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Brocade Communications: Brocade Reports Fourth Quarter And Fiscal Earnings

The following excerpt is from the company's SEC filing.

Record Total Revenue, IP Networking Revenue, and Earnings per Share in Fiscal 2015

SAN JOSE, Calif.,

November 23, 2015

— Brocade

(NASDAQ: BRCD)

today reported financial results for its

fourth

quarter and full fiscal year

ended

October 31, 2015

. Brocade reported

quarter revenue of

$589 million

, an increase of

year-over-year and

quarter-over-quarter. Revenue for fiscal year

$2,263 million

year-over-year. The resulting GAAP diluted earnings per share (EPS) was

for the fou rth quarter and

and up

year-over-year, respectively. The fiscal year 2014 GAAP EPS included a non-cash goodwill impairment charge associated with the strategic repositioning of the Brocade ADX

product family. Non-GAAP diluted EPS was

“Fiscal 2015 was a productive year in which we achieved many significant milestones,” said Lloyd Carney, CEO of Brocade. “We delivered annual revenue growth in fiscal 2015, with a year-over-year revenue increase in each fiscal quarter. We grew our non-GAAP EPS by

for the fiscal year, delivering more than a dollar per share for the first time. We continued to expand our portfolio of software and hardware products through both technology innovation and strategic acquisitions. Looking forward, these investments create new opportunities for us to continue to grow revenue and EPS in 2016 and beyond.”

Quarterly Key Financial Metrics:

Q4 2015

Q3 2015

Q4 2014

Q4 2015 vs. Q3 2015

Q4 2015 vs. Q4 2014

GAAP EPS—diluted

Non-GAAP EPS—diluted

GAAP gross margin

(0.4) pts

0.2 pts

Non-GAAP gross margin

(0.7) pts

GAAP operating margin

(1.5) pts

(2.2) pts

Non-GAAP operating margin

(1.9) pts

(1.8) pts

Full fiscal year financial metrics are detailed in the financial statements and schedules presented below.

Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

Highlights:

Q4 2015 SAN product revenue was

$325 million

year-over-year and up

quarter-over-quarter. The Q4 year-over-year product revenue performance reflects a

increase in director sales and a

increase in embedded switch sales, offset by a

decrease in switch sales. For fiscal year 2015, SAN product revenue was

$1,301 million

, down

year-over-year, primarily due to lower switch and embedded switch sales, partially offset by higher director sales.

Q4 2015 IP Networking product revenue was

$170 million

quarter-over-quarter. The Q4 year-over-year increase was primarily driven by a

increase in Ethernet switch sales and improved software sales, partially offset by a

decline in router revenue. For fiscal year 2015, IP Networking product revenue was

$601 million

year-over-year due to stronger switch, router, and software sales.

During Q4, Brocade launched the Brocade Analytics Monitoring Platform, a new, innovative, SAN solution designed for both new and existing Fibre Channel storage networking customers. This solution allows customers to better monitor, analyze and control their SAN environments, while also improving the operational performance, stability, and security of data flowing between servers and storage devices.

of 15

In fiscal year 2015, Brocade’s full-year GAAP gross margin and operating margin were

, respectively. Full-year non-GAAP gross margin and operating margin increased to

, a full-year improvement of

basis points and

basis points, respectively. The full-year non-GAAP gross margin improvement was primarily due to lower excess and obsolete inventory charges and lower manufacturing overhead spending, while the operating margin improvement was due to higher gross margins, partially offset by higher sales and marketing and research and development expenses.

Full-year fiscal 2015 operating cash flow was

$447 million

decrease from fiscal year 2014. The decrease in operating cash flow was primarily due to higher payments with respect to employee incentive compensation earned in fiscal year 2014 and paid in fiscal year 2015, changes in accounts receivable collections, and higher fiscal year 2015 tax payments related to fiscal year 2014 earnings. During fiscal year 2015, the Company repurchased

$344 million

of stock, or approximately

30 million

shares, and paid

$67 million

in dividends. This return of capital to shareholders represents

of adjusted free cash flow for the year.

Board Declares Dividend

The Brocade Board of Directors has declared a quarterly cash dividend of

$0.045

per share of the Company’s common stock. The dividend payment will be made on

January 4, 2016

, to shareholders of record at the close of market on

December 10, 2015

Brocade management will host a conference call today at 2:30 p.m. PT (5:30 p.m. ET) to discuss Q4 and fiscal year 2015 results, as well as Brocade’s Q1

outlook. To access the webcast, please go to

www.brcd.com/events.cfm

. A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at

Other

product, customer, and partner announcements are available at

http://newsroom.brocade.com/

Brocade (www.brocade.com)

130 Holger Way, San Jose, CA 95134

T. 408.333.8000 F. 408.333.8101

Financial Highlights and Additional Financial Information

Routes to market as a % of total net revenues:

OEM revenues

Channel/Direct revenues

10% or greater customer revenues

Geographic split as a % of total net revenues

Domestic revenues

International revenues

Segment split as a % of total net revenues:

SAN product revenues

IP Networking product revenues

Global Services revenues

SAN business revenues

IP Networking business revenues

IP Networking product revenues by use category

(3) (4)

Data Center

Enterprise Campus

Carrier Network (MAN/WAN)

Additional information:

GAAP net income

Non-GAAP net income

GAAP operating income

Non-GAAP operating income

EBITDA

GAAP effective tax rate

Non-GAAP effective tax rate

Cash and cash equivalents

Deferred revenues

Capital expenditures

Total debt, net of discount

Cash, net of senior debt, convertible debt and capitalized leases

Cash provided by operations

Days sales outstanding

36 days

33 days

Employees at end of period

SAN port shipments

Share repurchases

Revenues are attributed to geographic areas based on product delivery location. Since some OEM partners take delivery of Brocade products domestically and then ship internationally to their end users, the percentage of international revenues based on end-user location would likely be higher.

SAN and IP Networking business revenues include hardware and software product, support, and services revenues.

Product revenue by use category is estimated based on analysis of the information the Company collects in its sales management system. The estimated percentage of revenue by use category may fluctuate quarter to quarter due to seasonality and the timing of large customer orders.

Each use category includes enterprise, service provider, and government revenues.

The lower effective tax rates in Q3 2015 were, in part, due to various tax benefits recognized in the quarter including a domestic manufacturing deduction and releases of previously reserved tax provisions.

Q4 2015 and Q3 2015 total debt, net of discount...


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