Stec: Fiscal 1Q09 Financial Results

STEC, Inc. announced its financial results for the first quarter ended March 31, 2009. Revenue for the first quarter of 2009 was $63.5 million, an increase of 25.2% from $50.7 million for the first quarter of 2008, and an increase of 11.6% from $56.9 million for the fourth quarter of 2008. Shipments of the Company’s ZeusIOPS solid-state drives (SSD) into the Enterprise-Storage market grew to $25.7 million for the first quarter of 2009, an increase of 267.1% from $7.0 million for the first quarter of 2008, and an increase of 29.8% from $19.8 million for the fourth quarter of 2008.

Non-GAAP gross profit margin increased to a Company all-time high of 39.8% for the first quarter of 2009, compared to 34.6% for the first quarter of 2008 and 32.3% for fourth quarter of 2008. Non-GAAP diluted earnings per share from continuing operations was $0.17 for the first quarter of 2009, compared to $0.07 for the first quarter of 2008, and $0.05 for the fourth quarter of 2008. GAAP results for the first quarter of 2009 included start-up costs related to the Company’s Malaysia facility, employee stock compensation, intellectual property rights litigation costs and special charges related to the implementation of a Company restructuring plan.

GAAP gross profit margin was 36.3% for the first quarter of 2009, compared to 32.9% for the first quarter of 2008 and 27.8% for the fourth quarter of 2008. GAAP diluted earnings per share from continuing operations was $0.07 for the first quarter of 2009, compared to $0.04 for the first quarter of 2008, and $0.00 for the fourth quarter of 2008.

Additional highlights for the first quarter of 2009 include:

• Accelerated adoption of the ZeusIOPS SSDs into the major Enterprise-Storage and Enterprise-Server OEM customers, including IBM and Hitachi;
• Reduced lower-margin legacy product sales to less than 15% of the total product revenue mix; Increased cash and cash equivalents and short-term investments at the end of the first quarter of 2009 to approximately $63 million, a 91% increase from the end of the prior quarter;
• Decreased inventory to approximately $45 million at the end of the first quarter of 2009, a 30% decrease from the end of the prior quarter; and
• Reduced the Company’s effective corporate tax rate to 24% in the first quarter of 2009 from 40% in 2008 as a result of the  transition of substantially all of the Company’s manufacturing and certain supporting operations to its new Malaysia facility.

Business Outlook
"I am very pleased to report to you that we are executing on all of our strategic initiatives as evidenced by our excellent first quarter of 2009 results which exceeded even our most recent guidance," said Manouch Moshayedi, STEC’s Chairman and Chief Executive Officer. "We have shown a significant improvement in our already strong balance sheet, have added two major Enterprise-Storage OEMs to our blue chip customer list, have successfully transitioned substantially all of our core operations to Malaysia, and increased our non-GAAP gross profit margin to 39.8%."

"In our previous earnings report we had estimated that our ZeusIOPS sales for the first half of 2009 would surpass $53 million; however, it now appears that we had under estimated the growth of this product line and now believe that we will achieve an estimated $65 million in sales of ZeusIOPS during the first half of 2009."

Guidance
"We currently expect second quarter of 2009 revenue to range from $68 million to $70 million with diluted non-GAAP earnings per share to range from $0.20-$0.22."