Brocade: Fiscal 1Q16 Financial Results

Brocade Communications Systems, Inc. reported financial results for its first fiscal quarter ended January 30, 2016.

Brocade reported first quarter revenue of $574 million, flat year-over-year and down 2% quarter-over-quarter. The company reported GAAP diluted earnings per share (EPS) of $0.23, up from $0.20 in Q1 2015 and up from $0.20 in Q4 2015. Non-GAAP diluted EPS was $0.29 for Q1 2016, up from $0.27 in Q1 2015 and up from $0.26 in Q4 2015. Tax benefits recognized in Q1 2016 increased both GAAP and non-GAAP diluted EPS by approximately $0.02 in the quarter.

“Brocade delivered another solid quarter, exceeding our revenue and earnings expectations,” said Lloyd Carney, CEO of Brocade. “In particular, SAN revenue exceeded our outlook range, driven by strong customer demand for FC storage array capacity. We believe that industry analysts’ long-term projections for storage capacity growth is a solid indicator of the ongoing durability and health of our storage networking business. Looking forward, I am excited that over the next several quarters we will make a number of innovative new product announcements that we expect will expand our addressable market and enhance our capabilities in advanced storage networks, software defined data centers, and open, software-enabled new IP architectures.“

Highlights:

• SAN product revenue of $347 million, although above outlook range, was down 2% year-over-year. The year-over-year decline was primarily the result of softer demand for embedded and fixed-configuration FC switches, partially offset by continued growth in director revenue. Sequentially, SAN product revenue increased 7%, which is consistent with typical fiscal Q1 seasonality. The sequential revenue increase was driven by increased fixed-configuration switch sales while director and embedded sales were flat. Brocade believes the resiliency of its FC SAN business is primarily due to continued growth in overall FC storage array capacity. Both IDC and Gartner predict strong storage array capacity growth throughout their long-range forecasts.
• IP networking product revenue was within range at $134 million, up 1% year-over-year. The growth was primarily due to stronger switch sales, up 19%, offset by weaker router sales, down 25%. The increased revenue year-over-year was primarily from enterprise customers, as revenue from the service provider and U.S. federal customers was down year-over-year. Sequentially, IP networking product revenue decreased 21%. This was due to lower Ethernet switch and routing revenues, which were down 22% and 19%, respectively. This sequential decrease was primarily due to a more pronounced U.S. federal seasonal decline and lower router sales to service provider customers.
• On February 16, 2016, Brocade announced a mobility platform and vision for building open, new IP networks that can support new services and business models for mobile network operators as they prepare for 5G adoption. These innovative offerings are expected to open a new addressable worldwide market for Brocade. They position the company as a disrupter as operators enter the next wave of infrastructure investment. The company also announced collaboration with 14 technology partners, enabling mobile operators to accelerate the adoption of SDN, NFV, and mobile edge computing and transform their operations to achieve increased automation and service agility. Brocade and its partners will be demonstrating these new mobile networking solutions at Mobile World Congress to be held February 22-25 in Barcelona, Spain.

Board Declares Dividend:
The Brocade board of directors has declared a quarterly cash dividend of $0.045 per share of the company’s common stock. The dividend payment will be made on April 4, 2016, to stockholders of record at the close of market on March 10, 2016.