Blue Coat Systems Inc (BCSI, Financial) filed Quarterly Report for the period ended 2010-07-31.
Blue Coat Systems Inc has a market cap of $787.3 million; its shares were traded at around $18.47 with a P/E ratio of 16.7 and P/S ratio of 1.6. BCSI is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Steven Cohen of SAC Capital Advisors.
revenue from sales of our ProxySG and PacketShaper appliances and licenses to our WebFilter product. We recognized $46.9 million in service revenue in the first quarter of fiscal 2011, a $4.6 million increase compared with the first quarter of fiscal 2010. The increase in service revenue was driven primarily by an increase in revenue from new and renewal service contracts as well as an increase in consulting revenue. The increase in consulting revenue was driven by an arrangement that will be completed by the end of the second quarter of fiscal 2011. We do not expect consulting revenue to continue at this level after the completion of this contract.
Our operating income increased by $14.8 million to $19.3 million in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010. This increase was attributable to an increase in net revenue discussed above, an increase in our gross profit margin from 72.8% in the first quarter of fiscal 2010 to 78.5% in the first quarter of fiscal 2011, and a decrease in operating expenses of $3.1 million in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010. The decrease in operating expenses was primarily driven by lower personnel-related and legal costs. The year-over-year gross margin increase resulted from a decreased impact from the application of fair value purchase accounting on Packeteer inventory and deferred revenue, which negatively impacted the cost of net revenue and service revenue by $2.3 million in total in the first quarter of fiscal 2010 compared with a negative impact of $0.3 million in total in the first quarter of fiscal 2011. At July 31, 2010, $0.5 million of the fair value write-down on Packeteers deferred service revenue remained to be recognized and the fair value write-up of Packeteer inventory was fully recognized. Excluding the fair value purchase accounting impact on gross profit in these two fiscal periods, gross profit margin in fiscal 2011 would have been approximately 431 basis points higher than that in fiscal 2010, primarily as a result of higher gross margins associated with our high-end ProxySG appliance and higher service gross margins associated with the improved efficiency of our worldwide support delivery model.
Net deferred revenue was $159.9 million at July 31, 2010 compared with $154.2 million at April 30, 2010. The increase was primarily due to an increase in the sales of renewal service contracts to our customers, including an increase in long-term service contracts sold with our appliances.
For the first three months of fiscal 2011, we generated cash flow from operations of $28.6 million compared with $10.6 million generated for the same period in fiscal 2010. The increase in operating cash flow in fiscal 2011 was primarily driven by higher net income after excluding the impact of non-cash charges such as stock-based compensation, depreciation and amortization expense, as well as an increase in working capital sources of cash from higher accounts payable, accrued expenses and deferred revenue balances, partially offset by working capital uses of cash from higher accounts receivable and inventory balances at July 31, 2010. Our cash and cash equivalents and restricted cash were $262.6 million at July 31, 2010 compared with $237.3 million at April 30, 2010. The overall increase in our cash and cash equivalents balance was primarily due to higher cash generated by operations.
The impact from the adoption of the amended revenue recognition rules to total revenue, net income, and deferred revenue was not material. Total net revenue as reported for the quarter ended July 31, 2010 was $122.5 million compared with $121.5 million of total net revenue that would have been reported during the quarter under our revenue recognition policies in effect prior to the beginning of fiscal 2011. The new accounting guidance for revenue recognition is not expected to have a significant effect on total net revenue in periods after initial adoption, although the impact on the timing and pattern of revenue will vary depending on the nature and volume of new or materially modified contracts in any given period. However, we expect that this new accounting guidance will facilitate our efforts to optimize the sales and marketing of our offerings due to better alignment between the economics of an arrangement and the accounting for that arrangement. This may lead us to engage in new go-to-market practices. In particular, we expect that the new accounting standards will enable us to better combine products and services for which VSOE does not exist with other offerings and solutions. As these go-to-market strategies evolve, we may modify our pricing practices, which could result in changes in the relative selling prices of our elements, including both VSOE and BESP. As a result, the timing of revenue recognition on our future multiple element arrangements could differ materially from the recognition in the current period. Changes in the allocation of the sales price between elements may impact the timing of revenue recognition, but will not change the total revenue recognized with respect to the arrangement. We currently are unable to determine the impact that the newly adopted accounting principles could have on the timing of our revenue as these go-to-market strategies evolve.
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Blue Coat Systems Inc has a market cap of $787.3 million; its shares were traded at around $18.47 with a P/E ratio of 16.7 and P/S ratio of 1.6. BCSI is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:
Net revenue, which includes product and service revenue, increased to $122.5 million in the first quarter of fiscal 2011 from $116.0 million in the first quarter of fiscal 2010. Net product revenue in the first quarter of fiscal 2011 was $75.6 million, a $1.9 million increase compared with the first quarter of fiscal 2010, due to an increased demand for our products in APAC, however this increase was offset by a decline in product revenue in other geographies, primarily EMEA, which we believe primarily resulted from EMEA sales execution challenges combined with the continuing difficult economic conditions in Europe. Net product revenue primarily consists ofrevenue from sales of our ProxySG and PacketShaper appliances and licenses to our WebFilter product. We recognized $46.9 million in service revenue in the first quarter of fiscal 2011, a $4.6 million increase compared with the first quarter of fiscal 2010. The increase in service revenue was driven primarily by an increase in revenue from new and renewal service contracts as well as an increase in consulting revenue. The increase in consulting revenue was driven by an arrangement that will be completed by the end of the second quarter of fiscal 2011. We do not expect consulting revenue to continue at this level after the completion of this contract.
Our operating income increased by $14.8 million to $19.3 million in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010. This increase was attributable to an increase in net revenue discussed above, an increase in our gross profit margin from 72.8% in the first quarter of fiscal 2010 to 78.5% in the first quarter of fiscal 2011, and a decrease in operating expenses of $3.1 million in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010. The decrease in operating expenses was primarily driven by lower personnel-related and legal costs. The year-over-year gross margin increase resulted from a decreased impact from the application of fair value purchase accounting on Packeteer inventory and deferred revenue, which negatively impacted the cost of net revenue and service revenue by $2.3 million in total in the first quarter of fiscal 2010 compared with a negative impact of $0.3 million in total in the first quarter of fiscal 2011. At July 31, 2010, $0.5 million of the fair value write-down on Packeteers deferred service revenue remained to be recognized and the fair value write-up of Packeteer inventory was fully recognized. Excluding the fair value purchase accounting impact on gross profit in these two fiscal periods, gross profit margin in fiscal 2011 would have been approximately 431 basis points higher than that in fiscal 2010, primarily as a result of higher gross margins associated with our high-end ProxySG appliance and higher service gross margins associated with the improved efficiency of our worldwide support delivery model.
Net deferred revenue was $159.9 million at July 31, 2010 compared with $154.2 million at April 30, 2010. The increase was primarily due to an increase in the sales of renewal service contracts to our customers, including an increase in long-term service contracts sold with our appliances.
For the first three months of fiscal 2011, we generated cash flow from operations of $28.6 million compared with $10.6 million generated for the same period in fiscal 2010. The increase in operating cash flow in fiscal 2011 was primarily driven by higher net income after excluding the impact of non-cash charges such as stock-based compensation, depreciation and amortization expense, as well as an increase in working capital sources of cash from higher accounts payable, accrued expenses and deferred revenue balances, partially offset by working capital uses of cash from higher accounts receivable and inventory balances at July 31, 2010. Our cash and cash equivalents and restricted cash were $262.6 million at July 31, 2010 compared with $237.3 million at April 30, 2010. The overall increase in our cash and cash equivalents balance was primarily due to higher cash generated by operations.
The impact from the adoption of the amended revenue recognition rules to total revenue, net income, and deferred revenue was not material. Total net revenue as reported for the quarter ended July 31, 2010 was $122.5 million compared with $121.5 million of total net revenue that would have been reported during the quarter under our revenue recognition policies in effect prior to the beginning of fiscal 2011. The new accounting guidance for revenue recognition is not expected to have a significant effect on total net revenue in periods after initial adoption, although the impact on the timing and pattern of revenue will vary depending on the nature and volume of new or materially modified contracts in any given period. However, we expect that this new accounting guidance will facilitate our efforts to optimize the sales and marketing of our offerings due to better alignment between the economics of an arrangement and the accounting for that arrangement. This may lead us to engage in new go-to-market practices. In particular, we expect that the new accounting standards will enable us to better combine products and services for which VSOE does not exist with other offerings and solutions. As these go-to-market strategies evolve, we may modify our pricing practices, which could result in changes in the relative selling prices of our elements, including both VSOE and BESP. As a result, the timing of revenue recognition on our future multiple element arrangements could differ materially from the recognition in the current period. Changes in the allocation of the sales price between elements may impact the timing of revenue recognition, but will not change the total revenue recognized with respect to the arrangement. We currently are unable to determine the impact that the newly adopted accounting principles could have on the timing of our revenue as these go-to-market strategies evolve.
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