SOURCE: Violin Memory, Inc.

Violin Memory, Inc.

December 02, 2015 16:04 ET

Violin Memory Announces Third Quarter Fiscal Year 2016 Financial Results

SANTA CLARA, CA--(Marketwired - December 02, 2015) - 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 third fiscal quarter ended October 31, 2015.

Third Quarter Fiscal 2016 Financial Highlights

  • Third quarter fiscal 2016 revenue of $12.5 million
  • Third quarter fiscal 2016 GAAP1 gross margin of 51%
  • Third quarter fiscal 2016 non-GAAP2 gross margin of 56%
  • Third quarter fiscal 2016 GAAP net loss of $0.23 per share
  • Third quarter fiscal 2016 non-GAAP net loss of $0.19 per share

"Our strategic shift and product line transition to become a market leader in flash-based primary storage for enterprises continues to create short-term challenges in achieving predictable, consistent growth. However, we believe we are headed in the right direction overall and that our opportunity continues to be extremely attractive," said Kevin DeNuccio, president and chief executive officer, Violin Memory.

The Company also announced today that its Board of Directors has authorized the exploration of strategic alternatives to enhance shareholder value and has retained the services of an investment banking firm to assist with the evaluation process. There is no set timetable for completion of this process and there is no assurance given that the process will result in the consummation of any transaction. The Company does not intend to provide additional information until such time that the Board of Directors approves a specific alternative or the process is otherwise concluded.

"Our stock price remains at a level that we do not believe reflects the true value of our business and developed technology. As a management team, we are committed to act in the best interests of our shareholders, including considering alternate methods of enhancing shareholder value," said DeNuccio.

Third Quarter Fiscal 2016 Financial Results

Third quarter fiscal 2016 revenue was $12.5 million, 18% lower sequentially compared to $15.3 million reported in the second quarter of fiscal 2016, and 42% lower compared to $21.7 million reported in the third quarter of fiscal year 2015.

Third quarter fiscal 2016 GAAP gross margin was 51% compared to 43% reported in the second quarter of fiscal 2016 and compared to 51% reported in the third quarter of fiscal year 2015.

Third quarter fiscal 2016 non-GAAP gross margin was 56% compared to 47% reported in the second quarter of fiscal 2016 and compared to 54% reported in the third quarter of fiscal year 2015.

Third quarter fiscal 2016 GAAP net loss was $22.7 million, or $0.23 per share, compared to second quarter fiscal 2016 GAAP net loss of $24.4 million, or $0.25 per share and compared to third quarter fiscal 2015 GAAP net loss of $23.5 million, or $0.25 per share.

Third quarter fiscal 2016 non-GAAP net loss was $18.6 million, or $0.19 per share, compared to second quarter fiscal 2016 non-GAAP net loss of $18.4 million, or $0.19 per share, and compared to third quarter fiscal 2015 non-GAAP net loss of $17.8 million, or $0.19 per share.

Cash and cash equivalents, restricted cash and short-term investments totaled $95.9 million as of October 31, 2015.

Business Outlook

The Company will provide fourth quarter fiscal year 2016 guidance during today's conference call. Guidance will be posted on Violin Memory's investor relations website at investor.violin-memory.com following the conclusion of the conference call.

All forward-looking non-GAAP measures exclude estimates for items such as stock-based compensation expense, amortization of acquired intangibles, restructuring or impairment charges and litigation settlements. A reconciliation of non-GAAP measures to corresponding GAAP measures is not available on a forward-looking basis.

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 #75246928.

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, gross margin, 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, gain on sale of the PCIe product line, litigation settlements, restructuring charges, amortization of acquired intangibles and loss on debt extinguishment.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the following: the Company's ability to become a market leader in flash-based primary storage for enterprises; the Company's ability to overcome challenges and to achieve predictable, consistent growth; the Company's future business opportunities; the Company's exploration of strategic alternatives to enhance shareholder value and the potential results of the Company's exploration of strategic alternatives; the future value of the Company's business and developed technology; and the Company's business plans and strategy. There are a number of risks and uncertainties that could affect the Company's performance and financial results are included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Report on Form 10-Q for the second quarter of fiscal year 2016 which was filed with the SEC on September 9, 2015, and is available on the Company'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 press release are based on information available to the Company as of the date hereof, and the Company 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.

Business in a Flash. Violin Memory, the industry pioneer in All Flash Arrays, is the agile innovator, transforming the speed of business with enterprise-grade data services software on its leadership Flash Storage Platforms™. Violin Concerto™ OS 7 delivers complete data protection and data reduction services and consistent high performance in a storage operating system fully integrated with Violin's patented Flash Fabric Architecture™ for cloud, enterprise and virtualized business and mission-critical storage applications. Violin Flash Storage Platforms are designed for primary storage applications at costs below traditional hard disk arrays and accelerate breakthrough CAPEX and OPEX savings while helping customers build the next generation data center. Violin Flash Storage Platforms and All Flash Arrays enhance business agility while revolutionizing data center economics. 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.

                     
VIOLIN MEMORY, INC.  
Condensed Consolidated Statements of Operations  
(Unaudited; in thousands, except per share data)  
                 
 
 
 
 
Three Months Ended   Nine Months Ended  
   October 31,   July 31,  October 31,   October 31,   October 31,  
   2015   2015  2014   2015   2014  
Revenue:                         
 Product revenue  $6,326   $9,847  $16,887   $22,996   $43,848  
 Service revenue   6,213    5,456   4,842    16,947    14,607  
  Total revenue   12,539    15,303   21,729    39,943    58,455  
Cost of revenue:                         
 Cost of product revenue (1)   3,383    5,872   8,477    13,485    22,077  
 Cost of service revenue (1)   2,785    2,831   2,099    8,337    5,968  
  Total cost of revenue   6,168    8,703   10,576    21,822    28,045  
  Gross profit   6,371    6,600   11,153    18,121    30,410  
Operating expenses:                         
 Sales and marketing (1)   14,049    13,655   15,660    41,144    47,000  
 Research and development (1)   10,110    10,580   12,537    32,216    41,367  
 General and administrative (1)   3,456    4,708   4,890    13,315    15,876  
 Gain on sale of PCIe product line   -    -   -    -    (17,448 )
 Restructuring charges   -    -   -    -    3,062  
 Litigation settlement   -    -   -    -    652  
  Total operating expenses   27,615    28,943   33,087    86,675    90,509  
  Loss from operations   (21,244 )  (22,343 ) (21,934 )  (68,554 )  (60,099 )
Other income (expense), net   126    (303 ) (427 )  79    (489 )
Interest expense   (1,649 )  (1,694 ) (1,122 )  (5,093 )  (1,414 )
  Loss before income taxes   (22,767 )  (24,340 ) (23,483 )  (73,568 )  (62,002 )
Provision for (benefit from) income taxes   (98 )  42   44    (15 )  80  
  Net loss  $(22,669 ) $(24,382 )$(23,527 ) $(73,553 ) $(62,082 )
Net loss per share of common stock, basic and diluted  $(0.23 ) $(0.25 )$(0.25 ) $(0.76 ) $(0.69 )
Shares used in computing net loss per share of common stock, basic and diluted   97,556    96,588   92,373    96,552    90,292  
(1) Includes stock-based compensation expense as follows:                         
 Cost of product revenue  $233   $270  $156   $753   $614  
 Cost of service revenue   383    334   210    1,052    390  
 Sales and marketing   785    1,475   1,291    3,066    3,919  
 Research and development   1,582    1,977   1,735    5,537    7,835  
 General and administrative   1,052    1,902   1,861    4,846    4,951  
   $4,035   $5,958  $5,253   $15,254   $17,709  
                          
   
VIOLIN MEMORY, INC.  
Condensed Consolidated Balance Sheets  
(Unaudited; in thousands)  
          
          
Assets  October 31, 2015   January 31, 2015  
Current assets:         
 Cash and cash equivalents  $29,613   $93,432  
 Restricted cash   10,000    2,300  
 Short-term investments   56,272    60,483  
 Accounts receivable, net   9,512    15,080  
 Inventory   12,258    10,322  
 Other current assets   4,883    5,949  
  Total current assets   122,538    187,566  
Property and equipment, net   9,810    9,863  
Intangibles and other assets   8,996    10,806  
   $141,344   $208,235  
            
Liabilities and Stockholders' Equity (Deficit)           
Current liabilities:           
 Short-term borrowings  $13,894   $10,000  
 Accounts payable   6,361    11,065  
 Accrued liabilities   13,942    18,024  
 Deferred revenue, current   15,125    15,635  
  Total current liabilities   49,322    54,724  
Convertible senior notes   120,000    120,000  
Deferred revenue   7,090    10,398  
Long-term liabilities   658    1,707  
  Total liabilities   177,070    186,829  
            
Stockholders' equity (deficit):           
 Preferred stock   -    -  
 Common stock   10    9  
 Additional paid-in capital   498,886    482,674  
 Accumulated other comprehensive income   455    248  
 Accumulated deficit   (535,077 )  (461,525 )
  Total stockholders' equity (deficit)   (35,726 )  21,406  
   $141,344   $208,235  
            
            
   
VIOLIN MEMORY, INC.  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
          
   Nine Months Ended October 31,  
   2015   2014  
   (Unaudited)  
Cash flows from operating activities:           
Net loss  $(73,553 ) $(62,082 )
Adjustments to reconcile net loss to net cash used in operating activities:           
 Depreciation and amortization   6,655    8,368  
 Gain on sale of PCIe product line   -    (17,448 )
 Accretion of debt discount and debt issuance costs to interest expense   1,287    541  
 Provision for excess and obsolete inventory   -    1,033  
 Stock-based compensation   15,254    17,709  
 Changes in operating assets and liabilities, net:           
  Accounts receivable   5,568    2,516  
  Inventory   (1,800 )  10,409  
  Other assets   911    (3,001 )
  Accounts payable   (5,313 )  (9,675 )
  Accrued liabilities   (5,131 )  (16,462 )
  Deferred revenue   (3,818 )  1,590  
   Net cash used in operating activities   (59,940 )  (66,502 )
Cash flows from investing activities:           
 Purchase of property and equipment and intangibles, net   (5,451 )  (8,474 )
 Proceeds from sale of PCIe product line   -    23,000  
 Increase in restricted cash   (7,700 )  (2,300 )
 Purchase of short-term investments   (49,913 )  (35,261 )
 Proceeds from sales and maturities of short-term investments   54,107    54,222  
   Net cash provided by (used in) investing activities   (8,957 )  31,187  
Cash flows from financing activities:           
 Proceeds from issuance of convertible notes, net of issuance costs   -    115,397  
 Proceeds from issuance of common stock, net of related costs   962    3,371  
 Proceeds from debt and line of credit, net of facility set-up costs   31,617    36,776  
 Repayment of debt and line of credit   (27,723 )  (26,395 )
 Taxes paid related to net share settlement of equity awards   -    (3,872 )
   Net cash provided by financing activities   4,856    125,277  
Effect of exchange rates on cash and cash equivalents   222    (101 )
   Net increase (decrease) in cash and cash equivalents   (63,819 )  89,861  
Cash and cash equivalents at beginning of year   93,432    40,273  
Cash and cash equivalents at end of period  $29,613   $130,134  
            
            
              
VIOLIN MEMORY, INC.  
Reconciliation of GAAP to Non-GAAP Measures  
(In thousands, except per share data)  
              
   Three Months Ended  
   October 31,   July 31,   October 31,  
   2015   2015   2014  
   (Unaudited)  
                 
Gross profit (GAAP)  $6,371   $6,600   $11,153  
 Stock-based compensation   616    604    366  
 Amortization of acquired intangibles   -    -    111  
Gross profit (Non-GAAP)  $6,987   $7,204   $11,630  
                 
Operating expenses (GAAP)  $27,615   $28,943   $33,087  
 Stock-based compensation   (3,419 )  (5,354 )  (4,887 )
Operating expenses (Non-GAAP)  $24,196   $23,589   $28,200  
                 
Net loss (GAAP)  $(22,669 ) $(24,382 ) $(23,527 )
 Stock-based compensation   4,035    5,958    5,253  
 Amortization of acquired intangibles   -    -    111  
 Loss on debt extinguishment   -    -    372  
Net loss (Non-GAAP)  $(18,634 ) $(18,424 ) $(17,791 )
                 
Net loss per common share, basic and diluted (GAAP)  $(0.23 ) $(0.25 ) $(0.25 )
 Stock-based compensation   0.04    0.06    0.06  
 Amortization of acquired intangibles   -    -    -  
 Loss on debt extinguishment   -    -    -  
Net loss per common share, basic and diluted (Non-GAAP)  $(0.19 ) $(0.19 ) $(0.19 )
                 
                 

Contact Information

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