Category: High Tech

Published: 21 August 2015

Written by Editor

Brocade Reports Fiscal Q3 2015 Results

SAN JOSE, CA--(Aug 20, 2015) - Brocade ^® ( NASDAQ : BRCD ) today reported financial results for its third fiscal quarter ended August 1, 2015. Brocade reported third quarter revenue of $552 million, up 1% year over year and up 1% sequentially. The Company reported GAAP diluted earnings per share (EPS) of $0.21, up from $0.20 in Q3 2014 and up from $0.18 in Q2 2015. Non-GAAP diluted EPS was $0.27 for Q3 2015, up from $0.23 in Q3 2014 and up from $0.22 in Q2 2015. Tax benefits recognized in Q3 2015 increased both GAAP and non-GAAP diluted EPS by approximately $0.02 in the quarter.

"I am pleased with our Q3 2015 financial results as we delivered improved profitability and higher revenue year over year," said Lloyd Carney, CEO of Brocade. "Our IP Networking revenue growth of 16% continues to outpace the market with strong performance from both service provider and U.S. federal customers. As the storage market evolves, our SAN business continues to demonstrate the vital role of Fibre Channel as customers connect both traditional disk storage and next-generation flash arrays. Brocade is well positioned with our customers, partners, and products heading into the final quarter of our fiscal year."

Key Financial Metrics:


	Q3 2015			Q2 2015			Q3 2014			Q3 2015 vs. Q2 2015		Q3 2015 vs. Q3 2014
Revenue	$	552 M		$	547 M		$	545 M		1	%	1	%
GAAP EPS--diluted	$	0.21		$	0.18		$	0.20		20	%	8	%
Non-GAAP EPS--diluted	$	0.27		$	0.22		$	0.23		22	%	16	%
GAAP gross margin		67.4	%		68.1	%		66.3	%	(0.7 ) pts		1.1 pts
Non-GAAP gross margin		68.6	%		68.8	%		67.2	%	(0.2 ) pts		1.4 pts
GAAP operating margin		21.7	%		20.9	%		21.6	%	0.8 pts		0.1 pts
Non-GAAP operating margin		26.9	%		24.6	%		25.7	%	2.3 pts		1.2 pts

Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

Highlights:

SAN product revenue was $309 million, down 5% year over year. The decline was primarily the result of softer demand for embedded and fixed-configuration Fibre Channel switches, partially offset by growth in director revenue. The sequential revenue decline of 1% was consistent with normal fiscal Q3 seasonality.
IP Networking product revenue was $154 million, up 16% year over year. The growth was across each product category with router sales up 35%, switch sales up 6%, and higher software networking revenue. The increased revenue year over year was primarily from service providers, up 43%, and U.S. federal, up 32%, partially offset by a decline in enterprise revenue of 3%. Sequentially, IP Networking revenue increased 6% due to higher switch revenue, which was up 26%, as well as higher software networking revenue, partially offset by lower routing revenue, which was down 23% primarily due to the timing of large service provider orders. Q3 2015 included a full quarter of revenue from the virtual application delivery software acquired in Q2 2015.
On June 17, 2015, Brocade hosted the fourth annual Federal Forum in Washington, D.C. The multi-vendor sponsored event has become the showcase for New IP technologies that can help transform government networks to significantly lower cost, improve service agility, and increase security. The event has continued to grow in size and influence, with approximately 1,000 attendees this year across a wide variety of federal agencies, and has become an important component in building brand preference to support Brocade's revenue growth strategy.

Board Declares Dividend:

The Brocade Board of Directors has declared a quarterly cash dividend of $0.045 per share of the Company's common stock. The dividend payment will be made on October 2, 2015 to stockholders of record at the close of market on September 10, 2015.

Brocade management will host a conference call to discuss the fiscal third quarter results and the fiscal fourth quarter outlook today at 2:30 p.m. PT (5:30 p.m. ET). To access the webcast, please go to www.brcd.com/events.cfm . A replay of the conference call, prepared comments and slides, as well as a written transcript, will be available at www.brcd.com .

Other Q3 2015 product, customer, and partner announcements are available at http://newsroom.brocade.com/ .

Brocade ( www.brocade.com )
130 Holger Way, San Jose, CA 95134
T. 408.333.8000 F. 408.333.8101

Financial Highlights and Additional Financial Information


		Q3 2015		Q2 2015		Q3 2014
Routes to market as a % of total net revenues:
	OEM revenues	62	%	63	%	67	%
	Channel/Direct revenues	38	%	37	%	33	%
	10% or greater customer revenues	43	%	49	%	48	%
Geographic split as a % of total net revenues ⁽¹⁾ :
	Domestic revenues	57	%	56	%	56	%
	International revenues	43	%	44	%	44	%
Segment split as a % of total net revenues:
	SAN product revenues	56	%	57	%	60	%
	IP Networking product revenues	28	%	27	%	24	%
	Global Services revenues	16	%	16	%	16	%
	SAN business revenues ⁽²⁾	66	%	67	%	70	%
	IP Networking business revenues ⁽²⁾	34	%	33	%	30	%
IP Networking product revenues by use category ^{(3) (4)} :
	Data Center	52	%	62	%	55	%
	Enterprise Campus	40	%	30	%	39	%
	Carrier Network (MAN/WAN)	8	%	8	%	6	%

Additional information:		Q3 2015			Q2 2015			Q3 2014
	GAAP net income	$	92 M		$	77 M		$	87 M
	Non-GAAP net income	$	115 M		$	95 M		$	102 M
	GAAP operating income	$	120 M		$	114 M		$	118 M
	Non-GAAP operating income	$	149 M		$	134 M		$	140 M
	EBITDA	$	142 M		$	135 M		$	138 M
	Effective GAAP tax provision rate ⁽⁵⁾		17.4	%		26.0	%		23.4	%
	Effective Non-GAAP tax provision rate ⁽⁵⁾		20.1	%		25.7	%		21.9	%
	Cash and cash equivalents	$	1,320 M		$	1,367 M		$	1,149 M
	Deferred revenues	$	301 M		$	306 M		$	299 M
	Capital expenditures	$	19 M		$	18 M		$	14 M
	Total debt, net of discount ⁽⁶⁾	$	792 M		$	788 M		$	597 M
	Cash, net of senior debt, convertible debt and capitalized leases	$	444 M		$	491 M		$	547 M
	Cash provided by operations	$	55 M		$	202 M		$	106 M
	Days sales outstanding		33 days			31 days			32 days
	Employees at end of period		4,626			4,553			4,103
	SAN port shipments		0.9 M			0.9 M			1.1 M
	Share repurchases ⁽⁷⁾	$	103.1 M		$	77.1 M		$	112.1 M

Please see important note of explanation about the use of non-GAAP financial measures below, including a detailed reconciliation between GAAP and non-GAAP information in the tables included herein.

(1) Revenues are attributed to geographic areas based on product delivery location. Since some OEM partners take delivery of Brocade products domestically and then ship internationally to their end users, the percentage of international revenues based on end-user location would likely be higher.

(2) SAN and IP Networking business revenues include hardware and software product, support, and services revenues.

(3) Product revenue by use category is estimated based on analysis of the information the Company collects in its sales management system. The estimated percentage of revenue by use category may fluctuate quarter-to-quarter due to seasonality and the timing of large customer orders.

(4) Each use category includes enterprise, service provider, and government revenues.

(5) The lower effective tax rates in Q3 2015 were, in part, due to various tax benefits recognized in the quarter including a domestic manufacturing deduction and releases of previously reserved tax provisions.

(6) Q3 2015 and Q2 2015 total debt, net of discount, includes the debt discount recorded for the conversion feature that is required to be separately accounted for as equity for the $575 million convertible debt, thereby reducing the carrying value of the debt. The unamortized debt discount for the conversion feature was $73 million as of August 1, 2015, and $77 million as of May 2, 2015.

(7) $1.3 million of the $77.1 million in shares repurchased in Q2 2015 were pending cash settlement as of May 2, 2015.

Non-GAAP Financial Measures

To supplement financial information presented on a GAAP basis, Brocade provides information presented on a non-GAAP basis. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, financial information presented on a GAAP basis. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. The most directly comparable GAAP information and a reconciliation between the GAAP and non-GAAP amounts is provided in the tables at the end of this press release.

Management believes that the non-GAAP financial measures used in this press release allow management to gain a better understanding of Brocade's comparative operating performance, both from period to period and relative to its competitors. These non-GAAP financial measures also help with the determination of Brocade's baseline performance before gains, losses or charges that are considered by management to be outside of ongoing operating results. Accordingly, management uses these non-GAAP financial measures for planning and forecasting of future periods and in making decisions regarding operations and the allocation of resources.

Management believes these non-GAAP financial measures, when read in conjunction with Brocade's GAAP financials, provide useful information to investors by offering:

the ability to make more meaningful period-to-period comparisons of Brocade's ongoing operating results;
the ability to make more meaningful comparisons of Brocade's operating performance relative to its competitors;
the ability to better identify trends in Brocade's underlying business and to perform related trend analyses; and
a better understanding of how management plans and measures Brocade's underlying business.

Management excludes certain gains or losses and benefits or costs in determining non-GAAP financial measures that are the result of infrequent events or events that arise outside the ordinary course of Brocade's continuing operations. Management believes that it is appropriate to evaluate Brocade's operating performance by excluding those items that are not indicative of ongoing operating results or limit comparability. Such items include, but are not limited to: (i) acquisition and integration costs; (ii) restructuring, goodwill impairment and other related costs (benefits); and (iii) gain on sale of non-marketable equity investments.

Management also excludes the following non-cash charges in determining non-GAAP financial measures: (i) stock-based compensation expense; (ii) amortization of purchased intangible assets; and (iii) non-cash interest expense related to the convertible debt.

Management believes that the exclusion of stock-based compensation allows for more accurate comparisons of Brocade's operating results to Brocade's peer companies because of the varying use of valuation methodologies and subjective assumptions and the variety of award types. In addition, the exclusion of the expense associated with the amortization of acquisition-related intangible assets is appropriate because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have short lives, and the exclusion of amortization expense allows comparisons of operating results that are consistent over time for Brocade's newly acquired and long-held businesses. In connection with the convertible debt, under the relevant accounting guidance, a non-cash interest expense is recognized for the convertible debt as an imputed interest expense for the conversion feature. Management believes excluding the non-cash interest expense related to the convertible debt from its non-GAAP financial measures is useful for investors because the expense does not represent a cash outflow and is not indicative of ongoing operating performance.

Finally, management believes that it is appropriate to exclude the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income.

Limitations: These non-GAAP financial measures have limitations because they do not include all items of income and expense that impact the company. In addition, these non-GAAP financial measures may not be comparable to similar measurements reported by other companies. Management compensates for these limitations by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. Management also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure, and management encourages investors to review carefully those reconciliations.

Forward-Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Brocade's financial results, goals, plans, strategy, business outlook and prospects. These statements are based on current expectations as of the date of this presentation and involve a number of risks, uncertainties and assumptions that may cause actual results to differ significantly. The risks, uncertainties and assumptions include, but are not limited to: the effect on Brocade of increasing market competition and changes in the industry; Brocade's ability to execute on its sales strategy and plans for future operations; the impact on Brocade of macroeconomic trends and events and changes in IT spending levels; Brocade's ability to introduce and achieve market acceptance of new products and support offerings on a timely basis; risks associated with Brocade's international operations; and integration and other risks associated with acquisitions, divestitures and strategic investments. These and other risks are set forth in more detail in Brocade's Form 10-Q for the fiscal quarter ended May 2, 2015, and in Brocade's Annual Report on Form 10-K for the fiscal year ended November 1, 2014. Brocade expressly assumes no obligation to update any such forward-looking statements whether as the result of new developments or otherwise.

About Brocade

Brocade ( NASDAQ : BRCD ) networking solutions help the world's leading organizations transition smoothly to a world where applications and information reside anywhere. ( www.brocade.com )

ADX, Brocade, Brocade Assurance, the B-wing symbol, DCX, Fabric OS, HyperEdge, ICX, MLX, MyBrocade, OpenScript, The Effortless Network, VCS, VDX, Vplane, and Vyatta are registered trademarks, and Fabric Vision and vADX are trademarks of Brocade Communications Systems, Inc., in the United States and/or in other countries. Other brands, products, or service names mentioned may be trademarks of others.



BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

			Three Months Ended						Nine Months Ended
			August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
			(In thousands, except per share amounts)
Net revenues:
	Product		$	463,200		$	457,797		$	1,407,681		$	1,375,282
	Service			88,619			87,667			266,952			271,627
		Total net revenues		551,819			545,464			1,674,633			1,646,909
Cost of revenues:
	Product			144,243			145,518			431,781			441,416
	Service			35,672			38,233			109,056			116,818
		Total cost of revenues		179,915			183,751			540,837			558,234
Gross margin				371,904			361,713			1,133,796			1,088,675
Operating expenses:
	Research and development			85,072			84,152			262,173			261,862
	Sales and marketing			144,883			137,262			428,199			409,524
	General and administrative			20,422			22,140			65,815			63,395
	Amortization of intangible assets			889			131			1,654			10,145
	Acquisition and integration costs			789			-			3,133			-
	Restructuring, goodwill impairment, and other related costs (benefits)			-			131			(637	)		89,051
	Gain on sale of network adapter business			-			-			-			(4,884	)
		Total operating expenses		252,055			243,816			760,337			829,093
Income from operations				119,849			117,897			373,459			259,582
Interest expense				(9,778	)		(9,176	)		(45,754	)		(27,606	)
Interest and other income, net				947			5,299			854			3,943
Income before income tax				111,018			114,020			328,559			235,919
Income tax expense				19,351			26,668			72,585			81,367
Net income			$	91,667		$	87,352		$	255,974		$	154,552
Net income per share-basic			$	0.22		$	0.20		$	0.61		$	0.35
Net income per share-diluted			$	0.21		$	0.20		$	0.59		$	0.34
Shares used in per share calculation-basic				417,299			432,448			422,184			436,396
Shares used in per share calculation-diluted				427,518			441,789			433,303			448,596

Cash dividends declared per share			$	0.045		$	0.035		$	0.115		$	0.035



BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

			Three Months Ended						Nine Months Ended
			August 1, 2015			August 2, 2014			August 1, 2015			August 2, 2014
			(In thousands)
Net income			$	91,667		$	87,352		$	255,974		$	154,552
Other comprehensive income and loss, net of tax:
	Unrealized gains (losses) on cash flow hedges:
		Change in unrealized gains and losses		(414	)		(155	)		(2,332	)		14
		Net gains and losses reclassified into earnings		831			(218	)		2,544			(217	)
	Net unrealized gains (losses) on cash flow hedges			417			(373	)		212			(203	)
	Foreign currency translation adjustments			(492	)		(191	)		(5,781	)		284
Total other comprehensive income (loss)				(75	)		(564	)		(5,569	)		81
Total comprehensive income			$	91,592		$	86,788		$	250,405		$	154,633



BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

			August 1, 2015			November 1, 2014
			(In thousands, except par value)
ASSETS
Current assets:
	Cash and cash equivalents		$	1,319,671		$	1,255,017
	Accounts receivable, net of allowances for doubtful accounts of $1,843 and $80 as of August 1, 2015, and November 1, 2014, respectively			199,919			224,913
	Inventories			40,496			38,718
	Deferred tax assets			91,181			92,692
	Prepaid expenses and other current assets			63,020			46,665
		Total current assets		1,714,287			1,658,005
Property and equipment, net				440,343			445,433
Goodwill				1,617,136			1,567,723
Intangible assets, net				79,401			26,658
Other assets				52,898			35,856
		Total assets	$	3,904,065		$	3,733,675
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	95,804		$	93,705
	Accrued employee compensation			103,417			169,018
	Deferred revenue			229,557			239,993
	Other accrued liabilities			63,345			84,592	null
		Total current liabilities		492,123			587,308
Long-term debt, net of current portion				791,630			595,450
Non-current deferred revenue				71,565			71,746
Non-current income tax liability				46,504			39,647
Non-current deferred tax liabilities				25,461			27,153
Other non-current liabilities				3,767			4,310
		Total liabilities		1,431,050			1,325,614
Commitments and contingencies
Stockholders' equity:
	Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued and outstanding			-			-
	Common stock, $0.001 par value, 800,000 shares authorized:
		Issued and outstanding: 416,382 and 431,470 shares as of August 1, 2015, and November 1, 2014, respectively		416			431
	Additional paid-in capital			1,637,580			1,774,197
	Accumulated other comprehensive loss			(24,383	)		(18,814	)
	Retained earnings			859,402			652,247
		Total stockholders' equity		2,473,015			2,408,061
		Total liabilities and stockholders' equity	$	3,904,065		$	3,733,675



BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				Three Months Ended
				August 1, 2015			August 2, 2014
				(In thousands)
Cash flows from operating activities:
	Net income			$	91,667		$	87,352
	Adjustments to reconcile net income to net cash provided by operating activities:
		Excess tax benefits from stock-based compensation			(12,411	)		(10,283	)
		Depreciation and amortization			22,322			20,443
		Loss on disposal of property and equipment			379			152
		Net gain on sale of non-marketable equity investment			-			(5,242	)
		Amortization of debt issuance costs and debt discount			4,219			290
		Provision for doubtful accounts receivable and sales allowances			2,495			1,992
		Non-cash stock-based compensation expense			24,437			21,574
	Changes in assets and liabilities, net of acquisitions:
		Accounts receivable			(17,278	)		(5	)
		Inventories			(4,786	)		187
		Prepaid expenses and other assets			984			3,575
		Deferred tax assets			28			(10	)
		Accounts payable			8,426			2,717
		Accrued employee compensation			(54,855	)		(26,398	)
		Deferred revenue			(5,071	)		(4,593	)
		Other accrued liabilities			(4,943	)		14,854
		Restructuring liabilities			(648	)		(574	)
			Net cash provided by operating activities		54,965			106,031
Cash flows from investing activities:
	Purchases of non-marketable equity investment				(2,000	)		-
	Proceeds from sale of non-marketable equity investment				1,489			10,748
	Purchases of property and equipment				(19,051	)		(13,780	)
	Net cash paid in connection with acquisitions				(174	)		-
			Net cash used in investing activities		(19,736	)		(3,032	)
Cash flows from financing activities:
	Payment of debt issuance costs				(57	)		-
	Payment of principal related to capital leases				(410	)		(633	)
	Common stock repurchases				(104,357	)		(112,128	)
	Proceeds from issuance of common stock				29,370			26,763
	Payment of cash dividends to stockholders				(18,965	)		(15,270	)
	Excess tax benefits from stock-based compensation				12,411			10,283
			Net cash used in financing activities		(82,008	)		(90,985	)
	Effect of exchange rate fluctuations on cash and cash equivalents				(362	)		(240	)
	Net increase (decrease) in cash and cash equivalents				(47,141	)		11,774
	Cash and cash equivalents, beginning of period				1,366,812			1,137,613
	Cash and cash equivalents, end of period			$	1,319,671		$	1,149,387



BROCADE COMMUNICATIONS SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				Nine Months Ended
				August 1, 2015			August 2, 2014
				(In thousands)
Cash flows from operating activities:
	Net income			$	255,974		$	154,552
	Adjustments to reconcile net income to net cash provided by operating activities:
		Excess tax benefits from stock-based compensation			(41,981	)		(37,698	)
		Depreciation and amortization			62,569			80,370
		Loss on disposal of property and equipment			1,620			3,330
		Gain on sale of network adapter business			-			(4,884	)
		Net gain on sale of non-marketable equity investment			-			(5,242	)
		Amortization of debt issuance costs and debt discount			9,443			856
		Write-off of debt discount and debt issuance costs related to lenders that did not participate in refinancing			4,808			-
		Provision for doubtful accounts receivable and sales allowances			7,189			5,520
		Non-cash stock-based compensation expense			64,594			61,214
		Goodwill impairment charge			-			83,382
	Changes in assets and liabilities, net of acquisitions:
		Accounts receivable			17,959			52,261
		Inventories			(1,778	)		4,757
		Prepaid expenses and other assets			(20,854	)		(4,796	)
		Deferred tax assets			531			47
		Accounts payable			2,266			(4,409	)
		Accrued employee compensation			(94,852	)		(38,136	)
		Deferred revenue			(14,220	)		(4,020	)
		Other accrued liabilities			16,478			48,178
		Restructuring liabilities			(2,514	)		(11,538	)
			Net cash provided by operating activities		267,232			383,744
Cash flows from investing activities:
	Purchases of non-marketable equity and debt investments				(2,150	)		(223	)
	Proceeds from sale of non-marketable equity investment				1,489			10,748
	Purchases of property and equipment				(53,142	)		(41,175	)
	Purchase of intangible assets				(7,750	)		-
	Net cash paid in connection with acquisitions				(95,452	)		-
	Proceeds from collection of note receivable				250			250
	Proceeds from sale of network adapter business				-			9,995
			Net cash used in investing activities		(156,755	)		(20,405	)
Cash flows from financing activities:
	Payment of principal related to senior secured notes				(300,000	)		-
	Payment of debt issuance costs				(1,718	)		-
	Payment of principal related to capital leases				(1,677	)		(2,382	)
	Common stock repurchases				(312,601	)		(302,560	)
	Proceeds from issuance of common stock				51,345			81,293
	Payment of cash dividends to stockholders				(48,819	)		(15,270	)
	Proceeds from convertible notes				565,656			-
	Purchase of convertible hedge				(86,135	)		-
	Proceeds from issuance of warrants				51,175			-
	Excess tax benefits from stock-based compensation				41,981			37,698
			Net cash used in financing activities		(40,793	)		(201,221	)
	Effect of exchange rate fluctuations on cash and cash equivalents				(5,030	)		272
	Net increase in cash and cash equivalents				64,654			162,390
	Cash and cash equivalents, beginning of period				1,255,017			986,997
	Cash and cash equivalents, end of period			$	1,319,671		$	1,149,387



BROCADE COMMUNICATIONS SYSTEMS, INC.
RECONCILIATION BETWEEN GAAP AND NON-GAAP FINANCIAL MEASURES
(Unaudited)

			Three Months Ended
			August 1, 2015			May 2, 2015			August 2, 2014
			(In thousands, except per share amounts)
Non-GAAP adjustments
	Stock-based compensation expense included in cost of revenues		$	3,955		$	1,986		$	4,121
	Amortization of intangible assets expense included in cost of revenues			2,549			1,857			552
		Total gross margin impact from non-GAAP adjustments		6,504			3,843			4,673

	Stock-based compensation expense included in research and development			5,226			3,080			4,350
	Stock-based compensation expense included in sales and marketing			10,601			7,207			7,592
	Stock-based compensation expense included in general and administrative			4,655			3,802			5,511
	Amortization of intangible assets expense included in operating expenses			889			627			131
	Acquisition and integration costs			789			2,344			-
	Restructuring, goodwill impairment, and other related costs (benefits)			-			(637	)		131
		Total operating income impact from non-GAAP adjustments		28,664			20,266			22,388

	Convertible debt interest			3,684			3,639			-
	Gain on sale of non-marketable equity investment			-			-			(5,242	)
	Income tax effect of non-tax adjustments			(9,494	)		(5,823	)		(2,005	)
		Total net income impact from non-GAAP adjustments	$	22,854		$	18,082		$	15,141

Gross margin reconciliation
	GAAP gross margin		$	371,904		$	372,209		$	361,713
	Total gross margin impact from non-GAAP adjustments			6,504			3,843			4,673
		Non-GAAP gross margin	$	378,408		$	376,052		$	366,386
	GAAP gross margin, as a percentage of total net revenues			67.4	%		68.1	%		66.3	%
	Non-GAAP gross margin, as a percentage of total net revenues			68.6	%		68.8	%		67.2	%

Operating income reconciliation
	GAAP operating income		$	119,849		$	114,205		$	117,897
	Total operating income impact from non-GAAP adjustments			28,664			20,266			22,388
		Non-GAAP operating income	$	148,513		$	134,471		$	140,285
	GAAP operating income, as a percentage of total net revenues			21.7	%		20.9	%		21.6	%
	Non-GAAP operating income, as a percentage of total net revenues			26.9	%		24.6	%		25.7	%

Net income and net income per share reconciliation
	Net income on a GAAP basis		$	91,667		$	77,040		$	87,352
	Total net income impact from non-GAAP adjustments			22,854			18,082			15,141
		Non-GAAP net income	$	114,521		$	95,122		$	102,493
	Non-GAAP net income per share-basic		$	0.27		$	0.23		$	0.24
	Non-GAAP net income per share-diluted		$	0.27		$	0.22		$	0.23
	Shares used in non-GAAP per share calculation-basic			417,299			420,718			432,448
	Shares used in non-GAAP per share calculation-diluted			427,518			433,234			441,789

Contact:

BROCADE CONTACTS
Media Relations
Kristy Campbell
Tel: 408-333-4221
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Investor Relations
Michael Iburg
Tel: 408-333-0233
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Brocade Communications Systems ( BRCD )

Brocade Reports Fiscal Q3 2015 Results