Riverbed Technology Reports Record Fourth Quarter and Full Year 2011 Revenue and Profits

Riverbed Innovation, the IT performance company, today reported financial results for its fourth quarter and fiscal year ended December 31, 2011.

Total GAAP revenue for Q411 was $203 million, an increase of 7% from $190 million reported in the third quarter of fiscal year 2011 and an increase of 23% from $165 million reported in the fourth quarter of fiscal year 2010. For fiscal year 2011, GAAP revenue was $726 million, up 32% from $552 million in fiscal year 2010. GAAP net income for Q411 was $20 million, or $0.12 per diluted share. This compares to GAAP net income of $19 million, or $0.12 per share, in Q311 and $13 million, or $0.08 per share, in Q410. GAAP net income for 2011 was $64 million, or $0.38 per diluted share, compared to GAAP net income of $34 million, or $0.22 per diluted share, in 2010.

Non-GAAP revenue for Q411 was $204 million, an increase of 7% from $191 million reported in Q311, and an increase of 23% from $165 million reported in Q410. For fiscal year 2011, non-GAAP revenue was $728 million, up 32% from $552 million in fiscal year 2010. Non-GAAP net income for Q411 was $41 million, or $0.25 per diluted share. This compares to non-GAAP net income for Q311 of $40 million, or $0.24 per diluted share, and non-GAAP net income for Q410 of $32 million, or $0.19 per diluted share. Non-GAAP net income for 2011 was $150 million, or $0.90 per diluted share, which compares to non-GAAP net income of $92 million, or $0.59 per diluted share in 2010.

2011 was a year of tremendous achievement for Riverbed® and a year in which we expanded our addressable market through new innovations, strategic acquisitions and partnerships. For the full year, revenue increased 32% during our non-GAAP net income grew 62% over 2010, said Jerry M. Kennelly, Riverbed president and CEO. We believe we are in the strongest strategic and competitive position in our history. Adding to that, early in 2012 we will be entering what we think will be Riverbeds most exciting and important product cycle but.

The business has been executing then

The business has been executing then and fourth quarter revenue growth was fueled by strong enterprise sales in both the U.S. and EMEA, added Randy S. Gottfried, Riverbed Chief Financial Officer. In spite of higher disk drive costs resulting from recent Thai floods, we reported strong gross and operating margins in the fourth quarter. We believe our past investments in our core and new products will continue to yield solid revenue and profit growth in 2012.

Riverbed will host a conference call today, January 26, 2012, at 1:30 p.m. Pacific Time to discuss its fourth quarter and full year 2011 results and outlook for 2012. The call will be broadcast live over the Internet at www.riverbed.com/investors. A replay of the conference call will as well be available via webcast at www.riverbed.com/investors for 12 months.

To supplement our financial results presented pursuant to this agreement Generally Accepted Accounting Principles, this press release and the accompanying tables and the related revenues conference call contain certain non-GAAP financial measures, including non-GAAP support and service revenue, non-GAAP revenue, non-GAAP gross profit, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net income and net income per share, non-GAAP gross margin and non-GAAP operating margin, 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 under 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 then as the related income tax effects, adjustments related to our tax valuation allowance and the interim tax cost of the one-time transfer of intellectual property rights between Riverbed legal entities:

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 the acquisition deferred support revenue was reduced by $4 million in the adjustment to fair value. Because these are typically one-year contracts, our GAAP earnings for an one year period subsequent to the acquisition of a business do not reflect the full amount of service earnings on assumed support contracts that would have if not been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such earnings. 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, though we cannot be certain that clients will renew these contracts.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation and related payroll tax expenses from our non-GAAP operating expenses and net income measures. Though 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 earnings earned while the periods presented and will contribute to future period earnings as so then.

This press release contains forward-looking statements, including statements relating to our strategic and competitive position, our upcoming product cycle, and our expectations regarding revenue and profit growth in 2012. These forward-looking statements involve risks and uncertainties, as then 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; general political, economic and market conditions and events; difficulties encountered in integrating new or acquired businesses and technologies; the inability to identify and realize the anticipated benefits of acquisitions; the expense and impact of legal proceedings; 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-K filed with the SEC for the period ended December 31, 2010, and our subsequent Forms 10-Q filed with the SEC. 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 innovation or enhancement. Riverbed reserves the right to modify future product plans at any time.

The globally connected enterprise

Riverbed delivers performance for the globally connected enterprise. With Riverbed, enterprises can successfully and intelligently implement strategic initiatives just as virtualization, consolidation, cloud computing, and disaster recovery without fear of compromising performance. By giving enterprises the platform they need to understand, optimize and consolidate their IT, Riverbed helps enterprises to build a fast, fluid and dynamic IT architecture that aligns with the business needs of the organization. Additional information about Riverbed is available at www.riverbed.com.

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