Brocade Reports Fourth Quarter and Fiscal 2015 Earnings
Record Total Revenue, IP Networking Revenue, and Earnings per Share in Fiscal 2015
/EINPresswire.com/ -- SAN JOSE, CA -- (Marketwired) -- 11/23/15 -- Brocade® (NASDAQ: BRCD) today reported financial results for its fourth quarter and full fiscal year 2015 ended October 31, 2015. Brocade reported fourth quarter revenue of $589 million, an increase of 4% year-over-year and 7% quarter-over-quarter. Revenue for fiscal year 2015 was $2,263 million, up 2% year-over-year. The resulting GAAP diluted earnings per share (EPS) was $0.20 for the fourth quarter and $0.79 for fiscal year 2015, up 6% and up 48% year-over-year, respectively. The fiscal year 2014 GAAP EPS included a non-cash goodwill impairment charge associated with the strategic repositioning of the Brocade ADX® product family. Non-GAAP diluted EPS was $0.26 for the fourth quarter and $1.01 for fiscal year 2015, up 8% and up 12% year-over-year, respectively.
"Fiscal 2015 was a productive year in which we achieved many significant milestones," said Lloyd Carney, CEO of Brocade. "We delivered annual revenue growth in fiscal 2015, with a year-over-year revenue increase in each fiscal quarter. We grew our non-GAAP EPS by 12% for the fiscal year, delivering more than a dollar per share for the first time. We continued to expand our portfolio of software and hardware products through both technology innovation and strategic acquisitions. Looking forward, these investments create new opportunities for us to continue to grow revenue and EPS in 2016 and beyond."
Quarterly Key Financial Metrics: (1)
Q4 2015 vs. Q4 2015 vs.
Q4 2015 Q3 2015 Q4 2014 Q3 2015 Q4 2014
------- ------- ------- ----------- -----------
Revenue $ 589M $ 552M $ 564M 7% 4%
GAAP EPS--diluted $ 0.20 $ 0.21 $ 0.19 (7%) 6%
Non-GAAP EPS--diluted $ 0.26 $ 0.27 $ 0.24 (4%) 8%
GAAP gross margin 67.0% 67.4% 66.8% (0.4) pts 0.2 pts
Non-GAAP gross margin 67.9% 68.6% 67.7% (0.7) pts 0.2 pts
GAAP operating margin 20.2% 21.7% 22.4% (1.5) pts (2.2) pts
Non-GAAP operating margin 25.0% 26.9% 26.8% (1.9) pts (1.8) pts
(1) Full fiscal year financial metrics are detailed in the financial statements and schedules presented below.
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.
Highlights:
- Q4 2015 SAN product revenue was $325 million, flat year-over-year and up 5% quarter-over-quarter. The Q4 year-over-year product revenue performance reflects a 14% increase in director sales and a 1% increase in embedded switch sales, offset by a 12% decrease in switch sales. For fiscal year 2015, SAN product revenue was $1,301 million, down 2% year-over-year, primarily due to lower switch and embedded switch sales, partially offset by higher director sales.
- Q4 2015 IP Networking product revenue was $170 million, up 12% year-over-year and 10% quarter-over-quarter. The Q4 year-over-year increase was primarily driven by a 28% increase in Ethernet switch sales and improved software sales, partially offset by a 20% decline in router revenue. For fiscal year 2015, IP Networking product revenue was $601 million, up 14% year-over-year due to stronger switch, router, and software sales.
- During Q4, Brocade launched the Brocade Analytics Monitoring Platform, a new, innovative, SAN solution designed for both new and existing Fibre Channel storage networking customers. This solution allows customers to better monitor, analyze and control their SAN environments, while also improving the operational performance, stability, and security of data flowing between servers and storage devices.
- In fiscal year 2015, Brocade's full-year GAAP gross margin and operating margin were 67.5% and 21.8%, respectively. Full-year non-GAAP gross margin and operating margin increased to 68.4% and 26.3%, a full-year improvement of 110 basis points and 30 basis points, respectively. The full-year non-GAAP gross margin improvement was primarily due to lower excess and obsolete inventory charges and lower manufacturing overhead spending, while the operating margin improvement was due to higher gross margins, partially offset by higher sales and marketing and research and development expenses.
- Full-year fiscal 2015 operating cash flow was $447 million, a 17% decrease from fiscal year 2014. The decrease in operating cash flow was primarily due to higher payments with respect to employee incentive compensation earned in fiscal year 2014 and paid in fiscal year 2015, changes in accounts receivable collections, and higher fiscal year 2015 tax payments related to fiscal year 2014 earnings. During fiscal year 2015, the Company repurchased $344 million of stock, or approximately 30 million shares, and paid $67 million in dividends. This return of capital to shareholders represents 96% of adjusted free cash flow for the year.
Board Declares Dividend
- The Brocade Board of Directors has declared a quarterly cash dividend of $0.045 per share of the Company's common stock. The dividend payment will be made on January 4, 2016, to shareholders of record at the close of market on December 10, 2015.
Brocade management will host a conference call today at 2:30 p.m. PT (5:30 p.m. ET) to discuss Q4 and fiscal year 2015 results, as well as Brocade's Q1 2016 outlook. To access the webcast, please go to www.brcd.com/events.cfm. A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at www.brcd.com.
Other Q4 2015 product, customer, and partner announcements are available at http://newsroom.brocade.com/.
Brocade (www.brocade.com)
130 Holger Way, San Jose, CA 95134
T. 408.333.8000 F. 408.333.8101
Financial Highlights and Additional Financial Information
Q4 2015 Q3 2015 Q4 2014
-------- -------- --------
Routes to market as a % of total net revenues:
OEM revenues 62% 62% 63%
Channel/Direct revenues 38% 38% 37%
10% or greater customer revenues 29% 43% 44%
Geographic split as a % of total net revenues
(1):
Domestic revenues 54% 57% 61%
International revenues 46% 43% 39%
Segment split as a % of total net revenues:
SAN product revenues 55% 56% 58%
IP Networking product revenues 29% 28% 27%
Global Services revenues 16% 16% 15%
SAN business revenues (2) 65% 66% 67%
IP Networking business revenues (2) 35% 34% 33%
IP Networking product revenues by use category
(3) (4):
Data Center 60% 52% 58%
Enterprise Campus 35% 40% 34%
Carrier Network (MAN/WAN) 5% 8% 8%
Additional information: Q4 2015 Q3 2015 Q4 2014
-------- -------- --------
GAAP net income $ 84M $ 92M $ 83M
Non-GAAP net income $ 108M $ 115M $ 104M
GAAP operating income $ 119M $ 120M $ 127M
Non-GAAP operating income $ 147M $ 149M $ 151M
EBITDA $ 141M $ 142M $ 147M
GAAP effective tax rate (5) 23.6% 17.4% 29.1%
Non-GAAP effective tax rate (5) 24.2% 20.1% 26.6%
Cash and cash equivalents $ 1,441M $ 1,320M $ 1,255M
Deferred revenues $ 317M $ 301M $ 312M
Capital expenditures $ 16M $ 19M $ 14M
Total debt, net of discount (6) $ 796M $ 792M $ 597M
Cash, net of senior debt, convertible debt
and capitalized leases $ 566M $ 444M $ 653M
Cash provided by operations $ 180M $ 55M $ 158M
Days sales outstanding 36 days 33 days 36 days
Employees at end of period 4,640 4,626 4,161
SAN port shipments 1.0M 0.9M 1.1M
Share repurchases $ 31.1M $ 103.1M $ 32.8M
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.
(1) Revenues are attributed to geographic areas based on product delivery location. Since some OEM partners take delivery of Brocade products domestically and then ship internationally to their end users, the percentage of international revenues based on end-user location would likely be higher.
(2) SAN and IP Networking business revenues include hardware and software product, support, and services revenues.
(3) Product revenue by use category is estimated based on analysis of the information the Company collects in its sales management system. The estimated percentage of revenue by use category may fluctuate quarter to quarter due to seasonality and the timing of large customer orders.
(4) Each use category includes enterprise, service provider, and government revenues.
(5) The lower effective tax rates in Q3 2015 were, in part, due to various tax benefits recognized in the quarter including a domestic manufacturing deduction and releases of previously reserved tax provisions.
(6) Q4 2015 and Q3 2015 total debt, net of discount, includes the debt discount recorded for the conversion feature that is required to be separately accounted for as equity for the $575 million convertible debt, thereby reducing the carrying value of the debt. The unamortized debt discount for the conversion feature was $69 million as of October 31, 2015, and $73 million as of August 1, 2015.
Non-GAAP Financial Measures
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) call premium cost and write-off of debt discount and debt issuance costs related to lenders that did not participate in Brocade's debt refinancings; (ii) acquisition and integration costs; (iii) restructuring, goodwill impairment, and other related costs (benefits); (iv) gain on sale of non-marketable equity investment; (v) (gain) loss on sale of business; (vi) legal provision (recovery) associated with certain pre-acquisition litigation; (vii) legal fees (recovery) associated with indemnification obligations and other related costs, net; (viii) gain on litigation settlement, net; and (ix) specific non-cash and non-recurring tax benefits or detriments.
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.
Limitations: 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.
Forward-Looking Statements
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 presentation 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; 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. These and other risks are set forth in more detail in Brocade's Form 10-Q for the fiscal quarter ended August 1, 2015, and in Brocade's Annual Report on Form 10-K for the fiscal year ended November 1, 2014. Brocade expressly assumes no obligation to update any such forward-looking statements whether as the result of new developments or otherwise.
About Brocade
Brocade (NASDAQ: BRCD) networking solutions help the world's leading organizations transition smoothly to a world where applications and information reside anywhere. (www.brocade.com)
ADX, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, Fabric Vision, HyperEdge, ICX, MLX, MyBrocade, OpenScript, The Effortless Network, vADX, VCS, VDX, vPlane, and Vyatta are registered 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 Brocade or others.
© 2015 Brocade Communications Systems, Inc. All Rights Reserved.
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended For the Year Ended
------------------------ ------------------------
October 31, November 1, October 31, November 1,
2015 2014 2015 2014
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
Net revenues:
Product $ 494,720 $ 476,905 $ 1,902,401 $ 1,852,187
Service 94,107 87,453 361,059 359,080
----------- ----------- ----------- -----------
Total net revenues 588,827 564,358 2,263,460 2,211,267
----------- ----------- ----------- -----------
Cost of revenues:
Product 155,734 151,025 587,515 592,441
Service 38,816 36,215 147,872 153,033
----------- ----------- ----------- -----------
Total cost of
revenues 194,550 187,240 735,387 745,474
----------- ----------- ----------- -----------
Gross margin 394,277 377,118 1,528,073 1,465,793
Operating expenses:
Research and
development 94,547 83,687 356,720 345,549
Sales and marketing 157,031 144,991 585,230 554,515
General and
administrative 21,808 21,546 87,623 84,941
Amortization of
intangible assets 902 135 2,556 10,280
Acquisition and
integration costs 809 -- 3,942 --
Restructuring,
goodwill impairment,
and other related
costs (benefits) (41) 229 (678) 89,280
Gain on sale of
network adapter
business -- -- -- (4,884)
----------- ----------- ----------- -----------
Total operating
expenses 275,056 250,588 1,035,393 1,079,681
----------- ----------- ----------- -----------
Income from operations 119,221 126,530 492,680 386,112
Interest expense (9,824) (9,151) (55,578) (36,757)
Interest and other
income, net 1,095 323 1,949 4,266
----------- ----------- ----------- -----------
Income before income tax 110,492 117,702 439,051 353,621
Income tax expense 26,104 34,283 98,689 115,650
----------- ----------- ----------- -----------
Net income $ 84,388 $ 83,419 $ 340,362 $ 237,971
=========== =========== =========== ===========
Net income per share--
basic $ 0.20 $ 0.19 $ 0.81 $ 0.55
=========== =========== =========== ===========
Net income per share--
diluted $ 0.20 $ 0.19 $ 0.79 $ 0.53
=========== =========== =========== ===========
Shares used in per share
calculation--basic 414,769 431,843 420,331 435,258
=========== =========== =========== ===========
Shares used in per share
calculation--diluted 422,315 441,649 430,556 446,859
=========== =========== =========== ===========
Cash dividends declared
per share $ 0.045 $ 0.035 $ 0.16 $ 0.07
=========== =========== =========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended For the Year Ended
------------------------ ------------------------
October 31, November 1, October 31, November 1,
2015 2014 2015 2014
----------- ----------- ----------- -----------
(In thousands)
Net income $ 84,388 $ 83,419 $ 340,362 $ 237,971
Other comprehensive
income and loss, net of
tax:
Unrealized gains
(losses) on cash flow
hedges:
Change in unrealized
gains and losses (1,055) (1,953) (3,387) (1,939)
Net gains and losses
reclassified into
earnings 1,211 (18) 3,755 (235)
----------- ----------- ----------- -----------
Net unrealized gains
(losses) on cash flow
hedges 156 (1,971) 368 (2,174)
Foreign currency
translation
adjustments (775) (3,480) (6,556) (3,196)
----------- ----------- ----------- -----------
Total other
comprehensive loss (619) (5,451) (6,188) (5,370)
----------- ----------- ----------- -----------
Total comprehensive
income $ 83,769 $ 77,968 $ 334,174 $ 232,601
=========== =========== =========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, November 1,
2015 2014
----------- -----------
(In thousands, except
par value)
ASSETS
Current assets:
Cash and cash equivalents $ 1,440,882 $ 1,255,017
Accounts receivable, net of allowances for
doubtful accounts of $1,838 and $80 as of
October 31, 2015, and November 1, 2014,
respectively 235,883 224,913
Inventories 40,524 38,718
Deferred tax assets 78,675 92,692
Prepaid expenses and other current assets 56,235 46,665
----------- -----------
Total current assets 1,852,199 1,658,005
Property and equipment, net 439,224 445,433
Goodwill 1,617,161 1,567,723
Intangible assets, net 75,623 26,658
Other assets 53,971 35,856
----------- -----------
Total assets $ 4,038,178 $ 3,733,675
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 98,143 $ 93,705
Accrued employee compensation 142,075 169,018
Deferred revenue 244,622 239,993
Other accrued liabilities 77,524 84,592
----------- -----------
Total current liabilities 562,364 587,308
Long-term debt, net of current portion 795,804 595,450
Non-current deferred revenue 72,065 71,746
Non-current income tax liability 47,010 39,647
Non-current deferred tax liabilities 24,024 27,153
Other non-current liabilities 3,376 4,310
----------- -----------
Total liabilities 1,504,643 1,325,614
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000 shares
authorized, no shares issued and outstanding -- --
Common stock, $0.001 par value, 800,000 shares
authorized:
Issued and outstanding: 413,923 and 431,470
shares as of October 31, 2015, and November
1, 2014, respectively 414 431
Additional paid-in capital 1,632,984 1,774,197
Accumulated other comprehensive loss (25,002) (18,814)
Retained earnings 925,139 652,247
----------- -----------
Total stockholders' equity 2,533,535 2,408,061
----------- -----------
Total liabilities and stockholders' equity $ 4,038,178 $ 3,733,675
=========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------------
October 31, November 1,
2015 2014
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income $ 84,388 $ 83,419
Adjustments to reconcile net income to net cash
provided by operating activities:
Excess tax benefits from stock-based
compensation (6,962) (26,865)
Depreciation and amortization 22,238 20,277
Loss on disposal of property and equipment 1,543 1,788
Amortization of debt issuance costs and debt
discount 4,272 295
Net gain on sale of investment -- (50)
Provision for doubtful accounts receivable and
sales allowances 1,278 2,043
Non-cash stock-based compensation expense 23,934 23,700
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable (37,242) (35,140)
Inventories (27) 1,869
Prepaid expenses and other assets 5,010 (6,188)
Deferred tax assets (297) (934)
Accounts payable (2,159) 6,748
Accrued employee compensation 35,149 26,754
Deferred revenue 15,565 12,672
Other accrued liabilities 33,888 48,198
Restructuring liabilities (311) (733)
----------- -----------
Net cash provided by operating activities 180,267 157,853
----------- -----------
Cash flows from investing activities:
Proceeds from sale of non-marketable equity
investment -- 50
Purchases of property and equipment (15,601) (13,559)
Net cash paid in connection with acquisition -- (16,900)
----------- -----------
Net cash used in investing activities (15,601) (30,409)
----------- -----------
Cash flows from financing activities:
Payment of principal related to capital leases (141) (103)
Common stock repurchases (31,085) (32,820)
Proceeds from issuance of common stock 31 2,701
Payment of cash dividends to stockholders (18,651) (15,114)
Excess tax benefits from stock-based
compensation 6,962 26,865
----------- -----------
Net cash used in financing activities (42,884) (18,471)
----------- -----------
Effect of exchange rate fluctuations on cash and
cash equivalents (571) (3,343)
----------- -----------
Net increase in cash and cash equivalents 121,211 105,630
Cash and cash equivalents, beginning of period 1,319,671 1,149,387
----------- -----------
Cash and cash equivalents, end of period $ 1,440,882 $ 1,255,017
=========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Year Ended
------------------------
October 31, November 1,
2015 2014
----------- -----------
(In thousands)
Cash flows from operating activities:
Net income $ 340,362 $ 237,971
Adjustments to reconcile net income to net cash
provided by operating activities:
Excess tax benefits from stock-based
compensation (48,943) (64,563)
Depreciation and amortization 84,807 100,647
Loss on disposal of property and equipment 3,163 5,118
Gain on sale of network adapter business -- (4,884)
Amortization of debt issuance costs and debt
discount 13,715 1,151
Write-off of debt discount and debt issuance
costs related to lenders that did not
participate in refinancing 4,808 --
Net gain on sale of investments -- (5,292)
Provision for doubtful accounts receivable and
sales allowances 5,173 7,563
Non-cash stock-based compensation expense 88,528 84,914
Goodwill impairment charge -- 83,382
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable (15,989) 17,121
Inventories (1,805) 6,626
Prepaid expenses and other assets (15,844) (10,984)
Deferred tax assets 234 (887)
Accounts payable 107 2,339
Accrued employee compensation (59,703) (11,382)
Deferred revenue 1,345 8,652
Other accrued liabilities 50,366 96,376
Restructuring liabilities (2,825) (12,271)
----------- -----------
Net cash provided by operating activities 447,499 541,597
----------- -----------
Cash flows from investing activities:
Purchases of non-marketable equity and debt
investments (2,150) (223)
Proceeds from sale of non-marketable equity
investments 1,489 10,798
Purchases of property and equipment (68,743) (54,734)
Purchase of intangible assets (7,750) --
Net cash paid in connection with acquisitions (95,452) (16,900)
Proceeds from collection of note receivable 250 250
Proceeds from sale of network adapter business -- 9,995
----------- -----------
Net cash used in investing activities (172,356) (50,814)
----------- -----------
Cash flows from financing activities:
Payment of principal related to senior secured
notes (300,000) --
Payment of debt issuance costs (1,718) --
Payment of principal related to capital leases (1,818) (2,485)
Common stock repurchases (343,686) (335,380)
Proceeds from issuance of common stock 51,376 83,994
Payment of cash dividends to stockholders (67,470) (30,384)
Proceeds from convertible notes 565,656 --
Purchase of convertible note hedge (86,135) --
Proceeds from issuance of warrants 51,175 --
Excess tax benefits from stock-based
compensation 48,943 64,563
----------- -----------
Net cash used in financing activities (83,677) (219,692)
----------- -----------
Effect of exchange rate fluctuations on cash and
cash equivalents (5,601) (3,071)
----------- -----------
Net increase in cash and cash equivalents 185,865 268,020
Cash and cash equivalents, beginning of year 1,255,017 986,997
----------- -----------
Cash and cash equivalents, end of year $ 1,440,882 $ 1,255,017
=========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
-------------------------------------
October 31, August 1, November 1,
2015 2015 2014
----------- ----------- -----------
(In thousands, except per share
amounts)
Non-GAAP adjustments
Stock-based compensation expense
included in cost of revenues $ 3,189 $ 3,955 $ 4,225
Amortization of intangible assets
expense included in cost of
revenues 2,598 2,549 600
----------- ----------- -----------
Total gross margin impact from
non-GAAP adjustments 5,787 6,504 4,825
Stock-based compensation expense
included in research and
development 5,475 5,226 5,527
Stock-based compensation expense
included in sales and marketing 10,689 10,601 8,832
Stock-based compensation expense
included in general and
administrative 4,581 4,655 5,116
Amortization of intangible assets
expense included in operating
expenses 902 889 135
Acquisition and integration costs 809 789 --
Restructuring and other related
costs (benefits) (41) -- 229
----------- ----------- -----------
Total operating income impact
from non-GAAP adjustments 28,202 28,664 24,664
Convertible debt interest 3,730 3,684 --
Income tax effect of non-GAAP
adjustments (8,363) (9,494) (3,587)
----------- ----------- -----------
Total net income impact from
non-GAAP adjustments $ 23,569 $ 22,854 $ 21,077
=========== =========== ===========
Gross margin reconciliation
GAAP gross margin $ 394,277 $ 371,904 $ 377,118
Total gross margin impact from
non-GAAP adjustments 5,787 6,504 4,825
----------- ----------- -----------
Non-GAAP gross margin $ 400,064 $ 378,408 $ 381,943
=========== =========== ===========
GAAP gross margin, as a percent of
total net revenues 67.0% 67.4% 66.8%
Non-GAAP gross margin, as a
percent of total net revenues 67.9% 68.6% 67.7%
Operating income reconciliation
GAAP operating income $ 119,221 $ 119,849 $ 126,530
Total operating income impact from
non-GAAP adjustments 28,202 28,664 24,664
----------- ----------- -----------
Non-GAAP operating income $ 147,423 $ 148,513 $ 151,194
=========== =========== ===========
GAAP operating income, as a
percent of total net revenues 20.2% 21.7% 22.4%
Non-GAAP operating income, as a
percent of total net revenues 25.0% 26.9% 26.8%
Net income and net income per share
reconciliation
Net income on a GAAP basis $ 84,388 $ 91,667 $ 83,419
Total net income impact from non-
GAAP adjustments 23,569 22,854 21,077
----------- ----------- -----------
Non-GAAP net income $ 107,957 $ 114,521 $ 104,496
=========== =========== ===========
Non-GAAP net income per share--
basic $ 0.26 $ 0.27 $ 0.24
=========== =========== ===========
Non-GAAP net income per share--
diluted $ 0.26 $ 0.27 $ 0.24
=========== =========== ===========
Shares used in non-GAAP per share
calculation--basic 414,769 417,299 431,843
=========== =========== ===========
Shares used in non-GAAP per share
calculation--diluted 422,315 427,518 441,649
=========== =========== ===========
Effective tax rate reconciliation
GAAP effective tax rate 23.6% 17.4% 29.1%
Total tax impact from non-GAAP
adjustments 0.6% 2.7% (2.5)%
----------- ----------- -----------
Non-GAAP effective tax rate 24.2% 20.1% 26.6%
=========== =========== ===========
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
For the Year Ended
------------------------
October 31, November 1,
2015 2014
----------- -----------
(In thousands, except
per share amounts)
Non-GAAP adjustments
Stock-based compensation expense included in
cost of revenues $ 12,946 $ 14,962
Amortization of intangible assets expense
included in cost of revenues 7,641 8,010
----------- -----------
Total gross margin impact from non-GAAP
adjustments 20,587 22,972
Stock-based compensation expense included in
research and development 18,714 18,635
Stock-based compensation expense included in
sales and marketing 38,340 31,651
Stock-based compensation expense included in
general and administrative 18,528 19,666
Amortization of intangible assets expense
included in operating expenses 2,556 10,280
Acquisition and integration costs 3,942 --
Restructuring, goodwill impairment, and other
related costs (benefits) (678) 89,280
Gain on sale of network adapter business -- (4,884)
----------- -----------
Total operating income impact from non-GAAP
adjustments 101,989 187,600
Call premium cost and write-off of debt discount
and debt issuance costs related to lenders that
did not participate in refinancing 15,122 --
Gain on sale of non-marketable equity investment -- (5,242)
Convertible debt interest 11,731 --
Income tax effect of non-GAAP adjustments (33,179) (17,643)
----------- -----------
Total net income impact from non-GAAP
adjustments $ 95,663 $ 164,715
=========== ===========
Gross margin reconciliation
GAAP gross margin $ 1,528,073 $ 1,465,793
Total gross margin impact from non-GAAP
adjustments 20,587 22,972
----------- -----------
Non-GAAP gross margin $ 1,548,660 $ 1,488,765
=========== ===========
GAAP gross margin, as a percent of total net
revenues 67.5% 66.3%
Non-GAAP gross margin, as a percent of total net
revenues 68.4% 67.3%
Operating income reconciliation
GAAP operating income $ 492,680 $ 386,112
Total operating income impact from non-GAAP
adjustments 101,989 187,600
----------- -----------
Non-GAAP operating income $ 594,669 $ 573,712
=========== ===========
GAAP operating income, as a percent of total net
revenues 21.8% 17.5%
Non-GAAP operating income, as a percent of total
net revenues 26.3% 25.9%
Net income and net income per share reconciliation
Net income on a GAAP basis $ 340,362 $ 237,971
Total net income impact from non-GAAP
adjustments 95,663 164,715
----------- -----------
Non-GAAP net income $ 436,025 $ 402,686
=========== ===========
Non-GAAP net income per share--basic $ 1.04 $ 0.93
=========== ===========
Non-GAAP net income per share--diluted $ 1.01 $ 0.90
=========== ===========
Shares used in non-GAAP per share calculation--
basic 420,331 435,258
=========== ===========
Shares used in non-GAAP per share calculation--
diluted 430,556 446,859
=========== ===========
BROCADE CONTACTS
Public Relations
Ed Graczyk
Tel: 408-333-1836
egraczyk@brocade.com
Investor Relations
Michael Iburg
Tel: 408-333-0233
miburg@brocade.com
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