Dot Hill: Fiscal 3Q12 Financial Results
+6% for vertical market and -1% for OEMs Y/Y
This is a Press Release edited by StorageNewsletter.com on November 9, 2012 at 3:21 pm| (in US$ million) | 3Q11 | 3Q12 | 9 mo. 11 | 9 mo. 12 |
| Revenues | 48.1 | 48.2 | 150.4 | 150.8 |
| Growth | 0% | 0% | ||
| Net income (loss) | (12.2) | (3.0) | (15.4) | (9.9) |
Dot Hill Systems Corp. announced financial results for the third quarter 2012 ended September 30.
Financial and Operational Highlights:
- Third quarter 2012 non-GAAP net revenue and non-GAAP earnings per share within previously established guidance ranges;
- Net revenue from vertical markets (media and entertainment, telco service providers, oil and gas, data analytics and HPC) grew 50% on a third quarter year-to-date basis compared to the same period in 2011; and
- AssuredSAN 4000 and Pro 5000 mid-range products launched.
"We are encouraged with the early response to our new Pro 5000 and 4000 series products," stated Dana Kammersgard, president and CEO, Dot Hill Systems. "We have had very positive reviews in independent lab validations, and the performance and real-time tiering aspects of the Pro 5000 in particular is resonating very well with analysts, with resellers and especially with end-user customers."
"This is because the new normal with respect to storage requirements is a product that cost effectively and responsively handles the dynamically changing nature of the virtualized server workload," Kammersgard stated. "Batch migration that takes 24 hours to promote hot data to a faster tier employing solid state drives is no longer good enough, and pure play solid state arrays are simply too expensive for most applications and customers."
Third Quarter 2012 GAAP Financial Detail
(without the effects of discontinued operations presentation):
- The company recognized GAAP net revenue of $48.2 million for the third quarter of 2012, compared to $48.1 million for the third quarter of 2011 and $47.8 million for the second quarter of 2012.
- GAAP gross margin for the third quarter of 2012 was 25.3%, compared to 16.7% for the third quarter of 2011 and 22.9% for the second quarter of 2012.
- GAAP operating expenses for the third quarter of 2012 were $15.1 million, as compared to $20.1 million for the third quarter of 2011 and $15.6 million in the second quarter of 2012.
- GAAP net loss for the third quarter of 2012 was $3.0 million, or $(0.05) per share, as compared to a net loss of $12.2 million, or $(0.22) per share, for the third quarter of 2011, and net loss of $5.0 million, or $(0.09) per share, for the second quarter of 2012.
Third Quarter 2012 Non-GAAP Financial Detail:
The company recognized non-GAAP net revenue of $48.2 million for the third quarter of 2012, compared to $47.8 million for the third quarter of 2011 and $47.7 million for the second quarter of 2012. Going forward, the company intends to break out its revenue between Vertical Markets and Server OEMs. The company reported that net revenue from Vertical Markets was $10.2 million in the third quarter of 2012, and grew 2% over the prior quarter and 6% from the third quarter of 2011, despite some softness in its channel business in Europe and the US. Net revenue from the company’s Server OEM business increased 1% to $36.5 million in the third quarter of 2012 compared to the second quarter of 2012, but declined 1% compared to the third quarter of 2011.
Non-GAAP gross margin for the third quarter of 2012 was 26.4%, compared to 28.7% for the third quarter of 2011 and 27.4% for the second quarter of 2012. The company stated that the decline in non-GAAP gross margin percent was largely due to higher warranty related charges in the third quarter of 2012.
Non-GAAP operating expenses for the third quarter of 2012 were $14.2 million, as compared to $13.2 million for the third quarter of 2011 and $14.6 million in the second quarter of 2012.
Non-GAAP net loss for the third quarter of 2012 was $1.7 million, or $(0.03) per share, as compared to net income of $0.5 million, or $0.01 per share, for the third quarter of 2011, and net loss of $1.9 million, or $(0.03) per share, for the second quarter of 2012.
Balance Sheet:
The company exited the third quarter of 2012 with cash and cash equivalents of $40.5 million compared to $45.7 million at September 30, 2011 and $40.5 million at June 30, 2012. As of September 30, 2012, the company had borrowed $1.8 million from its previously established line of credit with Silicon Valley Bank.
Fourth Quarter 2012 Outlook:
Given the macro-economic environment, the company is targeting fourth quarter 2012 non-GAAP net revenue in the range of $48 million to $53 million and a non-GAAP earnings per share in the range of $(0.03) per share to $0.02 per share.
"Given the tough economic climate, I am quite pleased with the traction in our Vertical Markets business, as well as the discipline we demonstrated in managing working capital and operating expenses during the third quarter," said Hanif Jamal, CFO, Dot Hill Systems.
Comments
Some official comments of Dot Hill
following its financial results for 3Q12:
"The majority of sales to our channel partners were represented by our AssuredSAN line of products in 2011 and in the first nine months of 2012.
"Our storage system products' OEM partners currently include, among others, Hewlett-Packard, or HP, Sony Ericsson, or Ericsson, Motorola, Inc., or Motorola, General Dynamics Government Systems Corporation, or General Dynamics, Lockheed Martin Corporation, or Lockheed Martin, NEC Corporation, or NEC, Tektronix Inc., or Tektronix, Samsung Electronics, or Samsung, Stratus Technologies, or Stratus, and Fujitsu Technology Solutions GmbH, or FTS, and Concurrent Computer Corporation, or Concurrent. Our standalone storage software products' OEM partners currently include, among others, Dell Inc., or Dell. Although our products and services are sold worldwide, the majority of our net revenue is derived from our U.S. operations.
"We began shipping products to HP in the fourth quarter of 2007. In January 2008, we amended our agreement with HP to allow for sales of additional products to additional divisions within HP. Our products are primarily sold as HP's MSA 2000/P2000 product family. Sales to HP increased significantly during 2008 and increased again in 2009 primarily as a result of the successful launch and market acceptance of the HP MSA 2000 products. HP launched its third generation product line, now called the P2000 product line, in February 2010. Sales to HP increased again in 2010 as we began selling our next generation host interfaces across the HP P2000 product line. The agreement with HP does not contain any minimum purchase commitments. In October 2011, we extended our supply agreement with HP by five years to expire in October 2016 and also extended the expiration of 1.6 million warrants granted to HP in March 2008 to expire concurrently with the supply agreement in October 2016. Net revenue from HP approximated 74% of our total net revenue in 2011 and 67% of our total net revenue for the nine months ended September 30, 2012.
"The majority of our products sold in 2011 and in the three and nine months ended September 30, 2012 were manufactured by Foxconn. We expect Foxconn to manufacture substantially all of our products for the remainder of 2012.
"Substantially all of our 2012 Plan workforce reductions were completed by July 31, 2012. The closure of our Israel Technology Development Center is now recorded in discontinued operations, since we have ceased all ongoing operational activities as of September 30, 2012."
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