SOURCE: Violin Memory, Inc.

Violin Memory, Inc.

September 08, 2016 16:04 ET

Violin Memory Announces Second Quarter Fiscal Year 2017 Financial Results

SANTA CLARA, CA--(Marketwired - September 08, 2016) - Violin Memory®, Inc., (NYSE: VMEM), a global pioneer of award-winning all flash storage platform solutions for primary storage and active workloads, today announced financial results for the second fiscal quarter ended July 31, 2016.

Second Quarter Fiscal 2017 Financial Highlights

  • Second quarter fiscal 2017 revenue of $7.5 million
  • Second quarter fiscal 2017 GAAP1 gross margin of 3%
  • Second quarter fiscal 2017 non-GAAP2 gross margin of 44%
  • Second quarter fiscal 2017 GAAP net loss of $0.82 per share
  • Second quarter fiscal 2017 non-GAAP net loss of $0.59 per share

"Violin is proactively taking the actions necessary to return the company to growth by leveraging innovation and technology to meet customer needs, while achieving the lowest cost structure in the industry," said Kevin DeNuccio, President and CEO Violin Memory. "These actions, coupled with expanding Flash Storage Platform Customer engagements, will support the company's effort to attract additional capital to fuel growth through profitability."

Second Quarter Fiscal 2017 Financial Results

Second quarter fiscal 2017 revenue was $7.5 million, 23% lower sequentially compared to $9.7 million reported in the first quarter of fiscal 2017, and 51% lower compared to $15.3 million reported in the second quarter of fiscal 2016.

Second quarter fiscal 2017 GAAP gross margin was 3% compared to 40% reported in the first quarter of fiscal 2017 and compared to 43% reported in the second quarter of fiscal year 2016.

Second quarter fiscal 2017 non-GAAP gross margin was 44% compared to 42% reported in the first quarter of fiscal 2017 and compared to 47% reported in the second quarter of fiscal year 2016.

Second quarter fiscal 2017 GAAP net loss was $20.6 million, or $0.82 per share, compared to first quarter of fiscal 2017 GAAP net loss of $22.2million, or $0.89 per share and compared to second quarter fiscal 2016 GAAP net loss of $24.4 million, or $1.01 per share. All share and per share numbers reflect the Company's 1-for-4 reverse split that occurred on July 6, 2016.

Second quarter fiscal 2017 GAAP net loss included stock-based compensation expense of $3.1 million and an excess and obsolete inventory provision of $2.9 million partially offset by recovery against restructuring charges of $0.3 million.

Excluding special items, second quarter fiscal 2017 non-GAAP net loss was $14.8 million, or $0.59 per share, compared to first quarter fiscal 2017 non-GAAP net loss of $16.4 million, or $0.66 per share, and compared to second quarter fiscal 2016 non-GAAP net loss of $18.4 million, or $0.76 per share.

Cash and cash equivalents, restricted cash and short-term investments totaled $36.4 million as of July 31, 2016.

1 Generally Accepted Accounting Principles.

2 A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading "Non-GAAP Financial Measures."

Violin Memory Conference Call Information

Violin Memory will host a conference call today at 2:00 p.m. pacific time to discuss financial results and business highlights. This call will be webcast and can be accessed via the Violin Memory website at investor.violin-memory.com. A replay will be available following the call on the same website for one week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) using ID #68499428.

Non-GAAP Financial Measures

To supplement the reader's overall understanding of both its reported results presented in accordance with U.S. generally accepted accounting principles ("GAAP") and its outlook, the Company also presents non-GAAP measures of gross profit, operating expenses, net loss and net loss per share. The Company uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors as a supplement to GAAP measures in evaluating its ongoing operational performance and trends. As the calculation of non-GAAP financial measures differs between companies, the non-GAAP financial measures used by the Company may not be comparable to similarly titled measures used by other companies. As a result, the Company does not use, nor does it intend to use, the non-GAAP financial measures when assessing the Company's performance against that of other companies.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

The Company defines non-GAAP gross profit, operating expenses, net loss and net loss per share as the respective GAAP balances adjusted for stock-based compensation expense, provision for excess and obsolete inventory, restructuring charges or recovery and amortization of acquired intangibles.

Forward Looking Statements

This public announcement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the following: Violin Memory's ability to return to growth; Violin Memory's ability to maintain its low cost structure; Violin Memory's ability to expand customer engagements; Violin Memory's ability to attract additional capital and achieve profitability; financial and other benefits that customers and others may realize as the result of using Violin Memory's products and services; the performance and capabilities of Violin Memory's products and services; and Violin Memory's business plans and strategy. There are a significant number of risks and uncertainties that could affect Violin Memory's business performance and financial results, including those set forth under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Violin Memory's Quarterly Report on Form 10-Q for the first quarter of fiscal year 2017, which was filed with the U.S. Securities and Exchange Commission, and which is available on the Violin Memory's investor relations website at investor.violin-memory.com and on the SEC's website at www.sec.gov. All forward-looking statements in this public announcement are based on information available to Violin Memory as of the date hereof, and Violin Memory does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Violin Memory, Inc.

Be Instrumental. Violin Memory, the industry pioneer in All Flash Arrays, is revolutionizing how businesses operate by enabling IT to Be Instrumental in organizations in such ways as unlocking the power of data and creating economic advantage. The consistent high-throughput and predictable low latency showcased by the Flash Storage Platform™ is combined with Concerto™ OS 7, a fully integrated storage operating system that enables complete data protection, business continuity, and data reduction services. Violin Memory's innovative single storage platform solution delivers transformative performance for cloud, enterprise, virtualized business and mission-critical storage applications. The Violin Flash Storage Platform is designed to consolidate high performance and primary storage workloads onto a flexible, uniquely scalable solution called Scale Smart™, while achieving substantive CAPEX and OPEX savings. Founded in 2005, Violin Memory is headquartered in Santa Clara, California. For more information, visit www.violin-memory.com. Follow us on Twitter at twitter.com/violinmemory.

All Violin Memory news releases (financial, acquisitions, manufacturing, products, technology, etc.) are issued exclusively by Marketwired and are immediately thereafter posted on the company's external website. For more information about Violin Memory, including Violin Memory's trademarks, visit www.violin-memory.com.

                      
VIOLIN MEMORY, INC.  
Condensed Consolidated Statements of Operations  
(Unaudited; in thousands, except per share data)  
                      
   Three Months Ended   Six Months Ended  
   July 31,   April 30,   July 31,   July 31,   July 31,  
   2016   2016   2015   2016   2015  
                           
Revenue:                          
 Product revenue  $2,063   $4,157   $9,847   $6,220   $16,670  
 Service revenue   5,440    5,556    5,456    10,996    10,734  
  Total revenue   7,503    9,713    15,303    17,216    27,404  
Cost of revenue:                          
 Cost of product revenue (1)   4,764    3,122    5,872    7,886    10,102  
 Cost of service revenue (1)   2,533    2,714    2,831    5,247    5,552  
  Total cost of revenue   7,297    5,836    8,703    13,133    15,654  
  Gross profit   206    3,877    6,600    4,083    11,750  
Operating expenses:                          
 Sales and marketing (1)   7,516    9,032    13,655    16,548    27,095  
 Research and development (1)   8,637    10,194    10,580    18,831    22,106  
 General and administrative (1)   3,236    3,412    4,708    6,648    9,859  
 Restructuring charges (recovery)   (265 )  1,735    -    1,470    -  
  Total operating expenses   19,124    24,373    28,943    43,497    59,060  
  Loss from operations   (18,918 )  (20,496 )  (22,343 )  (39,414 )  (47,310 )
Other expense, net   (114 )  (194 )  (303 )  (308 )  (47 )
Interest and other financing expense   (1,514 )  (1,459 )  (1,694 )  (2,973 )  (3,444 )
 Loss before income taxes   (20,546 )  (22,149 )  (24,340 )  (42,695 )  (50,801 )
Income taxes   30    10    42    40    83  
 Net loss  $(20,576 ) $(22,159 ) $(24,382 ) $(42,735 ) $(50,884 )
Net loss per share of common stock, basic and diluted  $
(0.82
) $
(0.89
) $
(1.01
) $
(1.71
) $
(2.12
)
Shares used in computing net loss per share of common stock, basic and diluted   
25,061
   
24,773
   
24,147
   
24,919
   
24,011
 
(1) Includes stock-based compensation expense as follows:                          
 Cost of product revenue  $28   $6   $270   $34   $521  
 Cost of service revenue   153    201    334    354    669  
 Sales and marketing   661    649    1,475    1,310    2,280  
 Research and development   1,181    2,160    1,977    3,341    3,955  
 General and administrative   1,091    1,039    1,902    2,130    3,794  
   $3,114   $4,055   $5,958   $7,169   $11,219  
                     
                     
   
VIOLIN MEMORY, INC.  
Condensed Consolidated Balance Sheets  
(Unaudited; in thousands)  
          
   July 31, 2016   January 31, 2016  
Assets           
Current assets:           
 Cash and cash equivalents  $19,137   $23,921  
 Restricted cash   5,000    10,000  
 Short-term investments   12,290    42,058  
 Accounts receivable, net   2,567    5,308  
 Inventory   9,794    12,001  
 Other current assets   1,417    4,170  
  Total current assets   50,205    97,458  
Property and equipment, net   8,545    9,322  
Other assets   5,460    6,067  
   $64,210   $112,847  
            
  Liabilities and Stockholders' Deficit           
Current liabilities:           
 Short-term borrowings  $7,073   $13,398  
 Accounts payable   2,162    3,747  
 Accrued liabilities   11,239    13,570  
 Deferred revenue   11,118    13,006  
  Total current liabilities   31,592    43,721  
Convertible senior notes   118,089    117,464  
Deferred revenue, noncurrent   4,771    6,239  
Long-term liabilities   -    275  
  Total liabilities   154,452    167,699  
            
Stockholders' deficit:           
 Preferred stock   -    -  
 Common stock   3    10  
 Additional paid-in capital   512,533    505,274  
 Accumulated other comprehensive income   549    456  
 Accumulated deficit   (603,327 )  (560,592 )
  Total stockholders' deficit   (90,242 )  (54,852 )
   $64,210   $112,847  
            
            
          
VIOLIN MEMORY, INC.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited; in thousands)  
      
 
 
 
 
Six Months Ended  
   July 31,   July 31,  
   2016   2015  
       
Cash flows from operating activities:           
Net loss  $(42,735 ) $(50,884 )
Adjustments to reconcile net loss to net cash used in operating activities:          
 Depreciation and amortization   4,055    4,697  
 Accretion of debt issuance costs to interest expense   696    878  
 Loss on disposal of property and equipment   99    -  
 Provision for excess and obsolete inventory   2,940    -  
 Stock-based compensation   7,165    11,219  
 Changes in operating assets and liabilities, net:           
  Accounts receivable   2,741    9,338  
  Inventory   (2,611 )  (2,496 )
  Other assets   2,743    2,058  
  Accounts payable   (1,297 )  (5,597 )
  Accrued liabilities   (2,605 )  (3,915 )
  Deferred revenue   (3,356 )  (3,112 )
   Net cash used in operating activities   (32,165 )  (37,814 )
            
Cash flows from investing activities:           
 Purchase of property and equipment   (1,242 )  (3,149 )
 Decrease in restricted cash   5,000    (7,700 )
 Purchase of short-term investments   -    (41,139 )
 Maturity of short-term investments   29,780    34,915  
   Net cash provided by (used in) investing activities   33,538    (17,073 )
            
Cash flows from financing activities:           
 Proceeds from line of credit   12,847    17,723  
 Repayment of line of credit   (19,172 )  (14,000 )
 Proceeds from exercise of common stock options   87    955  
   Net cash used in financing activities   (6,238 )  4,678  
  Effect of exchange rates on cash and cash equivalents   81    228  
   Net increase in cash and cash equivalents   (4,784 )  (49,981 )
Cash and cash equivalents at beginning of year   23,921    93,432  
Cash and cash equivalents at end of period  $19,137   $43,451  
         
         
                      
VIOLIN MEMORY, INC.          
Reconciliation of GAAP to Non-GAAP Measures          
(Unaudited; in thousands, except per share data)          
                      
   Three Months Ended   Six Months Ended  
   July 31,   April 31,   July 31,   July 31,   July 31,  
   2016   2016   2015   2016   2015  
                 
                           
Gross profit (GAAP)  $206   $3,877   $6,600   $4,083   $11,750  
 Stock-based compensation   181    207    604    388    1,190  
 Provision for excess and obsolete inventory   2,940    -    -    2,940    -  
 Amortization of acquired intangibles   -    -    14    -    28  
Gross profit (Non-GAAP)  $3,327   $4,084   $7,218   $7,411   $12,968  
                           
Operating expenses (GAAP)  $19,124   $24,373   $28,943    43,497   $59,060  
 Stock-based compensation   (2,933 )  (3,848 )  (5,354 )  (6,781 )  (10,029 )
 Restructuring charges (recovery)   265    (1,735 )  -    (1,470 )  -  
Operating expenses (Non-GAAP)  $16,456   $18,790   $23,589   $35,246   $49,031  
                           
Net loss (GAAP)  $(20,576 ) $(22,159 ) $(24,382 ) $(42,735 ) $(50,884 )
 Stock-based compensation   3,114    4,055    5,958    7,169    11,219  
 Provision for excess and obsolete inventory   2,940    -    -    2,940    -  
 Restructuring charges (recovery)   (265 )  1,735    -    1,470       
 Amortization of acquired intangibles   -    -    14    -    28  
Net loss (Non-GAAP)  $(14,787 ) $(16,369 ) $(18,410 ) $(31,156 ) $(39,638 )
                           
Net loss per common share, basic and diluted (GAAP)  $(0.82 ) $(0.89 ) $(1.01 ) $(1.72 ) $(2.12 )
 Stock-based compensation   0.12    0.16    0.25    0.28    0.47  
 Provision for excess and obsolete inventory   0.12    -    -    0.12    -  
 Restructuring charges (recovery)   (0.01 )  0.07    -    0.06    -  
 Amortization of acquired intangibles   -    -    0.00    -    0.00  
Net loss per common share, basic and diluted (Non-GAAP)  $(0.59 ) $(0.66 ) $(0.76 ) $(1.25 ) $(1.65 )
                     
                     

Contact Information

  • Investor Relations Contact:
    Olga Dorovskikh
    Violin Memory, Inc.
    650-396-1525
    ir@vmem.com

    Media Contact:
    Tanya Tran
    Violin Memory, Inc.
    650-396-1489
    ttran@vmem.com