Riverbed Technology Inc. Reports Operating Results (10-Q)

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Oct 28, 2011
Riverbed Technology Inc. (RVBD, Financial) filed Quarterly Report for the period ended 2011-09-30.

Riverbed Technology Inc. has a market cap of $4.43 billion; its shares were traded at around $28.52 with a P/E ratio of 71.2 and P/S ratio of 8.

Highlight of Business Operations:

Combined, the total acquisition date fair value of consideration transferred was approximately $136.3 million, which included initial payments of $121.5 million in cash, of which $22.8 million was paid to escrow to secure the sellers indemnification obligations, $0.8 million paid upon the final Aptimize closing balance sheet, $1.0 million to be paid upon finalization of the Zeus closing balance sheet and the estimated fair value of acquisition-related contingent consideration of $14.6 million. Also included in the initial payments were $1.6 million of prepaid compensation costs. We preliminarily recorded $95.4 million of goodwill, $52.5 million of identifiable intangible assets, including $2.6 million of in-process technology, deferred tax liabilities of $7.9 million and $3.7 million of net other tangible liabilities related to these acquisitions. The results of operations of these companies are included in our condensed consolidated results for the period subsequent to the acquisition date. In the nine months ended September 30, 2011, we recognized $2.8 million in revenue, from the sale of these acquired companies products and services and we recognized $6.8 million of operating expenses, which included $1.7 million of acquisition-related intangible amortization, $0.2 million of stock-based compensation costs and $0.8 million of acquisition-related compensation costs.

During fiscal 2010, we acquired two companies to expand our product offerings. These acquisitions were not significant, individually or in the aggregate. Combined, the total purchase price for these acquisitions was approximately $26.8 million, which was paid in cash. We recorded $13.8 million of goodwill, $16.8 million of identifiable intangible assets, including $3.3 million of in-process technology intangible assets, $3.3 million of deferred tax liabilities, and $0.5 million of net tangible liabilities. The results of operations of these companies are included in our condensed consolidated results for the period subsequent to the acquisition date. In the nine months ended September 30, 2011, we recognized $10.4 million in revenue, from the sale of these acquired companies products and services and we recognized $7.4 million of operating expenses, which included $3.0 million of acquisition-related intangible amortization, $0.8 million of stock-based compensation costs and $2.1 million of acquisition-related costs, including retention bonuses.

Quarter Ended September 30, 2011 Compared to the Quarter Ended September 30, 2010: The total cost of revenue increased $10.2 million, or 29.3%, in the three months ended September 30, 2011 compared to the three months ended September 30, 2010. The cost of product sold increased $5.1 million, or 23.2%, primarily due to an increase in unit volume associated with higher revenue. Cost of support and services revenue increased $5.1million, or 39.8%, as we added more technical support headcount domestically and abroad to support our growing customer base. Technical support and services headcount was 191 employees, including seven acquired company employees, as of September 30, 2011 compared to 159 employees as of September 30, 2010.

Nine Months Ended September 30, 2011 Compared to the Nine Months Ended September 30, 2010: The total cost of revenue increased $30.4 million, or 32.5%, in the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. The increase in cost of product revenue of $17.3 million, or 30.2%, was due primarily to increased unit volume associated with higher revenue. Cost of support and services revenue increased $13.2 million, or 36.1%, due to increased personnel related costs as a result of increased headcount.

The provision for income taxes for the three months ended September 30, 2011 and 2010 was $6.0 million and $9.0 million, respectively. Our income tax provision consists of federal, foreign, and state income taxes. Our effective tax rate was 23.8% and 39.2% for the three months ended September 30, 2011 and 2010, respectively, and 35.8% and 40.7% for the nine months ended September 30, 2011 and 2010, respectively.

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