SOURCE: SGI

SGI

January 27, 2016 16:05 ET

SGI Reports Fiscal Second Quarter 2016 Financial Results

Return to Non-GAAP Profitability as UV for HPDA Gains Momentum

MILPITAS, CA--(Marketwired - Jan 27, 2016) - SGI (NASDAQ: SGI), a global leader in high performance solutions for compute, data analytics and data management, today reported financial results for its fiscal second quarter ended December 25, 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 second quarter was $152 million compared to $138 million in the second quarter of 2015. GAAP net loss for the second quarter was $0.5 million, or $(0.01) per share compared with a net loss of $10 million, or $(0.30) per share in the second quarter of 2015. Non-GAAP net income in the second quarter was $5 million, or $0.14 per share compared with net income of $0.1 million, or breakeven per share in the same quarter a year ago.

"The second quarter results marked our return to non-GAAP profitability with improvements in both the top and bottom line," said Jorge Titinger, President and CEO. "We made significant progress in our high performance data analytics business as we surpassed $10 million in revenue this quarter. We also continued to gain traction winning large deals in HPC such as the recent NCAR award in the weather vertical."

Recent Highlights

  • The National Center for Atmospheric Research ("NCAR") selected SGI's ICE XA to build one of the world's most advanced computer systems that will be used to develop models able to predict climate change and severe weather events on a global scale well into the future.

  • SGI delivered and put in production one of the fastest supercomputers in Latin America to CINVESTAV, which is expected to rank in the TOP500 supercomputers in the world. This new supercomputer will be used for modeling and research in earth and life sciences and was selected for its leading energy efficiency and flexible compute power.

  • The Nagaoka University of Technology recently chose SGI's family of servers for its Information Processing Centre. As demand outpaced capacity, the SGI solution was the preferred choice for the university to significantly improve both performance and capacity for its users.

Outlook

Consistent with its previously provided outlook for the full year, the company continues to expect:

  • Revenue in the range of $600 to $625 million, or year-over-year growth of 15 - 20%;
  • Non-GAAP gross margin between 26% and 27%;
  • Non-GAAP operating expenses flat to down 5% year-over-year;
  • Non-GAAP net income in the range of $0.25 to $0.35 per share after excluding approximately $17 million of adjustments; and
  • GAAP net loss in the range of $(0.11) to $(0.21) per share.

For the third quarter, we expect to be profitable on a non-GAAP basis at approximately $140 million in revenue.

Conference Call and Webcast

SGI's second quarter fiscal 2016 financial results conference call is scheduled to take place on Wednesday, January 27, 2016 at 1:30 p.m. PT (4:30 p.m. ET). A live webcast of the company's earnings conference call will be available simultaneously on the Investor Relations section of the company's website at investors.sgi.com. A replay of the webcast will also be available approximately two hours after the conclusion of the conference call and will remain available until next quarter.

The earnings conference call can also be accessed by dialing (888) 463-5422 (toll-free) or (970) 315-0484 (international) and entering the confirmation code: 17957979. 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: 17957979.

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 for more information.

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 Forms 10-K and 10-Q 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.

© 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.

                       
                       
Silicon Graphics International Corp.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(In thousands, except per share amounts)  
   
                       
  Three Months Ended     Six Months Ended  
  December 25,     December 26,     December 25,     December 26,  
  2015     2014     2015     2014  
                               
Revenue $ 151,826     $ 138,150     $ 278,133     $ 249,851  
Cost of revenue   111,001       101,341       208,844       180,670  
                               
Gross profit   40,825       36,809       69,289       69,181  
                               
Operating expenses:                              
  Research and development   12,987       14,779       26,167       27,979  
  Sales and marketing   13,826       16,780       26,394       32,641  
  General and administrative   12,604       15,254       24,511       28,559  
  Restructuring   -       -       -       116  
    Total operating expenses   39,417       46,813       77,072       89,295  
                               
Income (loss) from operations   1,408       (10,004 )     (7,783 )     (20,114 )
                               
  Interest expense, net   (2,027 )     (58 )     (4,056 )     (100 )
  Other income (expense), net   540       (247 )     437       (104 )
    Total other expense, net   (1,487 )     (305 )     (3,619 )     (204 )
Loss before income taxes   (79 )     (10,309 )     (11,402 )     (20,318 )
Income tax provision   400       129       649       453  
                               
Net loss $ (479 )   $ (10,438 )   $ (12,051 )   $ (20,771 )
                               
Basic and diluted net loss per share $ (0.01 )   $ (0.30 )   $ (0.34 )   $ (0.60 )
                               
Shares used in computing basic and diluted net loss per share   35,531       34,375       35,352       34,399  
                               
Share-based compensation by category is as follows:                          
                               
Cost of revenue $ 412     $ 566     $ 937     $ 1,032  
Research and development   495       659       1,201       1,218  
Sales and marketing   451       764       969       1,565  
General and administrative   1,809       2,182       3,967       3,855  
Total $ 3,167     $ 4,171     $ 7,074     $ 7,670  
       
       
       
Silicon Graphics International Corp.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
       
  December 25,   June 26,
  2015   2015
ASSETS          
Current assets:          
  Cash and cash equivalents $ 68,410   $ 67,191
  Current portion of restricted cash   2,109     2,109
  Accounts receivable, net   103,758     118,219
  Inventories   66,026     82,832
  Current portion of deferred cost of revenue   12,850     12,108
  Prepaid expenses and other current assets   10,187     17,547
    Total current assets   263,340     300,006
Non-current portion of restricted cash   2,135     2,251
Property and equipment, net   41,108     38,480
Goodwill and Intangible assets, net   11,001     11,303
Non-current portion of deferred cost of revenue   11,630     9,648
Other non-current assets   27,025     25,896
           
    Total assets $ 356,239   $ 387,584
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
  Accounts payable $ 46,122   $ 48,677
  Accrued compensation   16,178     17,797
  Short-term debt, net of unamortized debt issuance costs   3,978     3,096
  Current portion of deferred revenue   82,431     96,473
  Other current liabilities   21,441     33,180
    Total current liabilities
Long-tem debt, net of unamortized debt issuance costs   66,067     65,581
Non-current portion of deferred revenue   45,267     43,781
Long-term income taxes payable   7,698     8,420
Retirement benefit obligations   9,057     9,330
Other non-current liabilities   7,943     7,871
    Total liabilities   306,182     334,206
           
Stockholders' equity   50,057     53,378
      Total liabilities and stockholders' equity $ 356,239   $ 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  
    December 25, 2015  
    Net           Gross Profit     Operating  
    (Loss) / Income     EPS     Product     Service     Total     Expenses  
GAAP   $ (479 )   $ (0.01 )   $ 25,634     $ 15,191     $ 40,825     $ 39,417  
                                                 
  Share-based compensation (1)   3,167       0.09       98       314       412       (2,755 )
  Amortization of acquired intangibles (1)   192       -       175       -       175       (17 )
  Restructuring and severance (2)   730       0.02       -       -       -       (730 )
  Other non-recurring items (2)   1,396       0.04       -       (12 )     (12 )     (1,408 )
Non-GAAP   $ 5,006     $ 0.14     $ 25,907     $ 15,493     $ 41,400     $ 34,507  
                                                 
Gross Margin                                                
  Gross margin on a GAAP basis                     22.3 %     41.2 %     26.9 %        
  Gross margin on a Non-GAAP basis                     22.5 %     42.1 %     27.3 %        
                                                 
Weighted average shares used in computing:                                                
  Basic net loss per share             35,531                                  
  Diluted net income per share             36,021                                  
                                                 
                                                 
    Three Months Ended  
    December 26, 2014  
    Net           Gross Profit     Operating  
    (Loss) / Income     EPS     Product     Service     Total     Expenses  
GAAP   $ (10,438 )   $ (0.30 )   $ 21,547     $ 15,262     $ 36,809     $ 46,813  
                                   
  Share-based compensation (1)   4,171       0.12       122       444       566       (3,605 )
  Amortization of acquired intangibles (1)   1,310       0.04       900       -       900       (410 )
  Restructuring and severance (2)   3,792       0.11       8       693       701       (3,091 )
  Other non-recurring items (2)   1,268       0.03       -       10       10       (1,258 )
Non-GAAP   $ 103     $ (0.00 )   $ 22,577     $ 16,409     $ 38,986     $ 38,449  
                                                 
Gross Margin                                                
  Gross margin on a GAAP basis                     21.5 %     40.3 %     26.6 %        
  Gross margin on a Non-GAAP basis                     22.5 %     43.3 %     28.2 %        
                                                 
Weighted average shares used in computing:                                                
  Basic net loss per share             34,375                                  
  Diluted net income per share             35,134                                  
                                                 
                                                 
    Three Months Ended  
    September 25, 2015  
    Net           Gross Profit     Operating  
    Loss     EPS     Product     Service     Total     Expenses  
GAAP   $ (11,572 )   $ (0.33 )   $ 14,180     $ 14,284     $ 28,464     $ 37,655  
                                                 
  Share-based compensation (1)   3,907       0.11       109       416       525       (3,382 )
  Amortization and impairment of acquired intangibles (1)   92       -       75       -       75       (17 )
  Restructuring and severance (2)   944       0.03       -       123       123       (821 )
  Other non-recurring items (2)   1,283       0.04       -       23       23       (1,260 )
Non-GAAP   $ (5,346 )   $ (0.15 )   $ 14,364     $ 14,846     $ 29,210     $ 32,175  
                                                 
                                                 
Gross Margin                                                
  Gross margin on a GAAP basis                     15.1 %     44.3 %     22.5 %        
  Gross margin on a Non-GAAP basis                     15.3 %     46.1 %     23.1 %        
                                                 
Weighted average shares used in computing:                                                
  Basic and diluted net loss per share             35,174                                  
                                     
                                     
                                     
Silicon Graphics International Corp.  
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES  
(In thousands, except per share data)  
(Unaudited)  
                                     
    Six Months Ended  
    December 25, 2015  
    Net           Gross Profit     Operating  
    Loss     EPS     Product     Service     Total     Expenses  
GAAP   $ (12,051 )   $ (0.34 )   $ 39,814     $ 29,475     $ 69,289     $ 77,072  
                                                 
  Share-based compensation (1)   7,074       0.20       207       730       937       (6,137 )
  Amortization and impairment of acquired intangibles (1)   284       0.01       250       -       250       (34 )
  Restructuring and severance (2)   1,674       0.05       -       123       123       (1,551 )
  Other non-recurring items (2)   2,679       0.07       -       11       11       (2,668 )
Non-GAAP   $ (340 )   $ (0.01 )   $ 40,271     $ 30,339     $ 70,610     $ 66,682  
                                                 
Gross Margin                                                
  Gross margin on a GAAP basis                     19.0 %     42.7 %     24.9 %        
  Gross margin on a Non-GAAP basis                     19.3 %     43.9 %     25.4 %        
                                                 
Weighted average shares used in computing:                                                
  Basic and diluted net loss per share             35,352                                  
                                                 
    Six Months Ended  
    December 26, 2014  
    Net           Gross Profit     Operating  
    Loss     EPS     Product     Service     Total     Expenses  
GAAP   $ (20,771 )   $ (0.60 )   $ 37,656     $ 31,525     $ 69,181     $ 89,295  
                                                 
  Share-based compensation (1)   7,670       0.22       229       803       1,032       (6,638 )
Amortization of acquired intangibles       0.05       1,044       -       1,044       (481 )
  Restructuring and severance (2)   4,884       0.14       166       972       1,138       (3,746 )
  Other non-recurring items (2)   1,818       0.05       -       10       10       (1,808 )
Non-GAAP   $ (4,874 )   $ (0.14 )   $ 39,095     $ 33,310     $ 72,405     $ 76,622  
                                                 
Gross Margin                                                
  Gross margin on a GAAP basis                     21.5 %     42.3 %     27.7 %        
  Gross margin on a Non-GAAP basis                     22.3 %     44.7 %     29.0 %        
                                                 
Weighted average shares used in computing:                                                
  Basic and diluted net loss per share             34,399                                  
 
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, and other non-recurring items.
   
   
                         
Silicon Graphics International Corp.  
TRENDED FINANCIAL DATA  
(In thousands)  
(Unaudited)  
                         
    Q2 FY16     Q2 FY15     1H FY16     1H FY15  
                                 
Revenue                                
  Americas   $ 82,064     $ 87,615     $ 162,523     $ 155,285  
  APJ     51,201       33,671       71,506       60,089  
  EMEA     18,561       16,864       44,104       34,477  
    Total revenue   $ 151,826     $ 138,150     $ 278,133     $ 249,851  
                                 
Revenue                                
  Federal (*)   $ 66,025     $ 72,286     $ 138,480     $ 132,960  
  International / Commercial     85,801       65,864       139,653       116,891  
    Total revenue   $ 151,826     $ 138,150     $ 278,133     $ 249,851  
                                 
Revenue                                
  Product   $ 114,996     $ 100,288     $ 209,086     $ 175,290  
  Service     36,830       37,862       69,047       74,561  
    Total revenue   $ 151,826     $ 138,150     $ 278,133     $ 249,851  
Cost of revenue                                
  Product   $ 89,362     $ 78,741     $ 169,272     $ 137,634  
  Service     21,639       22,600       39,572       43,036  
    Total cost of revenue   $ 111,001     $ 101,341     $ 208,844     $ 180,670  
Gross margin by Product and Service                                
  Product Gross Margin     22.3 %     21.5 %     19.0 %     21.5 %
  Service Gross Margin     41.2 %     40.3 %     42.7 %     42.3 %
    Total gross margin     26.9 %     26.6 %     24.9 %     27.7 %
                                 
(*) Federal revenue includes U.S. government customers, system integrators, and higher education and research institutions          
           

Contact Information