SOURCE: Brocade

Brocade

May 22, 2014 17:49 ET

Brocade Reports Fiscal Q2 2014 Results

Board of Directors Initiates Cash Dividend

SAN JOSE, CA--(Marketwired - May 22, 2014) - 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     Q1 2014     Q2 2013     Q2 2014 vs. Q1 2014     Q2 2014 vs. 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,
 2014
    April 27,
 2013
    May 3,
 2014
    April 27,
 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,
2014
    April 27,
2013
    May 3,
2014
  April 27,
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,
2014
    October 26,
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,
2014
    April 27,
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,
2014
    April 27,
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,
2014
    January 25,
2014
    April 27,
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  
                         

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