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 5-Jun-2014All Recent SEC Filings

Show all filings for INFOBLOX INC

Form 10-Q for INFOBLOX INC


5-Jun-2014

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. 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 49.5% and 42.1% of our total net revenue for the three months ended April 30, 2014 and 2013 and was 47.0% and 43.5% of our total net revenue for the nine months ended April 30, 2014 and 2013.
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 third quarter of fiscal 2014, we saw continued year-over-year growth in total net revenue with significant increases in EMEA and APAC, partially offset by a slight decrease in the Americas. Total net revenue increased 5.1% year-over-year with services increasing by 23.7% while product revenue decreased by 8.3%. From a geographic perspective, year-over-year revenue increased by 15.1% in EMEA and 21.6% in APAC while the Americas decreased by 1.0%. Sequentially, product revenue decreased 2.4% from the prior quarter while services revenue increased by 3.1% and revenue in EMEA and APAC increased 9.4% and 16.7% while the Americas revenue decreased 5.7%. As reflected in our results of operations, the challenges we began to experience in our business during January 2014 continued in the third quarter of fiscal 2014. While we are taking actions to improve our sales execution and growth prospects, we anticipate that we will continue to experience a slowing of our revenue growth for at least two quarters.

During the quarter, we generated $9.5 million in cash flows from operating activities and exited the third quarter with approximately $261.7 million in cash, cash equivalents and short term investments and $110.4 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 nine months ended April 30, 2014, total operating expenses increased by 20.5% compared to the same period in the prior year. As of April 30, 2014, our employee count was 684 representing an increase of 21.3% from April 31, 2013 and was the most significant driver of the increase in costs and operating expenses.

Stock-based compensation expense amounted to $10.7 million and $5.7 million in the three months ended April 30, 2014 and 2013 and was $30.1 million and $16.2 million during the nine months ended April 30, 2014 and 2013. 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 and nine months
ended April 30, 2014 and 2013.

                                            Three Months Ended April 30,             Nine months ended April 30,
                                              2014                 2013               2014                2013

                                                                      (In thousands)
Net revenue:
Products and licenses                  $      30,799         $      33,596      $      98,326        $     91,501
Services                                      30,223                24,439             87,099              70,478
Total net revenue                             61,022                58,035            185,425             161,979
Cost of revenue(1):
Products and licenses(2)                       7,119                 7,786             22,092              20,726
Services                                       6,665                 4,910             19,119              13,701
Total cost of revenue                         13,784                12,696             41,211              34,427
Gross profit                                  47,238                45,339            144,214             127,552
Operating expenses:
Research and development(1)                   12,175                10,976             35,619              31,783
Sales and marketing(1) (2)                    34,589                28,138            100,574              82,877
General and administrative(1)                  7,839                 6,195             21,673              17,346
Total operating expenses                      54,603                45,309            157,866             132,006
Income (loss) from operations                 (7,365 )                  30            (13,652 )            (4,454 )
Other income (expense), net                      124                   (45 )              (80 )              (371 )
Loss before provision for income taxes        (7,241 )                 (15 )          (13,732 )            (4,825 )
Provision for income taxes                       201                   242                653               1,068
Net loss                               $      (7,442 )       $        (257 )    $     (14,385 )      $     (5,893 )

                                            Three Months Ended April 30,             Nine months ended April 30,
                                              2014                 2013               2014                2013
Net revenue:
Products and licenses                           50.5  %               57.9  %            53.0  %             56.5  %
Services                                        49.5                  42.1               47.0                43.5
Total net revenue                              100.0                 100.0              100.0               100.0
Cost of revenue(1):
Products and licenses(2)                        11.7                  13.4               11.9                12.8
Services                                        10.9                   8.5               10.3                 8.5
Total cost of revenue                           22.6                  21.9               22.2                21.3
Gross margin                                    77.4                  78.1               77.8                78.7
Operating expenses:
Research and development(1)                     20.0                  18.9               19.2                19.6
Sales and marketing(1) (2)                      56.7                  48.5               54.2                51.1
General and administrative(1)                   12.8                  10.6               11.8                10.7
Total operating expenses                        89.5                  78.0               85.2                81.4
Operating margin                               (12.1 )                 0.1               (7.4 )              (2.7 )
Other income (expense), net                      0.2                  (0.1 )                -                (0.3 )
Loss before provision for income taxes         (11.9 )                   -               (7.4 )              (3.0 )
Provision for income taxes                       0.3                   0.4                0.4                 0.6

Net loss (12.2 )% (0.4 )% (7.8 )% (3.6 )%


Table of Contents

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

                                     Three Months Ended April 30,         Nine months ended April 30,
                                        2014               2013              2014              2013

                                                             (In thousands)
Stock-based compensation:
Cost of revenue                  $             953     $       387     $         2,617     $     1,191
Research and development                     1,828           1,145               5,411           3,541
Sales and marketing                          5,874           2,956              16,942           8,643
General and administrative                   2,019           1,162               5,169           2,815
Total stock-based compensation   $          10,674     $     5,650     $        30,139     $    16,190

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

                                    Three Months Ended April 30,        Nine months ended April 30,
                                       2014              2013              2014              2013

                                                            (In thousands)
Intangible asset amortization:
Cost of products and licenses    $           290     $       254     $           820     $       762
revenue
Sales and marketing                          327             327                 981             981
Total intangible asset           $           617     $       581     $         1,801     $     1,743
amortization expense

Results of Operations for the Three and Nine Months Ended April 30, 2014 and 2013
The following table presents our net revenue for the three and nine months ended April 30, 2014 and related changes from the same period in prior year:
Net Revenue

                      Three Months Ended April
                                30,                    Change in            Nine Months Ended April 30,           Change in
                         2014          2013          $            %             2014             2013           $           %

                                                                (Dollars in thousands)
Products and licenses $  30,799     $ 33,596     $ (2,797 )     (8.3 )%   $        98,326     $  91,501     $  6,825        7.5 %
Services                 30,223       24,439        5,784       23.7  %            87,099        70,478       16,621       23.6 %
Total net revenue     $  61,022     $ 58,035     $  2,987        5.1  %   $       185,425     $ 161,979     $ 23,446       14.5 %

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013 Our net revenue increased by $3.0 million, or 5.1%, to $61.0 million during the three months ended April 30, 2014 from $58.0 million during the three months ended April 30, 2013.
Products and licenses revenue decreased by $2.8 million, or 8.3%, to $30.8 million during the three months ended April 30, 2014 from $33.6 million during the three months ended April 30, 2013. The change was due primarily to decreased sales of our solutions.


Table of Contents

Services revenue increased $5.8 million, or 23.7%, to $30.2 million during the three months ended April 30, 2014 from $24.4 million during the three months ended April 30, 2013. 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.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013 Our net revenue increased by $23.4 million, or 14.5%, to $185.4 million during the nine months ended April 30, 2014 from $162.0 million during the nine months ended April 30, 2013.
Products and licenses revenue increased by $6.8 million, or 7.5%, to $98.3 million during the nine months ended April 30, 2014 from $91.5 million during the nine months ended April 30, 2013. The change was due primarily to increased sales of our higher capacity and higher performance products.
Services revenue increased $16.6 million, or 23.6%, to $87.1 million during the nine months ended April 30, 2014 from $70.5 million during the nine months ended April 30, 2013. 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.

Gross Profit
                      Three Months Ended April 30,             Change in               Nine Months Ended April 30,              Change in
                         2014               2013             $            %             2014                 2013             $            %

                                                                      (Dollars in thousands)
Products and
Licenses Gross
Profit:
Products and
licenses gross
profit             $      23,680       $      25,810     $ (2,130 )     (8.3 )%   $       76,234       $       70,775     $  5,459        7.7  %
Products and
licenses gross
margin                      76.9 %              76.8 %                   0.1                77.5 %               77.3 %                   0.2
Services Gross
Profit:
Services gross
profit             $      23,558       $      19,529     $  4,029       20.6  %   $       67,980       $       56,777     $ 11,203       19.7  %
Services gross
margin                      77.9 %              79.9 %                  (2.0 )              78.0 %               80.6 %                  (2.6 )
Total Gross
Profit:
Total gross profit $47,238             $45,339           $  1,899        4.2  %   $      144,214       $      127,552     $ 16,662       13.1  %
Total gross margin          77.4 %              78.1 %                  (0.7 )              77.8 %               78.7 %                  (0.9 )

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013 Total gross margin during the three months ended April 30, 2014 was 0.7 percentage point lower than the same period in the prior year primarily due to the decrease in our services gross margin. Services gross margin decreased by 2.0 percentage points primarily due to personnel costs which increased at a higher rate than our services revenue.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013 Total gross margin during the nine months ended April 30, 2014 was 0.9 percentage point lower than the same period in the prior year primarily due to the decrease in our services gross margin. Services gross margin decreased by 2.6 percentage points primarily due to personnel costs which increased at a higher rate than our services revenue.


Table of Contents

Operating Expenses

                    Three Months Ended
                        April 30,                Change in           Nine Months Ended April 30,           Change in
                    2014          2013          $          %             2014             2013           $           %

                                                          (Dollars in thousands)
Research and
development      $  12,175     $ 10,976     $ 1,199       10.9 %   $        35,619     $  31,783     $  3,836       12.1 %
Sales and
marketing           34,589       28,138       6,451       22.9 %           100,574        82,877       17,697       21.4 %
General and
administrative       7,839        6,195       1,644       26.5 %            21,673        17,346        4,327       24.9 %
Total operating
expenses         $  54,603     $ 45,309     $ 9,294       20.5 %   $       157,866     $ 132,006     $ 25,860       19.6 %

Three Months Ended April 30, 2014 Compared to Three Months Ended April 30, 2013 Research and Development Expenses
Research and development expenses increased by $1.2 million, or 10.9%, to $12.2 million during the three months ended April 30, 2014 from $11.0 million during the three months ended April 30, 2013. The change was primarily attributable to a $0.5 million increase in the cost of third-party engineering and development services and a $0.4 million increase in personnel costs mainly due to the increase in stock-based compensation associated with our equity compensation programs. 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 $6.5 million, or 22.9%, to $34.6 million during the three months ended April 30, 2014 from $28.1 million during the three months ended April 30, 2013. The change was primarily related to a $5.7 million increase in personnel costs, which includes a $2.9 million increase in stock-based compensation related to our equity compensation programs. The change was also attributable to a $0.4 million increase in facility and information technology related expenses. We intend to continue to make investments in our sales resources and infrastructure and expect sales and marketing expense as a percentage of revenue to slightly increase for the remainder of fiscal 2014.
General and Administrative Expenses
General and administrative expenses increased by $1.6 million, or 26.5%, to $7.8 million during the three months ended April 30, 2014 from $6.2 million during the three months ended April 30, 2013. The change was principally attributable to a $1.3 million increase in personnel costs associated primarily with increased headcount. This increase included a $0.9 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. We expect general and administrative expense as a percentage of revenue to remain relatively consistent during the remainder of fiscal 2014.

Nine Months Ended April 30, 2014 Compared to Nine Months Ended April 30, 2013 Research and Development Expenses
Research and development expenses increased by $3.8 million, or 12.1%, to $35.6 million during the nine months ended April 30, 2014 from $31.8 million during the nine months ended April 30, 2013. The change was primarily attributable to a $1.7 million increase in personnel costs mainly due to an increase in stock-based compensation associated with our equity compensation programs. The change was also due to a $0.9 million increase in the cost of third-party engineering and development services and a $0.8 million increase in facility and information technology related expenses.


Table of Contents

Sales and Marketing Expenses
Sales and marketing expenses increased by $17.7 million, or 21.4%, to $100.6 million during the nine months ended April 30, 2014 from $82.9 million during the nine months ended April 30, 2013. The change was primarily related to a $14.5 million increase in personnel costs including an $8.3 million increase in stock-based compensation related to our equity compensation programs. The change was also attributable to a $2.2 million increase in facility and information technology related expenses and a $0.3 million increase in marketing expenses related to increased participation in marketing events with channel and technology partners.
General and Administrative Expenses
General and administrative expenses increased by $4.3 million, or 24.9%, to $21.7 million during the nine months ended April 30, 2014 from $17.3 million during the nine months ended April 30, 2013. The change was principally attributable to a $4.1 million increase in personnel costs associated primarily with increased headcount. This increase included a $2.4 million increase in stock-based compensation related to our equity compensation programs. Provision for Income Taxes
Nine Months Ended April Three Months Ended April 30, Change in 30, Change in 2014 2013 $ % 2014 2013 $ %

(Dollars in thousands)

Provision for
income taxes $ 201 $ 242 $ (41 ) (16.9 )% $ 653 $ 1,068 $ (415 ) (38.9 )%

The provision for income taxes for the three months ended April 30, 2014 and 2013 was $0.2 million for both periods, and the provision for income taxes for the nine months ended April 30, 2014 and 2013 was $0.7 million and $1.1 million. The provision for income taxes consisted primarily of state and foreign income taxes. The decrease in the provision for income taxes for nine months ended April 30, 2014 compared to the same period in the prior year was principally attributable to lower state income tax as a result of lower projected fiscal 2014 taxable income. 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.


Table of Contents

Liquidity and Capital Resources
                                                            April 30, 2014       July 31, 2013
. . .
  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
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.