BCSI beats the first quarter street estimate by $.08 and adjusts its second quarter guidance higher. They have also announced a two-for-one stock split.
Blue Coat Reports Financial Results For First Quarter Ended
July 31, 2007
Wednesday August 22, 7:00 am ET
Achieves Record Net Revenue and 15% Sequential Quarterly Growth
SUNNYVALE, Calif., Aug. 22 /PRNewswire-FirstCall/ -- Blue Coat Systems, Inc. (Nasdaq: BCSI - News), a leader in WAN Application Delivery and Secure Web Gateway, today reported its financial results for its first quarter of fiscal 2008 ended July 31, 2007. Net revenue for the first fiscal quarter of 2008 was $62.4 million, an increase of 71% compared to net revenue of $36.4 million for the same quarter last year and a 15% increase compared to net revenue of $54.5 million in the prior quarter.
"We attribute delivery of this quarterly record net revenue to our increasing success in the WAN Application Delivery market," said Brian NeSmith, President and Chief Executive Officer. "Clearly our customers see the value in our unique ability to provide security and high speed application delivery in one appliance, our ProxySG® product."
On a GAAP basis, the Company reported net income of $2.6 million, or $0.14 per diluted share, in the first quarter of fiscal 2008, compared to a net loss of $759,000, or $0.05 per diluted share, in the fourth quarter of fiscal 2007. Net income in the first quarter of fiscal 2008 includes $3.3 million in stock- based compensation expense, $1.9 million in expenses associated with the stock option investigation, and $0.4 million in amortization of intangible assets. In the fourth quarter of fiscal 2007, net income includes $2.5 million in legal and accounting expenses associated with the stock option investigation and related restatement of the Company's consolidated financial statements, $1.9 million in stock-based compensation expense, $1.7 million related to payroll taxes, interest and penalties on stock options, and $0.4 million in amortization of intangible assets.
The Company reported non-GAAP net income of $8.3 million, or $0.43 per diluted share, in the first quarter of fiscal 2008, compared to non-GAAP net income of $5.7 million, or $0.31 per diluted share, in the fourth quarter of fiscal 2007.
Blue Coat ended the quarter on July 31, 2007, with cash, cash equivalents, short-term investments, and restricted investments totaling $118 million, an increase of $19 million from the prior quarter.
The non-GAAP financial measures presented above exclude the amortization of intangible assets, stock-based compensation expense, expenses associated with the stock option investigation and related restatement of the Company's consolidated financial statements, and payroll taxes, interest and penalties on stock options. Refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP net income and earnings per share.
Financial Outlook
For the fiscal quarter ending October 31, 2007, the Company currently anticipates net revenue in the range of $67 - $70 million. On a non-GAAP basis, which excludes the amortization of intangible assets, stock-based compensation expense, and expenses associated with the stock option investigation, net income is expected to be between $8.6 - $10.1 million, or $0.43 - $0.50 per diluted share.
Two-for-One Stock Split
On August 16, 2007, Blue Coat's Board of Directors approved a two-for-one forward stock split of the Company's common stock. The stock split will be effected by the issuance of a stock dividend of one share of BCSI common stock for each share of BCSI common stock issued and outstanding as of the record date of September 13, 2007. The shares of BCSI common stock resulting from the stock split will be issued by BCSI's transfer agent. Following the stock split, Blue Coat will have approximately 36.3 million shares outstanding, on an as converted basis, based on the number of shares outstanding as of August 21, 2007. BCSI will begin trading on the NASDAQ Global Market on a split- adjusted basis on October 3, 2007.
The financial outlook of $0.43 - $0.50 per diluted share referenced above translates to $0.21 - $0.25 per diluted share, reflecting the effect of the stock split.
About Non-GAAP Financial Measures
Blue Coat uses the non-GAAP financial measures of income discussed above for internal evaluation and to report the results of its business. These non- GAAP financial measures include non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP net income per share. These measures are not in accordance with, or an alternative to, GAAP. The measures are intended to supplement GAAP financial information, and may be different from non-GAAP financial measures used by other companies. Blue Coat believes that these measures provide useful information to its management, board of directors and investors regarding its ongoing operating activities and business trends related to its financial condition and results of operations. Blue Coat believes that it is useful to provide investors with information to understand how specific line items in the statement of operations are affected by certain items, such as the legal and accounting expenses related to the stock option investigation and restatement of the Company's consolidated financial statements, stock-based compensation expense, payroll taxes, penalties and interest related to the disqualification of stock options due to revised measurement dates, and amortization of intangible assets. In addition, the Company's management and board of directors use certain non-GAAP financial measures in developing operating budgets and in reviewing the Company's financial results of operations since items such as the legal and accounting expenses related to the stock option investigation and related restatement of the Company's consolidated financial statements, stock-based compensation expense, payroll taxes, penalties and interest related to the disqualification of stock options due to revised measurement dates, and amortization of intangible assets are not considered to impact current resource allocation decisions. The Company believes that inclusion of these non-GAAP financial measures provides consistency and comparability with past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.
Conference Call & Webcast
The Company will host a conference call today at 5:00 a.m. Pacific Time (8:00 a.m. Eastern Time). Participants should call (612) 332-0725 with the passcode: 883048. A replay of the call will be available starting Wednesday, August 22, 2007 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time), and can be accessed by calling (320) 365-3844 with the passcode: 883048. An audio Webcast of the call will also be available at bluecoat.com.
About Blue Coat Systems
Blue Coat secures Web communications and accelerates business applications across the distributed enterprise. Blue Coat's family of appliances and client-based solutions -- deployed in branch offices, Internet gateways, end points, and data centers -- provide intelligent points of policy-based control enabling IT organizations to optimize security and accelerate performance between users and applications. Blue Coat has installed more than 40,000
appliances worldwide. Blue Coat is headquartered in Sunnyvale, California, and can be reached at (408) 220-2200 or bluecoat.com.
FORWARD LOOKING STATEMENTS: The statements contained in this press release that are not purely historical are forward-looking statements, including statements regarding the Company's expected net revenue, non-GAAP net income and non-GAAP earnings per share in the second fiscal quarter of 2008; the two- for-one forward stock split; and statements regarding Blue Coat Systems' expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this press release are based upon information available to Blue Coat Systems as of the date hereof, and Blue Coat Systems assumes no obligation to update any such forward-looking statements. Actual results may differ materially from those projected in such statements due to various factors, including but not limited to the risks described in the "Risk Factors" section of the Company's annual report on Form 10-K for the fiscal year ended April 30, 2007.
Media Contact: Investor Contact:
Steve Schick Carla Chun
Blue Coat Systems Blue Coat Systems
steve.schick@bluecoat.com carla.chun@bluecoat.com
408-220-2076 408-220-2318
BLUE COAT SYSTEMS, INC.
Table 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
July 31, April 30, July 31,
2007 2007 2006
(Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $48,076 $43,227 $27,260
Service 14,327 11,245 9,155
Total net revenue 62,403 54,472 36,415
Cost of net revenue:
Product 9,819 9,350 7,217
Service 4,792 3,786 3,033
Total cost of net revenue 14,611 13,136 10,250
Gross profit 47,792 41,336 26,165
Operating expenses:
Research and development 11,615 11,453 9,180
Sales and marketing 28,614 24,586 14,419
General and administrative 5,682 6,466 6,174
Amortization of intangible assets 112 113 188
Total operating expenses 46,023 42,618 29,961
Operating income/(loss) 1,769 (1,282) (3,796)
Interest income 1,247 968 897
Other income/(expense) (43) 39 (120)
Income/(loss) before income taxes 2,973 (275) (3,019)
Provision for income taxes 331 484 118
Net income/(loss) $2,642 $(759) $(3,137)
Basic net income/(loss) per common
share $0.17 $(0.05) $(0.22)
Diluted net income/(loss) per common
share $0.14 $(0.05) $(0.22)
Shares used in computing basic net
income/(loss)per common share 15,212 14,808 14,340
Shares used in computing diluted net
income/(loss) per common share 19,410 14,808 14,340
BLUE COAT SYSTEMS, INC.
Table 2
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
Excluding Amortization of Intangible Assets, Stock-Based Compensation and
Expenses Associated with the Stock Option Investigation and Related
Restatement
(In thousands, except per share amounts)
Three Months Ended
July 31, April 30, July 31,
2007 2007 2006
(Unaudited) (Unaudited) (Unaudited)
Net revenue:
Product $48,076 $43,227 $27,260
Service 14,327 11,245 9,155
Total net revenue 62,403 54,472 36,415
Cost of net revenue:
Product 9,211 8,950 6,787
Service 4,559 3,654 2,896
Total cost of net revenue 13,770 12,604 9,683
Gross profit 48,633 41,868 26,732
Operating expenses:
Research and development 9,927 9,243 8,241
Sales and marketing 26,980 23,946 13,396
General and administrative 4,277 3,614 3,267
Total operating expenses 41,184 36,803 24,904
Operating income/(loss) 7,449 5,065 1,828
Interest income 1,247 1,127 897
Other income/(expense) (43) 39 (120)
Income before income taxes 8,653 6,231 2,605
Provision for income taxes 331 484 118
Net income $8,322 $5,747 $2,487
Basic net income per common share $0.55 $0.39 $0.17
Diluted net income per common share $0.43 $0.31 $0.15
Shares used in computing basic net
income per common share 15,212 14,808 14,340
Shares used in computing diluted net
income per common share 19,410 18,582 16,269
BLUE COAT SYSTEMS, INC.
Table 3
RECONCILIATION OF NON-GAAP TO GAAP NET INCOME AND EPS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
July 31, April 30, July 31,
2007 2007 2006
Net income excluding certain charges
and benefits (Non-GAAP) $8,322 $5,747 $2,487
Stock-based compensation (1) (3,349) (1,890) (2,944)
Expenses related to stock option
investigation and restatement (2) (1,883) (2,524) (2,195)
Amortization of intangible assets
(Cost of net revenue) (3) (336) (311) (297)
Amortization of intangible assets
(Opex) (3) (112) (113) (188)
Payroll taxes, penalties and
interest (4) - (1,668) -
Net income/(loss) $2,642 $(759) $(3,137)
Diluted net income per common share
excluding certain charges and benefits
(Non-GAAP) $0.43 $0.31 $0.15
Stock-based compensation (0.17) (0.10) (0.18)
Expenses related to stock option
investigation and restatement (0.09) (0.14) (0.13)
Amortization of intangible assets
(Cost of net revenue) (0.02) (0.02) (0.02)
Amortization of intangible assets
(Opex) (0.01) (0.01) (0.01)
Payroll taxes, penalties and interest - (0.09) -
Anti-dilution adjustment for GAAP-
based net loss - - (0.03)
Diluted net income/(loss) per share $0.14 $(0.05) $(0.22)
Shares used in computing diluted net
income/(loss)per common share (5) 19,410 18,582 16,269
(1)Includes stock-based compensation as follows:
Cost of product $(161) $(89) $(133)
Cost of service (152) (132) (137)
Research and development (1,102) (701) (939)
Sales and marketing (1,114) (640) (1,023)
General and administration (820) (328) (712)
Total stock-based compensation $(3,349) $(1,890) $(2,944)
(2)In fiscal Q1 2008, we recognized $1.5 million in non-cash expense
related to the modification of outstanding stock options held by
employees in the U.S. who participated in the tender offer consummated
on May 29, 2007. The remaining amount in fiscal Q1 2008, and amounts
in other periods relate to professional services associated with the
Company's stock option investigation and related restatement.
(3)Amortization of intangible assets associated with the acquisitions
of certain NetCache assets, Permeo Technologies, Inc., Cerberian, Inc.,
and Ositis Software, Inc., in September 2006, March 2006, November 2004
and November 2003, respectively.
(4)Payroll taxes and associated penalties and interest related to the
disqualification of stock options due to revised measurement dates.
Cost of product $- $- $-
Cost of service - - -
Research and development - (1,509) -
Sales and marketing - - -
General and administration - - -
Penalties and interest - (159) -
Total payroll taxes, penalties and
interest $- $(1,668) $-
(5)For the first and fourth quarters of fiscal 2007, shares used in
computing diluted net income per common share on a non-GAAP basis
differ from shares used in computing net loss per common share on a
GAAP basis since the inclusion of certain instruments on a GAAP basis
would have been anti-dilutive.
BLUE COAT SYSTEMS, INC.
Table 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 31, April 30,
2007 2007
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $76,201 $50,013
Short-term investments 36,758 43,874
Restricted cash equivalents 4,168 4,120
Accounts receivable, net 33,055 32,079
Inventories 317 489
Prepaid expenses and other current
assets 6,830 7,536
Total current assets 157,329 138,111
Property and equipment, net 10,584 9,309
Restricted cash 861 861
Goodwill 92,243 92,243
Identifiable intangible assets, net 6,240 6,650
Other assets 1,452 1,500
Total assets $268,709 $248,674
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $7,714 $12,051
Accrued payroll and related
benefits 17,938 11,710
Deferred revenue 45,912 41,910
Accrued restructuring 163 238
Other accrued liabilities 4,706 5,808
Total current liabilities 76,433 71,717
Deferred revenue, less current
portion 14,887 13,858
Deferred rent, less current portion 1,453 1,585
Deferred income taxes 546 483
Other non-current liabilities 569 563
Commitments and contingencies
Series A redeemable convertible
preferred stock 41,879 41,879
Stockholders' equity:
Preferred stock - -
Common stock 2 2
Additional paid-in capital 1,040,109 1,028,409
Treasury stock (903) (903)
Accumulated deficit (906,288) (908,930)
Accumulated other comprehensive
income (loss) 22 11
Total stockholders' equity 132,942 118,589
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity $268,709 $248,674
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Source: Blue Coat Systems, Inc.
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