Riverbed Technology, Inc. Reports Second Quarter 2008 Financial Results

Revenues for the second quarter of 2008 were $81.6 million, an increase of 51% from the second quarter of 2007 and an increase of 12% from the first quarter of 2008. Pre-tax GAAP income was $1.4 million in the second quarter of 2008. Due to a GAAP tax rate of 163% in the period, Riverbed(R) posted a GAAP net loss of $869,000, or $0.01 per share. In the second quarter of 2007, with a GAAP tax rate of 17%, GAAP net income was $3.9 million, or $0.05 per share. Riverbed's second quarter of 2008 GAAP results included $14.0 million of stock-based compensation expenses and related payroll taxes. Excluding the impact of stock-based compensation and related payroll taxes in all periods, as well as related income tax effects, the non-GAAP net income for the second quarter of 2008 was $9.9 million, or $0.13 per share, compared to non-GAAP net income of $11.7 million, or $0.16 per share, in the second quarter of 2007. Our non-GAAP tax rate in the second quarter of 2008 was 35%, and our non-GAAP tax rate for the second quarter of 2007 was 7%.

"We are encouraged by our strong sequential and year-over-year revenue growth, as we posted the highest revenues in company history," said Jerry M. Kennelly, Riverbed president and chief executive officer. "Wide area data services offers compelling productivity and cost benefits, and the technological advantages of Riverbed's products are clearly evident in our competitive win rate and industry-leading customer base. During the second quarter, we added a significant number of new customers across a broad range of verticals, bringing our cumulative customer count to over 4,500. New customers included a number of the world's largest companies, and we now have 44 of the Forbes Global 100, many of which have been won in technical bake-offs against our competition."

"Gross margins increased for both our product and service offerings, and total operating expenses decreased as a percentage of sales compared to the first quarter of 2008," said Randy Gottfried, Riverbed chief financial officer. "Total deferred revenue increased 16% quarter-over-quarter to more than $44 million and we ended the quarter with $269 million in cash and marketable securities, after buying back $12.5 million of Riverbed stock as part of our stock repurchase program announced in April."

Conference Call Information

Riverbed will host a conference call for analysts and investors to discuss its second quarter results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). A live webcast of the conference call will also be accessible from the "Investor Relations" section of the company's website at www.riverbed.com. Following the webcast, an archived version will be available on the website for 30 days. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter passcode 11116589. International parties can access the replay at 303-590-3000 and should enter passcode 11116589.

About Riverbed

Riverbed Technology is the technology and market leader in wide-area data services (WDS) solutions for companies worldwide. By enabling application performance over the wide area network (WAN) that is orders of magnitude faster than what users experience today, Riverbed is changing the way people work, and enabling a distributed workforce that can collaborate as if they were local. Additional information about Riverbed (Nasdaq: RVBD | Quote | Chart | News | PowerRating) is available at www.riverbed.com.

Forward-Looking Statements

This press release contains forward-looking statements, including statements relating to the expected demand for Riverbed's products and services, statements relating to Riverbed's growth prospects and the growth prospects of the WDS market, and statements relating to Riverbed's ability to meet the needs of distributed organizations, grow market share or grow the market as a whole. 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; the adoption rate of our products; 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; 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 Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 15, 2008, as well as subsequent reports on Forms 10-Q and 8-K filed with or furnished to 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 informational purposes only and are not commitments to deliver any technology or enhancement. Riverbed reserves the right to modify future product plans at any time.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain non-GAAP financial measures. For a description of these non-GAAP financial measures, including the reasons why management uses each measure, and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled "Use of Non-GAAP Financial Information" as well as the related tables that follow it. We anticipate disclosing forward-looking non-GAAP financial information on our July 24, 2008 conference call to discuss our second quarter results, including an estimate of non-GAAP earnings for the third quarter and full fiscal year that excludes stock-based compensation expenses related to employee stock options, purchases of common stock under our Employee Stock Purchase Plan, and related payroll taxes, and the tax impact of non-GAAP adjustments. We cannot readily estimate these expenses because they depend on such factors as our future stock price for purposes of computing such expenses.

A copy of this press release can be found on the investor relations page of Riverbed's website at www.riverbed.com.

Riverbed Technology, Riverbed, Steelhead, RiOS, Interceptor, and the Riverbed logo are trademarks or registered trademarks of Riverbed Technology, Inc. All other trademarks used or mentioned herein belong to their respective owners.

Riverbed Technology, Inc. GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Three months ended Six months ended June 30, June 30, ------------------ ----------------- 2008 2007 2008 2007 --------- -------- --------- ------- Revenue: Product $ 62,607 $ 45,188 $120,336 $80,827 Support and services 18,985 8,814 34,238 15,959 --------- -------- --------- ------- Total revenue 81,592 54,002 154,574 96,786 Cost of revenue: Cost of product 14,564 12,856 28,500 23,024 Cost of support and services 6,967 3,502 12,977 5,888 --------- -------- --------- ------- Total cost of revenue 21,531 16,358 41,477 28,912 --------- -------- --------- ------- Gross profit 60,061 37,644 113,097 67,874 Operating expenses: Sales and marketing 34,930 20,804 66,137 37,896 Research and development 15,088 9,036 28,696 16,494 General and administrative 10,133 5,600 19,506 9,637 --------- -------- --------- ------- Total operating expenses 60,151 35,440 114,339 64,027 --------- -------- --------- ------- Operating income (loss) (90) 2,204 (1,242) 3,847 Other income, net 1,472 2,555 3,772 4,274 --------- -------- --------- ------- Income before provision for income taxes 1,382 4,759 2,530 8,121 Provision for income taxes 2,251 814 2,761 918 --------- -------- --------- ------- Net income (loss) $ (869) $ 3,945 $ (231) $ 7,203 ========= ======== ========= ======= Net income (loss) per share, basic $ (0.01) $ 0.06 $ - $ 0.11 Net income (loss) per share, diluted $ (0.01) $ 0.05 $ - $ 0.10 Shares used in computing basic net income (loss) per share 71,143 68,085 70,870 66,561 Shares used in computing diluted net income (loss) per share 71,143 74,091 70,870 72,221 Stock-based compensation expense included in above: Cost of product $ 42 $ 33 $ 77 $ 41 Cost of support and services 1,314 620 2,345 992 Sales and marketing 6,559 3,545 11,948 6,286 Research and development 3,559 1,991 6,460 3,447 General and administrative 2,444 1,251 4,296 2,050 --------- -------- --------- ------- Total stock-based compensation expense $ 13,918 $ 7,440 $ 25,126 $12,816 ========= ======== ========= =======

Riverbed Technology, Inc. Non-GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Three months Three months ended ended June 30, June 30, % change ----------------- ----------------- -------- % of % of 2008 Revenues 2007 Revenues ------- --------- ------- --------- Revenue: Product $62,607 77% $45,188 84% 39% Support and services 18,985 23% 8,814 16% 115% ------- --------- ------- --------- Total revenue 81,592 100% 54,002 100% 51% Cost of revenue: Cost of product 14,521 23% (a) 12,823 28% (a) 13% Cost of support and services 5,649 30% (a) 2,881 33% (a) 96% ------- --------- ------- --------- Total cost of revenue 20,170 25% 15,704 29% 28% ------- --------- ------- --------- Gross profit 61,422 75% 38,298 71% 60% Operating expenses: Sales and marketing 28,354 35% 17,114 32% 66% Research and development 11,512 14% 6,958 13% 65% General and administrative 7,684 9% 4,296 8% 79% ------- --------- ------- --------- Total operating expenses 47,550 58% 28,368 53% 68% ------- --------- ------- --------- Operating income 13,872 17% 9,930 18% 40% Other income, net 1,472 2% 2,555 5% -42% ------- --------- ------- --------- Income before provision for income taxes 15,344 19% 12,485 23% 23% Provision for income taxes 5,417 7% 814 2% 565% ------- --------- ------- --------- Net income $ 9,927 12% $11,671 22% -15% ======= ========= ======= ========= Net income per share, basic $ 0.14 $ 0.17 Net income per share, diluted $ 0.13 $ 0.16 Shares used in computing basic net income per share 71,143 68,085 Shares used in computing diluted net income per share 74,610 74,625 (a)Cost of product and cost of support and services are reflected as percent of product and support and services revenues, respectively.

Riverbed Technology, Inc. Non-GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Six months ended Six months ended June 30, June 30, % change ------------------ ----------------- -------- % of % of 2008 Revenues 2007 Revenues -------- --------- ------- --------- Revenue: Product $120,336 78% $80,827 84% 49% Support and services 34,238 22% 15,959 16% 115% -------- --------- ------- --------- Total revenue 154,574 100% 96,786 100% 60% Cost of revenue: Cost of product 28,422 24% (a) 22,983 28% (a) 24% Cost of support and services 10,628 31% (a) 4,895 31% (a) 117% -------- --------- ------- --------- Total cost of revenue 39,050 25% 27,878 29% 40% -------- --------- ------- --------- Gross profit 115,524 75% 68,908 71% 68% Operating expenses: Sales and marketing 54,156 35% 31,465 33% 72% Research and development 22,177 14% 12,960 13% 71% General and administrative 15,202 10% 7,534 8% 102% -------- --------- ------- --------- Total operating expenses 91,535 59% 51,959 54% 76% -------- --------- ------- --------- Operating income 23,989 16% 16,949 18% 42% Other income, net 3,772 2% 4,274 4% -12% -------- --------- ------- --------- Income before provision for income taxes 27,761 18% 21,223 22% 31% Provision for income taxes 9,937 6% 918 1% 982% -------- --------- ------- --------- Net income $ 17,824 12% $20,305 21% -12% ======== ========= ======= ========= Net income per share, basic $ 0.25 $ 0.31 Net income per share, diluted $ 0.24 $ 0.28 Shares used in computing basic net income per share 70,870 66,561 Shares used in computing diluted net income per share 74,518 72,659 (a)Cost of product and cost of support and services are reflected as percent of product and support and services revenues, respectively.

Riverbed Technology, Inc. Non-GAAP Condensed Consolidated Statements of Operations In thousands, except per share amounts Unaudited Three months Three months ended ended June 30, March 31, % change ----------------- ----------------- -------- % of % of 2008 Revenues 2008 Revenues ------- --------- ------- --------- Revenue: Product $62,607 77% $57,729 79% 8% Support and services 18,985 23% 15,253 21% 24% ------- --------- ------- --------- Total revenue 81,592 100% 72,982 100% 12% Cost of revenue: Cost of product 14,521 23% (a) 13,901 24% (a) 4% Cost of support and services 5,649 30% (a) 4,979 33% (a) 13% ------- --------- ------- --------- Total cost of revenue 20,170 25% 18,880 26% 7% ------- --------- ------- --------- Gross profit 61,422 75% 54,102 74% 14% Operating expenses: Sales and marketing 28,354 35% 25,802 35% 10% Research and development 11,512 14% 10,665 15% 8% General and administrative 7,684 9% 7,518 10% 2% ------- --------- ------- --------- Total operating expenses 47,550 58% 43,985 60% 8% ------- --------- ------- --------- Operating income 13,872 17% 10,117 14% 37% Other income, net 1,472 2% 2,300 3% -36% ------- --------- ------- --------- Income before provision for income taxes 15,344 19% 12,417 17% 24% Provision for income taxes 5,417 7% 4,520 6% 20% ------- --------- ------- --------- Net income $ 9,927 12% $ 7,897 11% 26% ======= ========= ======= ========= Net income per share, basic $ 0.14 $ 0.11 Net income per share, diluted $ 0.13 $ 0.11 Shares used in computing basic net income per share 71,143 70,597 Shares used in computing diluted net income per share 74,610 74,427 (a)Cost of product and cost of support and services are reflected as percent of product and support and services revenues, respectively.

Riverbed Technology, Inc. GAAP to Non-GAAP Reconciliation In thousands, except per share amounts Unaudited -------------------------------- Three months ended June 30, 2008 -------------------------------- GAAP Adjustments Non-GAAP -------- ----------- --------- Reconciliation of gross profit: Total revenue $81,592 $ - $ 81,592 Total cost of revenue 21,531 (1,361) (a) 20,170 -------- ----------- -------- Gross profit $60,061 $ 1,361 $ 61,422 ======== =========== ======== Reconciliation of operating expenses: Sales and marketing $34,930 $ (6,576) (a)$ 28,354 Research and development 15,088 (3,576) (a) 11,512 General and administrative 10,133 (2,449) (a) 7,684 -------- ----------- -------- Total operating expenses $60,151 $ (12,601) $ 47,550 ======== =========== ======== Reconciliation of operating income (loss), net income (loss) and net income (loss) per share: Operating income (loss) $ (90) $ 13,962 (a)$ 13,872 Income before provision for income taxes $ 1,382 $ 13,962 (a)$ 15,344 Income tax provision $ 2,251 $ 3,166 (b)$ 5,417 Net income (loss) $ (869) $ 10,796 $ 9,927 Net income (loss) per share, basic $ (0.01) $ 0.14 Net income (loss) per share, diluted $ (0.01) $ 0.13 Shares used in computing basic net income (loss) per share 71,143 71,143 Shares used in computing diluted net income (loss) per share 71,143 3,467 (c) 74,610 --------------------------------- Six months ended June 30, 2008 --------------------------------- GAAP Adjustments Non-GAAP --------- ----------- -------- Reconciliation of gross profit: Total revenue $154,574 $ - $154,574 Total cost of revenue 41,477 (2,427) (a) 39,050 --------- ----------- -------- Gross profit $113,097 $ 2,427 $115,524 ========= =========== ======== Reconciliation of operating expenses: Sales and marketing $ 66,137 $ (11,981) (a)$ 54,156 Research and development 28,696 (6,519) (a) 22,177 General and administrative 19,506 (4,304) (a) 15,202 --------- ----------- -------- Total operating expenses $114,339 $ (22,804) $ 91,535 ========= =========== ======== Reconciliation of operating income (loss), net income (loss) and net income (loss) per share: Operating income (loss) $ (1,242) $ 25,231 (a)$ 23,989 Income before provision for income taxes $ 2,530 $ 25,231 (a)$ 27,761 Income tax provision $ 2,761 $ 7,176 (b)$ 9,937 Net income (loss) $ (231) $ 18,055 $ 17,824 Net income (loss) per share, basic $ - $ 0.25 Net income (loss) per share, diluted $ - $ 0.24 Shares used in computing basic net income (loss) per share 70,870 - 70,870 Shares used in computing diluted net income (loss) per share 70,870 3,648 (c) 74,518 Use of Non-GAAP Financial Information: To supplement our condensed consolidated financial statements presented on a GAAP basis, Riverbed uses non-GAAP measures of operating results, net income (loss) and net income (loss) per share, which are adjusted to exclude stock-based compensation expense and payroll tax expense related to stock option exercises, exclude our tax valuation allowance and certain other extraordinary items from the tax rate, and to include dilutive shares where applicable. We believe these adjustments are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Riverbed's underlying operating results and trends and our marketplace performance. The non-GAAP results are an indication of our baseline performance that are considered by management for purpose of making operational decisions. In addition, these non-GAAP results are the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income (loss) or basic and diluted net income (loss) per share prepared in accordance with generally accepted accounting principles in the United States. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and are subject to limitations. GAAP to Non-GAAP Reconciliations: --------------------------------------------------------------------- (a) Stock-based compensation expense and payroll tax on stock option exercises -------------------------------- Three months ended June 30, 2008 -------------------------------- Payroll tax on Stock-based stock compensation option expense exercises Total ------------- ---------- ------- Cost of revenue $ 1,356 $ 5 $ 1,361 Sales and marketing 6,559 17 6,576 Research and development 3,559 17 3,576 General and administrative 2,444 5 2,449 ------------- ---------- ------- $ 13,918 $ 44 $13,962 ============= ========== ======= -------------------------------- Six months ended June 30, 2008 -------------------------------- Payroll tax on Stock-based stock compensation option expense exercises Total ------------- ---------- ------- Cost of revenue $ 2,422 $ 5 $ 2,427 Sales and marketing 11,948 33 11,981 Research and development 6,460 59 6,519 General and administrative 4,296 8 4,304 ------------- ---------- ------- $ 25,126 $ 105 $25,231 ============= ========== ======= Excluded amount represents stock-based compensation expense. Stock- based compensation is a non-cash expense accounted for in accordance with the intrinsic value method under Accounting Principles Board No. 25 through December 31, 2005, and with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R) effective January 1, 2006. While a large component of our expense, we believe investors want to exclude the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods. --------------------------------------------------------------------- --------------------------------------------------------------------- (b) Income tax provision ------------------------------- Three months ended June 30, 2008 ------------------------------- GAAP provision for income taxes $ 2,251 Effects of exclusion of stock-based compensation and valuation allowance 3,166 ------------ Non-GAAP provision for income taxes $ 5,417 ============ --------------------------------------------------------------------- --------------------------------------------------------------------- (b) Income tax provision -------------------------------- Six months ended June 30, 2008 -------------------------------- GAAP provision for income taxes $ 2,761 Effects of exclusion of stock-based compensation and valuation allowance 7,176 Non-GAAP provision for income taxes $ 9,937 ============ The non-GAAP tax rate excludes the effect of stock-based compensation expense as well as discrete tax benefits on stock option exercises. Additionally, the non-GAAP tax rate does not assume a full valuation allowance on our deferred tax assets. --------------------------------------------------------------------- (c) Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under SFAS 123(R).

Riverbed Technology, Inc. GAAP to Non-GAAP Reconciliation In thousands, except per share amounts Unaudited -------------------------------- Three months ended June 30, 2007 -------------------------------- GAAP Adjustments Non-GAAP ------- ----------- -------- Reconciliation of gross profit: Total revenue $54,002 $ - $ 54,002 Total cost of revenue 16,358 (654) (a) 15,704 ------- ----------- -------- Gross profit $37,644 $ 654 $ 38,298 ======= =========== ======== Reconciliation of operating expenses: Sales and marketing $20,804 $ (3,690) (a) $ 17,114 Research and development 9,036 (2,078) (a) 6,958 General and administrative 5,600 (1,304) (a) 4,296 ------- ----------- -------- Total operating expenses $35,440 $ (7,072) $ 28,368 ======= =========== ======== Reconciliation of operating income, net income and net income per share: Operating income (loss) $ 2,204 $ 7,726 (a) $ 9,930 Net income $ 3,945 $ 7,726 $ 11,671 Net income per share, basic $ 0.06 $ 0.17 Net income per share, diluted $ 0.05 $ 0.16 Shares used in computing basic net income per share 68,085 68,085 Shares used in computing diluted net income per share 74,091 534 (b) 74,625 --------------------------------- Six months ended June 30, 2007 --------------------------------- GAAP Adjustments Non-GAAP -------- ----------- -------- Reconciliation of gross profit: Total revenue $ 96,786 $ - $96,786 Total cost of revenue 28,912 (1,034) (a) 27,878 -------- ----------- -------- Gross profit $ 67,874 $ 1,034 $68,908 ======== =========== ======== Reconciliation of operating expenses: Sales and marketing $ 37,896 $ (6,431) (a) $31,465 Research and development 16,494 (3,534) (a) 12,960 General and administrative 9,637 (2,103) (a) 7,534 -------- ----------- -------- Total operating expenses $ 64,027 $ (12,068) $51,959 ======== =========== ======== Reconciliation of operating income, net income and net income per share: Operating income (loss) $ 3,847 $ 13,102 (a) $16,949 Net income $ 7,203 $ 13,102 $20,305 Net income per share, basic $ 0.11 $ 0.31 Net income per share, diluted $ 0.10 $ 0.28 Shares used in computing basic net income per share 66,561 66,561 Shares used in computing diluted net income per share 72,221 438 (b) 72,659 GAAP to Non-GAAP Reconciliations: --------------------------------------------------------------------- (a) Stock-based compensation expense and payroll tax on stock option exercises -------------------------------- Three months ended June 30, 2007 -------------------------------- ------------- ----------- ------ Payroll tax Stock-based on stock compensation option expense exercises Total ------------- ----------- ------ Cost of revenue $ 653 $ 1 $ 654 Sales and marketing 3,545 145 3,690 Research and development 1,991 87 2,078 General and administrative 1,251 53 1,304 ------------- ----------- ------ $ 7,440 $286 $7,726 ============= =========== ====== --------------------------------- Six months ended June 30, 2007 --------------------------------- ------------- ----------- ------- Payroll tax Stock-based on stock compensation option expense exercises Total ------------- ----------- ------- Cost of revenue $ 1,033 $ 1 $ 1,034 Sales and marketing 6,286 145 6,431 Research and development 3,447 87 3,534 General and administrative 2,050 53 2,103 ------------- ----------- ------- $ 12,816 $286 $13,102 ============= =========== ======= Excluded amount represents stock-based compensation expense. Stock- based compensation is a non-cash expense accounted for in accordance with the intrinsic value method under Accounting Principles Board No. 25 through December 31, 2005, and with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R) effective January 1, 2006. While a large component of our expense, we believe investors want to exclude the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods. --------------------------------------------------------------------- (b) Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under SFAS 123(R).

Riverbed Technology, Inc. GAAP to Non-GAAP Reconciliation In thousands, except per share amounts Unaudited ------------------------------------- Three months ended March 31, 2008 ------------------------------------- GAAP Adjustments Non-GAAP ------------- ----------- -------- Reconciliation of gross profit: Total revenue $ 72,982 $ - $72,982 Total cost of revenue 19,946 (1,066) (a) 18,880 ------------- ----------- -------- Gross profit $ 53,036 $ 1,066 $54,102 ============= =========== ======== Reconciliation of operating expenses: Sales and marketing $ 31,207 $ (5,405) (a) $25,802 Research and development 13,608 (2,943) (a) 10,665 General and administrative 9,373 (1,855) (a) 7,518 ------------- ----------- -------- Total operating expenses $ 54,188 $ (10,203) $43,985 ============= =========== ======== Reconciliation of operating income, net income and net income per share: Operating income (loss) $ (1,152) $ 11,269 (a) $10,117 Income before provision for income taxes $ 1,148 $ 11,269 (a) $12,417 Income tax provision $ 510 $ 4,010 (b) $ 4,520 Net income $ 638 $ 7,259 $ 7,897 Net income per share, basic $ 0.01 $ 0.11 Net income per share, diluted $ 0.01 $ 0.11 Shares used in computing basic net income per share 70,597 70,597 Shares used in computing diluted net income per share 73,959 468 (c) 74,427 GAAP to Non-GAAP Reconciliations: ------------------------------ ------------------------------------- (a) Stock-based compensation expense and payroll tax on stock option exercises Payroll tax Stock-based on stock compensation option expense exercises Total ------------- ----------- -------- Cost of revenue $ 1,066 $ - $ 1,066 Sales and marketing 5,389 16 5,405 Research and development 2,901 42 2,943 General and administrative 1,852 3 1,855 ------------- ----------- -------- $ 11,208 $ 61 $11,269 ============= =========== ======== Excluded amount represents stock-based compensation expense. Stock- based compensation is a non-cash expense accounted for in accordance with the intrinsic value method under Accounting Principles Board No. 25 through December 31, 2005, and with the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R) effective January 1, 2006. While a large component of our expense, we believe investors want to exclude the effects of stock-based compensation expense in order to compare our financial performance with that of other companies and between time periods. -------------------------------------------------------------------- -------------------------------------------------------------------- (b) Income tax provision GAAP provision for income taxes $ 510 Effects of exclusion of stock- based compensation and valuation allowance 4,010 ------------- Non-GAAP provision for income taxes $ 4,520 ============= The non-GAAP tax rate excludes the effect of stock-based compensation expense as well as discrete tax benefits on stock option exercises. Additionally, the non-GAAP tax rate does not assume a full valuation allowance on our deferred tax assets. -------------------------------------------------------------------- (c) Non-GAAP diluted earnings per share and non-GAAP diluted weighted average shares outstanding were calculated excluding the effects of expensing stock options under SFAS 123(R).

Riverbed Technology, Inc. Supplemental Financial Information In thousands Unaudited Revenue by Geography ----------------------------------------------------- Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 ----------------------------------------------------- Customers within the United States $29,579 $32,883 $38,736 $46,973 $40,502 $47,596 Customers outside the United States 13,205 21,119 24,574 29,337 32,480 33,996 ----------------------------------------------------- Total revenue $42,784 $54,002 $63,310 $76,310 $72,982 $81,592 ===================================================== As a percentage of total revenues: Customers within the United States 69% 61% 61% 62% 55% 58% Customers outside the United States 31% 39% 39% 38% 45% 42% ----------------------------------------------------- Total revenue 100% 100% 100% 100% 100% 100% ===================================================== Revenue by Sales Channel ----------------------------------------------------- Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 ----------------------------------------------------- Direct $ 4,023 $ 5,256 $ 7,516 $ 9,251 $ 8,063 $ 7,290 Indirect 38,761 48,746 55,794 67,059 64,919 74,302 ----------------------------------------------------- Total revenue $42,784 $54,002 $63,310 $76,310 $72,982 $81,592 ===================================================== As a percentage of total revenues: Direct 9% 10% 12% 12% 11% 9% Indirect 91% 90% 88% 88% 89% 91% ----------------------------------------------------- Total revenue 100% 100% 100% 100% 100% 100% =====================================================

Riverbed Technology, Inc. Condensed Consolidated Balance Sheets In thousands June 30, December 31, 2008 2007 ----------- ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 115,679 $ 162,979 Marketable securities 153,624 83,103 Trade receivables, net 45,055 50,072 Other receivables 493 1,273 Inventory 12,883 9,413 Prepaid expenses and other current assets 7,604 5,136 ----------- ------------ Total current assets 335,338 311,976 ----------- ------------ Fixed assets, net 22,403 18,826 Other assets 7,794 6,800 ----------- ------------ Total assets $ 365,535 $ 337,602 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,077 $ 20,325 Accrued compensation and related benefits 12,981 14,290 Other accrued liabilities 12,158 9,381 Deferred revenue 35,755 26,845 ----------- ------------ Total current liabilities 75,971 70,841 ----------- ------------ Deferred revenue non-current 8,599 6,634 Other long-term liabilities 317 409 ----------- ------------ Total long-term liabilities 8,916 7,043 ----------- ------------ Stockholders' equity: Common stock and additional paid-in-capital 315,400 295,487 Deferred stock-based compensation (2,001) (3,287) Accumulated deficit (32,766) (32,535) Accumulated other comprehensive loss 15 53 ----------- ------------ Total stockholders' equity 280,648 259,718 ----------- ------------ ----------- ------------ Total liabilities and stockholders' equity $ 365,535 $ 337,602 =========== ============

Riverbed Technology, Inc. Condensed Consolidated Statements of Cash Flows In thousands Unaudited Six months ended June 30, ------------------- 2008 2007 --------- --------- Operating activities: Net income (loss) $ (231) $ 7,203 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,532 2,203 Stock-based compensation 25,126 12,816 Excess tax benefit from employee stock plans (1,427) - Changes in operating assets and liabilities: (Increase) decrease in trade receivables 4,107 (7,742) Increase in inventory (5,900) (2,184) (Increase) decrease in prepaid expenses and other assets (1,962) 470 Decrease in accounts payable and other current liabilities (741) (198) Increase in income taxes payable 1,284 779 Increase in deferred revenue 11,108 7,262 --------- --------- Net cash provided by operating activities 35,896 20,609 Investing activities: Capital expenditures (8,120) (3,488) Purchase of available for sale securities (94,641) (66,078) Proceeds from sales and maturities of available for sale securities 24,003 4,000 Increase in other assets - (1,600) --------- --------- Net cash used in investing activities (78,758) (67,166) Financing activities: Proceeds from public offering, net of expenses - 87,681 Proceeds from issuance of common stock under employee stock plans, net of repurchases 6,540 5,215 Payments for repurchases of common stock (12,484) - Excess tax benefit from employee stock plans 1,427 - --------- --------- Net cash provided by (used in) financing activities (4,517) 92,896 Effect of exchange rate changes on cash and cash equivalents 79 18 --------- --------- Net increase (decrease) in cash and cash equivalents (47,300) 46,357 Cash and cash equivalents at beginning of period 162,979 105,330 --------- --------- Cash and cash equivalents at end of period $115,679 $151,687 ========= =========

SOURCE: Riverbed Technology, Inc.

Riverbed Technology, Inc. Renee Lyall, 415-247-6353 ir@riverbed.com or The Blueshirt Group Chris Danne, 415-217-7722 chris@blueshirtgroup.com