Riverbed: Fiscal 4Q08 Financial Results

Riverbed Technology reported financial results for its fourth quarter (Q4’08) and fiscal year ended December 31, 2008 (FY’08). Revenues for Q4’08 were $92.2 million. Revenues for Q4’08 increased 21% from $76.3 million reported in the fourth quarter of fiscal year 2007 (Q4’07) and increased 7% from $86.5 million reported in the third quarter of fiscal year 2008 (Q3’08). Revenues for FY’08 were $333.3 million, a 41% increase from $236.4 million of revenues in fiscal year 2007 (FY’07).

Reporting on a GAAP basis, net income for Q4’08 was $23.3 million, or $0.33 per diluted share. This compares to a GAAP net loss of $12.4 million in Q3’08, or $0.17 loss per share, and GAAP net income of $4.8 million, or $0.07 per diluted share, in Q4’07. Q4’08 net income was positively impacted by the release of $28.7 million related to the company’s deferred tax asset valuation allowance which resulted in a net $16.7 million tax benefit in the quarter. GAAP net income for FY’08 was $10.6 million, or $0.14 per diluted share, compared to GAAP net income of $14.8 million, or $0.20 per diluted share, in FY’07.

Non-GAAP net income for Q4’08 was $13.6 million, or $0.19 per diluted share, as compared to non-GAAP net income for Q3’08 of $11.0 million, or $0.15 per diluted share, and non-GAAP net income for Q4’07 of $14.6 million, or $0.20 per diluted share. Non-GAAP net income for FY’08 was $42.5 million, or $0.57 per diluted share, which compares to non-GAAP net income of $47.4 million, or $0.65 per diluted share, in FY’07. Non-GAAP net income excludes the impact of stock-based compensation, stock-based payroll expenses and related income tax effects. Q4’08 and FY’08 non-GAAP net income also excludes the reduction in the valuation allowance related to deferred tax assets. Q3’08 and FY’08 non-GAAP net income also excludes the one-time charge for the legal settlement with Quantum. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

“We are pleased with our fourth quarter and fiscal year financial results,” said Jerry M. Kennelly, Riverbed president and CEO. “We executed well, achieving full year revenue growth of 41% in a challenging economy. Customers continue to make Riverbed a spending priority because our platform – deployed by more than 5,500 customers – optimizes performance while cutting costs from the IT infrastructure. We believe the low total cost of ownership and strong return on investment make WAN optimization a high priority in any spending environment.”

Riverbed’s balance sheet was also strong exiting the fourth quarter. Deferred revenue, principally from service maintenance contracts, was $58.2 million at year end. Excluding the effect of the $11.0 million settlement payment to Quantum, non-GAAP cash flow from operations was $20.0 million in the fourth quarter and $82.4 million for the year. During fiscal 2008, the company repurchased $50.0 million of Riverbed common stock and ended the year with $267.8 million in cash and marketable securities and no debt.

2008 Highlights

• Industry Achievement – Riverbed Steelhead products continued to be recognized for excellence by many well-respected trade publications in 2008, including InfoWorld (Best WAN Accelerator of 2005, 2006, 2007, 2008 and 2009), Storage Magazine (Silver Award in network equipment category) and Network World (‘Best of the Tests’ designation for best WAN optimization solution). In addition, two Riverbed customers were named to the InfoWorld 100 for their implementation of Riverbed’s Steelhead appliances. The InfoWorld 100 honors IT projects that demonstrate the most creative use of cutting edge technologies to further their business goals.
• Product Innovation – Riverbed began shipping 13 new Steelhead appliances that provide simpler, more flexible upgrade paths and greater investment protection to customers. The company also launched enhanced versions of its Central Management Console, Riverbed Optimization System (RiOS), Steelhead Mobile and Riverbed Services Platform (RSP). VMware software is embedded as the virtualization platform for the enhanced RSP, allowing a company to run almost any software solution they choose on the platform.
• Customer Wins – Riverbed added over 2,000 customers in 2008, and by the end of the year had over 5,500 cumulative customers across a wide range of verticals and markets. Announced customers included HBOS Australia Banks, Nelson/Nygard, Psomas, Raiffeisen Banks, Secunet, Sutter Health, VINCI PLC, Ware Malcomb, and Willis. Riverbed boasts 49% of the Forbes Global 100 as customers.
• Global Expansion and Distribution – Riverbed expanded globally in 2008 and now has a presence in 29 countries. The company increased its distribution capacity by adding more than 200 channel partners in 2008. Riverbed now counts more than 800 VARs, Systems Integrators, and Service Providers as partners worldwide. The company has also teamed with more than a dozen of its Service Provider partners to deliver managed WAN optimization services to joint customers, including British Telecom, Digital Hands, NTT America, Pacnet, and SingTel.
• Technology Alliances – Riverbed expanded its technology alliances with important partners, including HP, Compellent, NetApp, NetScout, OPNET, VMware and others during 2008. More than 30 technology companies formally joined the Riverbed Technology Alliance Program during the year.