SAN JOSE, CA — (Marketwired) — 02/19/15 — (NASDAQ: BRCD) today reported financial results for its first fiscal quarter ended January 31, 2015. Brocade reported first quarter revenue of $576 million, up 2% both year-over-year and quarter-over-quarter. The Company reported GAAP diluted earnings per share (EPS) of $0.20, up from $0.18 in Q1 2014, and up from $0.19 in Q4 2014. Non-GAAP diluted EPS was $0.27 for Q1 2015, up from $0.24 in both Q1 2014 and Q4 2014, primarily due to higher revenue and improved gross margins.
“We delivered double-digit revenue growth in IP Networking year-over-year and one of the strongest SAN quarters in company history, resulting in increased profitability,” said Lloyd Carney, CEO of Brocade. “With a strong focus on the data center, we continue to invest strategically in disruptive technologies to build a portfolio of solutions that capitalize on the opportunities afforded to first-movers in the New IP era.”
Please see important note of explanation on non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.
SAN product revenue was $353 million, approximately flat year-over-year and up 9% sequentially. Year-over-year SAN revenue performance was led by Switch revenue, which grew 8% due to strong sales across most Gen 5 Fibre Channel switching platforms. Director and Server revenues were lower year-over-year by 2% and 24%, respectively, as customer buying patterns favored fixed configuration platforms in the quarter. The strong sequential revenue performance in the quarter was consistent with past fiscal first quarters, which aligns with many of the Company–s OEM partners– fiscal year-ends and is typically their strongest storage quarter. All SAN product segments saw strong sequential growth with Directors up 7%, Switches up 10%, and Server products up 9%.
IP Networking product revenue was $133 million, up 11% year-over-year and down 13% sequentially. The year-over-year growth was due to higher revenue from Brocade VDX® data center switches and Brocade MLX® routing products. Ethernet switch revenue increased 17% year-over-year while routing product revenue increased 14% year-over-year. Partially offsetting the gains in switches and routers was a decline in other IP product revenue related to the previously announced discontinuation of the wireless and network adapter products, and the repositioning of the Brocade ADX product line. Total IP Networking revenue was down sequentially due primarily to lower U.S. Federal revenue, which is typically lower in the fiscal first quarter.
In the quarter, Brocade completed a $575 million convertible debt offering, with the majority of the proceeds being used to redeem its $300 million senior secured notes. The new convertible debt is unsecured and has a significantly lower interest rate of 1.375% compared to 6.875% on the note that has been redeemed. In conjunction with the convertible offering, the Company entered into a call option hedge transaction designed to reduce the dilutive effect of the convertible notes. On the day of pricing, the Company repurchased 4.1 million shares of its common stock.
Subsequent to the end of the fiscal first quarter, Brocade announced its intent to acquire the SteelApp business from Riverbed Technology in an all-cash asset purchase. The transaction is expected to close in Brocade–s fiscal second quarter of 2015. The SteelApp product line is a leading virtual Application Delivery Controller and will extend Brocade–s New IP software portfolio to enable more advanced solutions for the Company–s data center and service provider customers.
The Brocade Board of Directors has declared a quarterly cash dividend of $0.035 per share of the Company–s common stock. The dividend payment will be made on April 2, 2015, to stockholders of record at the close of market on March 10, 2015.
Brocade management will host a conference call to discuss the fiscal first quarter results and the fiscal second quarter outlook today at 2:30 p.m. PT (5:30 p.m. ET). To access the webcast, please go to . A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at .
Other Q1 2015 product, customer, and partner announcements are available at .
Brocade ()
130 Holger Way, San Jose, CA 95134
T. 408.333.8000 F. 408.333.8101
Please see important note of explanation on non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.
This press release contains non-GAAP financial measures. In evaluating Brocade–s performance, management uses certain non-GAAP financial measures to supplement consolidated financial statements prepared under GAAP.
Management believes that non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade–s comparative operating performance both from period to period, and relative to its competitors– operating results. Management also believes these non-GAAP financial measures help with the determination of Brocade–s baseline performance before gains, losses or charges that are considered by management to be outside ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations and the allocation of resources. Management believes these non-GAAP financial measures, when read in conjunction with Brocade–s GAAP financials, provide useful information to investors by offering:
the ability to make more meaningful period-to-period comparisons of Brocade–s ongoing operating results;
the ability to make more meaningful comparisons of Brocade–s operating performance against its industry and competitor companies;
the ability to better identify trends in Brocade–s underlying business and to perform related trend analysis;
a better understanding of how management plans and measures Brocade–s underlying business; and
an easier way to compare Brocade–s most recent results of operations against investor and analyst financial models.
Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or events that arise outside the ordinary course of Brocade–s continuing operations. Management believes that it is appropriate to evaluate Brocade–s operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include, but are not limited to: (i) legal provision or recovery associated with certain pre-acquisition litigation, (ii) call premium cost and write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing, (iii) settlement gain associated with certain pre-acquisition-related litigation, (iv) restructuring, goodwill impairment, and other related costs, (v) gain on sale of network adapter business, (vi) gain on sale of non-marketable equity investment, and (vii) specific non-cash and non-recurring tax benefits or detriments.
Management also excludes the following non-cash charges in determining non-GAAP net income (i) stock-based compensation expense, (ii) amortization of purchased intangible assets, and (iii) non-cash interest expense related to the convertible debt. Because of varying use of valuation methodologies, subjective assumptions and the variety of award types, management believes that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Management also believes that the exclusion of expense associated with the amortization of acquisition-related intangible assets is appropriate because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and the exclusion of amortization expense allows comparisons of operating results that are consistent over time for Brocade–s newly acquired and long-held businesses. In connection with the convertible debt, under the relevant accounting guidance, a non-cash interest expense is recognized for the convertible debt as an imputed interest expense for the conversion feature. Management believes excluding the non-cash interest expense from its non-GAAP measures is useful for investors because the expense does not represent a cash outflow and is not indicative of ongoing operating performance.
Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.
These non-GAAP financial measures have limitations, however, because they do not include all items of income and expense that impact the company. Management compensates for these limitations by also considering Brocade–s GAAP results. The non-GAAP financial measures that Brocade uses are not prepared in accordance with, and should not be considered an alternative to measurements required by GAAP, such as operating income, net income and net income per share, and should not be considered measurements of Brocade–s liquidity. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies.
This press release contains statements that are forward-looking in nature, including statements regarding Brocade–s strategy, operational performance and prospects for revenue growth. These statements are based on current expectations on the date of this press release and involve a number of risks and uncertainties which may cause actual results to differ significantly from such estimates. The risks include, but are not limited to, the ability to close the SteelApp transaction, changes in IT spending levels in one or more of our target markets, Brocade–s ability to execute on its sale strategy, and the effect of increasing market competition and changes in the industry. Certain of these and other risks are set forth in more detail in “Item 1A. Risk Factors” in Brocade–s Annual Report on Form 10-K for the fiscal year ended November 1, 2014. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
Brocade (NASDAQ: BRCD) networking solutions help the world–s leading organizations transition smoothly to a world where applications and information reside anywhere. ()
ADX, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, HyperEdge, ICX, MLX, MyBrocade, OpenScript, The Effortless Network, VCS, VDX, Vplane, and Vyatta are registered trademarks, and Fabric Vision and vADX are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned may be trademarks of others.
© 2015 Brocade Communications Systems, Inc. All Rights Reserved.
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Kristy Campbell
Tel: 408-333-4221
Investor Relations
Michael Iburg
Tel: 408-333-0233
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