Infoblox Reports Second Quarter of Fiscal 2014 Results

Infoblox (NYSE:BLOX), the automated network control company, today reported its financial results for its second fiscal quarter ended January 31, 2014. Total net revenue for the second quarter of fiscal 2014 was $60.9 million, an increase of 12% on a year-over-year basis.

On a GAAP basis, the Company reported a net loss of $4.4 million, or $0.08 loss per fully diluted share, for the second quarter of fiscal 2014, compared with a net loss of $3.2 million, or $0.07 loss per fully diluted share, for the second quarter of fiscal 2013.

The Company reported non-GAAP net income of $6.6 million, or $0.11 diluted earnings per share on a non-GAAP weighted-average share basis, for the second quarter of fiscal 2014, compared with non-GAAP net income of $3.0 million, or $0.06 diluted earnings per share on a non-GAAP weighted-average share basis, for the second quarter of fiscal 2013. The GAAP to non-GAAP reconciling items for the second quarters of fiscal years 2014 and 2013 can be found in the "Reconciliation of GAAP to Non-GAAP Financial Measures" attached to this press release.

The second quarter fiscal 2014 financial results reported today by the Company, both on a GAAP and non-GAAP basis, are in line with the preliminary second quarter financial results provided in the Company’s press release on February 10, 2014.

“While we are disappointed in our second quarter financial results, we believe there are several strong secular trends from which we are continuing to benefit,” said Robert Thomas, president and chief executive officer. “The trends toward mobile devices, cloud computing, virtualization and next-generation data centers are placing incredible demands on networks worldwide. And with the sharp increase in DNS-based attacks, we see a great opportunity in the security market. We remain confident in our long-term strategy and are taking actions to improve our current growth trajectory.”

Financial Outlook

Infoblox announced its outlook of anticipated results for the third quarter ending April 30, 2014 and affirmed its revenue and non-GAAP EPS outlook for the year ending July 31, 2014 given in the Company’s press release on February 10, 2014. This outlook is based on a number of assumptions that it believes are reasonable at the time of this earnings release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in Infoblox’s filings with the Securities and Exchange Commission.

For the third fiscal quarter ending April 30, 2014, the Company currently expects:

• Total net revenue in the range of $61 million to $62 million;
• Non-GAAP gross margin to be between 78% to 79%;
• Non-GAAP operating margin in the range of 2.5% to 3.5%; and
• Non-GAAP diluted net income per share ("non-GAAP EPS") to be in the range of $0.02 to $0.03, assuming approximately 57.7 million shares on a non-GAAP diluted weighted-average share basis.

For the fiscal year ending July 31, 2014, the Company currently expects:

• Total net revenue in the range of $250 million to $254 million;
• Non-GAAP operating margin in the range of 7.5% to 8.5%; and
• Non-GAAP EPS to be in the range of $0.30 to $0.34, assuming approximately 57.5 million shares on a non-GAAP diluted weighted-average share basis.

About Non-GAAP Financial Measures

To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including non-GAAP gross profit and gross margin, non-GAAP operating income and operating margin, non-GAAP net income, non-GAAP EPS and non-GAAP diluted weighted-average shares outstanding. We also provide third fiscal quarter 2014 and fiscal year 2014 estimates for non-GAAP gross margin, non-GAAP operating margin, non-GAAP EPS and non-GAAP diluted weighted-average shares outstanding. We believe these non-GAAP financial measures are helpful in understanding our past financial performance and future results. Our non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. Our non-GAAP financial measures include adjustments based on the following items:

Stock-based compensation expenses: We have excluded the effect of stock-based compensation from our non-GAAP operating results. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets from our non-GAAP operating results. Amortization of intangible assets is a non-cash expense, and it is not part of our core operations. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well.

Acquisition related expenses: Acquisition related expenses may include transaction costs, costs for transitional employees, other acquired employee related retention costs, integration related professional services, adjustments to the fair value of the acquisition related contingent consideration, and the write-down of certain acquired in-progress research and development intangibles. We believe that to the extent we incur significant expenses in connection with our acquisitions, it is useful for investors to understand the effects of these items on our total operating expenses.

Our non-GAAP Financial Measures are described as follows:

Non-GAAP gross profit and gross margin. Non-GAAP gross profit is gross profit as reported on our consolidated statements of operations, excluding the impact of stock-based compensation and intangible asset amortization expense. Non-GAAP gross margin is non-GAAP gross profit divided by net revenue.

Non-GAAP operating income and operating margin. Non-GAAP operating income is income (loss) from operations as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, intangible asset amortization expense and acquisition related expenses. Non-GAAP operating margin is non-GAAP operating income divided by net revenue.

Non-GAAP net income and non-GAAP EPS. Non-GAAP net income is net income (loss) as reported on our consolidated statements of operations, excluding the impact of stock-based compensation, intangible asset amortization expense and acquisition related expenses. Non-GAAP EPS is non-GAAP net income divided by non-GAAP diluted weighted-average shares outstanding.

For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, “Reconciliation of GAAP to Non-GAAP Financial Measures.”

Conference Call & Webcast

Management will host a conference call today, February 26, 2014, at 1:30 p.m. PT/4:30 p.m. ET to discuss its fiscal second quarter 2014 financial results. To access the call, investors may dial 800-230-1092 (domestic) or 612-288-0337 (international) at least 10 minutes prior to the scheduled start of the call. A live webcast of the call will also be available on the corporate website at: http://ir.infoblox.com. An archive of the webcast will be available to the company’s website and a taped reply will be available for one week at 800-475-6701 (domestic) or 320-365-3844 (international), passcode 318525.

About Infoblox

Infoblox (NYSE:BLOX) delivers Automated Network Control solutions, the fundamental technology that connects end users, devices and networks. These solutions enable approximately 7,100 enterprises and service providers to transform, secure and scale complex networks. Infoblox helps take the burden of complex network control out of human hands, reduce costs, and increase security, accuracy and uptime. Infoblox is headquartered in Santa Clara, California and has operations in over 25 countries.

Cautionary Statement

All statements in this release that are not statements of historical fact, including but not limited to the quotation attributable to Mr. Thomas and the statements under “Financial Outlook” are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: unexpected delays in the delivery of our solutions, particularly at the end of the quarter, changes in demand for automated network control solutions, the market acceptance of our products; the fluctuations in our gross margins; the concentration of our customer base; competitive developments including pricing pressures; our ability to manage operating expenses effectively; and the general economic, industry or political conditions in the United States or internationally.

For a detailed discussion of these and other risk factors, please refer to our filings with the Securities and Exchange Commission, which are available on our investor relations Web site (http://ir.infoblox.com/) and on the SEC’s Web site (www.sec.gov).

All information provided in this release and in the attachments is as of February 26, 2014, and stockholders of Infoblox are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. Infoblox does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this February 26, 2014 press release, or to reflect the occurrence of unanticipated events.