Welcome!

News Feed Item

Brocade Reports Fiscal Q2 2014 Results

Board of Directors Initiates Cash Dividend

SAN JOSE, CA -- (Marketwired) -- 05/22/14 -- Brocade® (NASDAQ: BRCD) today reported financial results for its second fiscal quarter ended May 3, 2014. Brocade reported second quarter revenue of $537 million, flat year-over-year and down 5% quarter-over-quarter. The company reported a GAAP loss per share of $(0.03), compared with a profit of $0.10 per share in Q2 2013. The GAAP loss was due to an $83 million non-cash goodwill impairment charge associated with the strategic repositioning of the ADX product family. More information on this subject is provided in the highlights section below. Non-GAAP diluted EPS was $0.19, up from $0.17 in Q2 2013, principally due to higher gross margins and lower operating expenses.

"This was a solid quarter for Brocade in which our Storage Area Networking (SAN) revenue grew year-over-year and our refocused IP Networking business made good progress in the quarter," said Lloyd Carney, CEO of Brocade. "We see increasing customer interest in our software networking and Ethernet fabric technology as we drive innovation and disruption in data center networking. We are also pleased to report that our Board has approved the initiation of a quarterly cash dividend of $0.035 per share to be paid in Q3 2014."



Key Financial Metrics:

                                                 Q2 2014 vs.   Q2 2014 vs.
                    Q2 2014   Q1 2014   Q2 2013    Q1 2014       Q2 2013
                   --------  --------  --------  -----------   -----------
Revenue            $  537 M  $  565 M  $  539 M           (5%)          --%
GAAP EPS--diluted  $  (0.03) $   0.18  $   0.10         (118%)        (131%)
Non-GAAP EPS--
 diluted           $   0.19  $   0.24  $   0.17          (19%)          16%
GAAP gross margin      66.0%     66.0%     62.0%      -- pts       4.0 pts
Non-GAAP gross
 margin                66.7%     67.7%     65.1%   (1.0) pts       1.6 pts
GAAP operating
 margin                 3.8%     21.5%     10.6%  (17.7) pts     (6.8) pts
Non-GAAP operating
 margin                23.2%     27.9%     19.0%   (4.7) pts       4.2 pts
Cash provided by
 operations        $  168 M  $  109 M  $  120 M           54%           41%
Share Repurchases  $   50 M  $  140 M  $   39 M          (64%)          30%


Please see important note of explanation on non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

Highlights:

  • SAN business revenue, including products and services, was $379 million, up 1% year-over-year and down 8% sequentially. The year-over-year growth was primarily due to higher sales within the switch and embedded products as well as increased support revenue. The sequential decline was slightly better than expected in a seasonally soft quarter for many OEM partners of Brocade.

  • IP Networking business revenue, including products and services, was $157 million, down 4% year-over-year and up 3% sequentially. The year-over-year decline was due to lower sales to the U.S. Federal government, the divestiture of the network adapter business, and the change in the Company's wireless business strategy. The sequential increase was principally due to higher sales of Ethernet switching products as well as increased support revenue. During Q2 2014, an estimated 57% of IP Networking product revenue came from data center customers, up 7 pts year-over-year and down 2 pts sequentially. The estimated percentage of revenue coming from data center IP Networking customers may fluctuate quarter-to-quarter due to the timing of large data center customer transactions.

  • As part of the Company's previously communicated strategy to focus on the data center and other key technology segments, the Company made a strategic shift during Q2 2014 to reduce investment in the hardware-based ADX products and to increase investment in the software-based ADX products for the Layer 4-7 market. As a result of this change in strategy, the Company expects hardware-based ADX and related support revenue to be negatively impacted by $20 million to $40 million on an annualized basis compared with fiscal 2013 results. The Company recognized a related $83 million non-cash goodwill impairment charge in Q2 2014.

  • The $83 million goodwill impairment charge is non-deductible for tax purposes resulting in the Company's effective GAAP tax provision rate being significantly higher in Q2 2014. In addition, the effective GAAP and non-GAAP tax provision rates for Q2 2014 were higher than Q2 2013 due to the R&D tax credit that expired on December 31, 2013 and has not been extended by Congress.

  • The Brocade Board of Directors has initiated a quarterly cash dividend of $0.035 per share of the Company's common stock. The first dividend payment will be made on July 2, 2014 to stockholders of record as of the close of market on June 10, 2014. Future dividend payments are subject to review and approval by the Board of Directors.

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 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 Q2 2014 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

                                                Q2 2014   Q1 2014   Q2 2013
                                               --------  --------  --------
Routes to market as a % of total net revenues:
  OEM revenues                                       68%       70%       66%
  Channel/Direct revenues                            32%       30%       34%
  10% or greater customer revenues                   56%       57%       45%
Geographic split as a % of total net revenues
 (1):
  Domestic revenues                                  59%       57%       58%
  International revenues                             41%       43%       42%
Segment split as a % of total net revenues:
  SAN product revenues                               60%       63%       59%
  IP Networking product revenues                     22%       21%       25%
  Global Services revenues                           18%       16%       16%
  SAN business revenues (2)                          71%       73%       69%
  IP Networking business revenues (2)                29%       27%       31%
IP Networking Business Revenue by Use Category
 (3):
  Data Center (4)                                    57%       59%       50%
  Enterprise Campus                                  37%       34%       36%
  Carrier Network (MAN/WAN)                           6%        7%       14%
Additional information:                     Q2 2014    Q1 2014    Q2 2013
                                           ---------  ---------  ---------
  GAAP net income (loss)                   $   (14 M) $    81 M  $    47 M
  Non-GAAP net income                      $    87 M  $   109 M  $    78 M
  GAAP operating income                    $    20 M  $   121 M  $    57 M
  Non-GAAP operating income                $   124 M  $   158 M  $   103 M
  Adjusted EBITDA (5)                      $   146 M  $   184 M  $   120 M
  Effective GAAP tax provision (benefit)
   rate                                        225.1%      27.1%      (0.4%)
  Effective Non-GAAP tax provision rate         24.6%      26.1%      15.9%
  Cash and cash equivalents                $ 1,138 M  $   999 M  $   764 M
  Deferred revenues                        $   304 M  $   298 M  $   302 M
  Capital expenditures                     $    14 M  $    13 M  $    13 M
  Total debt, net of discount              $   598 M  $   599 M  $   599 M
  Cash, net of senior debt and capitalized
   leases                                  $   535 M  $   395 M  $   159 M
  Days sales outstanding                     35 days    35 days    40 days
  Employees at end of period                   4,061      4,077      4,648
  SAN port shipments                           1.1 M      1.2 M      1.0 M


Please see important note of explanation on 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 product, support, and
   services revenues.

3) Business revenue by use category split is estimated based on the analysis
   of the information the Company collects in its sales management system.

4) Data Center includes enterprise, service provider, and government data
   center revenues.

5) Adjusted EBITDA is as defined in the Company's Credit Agreement.

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 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 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:

  • 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 against industry and competitor companies;
  • the ability to better identify trends in Brocade's underlying business and to perform related trend analysis;
  • a better understanding of how management plans and measures Brocade's underlying business; and
  • an easier way to compare Brocade's most recent results of operations against investor and analyst financial models.

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 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) legal provision or recovery associated with certain pre-acquisition litigation, (ii) call premium cost and write-off of original issue discount and debt issuance costs related to lenders that did not participate in refinancing, (iii) settlement gain associated with certain pre-acquisition-related litigation, (iv) restructuring, goodwill impairment, and other related costs, net, (v) gain on sale of network adapter business and (vi) specific non-cash and non-recurring tax benefits or detriments.

Management also excludes the following non-cash charges in determining non-GAAP net income (i) stock-based compensation expense and (ii) amortization of purchased intangible assets. 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 also believes that the exclusion of 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 exclusion of the amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses.

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 and net income 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 strategy, operational performance and capital allocation. 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, changes in IT spending levels in one or more of our target markets, Brocade's ability to execute on its sale strategy, and the effect of increasing market competition and changes in the industry. Certain of these and other risks are set forth in more detail in "Item 1A. Risk Factors" in Brocade's Annual Report on Form 10-K for the fiscal year ended October 26, 2013. 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) 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, ICX, MLX, MyBrocade, OpenScript, VCS, VDX, and Vyatta are registered trademarks, and HyperEdge, The Effortless Network, and The On-Demand Data Center are 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 their respective owners.

© 2014 Brocade Communications Systems, Inc. All Rights Reserved.



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)

                                Three Months Ended      Six Months Ended
                              ---------------------  ----------------------
                                May 3,    April 27,    May 3,     April 27,
                                 2014        2013        2014        2013
                              ---------  ----------  ----------  ----------
                                 (In thousands, except per-share amounts)
Net revenues
  Product                     $ 442,280  $  451,746  $  917,485  $  953,993
  Service                        94,630      87,038     183,960     173,520
                              ---------  ----------  ----------  ----------
    Total net revenues          536,910     538,784   1,101,445   1,127,513
                              ---------  ----------  ----------  ----------
Cost of revenues
  Product                       142,271     164,599     295,898     338,974
  Service                        40,347      40,073      78,585      80,502
                              ---------  ----------  ----------  ----------
    Total cost of revenues      182,618     204,672     374,483     419,476
                              ---------  ----------  ----------  ----------
Gross margin                    354,292     334,112     726,962     708,037
Operating expenses:
  Research and development       90,554      98,429     177,710     196,119
  Sales and marketing           139,597     145,316     272,262     294,327
  General and administrative     21,112      20,037      41,255      39,114
  Amortization of intangible
   assets                           131      13,151      10,014      28,007
  Restructuring, goodwill
   impairment, and other
   related costs                 82,703          --      88,920          --
  Gain on sale of network
   adapter business                  --          --      (4,884)         --
                              ---------  ----------  ----------  ----------
    Total operating expenses    334,097     276,933     585,277     557,567
                              ---------  ----------  ----------  ----------
Income from operations           20,195      57,179     141,685     150,470
Interest expense                 (9,234)    (10,432)    (18,430)    (36,800)
Interest and other income
 (loss), net                        (20)         31      (1,356)         97
                              ---------  ----------  ----------  ----------
Income before income tax         10,941      46,778     121,899     113,767
Income tax expense (benefit)     24,625        (171)     54,699      88,073
                              ---------  ----------  ----------  ----------
Net income (loss)             $ (13,684) $   46,949  $   67,200  $   25,694
                              =========  ==========  ==========  ==========
Net income (loss) per share--
 basic                        $   (0.03) $     0.10  $     0.15  $     0.06
                              =========  ==========  ==========  ==========
Net income (loss) per share--
 diluted                      $   (0.03) $     0.10  $     0.15  $     0.06
                              =========  ==========  ==========  ==========
Shares used in per-share
 calculation--basic             436,167     453,133     438,370     453,988
                              =========  ==========  ==========  ==========
Shares used in per-share
 calculation--diluted           436,167     466,919     451,999     466,620
                              =========  ==========  ==========  ==========



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
      CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                (Unaudited)

                                   Three Months Ended     Six Months Ended
                                  --------------------  -------------------
                                    May 3,   April 27,    May 3,  April 27,
                                     2014       2013       2014      2013
                                  ---------  ---------  --------- ---------
                                                (In thousands)
Net income (loss)                 $ (13,684) $  46,949  $  67,200 $  25,694
Other comprehensive income and
 loss, net of tax:
  Unrealized gains (losses) on
   cash flow hedges:
    Change in unrealized gains and
     losses                           1,094     (1,915)       170    (1,992)
    Net gains and losses
     reclassified into earnings          32        (32)         1      (210)
                                  ---------  ---------  --------- ---------
  Net unrealized gains (losses) on
   cash flow hedges                   1,126     (1,947)       171    (2,202)
  Foreign currency translation
   adjustments                        1,298     (1,762)       475    (2,142)
                                  ---------  ---------  --------- ---------
Total other comprehensive income
 (loss)                           $   2,424  $  (3,709)       646    (4,344)
                                  =========  =========  ========= =========
Total comprehensive income (loss) $ (11,260) $  43,240  $  67,846 $  21,350
                                  =========  =========  ========= =========



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                                      May 3,    October 26,
                                                       2014         2013
                                                   -----------  -----------
                                                     (In thousands, except
                                                          par value)
ASSETS
Current assets:
  Cash and cash equivalents                        $ 1,137,613  $   986,997
  Accounts receivable, net of allowances for
   doubtful accounts of $531 and $575 at May 3,
   2014, and October 26, 2013, respectively            193,804      249,598
  Inventories                                           40,773       45,344
  Deferred tax assets                                  116,557       98,018
  Prepaid expenses and other current assets             47,687       42,846
                                                   -----------  -----------
    Total current assets                             1,536,434    1,422,803
Property and equipment, net                            452,722      472,940
Goodwill                                             1,556,733    1,645,437
Intangible assets, net                                  23,386       40,258
Non-current deferred tax assets                            788        1,585
Other assets                                            38,846       38,368
                                                   -----------  -----------
    Total assets                                   $ 3,608,909  $ 3,621,391
                                                   ===========  ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                 $    79,952  $    88,218
  Accrued employee compensation                        141,482      145,996
  Deferred revenue                                     230,704      226,696
  Current restructuring liabilities                      2,876       16,418
  Current portion of long-term debt                      2,277        2,996
  Other accrued liabilities                             64,898       80,339
                                                   -----------  -----------
    Total current liabilities                          522,189      560,663
Long-term debt, net of current portion                 595,452      596,208
Non-current restructuring liabilities                    3,587        1,008
Non-current deferred revenue                            72,956       76,426
Non-current income tax liability                        46,271       38,680
Non-current deferred tax liabilities                    31,124            -
Other non-current liabilities                            1,583        1,593
                                                   -----------  -----------
    Total liabilities                                1,273,162    1,274,578
                                                   -----------  -----------
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: 435,452 and 445,285
     shares at May 3, 2014, and October 26, 2013,
     respectively                                          436          445
Additional paid-in capital                           1,836,249    1,915,152
Accumulated other comprehensive loss                   (12,798)     (13,444)
Retained earnings                                      511,860      444,660
                                                   -----------  -----------
    Total stockholders' equity                       2,335,747    2,346,813
                                                   -----------  -----------
    Total liabilities and stockholders' equity     $ 3,608,909  $ 3,621,391
                                                   ===========  ===========



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                      Three Months Ended
                                                   ------------------------
                                                      May 3,     April 27,
                                                       2014         2013
                                                   -----------  -----------
                                                        (In thousands)
Cash flows from operating activities:
  Net income (loss)                                $   (13,684) $    46,949
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Excess tax benefits from stock-based
     compensation                                      (13,080)      (3,248)
    Depreciation and amortization                       21,173       43,964
    Loss on disposal of property and equipment             830        1,057
    Amortization of debt issuance costs and
     original issue discount                               285          268
    Call premium cost related to lenders that did
     not participate in refinancing                         --       (9,939)
    Provision for doubtful accounts receivable and
     sales allowances                                    1,961        2,206
    Non-cash compensation expense                       21,052       19,172
    Goodwill impairment charge                          83,382           --
  Changes in assets and liabilities:
    Restricted cash                                         --       11,926
    Accounts receivable                                 22,495      (24,811)
    Inventories                                          2,473        6,980
    Prepaid expenses and other assets                  (11,857)         (12)
    Deferred tax assets                                    (38)         157
    Accounts payable                                       951          268
    Accrued employee compensation                       27,470       18,407
    Deferred revenue                                     5,987        6,405
    Other accrued liabilities                           22,869           93
    Restructuring liabilities                           (4,025)        (227)
                                                   -----------  -----------
      Net cash provided by operating activities        168,244      119,615
                                                   -----------  -----------
Cash flows from investing activities:
  Purchases of non-marketable minority equity
   investments                                            (223)          --
  Purchases of property and equipment                  (14,429)     (13,082)
                                                   -----------  -----------
      Net cash used in investing activities            (14,652)     (13,082)
                                                   -----------  -----------
Cash flows from financing activities:
  Payment of principal related to senior secured
   notes                                                    --     (300,000)
  Payment of debt issuance costs related to senior
   unsecured notes                                          --         (549)
  Payment of principal related to capital leases        (1,141)        (491)
  Common stock repurchases                             (50,052)     (38,649)
  Proceeds from issuance of common stock                22,120       12,087
  Excess tax benefits from stock-based compensation     13,080        3,248
  Decrease in restricted cash                               --      300,000
                                                   -----------  -----------
      Net cash used in financing activities            (15,993)     (24,354)
                                                   -----------  -----------
Effect of exchange rate fluctuations on cash and
 cash equivalents                                        1,327       (1,497)
                                                   -----------  -----------
Net increase in cash and cash equivalents              138,926       80,682
Cash and cash equivalents, beginning of period         998,687      683,616
                                                   -----------  -----------
Cash and cash equivalents, end of period           $ 1,137,613  $   764,298
                                                   ===========  ===========



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)

                                                       Six Months Ended
                                                   ------------------------
                                                      May 3,     April 27,
                                                       2014         2013
                                                   -----------  -----------
                                                        (In thousands)
Cash flows from operating activities:
  Net income                                       $    67,200  $    25,694
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Excess tax benefits from stock-based
     compensation                                      (27,415)      (5,440)
    Non-cash tax charges                                    --       78,206
    Depreciation and amortization                       59,927       93,358
    Loss on disposal of property and equipment           3,178        3,046
    Gain on sale of network adapter business            (4,884)          --
    Amortization of debt issuance costs and
     original issue discount                               566          665
    Call premium cost and write-off of original
     issue discount and debt issuance costs related
     to lenders that did not participate in
     refinancing                                            --        5,360
    Provision for doubtful accounts receivable and
     sales allowances                                    3,528        4,560
    Non-cash compensation expense                       39,640       38,322
    Goodwill impairment charge                          83,382           --
  Changes in assets and liabilities:
    Accounts receivable                                 52,266      (10,561)
    Inventories                                          4,570       16,605
    Prepaid expenses and other assets                   (8,371)      (1,714)
    Deferred tax assets                                     57          322
    Accounts payable                                    (7,126)     (14,692)
    Accrued employee compensation                      (11,738)     (54,163)
    Deferred revenue                                       573        7,924
    Other accrued liabilities                           33,324       (7,969)
    Restructuring liabilities                          (10,964)        (418)
                                                   -----------  -----------
      Net cash provided by operating activities        277,713      179,105
                                                   -----------  -----------
Cash flows from investing activities:
  Purchases of non-marketable minority equity
   investments                                            (223)          --
  Purchases of property and equipment                  (27,395)     (31,568)
  Net cash paid in connection with acquisition              --      (44,629)
  Proceeds from collection of note receivable              250           --
  Proceeds from sale of network adapter business         9,995           --
                                                   -----------  -----------
      Net cash used in investing activities            (17,373)     (76,197)
                                                   -----------  -----------
Cash flows from financing activities:
  Proceeds from senior unsecured notes                      --      296,250
  Payment of principal related to senior secured
   notes                                                    --     (300,000)
  Payment of debt issuance costs related to senior
   unsecured notes                                          --         (549)
  Payment of principal related to capital leases        (1,749)        (975)
  Common stock repurchases                            (190,432)     (86,179)
  Proceeds from issuance of common stock                54,530       35,899
  Excess tax benefits from stock-based compensation     27,415        5,440
                                                   -----------  -----------
    Net cash used in financing activities             (110,236)     (50,114)
                                                   -----------  -----------
Effect of exchange rate fluctuations on cash and
 cash equivalents                                          512       (1,722)
                                                   -----------  -----------
Net increase in cash and cash equivalents              150,616       51,072
Cash and cash equivalents, beginning of period         986,997      713,226
                                                   -----------  -----------
Cash and cash equivalents, end of period           $ 1,137,613  $   764,298
                                                   ===========  ===========



                    BROCADE COMMUNICATIONS SYSTEMS, INC.
        RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
                                (Unaudited)

                                                Three Months Ended
                                      -------------------------------------
                                         May 3,    January 25,   April 27,
                                          2014         2014         2013
                                      -----------  -----------  -----------
                                         (In thousands, except per share
                                                     amounts)
Non-GAAP adjustments
  Stock-based compensation expense
   included in cost of revenues       $     3,474  $     3,142  $     3,541
  Amortization of intangible assets
   expense included in cost of
   revenues                                   396        6,462        9,651
  Provision associated with certain
   pre-acquisition litigation                  --           --        3,460
                                      -----------  -----------  -----------
Total gross margin impact from non-
 GAAP adjustments                           3,870        9,604       16,652

  Stock-based compensation expense
   included in research and
   development                              4,422        4,336        4,500
  Stock-based compensation expense
   included in sales and marketing          8,462        6,765        8,012
  Stock-based compensation expense
   included in general and
   administrative                           4,694        4,345        3,119
  Amortization of intangible assets
   expense included in operating
   expenses                                   131        9,883       13,151
  Restructuring, goodwill impairment,
   and other related costs                 82,703        6,217           --
  Gain on sale of network adapter
   business                                    --       (4,884)          --
                                      -----------  -----------  -----------
Total operating income impact from
 non-GAAP adjustments                     104,282       36,266       45,434

  Income tax effect of non-tax
   adjustments                             (3,685)      (8,366)     (14,814)
                                      -----------  -----------  -----------
Total net income impact from non-GAAP
 adjustments                          $   100,597  $    27,900  $    30,620
                                      ===========  ===========  ===========

Gross margin reconciliation
GAAP gross margin                     $   354,292  $   372,670  $   334,112
  Total gross margin impact from non-
   GAAP adjustments                         3,870        9,604       16,652
                                      -----------  -----------  -----------
Non-GAAP gross margin                 $   358,162  $   382,274  $   350,764
                                      ===========  ===========  ===========
GAAP gross margin, as a percent of
 Net revenues                                66.0%        66.0%        62.0%
Non-GAAP gross margin, as a percent
 of Net revenues                             66.7%        67.7%        65.1%

Operating income reconciliation
GAAP operating income                 $    20,195  $   121,490  $    57,179
  Total operating income impact from
   non-GAAP adjustments                   104,282       36,266       45,434
                                      -----------  -----------  -----------
Non-GAAP operating income             $   124,477  $   157,756  $   102,613
                                      ===========  ===========  ===========
GAAP operating income, as a percent
 of Net revenues                              3.8%        21.5%        10.6%
Non-GAAP operating income, as a
 percent of Net revenues                     23.2%        27.9%        19.0%

Net income (loss) and net income
 (loss) per share reconciliation
Net income (loss) on a GAAP basis     $   (13,684) $    80,884  $    46,949
  Total net income impact from non-
   GAAP adjustments                       100,597       27,900       30,620
                                      -----------  -----------  -----------
Non-GAAP net income                   $    86,913  $   108,784  $    77,569
                                      ===========  ===========  ===========
Non-GAAP net income per share --
 basic                                $      0.20  $      0.25  $      0.17
                                      ===========  ===========  ===========
Non-GAAP net income per share --
 diluted                              $      0.19  $      0.24  $      0.17
                                      ===========  ===========  ===========
Shares used in non-GAAP per share
 calculation -- basic                     436,167      440,573      453,133
                                      ===========  ===========  ===========
Shares used in non-GAAP per share
 calculation -- diluted                   450,449      453,549      466,919
                                      ===========  ===========  ===========

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Organizations planning enterprise data center consolidation and modernization projects are faced with a challenging, costly reality. Requirements to deploy modern, cloud-native applications simultaneously with traditional client/server applications are almost impossible to achieve with hardware-centric enterprise infrastructure. Compute and network infrastructure are fast moving down a software-defined path, but storage has been a laggard. Until now.
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 19th International Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo Silicon Valley Call for Papers is now open.
IoT is rapidly changing the way enterprises are using data to improve business decision-making. In order to derive business value, organizations must unlock insights from the data gathered and then act on these. In their session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, and Peter Shashkin, Head of Development Department at EastBanc Technologies, discussed how one organization leveraged IoT, cloud technology and data analysis to improve customer experiences and effi...
SYS-CON Events announced today that Isomorphic Software will exhibit at DevOps Summit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Isomorphic Software provides the SmartClient HTML5/AJAX platform, the most advanced technology for building rich, cutting-edge enterprise web applications for desktop and mobile. SmartClient combines the productivity and performance of traditional desktop software with the simp...
"We've discovered that after shows 80% if leads that people get, 80% of the conversations end up on the show floor, meaning people forget about it, people forget who they talk to, people forget that there are actual business opportunities to be had here so we try to help out and keep the conversations going," explained Jeff Mesnik, Founder and President of ContentMX, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
"When you think about the data center today, there's constant evolution, The evolution of the data center and the needs of the consumer of technology change, and they change constantly," stated Matt Kalmenson, VP of Sales, Service and Cloud Providers at Veeam Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Let’s face it, embracing new storage technologies, capabilities and upgrading to new hardware often adds complexity and increases costs. In his session at 18th Cloud Expo, Seth Oxenhorn, Vice President of Business Development & Alliances at FalconStor, discussed how a truly heterogeneous software-defined storage approach can add value to legacy platforms and heterogeneous environments. The result reduces complexity, significantly lowers cost, and provides IT organizations with improved efficienc...
With 15% of enterprises adopting a hybrid IT strategy, you need to set a plan to integrate hybrid cloud throughout your infrastructure. In his session at 18th Cloud Expo, Steven Dreher, Director of Solutions Architecture at Green House Data, discussed how to plan for shifting resource requirements, overcome challenges, and implement hybrid IT alongside your existing data center assets. Highlights included anticipating workload, cost and resource calculations, integrating services on both sides...
In his session at @DevOpsSummit at 19th Cloud Expo, Yoseph Reuveni, Director of Software Engineering at Jet.com, will discuss Jet.com's journey into containerizing Microsoft-based technologies like C# and F# into Docker. He will talk about lessons learned and challenges faced, the Mono framework tryout and how they deployed everything into Azure cloud. Yoseph Reuveni is a technology leader with unique experience developing and running high throughput (over 1M tps) distributed systems with extre...
Manufacturers are embracing the Industrial Internet the same way consumers are leveraging Fitbits – to improve overall health and wellness. Both can provide consistent measurement, visibility, and suggest performance improvements customized to help reach goals. Fitbit users can view real-time data and make adjustments to increase their activity. In his session at @ThingsExpo, Mark Bernardo Professional Services Leader, Americas, at GE Digital, discussed how leveraging the Industrial Internet a...
Big Data engines are powering a lot of service businesses right now. Data is collected from users from wearable technologies, web behaviors, purchase behavior as well as several arbitrary data points we’d never think of. The demand for faster and bigger engines to crunch and serve up the data to services is growing exponentially. You see a LOT of correlation between “Cloud” and “Big Data” but on Big Data and “Hybrid,” where hybrid hosting is the sanest approach to the Big Data Infrastructure pro...
In his session at 18th Cloud Expo, Sagi Brody, Chief Technology Officer at Webair Internet Development Inc., and Logan Best, Infrastructure & Network Engineer at Webair, focused on real world deployments of DDoS mitigation strategies in every layer of the network. He gave an overview of methods to prevent these attacks and best practices on how to provide protection in complex cloud platforms. He also outlined what we have found in our experience managing and running thousands of Linux and Unix ...
Cloud analytics is dramatically altering business intelligence. Some businesses will capitalize on these promising new technologies and gain key insights that’ll help them gain competitive advantage. And others won’t. Whether you’re a business leader, an IT manager, or an analyst, we want to help you and the people you need to influence with a free copy of “Cloud Analytics for Dummies,” the essential guide to this explosive new space for business intelligence.
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
A critical component of any IoT project is what to do with all the data being generated. This data needs to be captured, processed, structured, and stored in a way to facilitate different kinds of queries. Traditional data warehouse and analytical systems are mature technologies that can be used to handle certain kinds of queries, but they are not always well suited to many problems, particularly when there is a need for real-time insights.