Blue Coat Systems, Inc. (NASDAQ: BCSI), the leader in WAN Application Delivery and Secure Web Gateway, today reported its financial results for its second quarter of fiscal 2009 ended October 31, 2008. Total net revenue for the second quarter of fiscal 2009 was $119.0 million, an increase of 62% compared to net revenue of $73.4 million in the same quarter last year, and an increase of 16% compared to net revenue of $102.5 million in the immediately preceding quarter. Excluding net revenue associated with the acquisition of Packeteer, Inc. on June 6, 2008, net revenue for the second quarter of fiscal 2009 was $93.9 million, an increase of 28% compared to net revenue of $73.4 million in the same quarter last year, and an increase of 9% compared to net revenue of $86.4 million in the immediately preceding quarter.
"Despite a difficult economic environment, Blue Coat continued to execute its strategy during the second quarter, enabling us to once again report record net revenue," said Brian NeSmith, president and chief executive officer, Blue Coat Systems. "We have largely completed the integration of Packeteer, Inc., which we acquired in June, and recognized approximately $25 million in net revenue from the acquired business in the second quarter. In addition, we achieved integration between our ProxySG appliances and the PacketShaper appliances we acquired from Packeteer. Customers around the world have an ongoing need to gain visibility and control of corporate networks, accelerate business-critical applications, and prevent malicious attacks to achieve the cost and risk reduction that is essential to their success. Blue Coat is uniquely positioned to provide the visibility, acceleration and security required in a single solution."
On a GAAP basis, the Company reported a net loss of $0.3 million, or ($0.01) per share, in the second quarter of fiscal 2009, compared to net income of $7.0 million, or $0.17 per diluted share, in the second quarter of fiscal 2008, and a net loss of $5.8 million, or ($0.15) per share, in the first quarter of fiscal 2009.
The Company reported non-GAAP net income of $11.6 million, or $0.27 per diluted share, in the second quarter of fiscal 2009, compared to non-GAAP net income of $12.4 million, or $0.30 per diluted share, in the second quarter of fiscal 2008, and net income of $6.8 million, or $0.16 per diluted share, in the first quarter of fiscal 2009.
Current quarter GAAP and non-GAAP net income includes $4.6 million of expense for Packeteer integration activities compared to $4.8 million in the first quarter of fiscal 2009. These expenses relate principally to compensation incentives that are not anticipated in future quarters.
Excluded from current quarter non-GAAP net income is $7.2 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $5.1 million in stock-based compensation expense, $3.2 million in amortization of intangible assets, and $0.7 million in expenses associated with matters related to the stock option investigation. Non-GAAP net income for the current quarter also includes $4.3 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.
In the second quarter of fiscal 2008, non-GAAP net income excluded $4.0 million in stock-based compensation expense, $0.4 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $0.3 million in legal settlement costs. Non-GAAP net income in the second quarter of fiscal 2008 did not include additional tax expense for non-GAAP items as the Company's tax liability at that time was limited to foreign and state tax obligations.
Non-GAAP net income in the first quarter of fiscal 2009 included $4.8 million of expense for integration activities related to the acquisition of Packeteer, but excluded $6.1 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $4.2 million in stock-based compensation expense, $2.1 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $1.5 million in restructuring expense related to severance costs. Non-GAAP net income in the first quarter of fiscal 2009 also included $2.1 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.
Blue Coat ended the quarter on October 31, 2008, with cash, cash equivalents, and restricted cash of $97.8 million, an increase of $21.5 million from the prior quarter. Cash flow provided by operations in the second quarter of fiscal 2009 was $27.1 million.
Financial Outlook
For the third fiscal quarter ending January 31, 2009, in consideration of the current economic environment the Company is currently planning net revenue in the range of $106.0 to $112.0 million. On a GAAP basis, the Company expects a net loss of ($0.12) to ($0.03) per share. On a non-GAAP basis, the Company expects net income of $0.12 to $0.20 per diluted share. Non-GAAP earnings per diluted share excludes expense related to the fair value write-up of acquired inventory sold during the quarter, stock-based compensation expense, amortization of intangible assets, and expenses associated with the stock option investigation and assumes an effective tax rate of 30% on non-GAAP pre-tax income.
About Non-GAAP Financial Measures
Blue Coat uses non-GAAP financial measures of income for internal evaluation and to report the results of its business. These non-GAAP financial measures include non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP net income per share. These measures are not in accordance with, nor an alternative to, GAAP. These 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 expense related to the fair value write-up of acquired inventory sold, stock-based compensation expense, amortization of intangible assets, expenses associated with matters related to the stock option investigation, restructuring expenses, and related tax adjustments. 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 expense related to the fair value write-up of acquired inventory sold, stock-based compensation expense, amortization of intangible assets, expenses associated with matters related to the stock option investigation, restructuring expenses, and related tax adjustments do not impact its current resource allocation decisions. Additionally, the Company believes that inclusion of these non-GAAP financial measures provides consistency and comparability with its past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP gross profit, operating income, net income and income per share.
Conference Call & Webcast
The Company will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Participants should call (612) 234-9959 with the passcode: 968268. A replay of the call will be available starting November 25, 2008 at 4:00 p.m. Pacific Time (7:00 p.m. Eastern Time), and can be accessed by calling (320) 365-3844 with the passcode: 968268. An audio Webcast of the call will also be available at http://www.bluecoat.com/....
FORWARD LOOKING STATEMENTS: This document contains certain forward looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements including: statements regarding the Company's expected net revenue, GAAP earnings per share and non-GAAP earnings per share in the third fiscal quarter of 2009; the expected results of the Company's recent acquisition of Packeteer; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the risks that are described from time to time in the Securities and Exchange Commission reports filed by Blue Coat, including but not limited to the risks described in Blue Coat's Annual Report on Form 10-K for the year ended April 30, 2008 and in its Quarterly Report on Form 10-Q for the quarter ended July 31, 2008. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of Blue Coat. Blue Coat assumes no obligation and does not intend to update these forward-looking statements except as required by applicable law.
"Despite a difficult economic environment, Blue Coat continued to execute its strategy during the second quarter, enabling us to once again report record net revenue," said Brian NeSmith, president and chief executive officer, Blue Coat Systems. "We have largely completed the integration of Packeteer, Inc., which we acquired in June, and recognized approximately $25 million in net revenue from the acquired business in the second quarter. In addition, we achieved integration between our ProxySG appliances and the PacketShaper appliances we acquired from Packeteer. Customers around the world have an ongoing need to gain visibility and control of corporate networks, accelerate business-critical applications, and prevent malicious attacks to achieve the cost and risk reduction that is essential to their success. Blue Coat is uniquely positioned to provide the visibility, acceleration and security required in a single solution."
On a GAAP basis, the Company reported a net loss of $0.3 million, or ($0.01) per share, in the second quarter of fiscal 2009, compared to net income of $7.0 million, or $0.17 per diluted share, in the second quarter of fiscal 2008, and a net loss of $5.8 million, or ($0.15) per share, in the first quarter of fiscal 2009.
The Company reported non-GAAP net income of $11.6 million, or $0.27 per diluted share, in the second quarter of fiscal 2009, compared to non-GAAP net income of $12.4 million, or $0.30 per diluted share, in the second quarter of fiscal 2008, and net income of $6.8 million, or $0.16 per diluted share, in the first quarter of fiscal 2009.
Current quarter GAAP and non-GAAP net income includes $4.6 million of expense for Packeteer integration activities compared to $4.8 million in the first quarter of fiscal 2009. These expenses relate principally to compensation incentives that are not anticipated in future quarters.
Excluded from current quarter non-GAAP net income is $7.2 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $5.1 million in stock-based compensation expense, $3.2 million in amortization of intangible assets, and $0.7 million in expenses associated with matters related to the stock option investigation. Non-GAAP net income for the current quarter also includes $4.3 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.
In the second quarter of fiscal 2008, non-GAAP net income excluded $4.0 million in stock-based compensation expense, $0.4 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $0.3 million in legal settlement costs. Non-GAAP net income in the second quarter of fiscal 2008 did not include additional tax expense for non-GAAP items as the Company's tax liability at that time was limited to foreign and state tax obligations.
Non-GAAP net income in the first quarter of fiscal 2009 included $4.8 million of expense for integration activities related to the acquisition of Packeteer, but excluded $6.1 million in expense related to the fair value write-up of acquired inventory that was sold during the quarter, $4.2 million in stock-based compensation expense, $2.1 million in amortization of intangible assets, $0.7 million in expenses associated with matters related to the stock option investigation, and $1.5 million in restructuring expense related to severance costs. Non-GAAP net income in the first quarter of fiscal 2009 also included $2.1 million in additional income tax expense based on a 30% effective tax rate applied to non-GAAP pre-tax income.
Blue Coat ended the quarter on October 31, 2008, with cash, cash equivalents, and restricted cash of $97.8 million, an increase of $21.5 million from the prior quarter. Cash flow provided by operations in the second quarter of fiscal 2009 was $27.1 million.
Financial Outlook
For the third fiscal quarter ending January 31, 2009, in consideration of the current economic environment the Company is currently planning net revenue in the range of $106.0 to $112.0 million. On a GAAP basis, the Company expects a net loss of ($0.12) to ($0.03) per share. On a non-GAAP basis, the Company expects net income of $0.12 to $0.20 per diluted share. Non-GAAP earnings per diluted share excludes expense related to the fair value write-up of acquired inventory sold during the quarter, stock-based compensation expense, amortization of intangible assets, and expenses associated with the stock option investigation and assumes an effective tax rate of 30% on non-GAAP pre-tax income.
About Non-GAAP Financial Measures
Blue Coat uses non-GAAP financial measures of income for internal evaluation and to report the results of its business. These non-GAAP financial measures include non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP net income per share. These measures are not in accordance with, nor an alternative to, GAAP. These 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 expense related to the fair value write-up of acquired inventory sold, stock-based compensation expense, amortization of intangible assets, expenses associated with matters related to the stock option investigation, restructuring expenses, and related tax adjustments. 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 expense related to the fair value write-up of acquired inventory sold, stock-based compensation expense, amortization of intangible assets, expenses associated with matters related to the stock option investigation, restructuring expenses, and related tax adjustments do not impact its current resource allocation decisions. Additionally, the Company believes that inclusion of these non-GAAP financial measures provides consistency and comparability with its past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP gross profit, operating income, net income and income per share.
Conference Call & Webcast
The Company will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Participants should call (612) 234-9959 with the passcode: 968268. A replay of the call will be available starting November 25, 2008 at 4:00 p.m. Pacific Time (7:00 p.m. Eastern Time), and can be accessed by calling (320) 365-3844 with the passcode: 968268. An audio Webcast of the call will also be available at http://www.bluecoat.com/....
FORWARD LOOKING STATEMENTS: This document contains certain forward looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements including: statements regarding the Company's expected net revenue, GAAP earnings per share and non-GAAP earnings per share in the third fiscal quarter of 2009; the expected results of the Company's recent acquisition of Packeteer; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the risks that are described from time to time in the Securities and Exchange Commission reports filed by Blue Coat, including but not limited to the risks described in Blue Coat's Annual Report on Form 10-K for the year ended April 30, 2008 and in its Quarterly Report on Form 10-Q for the quarter ended July 31, 2008. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of Blue Coat. Blue Coat assumes no obligation and does not intend to update these forward-looking statements except as required by applicable law.
