Tuesday, business software and services provider Blue Coat Systems, Inc. (BCSI), reported a swing to profit in the second quarter, primarily on a decline in operating expenses. Earnings for the quarter, as well as revenues came in ahead of Street estimates. Looking ahead, Blue Coat has forecast strong earnings for the third quarter in line with analysts' expectations.
On a GAAP basis, Blue Coat Systems reported a second quarter net income of $8.4 million or $0.19 per share, compared with net loss of $0.3 million, or $0.01 per share, in the second quarter of fiscal 2009.
On a non-GAAP basis, net income for the quarter was $13.1 million or $0.29 per share, compared with non-GAAP net income of $11.6 million, or $0.27 per share in the second quarter a year-ago.
On average, sixteen analysts polled by Thomson Reuters expected the company to earn $0.26 per share for the quarter. Analysts' estimates typically exclude special items.
The Sunnyvale, California-based company's total net revenue for the second quarter increased 1% to $120.4 million from $119.0 million in the second quarter of the year-ago period. Fourteen Wall Street analysts estimated a revenue of $120.11 million for the quarter.
Segment-wise, Product revenue for the quarter declined to $76.50 million from $84.79 million a year-ago, while Service revenue rose to $43.93 million from $34.22 million last year.
Cost of Blue Coat's product revenue declined to $19.26 million from $25.12 million year-ago, but the cost of its service revenue increased slightly to $12.94 million from $12.07 million in the year-ago period.
The quarter saw a decline in the company's total operating expenses with marketing expenses increasing marginally to $45.60 million from $44.95 million year-ago. Research and development expenses declined to $19.56 million from $20.17 million in the prior year quarter. General and administrative expenses declined to $11.17 million from $13.28 million in the similar quarter last year.
Brian NeSmith, president and chief executive officer, Blue Coat Systems said, "In the quarter, we experienced solid sequential revenue growth in North America and in Europe. We saw strong demand in both the U.S. Federal and enterprise segments of our business for Application Delivery Network solutions, which help contain network and bandwidth costs, enhance business productivity, and mitigate exposure to evolving threat environments."
The company ended the quarter on October 31 with cash, cash equivalents, and restricted cash of $142.5 million, an increase of $19.8 million from the prior quarter. Cash flow provided by operations in the second quarter of fiscal 2010 was $18.2 million.
According to Gordon Brooks, senior vice president and chief financial officer, Blue Coat Systems, the company's non-GAAP operating margin percentage increased sequentially 300 basis points to 15.5% compared with 12.5% in the prior quarter.
For the third fiscal quarter ending January 31, 2010, the company currently expects net income to be in the range of $0.01 - $0.12 per share. On a non-GAAP basis, the company expects net income of $0.31 - $0.36 per share. Blue Coat expects net revenue for the period in the range of $121 - $126 million.
Analysts currently expect the company to report earnings of $0.31 per share on revenues of $124.98 million for the third quarter.
For the six months ended October 31, net income on a GAAP basis was $12.36 million or $0.28 per share, compared with a loss of $6.08 million or $0.16 per share in the year-ago period. Non-GAAP net income for the period increased to $23.14 million or $0.52 per share from $18.42 million or $0.43 per share in the prior year period.
For the year-to-date period, Blue Coat reported total net revenue increase of $236.42 million from $221.52 million in the year-ago period.
BCSI closed Tuesday's trading at $25.67, down $0.43 or 1.65%, on a volume of 0.78 million shares on the Nasdaq. In after hours, the stock gained $0.11 or 0.43%, trading at 25.78. In the last 52 weeks, the stock trended in the range of $6.96 - $27.65, with a three-month average volume of 0.71 million shares.
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