Brocade: Fiscal 1Q12 Financial Results

Brocade Communications Systems, Inc. reported financial results for its first fiscal quarter ended January 28, 2012.

It reported first quarter revenue of $561 million, representing an increase of 2% quarter-over-quarter and 3% year-over-year, and resulting in diluted earnings per share of $0.12 on a GAAP basis and diluted earnings per share of $0.20 on a non-GAAP basis.

Summary of Q1 2012 results:

• Storage business revenue, including products and services, was a record $406.4 million, up 12% sequentially and 4% year-over-year. Storage product revenue grew 17% sequentially driven by strong demand across all product segments including the continued ramp of 16Gb FC products.
• Ethernet business revenue, including products and services, was $154.3 million, down 18% quarter-over-quarter and up 1% year-over-year. Revenue from service provider customers was a record $64.5 million in the quarter and was offset by lower enterprise revenue and expected softness in Federal revenue.
• GAAP gross margin was 61.5% and non-GAAP gross margin was 64.8% in Q1 2012, compared to 58.8% and 62.0% in Q1 2011, respectively. The improvement in gross margin was driven by a favorable mix to higher margin storage products, margin expansion in global services and an increase in overall revenue.
• GAAP operating margin was 12.4% and non-GAAP operating margin was 21.5% in Q1 2012, compared to 7.8% and 17.1% in Q1 2011, respectively. The improvement in operating margin was primarily driven by higher gross margin and the increase in revenue.
• Non-GAAP EPS of $0.20 in Q1 2012 was up 22% sequentially and 61% year-over-year.
• Non-GAAP EPS included a tax benefit of approximately $0.03 from the closure of various tax audits in the United States during Q1 2012.
• Brocade generated operating cash flow of $127 million and reduced its term loan by $70 million. The term loan balance was $120 million exiting Q1 2012.

"Q1 was a great quarter for Brocade – achieving record revenue, expanding gross margins, and increasing profits as we continued to see strong momentum across many areas of our business," said Michael Klayko, CEO of Brocade. "It is clear that we are executing well on our Playbook strategy of using ‘innovation as a differentiator’ which fueled strength in both our storage and service provider businesses. We look forward to delivering on our next wave of innovation focused on the Campus LAN market and to transition these customers to our new portfolio of solutions."

Q1 2012 total SAN port shipments were approximately 1.2 million.