533
Service 5,478 6,028 6,531 7,602
Total net revenue 33,368 36,702 35,517 36,135
Cost of revenue:
Product 8,449 8,051 7,615 8,429
Service 1,870 2,480 2,591 2,844
Total cost of revenue 10,319 10,531 10,206 11,273
Gross profit 23,049 26,171 25,311 24,862
gross profit margin 69.1% 71.3% 71.3% 68.8%
Operating expenses:
Research and development 5,486 6,049 6,525 7,859
Sales and marketing 11,616 13,014 13,278 14,304
General and administrative 2,693 3,110 2,956 3,025
Total operating expenses 19,795 22,174 22,758 25,188
Operating income/(loss) 3,254 3,997 2,552 (326)
Interest income, net 351 444 620 640
Other income (expense) 25 (101) (124) (149)
Income/(loss) before income taxes 3,630 4,340 3,048 165
Provision for income taxes 90 158 9 18
Net income/(loss) $ 3,540 $ 4,182 $ 3,039 $ 147
Basic net income/(loss) per common
share $ 0.29 $ 0.33 $ 0.23 $ 0.01
Diluted net income/(loss) per common
share $ 0.26 $ 0.29 $ 0.20 $ 0.01
Shares used in computing basic net
income/(loss) per common share 12,353 12,705 12,962 13,839
Shares used in computing diluted net
income/(loss) per common share 13,815 14,624 14,845 14,995
BLUE COAT SYSTEMS, INC.
Table 7
RECONCILIATION OF GAAP AND NON-GAAP NET INCOME AND EPS
FOR FISCAL YEAR 2006, BY QUARTER
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
------------------------------------------------------------
July 31, October 31, January 31, April 30,
2005 2005 2006 2006
------------ ------------ ------------ ------------
Net income/(loss) GAAP $ 1,129 $ 2,058 $ 2,702 $ (2,949)
Amortization of intangible
assets - cost of goods sold (1) 130 130 130 241
Amortization of intangible
assets - operating expense (1) 174 174 174 184
Restructuring costs (2) - - - (48)
In-process research &
development (3) - - - 3,300
Stock based compensation - cost of
goods sold 35 20 7 26
Stock based compensation -
research and development 221 227 205 214
Stock based compensation - sales
and marketing 179 169 152 118
Stock based compensation - general
and administration 1,673 1,405 (329) (941)
Net income/(loss) excluding certain
charges and benefits (Non-GAAP) $ 3,540 $ 4,182 $ 3,039 $ 147
(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) The Company reversed certain restructuring reserves in Q4 of fiscal 2006
related to decreases in the estimated costs required to restore leased
facilities to the condition stipulated in the related lease agreements.
(3) Charge for acquired in-process research and development associated
with the acquisition of Permeo in March 2006
SOURCE Blue Coat Systems
-0- 03/28/2007
/CONTACT: Media, Steve Schick, +1-408-220-2076,
steve.schick@bluecoat.com, Investors, Lily Wu, +1-408-220-2318,
lily.wu@bluecoat.com, both of Blue Coat Systems /
/Web site: http://www.bluecoat.com /
(BCSI)