SAN JOSE, CA — (Marketwired) — 05/19/16 — (NASDAQ: BRCD) today reported financial results for its second fiscal quarter ended April 30, 2016. Brocade reported second quarter revenue of $523 million, down 4% year-over-year and down 9% quarter-over-quarter. The Company reported GAAP diluted earnings per share (EPS) of $0.11, down from $0.18 in Q2 2015 and down from $0.23 in Q1 2016. Non-GAAP diluted EPS was $0.22 for Q2 2016, flat year-over-year and down from $0.29 in Q1 2016.
“Despite the challenging environment for both SAN and IP networking, Brocade had a productive second fiscal quarter,” said Lloyd Carney, CEO of Brocade. “We were excited to announce our intent to acquire Ruckus Wireless, a pioneer in wireless infrastructure solutions, in a transaction that we expect to close in our third fiscal quarter. In addition, we began shipping our industry-leading Gen 6 Fibre Channel switching solution, and garnered our first customer win for the New IP-based mobility platform, Brocade Virtual Core for Mobile, that we launched earlier in the quarter. Through achievements such as these, we continue to drive the strategic evolution of our business as a pure-play networking provider for the digital transformation era. Additionally, we expect our product roadmap to deliver further advancements across our portfolio that set the stage for expanded opportunities in the quarters to come.”
Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.
SAN product revenue of $297 million was down 5% year-over-year. The year-over-year decline was primarily the result of softer demand across the product portfolio, with Fibre Channel directors down 6%, fixed-configuration switches down 4%, and embedded server switches down 9%. Sequentially, SAN product revenue decreased 15%, with Fibre Channel directors declining 12%, fixed-configuration switches down 14%, and embedded server switches down 25%. While the Fibre Channel SAN business normally experiences seasonal softness in our fiscal Q2, the sequential revenue decline was larger than expected due primarily to unusually weak storage demand as reported by many of our partners and peers.
During the quarter, Brocade announced and recorded revenue in connection with the launch of the first phase of the Gen 6 Fibre Channel switching platform, the Brocade G620 Switch. Advancing Brocade–s leadership in Fibre Channel technology, this next generation of switches delivers superior performance and scalability designed to support continued data growth and the demanding workloads from mission-critical applications that are increasingly deployed on flash-based storage.
IP Networking product revenue of $132 million was down 9% year-over-year. The decline was primarily due to lower router sales, down 33%, partially offset by stronger Ethernet switch sales, up 9% from Q2 of 2015. The year-over-year decline was primarily the result of lower service provider and U.S. federal sales. Sequentially, IP Networking product revenue decreased 2% primarily due to lower Ethernet switch sales, which were down 3% from Q1 of 2016. The sequential revenue decline was primarily due to lower sales to enterprise customers as both service provider and U.S. federal revenue grew sequentially.
On April 4, 2016, Brocade announced its intention to acquire Ruckus Wireless, Inc., enhancing Brocade–s position as a pure-play networking company with solutions spanning from the heart of the data center to the wireless network edge. The combined company is expected to be #1 in storage area networking, #1 in service provider Wi-Fi, #2 in data center networking, #3 in enterprise wireless LAN, and #3 in enterprise edge networking (in the U.S. and EMEA). The acquisition is expected to close in Brocade–s fiscal third quarter.
The Brocade Board of Directors has declared a regular third fiscal quarter cash dividend of $0.055 per share of the Company–s common stock, a 22% increase from the dividend of $0.045 per share declared and paid in each of the previous four fiscal quarters. The dividend payment will be made on July 5, 2016 to stockholders of record at the close of market on June 10, 2016.
Brocade management will host a conference call to discuss the fiscal second quarter results and the fiscal third 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 Q2 2016 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 about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.
To supplement financial information presented on a GAAP basis, Brocade provides information presented on a non-GAAP basis. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, financial information presented on a GAAP basis. 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. The most directly comparable GAAP information and a reconciliation between the GAAP and non-GAAP amounts is provided in the tables at the end of this press release.
Management believes that the 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. These non-GAAP financial measures also help with the determination of Brocade–s baseline performance before gains, losses or charges that are considered by management to be outside of 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 relative to its competitors;
the ability to better identify trends in Brocade–s underlying business and to perform related trend analyses; and
a better understanding of how management plans and measures Brocade–s underlying business.
Management excludes certain gains or losses and benefits or costs in determining non-GAAP financial measures 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) acquisition and integration costs; (ii) restructuring and other related benefits; and (iii) effects of certain intercompany transactions on the tax provision.
Management also excludes the following non-cash charges in determining non-GAAP financial measures: (i) stock-based compensation expense; (ii) amortization of purchased intangible assets; and (iii) non-cash interest expense related to the convertible debt.
Management believes that the exclusion of stock-based compensation allows for more accurate comparisons of Brocade–s operating results to Brocade–s peer companies because of the varying use of valuation methodologies and subjective assumptions and the variety of award types. In addition, the exclusion of the 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 related to the convertible debt from its non-GAAP financial measures is useful for investors because the expense does not represent a cash outflow in the respective reporting periods 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 because they do not include all items of income and expense that impact the company. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies. Management compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. Management also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure, and management encourages investors to review carefully those reconciliations.
This communication is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares. On April 29, 2016, Brocade filed a Registration Statement on Form S-4 (including a Prospectus/Offer to Exchange, a related Letter of Transmittal and other exchange offer documents (collectively, the “Registration Statement”)) related to the transaction referenced herein with the U.S. Securities and Exchange Commission (“SEC”) and may file additional amendments thereto. Also on April 29, 2016, Brocade and a wholly-owned subsidiary of Brocade filed a Tender Offer Statement on Schedule TO related to the transaction with the SEC and have filed and may file additional amendments thereto. In addition, on April 29, 2016, Ruckus Wireless, Inc. (“Ruckus”) filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC and has filed and may file additional amendments thereto. Brocade and Ruckus may also file other documents with the SEC related to the transaction. This document is not a substitute for the Registration Statement, the Tender Offer Statement, the Solicitation/Recommendation Statement or any other document that Brocade or Ruckus may file with the SEC related to the transaction (collectively, the “Exchange Offer Materials”). THE EXCHANGE OFFER MATERIALS CONTAIN IMPORTANT INFORMATION. RUCKUS STOCKHOLDERS ARE URGED TO READ THESE DOCUMENTS (AS THEY MAY BE AMENDED FROM TIME TO TIME) CAREFULLY BECAUSE THEY CONTAIN AND WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF RUCKUS STOCK SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING EXCHANGING THEIR STOCK. The Exchange Offer Materials are available to all holders of Ruckus stock at no expense to them at the SEC–s website at . Copies of the Registration Statement, the Tender Offer Statement and the Solicitation/Recommendation Statement, and any amendments thereto, may be obtained for free by contacting Brocade–s Investor Relations department at (408) 333-0233 or at .
In addition to the Exchange Offer Materials, Brocade and Ruckus file annual, quarterly and current reports and other information with the SEC. You may read and copy any reports or other information filed by Brocade and Ruckus at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Brocade–s and Ruckus– filings with the SEC are also available to the public from commercial document-retrieval services and at the website maintained by the SEC at .
This press release contains forward-looking statements including, but not limited to, statements regarding Brocade–s financial results, goals, plans, strategy, business outlook and prospects. These statements are based on current expectations as of the date of this press release and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; the impact on Brocade of conditions in the market for Storage Area Networking products; Brocade–s ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade–s ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade–s international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments, including Brocade–s recently announced proposed acquisition of Ruckus; the ability of Brocade and Ruckus to consummate the proposed transaction on a timely basis or at all; and the satisfaction of the conditions precedent to consummation of the proposed transaction, including the condition that a majority of Ruckus–s shares be validly tendered into the exchange offer. These and other risks are set forth in more detail in Brocade–s Form 10-Q for the fiscal quarter ended January 30, 2016, and in Brocade–s Annual Report on Form 10-K for the fiscal year ended October 31, 2015. 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 turn their networks into platforms for business innovation. With solutions spanning public and private data centers to the network edge, Brocade is leading the industry in its transition to the New IP network infrastructures required for today–s era of digital business. ()
Brocade and the B-wing symbol are registered trademarks of Brocade Communications Systems, Inc., in the United States and many other countries. Other brands, products, or service names mentioned herein may be trademarks of Brocade or others. Additional information about Brocade–s trademarks is available at: .
© 2016 Brocade Communications Systems, Inc. All Rights Reserved.
Media Relations
Ed Graczyk
Tel: 408-333-1836
Investor Relations
Michael Iburg
Tel: 408-333-0233
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