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SOURCE: Cray Inc.
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February 16, 2010 16:05 ET
Cray Inc. Reports Fourth Quarter and Full Year 2009 Results
Company Posts Record Annual Revenue
SEATTLE, WA--(Marketwire - February 16, 2010) - Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced 2009 financial results for the fourth quarter and
full-year. Revenue for the fourth quarter of 2009 was $88.2 million
compared to $155.4 million in the fourth quarter of 2008. The fourth
quarter of 2008 revenue included approximately $100 million from a single
transaction, the Cray XT5 supercomputer at Oak Ridge National Laboratory,
known as "Jaguar" (currently the fastest supercomputer in the world). The
company reported net income for the fourth quarter of 2009 of $3.0 million,
or $0.08 per share, compared to a net loss of ($26.0 million), or ($0.79)
per share, in the fourth quarter 2008. A non-cash, goodwill impairment of
$54.5 million was taken in the fourth quarter of 2008.
For 2009, Cray reported record revenue of $284.0 million and a net loss of
($0.6 million), or ($0.02) per share. For 2008, revenue was $282.9 million
and net loss was ($40.7 million), or ($1.25) per share.
For the fourth quarter 2009, overall gross profit margin was 41 percent
compared to 36 percent in the fourth quarter 2008. Product margin for the
quarter was 43 percent compared to 36 percent in the prior year period, and
fourth quarter 2009 service margin was 37 percent. Overall gross profit
margin for 2009 was 37 percent compared to 39 percent in 2008. Product
margin for 2009 was 34 percent compared to 39 percent in 2008 and service
margin for 2009 was 44 percent compared to 40 percent for 2008.
Core operating expenses, consisting of research and development, sales and
marketing, and general and administrative expenses, increased to $106.1
million in 2009 from $93.5 million in 2008. The increase in operating
expenses in 2009 was primarily due to increased research and development
("R&D") expenses resulting from a delayed Defense Advanced Research
Projects Agency ("DARPA") contract modification and related development
milestones. Included in the 2009 results were $8.5 million for
depreciation and amortization and $5.8 million related to stock
compensation. Additionally, 2009 results were negatively impacted by $2.0
million of non-cash items related to recent changes in accounting
guidelines applicable to our now retired convertible notes.
Core operating expenses in the fourth quarter 2009 were $33.7 million
compared to $27.2 million in the prior year period. Included in the fourth
quarter 2009 results were non-cash items of $2.1 million for depreciation
and amortization and $1.2 million related to stock compensation.
As of December 31, 2009, cash and short-term investments totaled $113.2
million.
"I am very pleased that we were able to post another year of record
revenues, including strong growth in our custom engineering initiative,"
said Peter Ungaro, president and CEO of Cray. "While we didn't reach our
goal of profitability, driven by a delay in our development contract
modification and associated milestone with DARPA, we continued to improve
our balance sheet by eliminating all of our debt and ended the year in a
very solid net cash position -- another record for us."
Ungaro added, "For 2010, we have already finalized this DARPA contract
modification and are on our way toward a strong year. Building on the
broad strength of our XT supercomputer line and through our new
initiatives, our business is stronger and more diversified than in the
past. Our addressable market continues to expand with planned product
introductions over the course of 2010 and we expect custom engineering to
continue to grow at a very fast pace. With the recent announcement of our
XT6 supercomputer and the planned release of our next-generation system we
call 'Baker,' which builds on the system architecture of the world's
fastest supercomputer and improves it in every dimension, we are in an
excellent position to have an outstanding 2010."
Outlook
A wide range of results remains possible for 2010. Many variables may
impact our results, but one significant item is the timing of the
availability and release of our next generation supercomputer, code-named
"Baker," including its new interconnect chipset, known as "Gemini," and
associated system software.
Assuming a successful release of Baker in the third quarter of 2010 as
currently planned, we anticipate revenue in the range of $305 to $325
million for 2010. As a result of the timing of the Baker system release,
we expect a significant majority of 2010 revenue to be recognized in the
fourth quarter. Service revenue is expected to be in the range of $110
million for 2010, driven by strong growth in our custom engineering
initiative. Gross margins for 2010 are expected to be in the mid-30
percent range. Operating expenses are expected to be lower in 2010 than in
2009, driven primarily by lower research and development expenses for the
year. Based on this outlook, we expect to be profitable for 2010.
We expect to use cash in 2010, with the majority of the decline coming in
the third quarter as we build inventory for product deliveries during the
second half of 2010.
Recent Highlights
-- During the fourth quarter, Cray successfully installed and received
acceptance for the upgrade to the Cray XT5 supercomputer named "Jaguar"
at the Oak Ridge National Laboratory. With this system clocking in at
over two petaflops of peak performance, several real-world applications
were run at speeds well beyond anything previously achieved. An Oak
Ridge research team recorded an unprecedented sustained performance of
over one petaflops on an important quantum chemistry problem and
another in material science research that may facilitate new storage
mediums and the development of lighter, stronger motors for electric
vehicles. Also, following the upgrade, the Jaguar system was recognized
by the Top 500 list (www.top500.org) as the world's fastest
supercomputer.
-- In November, Cray announced that Dell will be the exclusive reseller of
its latest deskside supercomputer, the Cray CX1-iWS system. The Cray
CX1-iWS combines a powerful Microsoft Windows 7 workstation with a
fully integrated high-performance computing (HPC) cluster running
Microsoft Windows HPC Server 2008. With a list price beginning at
under $40,000, the Cray CX1-iWS is designed to address a market need
for a new generation of workstations.
-- In early 2010, Cray's custom engineering group was awarded a contract
with a large commercial customer to research and prototype a system
infrastructure for future use in the customer's cloud computing data
centers. The one-year contract represents the custom engineering
group's first breakthrough into the commercial market.
-- During the first quarter of 2010, an amendment to our development
agreement with DARPA was finalized. Consistent with previous
disclosure, the remaining amount of the contract was reduced by
$60 million, to $92.5 million. The contract reduces the project's
overall scope, and consequently we expect future R&D expenses related
to this program, net of reimbursement, to be lower than previously
anticipated. As with the previous contract, the balance of the modified
contract is expected to be received through achievement of a series of
pre-defined milestones culminating in the delivery of a prototype
system in 2012. The next payable milestone is expected to be completed
later in the first quarter of 2010.
Conference Call Information
Cray will host a conference call today, Tuesday, February 16, 2010 at 1:15
p.m. Pacific Time (4:15 p.m. Eastern Time) to discuss fourth quarter and
full-year 2009 financial results. To access the call, please dial into the
conference at least 10 minutes prior to the beginning of the call at
1-800-762-8795. International callers should dial 1-480-629-9774. To
listen to the live audio webcast, go to the Investors section of the Cray
website at http://investors.cray.com.
If you are unable to attend the live conference call, an audio webcast
replay will be available in the Investors section of the Cray website for
180 days. If you do not have Internet access, a replay of the call will be
available by dialing 1-800-406-7325 and entering access code 4220054.
International callers can listen to the replay by dialing 1-303-590-3030,
access code 4220054. The conference call replay will be available for 72
hours, beginning at 4:15 p.m. Pacific Time on Tuesday, February 16, 2010.
About Cray Inc.
As a global leader in supercomputing, Cray provides highly advanced
supercomputers and world-class services and support to government, industry
and academia. Cray technology is designed to enable scientists and
engineers to achieve remarkable breakthroughs by accelerating performance,
improving efficiency and extending the capabilities of their most demanding
applications. Cray's Adaptive Supercomputing vision is focused on
delivering innovative next-generation products that integrate diverse
processing technologies into a unified architecture, allowing customers to
surpass today's limitations and meeting the market's continued demand for
realized performance. Go to www.cray.com for more information.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933, including, but not limited to, statements
related to Cray's financial guidance and expected future operating results,
its product development plans, including its planned release of the Baker
system, its ability to complete and receive payment on co-funded
development milestones pursuant to its DARPA agreement, its ability to grow
revenue from its Custom Engineering business and its ability to expand and
penetrate its addressable market. These statements involve current
expectations, forecasts of future events and other statements that are not
historical facts. Inaccurate assumptions as well as known and unknown risks
and uncertainties can affect the accuracy of forward-looking statements and
cause actual results to differ materially from those anticipated by these
forward-looking statements. Factors that could affect actual future events
or results include, but are not limited to, the risk that Cray does not
achieve the operational or financial results that it expects, the risk that
customer acceptances are not received when expected or at all, the risk
that Cray is not able to successfully complete its planned product
development efforts or to ship the Baker system within the planned
timeframe or at all, the risk that Cray is not able to achieve and obtain
acceptance of co-funded development milestones when or as expected or at
all, the risk that Cray will not be successful in growing revenue from its
strategic initiatives, including Custom Engineering, the risk that Cray
will not be able to expand and penetrate its addressable market as expected
or at all and such other risks as identified in the Company's quarterly
report on Form 10-Q for the period ended September 30, 2009, and from time
to time in other reports filed by Cray with the U.S. Securities and
Exchange Commission. You should not rely unduly on these forward-looking
statements, which apply only as of the date of this release. Cray
undertakes no duty to publicly announce or report revisions to these
statements as new information becomes available that may change the
Company's expectations.
Cray is a registered trademark and Cray XT6, Cray XT5 and Cray CX1-iWS are
trademarks of Cray Inc. Other product and service names mentioned herein
are the trademarks of their respective owners.
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
Three Months Ended Year Ended
December 30, December 30,
2009 2008 2009 2008
--------- --------- --------- ---------
(As Adjusted) (As Adjusted)
(1) (1)
REVENUE:
Product $ 65,177 $ 137,364 $ 199,114 $ 218,970
Service 23,070 18,035 84,933 63,883
--------- --------- --------- ---------
Total revenue 88,247 155,399 284,047 282,853
--------- --------- --------- ---------
COST OF REVENUE:
Cost of product revenue 37,063 88,034 130,444 133,715
Cost of service revenue 14,624 11,100 47,719 38,062
--------- --------- --------- ---------
Total cost of
revenue 51,687 99,134 178,163 171,777
--------- --------- --------- ---------
Gross profit 36,560 56,265 105,884 111,076
--------- --------- --------- ---------
OPERATING EXPENSES:
Research and
development, net 20,701 13,802 62,947 51,775
Sales and marketing 7,918 7,623 26,601 24,988
General and
administrative 5,056 5,806 16,579 16,742
Restructuring and
impairment - 54,450 - 54,450
--------- --------- --------- ---------
Total operating
expenses 33,675 81,681 106,127 147,955
--------- --------- --------- ---------
Income (loss) from
operations 2,885 (25,416) (243) (36,879)
Other income (expense),
net 145 227 (1) (430) 588 (1)
Interest income
(expense), net 44 (686)(1) (805) (4,068)(1)
--------- --------- --------- ---------
Income (loss) before
income taxes 3,074 (25,875) (1,478) (40,359)
Income tax benefit
(expense) (103) (85) 874 (387)
--------- --------- --------- ---------
Net income (loss) $ 2,971 $ (25,960)(1) $ (604) $ (40,746)(1)
========= ========= ========= =========
Diluted net income
(loss) per common
share $ 0.08 $ (0.79)(1) $ (0.02) $ (1.25)(1)
========= ========= ========= =========
Diluted weighted
average shares
outstanding 35,015 32,769 33,559 32,573
========= ========= ========= =========
(1) December 31, 2008 results have been adjusted for new guidance included
in Accounting Standards Codification Topic 470, Debt, related to
convertible debt instruments that may be settled in cash upon conversion
A summary of adjustments due to retrospective application to previously
reported results for the three months and year ended December 31, 2008:
For the three months ended December 31, 2008:
As
Previously As
Reported Adjustment Adjusted
---------- ---------- ----------
Other income (expense), net $ 4,772 $ (4,545) $ 227
Interest income (expense), net 37 (723) (686)
Net loss (20,692) (5,268) (25,960)
Diluted net loss per common share (0.63) (0.16) (0.79)
For the year ended December 31, 2008:
As
Previously As
Reported Adjustment Adjusted
---------- ---------- ----------
Other income (expense), net $ 5,133 $ (4,545) $ 588
Interest income (expense), net 787 (4,855) (4,068)
Net loss (31,346) (9,400) (40,746)
Diluted net loss per common share (0.96) (0.29) (1.25)
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
December December
31, 31,
2009 2008
--------- ---------
(As
Adjusted)(1)
ASSETS
Current assets:
Cash and cash equivalents $ 105,018 $ 72,373
Restricted cash 5,161 2,691
Short term investments, available-for-sale 2,999 5,350
Accounts and other receivables, net 38,207 95,667
Inventory 29,011 80,437
Prepaid expenses and other current assets 5,514 29,993 (1)
--------- ---------
Total current assets 185,910 286,511
Property and equipment, net 19,809 18,396
Service inventory, net 1,719 1,917
Deferred tax asset 2,661 1,200
Other non-current assets 13,561 5,837
--------- ---------
TOTAL ASSETS $ 223,660 $ 313,861
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,783 $ 16,730
Accrued payroll and related expenses 16,219 23,672
Advance research and development payments - 13,887
Short-term convertible notes - 25,681 (1)
Other accrued liabilities 9,735 24,670
Deferred revenue 42,414 67,692
--------- ---------
Total current liabilities 87,151 172,332
Long-term deferred revenue 9,627 18,154
Other non-current liabilities 2,719 3,170
--------- ---------
TOTAL LIABILITIES 99,497 193,656
Shareholders' equity:
Common stock and additional paid-in capital 551,220 543,442 (1)
Accumulated other comprehensive income 6,148 9,364
Accumulated deficit (433,205) (432,601)(1)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 124,163 120,205
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 223,660 $ 313,861
========= =========
(1) December 31, 2008 results have been adjusted for new guidance included
in Accounting Standards Codification Topic 470, Debt, related to
convertible debt instruments that may be settled in cash upon conversion
A summary of adjustments due to retrospective application to previously
reported December 31, 2008 balances:
As
Previously As
Reported Adjustment Adjusted
---------- ---------- ----------
Prepaid expenses and other current
assets $ 30,023 $ (30) $ 29,993
Convertible notes 27,727 (2,046) 25,681
Common stock and additional paid-in
capital 518,727 24,715 543,442
Accumulated deficit (409,902) (22,699) (432,601)