Return to Non-GAAP Profitability as UV for HPDA Gains Momentum
MILPITAS, CA -- (Marketwired - January 27, 2016) - SGI (NASDAQ: SGI), a global leader in high performance solutions for compute, data analytics and data management, today reported financial results for its fiscal second quarter ended December 25, 2015. The data in this release is presented on both a GAAP and non-GAAP basis and a reconciliation of GAAP to non-GAAP measures is included in the financial tables in this press release.
Total revenue for the second quarter was $152 million compared to $138 million in the second quarter of 2015. GAAP net loss for the second quarter was $0.5 million, or $(0.01) per share compared with a net loss of $10 million, or $(0.30) per share in the second quarter of 2015. Non-GAAP net income in the second quarter was $5 million, or $0.14 per share compared with net income of $0.1 million, or breakeven per share in the same quarter a year ago.
"The second quarter results marked our return to non-GAAP profitability with improvements in both the top and bottom line," said Jorge Titinger, President and CEO. "We made significant progress in our high performance data analytics business as we surpassed $10 million in revenue this quarter. We also continued to gain traction winning large deals in HPC such as the recent NCAR award in the weather vertical."
Recent Highlights
Outlook
Consistent with its previously provided outlook for the full year, the company continues to expect:
For the third quarter, we expect to be profitable on a non-GAAP basis at approximately $140 million in revenue.
Conference Call and Webcast
SGI's second quarter fiscal 2016 financial results conference call is scheduled to take place on Wednesday, January 27, 2016 at 1:30 p.m. PT (4:30 p.m. ET). A live webcast of the company's earnings conference call will be available simultaneously on the Investor Relations section of the company's website at investors.sgi.com. A replay of the webcast will also be available approximately two hours after the conclusion of the conference call and will remain available until next quarter.
The earnings conference call can also be accessed by dialing (888) 463-5422 (toll-free) or (970) 315-0484 (international) and entering the confirmation code: 17957979. An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available for five days and can be accessed by dialing (855) 859-2056 (toll-free) or (404) 537-3406 (international) and entering the confirmation code: 17957979.
About SGI
SGI is a global leader in high performance solutions for compute, data analytics and data management that enable customers to accelerate time to discovery, innovation and profitability. Visit sgi.com for more information.
Connect with SGI on Twitter (@sgi_corp), YouTube (youtube.com/sgicorp), Facebook (facebook.com/sgiglobal) and LinkedIn (linkedin.com/company/sgi).
Forward Looking Statements
The statements made in this press release regarding projected financial results, including SGI's growth strategy, outlook regarding future profitability and positive cash generation, as well as certain statements made in the earnings conference call, are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. Actual results could differ materially from those described by these statements due to a number of factors, including, but not limited to the following: sales to U.S. government entities, which are subject to the government's budgetary constraints; customer concentration risks; fluctuations in the buying patterns and sizes of customer orders from one quarter to the next; increased competition causing SGI to sell products or services at lower margins than expected; lengthy acceptance cycles of SGI's products by certain customers and their effects on SGI's revenue and liquidity; development or product delivery delays, delays in obtaining necessary components from suppliers or delays in customer acceptance once products are delivered; the addition of new customers or loss of existing customers; unexpected changes in the price for, and the availability of, components from SGI's suppliers; SGI's ability to enhance its products with new and better designs and functionality; actions taken by competitors, such as new product announcements or introductions or changes in pricing; market acceptance of newer products; and risks related to SGI's term loan. Some of these risks and uncertainties are described in more detail in SGI's most recent Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission ("SEC") and are available at the SEC's web site at http://www.sec.gov. Forward-looking statements are made based on information available to the company on the date of this press release. The company assumes no obligation to update the information in this press release.
Use of Non-GAAP Financial Measures
This press release and the related earnings conference call include financial measures that are not determined in accordance with U.S. generally accepted accounting principles ("GAAP"), including non-GAAP gross margin, non-GAAP net income (loss) and non-GAAP basic and diluted net income (loss) per share. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and management exercises judgment in determining which items should be excluded in the calculation of non-GAAP measures. In addition, these non-GAAP measures may be different from non-GAAP measures used by other companies. While we believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, we believe that non-GAAP measures are valuable in evaluating the company's operating performance and analyzing our business operations. Management may exclude the following items from one or more of non-GAAP measures: (1) share-based compensation; (2) amortization and impairment of intangible assets; (3) restructuring and severance charges; (4) excess and obsolete inventory write-offs; (5) gains or losses on investments; and (6) other non-recurring costs. Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between GAAP and non-GAAP financial results is provided in this press release. The adjustments made should not be construed as an inference that all such adjustments or costs are unusual, infrequent or non-recurring. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in this release and SGI's SEC filings.
For a full reconciliation of historical non-GAAP measures referenced in this press release or today's presentation to the comparable measures under GAAP, please refer to the company's press releases on its website at www.sgi.com.
© 2016 Silicon Graphics International Corp. All rights reserved. SGI and the SGI logo are trademarks or registered trademarks of Silicon Graphics International Corp. or its subsidiaries in the United States and/or other countries. All other trademarks are property of their respective holders.
Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
-------------------------- --------------------------
December 25, December 26, December 25, December 26,
2015 2014 2015 2014
------------ ------------ ------------ ------------
Revenue $ 151,826 $ 138,150 $ 278,133 $ 249,851
Cost of revenue 111,001 101,341 208,844 180,670
------------ ------------ ------------ ------------
Gross profit 40,825 36,809 69,289 69,181
------------ ------------ ------------ ------------
Operating expenses:
Research and
development 12,987 14,779 26,167 27,979
Sales and marketing 13,826 16,780 26,394 32,641
General and
administrative 12,604 15,254 24,511 28,559
Restructuring - - - 116
------------ ------------ ------------ ------------
Total operating
expenses 39,417 46,813 77,072 89,295
------------ ------------ ------------ ------------
Income (loss) from
operations 1,408 (10,004) (7,783) (20,114)
------------ ------------ ------------ ------------
Interest expense,
net (2,027) (58) (4,056) (100)
Other income
(expense), net 540 (247) 437 (104)
------------ ------------ ------------ ------------
Total other
expense, net (1,487) (305) (3,619) (204)
------------ ------------ ------------ ------------
Loss before income
taxes (79) (10,309) (11,402) (20,318)
Income tax provision 400 129 649 453
------------ ------------ ------------ ------------
Net loss $ (479) $ (10,438) $ (12,051) $ (20,771)
============ ============ ============ ============
Basic and diluted net
loss per share $ (0.01) $ (0.30) $ (0.34) $ (0.60)
============ ============ ============ ============
Shares used in
computing basic and
diluted net loss per
share 35,531 34,375 35,352 34,399
============ ============ ============ ============
Share-based compensation by
category is as follows:
Cost of revenue $ 412 $ 566 $ 937 $ 1,032
Research and
development 495 659 1,201 1,218
Sales and marketing 451 764 969 1,565
General and
administrative 1,809 2,182 3,967 3,855
------------ ------------ ------------ ------------
Total $ 3,167 $ 4,171 $ 7,074 $ 7,670
============ ============ ============ ============
Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 25, June 26,
2015 2015
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 68,410 $ 67,191
Current portion of restricted cash 2,109 2,109
Accounts receivable, net 103,758 118,219
Inventories 66,026 82,832
Current portion of deferred cost of revenue 12,850 12,108
Prepaid expenses and other current assets 10,187 17,547
------------ ------------
Total current assets 263,340 300,006
Non-current portion of restricted cash 2,135 2,251
Property and equipment, net 41,108 38,480
Goodwill and Intangible assets, net 11,001 11,303
Non-current portion of deferred cost of revenue 11,630 9,648
Other non-current assets 27,025 25,896
------------ ------------
Total assets $ 356,239 $ 387,584
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,122 $ 48,677
Accrued compensation 16,178 17,797
Short-term debt, net of unamortized debt
issuance costs 3,978 3,096
Current portion of deferred revenue 82,431 96,473
Other current liabilities 21,441 33,180
------------ ------------
Total current liabilities
Long-tem debt, net of unamortized debt issuance
costs 66,067 65,581
Non-current portion of deferred revenue 45,267 43,781
Long-term income taxes payable 7,698 8,420
Retirement benefit obligations 9,057 9,330
Other non-current liabilities 7,943 7,871
------------ ------------
Total liabilities 306,182 334,206
Stockholders' equity 50,057 53,378
------------ ------------
Total liabilities and stockholders' equity $ 356,239 $ 387,584
============ ============
Silicon Graphics International Corp.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
--------------------------------------------------------
December 25, 2015
Net Gross Profit Operating
-------------------------
(Loss) /
Income EPS Product Service Total Expenses
--------- ------- ------- ------- ------- ---------
GAAP $ (479) $ (0.01) $25,634 $15,191 $40,825 $ 39,417
Share-based (1)
compensation 3,167 0.09 98 314 412 (2,755)
Amortization (1)
of acquired
intangibles 192 - 175 - 175 (17)
Restructuring (2)
and severance 730 0.02 - - - (730)
Other non- (2)
recurring
items 1,396 0.04 - (12) (12) (1,408)
--------- ------- ------- ------- ------- ---------
Non-GAAP $ 5,006 $ 0.14 $25,907 $15,493 $41,400 $ 34,507
========= ======= ======= ======= ======= =========
Gross Margin
Gross margin
on a GAAP
basis 22.3% 41.2% 26.9%
Gross margin
on a Non-GAAP
basis 22.5% 42.1% 27.3%
Weighted average
shares used in
computing:
Basic net loss
per share 35,531
Diluted net
income per
share 36,021
Three Months Ended
--------------------------------------------------------
December 26, 2014
Net Gross Profit Operating
-------------------------
(Loss) /
Income EPS Product Service Total Expenses
--------- ------- ------- ------- ------- ---------
GAAP $ (10,438) $ (0.30) $21,547 $15,262 $36,809 $ 46,813
Share-based (1)
compensation 4,171 0.12 122 444 566 (3,605)
Amortization (1)
of acquired
intangibles 1,310 0.04 900 - 900 (410)
Restructuring (2)
and severance 3,792 0.11 8 693 701 (3,091)
Other non- (2)
recurring
items 1,268 0.03 - 10 10 (1,258)
--------- ------- ------- ------- ------- ---------
Non-GAAP $ 103 $ (0.00) $22,577 $16,409 $38,986 $ 38,449
========= ======= ======= ======= ======= =========
Gross Margin
Gross margin
on a GAAP
basis 21.5% 40.3% 26.6%
Gross margin
on a Non-GAAP
basis 22.5% 43.3% 28.2%
Weighted average
shares used in
computing:
Basic net loss
per share 34,375
Diluted net
income per
share 35,134
Three Months Ended
--------------------------------------------------------
September 25, 2015
Net Gross Profit Operating
-------------------------
Loss EPS Product Service Total Expenses
--------- ------- ------- ------- ------- ---------
GAAP $ (11,572) $ (0.33) $14,180 $14,284 $28,464 $ 37,655
Share-based (1)
compensation 3,907 0.11 109 416 525 (3,382)
Amortization (1)
and
impairment of
acquired
intangibles 92 - 75 - 75 (17)
Restructuring (2)
and severance 944 0.03 - 123 123 (821)
Other non- (2)
recurring
items 1,283 0.04 - 23 23 (1,260)
--------- ------- ------- ------- ------- ---------
Non-GAAP $ (5,346) $ (0.15) $14,364 $14,846 $29,210 $ 32,175
========= ======= ======= ======= ======= =========
Gross Margin
Gross margin
on a GAAP
basis 15.1% 44.3% 22.5%
Gross margin
on a Non-GAAP
basis 15.3% 46.1% 23.1%
Weighted average
shares used in
computing:
Basic and
diluted net
loss per
share 35,174
Silicon Graphics International Corp.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
Six Months Ended
-------------------------------------------------------
December 25, 2015
Net Gross Profit Operating
-------------------------
Loss EPS Product Service Total Expenses
-------- ------- ------- ------- ------- ---------
GAAP $(12,051) $ (0.34) $39,814 $29,475 $69,289 $ 77,072
Share-based (1)
compensation 7,074 0.20 207 730 937 (6,137)
Amortization (1)
and impairment
of acquired
intangibles 284 0.01 250 - 250 (34)
Restructuring (2)
and severance 1,674 0.05 - 123 123 (1,551)
Other non- (2)
recurring
items 2,679 0.07 - 11 11 (2,668)
-------- ------- ------- ------- ------- ---------
Non-GAAP $ (340) $ (0.01) $40,271 $30,339 $70,610 $ 66,682
======== ======= ======= ======= ======= =========
Gross Margin
Gross margin on
a GAAP basis 19.0% 42.7% 24.9%
Gross margin on
a Non-GAAP
basis 19.3% 43.9% 25.4%
Weighted average
shares used in
computing:
Basic and
diluted net
loss per share 35,352
Six Months Ended
-------------------------------------------------------
December 26, 2014
Net Gross Profit Operating
-------------------------
Loss EPS Product Service Total Expenses
-------- ------- ------- ------- ------- ---------
GAAP $(20,771) $ (0.60) $37,656 $31,525 $69,181 $ 89,295
Share-based (1)
compensation 7,670 0.22 229 803 1,032 (6,638)
Amortization of acquired
intangibles 0.05 1,044 - 1,044 (481)
Restructuring (2)
and severance 4,884 0.14 166 972 1,138 (3,746)
Other non- (2)
recurring
items 1,818 0.05 - 10 10 (1,808)
-------- ------- ------- ------- ------- ---------
Non-GAAP $ (4,874) $ (0.14) $39,095 $33,310 $72,405 $ 76,622
======== ======= ======= ======= ======= =========
Gross Margin
Gross margin on
a GAAP basis 21.5% 42.3% 27.7%
Gross margin on
a Non-GAAP
basis 22.3% 44.7% 29.0%
Weighted average
shares used in
computing:
Basic and
diluted net
loss per share 34,399
NOTE: This presentation includes certain financial measures not in
conformity with Generally Accepted Accounting Principles in the United
States (non-GAAP measures). Our non-GAAP measures are not meant to be
considered in isolation or as a substitute for comparable GAAP measures, and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP.
(1) Adjustments to exclude certain non-cash expenses such as share-based
compensation and amortization and impairment of intangible assets.
(2) Adjustments to exclude the items discussed below because such items are
either operating expenses which would not otherwise have been incurred by
the company in the normal course of the company's business operations or are
not reflective of the company's core results over time. These items may
include recurring as well as non-recurring items.
(a) Restructuring charges and severance - Restructuring charges consist
primarily of severance expense, facility closure and relocation costs.
(b) Other non-recurring items include settlements, asset impairments, and
other non-recurring items.
Silicon Graphics International Corp.
TRENDED FINANCIAL DATA
(In thousands)
(Unaudited)
Q2 FY16 Q2 FY15 1H FY16 1H FY15
---------------------------- ---------- ---------- ---------- ----------
Revenue
Americas $ 82,064 $ 87,615 $ 162,523 $ 155,285
APJ 51,201 33,671 71,506 60,089
EMEA 18,561 16,864 44,104 34,477
---------------------------- ---------- ---------- ---------- ----------
Total revenue $ 151,826 $ 138,150 $ 278,133 $ 249,851
============================ ========== ========== ========== ==========
Revenue
Federal (*) $ 66,025 $ 72,286 $ 138,480 $ 132,960
International / Commercial 85,801 65,864 139,653 116,891
---------------------------- ---------- ---------- ---------- ----------
Total revenue $ 151,826 $ 138,150 $ 278,133 $ 249,851
============================ ========== ========== ========== ==========
Revenue
Product $ 114,996 $ 100,288 $ 209,086 $ 175,290
Service 36,830 37,862 69,047 74,561
---------------------------- ---------- ---------- ---------- ----------
Total revenue $ 151,826 $ 138,150 $ 278,133 $ 249,851
============================ ========== ========== ========== ==========
Cost of revenue
Product $ 89,362 $ 78,741 $ 169,272 $ 137,634
Service 21,639 22,600 39,572 43,036
---------------------------- ---------- ---------- ---------- ----------
Total cost of revenue $ 111,001 $ 101,341 $ 208,844 $ 180,670
============================ ========== ========== ========== ==========
Gross margin by Product and
Service
Product Gross Margin 22.3% 21.5% 19.0% 21.5%
Service Gross Margin 41.2% 40.3% 42.7% 42.3%
Total gross margin 26.9% 26.6% 24.9% 27.7%
============================ ========== ========== ========== ==========
(*) Federal revenue includes U.S. government customers, system
integrators, and higher education and research institutions
Contact Information: SGI Investor Relations Annie Leschin (415) 775-1788 annie@streetsmartir.com Ben Liao (669) 900-8090 bliao@sgi.com