3par: Fiscal 4Q09 Financial Results

(in US$ millions)	4Q08	4Q09	FY08	FY09
Revenues	35.5	48.5	118.0	184.7
*Growth*		+37%		*+57*%
Net income (loss)	(1.2)	(0.9)	(10.1)	(1.0)

3PAR reported results for the fourth quarter of fiscal year 2009, which ended March 31, 2009. Revenue for the fourth quarter was $48.5 million, an increase of 37% compared to revenue of $35.5 million for the same period a year ago, and an increase of 1% compared to $48.2 million in the prior quarter, which ended December 31, 2008.

For the fourth quarter of fiscal 2009, GAAP net loss was $907,000, or ($0.01) per share compared to GAAP net loss of $1.2 million, or ($0.02) per share for the same period in the prior year. Non-GAAP net income, which excludes the impact of stock-based compensation expense, for the fourth quarter of fiscal 2009 was $906,000, or $0.01 per share, compared to $60,000, or $0.00 per share, for the same period in the prior year.

Revenue for the fiscal year ended March 31, 2009 was $184.7 million, an increase of 57% from $118.0 million reported in the prior year. GAAP net loss for the full fiscal year 2009 was $959,000, or $(0.02) per share, compared to a net loss of $10.1 million, or ($0.30) per share in 2008. Non-GAAP net income for the full fiscal year 2009 was $5.7 million, or $0.09 per share, compared to a non-GAAP net loss of $6.5 million, or ($0.19) per share in fiscal 2008.

"We believe the strong revenue growth we reported for fiscal 2009 reflects not only the ongoing financial discipline of the company, but also the unique value that 3PAR Utility Storage platform brings to the market as a capacity- and energy-efficient means of addressing the need for both CAPEX and OPEX reduction in today’s datacenters," said David Scott, Chief Executive Officer. "Our highly virtualized storage arrays enable organizations to build virtual datacenters, making it possible to deliver enterprise IT as a utility service and to deploy cloud computing service delivery models. Both of these approaches align with the need of organizations to reduce costs due to financial pressures resulting from the global economic downturn. 3PAR customers have used our highly efficient, high-performance platform to reduce their total cost of data by up to 50%."

Additional Fourth Quarter Fiscal 2009 Financial Information

3PAR reports operating income (loss), net income (loss), and earnings (loss) per share (EPS) on a GAAP and on a non-GAAP basis, which excludes the impact of stock-based compensation expense.

GAAP operating loss for the fourth quarter of fiscal 2009 was $1.2 million, or 2% of revenue. This compares to GAAP operating income of $507,000 in the third quarter of fiscal 2009, or 1% of revenue. Non-GAAP operating income in the fourth quarter of fiscal 2009 was $609,000, or 1% of revenue, compared to $2.4 million, or 5% of revenue, in the third quarter of fiscal 2009. GAAP net loss for the fourth quarter of fiscal 2009 was $907,000 compared to a GAAP income of $461,000 in the third quarter of fiscal 2009. Non-GAAP net income in the fourth quarter of fiscal 2009 was $906,000, compared to $2.3 million in the third quarter of fiscal 2009.

GAAP EPS for the fourth quarter of fiscal 2009 was ($0.01) on 60.9 million shares outstanding, compared to $0.01 in the third quarter of fiscal 2009 on 63.1 million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of fiscal 2009 was $0.01 on 63.4 million diluted shares outstanding compared to $0.04 in the third quarter of fiscal 2009.

Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation. In the fourth and third quarters of fiscal 2009, the charges related to stock-based compensation were $1.8 million and $1.9 million, respectively.

Comments

Here are some abstracts of the conference call transcript:

David Scott, president and CEO:

"Our business-to-business service provider segment continue to be a largest segment in the fourth fiscal quarter registering in the 35% to 40% range of total revenue. We had one rate of 10% customer in the quarter which was AT&T global hosting at 12% of our business. It appears service provider spending is remaining relatively robust in the shared infrastructure segments we support.

"Financial services strengthened the game for the third quarter in a row with many of our new customers in that segment. This vertical is now firmly established as our second largest business segments. In this category, we observe broad strength across multiple sub-segments in geographies, balance between new and repeat business.

"We also saw a very strong performance in the government segment this quarter as our ramp up in important programs continuous. The internet Web 2.0 segment was again restricted in its spending last quarter and it seems to be where we are seeing the most significant impact from the economic downturn.

"We were especially encouraged by the number of large deals over $1 million that we booked in our fiscal Q4, at a very significant level of $22.3 million for more than 10 transactions. We take this as an encouraging sign of how important our platform is becoming strategically to a number of enterprises, service providers, and government organizations.

"It seems to have missed the mark much in the same way the XIV did. What EMC and Nielsen had done is declare that the war about architectural superiority is over and 3PAR won. EMC's flagship monolithic storage array design is destined for the graveyard and EMC has agreed that the future is with modular clustered architectures. Unfortunately EMC's new offering is a handicapped hybrid, brought-to-market seven years ago after we introduced the InServ. 3PAR overtook EMC's future back in 2002.

"You can often tell a lot about a product from its internal project name and Tigon was the internal name for V-Max and as you may know, a Tigon is a hybrid tiger-lion offspring. It is the stellar big cat equivalent of a mule and it appears that EMC has boomed this platform by building the old ingenuity operating system onto a copycat type plastered architecture. The problem is that hybrids tend to be genetic dead ends and Tigon could be an architectural dead end because of its sterile operating system roots."

Adriel Lares, CFO and VP of finance

"The 17% of revenue representing new business this we are now expected range. Excluding revenue attributable to software contract renewals, our repeat revenue for this quarter and fiscal 2009 were both 73%. This quarter only one single customer accounted for more than 10% of our total revenue.

"As of March 31^st, 2009, cash, cash equivalents, and marketable securities totaled $103.8 million. This represents a $3.2 million increase from the previous quarter. On a worldwide basis, 3PAR employed 591 full-time employees as of March 31^st, 2009 up from 572 full-time employees as of December 31^st, 2008 and 451 full-time employees as of March 31^st, 2008.

"With that, let me turn to our outlook for fiscal 2010. We currently expect our full year fiscal 2010 revenue to be between $205 million and $210 million. Turning to the first quarter, our revenue forecast for fiscal Q1 is between $48 million and $50 million."