SOURCE: Brocade

Brocade

August 21, 2014 18:15 ET

Brocade Reports Fiscal Q3 2014 Results

Strength in SAN and Ethernet Switching Drives Improved Profit Margins

SAN JOSE, CA--(Marketwired - Aug 21, 2014) -  Brocade® (NASDAQ: BRCD) today reported financial results for its third fiscal quarter ended August 2, 2014. Brocade reported third quarter revenue of $545 million, up 2% year-over-year and up 2% quarter-over-quarter. The Company reported GAAP diluted earnings per share (EPS) of $0.20, down from $0.26 in Q3 2013, and up from a loss per share of $(0.03) in Q2 2014. During Q3 2013, the Company recognized a gain of $77 million related to the litigation settlement with A10 Networks, which increased GAAP EPS by $0.13 in that quarter. During Q2 2014, the Company incurred a $83 million non-cash goodwill impairment charge associated with the strategic repositioning of the Brocade ADX® product family, which decreased GAAP EPS by $0.19 in that quarter. Non-GAAP diluted EPS was $0.23 for Q3 2014, up from $0.19 in both Q3 2013 and Q2 2014, primarily due to higher revenue, improved gross margin, and lower operating expenses.

"With another solid quarter behind us, we are seeing the tangible benefits of our data center focused strategy," said Lloyd Carney, CEO of Brocade. "The resilience and durability of our SAN business, along with strong Brocade VDX® sales, validate our strategic direction. We continue to leverage our core competencies in hardware and software networking to position the company for growth, and we remain focused on delivering a world-class customer experience, even in the most demanding environments."

Key Financial Metrics:

                               
    Q3 2014     Q2 2014     Q3 2013     Q3 2014 vs. Q2 2014     Q3 2014 vs. Q3 2013  
Revenue   $ 545 M     $ 537 M     $ 537 M     2 %   2 %
GAAP EPS--diluted   $ 0.20     $ (0.03 )   $ 0.26     N/A     (23 %)
Non-GAAP EPS--diluted   $ 0.23     $ 0.19     $ 0.19     20 %   23 %
GAAP gross margin     66.3 %     66.0 %     63.0 %   0.3 pts     3.3 pts  
Non-GAAP gross margin     67.2 %     66.7 %     65.6 %   0.5 pts     1.6 pts  
GAAP operating margin     21.6 %     3.8 %     13.9 %   17.8 pts     7.7 pts  
Non-GAAP operating margin     25.7 %     23.2 %     21.6 %   2.5 pts     4.1 pts  
Cash provided by operations   $ 106 M     $ 168 M     $ 102 M     (37 %)   4 %
Share repurchases   $ 112 M     $ 50 M     $ 101 M     124 %   11 %
                                     

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 $380 million, up 3% year-over-year and flat sequentially. The year-over-year improvement was the result of 4% growth in SAN product revenue due to higher switch and director sales, partially offset by lower embedded product sales and the revenue impact from the divestiture of the HBA business during Q1 2014. The revenue performance was better than expected in a typically soft demand quarter.

  • IP Networking business revenue, including products and services, was $166 million, down 1% year-over-year and up 5% sequentially. The sequential increase was primarily due to higher sales of Ethernet switching products to the U.S. Federal government and strong Brocade VDX sales to data center customers, partially offset by lower routing sales to service provider customers and lower support revenue. Q3 2014 IP Networking product revenue was $133 million, down 1% year-over-year and up 9% sequentially. Ethernet switch revenue increased 17% year-over-year and 27% sequentially. Routing product revenue decreased 19% year-over-year and 20% sequentially, primarily due to a pause in some customer orders in anticipation of new products scheduled for release in fiscal Q4 2014.

  • During the quarter, the Company initiated a quarterly cash dividend of $0.035 per share of the Company's common stock and repurchased 12.8 million shares for $112 million.

Board Declares Dividend:

  • The Brocade Board of Directors has declared a quarterly cash dividend of $0.035 per share of the Company's common stock. The dividend payment will be made on October 2, 2014 to stockholders of record at the close of market on September 10, 2014.

Brocade management will host a conference call to discuss the fiscal third quarter results and the fiscal fourth 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 Q3 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

                   
    Q3 2014     Q2 2014     Q3 2013  
Routes to market as a % of total net revenues:                  
  OEM revenues   67 %   68 %   66 %
  Channel/Direct revenues   33 %   32 %   34 %
  10% or greater customer revenues   48 %   56 %   47 %
Geographic split as a % of total net revenues (1):                  
  Domestic revenues   56 %   59 %   61 %
  International revenues   44 %   41 %   39 %
Segment split as a % of total net revenues:                  
  SAN product revenues   60 %   60 %   59 %
  IP Networking product revenues   24 %   22 %   25 %
  Global Services revenues   16 %   18 %   16 %
  SAN business revenues (2)   70 %   71 %   69 %
  IP Networking business revenues (2)   30 %   29 %   31 %
IP Networking business revenues by use category (3):                  
  Data Center (4)   55 %   57 %   48 %
  Enterprise Campus   39 %   37 %   40 %
  Carrier Network (MAN/WAN)   6 %   6 %   12 %
                     
Additional information:   Q3 2014     Q2 2014     Q3 2013  
  GAAP net income (loss)   $ 87 M     $ (14 M )   $ 119 M  
  Non-GAAP net income   $ 102 M     $ 87 M     $ 87 M  
  GAAP operating income   $ 118 M     $ 20 M     $ 74 M  
  Non-GAAP operating income   $ 140 M     $ 124 M     $ 116 M  
  Adjusted EBITDA (5)   $ 165 M     $ 146 M     $ 213 M  
  Effective GAAP tax provision rate     23.4 %     225.1 %     16.3 %
  Effective Non-GAAP tax provision rate     21.9 %     24.6 %     18.2 %
  Cash and cash equivalents   $ 1,149 M     $ 1,138 M     $ 790 M  
  Deferred revenues   $ 299 M     $ 304 M     $ 300 M  
  Capital expenditures   $ 14 M     $ 14 M     $ 10 M  
  Total debt, net of discount   $ 597 M     $ 598 M     $ 599 M  
  Cash, net of senior debt and capitalized leases   $ 547 M     $ 535 M     $ 186 M  
  Days sales outstanding     32 days       35 days       37 days  
  Employees at end of period     4,103       4,061       4,565  
  SAN port shipments     1.1 M       1.1 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 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) 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 relative to its competitors' operating results. Management also believes these non-GAAP financial measures help with the determination of 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 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 its 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 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) 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, (v) gain on sale of network adapter business, (vi) gain on sale of non-marketable equity investment, and (vii) 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 use of 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 the exclusion of 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 prospects for revenue growth. 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 Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2014, and 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, HyperEdge, ICX, MLX, MyBrocade, OpenScript, VCS, VDX, and Vyatta are registered trademarks, and 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 others.

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

 
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
    Three Months Ended     Nine Months Ended  
    August 2,
 2014
    July 27,
 2013
    August 2,
 2014
    July 27,
 2013
 
    (In thousands, except per share amounts)  
Net revenues:                                
  Product   $ 457,797     $ 447,993     $ 1,375,282     $ 1,401,986  
  Service     87,667       88,558       271,627       262,078  
    Total net revenues     545,464       536,551       1,646,909       1,664,064  
Cost of revenues:                                
  Product     145,518       160,441       441,416       499,415  
  Service     38,233       37,908       116,818       118,410  
    Total cost of revenues     183,751       198,349       558,234       617,825  
Gross margin     361,713       338,202       1,088,675       1,046,239  
Operating expenses:                                
  Research and development     84,152       92,969       261,862       289,088  
  Sales and marketing     137,262       139,220       409,524       433,547  
  General and administrative     22,140       18,526       63,395       57,640  
  Amortization of intangible assets     131       13,124       10,145       41,131  
  Restructuring, goodwill impairment, and other related costs     131       --       89,051       --  
  Gain on sale of network adapter business     --       --       (4,884 )     --  
    Total operating expenses     243,816       263,839       829,093       821,406  
Income from operations     117,897       74,363       259,582       224,833  
Interest expense     (9,176 )     (9,247 )     (27,606 )     (46,047 )
Interest and other income, net     5,299       76,684       3,943       76,781  
Income before income tax     114,020       141,800       235,919       255,567  
Income tax expense     26,668       23,104       81,367       111,177  
Net income   $ 87,352     $ 118,696     $ 154,552     $ 144,390  
Net income per share--basic   $ 0.20     $ 0.26     $ 0.35     $ 0.32  
Net income per share--diluted   $ 0.20     $ 0.26     $ 0.34     $ 0.31  
Shares used in per share calculation--basic     432,448       449,446       436,396       452,474  
Shares used in per share calculation--diluted     441,789       461,344       448,596       464,861  
                                 
Cash dividends declared per share   $ 0.035     $ --     $ 0.035     $ --  
                                 
                                 
 
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
    Three Months Ended     Nine Months Ended  
    August 2,
 2014
    July 27,
 2013
    August 2,
 2014
    July 27,
 2013
 
    (In thousands)  
Net income   $ 87,352     $ 118,696     $ 154,552     $ 144,390  
Other comprehensive income and loss, net of tax:                                
  Unrealized gains (losses) on cash flow hedges:                                
    Change in unrealized gains and losses     (155 )     (1,000 )     14       (2,998 )
    Net gains and losses reclassified into earnings     (218 )     (10 )     (217 )     (214 )
  Net unrealized gains (losses) on cash flow hedges     (373 )     (1,010 )     (203 )     (3,212 )
  Foreign currency translation adjustments     (191 )     (1,470 )     284       (3,612 )
Total other comprehensive income (loss)     (564 )     (2,480 )     81       (6,824 )
Total comprehensive income   $ 86,788     $ 116,216     $ 154,633     $ 137,566  
                                 
                                 
 
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
    August 2,
 2014
    October 26,
 2013
 
    (In thousands, except par value)  
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 1,149,387     $ 986,997  
  Accounts receivable, net of allowances for doubtful accounts of $531 and $575 at August 2, 2014, and October 26, 2013, respectively     191,816       249,598  
  Inventories     40,586       45,344  
  Deferred tax assets     113,133       98,018  
  Prepaid expenses and other current assets     47,238       42,846  
    Total current assets     1,542,160       1,422,803  
Property and equipment, net     448,195       472,940  
Goodwill     1,556,361       1,645,437  
Intangible assets, net     22,703       40,258  
Non-current deferred tax assets     792       1,585  
Other assets     31,679       38,368  
    Total assets   $ 3,601,890     $ 3,621,391  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 84,242     $ 88,218  
  Accrued employee compensation     132,107       145,996  
  Deferred revenue     225,353       226,696  
  Current restructuring liabilities     2,670       16,418  
  Current portion of long-term debt     1,817       2,996  
  Other accrued liabilities     58,245       80,339  
    Total current liabilities     504,434       560,663  
Long-term debt, net of current portion     595,420       596,208  
Non-current restructuring liabilities     3,218       1,008  
Non-current deferred revenue     73,714       76,426  
Non-current income tax liability     45,271       38,680  
Non-current deferred tax liabilities     41,679       --  
Other non-current liabilities     1,553       1,593  
    Total liabilities     1,265,289       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: 432,664 and 445,285 shares at August 2, 2014, and October 26, 2013, respectively     433       445  
  Additional paid-in capital     1,765,589       1,915,152  
  Accumulated other comprehensive loss     (13,363 )     (13,444 )
  Retained earnings     583,942       444,660  
    Total stockholders' equity     2,336,601       2,346,813  
    Total liabilities and stockholders' equity   $ 3,601,890     $ 3,621,391  
                 
                 
 
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Three Months Ended  
    August 2,
 2014
    July 27,
 2013
 
    (In thousands)  
Cash flows from operating activities:            
  Net income   $ 87,352     $ 118,696  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Excess tax benefits from stock-based compensation     (10,283 )     (1,469 )
    Depreciation and amortization     20,443       45,647  
    Loss on disposal of property and equipment     152       984  
    Amortization of debt issuance costs and original issue discount     290       272  
    Net gain on sale of investment     (5,242 )     --  
    Provision for doubtful accounts receivable and sales allowances     1,992       2,337  
    Non-cash compensation expense     21,574       18,769  
  Changes in assets and liabilities:                
    Accounts receivable     (5 )     18,511  
    Inventories     187       2,310  
    Prepaid expenses and other assets     3,575       (67,303 )
    Deferred tax assets     (10 )     22  
    Accounts payable     2,717       (7,052 )
    Accrued employee compensation     (26,398 )     (28,294 )
    Deferred revenue     (4,593 )     (1,974 )
    Other accrued liabilities     14,854       887  
    Restructuring liabilities     (574 )     (188 )
      Net cash provided by operating activities     106,031       102,155  
Cash flows from investing activities:                
  Proceeds from sale of non-marketable equity investment     10,748       --  
  Purchases of property and equipment     (13,780 )     (10,381 )
      Net cash used in investing activities     (3,032 )     (10,381 )
Cash flows from financing activities:                
  Payment of debt issuance costs related to senior unsecured notes     --       (443 )
  Payment of principal related to capital leases     (633 )     (561 )
  Common stock repurchases     (112,128 )     (101,181 )
  Proceeds from issuance of common stock     26,763       35,959  
  Payment of cash dividends to stockholders     (15,270 )     --  
  Excess tax benefits from stock-based compensation     10,283       1,469  
      Net cash used in financing activities     (90,985 )     (64,757 )
Effect of exchange rate fluctuations on cash and cash equivalents     (240 )     (1,222 )
Net increase in cash and cash equivalents     11,774       25,795  
Cash and cash equivalents, beginning of period     1,137,613       764,298  
Cash and cash equivalents, end of period   $ 1,149,387     $ 790,093  
                 
                 
 
BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    Nine Months Ended  
    August 2,
 2014
    July 27,
 2013
 
    (In thousands)  
Cash flows from operating activities:            
  Net income   $ 154,552     $ 144,390  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Excess tax benefits from stock-based compensation     (37,698 )     (6,909 )
    Non-cash tax charges     --       78,206  
    Depreciation and amortization     80,370       139,005  
    Loss on disposal of property and equipment     3,330       4,030  
    Gain on sale of network adapter business     (4,884 )     --  
    Amortization of debt issuance costs and original issue discount     856       937  
    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  
    Net gain on sale of investment     (5,242 )     --  
    Provision for doubtful accounts receivable and sales allowances     5,520       6,897  
    Non-cash compensation expense     61,214       57,091  
    Goodwill impairment charge     83,382       --  
  Changes in assets and liabilities:                
    Accounts receivable     52,261       7,950  
    Inventories     4,757       18,915  
    Prepaid expenses and other assets     (4,796 )     (69,017 )
    Deferred tax assets     47       344  
    Accounts payable     (4,409 )     (21,744 )
    Accrued employee compensation     (38,136 )     (82,457 )
    Deferred revenue     (4,020 )     5,950  
    Other accrued liabilities     48,178       (7,082 )
    Restructuring liabilities     (11,538 )     (606 )
      Net cash provided by operating activities     383,744       281,260  
Cash flows from investing activities:                
  Purchases of non-marketable equity investments     (223 )     --  
  Proceeds from sale of non-marketable equity investment     10,748       --  
  Purchases of property and equipment     (41,175 )     (41,949 )
  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     (20,405 )     (86,578 )
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     --       (992 )
  Payment of principal related to capital leases     (2,382 )     (1,536 )
  Common stock repurchases     (302,560 )     (187,360 )
  Proceeds from issuance of common stock     81,293       71,858  
  Payment of cash dividends to stockholders     (15,270 )     --  
  Excess tax benefits from stock-based compensation     37,698       6,909  
      Net cash used in financing activities     (201,221 )     (114,871 )
Effect of exchange rate fluctuations on cash and cash equivalents     272       (2,944 )
Net increase in cash and cash equivalents     162,390       76,867  
Cash and cash equivalents, beginning of period     986,997       713,226  
Cash and cash equivalents, end of period   $ 1,149,387     $ 790,093  
                 
                 
 
BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
(Unaudited)
 
    Three Months Ended  
    August 2,
 2014
    May 3,
 2014
    July 27,
 2013
 
    (In thousands, except per share amounts)  
Non-GAAP adjustments                        
  Stock-based compensation expense included in cost of revenues   $ 4,121     $ 3,474     $ 3,858  
  Amortization of intangible assets expense included in cost of revenues     552       396       9,650  
    Total gross margin impact from non-GAAP adjustments     4,673       3,870       13,508  
                         
  Stock-based compensation expense included in research and development     4,350       4,422       4,020  
  Stock-based compensation expense included in sales and marketing     7,592       8,462       7,164  
  Stock-based compensation expense included in general and administrative     5,511       4,694       3,727  
  Amortization of intangible assets expense included in operating expenses     131       131       13,124  
  Restructuring, goodwill impairment, and other related costs     131       82,703       --  
    Total operating income impact from non-GAAP adjustments     22,388       104,282       41,543  
                         
  Gain on A10 litigation settlement, net     --       --       (76,816 )
  Gain on sale of non-marketable equity investment     (5,242 )     --       --  
  Income tax effect of non-tax adjustments     (2,005 )     (3,685 )     3,716  
    Total net income impact from non-GAAP adjustments   $ 15,141     $ 100,597     $ (31,557 )
                         
Gross margin reconciliation                        
  GAAP gross margin   $ 361,713     $ 354,292     $ 338,202  
  Total gross margin impact from non-GAAP adjustments     4,673       3,870       13,508  
    Non-GAAP gross margin   $ 366,386     $ 358,162     $ 351,710  
  GAAP gross margin, as a percent of total net revenues     66.3 %     66.0 %     63.0 %
  Non-GAAP gross margin, as a percent of total net revenues     67.2 %     66.7 %     65.6 %
                         
Operating income reconciliation                        
  GAAP operating income   $ 117,897     $ 20,195     $ 74,363  
  Total operating income impact from non-GAAP adjustments     22,388       104,282       41,543  
    Non-GAAP operating income   $ 140,285     $ 124,477     $ 115,906  
  GAAP operating income, as a percent of total net revenues     21.6 %     3.8 %     13.9 %
  Non-GAAP operating income, as a percent of total net revenues     25.7 %     23.2 %     21.6 %
                         
Net income (loss) and net income (loss) per share reconciliation                        
  Net income (loss) on a GAAP basis   $ 87,352     $ (13,684 )   $ 118,696  
  Total net income impact from non-GAAP adjustments     15,141       100,597       (31,557 )
    Non-GAAP net income   $ 102,493     $ 86,913     $ 87,139  
  Non-GAAP net income per share--basic   $ 0.24     $ 0.20     $ 0.19  
  Non-GAAP net income per share--diluted   $ 0.23     $ 0.19     $ 0.19  
  Shares used in non-GAAP per share calculation--basic     432,448       436,167       449,446  
  Shares used in non-GAAP per share calculation--diluted     441,789       450,449       461,344  
                           
                           

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