SOURCE: 3PAR

3PAR

January 28, 2010 16:00 ET

3PAR Reports Financial Results for Third Quarter of Fiscal 2010

FREMONT, CA--(Marketwire - January 28, 2010) - 3PAR® (NYSE: PAR), the leading global provider of utility storage, today reported results for the third quarter of fiscal year 2010, which ended December 31st, 2009. Revenue for the third quarter was $50.1 million, an increase of 4% compared to revenue of $48.2 million for the same period a year ago and an increase of 9% compared to $46.1 million in the prior quarter, which ended September 30th, 2009.

For the third quarter of fiscal 2010, GAAP net loss was $528,000, or ($0.01) per share, compared to GAAP net income of $461,000, or $0.01 per share, for the same period in the prior year. Non-GAAP net income, which excludes the impact of stock-based compensation expense, for the third quarter of fiscal 2010 was $1.9 million, or $0.03 per share, compared to $2.3 million, or $0.04 per share, for the same period in the prior year.

"Through unique hardware and software innovations such as our newly-announced, hardware-accelerated thin software technologies (Thin Conversion, Thin Persistence, and Thin Copy Reclamation), 3PAR has continued to move the goal posts forward, ahead of the incumbents, widening the gap between the value that legacy storage vendors promise and the value that we actually deliver," said David Scott, President and Chief Executive Officer. "We have continued to stay ahead of the game with first-to-market technologies such as autonomic storage management for clusters, as well as autonomic storage tiering within high-end arrays. This technology leadership has created a strong incentive for customers to choose a best-of-breed approach over the sub-optimal, proprietary, vertical stacks offered by legacy storage vendors."

Additional Third Quarter Fiscal 2010 Financial Information

3PAR reports operating income (loss), net income (loss), and earnings (loss) per share (EPS) on a GAAP and on a non-GAAP basis, which excludes the impact of stock-based compensation expense. The non-GAAP measures are described in greater detail below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

--  GAAP operating loss for the third quarter of fiscal 2010 was $474,000
    compared to $667,000 in the second quarter of fiscal 2010. GAAP operating
    loss was 1% of revenue in both quarters. Non-GAAP operating income in the
    third quarter of fiscal 2010 was $2.0 million compared to $1.7 million in
    the second quarter of fiscal 2010. Non-GAAP operating income was 4% of
    revenue in both quarters. GAAP net loss for the third quarter of fiscal
    2010 was $528,000 compared to $758,000 in the second quarter of fiscal
    2010. Non-GAAP net income in the third quarter of fiscal 2010 was $1.9
    million, compared to $1.6 million in the second quarter of fiscal 2010.
    
--  GAAP EPS for the third quarter of fiscal 2010 was ($0.01) on 61.9 million
    basic and diluted shares outstanding, compared to ($0.01) in the second
    quarter of fiscal 2010 on 61.7 million basic and diluted shares
    outstanding. Non-GAAP EPS in the third quarter of fiscal 2010 was $0.03 on
    64.4 million diluted shares outstanding compared to $0.03 on 64.1 million
    diluted shares outstanding in the second quarter of fiscal 2010.
    
--  Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS are
    computed net of stock-based compensation. In the third quarter of fiscal
    2010 the charges related to stock-based compensation were $2.5 million
    compared to $2.4 million in the second quarter of 2010.
    

Reconciliations of Non-GAAP measures to GAAP operating income (loss), net income (loss), and EPS are included at the end of this release.

Webcast and Conference Call Information

3PAR will host a conference call for analysts and investors to discuss its fiscal 2010 third quarter results today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). To access the conference call by phone within the US, please dial 1-800-510-9691 and use passcode 79122298. International participants can dial 617-614-3453 and use passcode 79122298 to access the conference call.

A live Webcast of the conference call will also be accessible from the "Investors" section of 3PAR's Website at www.3PAR.com. Following the Webcast, an archived version will be available on the Website for seven days. To hear the replay, parties in the US and Canada should call 1-888-286-8010 and enter passcode 21278266. International parties can access the replay at 617-801-6888 by entering passcode 21278266.

About 3PAR

3PAR® (NYSE: PAR) is the leading global provider of utility storage, a category of highly virtualized and dynamically tiered storage arrays built for public and private cloud computing. Our virtualized storage platform was built from the ground up to be agile and efficient to address the limitations of traditional storage arrays for utility infrastructures. As a pioneer of thin provisioning and other storage virtualization technologies, we design our products to reduce power consumption to help companies meet their green computing initiatives and to cut storage total cost of ownership. 3PAR customers have used our self-managing, efficient, and adaptable utility storage systems to reduce administration time and provisioning complexity, to improve server and storage utilization, and to scale and adapt flexibly in response to continuous growth and changing business needs. For more information, visit the 3PAR Website at: www.3PAR.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among others, statements concerning our future financial performance, our ability to maintain and control costs, the effectiveness of our business strategies, market share opportunities and reception of our value proposition as well as demand for and adoption of our storage solution in our customer markets. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, to be materially different from any future results expressed or implied by the forward-looking statements. Forward-looking statements are based on management's current, preliminary expectations and are subject to various risks and uncertainties, including the potential for slower than expected growth of the utility storage market or in customer adoption of our storage solutions, particularly in light of substantial uncertainty about macroeconomic trends in the United States and globally and their potential impact on information technology spending; the impact of competitive conditions; as well as the risks and uncertainties included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K for the year ended March 31, 2009, and our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2009 and September 30, 2009, as such reports are filed with the SEC. These reports are available on the SEC's website at www.sec.gov, as well as on our investor relations website at ir.3PAR.com. Additional risks, uncertainties and other information will be contained in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, which will be filed with the SEC in February 2010.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with Generally Accepted Accounting Principles (GAAP), this press release and the accompanying tables contain the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share (EPS). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Non-GAAP operating income, net income and EPS. 3PAR defines non-GAAP operating income and net income as operating loss and net loss plus stock-based compensation expenses. 3PAR defines non-GAAP EPS as non-GAAP net loss divided by the weighted average basic and diluted shares outstanding. 3PAR's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding 3PAR's performance by excluding non-cash stock-based compensation expenses. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use to calculate stock-based compensation under authoritative guidance from Financial Accounting Standards Board, 3PAR's management believes that providing these non-GAAP financial measures allows investors to compare these results with those of other companies, as well as providing management with an important tool for financial and operational decision making and for evaluating 3PAR's operating results (excluding the impact of these non-cash charges) over different periods of time.

There are a number of limitations related to the use of non-GAAP operating income, net income and EPS versus operating income (loss), net income (loss) and EPS calculated in accordance with GAAP. First, these non-GAAP financial measures exclude stock-based compensation expenses that are recurring. Stock-based expenses have been and will continue to be for the foreseeable future a significant recurring expense in 3PAR's business. Second, stock-based awards are an important part of 3PAR's employees' compensation and impact their performance. Third, the components of the costs that 3PAR excludes in its calculation of non-GAAP net income may differ from the components that its peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their most directly comparable financial measures calculated in accordance with GAAP. The accompanying tables have more details on these non-GAAP financial measures, including reconciliations between these financial measures and their most directly comparable GAAP equivalents.

A copy of this press release can be found on the "Investors" page of the 3PAR Website at www.3PAR.com.

© 2010 3PAR Inc. All rights reserved. 3PAR, the 3PAR logo, Serving Information, InServ, InForm, InSpire, and Thin Built In are all trademarks or registered trademarks of 3PAR Inc. All other trademarks and registered trademarks are the property of their respective owners.

                                3PAR Inc.
                  Condensed Consolidated Balance Sheets
                              (In thousands)
                                (Unaudited)


                                                December 31,    March 31,
                                                    2009          2009
                                                ------------- -------------
ASSETS
Current assets:
  Cash and cash equivalents                     $      48,678 $      47,621
  Short-term investments                               59,344        56,186
  Accounts receivable, net                             41,556        34,706
  Inventory                                            24,958        26,650
  Deferred cost                                         4,123         2,887
  Prepaid and other current assets                      3,399         2,500
                                                ------------- -------------
    Total current assets                              182,058       170,550
Property and equipment, net                            23,273        22,079
Other non-current assets                                  196           190
                                                ------------- -------------
    Total assets                                $     205,527 $     192,819
                                                ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                     11,124         9,303
  Accrued liabilities                                  15,255        18,723
  Deferred revenue                                     30,678        25,707
  Accrued warranty                                      4,244         3,999
                                                ------------- -------------
    Total current liabilities                          61,301        57,732
Accrued warranty, non-current                           2,644         3,031
Deferred revenue, non-current                           8,470         6,303
Other long-term liabilities                             1,061         1,224
                                                ------------- -------------
    Total liabilities                                  73,476        68,290
Stockholders' equity                                  132,051       124,529
                                                ------------- -------------
    Total liabilities and stockholders' equity  $     205,527 $     192,819
                                                ============= =============




                                3PAR Inc.
              Condensed Consolidated Statement of Operations
                            (On a GAAP basis)
                 (In thousands, except per share amounts)
                                (Unaudited)


                                 Three Months Ended     Nine Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenue:
  Product                       $  43,136  $  43,713  $ 121,631  $ 125,064
  Support                           6,968      4,446     18,997     11,195
                                ---------  ---------  ---------  ---------
    Total revenue                  50,104     48,159    140,628    136,259
Cost of revenue:
  Product                          15,364     15,698     42,981     44,270
  Support                           2,080      1,388      5,707      3,551
                                ---------  ---------  ---------  ---------
    Total cost of revenue (1)      17,444     17,086     48,688     47,821
                                ---------  ---------  ---------  ---------
Gross profit                       32,660     31,073     91,940     88,438
Operating expenses:
  Research and development (1)     12,335     11,510     35,326     33,701
  Sales and marketing (1)          16,973     15,191     48,348     44,570
  General and administrative (1)    3,826      3,865     11,495     10,985
                                ---------  ---------  ---------  ---------
    Total operating expenses       33,134     30,566     95,169     89,256
                                ---------  ---------  ---------  ---------
Income (loss) from operations        (474)       507     (3,229)      (818)
Interest and other income
 (expense), net                       (20)        47        378        925
                                ---------  ---------  ---------  ---------
Income (loss) before provision
 for income taxes                    (494)       554     (2,851)       107
Income tax provision                  (34)       (93)      (234)      (159)
                                ---------  ---------  ---------  ---------
Net income (loss)               $    (528) $     461  $  (3,085) $     (52)
                                =========  =========  =========  =========
Net income (loss) per common
 share, basic                   $   (0.01) $    0.01  $   (0.05) $   (0.00)
                                =========  =========  =========  =========
Net income (loss) per common
 share, diluted                 $   (0.01) $    0.01  $   (0.05) $   (0.00)
                                =========  =========  =========  =========
Shares used to compute net
 loss per common share:
  Basic                            61,945     60,772     61,651     60,539
                                =========  =========  =========  =========
  Diluted                          61,945     63,122     61,651     60,539
                                =========  =========  =========  =========
(1) Includes stock-based
 compensation as follows:
  Cost of revenue               $     100  $      75  $     281  $     189
  Research and development            790        570      2,193      1,574
  Sales and marketing                 917        831      2,523      2,108
  General and administrative          660        387      1,689        990






                                3PAR Inc.
              Condensed Consolidated Statement of Operations               
                    (GAAP to non-GAAP reconciliation)
                 (In thousands, except per share amounts)
                                (Unaudited)



                                    Three Months Ended  Nine Months Ended
                                       December 31,        December 31,
                                    ------------------- ------------------
                                      2009      2008      2009      2008
                                    --------  --------- --------  --------
GAAP operating income (loss)       $   (474) $     507 $ (3,229) $   (818)
Plus:
  Stock-based compensation             2,467      1,863    6,686     4,861
                                    --------  --------- --------  --------
Non-GAAP operating income           $  1,993  $   2,370 $  3,457  $  4,043
                                    ========  ========= ========  ========
GAAP net income (loss)              $   (528) $     461 $ (3,085) $    (52)
Plus:
  Stock-based compensation             2,467      1,863    6,686     4,861
                                    --------  --------- --------  --------
Non-GAAP net income                 $  1,939  $   2,324 $  3,601  $  4,809
                                    ========  ========= ========  ========
GAAP net income (loss) per common
 share, basic and diluted           $  (0.01) $    0.01 $  (0.05) $  (0.00)
                                    ========  ========= ========  ========
Plus:
  Stock-based compensation          $   0.04  $    0.03 $   0.11  $   0.08
                                    ========  ========= ========  ========
Non-GAAP net income per common
 share, basic                       $   0.03  $    0.04 $   0.06  $   0.08
                                    ========  ========= ========  ========
Non-GAAP net income per common
 share, diluted                     $   0.03  $    0.04 $   0.06  $   0.08
                                    ========  ========= ========  ========
Shares used in computing basic
 non-GAAP net income per
 common share                         61,945     60,772   61,651    60,539
                                    ========  ========= ========  ========
Shares used in computing diluted
 non-GAAP net income per
 common share                         64,443     63,122   64,143    63,480
                                    ========  ========= ========  ========

Contact Information

  • 3PAR U.S. Contact
    Adriel Lares
    Vice President of Finance and
    Chief Financial Officer
    (510) 413-5999