Strong Revenue and Gross Margin Performance
FREMONT, Calif., Nov 04, 2009 (BUSINESS WIRE) -- SGI (NASDAQ:SGI), a global leader in HPC and data center solutions, today announced financial results for its first quarter of fiscal 2010, which ended September 25, 2009.
Q1 GAAP revenue was $100.1 million, compared to $58.4 million in the prior quarter and $65.1 million in the comparable year ago quarter. Non-GAAP revenue was $122.7 million, compared to $60.5 million in the prior quarter. The company did not report non-GAAP revenue in the comparable year ago quarter. On a sequential basis, GAAP revenue grew by 71% and non-GAAP revenue grew by 103%.
Q1 GAAP gross margin was 22.3%, compared to 8.7% in the prior quarter and 17.0% in the comparable year ago quarter. Non-GAAP gross margin was 28.4%, compared to 15.2% in the prior quarter and 17.4% in the comparable year ago quarter. On a sequential basis, GAAP gross margin percentage grew by 156% and non-GAAP gross margin percentage grew by 87%.
"SGI delivered a solid quarter in terms of revenue, gross margin and operations. We increased revenue by 103% and expanded gross margin up to a record 28.4%, both on a non-GAAP basis," stated Mark J. Barrenechea, president and CEO of SGI. "Operationally, our integration is ahead of schedule in most key areas. We also introduced new products that could expand our addressable market by over $1.7 billion while investing for long-term growth."
Q1 GAAP net loss from continuing operations was $0.60 per share, compared to GAAP net loss of $0.17 per share for the comparable year ago quarter. Q1 Non-GAAP net loss was $0.09 per share, compared to a non-GAAP net loss of $0.04 per share for the comparable year ago quarter. (Please see the financial tables accompanying this release for details on all non-GAAP metrics and their reconciliation to GAAP measures.)
SGI ended Q1 with $123.5 million in cash, cash equivalents, long-term and short-term investments and restricted cash, compared to $139.5 million at the end of the prior quarter.
Business and Financial Highlights
SGI maintains the 2010 fiscal year internal planning objectives discussed in the prior quarter, and further highlights the following:
- Revenue increased by 103% from the prior quarter and 88% from the comparable year ago quarter on a non-GAAP basis, in part due to the acquisition of the assets of Silicon Graphics, Inc.
- Gross margin of 28.4% on a non-GAAP basis.
- Services 33% of revenue and International 31% of revenue, both on a non-GAAP basis.
- Storage 16% of revenue on a non-GAAP basis.
- Strong industry performance and diversification: Cloud, Defense, Intelligence, Financial Services, and Manufacturing.
- Strong customer performance including: British Telecom, ONERA, Naval Research Laboratories, Audi, Skoda, Amazon, Spotify and Microsoft.
- Expanded addressable market by $1.7 billion with the introduction of Octane III and CloudRack X2, targeting personal supercomputing and workgroup markets.
- Completed headquarters consolidation to Fremont, CA.
- Completed manufacturing consolidation to Chippewa Falls, WI.
- Set a world record in benchmark testing while also beating IBM, HP and Sun by a more than a factor of two in every test. The Altix 4700 claimed three Standard Performance Evaluation Corporation (SPEC) benchmark world records at the Leibniz Supercomputing Centre (LRZ).
Conference Call Information
SGI will discuss these financial results in a conference call at 2:00 p.m. PT today. The public is invited to listen to a live web cast of the call on the Investor Relations section of the Company's website at investors.sgi.com. A replay of the web cast will be available approximately two hours after the conclusion of the call and remain available until the next earnings call. 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 719-457-0820 or 888-203-1112 and entering the confirmation code: 9725418.
SGI® is a global leader in cloud computing and high-performance computing and is dedicated to solving our customers' most demanding technology and business challenges. Visit www.sgi.com for more information.
Cautionary Statement Regarding Forward Looking Statements
This press release contains forward-looking statements; including statements regarding SGI's internal plan for 2010, anticipated product performance, general business outlook and integration of the businesses and assets acquired from Silicon Graphics, Inc. Any statements contained herein that are not statements of historical fact may be deemed forward-looking statements. Actual results may differ materially from forward-looking statements due to a number of risks and uncertainties including those associated with: the businesses and assets acquired from Silicon Graphics, Inc., which may not be successfully integrated and SGI's more extensive international operations following this acquisition; economic conditions impacting the purchasing decisions of SGI's customers; SGI operates in a very competitive market, and increased competition has in the past, and may continue, to cause pricing pressure on SGI's products, which would negatively affect SGI's gross and operating margins, as well as other financial measures; a significant portion of the Company's revenues come from a small number of customers, and so the delay in placing an order, or the failure of a significant customer to place additional orders, could have a significant negative effect on SGI's financial performance; SGI relies on sales to U.S. government entities and has limited experience dealing with the U.S. government as a customer; orders for SGI's products can be received at the end of the quarter, and so a delay in placing an order in the fourth quarter could have a significant negative effect on SGI's financial performance for the year; SGI is unable to control component pricing, such as DDR memory pricing as has happened in the past, and as a result component pricing can rise unexpectedly, negatively impacting SGI's gross margins as well as other financial measures; SGI may be required to write-off additional significant amounts of excess and obsolete inventory; and new products by competitors may come on the market, which would decrease the demand for SGI's products. Detailed information about these and other potential factors that could affect SGI's business, financial condition and results of operations is included in SGI's annual report on Form 10-K under the caption "Risk Factors," in Part I, Item 1A of that report, filed with the Securities and Exchange Commission ("SEC") on March 19, 2009, as updated by SGI's subsequent filings with the SEC, all of which are available at the SEC's Web site at http://www.sec.gov. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. SGI undertakes no responsibility to update the information in this report.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures discussed in the text of this press release and accompanying non-GAAP supplemental information are financial measures used by SGI's management to evaluate the operating performance of the Company and to conduct its business operations. All non-GAAP financial measures discussed and presented in this press release excludes the revenue and associated costs of revenue deferred in accordance with Financial Accounting Standards Board, Accounting Standards Codification, ASC985-605 "Software Revenue Recognition" for certain of the Company's transactions where software is more than incidental to the overall product solution sold. Non-GAAP gross profit and gross margin also excludes stock-based compensation expense, amortization of intangibles and inventory step up arising from acquisition of substantially all the assets of Silicon Graphics, Inc. Non-GAAP net loss per share excludes the same items as discussed above, restructuring expenses, tradename impairments, gain on settlement agreement, gain on acquisition, and, as well, the related tax effects of the applicable items. Management presents non-GAAP financial measures because it considers them to be important supplemental measures of performance. Management believes that the excluded charges are not central to the Company's core operating performance and uses the non-GAAP financial measures for planning purposes, including analysis of the Company's core operating performance against prior periods, the preparation of operating budgets and to determine appropriate levels of operating and capital investments. Management excludes from its non-GAAP revenue and non-GAAP gross margin the items cited above, whether or not recurring, to facilitate its review of the comparability of the Company's core operating performance on a period to period basis as well as to better understand the fundamental economics of a specific period's operational and financial performance. Management uses this view of the Company's operating performance for purposes of comparison with its business plan and individual operating budgets and allocations of resources. Management also believes that the non-GAAP financial measures provide additional insight for analysts and investors in evaluating the Company's financial and operational performance in the same way that management evaluates SGI's financial performance. However, these non-GAAP financial measures have limitations as an analytical tool, as they exclude the financial impact of transactions necessary or advisable for the conduct of the Company's business, such as the granting of equity compensation awards and are not intended to be an alternative to financial measures prepared in accordance with GAAP. Hence, to compensate for these limitations, management does not review these non-GAAP financial metrics in isolation from its GAAP results, nor should investors. Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between the Company's GAAP and non-GAAP financial results is provided at the end of this press release. Investors are advised to carefully review and consider this information as well as the GAAP financial results that are disclosed in the Company's SEC filings.
SGI, CloudRack and Octane are trademarks or registered trademarks of Silicon Graphics International Corp. All other trademarks are property of their respective holders
Full Release with Financial Tables
Erik Bylin, 510-933-8088
Copyright Business Wire 2009