- Revenue: $112.9 million GAAP; $130.3 million non-GAAP
- Gross Margin: 27.5% GAAP; 28.3% non-GAAP
- Reaffirming previously announced financial guidance
FREMONT, Calif., November 3, 2010 - SGI (NASDAQ:SGI), a trusted leader in technical computing, today announced financial results for its first quarter of fiscal 2011.
"Our Q1 results are a solid start to FY11 as we grew revenues and expanded margins quarter-to-quarter, with strong performance in the Government and Cloud industries," said Mark J. Barrenechea SGI CEO. "Customers are responding well to our new line of products, including Altix® UV and COPANTM. We are reaffirming our previously announced guidance."
Business and Financial Highlights
- Shipped Altix UV to 49 customers in the quarter including: University of Tohoku, University of Minnesota (in partnership with NIH), Catalonia Supercomputing Centre, University of Queensland, University of São Paulo, Los Alamos National Laboratory, Agency for Science, Technology and Research
- Altix UV enters pharma and biotech industry with Altix UV sales to Merck and Biogemma and GenomeQuest teams with SGI to create Whole-Genome Analysis Architecture
- Announced support for Oracle 11g for the Altix UV
- Customer successes include: Sandia, Los Alamos National Labs, Amazon, Motorola, Microsoft, Carbonite, Stanford University, Raytheon, Northup Grumman and COSMOS Consortium with Professor Stephen Hawking
- Shipped COPAN 400T during the quarter
- Partnered with DARPA and Intel to help deliver future Exascale computing
- First full quarter of LSI channel partnership - delivered revenue in the quarter
- International business provided 26% of non-GAAP revenue
- Channel business provided 28% of non-GAAP revenue
- Solid industry performance: Intelligence, Cloud, Department of Defense, US National Laboratories, Education and Research, Manufacturing, Telecommunications and Financial Services
SGI ended Q1 FY11 with $98.9 million in cash (includes restricted cash, equivalents and investments), a $41.9 million decrease from the prior quarter. $32.3 million in cash was used to fund customer orders.
Starting in Q1 FY 11, we have adopted new revenue recognition accounting standards. These new standards did not impact our non-GAAP results. For our Q1 GAAP results, $12.3 million of revenue and 210 basis points of gross margin were directly attributed to adoption of these new standards.
Fiscal Year 2011 Guidance
For fiscal year 2011, SGI is reaffirming its previously announced non-GAAP guidance:
- Revenue between $550 million and $575 million
- Gross margin between 27% and 30%
- Operating expenses between $165 million and $171 million
- EPS breakeven
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 (706) 645-9291 or (800) 642-1687 and entering the confirmation code: 18407965.
SGI, a trusted leader in technical computing, is focused on helping customers solve their most demanding business and technology 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 guidance for 2011 financial performance, general business outlook and anticipated product performance and offerings. 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: SGI's more extensive international operations; economic conditions impacting the purchasing decisions of SGI's customers; SGI operates in a very competitive market, and increased competition and competitors' new products, have 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 has come from a limited 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; SGI is unable to control component pricing, such as what our suppliers charge for central processing units, and, as has happened in the past, component pricing can rise unexpectedly, negatively impacting SGI's gross margins as well as other financial measures; and SGI may be required to write-off additional significant amounts of excess and obsolete inventory. 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 September 8, 2010, 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 announcement. SGI undertakes no responsibility to update the information in this announcement, except as may be required by law.
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 operating expenses include Research and Development, Sales and Marketing and General Administrative expenses. Non-GAAP operating expenses exclude amortization of intangible assets, stock based compensation, restructuring and acquisition-related charges. Non-GAAP net income/(loss) per share excludes the same items as discussed above and, as well, the related tax effects of the applicable items and realized losses on Auction Rate Securities. 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 financial measures 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.
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