The Trusted Leader in High Performance Computing


SGI Reports Financial Results for First Quarter of Fiscal 2014

FREMONT, Calif., Oct. 30, 2013 - SGI (NASDAQ:SGI), the trusted leader in high performance computing and Big Data, today reported financial results for its first fiscal quarter ended Sept. 27, 2013. Total revenue for the first fiscal quarter was $148 million, which compares with $171 million in the previous quarter and $193 million in the first fiscal quarter of 2013.

GAAP net loss for the first quarter was $7 million, or $(0.20) per share, which compares with a net loss of $4 million, or $(0.13) per share, in the prior quarter, and a net loss of $9 million, or $(0.27) per share, in the first quarter of fiscal 2013. Non-GAAP net income for the quarter was $1 million, or $0.04 per diluted share, which compares with non-GAAP net income of $6 million, or $0.17 per diluted share, in the prior quarter and a non-GAAP net loss of $3 million, or $(0.10) per share, in the year-ago period.

  • Core revenue (total revenue excluding revenue attributable to legacy cloud infrastructure) for HPC, Big Data, storage and services was $132 million, a 5% increase over core revenue of $125 million in the prior quarter. Core revenue in the first quarter of fiscal 2013 was $132 million, excluding $15 million related to low-margin deals (LMDs).
  • Revenue related to the legacy cloud, which is generally commodity servers for provisioning cloud infrastructure, was $16 million, which compares with $46 million in the prior quarter and $45 million in the fiscal first quarter of 2013.
  • Adjusted EBITDA in the quarter was approximately $5 million, which compares with $8 million in the prior quarter and $0 million in the same quarter a year ago.

"Final results for the quarter were consistent with the preliminary results announced earlier this month, and reflect sequential growth in our core revenue focus areas," said Jorge Titinger, president and CEO of SGI. "Our operational turnaround is on track and we are hitting our targets for margin improvement and expense reductions. Our strategic focus on core growth markets in HPC, Big Data, and Storage is gaining traction, as evidenced by the sequential growth in core revenue. However, due to the uncertain timing of some government projects, and given that much of our growth will be driven by large deals with long sales cycles and extended acceptance criteria, our trajectory is likely to be non-linear. We continue to expect solid revenue growth and profitability in the second half of the fiscal year and remain committed to our long-term goal of higher-than-market revenue growth and low-double-digit operating margins."

Recent Highlights

  • On Oct. 22, SGI launched a portfolio of new solutions to enable Big Data innovations including SGI InfiniteData Cluster, SGI Object-Based Storage Solutions and SGI LiveArc AE for SGI InfiniteStorage Gateway that accelerate time to value, deliver petabyte scale, and lower costs for Big Data.
  • On Oct. 1, SGI announced that it acquired the assets of FileTek to expand its leadership in storage solutions that allow customers to manage data assets efficiently, reduce administrative overhead, and lower the cost of high-volume storage. The acquisition expands SGI's ability to solve the growing challenge of Big Data that is overwhelming budgets, staff, and the protection of data assets in today's enterprise.
  • On Sept. 10, SGI announced support for new Intel® Xeon® processor E5-2600 v2 within SGI Rackable, SGI® ICE X and InfiniteStorage suite of solutions, enabling new science and discoveries for NASA, Irish Center for High-End Computing (ICHEC), T-Systems, and AWE.

The company provides technical computing and storage solutions to large government, higher education, and commercial customers. Any given customer deal can include a varying mix of compute and storage hardware, software, and services, and generally will carry terms that result in most of the product revenue associated with the deal being recognized upon final shipment or acceptance of the system. The timing of booking, installation, and acceptance of large deals is difficult to predict and can cause significant swings in quarterly revenue. The company derives a significant portion of its revenue from the U.S. government and from third parties and educational institutions that receive funding from the U.S. government. Government shutdowns and other disruptions in the funding or acceptance of government-related programs can impact the booking, installation and final acceptance of systems. Management provides guidance on revenue and other items based on its current expectations of the timing of revenue and associated costs; however there can be no assurance that revenues and associated costs will be recognized according to expected schedules and management assumes no obligation to update its guidance if the timing of revenues or other circumstances in the business differ from current expectations.

Due to current budget uncertainty in the Federal government, the company lacks near-term visibility into expected revenue timing for a large portion of its pipeline and therefore is suspending financial guidance pending further clarity on expected government spending.

Webcast and Conference Call Information
A live webcast of the earnings conference call will be available on the Investor Relations section of SGI's website at The public can also listen to the earnings conference call at 2:00 p.m. PT (5:00 p.m. ET) by dialing (888) 463-5422 (toll-free) or (970) 315-0484 (international).

A replay of the webcast will be available approximately two hours after the conclusion of the call and will 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 (855) 859-2056 (toll-free) or (404) 537-3406 (international) and entering the confirmation code: 78589823.

About SGI
SGI, the trusted leader in technical computing, is focused on helping customers solve their most demanding business and technology challenges by delivering technical computing, Big Data analytics, cloud computing, and petascale storage solutions that accelerate time to discovery, innovation, and profitability. Connect with SGI on Twitter (@sgi_corp), YouTube (, Facebook ( and LinkedIn.

Cautionary Statement Regarding Forward Looking Statements
The statements made in this press release regarding projected financial results, including SGI's anticipated growth and profitability, and 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 uncertainties, including, but not limited to:

  • Substantial 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, development or product delivery delays, and delays in obtaining necessary components from suppliers;
  • 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; and
  • Market acceptance of newer products.

In addition, SGI's actual growth in revenue and profitability for the fiscal year ending June 27, 2014 could differ materially from expectations for a number of reasons, including, but not limited to, changes driven by new accounting, regulations, interpretations or guidance and other risks as detailed in SGI's filings with the Securities and Exchange Commission ("SEC"), including those described in SGI's Annual Report on Form 10-K under the caption "Risk Factors" filed with the SEC on Sept. 9, 2013, which is available at the SEC's web site at 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 obligation to update the information in this earnings release or the related earnings conference call, whether as a result of new information, future events or otherwise, unless otherwise required by law.

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. general accepted accounting principles ("GAAP"), including 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 excludes the following items from one or more of non-GAAP measures: (1) share-based compensation; (2) amortization of intangible assets; (3) restructuring and severance charges; (4) excess and obsolete inventory write-off; and (5) other non-recurring costs, including settlements and other items. These measures are adjusted as described in the reconciliation of GAAP and non-GAAP numbers included in this release, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring.

In addition, management uses these non-GAAP financial measures to facilitate its review of the comparability of SGI'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 SGI'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 SGI's financial and operational performance in the same way that management evaluates the company'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 SGI'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 SGI's GAAP and non-GAAP financial results is provided in this press release. 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.

Contact Information:

SGI Investor Relations
John Swenson

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