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| BLOX > SEC Filings for BLOX > Form 10-Q on 4-Dec-2012 | All Recent SEC Filings |
4-Dec-2012
Quarterly Report
Results of Operations
The following tables provide condensed consolidated statements of operations
data in dollars and as a percentage of our net revenue for the three months
ended October 31, 2012 and 2011.
Three Months Ended
October 31,
2012 2011
(In thousands)
Net revenue:
Products and licenses $ 27,098 $ 22,691
Services 22,407 16,664
Total net revenue 49,505 39,355
Cost of revenue(1):
Products and licenses(2) 5,840 4,694
Services 4,249 3,571
Total cost of revenue 10,089 8,265
Gross profit 39,416 31,090
Operating expenses:
Research and development(1) 10,214 8,906
Sales and marketing(1) (2) 25,631 19,673
General and administrative(1) 5,658 3,677
Total operating expenses 41,503 32,256
Loss from operations (2,087 ) (1,166 )
Other expense, net (106 ) (168 )
Loss before provision for income taxes (2,193 ) (1,334 )
Provision for income taxes 197 435
Net loss $ (2,390 ) $ (1,769 )
Three Months Ended
October 31,
2012 2011
(As a % of net revenue)
Net revenue:
Products and licenses 54.7 % 57.7 %
Services 45.3 42.3
Total net revenue 100.0 100.0
Cost of revenue(1):
Products and licenses(2) 11.8 11.9
Services 8.6 9.1
Total cost of revenue 20.4 21.0
Gross margin 79.6 79.0
Operating expenses:
Research and development(1) 20.6 22.6
Sales and marketing(1) (2) 51.8 50.0
General and administrative(1) 11.4 9.3
Total operating expenses 83.8 81.9
Operating margin (4.2 ) (2.9 )
Other expense, net (0.2 ) (0.5 )
Loss before provision for income taxes (4.4 ) (3.4 )
Provision for income taxes 0.4 1.1
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(1) Results above include stock-based compensation as follows:
Three Months Ended
October 31,
2012 2011
(In thousands)
Stock-based compensation:
Cost of revenue $ 428 $ 99
Research and development 1,212 358
Sales and marketing 2,484 810
General and administrative 798 425
Total stock-based compensation $ 4,922 $ 1,692
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(2) Results above include intangible asset amortization expense as follows:
Three Months Ended
October 31,
2012 2011
(In thousands)
Intangible asset amortization:
Cost of products and licenses revenue $ 254 $ 330
Sales and marketing 327 579
Total intangible asset amortization expense $ 581 $ 909
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Results of Operations for the Three Months Ended October 31, 2012 and 2011
The following table presents our net revenue for the three months ended
October 31, 2012 and related changes from the period in prior year:
Net Revenue
Three Months Ended
October 31, Change in
2012 2011 $ %
(Dollars in thousands)
Products and licenses $ 27,098 $ 22,691 $ 4,407 19.4 %
Services 22,407 16,664 5,743 34.5 %
Total net revenue $ 49,505 $ 39,355 $ 10,150 25.8 %
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Our net revenue increased by $10.2 million, or 25.8%, to $49.5 million during
the three months ended October 31, 2012 from $39.4 million during the three
months ended October 31, 2011.
Products and licenses revenue increased by $4.4 million, or 19.4%, to $27.1
million during the three months ended October 31, 2012 from $22.7 million during
the three months ended October 31, 2011. The change was due primarily to higher
unit sales and, to a lesser extent, an increase in the mix of higher capacity
products, which generally sell for higher prices.
Services revenue increased $5.7 million, or 34.5%, to $22.4 million during the
three months ended October 31, 2012 from $16.7 million during the three months
ended October 31, 2011. The increase in our services revenue reflects the growth
in our customer base and the strength of our renewals business. As our end
customer base grows, we expect our revenue generated from maintenance and
support services to increase.
Gross Profit
Three Months Ended
October 31, Change in
2012 2011 $ %
(Dollars in thousands)
Products and Licenses Gross Profit:
Products and licenses gross profit $ 21,258 $ 17,997 $ 3,261 18.1 %
Products and licenses gross margin 78.4 % 79.3 % (0.9 )
Services Gross Profit:
Services gross profit $ 18,158 $ 13,093 $ 5,065 38.7 %
Services gross margin 81.0 % 78.6 % 2.4
Total Gross Profit:
Total gross profit $ 39,416 $ 31,090 $ 8,326 26.8 %
Total gross margin 79.6 % 79.0 % 0.6
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Total gross margin for the three months ended October 31, 2012 was essentially unchanged compared to the three months ended October 31, 2011. The 0.9 percentage point decrease in products and licenses gross margin was primarily due to shipments of our next generation appliances, which have a higher cost. The 2.4 percentage point increase in services gross margin was principally the result of personnel costs growing more slowly than services revenue. Operating Expenses
Three Months Ended
October 31, Change in
2012 2011 $ %
(Dollars in thousands)
Research and development $ 10,214 $ 8,906 $ 1,308 14.7 %
Sales and marketing 25,631 19,673 5,958 30.3 %
General and administrative 5,658 3,677 1,981 53.9 %
Total operating expenses $ 41,503 $ 32,256 $ 9,247 28.7 %
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Research and Development Expenses
Research and development expenses increased by $1.3 million, or 14.7%, to $10.2
million during the three months ended October 31, 2012 from $8.9 million during
the three months ended October 31, 2011. The change was attributable to $1.3
million increase in personnel costs. This increase in personnel costs included a
$0.9 million increase in stock-based compensation primarily due to the adoption
our ESPP during the third quarter of fiscal 2012. We intend to continue to
invest in our research and development organization but expect research and
development expense as a percentage of revenue to remain comparable for the
remainder of fiscal 2013.
Sales and Marketing Expenses
Sales and marketing expenses increased by $6.0 million, or 30.3%, to $25.6
million during the three months ended October 31, 2012 from $19.7 million during
the three months ended October 31, 2011. The change was primarily related to a
$5.3 million increase in personnel costs, including higher sales commissions due
to higher revenues. This increase in personnel costs also included a $1.7
million increase in stock-based compensation mainly due to the adoption of our
ESPP during the third quarter of fiscal 2012. There was also a $0.3 million
increase in marketing and product promotional-related expenses as we increased
our participation in marketing events with technology partners. We intend to
continue to make investments in our sales resources and infrastructure, which
are critical to support sustainable growth, but expect sales and marketing
expense as a percentage of revenue to remain at comparable levels for the
remainder of fiscal 2013.
General and Administrative Expenses
General and administrative expenses increased by $2.0 million, or 53.9%, to $5.7
million during the three months ended October 31, 2012 from $3.7 million during
the three months ended October 31, 2011. The change was principally attributable
to a $1.3 million increase in personnel costs associated with increased
headcount. This increase included a $0.4 million increase in stock-based
compensation mainly due to the adoption of our ESPP during the third quarter of
fiscal 2012. In addition, we incurred $0.8 million in professional legal,
accounting and advisory services fees associated with our secondary offering
during the first quarter of fiscal 2013. We expect general and administrative
expense as a percentage of revenue to remain comparable or decline during the
remainder of fiscal 2013.
Provision for Income Taxes
Three Months Ended
October 31, Change in
2012 2011 $ %
(Dollars in thousands)
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Due to the full valuation allowance recorded against our domestic net deferred
tax assets, our provisions for income taxes during the three months ended
October 31, 2012 and 2011 consisted of foreign income taxes, state taxes for
states in which we have no net operating loss carryforwards, and state minimum
taxes. Our provisions for income taxes for the three months ended October 31,
2012 and 2011 were $0.2 million and $0.4 million. The decrease in our provision
for income taxes from 2011 to 2012 was principally attributable to lower foreign
income taxes.
Liquidity and Capital Resources
October 31, July 31,
2012 2012
(In thousands)
Cash and cash equivalents $ 80,067 $ 156,613
Short-term investments 88,090 -
Total cash, cash equivalents and short-term investments $ 168,157 $ 156,613
Working Capital $ 120,338 $ 113,642
Three Months Ended
October 31,
2012 2011
(In thousands)
Net cash provided by operating activities $ 8,879 $ 2,150
Net cash used in investing activities $ (88,568 ) $ (1,173 )
Net cash provided by financing activities $ 3,143 $ 342
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Cash, Cash Equivalents and Short-term Investments
As of October 31, 2012, we had cash, cash equivalents and short-term investments
of $168.2 million, including $2 million held by our foreign subsidiaries. We
intend to permanently reinvest our earnings from foreign operations, and do not
anticipate that we will need funds generated from foreign operations to fund our
domestic operations. In the event funds from foreign operations are needed to
fund operations in the United States and if U.S. tax has not already been
previously provided, we would be required to accrue and pay additional U.S.
taxes in order to repatriate these funds. Cash, cash equivalents and short-term
investments exclude $3.6 million of money market funds and time deposits
maintained in connection with various letters of credit, which are classified as
restricted cash. Cash, cash equivalents and short-term investments consist of
cash, money market funds, U.S. Treasury securities, U.S. government agency
securities and FDIC-backed certificates of deposit. We believe that our existing
cash, cash equivalents and short-term investments, together with cash generated
from operations, will be sufficient to meet our working capital expenditure
requirements for at least the next 12 months. We expect to incur a total of
approximately $13.3 million in capital expenditures in connection with the
relocation of our corporate headquarters during the second and third quarters of
fiscal 2013. Of this amount, approximately $6.0 million is expected to be
refunded by our landlord as leasehold improvement incentives. In the event that
we require additional financing from outside sources, we may not be able to
raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, operating results and financial
condition would be adversely affected.
Cash Flows from Operating Activities
Our cash provided by operating activities is driven primarily by sales and
licenses of our products and, to a lesser extent, by up-front payments from end
customers under maintenance and support contracts. Our primary uses of cash from
operating activities have been for personnel-related expenditures, manufacturing
costs, marketing and promotional expenses and costs related to our facilities.
Our cash flows from operating activities will continue to be affected
principally by our working capital requirements and the extent to which we
increase spending on personnel and sales and marketing activities as our
business grows.
Cash provided by operating activities of $8.9 million during the three months ended October 31, 2012 was primarily attributable to a net loss of $2.4 million, which was more than offset by non-cash charges of $4.9 million for stock-based compensation and $1.4 million for depreciation and amortization. The $5.0 million change in our net operating assets and liabilities was primarily a result of a $2.4 million increase in accrued compensation mainly related to employee contributions under our ESPP, a $1.6 million increase in deferred revenue attributable to an increase in our established base of maintenance and support contracts and a $0.9 million decrease in accounts receivable due to better collection.
Cash provided by operating activities of $2.2 million during the three months
ended October 31, 2011 was primarily attributable to a net loss of $1.8 million,
which was more than offset by non-cash charges of $1.7 million for stock-based
compensation, $1.6 million for depreciation and amortization and a $0.7 million
cash inflow from the change in our net operating assets and liabilities. The
$0.7 million change in our net operating assets and liabilities was primarily a
result of an increase in net deferred revenue of $3.2 million, which was
attributable to an increase in our established base of maintenance and support
contracts, partially offset by a $1.2 million increase in accounts receivable, a
$0.2 million increase in inventory, a $0.5 million increase in prepaid expenses,
other current assets and other assets, a $0.5 million decrease in accrued
compensation and a $0.2 million decrease in other liabilities.
Cash Flows from Investing Activities
Our uses of cash from investing activities consisted primarily of capital
expenditures for computer equipment and software, cash used for acquisitions and
the purchase of intangible assets and net purchases of short-term investments.
The $88.6 million cash used in our investing activities during the three months
ended October 31, 2012 was primarily due to $88.2 million in cash used to
purchase short-term investments and $0.9 million in cash used for purchases of
computer equipment and software, partially offset by the $0.5 million decrease
in restricted cash.
During the three months ended October 31, 2011, cash used in investing
activities was approximately $1.2 million primarily for purchases of computer
equipment and software.
Cash Flows from Financing Activities
Cash provided by financing activities during the three months ended October 31,
2012 and 2011 consisted primarily of net proceeds from the issuance of common
stock related to the exercise of stock options which amounted to $3.2 million
and $0.3 million.
Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States and include our
accounts and the accounts of our wholly-owned subsidiaries. The preparation of
these condensed consolidated financial statements requires our management to
make estimates, assumptions and judgments that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenue and
expenses during the applicable periods. We base our estimates, assumptions and
judgments on historical experience and on various other factors that we believe
to be reasonable under the circumstances. Different assumptions and judgments
would change the estimates used in the preparation of our consolidated financial
statements, which, in turn, could change the results from those reported. We
evaluate our estimates, assumptions and judgments on an ongoing basis.
There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in our Annual Report on Form 10-K for the fiscal year ended July 31,
2012.
Contractual Obligations
Our contractual commitments will have an impact on our future liquidity. The
following table summarizes our contractual obligations that represent material
expected or contractually committed future obligations, as of October 31, 2012.
We believe that we will be able to fund these obligations through cash generated
from operations and from our existing cash and cash equivalents balances.
Payments Due by Period
Remainder of 2018 and
Total 2013 2014 2015 2016 2017 Thereafter
Contractual (In thousands)
Obligations(1):
Operating lease
obligations(2) $ 32,713 $ 2,771 $ 4,427 $ 4,134 $ 4,093 $ 4,062 $ 13,226
Purchase
commitments(3) 2,380 2,380 - - - - -
Total $ 35,093 $ 5,151 $ 4,427 $ 4,134 $ 4,093 $ 4,062 $ 13,226
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(1) The contractual obligation table above excludes tax liabilities of $1.3 million related to uncertain tax positions because we are unable to make a reasonably reliable estimate of the timing of settlement, if any, of these future payments.
(2) Operating lease obligations represent our obligations to make payments under non-cancelable lease agreements for our facilities. In May 2012, we entered into a lease agreement for our new corporate headquarters in Santa Clara, California for an initial term of eight years commencing on February 2013. Our annual base rent under this lease ranges from approximately $3.2 million to $3.9 million over its term.
(3) Purchase commitments are contractual obligations to purchase inventory from our third-party manufacturers in advance of anticipated sales.
Off-Balance Sheet Arrangements
As of October 31, 2012, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, that would have been established
for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes.
Recent Accounting Pronouncements
See Note 1 of our notes to condensed consolidated financial statements for a
full description of recent accounting pronouncements.
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