~ Company Delivers 12% Year Over Year Revenue Growth ~ SANTA CLARA, Calif., July 21
SANTA CLARA, Calif., July 21 /PRNewswire-FirstCall/ -- Foundry
Networks(TM), Inc. (Nasdaq: FDRY), a performance and total solutions leader
for end-to-end switching and routing, today announced financial results for
its second quarter ended June 30, 2008.
Foundry's revenue for the second quarter of 2008 was $160.7 million,
compared to $143.2 million in the second quarter of 2007, and compared to
$150.1 million in the first quarter of 2008, an increase of 12% and 7%
respectively. Net income was $18.3 million or $0.12 per diluted share,
compared to net income of $15.6 million, or $0.10 per diluted share in the
second quarter of 2007, and net income of $13.9 million, or $0.09 per diluted
share in the first quarter of 2008.
Revenue for the first six months of 2008 was $310.7 million, compared to
$279.1 million for the first six months of 2007, an increase of 11%. Net
income for the first six months of 2008 was $32.2 million, or $0.21 per
diluted share, compared to net income of $24.7 million, or $0.16 per diluted
share, for the same period in 2007.
Included in Foundry's results for the second quarter of 2008 was $11.2
million of non-cash stock-based compensation expense. Excluding these
expenses and the related tax effect, non-GAAP net income in the second quarter
of 2008 was $25.3 million and non-GAAP net income per diluted share was $0.17
per share. Please refer to the table below for a reconciliation of GAAP to
non-GAAP net income.
In the second quarter of 2008, North American non-Federal commercial
revenue represented 58.2% of total revenue; a record for the segment,
primarily due to increased revenue from service provider customers. Sales to
Europe, the Middle East and Africa (EMEA) represented 14.8% of total revenue
and were essentially flat in absolute dollars from the first quarter of 2008.
Sales to Japan represented 3.1% of total revenue while the rest of Asia
represented 6.6%. Sales to the U.S. Federal Government represented
approximately 17.3% of total sales.
The Company's cash and investments balance was $950.1 million in the
second quarter of 2008. During the quarter, the Company spent $15.7 million
repurchasing 1.2 million shares of Foundry common stock at an average price of
$12.84 per share. To date, the Company has spent $158.7 million to repurchase
10.0 million shares of Foundry common stock at an average price of $15.82 per
share.
Quarterly Highlights
-- Revenue breakdown: US Commercial = 58.2%, Federal = 17.3%,
EMEA = 14.8%, Japan = 3.1%, Rest of Asia = 6.6%
-- Technology breakdown: Layer 2/3 Switching = 50.7%, Internet & Metro
Routers = 24.8%, Layer 4-7 = 8.6%, Support = 15.9%
-- Chassis revenue = 71.7%, stackable revenue = 28.3%
-- Enterprise revenue = 73.0%, service provider = 27.0%
-- Total headcount as of June 30, 2008 = 1,068
-- DSO = 63 days
-- Book-to-bill was greater than one
-- Gross margin improvement driven primarily by stable pricing and cost
reduction
About Non-GAAP Financial Measures
Foundry uses non-GAAP net income and non-GAAP net income per share for
internal planning purposes, to assess the results of its business on an
ongoing basis, to determine management compensation, and for the convenience
of analysts and investors. These measures are not in accordance with, or an
alternative to, similarly-named measures under GAAP. The measures are
intended to supplement GAAP financial information, and may be different from
non-GAAP financial measures used by other companies. Foundry believes these
measures provide useful information to its management, board of directors and
investors regarding Foundry's performance when used in conjunction with GAAP
information. Foundry believes it is useful to investors to receive
information about how items in the statement of operations are affected by
stock-based compensation, litigation settlement charges, the expenses related
to the stock option investigation and restatement of the Company's
consolidated financial statements and the related income tax effect. Stock-
based compensation expense consists of expenses recorded under SFAS 123(R),
"Share-Based Payment," in connection with awards granted under the Company's
equity incentive plans and shares issued pursuant to the Company's employee
stock purchase plan. The Company excludes stock-based compensation expense
from non-GAAP financial measures because it is a non-cash measurement that
does not reflect the Company's ongoing business and because the Company
believes that investors want to understand the impact on the Company of the
adoption of SFAS 123(R); the Company believes that the provision of non-GAAP
information that excludes stock-based compensation improves the ability of
investors to compare its period-over-period operating results, as there is
significant variability and unpredictability across companies with respect to
this expense. The Company also excludes legal, accounting and one-time
employee compensation costs related to the stock option investigation and
restatement of the Company's consolidated financial statements in addition to
litigation settlement charges because these payments do not reflect the
Company's ongoing business and the exclusion of these payments improves the
ability of investors to compare its period-over-period operating results.
However, investors should be aware that non-GAAP measures have inherent
limitations and should be read in conjunction with our consolidated financial
statements prepared in accordance with GAAP.
About Foundry Networks
Foundry Networks, Inc. (Nasdaq: FDRY) is a leading provider of high-
performance enterprise and service provider switching, routing, security and
Web traffic management solutions, including Layer 2/3 LAN switches, Layer 3
Backbone switches, Layer 4-7 application switches, wireless LAN and access
points, metro and core routers. Foundry's customers include the world's
premier ISPs, metro service providers, and enterprises, including e-commerce
sites, universities, entertainment, health and wellness, government, financial
and manufacturing companies. For more information about the company and its
products, call 1.888.TURBOLAN or visit http://www.foundrynet.com.
FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net revenue:
Product $134,843 $120,784 $260,705 $236,002
Service 25,836 22,456 50,029 43,051
Total net revenue 160,679 143,240 310,734 279,053
Cost of revenue:
Product 51,591 51,695 100,006 102,832
Service7,5965,444 15,779 10,910
Total cost of
revenue59,187 57,139 115,785 113,742
Gross margin 101,492 86,101 194,949 165,311
Operating expenses:
Research and
development 21,925 17,853 43,653 39,103
Sales and
marketing46,391 38,470 93,527 78,560
General and
administrative 10,205 11,771 22,044 22,704
Other charges, net -3,067-5,600
Total operating
expenses 78,521 71,161 159,224 145,967
Income from operations 22,971 14,940 35,725 19,344
Interest and other
income, net 6,428 10,514 15,728 20,897
Income before provision
for income taxes 29,399 25,454 51,453 40,241
Provision for income
taxes 11,0739,822 19,221 15,518
Net income $18,326 $15,632 $32,232 $24,723
Basic net income per
share $ 0.13$0.11 $ 0.22$0.17
Weighted average shares
used in computing
basic net income per
share 145,092 147,285 146,163 147,194
Diluted net income
per share $ 0.12$0.10$0.21$0.16
Weighted average shares
used in computing
diluted net income per
share 149,059 154,034 150,219 153,668
FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2008 2007
ASSETS (unaudited)(2)
Assets:
Cash and investments (1)$950,119 $965,668
Accounts receivable, net 112,362124,234
Inventories 49,531 42,384
Prepaid expenses and other current assets 14,294 12,439
Deferred tax assets 85,112 79,214
Property and equipment, net7,616 9,658
Other long-term assets 5,697 5,234
Total assets $1,224,731 $1,238,831
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $21,627$23,892
Accrued payroll and related expenses 40,753 50,806
Other accrued expenses12,441 12,382
Income taxes payable 12,833 11,860
Deferred product and support revenue 90,368 80,767
Other long-term liabilities 460475
Total liabilities178,482180,182
Stockholders' equity 1,046,249 1,058,649
Total liabilities and shareholders' equity$1,224,731 $1,238,831
(1) Includes $101.3 million of long-term marketable securities at June
30, 2008 and $58.1 million at December 31, 2007.
(2) Derived from audited condensed consolidated financial statements as
of December 31, 2007.
FOUNDRY NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
Six Months Ended
June 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $32,232$24,723
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,129 5,649
Stock-based compensation expense 25,159 19,515
Provision for doubtful accounts 89 (230)
Provision for sales returns (729) (888)
Inventory provisions 4,274 3,035
Benefit for deferred income taxes (5,898)(5,500)
Excess tax benefits from stock-based
compensation (555) (934)
Changes in operating assets and
liabilities:
Accounts receivable 12,513 (12,718)
Inventories(11,411) (10,665)
Prepaid expenses and other assets (3,860)(6,290)
Accounts payable(2,263) 1,414
Accrued payroll and related expenses (10,053) 108
Income taxes payable 564 6,641
Other accrued expenses 43287
Deferred product and support revenue 9,600 9,069
Net cash provided by operating
activities 54,834 33,216
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and purchases of investments, net (64,495) (72,629)
Purchases of property and equipment, net(1,625)(4,093)
Net cash used in investing activities(66,120) (76,722)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of common stock
under stock plans, net of repurchases 12,459 4,486
Repurchase and retirement of common stock (75,580) -
Excess tax benefits from stock-based
compensation 555934
Net cash provided by (used in) financing
activities (62,566) 5,420
Decrease in cash and cash equivalents (73,852) (38,086)
Effect of exchange rate changes on cash (169) (121)
Cash and cash equivalents, beginning of
period331,961258,137
Cash and cash equivalents, end of period $ 257,940 $219,930
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes, net of
refunds received$27,131$18,229
FOUNDRY NETWORKS, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME AND EPS (unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 20082007
Net income excluding
certain charges
and benefits
(Non-GAAP)$25,271 $23,809 $48,287 $44,975
Stock-based
compensation
expense (1) (11,158) (9,893) (25,159) (19,515)
Stock option
investigation and
related compensation
costs (2) - (3,067) - (13,186)
Income tax effect4,2134,7839,104 12,449
Net income $18,326 $15,632 $32,232 $24,723
Diluted net income per
share excluding
certain charges and
benefits (Non-GAAP) $0.17$0.15$0.32$0.29
Stock-based compensation
expense (1) (0.08) (0.06) (0.17) (0.13)
Stock option
investigation and
related compensation
costs (2) -(0.02) -(0.08)
Income tax effect 0.03 0.03 0.06 0.08
Diluted net income per
share $0.12$0.10$0.21$0.16
(1) Includes stock-based compensation expense as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Cost of product revenue $430 $319 $905 $634
Cost of service revenue752 4141,722 863
Research and development 3,8373,4408,7176,778
Sales and marketing 4,4943,9029,9727,597
General and
administrative 1,6451,8183,8433,643
Total$11,158 $9,893 $25,159 $19,515
(2) Reflects expenses related to the independent review of our stock
option practices, which began in June 2006, and related legal,
accounting, and compensation costs as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Cost of product revenue $- $- $- $250
Cost of service revenue --- 228
Research and development ---3,305
Sales and marketing ---3,128
General and administrative --- 675
Other charges, net -3,067-5,600
Total $- $3,067 $- $13,186
SOURCE Foundry Networks, Inc.
