Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
BLOX > SEC Filings for BLOX > Form 10-Q on 6-Dec-2013All Recent SEC Filings

Show all filings for INFOBLOX INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for INFOBLOX INC


6-Dec-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-Q, including this Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," "assumes," and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under "Part II, Item 1A. Risk Factors," and elsewhere herein. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes to audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on September 20, 2013. In this Quarterly Report, unless otherwise specified or the context otherwise requires, "Infoblox," "we," "us," and "our" refer to Infoblox and its consolidated subsidiaries. Business Overview
We are a leader in automated network control and provide an appliance-based solution that enables dynamic networks and next-generation data centers. Our solution combines real-time IP address management with the automation of key network control and network change and configuration management processes in purpose-built physical and virtual appliances. It is based on our proprietary software that is highly scalable and automates vital network functions, such as IP address management, device configuration, compliance, network discovery, policy implementation, security and monitoring. Our solution enables our end customers to create dynamic networks, address burgeoning growth in the number of network-connected devices and applications, manage complex networks efficiently and capture more fully the value from virtualization and cloud computing. Our physical appliances are built by third-party manufacturers and primarily utilize readily available components. Our virtual appliances are designed to approximate their physical counterparts in functionality, scalability and performance and currently operate in VMware and Microsoft virtual environments and are integrated within certain third party products.
We derive revenue from sales and licensing of our products and sales of our services. We generate products and licenses revenue primarily from sales of perpetual licenses to our software installed on our physical and virtual appliances. We generate services revenue primarily from sales of maintenance and support and, to a lesser extent, from sales of training and consulting services. End customers typically purchase maintenance and support in conjunction with purchases of our products, and generally renew their maintenance and support contracts upon expiration. Maintenance and support provide a significant source of recurring revenue for us. Services revenue was 43.4% and 45.3% of our total net revenue for the three months ended October 31, 2013 and 2012. We sell our products and services to enterprises and government entities primarily through our channel partners, including distributors, systems integrators, managed service providers and value-added resellers in the United States and internationally. We also have a field sales force that sells our solution directly to certain end customers, and typically works closely with our channel partners in all phases of initial sales of our products and services.


Table of Contents

Our results of operations have benefited from the increasing complexity of networks, including increasing numbers of connected devices and applications, expanding use of technologies, such as virtualization, cloud computing and adoption of IPv6, which we believe is straining legacy network control approaches and driving organizations to replace their legacy approaches to network control with automated network control solutions. Accordingly, we expect that our future business and operating results will be significantly affected by the speed with which organizations transition to automated network control solutions. Our future business and operating results will depend both on our ability to add new end customers continually and to continue to sell additional products and services to our growing base of existing customers directly and through our channel partners. Since our prior results have benefited from our success at selling more complex and higher performance configurations of our product solutions, which generally result in higher value per product sold, we expect that our ability to sell more robust product configurations will be an important factor in sustaining our revenue growth rates and our operating results in any quarter. To achieve the foregoing objectives, we intend to continue to invest for long-term growth by, among other things, expanding our field sales force, our channel and technology partnerships and our programs to market our solutions. In addition, we expect to continue to invest in research and development and selective acquisitions in order to expand the capabilities of our solutions. We expect that our operating results will be impacted by the timing and size of these investments over the next few quarters.

Financial Highlights

In the first quarter of fiscal 2014, we saw continued growth with significant year-over-year revenue increases across all of our major geographic regions and industry verticals. Total revenue increased 28.3% year-over-year while product revenue increased by 32.7%. From a geographic perspective, year-over-year revenue increased by 32.7% in the Americas, 19.4% in EMEA and 21.0% in APAC. Sequentially, EMEA and APAC revenue decreased from the prior quarter due to the strong performance in the previous quarter.

During the quarter, we generated $14.9 million in cash flows from operating activities and exited the first quarter with approximately $229.1 million in cash, cash equivalents and short term investments and $103.3 million of total deferred net revenue.

We continued to invest in our organization to achieve our profitability goals, incurring additional expenses to expand our sales, support, marketing, development, and general and administrative capabilities to grow our business. Personnel-related costs, including stock-based compensation, are the most significant component of our operating expenses. During the first quarter of fiscal 2014, total operating expenses increased by 24.6% compared to the same period in the prior year. As of October 31, 2013, our employee count was 633 for an increase of 22% from October 31, 2012 and is the most significant driver of the increase in costs and operating expenses.

Stock-based compensation expense amounted to $9.0 million and $4.9 million in the three months ended October 31, 2013 and 2012. We expect to continue to incur significant stock-based compensation expense and anticipate further growth in stock-based compensation expense as our employee base grows because we expect stock-based compensation to continue to play an important part in the overall compensation structure for our employees.


Table of Contents

Results of Operations
The following tables provide condensed consolidated statements of operations
data in dollars and as a percentage of net revenue for the three months ended
October 31, 2013 and 2012.

                                             Three Months Ended October 31,
                                                2013                 2012

                                                    (In thousands)
Net revenue:
Products and licenses                    $      35,962         $      27,098
Services                                        27,559                22,407
Total net revenue                               63,521                49,505
Cost of revenue(1):
Products and licenses(2)                         7,887                 5,840
Services                                         5,821                 4,249
Total cost of revenue                           13,708                10,089
Gross profit                                    49,813                39,416
Operating expenses:
Research and development(1)                     11,600                10,214
Sales and marketing(1) (2)                      33,131                25,631
General and administrative(1)                    6,986                 5,658
Total operating expenses                        51,717                41,503
Loss from operations                            (1,904 )              (2,087 )
Other expense, net                                (101 )                (106 )
Loss before provision for income taxes          (2,005 )              (2,193 )
Provision for income taxes                         544                   197
Net loss                                 $      (2,549 )       $      (2,390 )

                                             Three Months Ended October 31,
                                                2013                 2012
Net revenue:
Products and licenses                             56.6  %               54.7  %
Services                                          43.4                  45.3
Total net revenue                                100.0                 100.0
Cost of revenue(1):
Products and licenses(2)                          12.4                  11.8
Services                                           9.2                   8.6
Total cost of revenue                             21.6                  20.4
Gross margin                                      78.4                  79.6
Operating expenses:
Research and development(1)                       18.3                  20.6
Sales and marketing(1) (2)                        52.1                  51.8
General and administrative(1)                     11.0                  11.4
Total operating expenses                          81.4                  83.8
Operating margin                                  (3.0 )                (4.2 )
Other expense, net                                (0.2 )                (0.2 )
Loss before provision for income taxes            (3.2 )                (4.4 )
Provision for income taxes                         0.8                   0.4

Net loss (4.0 )% (4.8 )%


Table of Contents

(1) Results above include stock-based compensation as follows:

                                         Three Months Ended October 31,
                                                2013                     2012

                                                (In thousands)
Stock-based compensation:
Cost of revenue                  $            704                      $   428
Research and development                    1,672                        1,212
Sales and marketing                         5,192                        2,484
General and administrative                  1,473                          798
Total stock-based compensation   $          9,041                      $ 4,922

(2) Results above include intangible asset amortization expense as follows:

                                                              Three Months Ended October 31,
                                                                   2013              2012

                                                                    (In thousands)
Intangible asset amortization:
Cost of products and licenses revenue                       $            254     $      254
Sales and marketing                                                      327            327
Total intangible asset amortization expense                 $            581     $      581

Results of Operations for the Three Months Ended October 31, 2013 and 2012 The following table presents our net revenue for the three months ended October 31, 2013 and related changes from the same period in prior year:
Net Revenue

                                Three Months Ended October 31,               Change in
                                       2013                    2012          $         %

                                             (Dollars in thousands)
Products and licenses   $          35,962                    $ 27,098    $  8,864    32.7 %
Services                           27,559                      22,407       5,152    23.0 %
Total net revenue       $          63,521                    $ 49,505    $ 14,016    28.3 %

Three Months Ended October 31, 2013 Compared to Three Months Ended October 31, 2012
Our net revenue increased by $14.0 million, or 28.3%, to $63.5 million during the three months ended October 31, 2013 from $49.5 million during the three months ended October 31, 2012.
Products and licenses revenue increased by $8.9 million, or 32.7%, to $36.0 million during the three months ended October 31, 2013 from $27.1 million during the three months ended October 31, 2012. The change was due primarily to increased sales of our higher capacity and higher performance products and sales of new products.


Table of Contents

Services revenue increased $5.2 million, or 23.0%, to $27.6 million during the three months ended October 31, 2013 from $22.4 million during the three months ended October 31, 2012. The change was primarily attributable to the growth of our established base of customers with maintenance and support contracts for which revenue is recognized ratably over the service period. 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
                                                 2013                 2012              $             %

                                                               (Dollars in thousands)
Products and Licenses Gross Profit:
Products and licenses gross profit         $       28,075       $       21,258     $   6,817         32.1  %
Products and licenses gross margin                   78.1 %               78.4 %                     (0.3 )
Services Gross Profit:
Services gross profit                      $       21,738       $       18,158     $   3,580         19.7  %
Services gross margin                                78.9 %               81.0 %                     (2.1 )
Total Gross Profit:
Total gross profit                         $       49,813       $       39,416     $  10,397         26.4  %
Total gross margin                                   78.4 %               79.6 %                     (1.2 )

Three Months Ended October 31, 2013 Compared to Three Months Ended October 31, 2012
Total gross margin during the three months ended October 31, 2013 was 1.2 percentage points lower than the same period in the prior year primarily due to the decrease in our services gross margin. Services gross margin decreased by 2.1 percentage points primarily due to personnel costs which increased at a higher rate than services revenue as we continue to scale our business to accommodate growth in our install base.


Table of Contents

Operating Expenses

                                            Three Months Ended October
                                                       31,                      Change in
                                               2013           2012            $            %

                                                          (Dollars in thousands)
Research and development                   $    11,600     $  10,214     $   1,386         13.6 %
Sales and marketing                             33,131        25,631         7,500         29.3 %
General and administrative                       6,986         5,658         1,328         23.5 %
Total operating expenses                   $    51,717     $  41,503     $  10,214         24.6 %

Three Months Ended October 31, 2013 Compared to Three Months Ended October 31, 2012
Research and Development Expenses
Research and development expenses increased by $1.4 million, or 13.6%, to $11.6 million during the three months ended October 31, 2013 from $10.2 million during the three months ended October 31, 2012. The change was primarily attributable to a $0.7 million increase in personnel costs, which includes a $0.5 million increase in stock-based compensation associated with our equity compensation programs. The change was also due to a $0.4 million increase in facility and information technology related expenses and a $0.1 million increase in the cost of third-party engineering and development services. 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 relatively consistent for the remainder of fiscal 2014.
Sales and Marketing Expenses
Sales and marketing expenses increased by $7.5 million, or 29.3%, to $33.1 million during the three months ended October 31, 2013 from $25.6 million during the three months ended October 31, 2012. The change was primarily related to a $6.0 million increase in personnel costs due to increased headcount and a $2.7 million increase in stock-based compensation related to our equity compensation programs. The change was also attributable to a $0.9 million increase in facility and information technology related expenses, a $0.2 million increase in marketing expenses related to increased participation in marketing events with channel and technology partners and a $0.2 million increase in third-party sales and marketing services. We intend to continue to make investments in our sales resources and infrastructure, but expect sales and marketing expense as a percentage of revenue to remain at relatively consistent levels for the remainder of fiscal 2014.
General and Administrative Expenses
General and administrative expenses increased by $1.3 million, or 23.5%, to $7.0 million during the three months ended October 31, 2013 from $5.7 million during the three months ended October 31, 2012. The change was principally attributable to a $1.4 million increase in personnel costs associated primarily with increased headcount. This increase included a $0.7 million increase in stock-based compensation related to our equity compensation programs. In addition, there was a $0.3 million increase in consulting, professional accounting, tax and advisory services associated with our organizational growth and operations as a public company and a $0.3 million in facility and information technology related expenses. These increases were partially offset by the $0.8 million decrease in professional, legal, accounting and advisory services fees. Such fees were higher during the first quarter of fiscal 2013 as a result of the October 2012 secondary offering by certain of our stockholders. We expect general and administrative expense as a percentage of revenue to remain relatively consistent during the remainder of fiscal 2014.


Table of Contents

Provision for Income Taxes
Three Months Ended October 31, Change in 2013 2012 $ %

(Dollars in thousands)

Provision for income taxes $ 544 $ 197 $ 347 176.1 %

The provision for income taxes for the three months ended October 31, 2013 and 2012 was $0.5 million and $0.2 million. The provision for income taxes for the three months ended October 31, 2013 consists primarily of federal and state income taxes. The income tax provision for the three months ended October 31, 2012 consists primarily of state and foreign income taxes. The increase in the provision for income taxes for the three months ended October 31, 2013 compared to the same period in the prior year was principally attributable to $0.3 million of federal income tax provision due to limitations on our ability to utilize certain net operating loss carryforwards. We continued to provide a full valuation allowance against our domestic net deferred tax assets. As a result of the utilization of our net operating losses, we expect to experience higher levels of provision for income taxes in future annual periods.

Liquidity and Capital Resources
                                                           October 31, 2013       July 31, 2013

                                                                      (In thousands)
Cash and cash equivalents                                 $          84,241     $        69,828
Short-term investments                                              144,892             139,508
Total cash, cash equivalents and short-term investments   $         229,133     $       209,336

Working Capital                                           $         181,212     $       166,581



                                                 Three Months Ended October 31,
                                                  2013                  2012

                                                        (In thousands)
Net cash provided by operating activities   $       14,906       $          8,879
Net cash used in investing activities       $       (7,014 )     $        (88,568 )
Net cash provided by financing activities   $        6,521       $          3,143

Cash, Cash Equivalents and Short-term Investments As of October 31, 2013, we had cash, cash equivalents and short-term investments of $229.1 million, including $3.4 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 $3.5 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. 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.


Table of Contents

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 $14.9 million during the three months ended October 31, 2013 was primarily attributable to a net loss of $2.5 million, which was more than offset by non-cash charges of $9.0 million for stock-based compensation, $2.1 million for depreciation and amortization and a $6.6 million cash inflow from the change in our net operating assets and liabilities. The $6.6 million change in our net operating assets and liabilities was primarily the result of a $5.1 million increase in deferred revenue attributable to an increase in our established base of maintenance and support contracts, a $1.5 million increase in accounts payable and accrued liabilities, a $1.1 million increase in accrued compensation primarily due to employee contributions under our ESPP and a $0.8 million decrease in prepaid expenses, other current assets and other assets, partially offset by a $0.9 million increase in accounts receivable due to the growth of our business and the timing of invoicing, a $0.8 million increase in inventory and a $0.2 million decrease in other liabilities.
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, $1.4 million for depreciation and amortization and a $5.0 million cash inflow from the change in our net operating assets and liabilities. 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 Flows from Investing Activities
The $7.0 million cash used in our investing activities during the three months ended October 31, 2013 was primarily due to $27.1 million in cash used to purchase short-term investments and $1.5 million in cash used for purchases of computer equipment and software and certain leasehold improvements, partially . . .

  Add BLOX to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for BLOX - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.