Blue Coat reports results for first quarter fiscal 2012

Blue Coat Systems, a leading provider of Web security and WAN optimization solutions, today reported financial results for its first fiscal 2012 quarter ended July 31, 2011. Total net revenue for the first quarter of fiscal 2012 was $109.5 million compared with net revenue of $120.7 million in the fourth quarter of fiscal 2011 and $122.5 million in the first quarter of fiscal 2011.

“Our first quarter results were disappointing as they came in below our expectations,” said David W. Hanna, chairman of the board of directors. “We are taking the necessary actions to reinforce our leadership position in the Web security market, while capitalizing on opportunities in the WAN optimization market based on our strong competitive advantages.”

“While we continue to address our go-to-market challenges, product revenue was also impacted by weakness in the U.S. Federal vertical,” said Gordon C. Brooks, senior vice president and chief financial officer. “This weakness in product revenue reduced our profitability for the quarter.” 

Blue Coat separately announced today the appointment of Gregory S. Clark as its president and chief executive officer and a member of the board of directors.

On a GAAP basis, the Company reported net income of $2.7 million, or $0.06 per diluted share, for the first quarter of fiscal 2012, compared with net income of $9.0 million, or $0.18 per diluted share, in the fourth quarter of fiscal 2011 and $13.9 million, or $0.29 per diluted share, in the first quarter of fiscal 2011.

The Company reported non-GAAP net income of $8.4 million, or $0.18 per diluted share, for the first quarter of fiscal 2012, compared with non-GAAP net income of $14.6 million, or $0.30 per diluted share, in the fourth quarter of fiscal 2011 and $19.1 million, or $0.40 per diluted share, in the first quarter of fiscal 2011. 

Cash flow provided by operations in the first quarter of fiscal 2012 was $9.5 million compared with $20.4 million in the fourth quarter of fiscal 2011 and $28.6 million in the first quarter of fiscal 2011. The Company repurchased 1.9 million shares of common stock for $43.0 million during the first quarter of fiscal 2012 and ended the quarter with cash, cash equivalents, and restricted cash of $342.4 million. 

Financial Outlook

For the second fiscal quarter ending October 31, 2011, the Company currently expects net revenue in the range of $103 to $110 million. On a GAAP basis, the Company currently expects net loss of $(0.04) per diluted share to net income of $0.04 per diluted share. On a non-GAAP basis, the Company currently expects net income of $0.09 to $0.17 per diluted share. For the second quarter of fiscal 2012, the Company is assuming a diluted share count of approximately 47.5 million shares, an expected annual effective GAAP tax rate of 36% and an expected annual effective non-GAAP tax rate of 30%.

About Non-GAAP Financial Measures

The Company uses non-GAAP financial measures for internal evaluation and to report the results of its business. These non-GAAP financial measures include non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted net income per share. These measures are not in accordance with, nor an alternative to, U.S. generally accepted accounting principles or GAAP. These measures are intended to supplement GAAP financial information, and may be different from non-GAAP financial measures used by other companies. The Company believes that these measures provide useful information to its management, board of directors and investors regarding its ongoing operating activities and business trends related to its financial condition and results of operations. The Company believes that it is useful to provide investors with information to understand how specific line items in the statement of operations are affected by certain items, such as stock-based compensation expense, amortization of intangible assets, expenses for matters related to the stock option investigation, and restructuring expenses, and related income tax adjustments.  In addition, the Company’s management and board of directors use these non-GAAP financial measures in developing operating budgets and in reviewing the Company’s results of operations, since such items have limited impact on their current and future operating decisions. Additionally, the Company believes that inclusion of these non-GAAP financial measures provides consistency and comparability with its past reports of financial results. However, investors should be aware that non-GAAP measures have inherent limitations and should be read in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. Refer to the accompanying tables for a detailed reconciliation of GAAP to non-GAAP gross profit, operating income, net income and diluted net income per share.

Conference Call & Webcast

Blue Coat will hold its quarterly conference call to discuss final results for the first quarter of fiscal 2012 and the outlook for the second quarter of fiscal 2012 on Tuesday, August 16, 2011 at 2:00 p.m. PDT (5:00 p.m. EDT). Participants in the United States should call (800) 230-1074. International participants should call (612) 234-9959. The passcode for the call is: 213225. The conference call can also be accessed through an audio webcast from the Company’s website, www.bluecoat.com/company/investorrelations. A replay of the call will be available starting on Tuesday, August 16, 2011 at 5:00 p.m. PDT (8:00 p.m. EDT), and can be accessed by calling (800) 475-6701 for U.S. participants and (320) 365-3844 for international participants. The passcode for the replay is 213225.