Ruckus Wireless Reports Second Quarter 2015 Financial Results

  • Revenue of $92.2 million, an increase of 12.4% quarter-over-quarter
  • Non-GAAP operating income of $9.4 million, an increase of 38.6% quarter-over-quarter
  • Non-GAAP diluted net income per share of $0.09, an increase of $0.02 quarter-over-quarter

SUNNYVALE, Calif., July 29, 2015 - Ruckus Wireless, Inc. (NYSE: RKUS) today announced financial results for its second quarter of 2015 ended June 30, 2015.

Financial Summary

Revenue for the second quarter of 2015 was $92.2 million, an increase of 13.9% from the second quarter of 2014.

GAAP net income was $0.8 million for the second quarter of 2015, compared with GAAP net income of $1.4 million for the second quarter of 2014. GAAP operating income was $1.4 million for the second quarter of 2015, compared with GAAP operating income of$4.1 million for the second quarter of 2014.

Non-GAAP net income was $9.2 million for the second quarter of 2015, compared with non-GAAP net income of $10.8 million for the second quarter of 2014. Non-GAAP operating income was $9.4 million for the second quarter of 2015, compared with non-GAAP operating income of $11.1 million for the second quarter of 2014.

GAAP diluted net income per share was $0.01 for the second quarter of 2015, compared with $0.02 for the second quarter of 2014. Non-GAAP diluted net income per share was $0.09 for the second quarter of 2015, compared with $0.11 for the second quarter of 2014.

"We are very pleased with our results in the second quarter, as we displayed strength across all of our geographies and verticals," saidSelina Lo, president and chief executive officer, Ruckus Wireless. "Ruckus reported revenue above our guidance and market share gains based on the latest WLAN market reports from Dell'Oro and Infonetics. We continued to raise the bar in wireless performance with shipments of the industry's first enterprise-class 802.11ac Wave 2 product in the second quarter. Our new CloudManager for Xclaim is enabling WISPs to deliver low cost managed services. Further, with new and expanded partnerships, we continue to enhance our competitive position and expand our market opportunities."

Business Highlights

  • Announced a partnership with Juniper Networks to collaborate on unified wired and wireless solutions and global go-to-market opportunities for mid-size and large enterprise customers.
  • Shipped the ZoneFlex R710, the world's first 802.11ac Wave 2 capable Smart WiFi access point.
  • Announced the ZoneFlex P300, a Gigabit-class, outdoor Smart WiFi bridging system.
  • 11ac access points accounted for 71% of access point product sales in the second quarter, up from 49% in the prior quarter.
  • Launched CloudManager™ service for Xclaim™, a free cloud service that allows Xclaim customers to configure, monitor and troubleshoot networks from anywhere, over a web browser.
  • Launched the new SmartZone™ software platform, a carrier-grade solution developed for and deployed by service providers around the globe, now extended to the company's enterprise customers.
  • The company reported 13.9% year-over-year revenue growth; Americas revenue grew 19.1%, APAC revenue grew 13.0% and EMEA revenue grew 4.3% as compared to the second quarter of 2014.
  • Added 12 new service provider end-customers in the second quarter, bringing the total service provider end-customer base to over 230.
  • Added approximately 4,200 enterprise end-customers in the second quarter, bringing the total enterprise end-customer base to over 56,000.
  • Identified by the Dell'Oro Group as the #1 market share leader in Service Provider WiFi.

Guidance

For the third quarter of 2015 ending September 30, 2015, the company expects:

  • Total revenue in the range of $94 million to $99 million; and
  • Non-GAAP diluted net income per share of $0.10 to $0.13 using approximately 99 million shares.

Conference Call Information

Ruckus Wireless is hosting a conference call for analysts and investors to discuss its second quarter 2015 results and outlook for its third quarter of 2015 at 2:00 p.m. Pacific Daylight Time today, July 29, 2015. A live audio webcast of the conference call along with supplemental financial information will also be accessible from the "Investors" section of the Company's website at http://investors.ruckuswireless.com. A replay will be available following the call on the Ruckus Wireless Investor Relations website or for one week at the following numbers: (855) 859-2056 (domestic), (404) 537-3406 (international) using ID# 78115645. An archived version of the audio from the call will be available for at least thirty days on the Company's website at http://investors.ruckuswireless.com.

Safe Harbor Statement

This press release contains forward-looking statements, including statements regarding Ruckus Wireless' financial expectations for the third quarter of 2015 and future periods and statements regarding new partnerships, competitive position and future market opportunities. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks and uncertainties related to: growth of the market and customer base for Ruckus Wireless products and services, delays in education spending and changes or other developments associated with government funding programs for education, unpredictable market conditions, deployment and adoption of new products and services, Ruckus Wireless' rapid growth, competition, technological change, the pace and timing of new product introductions, reliance on third parties, and general market, political, regulatory, economic and business conditions in the United States and internationally.

Additional risks and uncertainties that could affect Ruckus Wireless's financial results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the company's annual report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission (the "SEC") on February 25, 2015. Ruckus Wireless' SEC filings are available on the company's investor relations website at http://investors.ruckuswireless.com and on the SEC's website at www.sec.gov. All forward-looking statements in this press release are based on information available to the company as of the date hereof, and Ruckus Wireless does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

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 dilutive net income per share and non-GAAP weighted-average diluted shares. We also provide projected third quarter 2015 non-GAAP dilutive net income per share and non-GAAP weighted-average diluted shares. 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 expense: We have excluded the effect of stock-based compensation expense. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expense. Stock-based compensation will recur in future periods.

Employer payroll tax expense associated with stock-based compensation: We have excluded the employer payroll tax expense associated with stock option exercises and restricted stock releases, in order to provide a complete picture of the Company's recurring core business operating results. Stock-based compensation will continue to be used as a method to compensate certain employees for the foreseeable future.

Amortization of intangible assets: We have excluded the effect of amortization of intangible assets. 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 revenue earned during the periods presented and will contribute to future period revenue as well.

Legal settlement benefit, net: We have excluded non-recurring patent infringement settlements. We will continue to be party to litigation and subject to claims related to intellectual property infringement arising in the ordinary course of business.

Non-cash income tax expense (benefit): We have excluded non-cash income taxes, as the Company does not expect to pay any material federal or state income taxes in 2015.

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 condensed consolidated statements of operations, excluding the impact of stock-based compensation expense, employer payroll tax expense associated with stock-based compensation and amortization of intangible assets. Non-GAAP gross margin is non-GAAP gross profit divided by revenue.

Non-GAAP operating income and operating margin. Non-GAAP operating income is income (loss) from operations as reported on our condensed consolidated statements of operations, excluding the impact of stock-based compensation expense, employer payroll tax expense associated with stock-based compensation, amortization of intangible assets and legal settlement benefit, net. Non-GAAP operating margin is non-GAAP operating income divided by revenue.

Non-GAAP net income and diluted net income per share. Non-GAAP net income is net income as reported on our condensed consolidated statements of operations, excluding the impact of stock-based compensation expense, employer payroll tax expense associated with stock-based compensation, amortization of intangible assets, legal settlement benefit, net and non-cash income tax expense (benefit). Non-GAAP diluted net income per share is non-GAAP net income divided by non-GAAP weighted-average diluted shares.

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."

Media Contacts

Ruckus, Ruckus Wireless and SmartCell are trademarks of Ruckus Wireless, Inc. in the United States and other countries.

Ruckus Wireless, Inc.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

 

2015

2014

2015

2014

Revenue:

 

Product

$85,040

$75,352

$160,337

$145,427

Service

7,190

5,648

13,971

10,625

Total revenue

92,230

81,000

174,308

156,052

Cost of revenue:

 

Product

26,720

22,209

49,951

43,705

Service

3,683

2,932

7,225

5,691

Total cost of revenue

30,403

25,141

57,176

49,396

Gross profit

61,827

55,859

117,132

106,656

Operating expenses:

 

Research and development

22,843

18,954

44,139

37,093

Sales and marketing

27,696

24,412

53,774

47,682

General and administrative

9,921

8,358

19,355

16,795

Total operating expenses

60,460

51,724

117,268

101,570

Operating income (loss)

1,367

4,135

(136)

5,086

Interest income

156

46

297

92

Other expense, net

(94)

(84)

(172)

(110)

Income (loss) before income taxes

1,429

4,097

(11)

5,068

Income tax expense (benefit)

670

2,658

(197)

3,356

Net income

$759

$1,439

$186

$1,712

Net income per share:

 

Basic

$0.01

$0.02

$0.00

$0.02

Diluted

$0.01

$0.02

$0.00

$0.02

Weighted average shares used in computing net income per share:

 

Basic

87,017

82,315

86,331

81,799

Diluted

95,465

92,358

95,001

92,967

Ruckus Wireless, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(unaudited, in thousands, except per share amounts)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

 

2015

2014

2015

2014

Gross Profit Reconciliation:

 

GAAP gross profit:

$61,827

$55,859

$117,132

$106,656

Stock-based compensation

249

254

565

499

Employer payroll tax associated with stock-based compensation

14

2

25

32

Amortization of intangible assets

705

580

1,410

910

Non-GAAP gross profit:

$62,795

$56,695

$119,132

$108,097

Gross Margin Reconciliation:

 

GAAP gross margin:

67.0%

69.0%

67.2%

68.4%

Stock-based compensation

0.3%

0.3%

0.3%

0.3%

Employer payroll tax associated with stock-based compensation

–%

–%

–%

–%

Amortization of intangible assets

0.8%

0.7%

0.8%

0.6%

Non-GAAP gross margin:

68.1%

70.0%

68.3%

69.3%

Operating Income Reconciliation:

 

GAAP operating income (loss):

$1,367

$4,135

$(136)

$5,086

Stock-based compensation

7,085

6,340

14,407

12,686

Employer payroll tax associated with stock-based compensation

256

81

523

462

Amortization of intangible assets

705

580

1,410

910

Legal settlement benefit, net

(760)

Non-GAAP operating income:

$9,413

$11,136

$16,204

$18,384

Operating Margin Reconciliation:

 

GAAP operating margin (loss):

1.5%

5.1%

(0.1)%

3.3%

Stock-based compensation

7.7%

7.8%

8.3%

8.1%

Employer payroll tax associated with stock-based compensation

0.3%

0.1%

0.3%

0.3%

Amortization of intangible assets

0.7%

0.7%

0.8%

0.6%

Legal settlement benefit, net

–%

–%

–%

(0.5)%

Non-GAAP operating margin:

10.2%

13.7%

9.3%

11.8%

Net Income Reconciliation:

 

GAAP net income:

$759

$1,439

$186

$1,712

Stock-based compensation

7,085

6,340

14,407

12,686

Employer payroll tax associated with stock-based compensation

256

81

523

462

Amortization of intangible assets

705

580

1,410

910

Legal settlement benefit, net

(760)

Non-cash income tax expense (benefit)

386

2,392

(827)

2,839

Non-GAAP net income:

$9,191

$10,832

$15,699

$17,849

Non-GAAP diluted net income per share:

$0.09

$0.11

$0.16

$0.19

Shares used in computing Non-GAAP Net Income per share Reconciliation

 

Weighted-average shares outstanding used in calculating GAAP diluted net income per share

95,465

92,358

95,001

92,967

Additional dilutive securities for non-GAAP income

2,944

2,627

3,130

2,380

Weighted-average shares outstanding used in calculating non-GAAP diluted net income per share

98,409

94,985

98,131

95,347

Ruckus Wireless, Inc.
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except par value)

 

June 30,
2015

December 31,
2014

ASSETS

 

Current assets:

 

Cash and cash equivalents

$63,379

$56,083

Short-term investments

148,478

142,706

Accounts receivable, net of allowance for doubtful accounts of $800 as of June 30, 2015 and December 31, 2014

67,692

59,553

Inventories

24,059

21,064

Deferred costs

3,122

4,414

Deferred tax assets

6,094

6,205

Prepaid expenses and other current assets

6,250

5,367

Total current assets

319,074

295,392

Property and equipment, net

18,275

13,636

Goodwill

9,945

9,945

Intangible assets, net

5,941

7,351

Noncurrent deferred tax asset

24,568

21,166

Restricted cash

5,000

5,000

Other assets

1,414

1,504

Total assets

$384,217

$353,994

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

Accounts payable

$28,527

$23,538

Accrued compensation

14,554

13,765

Accrued liabilities

7,654

5,282

Deferred revenue

36,228

39,231

Total current liabilities

86,963

81,816

Noncurrent deferred revenue

11,870

10,554

Non-current deferred tax liabilities

410

596

Other non-current liabilities

1,438

1,379

Total liabilities

100,681

94,345

Stockholders’ equity:

 

Common stock, $0.001 par value; 250,000 shares authorized as of June 30, 2015 and December 31, 2014; 87,524 and 85,110 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively

88

85

Additional paid–in capital

296,935

273,276

Accumulated other comprehensive loss

(58)

(97)

Accumulated Deficit

(13,429)

(13,615)

Total stockholders’ equity

283,536

259,649

Total liabilities and stockholders’ equity

$384,217

$353,994

Ruckus Wireless, Inc.
Summary of Cash Flows
(unaudited, in thousands)

 

Three Months Ended
June 30,

Six Months Ended
June 30,

 

2015

2014

2015

2014

Net cash provided by (used in) operating activities

$18,644

$12,298

$13,332

$15,859

Net cash used in investing activities

(6,760)

(3,283)

(15,291)

(21,552)

Net cash provided by financing activities

5,228

4,235

9,255

7,428

Net increase (decrease) in cash and cash equivalents

$AAAAA

$17,112

$7,296

$1,735