[October 23, 2014]

Riverbed Reports Third Quarter Fiscal Year 2014 Results

Riverbed Technology (NASDAQ:RVBD), the leader in application performance infrastructure, today reported financial results for its third quarter fiscal 2014 (Q3'14) ended September 30, 2014.

Q3'14 GAAP Financials

GAAP revenue for Q3'14 was $276 million, compared to $262 million in the third quarter of 2013 (Q3'13), representing 6% year-over-year growth. GAAP net income for Q3'14 was $11.5 million, or $0.07 per diluted share, compared to GAAP net income of $3.8 million, or $0.02 per diluted share, in Q3'13.

Q3'14 Non-GAAP Financials

Non-GAAP revenue for Q3'14 was $277 million, an increase of 4% compared to $265 million in Q3'13. Non-GAAP net income for Q3'14 was $48.7 million compared to non-GAAP net income of $43.3 million in Q3'13. Non-GAAP earnings were $0.30 per diluted share for Q3'14 compared with $0.26 per diluted share in Q3'13, representing a 15% increase year-over-year.

"Our third quarter financial results were in-line with our revised guidance. While we are not satisfied with our top line performance, we are pleased to see steady growth in our SteelFusion and SteelCentral businesses," said Jerry M. Kennelly, chairman and CEO. "Our ongoing focus to gain increased operating leverage is evident in our Q3 results, delivering earnings per share in-line with our expectations. We've started to execute our previously announced restructuring plans to drive further operational improvements and remain committed to delivering profitable growth and enhancing shareholder value," continued Kennelly.

Q3'14 Business Highlights

• Strengthened VMware partnership by achieving VMware Ready® - vCloud® Air™ status on Riverbed® SteelApp™ Traffic Manager, Riverbed® SteelCentral™ Services Controller for SteelApp and Riverbed® SteelHead™ CX application performance solutions.
• Named an inaugural member of the Microsoft Azure Certified Program and announced Riverbed SteelHead CX for IaaS (Infrastructure-as-a-Service) which can accelerate data and applications hosted by Azure up to 33x faster, while using up to 97% less bandwidth.
• Gained customer traction with Riverbed® SteelFusion™ branch converged infrastructure solution:
  • Deployed by Canadian based mining company, Alamos Gold, to centralize server, storage, and network infrastructure into a single branch appliance, improving data protection and increasing business performance.
  • Deployed by WAMGROUP, industrial equipment manufacturer and longstanding SteelHead customer, to strengthen its disaster-recovery capabilities and provide resilient IT support for branch offices located in a seismic zone.
• Riverbed SteelCentral enabled Allianz, a global insurance provider, to resolve network performance issues up to 50% faster, resulting in improved productivity and a better customer experience.
• Appointed new board members and key executives:
  • Mike Nefkens, Board of Directors; currently serves as Executive Vice President of Hewlett-Packard Enterprise Services
  • Steffan Tomlinson, Board of Directors; currently serves as Chief Financial Officer of Palo Alto Networks
  • Paul Mountford, Senior Vice President and Chief Sales Officer; seasoned industry veteran with 30 years of leadership experience in the technology sector, including 16 years with Cisco

Q4'14 Outlook

The Company provides the following financial guidance for the fourth quarter of fiscal year 2014, which reflects the partial quarter impact of the planned Q4 restructuring:

• Non-GAAP revenues are expected to be in the range of $285 million and $290 million
• Non-GAAP earnings per share are expected to be in the range of $0.31 to $0.33 per share

Riverbed will host a conference call today, October 23, 2014 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) to discuss its third quarter 2014 results and outlook for the fourth quarter of 2014. The call will be broadcast live over the Internet at http://www.riverbed.com/investors and a replay of the webcast will also be available for 12 months.

Use of Non-GAAP Financial Information

To supplement our financial results presented in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures, including non-GAAP revenue, non-GAAP net income and non-GAAP net income per share, which we believe are helpful in understanding our past financial performance and future results. 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, "GAAP to Non-GAAP Reconciliations." Our non-GAAP financial measures are not meant to 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; as such, we believe it is useful for investors to understand the effects of these items on our total operating expenses. Our non-GAAP financial measures include adjustments based on the following items, as well as the related income tax effects, adjustments related to our tax valuation allowance and the interim tax cost of the one-time transfer of intellectual property rights between Riverbed legal entities:

Support and services deferred revenue: Business combination accounting rules require us to account for the fair value of support and service contracts assumed in connection with our acquisitions. The book value of the acquisition deferred support and services revenue related to OPNET was reduced by $19 million in the adjustment to fair value. Because these are typically one to five year contracts, our GAAP revenues for the periods subsequent to the acquisition of a business do not reflect the full amount of service revenues on assumed support contracts that would have otherwise been recorded by the acquired entity. The non-GAAP adjustment is intended to reflect the full amount of such revenues. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business because we have historically experienced high renewal rates on support contracts, although we cannot be certain that customers will renew these contracts.

Inventory and cost of product revenue: Business combination accounting rules require us to account for the fair value of inventory acquired in connection with our acquisitions. The fair value of inventory is estimated as the selling price minus the estimated cost to sell. In the period subsequent to the acquisition, the cost of product revenue includes the higher fair value of the acquired inventory that would not have otherwise been recorded by the acquired entity.

Stock-based compensation expenses: We have excluded the effect of stock-based compensation and related payroll tax expenses from our non-GAAP operating expenses and net income measures. 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 net income. 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 revenues as well.

Acquisition related expenses: We incur significant expenses in connection with our acquisitions. Acquisition related expenses consist of transaction costs, costs for transitional employees, other acquired employee related retention costs, facilities consolidation and exit costs, integration related professional services, adjustments to the fair value of the acquisition related contingent consideration, the write-down of certain acquired in-progress research and development intangibles, and foreign exchange losses on the acquisition related contingent consideration.

Other expenses are those which we would not otherwise have incurred in the periods presented as a part of our ongoing expenses. In the periods presented, Other expenses included:

Operating lease not in service - We entered into an operating lease on a new corporate headquarters in San Francisco. The lease accounting rules require that rent expense begin on a straight line basis starting in the period that we have the right to access the new facility. We gained the right to access the facility in November 2013 to begin constructing our leasehold improvements. We occupied the new facility in the second quarter of 2014. We believe that the duplicate rent of the new facility during the construction period is not representative of the ongoing operating costs of the company.

Non-routine corporate governance and shareholder matters - Beginning in the fourth quarter of 2013, we began incurring professional service fees related to non-routine corporate governance and shareholder matters. We believe these fees are not representative of the ongoing operating costs of the company.

Forward Looking Statements

This press release contains forward-looking statements, including statements relating to revenue and earnings growth, including guidance for the fourth quarter of fiscal 2014, restructuring plans to drive further operational improvements, and other forward opportunities. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; customer adoption rate of our products and our Application Performance Platform; our ability to establish and maintain successful relationships with our distribution partners; our ability to compete in our industry; fluctuations in demand, sales cycles and prices for our products and services; our ability to timely and effectively implement our restructuring plans; shortages or price fluctuations in our supply chain; our ability to protect our intellectual property rights; general political, economic and market conditions and events; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact Riverbed's business are set forth in our Form 10-K filed with the SEC for the period ended December 31, 2013, and our subsequent quarterly reports filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements. Any future product, feature or related specification that may be referenced in this release are for information purposes only and are not commitments to deliver any technology or enhancement. Riverbed reserves the right to modify future product plans at any time.

About Riverbed

Riverbed, at more than $1 billion in annual revenue, is the leader in Application Performance Infrastructure, delivering the most complete platform for Location-Independent Computing. Location-Independent Computing turns location and distance into a competitive advantage by allowing IT to have the flexibility to host applications and data in the most optimal locations while ensuring applications perform as expected, data is always available when needed, and performance issues are detected and fixed before end users notice. Riverbed's 25,000+ customers include 97% of both the Fortune 100 and the Forbes Global 100. Learn more at www.riverbed.com.

Riverbed and any Riverbed product or service name or logo used herein are trademarks of Riverbed Technology, Inc. All other trademarks used herein belong to their respective owners.

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