SGI

The Trusted Leader in High Performance Computing

 

SGI Reports Fourth Quarter and Fiscal Year 2015 Financial Results


Expects Non-GAAP Profitability and Positive Cash Flow in FY2016

MILPITAS, CA -- (Marketwired) -- 08/05/15 -- SGI (NASDAQ: SGI), a global leader in high performance solutions for compute, data analytics and data management, today reported financial results for its fourth quarter and fiscal year ended June 26, 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 fiscal fourth quarter was $153 million compared to $142 million in the fourth quarter of fiscal 2014. GAAP net loss for the fiscal fourth quarter was $10 million, or $(0.28) per share compared with a net loss of $10 million, or $(0.30) per share in the fourth quarter of fiscal year 2014. Non-GAAP net loss for the fiscal fourth quarter was $4 million, or $(0.12) per share compared with a net loss of $0.5 million, or $(0.01) per share in the same quarter a year ago.

Total revenue for fiscal 2015 was $521 million compared with $530 million in fiscal 2014. GAAP net loss for fiscal 2015 was $39 million, or $(1.13) per share, compared with a net loss of $53 million, or $(1.54) per share, in fiscal 2014. Non-GAAP net loss was $13 million, or $(0.36) per share for fiscal 2015, compared with a net loss of $13 million, or $(0.39) per share, for fiscal 2014.

"We began fiscal 2016 with significantly higher bookings and backlog than last year. The building blocks of our growth strategy are in place as we continue to win large strategic deals in HPC and penetrate the enterprise market for data analytics with our single node in-memory solutions. With our focus on profitable revenue growth and cost management, we are committed to achieving non-GAAP profitability and positive cash generation in fiscal 2016," said Jorge Titinger, President and CEO of SGI.

Recent Highlights

  • SGI is now SAP®-certified to run the SAP HANA® platform in controlled availability at 20-sockets, delivering up to 15 terabytes (TB) of in-memory computing capacity in a single node. This specialized offering enables enterprises to further unlock value from information in real-time, boost innovation, and lower IT costs.

  • Dell and SGI signed a significant partnership agreement that will broaden the availability of SGI's industry-leading in-memory computing solution, the SGI® UV™ 300H compute servers for the SAP HANA® platform.

  • The Institute for Solid State Physics (ISSP) of the University of Tokyo has deployed our recently introduced SGI ICE XA system together with a number of UV systems as its next supercomputer. The performance of this solution, at 2.6 petaflops, is nearly 15 times more powerful than their previous system and is among the largest SGI systems in Japan.

  • PETRONAS, Malaysia's largest oil and gas company, installed an SGI ICE X system incorporating graphic processing unit (GPU) accelerators to support its research and development capabilities in subsurface imaging.

Outlook

The company currently expects revenue for fiscal year 2016 to be in the range of $600 to $625 million, representing year-over-year growth of 15% - 20%. While ranges could vary, the company currently anticipates first half revenue to be 45% to 50% of the full year. Non-GAAP gross margin for fiscal 2016 is expected to be between 26% and 27%. Total non-GAAP operating expenses for the year are expected to be flat to down 5% compared to fiscal 2015.

Based on this outlook, and after excluding approximately $17 million of adjustments, the company expects to be profitable on a non-GAAP basis in the range of $0.25 to $0.35 per share for fiscal 2016. On a GAAP basis, net loss is expected to be in the range of $(0.11) to $(0.21) per share for fiscal 2016. Earnings per share calculations for the fiscal year 2016 assume 36 million weighted average shares outstanding.

Webcast and Conference Call Information

Management will host a conference call and a live webcast of the earnings conference call will be available on the Investor Relations section of the Company's website at investors.sgi.com beginning at 1:30 p.m. PT (4:30 p.m. ET). 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.

The public can also listen to the 1:30 p.m. PT (4:30 p.m. ET) earnings conference call by dialing (888) 463-5422 (toll-free) or (970) 315-0484 (international). 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: 80872796.

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 (sgi.com/) for more information.

Connect with SGI 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 Form 10-Q, Form 10-K 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.

Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Year Ended
June 26, June 27, June 26, June 27,
2015 2014 2015 2014
Revenue $ 152,904 $ 142,084 $ 521,259 $ 529,946
Cost of revenue 121,106 106,478 386,621 391,539
Gross profit 31,798 35,606 134,638 138,407
Operating expenses:
Research and development 12,211 16,463 53,206 63,526
Sales and marketing 14,655 17,165 61,544 72,681
General and administrative 12,462 12,336 53,861 55,796
Restructuring - 605 116 1,251
Total operating expenses 39,328 46,569 168,727 193,254
Loss from operations (7,530 ) (10,963 ) (34,089 ) (54,847 )
Interest expense, net (2,030 ) (23 ) (3,744 ) (117 )
Other income (expense), net (193 ) (359 ) (872 ) 2,162
Total other income (expense), net (2,223 ) (382 ) (4,616 ) 2,045
Loss before income taxes (9,753 ) (11,345 ) (38,705 ) (52,802 )
Income tax (benefit) provision (141 ) (896 ) 440 12
Net loss $ (9,612 ) $ (10,449 ) $ (39,145 ) $ (52,814 )
Basic and diluted net loss per share $ (0.28 ) $ (0.30 ) $ (1.13 ) $ (1.54 )
Shares used in computing basic and diluted net loss per share 34,839 34,445 34,559 34,260
Share-based compensation by category is as follows:
Cost of revenue $ 371 $ 344 $ 1,962 $ 1,676
Research and development 437 327 2,318 2,072
Sales and marketing 489 439 2,771 2,598
General and administrative 1,686 1,108 7,498 5,633
Total $ 2,983 $ 2,218 $ 14,549 $ 11,979
Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 26, June 27,
2015 2014
ASSETS
Current assets:
Cash and cash equivalents $ 67,191 $ 109,297
Current portion of restricted cash 2,109 2,273
Accounts receivable, net 118,219 72,076
Inventories 82,832 47,354
Current portion of deferred cost of revenue 12,108 12,180
Prepaid expenses and other current assets 17,547 19,802
Total current assets 300,006 262,982
Non-current portion of restricted cash 2,251 2,177
Property and equipment, net 38,480 34,584
Goodwill and Intangible assets, net 11,303 13,207
Non-current portion of deferred cost of revenue 9,648 7,592
Other non-current assets 25,896 44,396
Total assets $ 387,584 $ 364,938
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,677 $ 53,128
Accrued compensation 17,797 20,049
Short-term debt net of unamortized debt issuance costs 3,096 -
Current portion of deferred tax liabilities 45 15,846
Current portion of deferred revenue 96,473 78,675
Other current liabilities 33,135 37,814
Total current liabilities 199,223 205,512
Long-tem debt net of unamortized debt issuance costs 65,581 -
Non-current portion of deferred revenue 43,781 45,422
Long-term income taxes payable 8,420 10,114
Retirement benefit obligations 9,330 12,931
Other non-current liabilities 7,871 8,807
Total liabilities 334,206 282,786
Stockholders' equity 53,378 82,152
Total liabilities and stockholders' equity $ 387,584 $ 364,938
Silicon Graphics International Corp.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 26, 2015
Net Gross Profit Operating
Loss EPS Product Service Total Expenses
GAAP $ (9,612 ) $ (0.28 ) $ 16,262 $ 15,536 $ 31,798 $ 39,328
Share-based compensation (1) 2,983 0.09 78 293 371 (2,612 )
Amortization and impairment of acquired intangibles (1) 223 0.01 205 - 205 (18 )
Restructuring and severance (2) 722 0.02 - 4 4 (718 )
Other non-recurring items (2) 1,372 0.04 - 121 121 (1,251 )
Non-GAAP $ (4,312 ) $ (0.12 ) $ 16,545 $ 15,954 $ 32,499 $ 34,729
Gross Margin
Gross margin on a GAAP basis 13.7 % 45.3 % 20.8 %
Gross margin on a Non-GAAP basis 13.9 % 46.5 % 21.3 %
Weighted average shares used in computing:
Basic and diluted net loss per share 34,839
Three Months Ended
June 27, 2014
Net Gross Profit Operating
Loss EPS Product Service Total Expenses
GAAP $ (10,449 ) $ (0.30 ) $ 17,493 $ 18,113 $ 35,606 $ 46,569
Share-based compensation (1) 2,218 0.06 117 227 344 (1,874 )
Amortization of acquired intangibles (1) 3,815 0.11 3,567 - 3,567 (248 )
Restructuring and severance (2) 2,227 0.07 (475 ) (101 ) (576 ) (2,803 )
Other non-recurring items (2) 1,734 0.05 566 - 566 (1,168 )
Non-GAAP $ (455 ) $ (0.01 ) $ 21,268 $ 18,239 $ 39,507 $ 40,476
Gross Margin
Gross margin on a GAAP basis 17.1 % 45.7 % 25.1 %
Gross margin on a Non-GAAP basis 20.8 % 46.1 % 27.8 %
Weighted average shares used in computing:
Basic and diluted net loss per share 34,445
Three Months Ended
March 27, 2015
Net Gross Profit Operating
Loss EPS Product Service Total Expenses
GAAP $ (8,762 ) $ (0.25 ) $ 18,604 $ 15,055 $ 33,659 $ 40,104
Share-based compensation (1) 3,896 0.11 145 414 559 (3,337 )
Amortization and impairment of acquired intangibles (1) 106 - 75 - 75 (31 )
Restructuring and severance (2) 708 0.02 (5 ) 479 474 (234 )
Other non-recurring items (2) 688 0.02 - 68 68 (390 )
Non-GAAP $ (3,364 ) $ (0.10 ) $ 18,819 $ 16,016 $ 34,835 $ 36,112
Gross Margin
Gross margin on a GAAP basis 22.6 % 41.7 % 28.4 %
Gross margin on a Non-GAAP basis 22.8 % 44.4 % 29.4 %
Weighted average shares used in computing:
Basic and diluted net loss per share 34,586
Silicon Graphics International Corp.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
Year Ended
June 26, 2015
Net Gross Profit Operating
Loss EPS Product Service Total Expenses
GAAP $ (39,145 ) $ (1.13 ) $ 72,522 $ 62,116 $ 134,638 $ 168,727
Share-based compensation (1) 14,549 0.42 453 1,509 1,962 (12,587 )
Amortization and impairment of acquired intangibles (1) 1,854 0.06 1,324 - 1,324 (530 )
Restructuring and severance (2) 6,314 0.18 160 1,456 1,616 (4,698 )
Other non-recurring items (2) 3,878 0.11 - 199 199 (3,449 )
Non-GAAP $ (12,550 ) $ (0.36 ) $ 74,459 $ 65,280 $ 139,739 $ 147,463
Gross Margin
Gross margin on a GAAP basis 19.3 % 42.8 % 25.8 %
Gross margin on a Non-GAAP basis 19.8 % 45.0 % 26.8 %
Weighted average shares used in computing:
Basic and diluted net loss per share 34,559
Year Ended
June 27, 2014
Net Gross Profit Operating
Loss EPS Product Service Total Expenses
GAAP $ (52,814 ) $ (1.54 ) $ 68,780 $ 69,627 $ 138,407 $ 193,254
Share-based compensation (1) 11,979 0.34 561 1,115 1,676 (10,303 )
Amortization of acquired intangibles (1) 6,748 0.20 4,705 - 4,705 (2,043 )
Restructuring and severance (2) 12,222 0.36 445 1,634 2,079 (10,143 )
Excess and obsolete inventory (2) 5,424 0.16 5,424 - 5,424 -
Other non-recurring items (2) 5,383 0.16 672 - 672 (4,711 )
Gain on investment (2) (1,717 ) (0.05 ) - - - -
Income tax abatement (2) (611 ) (0.02 ) - - - -
Non-GAAP $ (13,386 ) $ (0.39 ) $ 80,587 $ 72,376 $ 152,963 $ 166,054
Gross Margin
Gross margin on a GAAP basis 18.4 % 44.8 % 26.1 %
Gross margin on a Non-GAAP basis 21.5 % 46.6 % 28.9 %
Weighted average shares used in computing:
Basic and diluted net loss per share 34,260
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, headquarters relocation costs, asset impairments, acquisition- related costs, and costs associated with contract manufacturing transition / termination.
(c) Excess and obsolete charges related to our strategic withdrawal from legacy cloud infrastructure and other products that are at the end of the product life cycle.
Silicon Graphics International Corp.
TRENDED FINANCIAL DATA
(In thousands)
(Unaudited)
Q4 FY15 Q4 FY14 FY15 FY14
Total Revenue
Americas $ 95,915 $ 56,122 $ 323,785 $ 277,536
APJ 31,919 35,182 124,163 136,339
EMEA 25,070 50,780 73,311 116,071
Total revenue $ 152,904 $ 142,084 $ 521,259 $ 529,946
Revenue
Product $ 118,606 $ 102,484 $ 376,294 $ 374,565
Service 34,298 39,600 144,965 155,381
Total revenue $ 152,904 $ 142,084 $ 521,259 $ 529,946
Cost of revenue
Product $ 102,344 $ 84,991 $ 303,772 $ 305,785
Service 18,762 21,487 82,849 85,754
Total cost of revenue $ 121,106 $ 106,478 $ 386,621 $ 391,539
Gross margin by Product and Service
Product Gross Margin 13.7 % 17.1 % 19.3 % 18.4 %
Service Gross Margin 45.3 % 45.7 % 42.8 % 44.8 %
Total gross margin 20.8 % 25.1 % 25.8 % 26.1 %
Silicon Graphics International Corp.
CORE REVENUE TREND
(In thousands)
(Unaudited)
Q4 FY15 Q4 FY14 FY15 FY14
Core Revenue
Federal (*) $ 89,803 $ 37,077 $ 279,906 $ 202,866
International / Commercial (**) 62,505 103,470 237,928 298,426
Total Core Revenue 152,308 140,547 517,834 501,292
Legacy Cloud 596 1,537 3,425 28,654
Total Revenue $ 152,904 $ 142,084 $ 521,259 $ 529,946
(*) Core Federal revenue includes U.S. government customers, system integrators, and higher education and research institutions
(**) Core International / Commercial revenue excludes revenue related to legacy cloud infrastructure

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