conference date: August 10, 2009 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2009 (2nd quarter 2009)
Overview: Flat sequential revenue, with some upside seen for third quarter.
Basic data (GAAP) :
Revenues were $54.3 million, up under 1% sequentially from $53.9 million but down 24% from $71.0 million in the year-earlier quarter.
Net income was negative $4.2 million, worse than the $3.3 million loss in Q1 and but improved from negative $7.4 million year-earlier.
EPS was negative $0.09, down sequentially from negative $0.07, but improved from negative $0.16 year-earlier.
Estimated Q3 revenue is $55 to $62 million. Non-GAAP EPS negative $0.02 to $0.08. Gross margin flat to slightly up. Cash and equivalents at the end of the quarter between $52 million and $56 million. Now believes at end of Q4 to end around $50 million (improved from prior forecasts).
Revenues from Sun declined, but were partially offset y/y by increased revenues from HP. Sequentially HP revenue increases exceeded Sun revenue declines. Since Q1 demand has stabilized.
"We already have five new design wins this year with others pending and a revenue pipeline that appears to be increasing." One was a RaidCore win. Software product development is going well, and should become a significant revenue stream in 2010.
Most major customers are forecasting some growth in Q3. New 2.5 inch drive products are ramping well. Costs of producing products continues to decline.
GAAP gross margin was 14.7%. Non-GAAP gross margin was 14.9%, up from 10.6% year-earlier but down from 17.4% in Q2. Mix impact was negative due to decline in SANnet II and Sun revenues.
Customers have reduced their forecast for legacy products, resulting in an accrual for potential excess materials.
Non-GAAP net loss was $3.0 million or $0.06 per share.
Cash and equivalents ended at $57.1 million, with a $0.7 million note payable for acquisition of Ciprico intellectual property. The increase in cash position from $54.3 million was mainly due to $3.4 million in cash flow from operations.
EBITDA negative $2.3 million. Excluding accruals would have been $1.5 million.
Operating expenses to increase in Q3 due to investment in sales, product development, and the move of headquarters to Colorado.
Cost of goods sold was $46.4 million. Gross profit $8.0 million. Operating expenses of $12.3 million included sales and marketing $$2.5 million; R&D $6.9 million; general and administrative $2.5 million; and a restructuring charge of $326 thousand. Operating loss was $4.3 million. Other income was $55 thousand. Income tax benefit was $39 thousand.
Non-legacy product revenues grew 16% sequentially to $50.7 million. Revenues from HP increased 24% sequentially. Legacy product revenues declined $6.6 million sequentially.
HP 51% of total revenue; NetApp 24%; Sun 5% (in Q1 was 42%, 23%, and 13% respectively). Leaving 20% from smaller customers.
Demand linearity and in Q3? Q2 had fairly normal linearity. We had a fairly good first month of Q3.
RaidCore design win gross margins? It is host-based software, so we hope it will have margins of 80s or 90s, but it will take a while to build an installed base.
Headcount? Ended at 271.
In the past few quarters we were managing forecast shortfalls, now we are seeing orders above forecasts and increasing forecasts. Storage demand appears to be picking up. Customer forecasts did come down for legacy products.
New products tend to start with lower margins, then as costs are reduced margins on them rise.
Data management services? Adoptions have been fairly constant within our largest customer. We are rolling out initiatives to up the adoption rate.
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