SOURCE: Infoblox

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February 25, 2016 16:10 ET

Infoblox Reports Fiscal Second Quarter 2016 Results

Strong Execution Drives Record Revenue With Product Revenue Up 36% Year-Over-Year

SANTA CLARA, CA--(Marketwired - February 25, 2016) - Infoblox (NYSE: BLOX), the network control company, today reported its financial results for its second fiscal quarter ended January 31, 2016. Total net revenue for the second quarter of fiscal 2016 was a record $96 million, an increase of 29% on a year-over-year basis. Products and licenses revenue for the quarter was a record $52 million, an increase of 36% on a year-over-year basis.

On a GAAP basis, the Company reported net income of $4 million, or $0.06 net income per diluted share, for the second quarter of fiscal 2016, compared with a net loss of $7 million, or $0.13 net loss per diluted share, for the second quarter of fiscal 2015.

On a non-GAAP basis, the Company reported net income of $10 million, or $0.17 net income per diluted share for the second quarter of fiscal 2016, compared with net income of $5 million, or $0.09 net income per diluted share for the second quarter of fiscal 2015.

"We are reporting strong second quarter results today, with revenue up 29% compared to the prior year, led by product revenue which grew 36% year-over-year," said Jesper Andersen, president and chief executive officer. "Revenue grew across all major geographies, and security revenue grew more than 50%," continued Andersen. "Looking forward, we will continue to focus on strong execution combined with innovation as the industry leading DDI vendor uniquely securing the DNS infrastructure and simplifying the path to hybrid cloud deployment. We believe we are well positioned to execute on the opportunities ahead."

"Every measure of profitability in the quarter exceeded our expectations, underscoring the potential for leverage in our operating model," said Janesh Moorjani, chief financial officer. "As we move forward, we intend to continue to balance our investment in our top line growth with our commitment to drive annual improvement in our operating margin performance."

Q2'16 Financial Highlights

  • Total net revenue grew 29% year-over-year to $96 million
  • Products and licenses revenue grew 36% year-over-year to $52 million
  • Services revenue grew 22% year-over-year to $44 million
  • Non-GAAP gross margin increased to 81.9% compared to 80.1% in Q2'15
  • Non-GAAP operating margin grew to 16.8% compared to 8.2% in Q2'15
  • Non-GAAP net income grew 92% year-over-year to $10 million
  • Cash flow from operations was $25 million compared to $15 million in Q2'15

Recent Business Highlights

  • Launched NIOS 7.3 upgrading the underlying operating system for Infoblox products adding major enhancements including:
    • Infoblox DNS Threat Analytics - the first technology that applies behavioral analytics to DNS queries in real time to detect and actively block data exfiltration attempts using DNS as a communications pathway
    • Infoblox Reporting and Analytics - a powerful solution that unlocks the value of core network services data to help bolster security and mitigate threats, ensure compliance, improve application uptime and capacity planning to prevent network overloads or failures
    • Amazon Web Services Route 53 Discovery - customers can now have a single console for DDI for their enterprise as well as AWS Route 53
    • DNS Scavenging - automates the clean-up and removal of stale DNS records helping to ensure better performance and responsiveness of DNS servers and lower total cost of ownership
  • Acquired IID, a leader in global cyberthreat intelligence, making Infoblox the first enterprise-grade DDI vendor to combine contextual network data with federated threat intelligence and a dedicated threat research team, to provide context-aware security using infrastructure that customers already have in place
  • Announced Bloxfest, Infoblox's first end-user and customer focused conference to be hosted in May 2016
  • Announced new executives and board members:
    • Edzard Overbeek, most recently senior vice president of the global services business at Cisco, was appointed to the board of directors
    • Janesh Moorjani, most recently senior vice president of finance at VMware, was appointed as executive vice president and chief financial officer
    • Atul Garg, most recently vice president and general manager of Cloud and Automation at Hewlett Packard Software, was appointed as executive vice president of engineering
    • Ashish Gupta, most recently chief marketing officer at Actian and Vidyo, was appointed as executive vice president and chief marketing officer

Financial Outlook

 Infoblox announced its outlook of anticipated results for the third fiscal quarter ending April 30, 2016 and fiscal year ending July 31, 2016. This outlook is based on a number of assumptions that it believes are reasonable at the time of this earnings release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in Infoblox's filings with the Securities and Exchange Commission.

 This outlook includes the anticipated effects of the acquisition of IID, which closed on February 8, 2016.

 For the third fiscal quarter ending April 30, 2016, the Company currently expects:

  • Total net revenue in the range of $91 million to $93 million;
  • Non-GAAP gross margin in the range of 79% to 80%;
  • Non-GAAP operating margin in the range of 5% to 6%; and
  • Non-GAAP net income per diluted share ("non-GAAP EPS") in the range of $0.05 to $0.06, assuming approximately 58 million to 59 million diluted shares. 

 For the fiscal year ending July 31, 2016, the Company currently expects:

  • Total net revenue in the range of $370 million to $380 million; and
  • Non-GAAP operating margin in the range of 10% to 12%.

Conference Call & Webcast

Management will host a conference call today, February 25, 2016 at 1:30 p.m. PST/4:30 p.m. EST to discuss its fiscal second quarter 2016 financial results. To access the call, dial 800-230-1085 (domestic) or 612-288-0329 (international) at least 10 minutes prior to the scheduled start of the call. A live webcast of the call will also be available on the corporate website at: http://ir.infoblox.com. An archive of the webcast will be available on the company's website and a taped replay will be available for one week at 800-475-6701 (domestic) or 320-365-3844 (international), passcode 385185.

About Non-GAAP Financial Measures

To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP net income, non-GAAP EPS and non-GAAP diluted shares outstanding. We also provide third fiscal quarter 2016 estimates for net revenue, non-GAAP gross margin, non-GAAP operating margin, non-GAAP EPS and non-GAAP diluted shares outstanding and fiscal 2016 estimates for net revenue and non-GAAP operating margin. We believe these non-GAAP financial measures are helpful in understanding our past financial performance and future results. Our non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. Our non-GAAP financial measures include adjustments based on the following items:

Stock-based compensation expenses: We have excluded the effect of stock-based compensation from our non-GAAP operating results. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating results. Amortization of intangible assets is a non-cash expense, and it is not part of our core operations. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well. 

Acquisition related expenses: We have excluded acquisition transaction costs from our non-GAAP operating results. We believe that to the extent we incur significant expenses in connection with our acquisitions, it is useful for investors to understand the effects of these items on our total operating expenses.

Our non-GAAP Financial Measures are described as follows:

Non-GAAP gross profit and gross margin. Non-GAAP gross profit is gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation and intangible asset amortization expense. Non-GAAP gross margin is non-GAAP gross profit divided by net revenue.

Non-GAAP operating income and operating margin. Non-GAAP operating income is income (loss) from operations as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, intangible asset amortization expense and acquisition related expenses. Non-GAAP operating margin is non-GAAP operating income divided by net revenue.

Non-GAAP net income and non-GAAP EPS. Non-GAAP net income is net income (loss) as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, intangible asset amortization expense and acquisition related expenses with income taxes adjusted to reflect our estimated long-term effective tax rate on a non-GAAP basis. Non-GAAP EPS is non-GAAP net income divided by non-GAAP diluted weighted average shares outstanding.

For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, "Reconciliation of GAAP to Non-GAAP Financial Measures."

About Infoblox

Infoblox (NYSE: BLOX) delivers critical network services that protect Domain Name System (DNS) infrastructure, automate cloud deployments, and increase the reliability of enterprise and service provider networks around the world. As the industry leader in DNS, DHCP, and IP address management, the category known as DDI, Infoblox (www.infoblox.com) reduces the risk and complexity of networking.

Cautionary Statement

All statements in this release that are not statements of historical fact, including but not limited to the quotations attributable to Mr. Andersen and Mr. Moorjani, the statements under "Financial Outlook" and regarding the expected benefits of and the capabilities enabled by the IID acquisition are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: unexpected delays in the delivery of our solutions, particularly at the end of the quarter; unforeseen difficulties in integrating IID; the expected benefits of the IID acquisition may take longer to materialize or be less significant than expected; changes in demand for network control solutions; the market acceptance of our products; the fluctuations in our gross margins; the concentration of our customer base; competitive developments including pricing pressures; our ability to manage operating expenses effectively; and the general economic, industry or political conditions in the United States or internationally. Such risk factors also include those related to whether or not we will complete our share repurchase program during any particular time frame or at all and whether our cash and short term investments may be insufficient to fund our share repurchase program.

For a detailed discussion of these and other risk factors, please refer to our filings with the Securities and Exchange Commission, which are available on our investor relations Web site (http://ir.infoblox.com/) and on the SEC's Web site (www.sec.gov).

All information provided in this release and in the attachments is as of February 25, 2016, and stockholders of Infoblox are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Infoblox does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this February 25, 2016, press release, or to reflect the occurrence of unanticipated events.

   
INFOBLOX INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - GAAP BASIS  
(In thousands, except per share data)  
(Unaudited)  
   
   
    Three Months Ended     Six Months Ended  
    January 31,
 2016
    October 31,
 2015
    January 31,
 2015
    January 31,
 2016
    January 31,
 2015
 
Net revenue:                                        
  Products and licenses   $ 51,516     $ 50,857     $ 37,917     $ 102,373     $ 69,425  
  Services     44,483       43,165       36,387       87,648       71,598  
    Total net revenue     95,999       94,022       74,304       190,021       141,023  
Cost of revenue:                                        
  Products and licenses     9,856       10,350       8,787       20,206       16,254  
  Services     9,065       8,752       7,491       17,817       14,958  
    Total cost of revenue     18,921       19,102       16,278       38,023       31,212  
Gross profit     77,078       74,920       58,026       151,998       109,811  
Operating expenses:                                        
  Research and development     17,461       17,833       15,504       35,294       30,074  
  Sales and marketing     45,996       47,286       39,788       93,282       78,243  
  General and administrative     11,149       10,457       9,355       21,606       17,315  
    Total operating expenses     74,606       75,576       64,647       150,182       125,632  
Income (loss) from operations     2,472       (656 )     (6,621 )     1,816       (15,821 )
Other income (expense), net     167       95       (590 )     262       (780 )
Income (loss) before provision for (benefit from) income taxes     2,639       (561 )     (7,211 )     2,078       (16,601 )
Provision for (benefit from) income taxes     (1,139 )     950       (200 )     (189 )     620  
Net income (loss)   $ 3,778     $ (1,511 )   $ (7,011 )   $ 2,267     $ (17,221 )
Net income (loss ) per share - basic and diluted   $ 0.06     $ (0.03 )   $ (0.13 )   $ 0.04     $ (0.31 )
Weighted-average shares used in computing basic net income (loss) per share     58,926       59,272       56,087       59,099       55,729  
Weighted-average shares used in computing diluted net income (loss) per share     60,138       59,272       56,087       60,795       55,729  
   
   
INFOBLOX INC.  
   
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES  
(In thousands, except per share data)  
(Unaudited)  
   
   
    Three Months Ended     Six Months Ended  
    January 31,
 2016
    October 31,
 2015
    January 31,
 2015
    January 31,
 2016
    January 31,
 2015
 
Gross Profit Reconciliation:                                        
GAAP gross profit   $ 77,078     $ 74,920     $ 58,026     $ 151,998     $ 109,811  
  Stock-based compensation expense     1,221       1,128       1,201       2,349       2,404  
  Amortization of intangible assets     290       290       290       580       580  
Non-GAAP gross profit   $ 78,589     $ 76,338     $ 59,517     $ 154,927     $ 112,795  
Gross Margin Reconciliation:                                        
GAAP gross margin     80.3 %     79.7 %     78.1 %     80.0 %     77.9 %
  Stock-based compensation expense     1.3       1.2       1.6       1.2       1.7  
  Amortization of intangible assets     0.3       0.3       0.4       0.3       0.4  
Non-GAAP gross margin     81.9 %     81.2 %     80.1 %     81.5 %     80.0 %
Operating Income (Loss) Reconciliation:                                        
GAAP operating income (loss)   $ 2,472     $ (656 )   $ (6,621 )   $ 1,816     $ (15,821 )
  Stock-based compensation expense     12,965       12,828       12,117       25,793       24,339  
  Acquisition related expenses     382       -       -       382       -  
  Amortization of intangible assets     322       322       617       644       1,234  
Non-GAAP operating income   $ 16,141     $ 12,494     $ 6,113     $ 28,635     $ 9,752  
Operating Margin Reconciliation:                                        
GAAP operating margin     2.6 %     (0.7 %)     (8.9 %)     1.0 %     (11.2 %)
  Stock-based compensation expense     13.5       13.6       16.3       13.6       17.3  
  Acquisition related expenses     0.4       -       -       0.2       -  
  Amortization of intangible assets     0.3       0.4       0.8       0.3       0.9  
Non-GAAP operating margin     16.8 %     13.3 %     8.2 %     15.1 %     7.0 %
Net Income (Loss) Reconciliation:                                        
GAAP net income (loss)   $ 3,778     $ (1,511 )   $ (7,011 )   $ 2,267     $ (17,221 )
  Stock-based compensation expense     12,965       12,828       12,117       25,793       24,339  
  Acquisition related expenses     382       -       -       382       -  
  Amortization of intangible assets     322       322       617       644       1,234  
  Income tax adjustment     (7,336 )     (3,834 )     (457 )     (11,170 )     (122 )
Non-GAAP net income   $ 10,111     $ 7,805     $ 5,266     $ 17,916     $ 8,230  
                                         
Non-GAAP EPS   $ 0.17     $ 0.13     $ 0.09     $ 0.29     $ 0.14  
Shares used in Computing non-GAAP EPS Reconciliation:                                        
Diluted shares:                                        
Weighted-average shares used in calculating GAAP diluted net income (loss) per share     60,138       59,272       56,087       60,795       55,729  
Additional dilutive securities for non-GAAP income     -       1,976       2,372       -       1,838  
Weighted-average shares used in calculating non-GAAP diluted net income per share     60,138       61,248       58,459       60,795       57,567  
   
   
INFOBLOX INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, except per share data)  
   
   
  January 31, 2016     July 31, 2015  
  (Unaudited)     (a)  
ASSETS              
CURRENT ASSETS:              
  Cash and cash equivalents $ 132,804     $ 103,124  
  Short-term investments   194,427       227,712  
  Accounts receivable, net   53,883       45,881  
  Inventory   6,709       8,588  
  Prepaid expenses and other current assets   11,860       10,459  
    Total current assets   399,683       395,764  
Property and equipment, net   23,212       23,225  
Restricted cash   3,518       3,515  
Intangible assets, net   1,279       1,923  
Goodwill   33,293       33,293  
Other assets   1,279       1,547  
TOTAL ASSETS $ 462,264     $ 459,267  
LIABILITIES AND STOCKHOLDERS' EQUITY              
CURRENT LIABILITIES:              
  Accounts payable and accrued liabilities $ 19,199     $ 19,136  
  Accrued compensation   19,091       22,931  
  Deferred revenue, net   108,216       95,130  
    Total current liabilities   146,506       137,197  
Deferred revenue, net   50,924       41,717  
Other liabilities   4,687       5,201  
TOTAL LIABILITIES   202,117       184,115  
STOCKHOLDERS' EQUITY:              
  Convertible preferred stock, $0.0001 par value per share--5,000 shares authorized; no shares issued or outstanding   -       -  
  Common stock, $0.0001 par value per share--100,000 shares authorized; 58,517 shares and 58,836 shares issued and outstanding as of January 31, 2016 and July 31, 2015   6       6  
  Additional paid-in capital   446,195       438,725  
  Accumulated other comprehensive loss   (218 )     (37 )
  Accumulated deficit   (185,836 )     (163,542 )
TOTAL STOCKHOLDERS' EQUITY   260,147       275,152  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 462,264     $ 459,267  

(a) Derived from the July 31, 2015 audited consolidated financial statements.

   
   
INFOBLOX INC.  
   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(Unaudited)  
   
   
  Six Months Ended  
  January 31,
2016
    January 31,
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income (loss) $ 2,267     $ (17,221 )
Adjustments to reconcile net loss to net cash provided by operating activities:              
  Stock-based compensation   25,792       24,339  
  Depreciation and amortization   4,982       4,437  
  Increase (decrease) in excess tax benefits from employee stock plans   387       (241 )
  Other   557       1,552  
  Changes in operating assets and liabilities:              
    Accounts receivable, net   (8,002 )     (2,473 )
    Inventory   1,778       (1,267 )
    Prepaid expenses, other current assets and other assets   (930 )     (907 )
    Accounts payable and accrued liabilities   358       553  
    Accrued compensation   (3,840 )     3,247  
    Deferred revenue, net   22,293       15,239  
    Other liabilities   (514 )     (430 )
      Net cash provided by operating activities   45,128       26,828  
CASH FLOWS FROM INVESTING ACTIVITIES:              
  Purchases of short-term investments   (29,905 )     (56,316 )
  Proceeds from maturities of short-term investments   62,700       40,880  
  Purchases of property and equipment   (5,144 )     (3,299 )
  Proceeds from sales of short-term investments   -       1,001  
      Net cash provided by (used in) investing activities   27,651       (17,734 )
CASH FLOWS FROM FINANCING ACTIVITIES:              
  Common stock repurchases   (50,019 )     -  
  Proceeds from issuance of common stock under the employee stock plans   7,555       7,633  
  Increase (decrease) in excess tax benefits from employee stock plans   (387 )     241  
      Net cash provided by (used in) financing activities   (42,851 )     7,874  
               
Effect of foreign exchange rate changes on cash and cash equivalents   (248 )     (1,269 )
               
NET INCREASE IN CASH AND CASH EQUIVALENTS   29,680       15,699  
CASH AND CASH EQUIVALENTS--Beginning of period   103,124       78,535  
CASH AND CASH EQUIVALENTS--End of period $ 132,804     $ 94,234  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:              
Purchases of property and equipment not yet paid $ 522     $ 378  
Cash paid for income taxes, net $ 439     $ 138  
               

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