SAN FRANCISCO, Oct 21, 2010 (BUSINESS WIRE) --

Riverbed Technology (NASDAQ:RVBD), the IT performance company, today reported financial results for its third quarter ended September 30, 2010 (Q3'10). Revenues for Q3'10 were $147.8 million, up 17% compared to the second quarter of 2010 (Q2'10), and up 45% compared to the third quarter of 2009 (Q3'09).

Reporting on a GAAP basis, net income for Q3'10 was $13.9 million, or $0.18 per diluted share. This compares to GAAP net income of $6.6 million, or $0.09 per share, in Q2'10 and $5.5 million, or $0.08 per share, in Q3'09. GAAP net income increased 112% over the prior quarter and 154% over the prior year.

Non-GAAP net income for Q3'10 was $26.6 million, or $0.34 per diluted share. This compares to non-GAAP net income of $19.2 million, or $0.25 per diluted share, in Q2'10, and $14.5 million, or $0.19 per diluted share, in Q3'09. Non-GAAP net income increased 38% sequentially and 84% over the prior year. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

"WAN optimization continues to be a strategic spending priority for IT as organizations consolidate and virtualize their global data infrastructures. Riverbed(R) reported a record-breaking third quarter with growth across all major geographies and industry verticals and is the undisputed technology and market leader," said Jerry M. Kennelly, Riverbed president and CEO. "In the third quarter, deployment sizes continued to grow as we expanded our presence in the enterprise. We executed well, with the strongest top line growth Riverbed has reported in more than two years, and bottom line growth outpaced the top line, resulting in a 28% non-GAAP operating margin."

Q3'10 Financial Highlights

• Total revenue increased 17% sequentially and 45% year-over-year
• Product revenue increased 22% sequentially and 48% year-over-year
• Non-GAAP operating profit increased 36% sequentially and 84% year-over-year
• Non-GAAP operating margin increased to 28.1% compared to 24.2% in Q2'10 and 22.0% in Q3'09
• Days sales outstanding decreased to 27 days from 32 days in Q2'10 and 42 days in Q3'09
• Cash and investments grew to $469 million compared to $422 million in Q2'10 and $297 million in Q3'09

Q3'10 Business Highlights

• Identified as the Advanced Platform WAN optimization controller worldwide market share leader with 40.3% share for Q2'10 based on revenue in the Gartner September 2010 report, "Market Share: Application Acceleration Equipment, Worldwide, 2Q10" (J. Skorupa and N. Pham, September 15, 2010).
• Further enhanced competitive position with the release of Virtual Steelhead(R). Virtual Steelhead extends the reach of Riverbed's market-leading WAN optimization solutions enabling customers to deploy Riverbed WAN optimization solutions in a wider range of environments that may have specialized requirements, such as ruggedized environments or environments with space limitations, as well as data centers that have been heavily virtualized.
• Launched Steelhead Mobile 3.1 offering the industry's only mobile WAN optimization solution for Apple Mac desktops and laptops. Mobile 3.1 also optimizes Citrix Virtual Desktop deployments and Microsoft applications including Exchange 2010 and Sharepoint and Microsoft Online.
• Achieved EAL4+ certification under the Common Criteria for Information Technology Security Evaluation and Certification Scheme (CCS). By obtaining this certification, Riverbed assures federal agencies and departments that its WAN optimization solution meets stringent government requirements mandated for commercial information security products purchased by the U.S. government for use in national security systems.

Stock Split

Riverbed also announced today that its Board of Directors has approved a two-for-one stock split of the company's outstanding shares of common stock to be effected in the form of a stock dividend. The stock split will entitle each stockholder of record at the close of business on Monday, November 1, 2010, to receive one additional share for every one share owned as of that date. The additional shares resulting from the stock split are expected to be distributed by the company's transfer agent on or about Monday, November 8, 2010. Upon the completion of the stock split, Riverbed will have approximately 147 million shares of common stock outstanding.

Conference Call

Riverbed will host a conference call today, October 21, 2010, at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its third quarter 2010 results and outlook for the fourth quarter of 2010. The call will be broadcast live over the Internet at www.riverbed.com/investors. A replay of the conference call will also be available via webcast for 12 months.

Forward Looking Statements

This press release contains forward-looking statements, including statements related to WAN optimization as an IT spending priority and statements related to the record date for the stock split; the date of the distribution of the stock dividend; the amount of the distribution and the number of shares outstanding after the stock split. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; the adoption rate of our products; our ability to establish and maintain successful relationships with our distribution partners; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; additional issuances of common stock before the distribution date; unanticipated delays in effecting the stock split in the form of a stock dividend caused by system or other errors; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact Riverbed's business are set forth in our Form 10-Q filed for the quarter ended June 30, 2010. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. Any future product, feature or related specification that may be referenced in this release are for information purposes only and are not commitments to deliver any technology or enhancement. Riverbed reserves the right to modify future product plans at any time.

Use of Non-GAAP Financial Information

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 that we believe are helpful in understanding our past financial performance and future results. 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, "GAAP to Non-GAAP Reconciliations." Our non-GAAP financial measures are not meant to 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. Our non-GAAP financial measures include adjustments based on the following items, as well as the related income tax effects and adjustments related to our tax valuation allowance:

Support deferred revenue: Business combination accounting rules require us to account for the fair value of support contracts assumed in connection with our acquisitions. The book value of our deferred support revenue was reduced in the adjustment to fair value. Because these are typically one-year contracts, our GAAP revenues for the one year period subsequent to the acquisition of a business do not reflect the full amount of service revenues on assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such revenues. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be certain that customers will renew these contracts.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation and stock-based payroll expenses from our non-GAAP operating expenses and net income measures. 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 net income. 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 and other expenses: We incurred significant expenses in connection with our acquisition of Mazu and also incurred certain other operating expenses, which we would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related and other expenses consist of transaction costs, costs for transitional employees, other acquired employee related costs, integration related professional services, and adjustments to the fair value of the acquisition related contingent consideration. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

About Riverbed

Riverbed Technology is the IT performance company. The Riverbed family of wide area network (WAN) optimization solutions liberates businesses from common IT constraints by increasing application performance, enabling consolidation, and providing enterprise-wide network and application visibility - all while eliminating the need to increase bandwidth, storage or servers. Thousands of companies with distributed operations use Riverbed to make their IT infrastructure faster, less expensive and more responsive. Additional information about Riverbed (NASDAQ: RVBD) is available at www.riverbed.com.

Riverbed and any Riverbed product or service name or logo used herein are trademarks of Riverbed Technology, Inc.All other trademarks used herein belong to their respective owners.

SOURCE: Riverbed Technology

Riverbed Technology
Renee Lyall, 415-247-6353 (Investor Relations)
renee.lyall@riverbed.com
Kristalle Ward, 415-247-8140 (Media)
kristalle.ward@riverbed.com