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SGI Announces Fourth Quarter and Fiscal Year 2016 Financial Results


MILPITAS, CA -- (Marketwired) -- 08/11/16 -- SGI (NASDAQ: SGI), a global leader in high-performance solutions for compute, data analytics and data management, today announced financial results for its fourth quarter and fiscal year 2016 ended June 24, 2016. 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 $123 million compared to $153 million in the fourth quarter of fiscal 2015. GAAP net income for the fiscal fourth quarter was $0.1 million, or breakeven per share compared with a net loss of $10 million, or $(0.28) per share in the fourth quarter of fiscal year 2015. Non-GAAP net income for the fiscal fourth quarter was $3 million, or $0.08 per share compared with a net loss of $4 million, or $(0.12) per share in the same quarter a year ago.

Total revenue for fiscal 2016 was $533 million compared with $521 million in fiscal 2015. GAAP net loss for fiscal 2016 was $11 million, or $(0.31) per share compared with a net loss of $39 million, or $(1.13) per share in fiscal 2015. Non-GAAP net income was $4 million, or $0.11 per share for fiscal 2016, compared with a net loss of $13 million, or $(0.36) per share for fiscal 2015.

Conference Call and Webcast Information

Due to the earlier announcement of Hewlett Packard Enterprise's acquisition of SGI, the previously scheduled conference call has been cancelled.

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.

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© 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.

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) gains or losses on sale of assets; and (5) 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 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 24, June 26, June 24, June 26,
2016 2015 2016 2015
Revenue $ 122,714 $ 152,904 $ 532,930 $ 521,259
Cost of revenue 85,226 121,106 388,385 386,621
Gross profit 37,488 31,798 144,545 134,638
Operating expenses:
Research and development 11,786 12,211 50,697 53,206
Sales and marketing 12,823 14,655 51,525 61,544
General and administrative 11,123 12,462 43,435 53,861
Restructuring - - - 116
Total operating expenses 35,732 39,328 145,657 168,727
Income (loss) from operations 1,756 (7,530 ) (1,112 ) (34,089 )
Interest expense, net (1,888 ) (2,030 ) (7,932 ) (3,744 )
Other expense, net (1,385 ) (193 ) (2,760 ) (872 )
Total other expense, net (3,273 ) (2,223 ) (10,692 ) (4,616 )
Loss before income taxes (1,517 ) (9,753 ) (11,804 ) (38,705 )
Income tax (benefit) provision (1,651 ) (141 ) (626 ) 440
Net income (loss) $ 134 $ (9,612 ) $ (11,178 ) $ (39,145 )
Basic net income (loss) per share $ 0.00 $ (0.28 ) $ (0.31 ) $ (1.13 )
Diluted net income (loss) per share $ 0.00 $ (0.28 ) $ (0.31 ) $ (1.13 )
Shares used in computing basic net income (loss) per share 36,319 34,839 35,745 34,559
Shares used in computing diluted net income (loss) per share 37,379 34,839 35,745 34,559
Share-based compensation by category is as follows:
Cost of revenue - product $ 67 $ 78 $ 384 $ 452
Cost of revenue - service 213 293 1,238 1,510
Research and development 364 437 2,132 2,318
Sales and marketing 299 489 1,675 2,771
General and administrative 1,072 1,686 6,608 7,498
Total $ 2,015 $ 2,983 $ 12,037 $ 14,549
Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 24, June 26,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 92,946 $ 67,191
Current portion of restricted cash 2,109 2,109
Accounts receivable, net 85,834 118,219
Inventories 55,911 82,832
Current portion of deferred cost of revenue 15,453 12,108
Prepaid expenses and other current assets 11,698 17,547
Total current assets 263,951 300,006
Non-current portion of restricted cash 1,360 2,251
Property and equipment, net 40,526 38,480
Goodwill and Intangible assets, net 10,610 11,303
Non-current portion of deferred cost of revenue 11,459 9,648
Other non-current assets 28,223 25,896
Total assets $ 356,129 $ 387,584
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 55,761 $ 48,677
Accrued compensation 15,849 17,797
Short-term debt, net of unamortized debt issuance costs 3,776 3,096
Current portion of deferred revenue 64,392 96,473
Other current liabilities 27,605 33,180
Total current liabilities 167,383 199,223
Long-tem debt, net of unamortized debt issuance costs 60,722 65,581
Non-current portion of deferred revenue 46,619 43,781
Long-term income taxes payable 7,529 8,420
Retirement benefit obligations 10,868 9,330
Other non-current liabilities 7,818 7,871
Total liabilities 300,939 334,206
Stockholders' equity 55,190 53,378
Total liabilities and stockholders' equity $ 356,129 $ 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
June 24, 2016
Net Gross Profit Operating
Income EPS Product Service Total Expenses
GAAP $ 134 $ 0.00 $ 23,626 $ 13,862 $ 37,488 $ 35,732
Share-based compensation (1) 2,015 0.05 67 213 280 (1,735 )
Amortization of acquired intangibles (1) 187 0.01 175 - 175 (12 )
Severance (2) 163 - - 123 123 (40 )
Other non-recurring items (2) 589 0.02 - 9 9 (580 )
Non-GAAP $ 3,088 $ 0.08 $ 23,868 $ 14,207 $ 38,075 $ 33,365
Gross Margin
Gross margin on a GAAP basis 26.4 % 41.5 % 30.5 %
Gross margin on a Non-GAAP basis 26.7 % 42.6 % 31.0 %
Weighted average shares used in computing:
Basic net income per share 36,319
Diluted net income per share 37,379
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 of acquired intangibles (1) 223 0.01 205 - 205 (18 )
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
March 25, 2016
Net Gross Profit Operating
Income EPS Product Service Total Expenses
GAAP $ 739 $ 0.02 $ 22,137 $ 15,631 $ 37,768 $ 32,853
Share-based compensation (1) 2,948 0.08 110 295 405 (2,543 )
Amortization of acquired intangibles (1) 191 - 175 - 175 (16 )
Severance (2) 723 0.02 5 - 5 (718 )
Other non-recurring items (2) (3,485 ) (0.09 ) - (21 ) (21 ) 3,442
Non-GAAP $ 1,116 $ 0.03 $ 22,427 $ 15,905 $ 38,332 $ 33,018
Gross Margin
Gross margin on a GAAP basis 23.0 % 43.8 % 28.6 %
Gross margin on a Non-GAAP basis 23.3 % 44.6 % 29.0 %
Weighted average shares used in computing:
Basic net income per share 35,954
Diluted net income per share 37,028
Silicon Graphics International Corp.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, except per share data)
(Unaudited)
Year Ended
June 24, 2016
Net Gross Profit Operating
(Loss) / Income EPS Product Service Total Expenses
GAAP $ (11,178 ) $ (0.31 ) $ 85,577 $ 58,968 $ 144,545 $ 145,657
Share-based compensation (1) 12,037 0.34 384 1,238 1,622 (10,415 )
Amortization of acquired intangibles (1) 662 0.02 600 - 600 (62 )
Severance (2) 2,560 0.07 5 246 251 (2,309 )
Other non-recurring items (2) (217 ) (0.01 ) - (1 ) (1 ) 194
Non-GAAP $ 3,864 $ 0.11 $ 86,566 $ 60,451 $ 147,017 $ 133,065
Gross Margin
Gross margin on a GAAP basis 21.7 % 42.7 % 27.1 %
Gross margin on a Non-GAAP basis 21.9 % 43.8 % 27.6 %
Weighted average shares used in computing:
Basic net loss per share 35,745
Diluted net income per share 36,445
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
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, sale of assets, and other non-recurring items.
Silicon Graphics International Corp.
TRENDED FINANCIAL DATA
(In thousands)
(Unaudited)
Q4 FY16 Q4 FY15 FY16 FY15
Revenue
Americas $ 78,391 $ 95,915 $ 295,518 $ 323,785
APJ 25,138 31,919 129,973 124,163
EMEA 19,185 25,070 107,439 73,311
Total revenue $ 122,714 $ 152,904 $ 532,930 $ 521,259
Revenue
Federal (*) $ 53,134 $ 89,803 $ 231,657 $ 279,906
International / Commercial 69,580 63,101 301,273 241,353
Total revenue $ 122,714 $ 152,904 $ 532,930 $ 521,259
Revenue
Product $ 89,326 $ 118,606 $ 394,844 $ 376,294
Service 33,388 34,298 138,086 144,965
Total revenue $ 122,714 $ 152,904 $ 532,930 $ 521,259
Cost of revenue
Product $ 65,700 $ 102,344 $ 309,267 $ 303,772
Service 19,526 18,762 79,118 82,849
Total cost of revenue $ 85,226 $ 121,106 $ 388,385 $ 386,621
Gross margin by Product and Service
Product Gross Margin 26.4 % 13.7 % 21.7 % 19.3 %
Service Gross Margin 41.5 % 45.3 % 42.7 % 42.8 %
Total gross margin 30.5 % 20.8 % 27.1 % 25.8 %
(*) 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
Email Contact

Ben Liao
(669) 900-8090
Email Contact

Source: SGI

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