Brocade Delivers Record Fiscal Q4 and 2009 Results With 33% Year-Over-Year Annual Revenue Growth
Quarterly Revenues Outpace Sequential Growth of Large Networking Peers and Increase 31 Percent Year-Over-Year
SAN JOSE, Calif.–(BUSINESS WIRE)– Brocade® (NASDAQ:BRCD) today reported financial results for its fourth fiscal quarter and full fiscal year ended October 31, 2009. Brocade’s quarterly revenues increased 31 percent year-over-year to $521.8 million and annual revenues increased 33 percent year-over-year to over $1.95 billion.
“Fiscal 2009 was a transformational year as Brocade became one of only two end-to-end networking solutions providers in the industry,” said Michael Klayko, CEO of Brocade. “Brocade also delivered exceptionally strong year-over-year revenue growth and increased its account penetration in the Ethernet networking market while growing share in the storage networking market.”
Klayko continued, “In addition, Q4 saw tremendous momentum as we exceeded the Street’s consensus non-GAAP EPS estimates for the seventeenth consecutive quarter, delivered the fastest sequential revenue growth of any large networking vendor, and generated strong cash flows. Looking at 2010, we expect to continue our momentum as we execute our strategy of delivering the highest levels of performance, quality, innovation and choice to the IT market.”
Brocade management has posted prepared comments and slides on its Fiscal Q4 and 2009 results and Fiscal 2010 outlook at www.BRCD.com in addition to this press release. Brocade will host a live webcast conference call to answer questions from investors and analysts at 5:00 a.m. Pacific time on November 24. Questions may be also submitted in advance to ir@brocade.com.
Other Q4 product, customer, and partner announcements are available at http://newsroom.brocade.com/.
Financial Highlights and Additional Financial Information
Q4 2009
Q3 2009
Q4 2008
Adjusted EBITDA (4)
$130.6 M
$119.3 M
$142.1 M
Cash provided by operations
$155.3 M
$16.6 M
$168.6 M
Q4 2009 (3)
Q3 2009
Q4 2008
Ethernet Products Revenue
25%
24%
0%
Stackable % of Ethernet Revenues (2)
30%
26%
28%
Chassis % of Ethernet Revenues (2)
70%
74%
72%
Enterprise % of Ethernet Revenues (2)
86%
83%
73%
Service Providers % of Ethernet Revenues (2)
14%
17%
27%
Q4 2009
Q3 2009
Q4 2008
1) Based on Brocade estimates of adjustment for partners taking delivery of internationally bound shipments in the United States, end-user demand was 53% domestic and 47% international.
2) On an “As If” combined Brocade basis with respect to Q4 2008.
3) Q4 2009 is the third full quarter of combined operations post acquisition of Foundry.
4) EBITDA adjusted for non cash expenses and legal fees and recoveries related to indemnification obligations.
Non-GAAP Financial Measures
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 net income and other non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade’s comparative operating performance from period to period and to its competitors’ operating results. Management also believes these non-GAAP financial measures help indicate 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 performance 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:
Management excludes certain gains or losses and benefits or costs in determining non-GAAP net income that are the result of infrequent events or arise outside the ordinary course of our 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: (i) legal fees and recoveries associated with indemnification obligations to former directors and officers and other related costs, net, (ii) provision for class action lawsuit, (iii) acquisition and integration costs (in connection with the Foundry acquisition), (iv) in-process research and development charges (in connection with the Foundry acquisition), (v) loss on sale of investments, and (vi) loss on impairment of portfolio investments.
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, (iii) costs/benefits associated with restructuring costs and facilities lease losses, and (iv) goodwill and acquisition-related intangible assets impairment. Because of varying available 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 believes that the expense associated with the amortization of acquisition-related intangible assets is appropriate to be excluded because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives and exclusion of the amortization expense allows comparisons of operating results that are consistent over time for Brocade’s newly acquired and long-held businesses. Management also believes that the expense associated with the goodwill and acquisition-related intangible assets impairment is appropriate to be excluded because we do not believe that this charge is indicative of future operating results and we believe that investors benefit from an understanding of our operating results without giving effect to it.
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.
Limitations. 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 (loss) and net income (loss) 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.
Cautionary Statement
This press release contains statements that are forward-looking in nature, including statements regarding Brocade’s market positioning and opportunities, including potential benefits of new or expanded partner relationships, and the integration of the Foundry acquisition. 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 effect of changes in IT spending levels, market competition and changes in the industry, Brocade’s ability to successfully introduce new products and services on a timely basis, and Brocade’s ability to manage its business effectively in a rapidly evolving market. Certain of these and other risks are set forth in more detail in “Item 1A. Risk Factors” in Brocade’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2009. Brocade does not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
About Brocade
Brocade® (NASDAQ:BRCD) develops extraordinary networking solutions that enable today’s complex, data-intensive businesses to optimize information connectivity and maximize the business value of their data. For more information, visit www.brocade.com.
Brocade, the B-wing symbol, BigIron, DCX, Fabric OS, FastIron, IronPoint, IronShield, IronView, IronWare, JetCore, NetIron, SecureIron, ServerIron, StorageX and TurboIron are registered trademarks, and DCFM, Extraordinary Networks and SAN Health are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. All other brands, products or service names are or may be trademarks or service marks of, and are used to identify, products or services of their respective owners.
© 2009 Brocade Communications Systems, Inc. All Rights Reserved.
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
22,209
84,962
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
Liabilities and Stockholders’ Equity
Current liabilities:
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended October 31, 2009 and October 25, 2008
(in thousands)
(unaudited)
BROCADE COMMUNICATIONS SYSTEMS, INC.
GAAP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended October 31, 2009 and October 25, 2008
(in thousands)
(unaudited)
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME
(in thousands, except per share amounts)
(unaudited)
October 31,
October 25,
2009
2008
See explanation of non-GAAP information included herein.
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited)
October 31,
October 25,
2009
2008
See explanation of non-GAAP information included herein.
