FOR IMMEDIATE RELEASE
Contact:
Hanif Jamal
Chief Financial Officer
Tel: 303-845-3377
Email: investors@dothill.com
Jodi Bochert
Investor Relations
Tel: 303-845-3469
Email: investors@dothill.com
Dot Hill Reports Third Quarter 2014 Results
| |
| • | Third Quarter Revenue and EPS within Guidance |
•Projecting 25% non-GAAP revenue and over 250% non-GAAP EPS sequential growth at fourth quarter guidance midpoint
LONGMONT, Colo. -November 6, 2014 - Dot Hill Systems Corp. (NASDAQ:HILL), a trusted supplier of innovative enterprise class storage systems, today announced financial results for the third quarter ended September 30, 2014.
Financial and Operational Highlights:
| |
| • | Grew trailing 12 month as of September 30, 2014 relative to trailing 12 month as of September 30, 2013 non-GAAP revenue by 7%, with Vertical Markets growing 28% over the same period. |
| |
| • | Awarded three new patents, which brings Dot Hill’s total US portfolio to 99 patents. |
| |
| • | Unveiled the latest version of its storage management software, RealStor™ version 2.0, which delivers application workload-aware intelligence for today’s next-generation hybrid flash storage arrays. |
| |
| • | Announced the Ultra48™ AssuredSAN® ultra-density, next-generation hybrid arrays, available with RealStor™ 2.0 software. |
“I am very excited by the potential revenue contribution our new products represent - both the RealStor 2.0 software and its instantiation in the one-of-a-kind Ultra 48 AssuredSAN storage solution,” stated Dana Kammersgard, president and CEO, Dot Hill Systems Corp. “We believe growth in company-specific growth catalysts is beginning, our business model is intact and the operating leverage that comes from both will soon be evident. It is gratifying to have arrived at a point where we can demonstrate the operating leverage inherent in our business model.”
Third Quarter 2014 GAAP Financial Detail (including discontinued operations):
| |
| • | The Company recognized GAAP net revenue of $52.1 million for the third quarter of 2014, compared to $52.6 million for the third quarter of 2013 and $48.2 million for the second quarter of 2014. |
| |
| • | GAAP gross margin for the third quarter of 2014 was 32.5%, compared to 32.1% for the third quarter of 2013 and 33.2% for the second quarter of 2014. |
| |
| • | GAAP operating expenses for the third quarter of 2014 were $16.9 million, as compared to $15.0 million for the third quarter of 2013 and $16.0 million in the second quarter of 2014. |
| |
| • | GAAP net income for the third quarter of 2014 was $0.04 million, or $0.00 per fully diluted share, as compared to $1.8 million, or $0.03 per fully diluted share, for the third quarter of 2013, and a net loss of $0.08 million, or ($0.00) per share, for the second quarter of 2014. |
Third Quarter 2014 Non-GAAP Financial Detail
| |
| • | The Company recognized non-GAAP net revenue of $52.0 million for the third quarter of 2014, as compared to $52.9 million for the third quarter of 2013 and $48.4 million for the second quarter of 2014. |
| |
| ◦ | Vertical Markets non-GAAP net revenue was $20.5 million, compared to $17.5 million in the third quarter of 2013 and $20.8 million in the second quarter of 2014. |
| |
| ◦ | Server OEM non-GAAP net revenue was $31.5 million, compared to $35.4 million in the third quarter of 2013 and $27.7 million in the second quarter of 2014. |
| |
| • | Non-GAAP gross margin for the third quarter of 2014 was 32.4%, compared to 32.8% for the third quarter of 2013 and 33.9% for the second quarter of 2014. The Company stated that the sequential decline in non-GAAP gross margin percent was largely due to customer mix. |
| |
| ◦ | Vertical Markets non-GAAP gross margin was 43.3%, compared to 45.4% in the third quarter of 2013 and 44.7% in the second quarter of 2014. |
| |
| ◦ | Server OEM non-GAAP gross margin was 25.4%, compared to 26.5% in the third quarter of 2013 and 25.9% in the second quarter of 2014. |
| |
| • | Non-GAAP operating expenses for the third quarter of 2014 were $15.1 million, as compared to $14.5 million for the third quarter of 2013 and $15.1 million in the second quarter of 2014. |
| |
| • | Vertical Markets non-GAAP contribution margin was 30.9% for the third quarter of 2014, compared to 32.0% in the third quarter of 2013 and 33.0% in the second quarter of 2014. |
| |
| • | Server OEM non-GAAP contribution margin was 23.8% for the third quarter of 2014, compared to 25.2% in the third quarter of 2013 and 24.0% in the second quarter of 2014. |
Balance Sheet:
On September 30, 2014, the Company had cash and cash equivalents of $42.4 million as compared to $42.2 million in cash and cash equivalents on June 30, 2014, and $40.4 million in cash and cash equivalents on September 30, 2013.
Fourth Quarter and Full Year 2014 Outlook:
The Company expects fourth quarter 2014 non-GAAP net revenue to be in the range of $62 million to $68 million and non-GAAP earnings per share in the range of $0.07 to $0.12 per fully diluted share.
“Based on our development and some of our customer’s launch schedules, we have been anticipating a back-end loaded 2014, particularly in our Vertical Market’s business,” stated Hanif Jamal, CFO, Dot Hill
Systems Corp. “The midpoint of our fourth quarter guidance represents 25% non-GAAP revenue and 250% non-GAAP EPS sequential growth and is an indication of our confidence in a strong Q4 revenue inflection which should set us up very well for a solid 2015.”
Conference Call Information:
Dot Hill’s third quarter 2014 financial results conference call is scheduled to take place on November 6, 2014 at 11:00 a.m. ET. The live audio webcast will be accessible at www.dothill.com in the Investor Relations section. For access via telephone, please dial 877-303-3196 (U.S.) or 408-427-3864 (International) at least five minutes prior to the start of the call. A replay of the webcast will be available on the Dot Hill web site following the conference call. For a telephone replay, please dial 855-859-2056 (U.S.) or 404-537-3406 (International) and enter Conference ID 98120310.
About Non-GAAP Financial Measures
The Company’s non-GAAP financial measures exclude the impact of stock-based compensation expense, legal settlements and associated expenses, intangible asset amortization, restructuring and severance charges, charges or credits for contingent consideration adjustments, charges for impairment of goodwill and other long-lived assets, specific and significant warranty claims arising from a supplier’s defective products, the impact of our discontinued AssuredUVS software business and the effects of foreign currency gains or losses. The non-GAAP financial measures include the recognition of revenues and directly related costs associated with long-term AssuredVRA software contracts, which were deferred and amortized in the Company’s GAAP financial statements. The Company used these non-GAAP measures when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. These non-GAAP measures should not be viewed in isolation from or as a substitute for the Company’s financial results in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is attached to this press release.
About Segment Financial Reporting
The Server OEM segment consists primarily of large Original Equipment Manufacturers who purchase products from the Company to sell along with their Server products. Major Server OEM customers include Hewlett Packard, Lenovo, Stratus, Dell, and AMD. The Vertical Markets segment consists of strategically selected Vertical Markets including Media & Entertainment, Telecommunications Infrastructure, Oil and Gas, Big Data Analytics and Digital Imaging among others. These customers typically embed the Company’s products into solutions for their customers. The Company sells to these customers through Vertical Markets OEM partners or Embedded Solutions Integrators, as well as through Channel Partners. Major Vertical Market customers include Teradata, Motorola, Tektronix, Concurrent, Autodesk, and Nokia Siemens. The Corporate segment consists primarily of “platform costs” that support both the Server OEM and Vertical Markets segments.
About Dot Hill
Leveraging its proprietary Assured family of storage solutions, Dot Hill solves many of today’s most challenging storage problems - helping IT to improve performance, increase availability, simplify operations, and reduce costs. Dot Hill’s solutions combine breakthrough software with the industry’s most flexible and extensive hardware platform and automated management to deliver best-in-class solutions. Headquartered in Longmont, Colorado, Dot Hill has offices and/or representatives in China, Germany,
India, Japan, Singapore, the United Kingdom, and the United States. For more information, visit www.dothill.com
Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such statements include statements regarding future opportunities for additional business and the stage of such opportunities relative to a final binding agreement, prospects for Dot Hill’s continued growth, and Dot Hill’s projected financial results for the fourth quarter and full year of 2014. The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: the risk that actual financial results for the fourth quarter and full year of 2014 may be different from the financial guidance provided in this press release; the risks associated with macroeconomic factors that are outside of Dot Hill’s control; the risk that projected future opportunities may never fully develop into ongoing business relationships and/or binding contractual agreements; the fact that no Dot Hill customer agreements provide for mandatory minimum purchase requirements; the risk that one or more of Dot Hill’s OEM or other customers may cancel or reduce orders, not order as forecasted or terminate their agreements with Dot Hill; the risk that Dot Hill’s new products may not prove to be popular; the risk that one or more of Dot Hill’s suppliers or subcontractors may fail to perform or may terminate their agreements with Dot Hill; the risk that vertical markets’ sales may not ramp as expected; unforeseen product quality, technological, intellectual property, personnel or engineering issues and any costs that may result from such issues; and the additional risks set forth in Dot Hill’s most recent Form 10-Q and Form10-K filings with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made. Dot Hill undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.
HILL-F
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| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (In thousands, except per share amounts) |
| | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 |
| Net revenue | $ | 52,603 |
| | $ | 48,222 |
| | $ | 52,121 |
| | $ | 147,766 |
| | $ | 148,550 |
|
| Cost of goods sold | 35,730 |
| | 32,199 |
| | 35,159 |
| | 99,446 |
| | 100,300 |
|
| Gross profit | 16,873 |
| | 16,023 |
| | 16,962 |
| | 48,320 |
| | 48,250 |
|
| Operating expenses: | | | | |
| | | | |
| Research and development | 8,972 |
| | 9,340 |
| | 9,516 |
| | 26,593 |
| | 28,332 |
|
| Sales and marketing | 3,512 |
| | 3,843 |
| | 3,522 |
| | 9,807 |
| | 10,659 |
|
| General and administrative | 2,512 |
| | 2,851 |
| | 3,836 |
| | 8,416 |
| | 9,585 |
|
| Total operating expenses | 14,996 |
| | 16,034 |
| | 16,874 |
| | 44,816 |
| | 48,576 |
|
| Operating income (loss) | 1,877 |
| | (11 | ) | | 88 |
| | 3,504 |
| | (326 | ) |
| Other income (expense): | | | | |
|
| | | | |
| Interest income (expense), net | (1 | ) | | (4 | ) | | (4 | ) | | (16 | ) | | (26 | ) |
| Other income (expense), net | (1 | ) | | 11 |
| | 2 |
| | (1 | ) | | 23 |
|
| Total other income (expense), net | (2 | ) | | 7 |
| | (2 | ) | | (17 | ) | | (3 | ) |
| Income (loss) before income taxes and discontinued operations | 1,875 |
| | (4 | ) | | 86 |
| | 3,487 |
| | (329 | ) |
| Income tax expense | 100 |
| | 74 |
| | 46 |
| | 183 |
| | 121 |
|
| Income (loss) from continuing operations | 1,775 |
| | (78 | ) | | 40 |
| | 3,304 |
| | (450 | ) |
| Loss from discontinued operations | (18 | ) | | — |
| | — |
| | (452 | ) | | — |
|
| Net income (loss) | $ | 1,757 |
| | $ | (78 | ) | | $ | 40 |
| | $ | 2,852 |
| | $ | (450 | ) |
| | | | | | | | | | |
| Continuing operations: | | | | | | | | | |
| Basic and diluted earnings (loss) per share | $ | 0.03 |
| | $ | (0.00 | ) | | $ | 0.00 |
| | $ | 0.06 |
| | $ | (0.01 | ) |
| Discontinued operations: | | | | | | | | | |
| Basic and diluted loss per share | $ | (0.00 | ) | | $ | — |
| | $ | — |
| | $ | (0.01 | ) | | $ | — |
|
| Net income (loss): | | | | | | | | | |
| Basic and diluted income (loss) per share* | $ | 0.03 |
| | $ | (0.00 | ) | | $ | 0.00 |
| | $ | 0.05 |
| | $ | (0.01 | ) |
| Weighted average shares used to calculate net income (loss) per share: | | | | | | | | | |
| Basic | 58,736 |
| | 60,159 |
| | 60,396 |
| | 58,376 |
| | 60,021 |
|
| Diluted | 60,062 |
| | 60,159 |
| | 63,755 |
| | 58,879 |
| | 60,021 |
|
| | | | | | | | | | |
| * Per share data may not always add to the total for the period because each figure is independently calculated. |
|
| | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED CONSOLIDATED BALANCE SHEETS |
| (In thousands, except par value data) |
| | | | |
| | December 31, 2013 | | September 30, 2014 |
| Assets | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 40,406 |
| | $ | 42,369 |
|
| Accounts receivable, net | 42,907 |
| | 36,921 |
|
| Inventories | 6,539 |
| | 6,985 |
|
| Prepaid expenses and other assets | 7,265 |
| | 7,749 |
|
| Total current assets | 97,117 |
| | 94,024 |
|
| Property and equipment, net | 7,565 |
| | 8,827 |
|
| Intangible assets | — |
| | 1,235 |
|
| Other assets | 702 |
| | 483 |
|
| Total assets | $ | 105,384 |
| | $ | 104,569 |
|
| | | | |
| Liabilities and stockholders' equity | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 33,255 |
| | $ | 30,873 |
|
| Accrued compensation | 4,922 |
| | 3,266 |
|
| Accrued expenses | 8,935 |
| | 7,912 |
|
| Deferred revenue | 4,211 |
| | 5,272 |
|
| Credit facility borrowings | 2,000 |
| | — |
|
| Total current liabilities | 53,323 |
| | 47,323 |
|
| Other long-term liabilities | 4,414 |
| | 4,706 |
|
| Total liabilities | 57,737 |
| | 52,029 |
|
| | | | |
| Stockholders' equity: | | | |
| Preferred stock | — |
| | — |
|
| Common stock | 59 |
| | 60 |
|
| Additional paid-in capital | 330,103 |
| | 335,423 |
|
| Accumulated other comprehensive loss | (3,254 | ) | | (3,232 | ) |
| Accumulated deficit | (279,261 | ) | | (279,711 | ) |
| Total stockholders' equity | 47,647 |
| | 52,540 |
|
| Total liabilities and stockholders' equity | $ | 105,384 |
| | $ | 104,569 |
|
|
| | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS) |
| (In thousands) |
| | | | | | |
| | Three Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 |
| Cash Flows From Operating Activities: | | | | | |
| Net income (loss) | $ | 1,757 |
| | $ | (78 | ) | | $ | 40 |
|
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
|
|
| Depreciation and amortization | 852 |
| | 932 |
| | 989 |
|
| Stock-based compensation expense | 560 |
| | 1,054 |
| | 765 |
|
| Provision for bad debt expense | 7 |
| | 2 |
| | 65 |
|
| Write-off of property and equipment | — |
| | 5 |
| | — |
|
| Changes in operating assets and liabilities: | | | | |
|
|
| Accounts receivable | (1,108 | ) | | 621 |
| | (4,247 | ) |
| Inventories | (2,236 | ) | | 87 |
| | 547 |
|
| Prepaid expenses and other assets | (751 | ) | | 1,306 |
| | (2,812 | ) |
| Accounts payable | 2,413 |
| | (2,010 | ) | | 5,467 |
|
| Accrued compensation and other expenses | 478 |
| | (404 | ) | | 390 |
|
| Deferred revenue | 244 |
| | 32 |
| | 234 |
|
| Other long-term liabilities | (9 | ) | | 109 |
| | 441 |
|
| Net cash provided by operating activities | 2,207 |
| | 1,656 |
| | 1,879 |
|
| | | | | |
|
|
| Cash Flows From Investing Activities: | | | | |
|
|
| Purchases of property and equipment | (600 | ) | | (437 | ) | | (1,596 | ) |
| Purchase of intangible assets | — |
| | — |
| | (545 | ) |
| Net cash used in investing activities | (600 | ) | | (437 | ) | | (2,141 | ) |
| | | | | |
|
|
| Cash Flows From Financing Activities: | | | | |
|
|
| Proceeds from bank borrowings | (2,100 | ) | | — |
| | — |
|
| Shares withheld for tax purposes | (7 | ) | | (8 | ) | | (12 | ) |
| Proceeds from sale of stock to employees | 380 |
| | 646 |
| | 516 |
|
| Net cash provided by (used in) financing activities | (1,727 | ) | | 638 |
| | 504 |
|
| | | | | |
|
|
| Effect of Exchange Rate Changes on Cash and Cash Equivalents | 75 |
| | 17 |
| | (69 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | (45 | ) | | 1,874 |
| | 173 |
|
| Cash and Cash Equivalents, beginning of period | 40,402 |
| | 40,322 |
| | 42,196 |
|
| Cash and Cash Equivalents, end of period | $ | 40,357 |
| | $ | 42,196 |
| | $ | 42,369 |
|
| | | | | |
|
|
| Supplemental Disclosures of Non-Cash Investing and Financing Activities: | | | | |
|
|
| Capital assets acquired but not paid | $ | 340 |
| | $ | 345 |
| | $ | 1,652 |
|
| Supplemental Cash Flow Data: | | | | |
|
|
| Cash paid (refunded) for income taxes | $ | (9 | ) | | $ | 65 |
| | $ | (15 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES |
| (In thousands, except per share amounts) |
| | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 |
| GAAP net revenue from continuing operations | $ | 52,603 |
| | $ | 48,222 |
| | $ | 52,121 |
| | $ | 147,766 |
| | $ | 148,550 |
|
| GAAP revenue from discontinued operations | 18 |
| | — |
| | — |
| | 40 |
| | — |
|
| GAAP net revenue from continuing and discontinued operations | $ | 52,621 |
| | $ | 48,222 |
| | $ | 52,121 |
| | $ | 147,806 |
| | $ | 148,550 |
|
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| Long-term software contract royalties | 286 |
| | 203 |
| | (150 | ) | | 1,237 |
| | 706 |
|
| Non-GAAP net revenue | $ | 52,889 |
| | $ | 48,425 |
| | $ | 51,971 |
| | $ | 149,003 |
| | $ | 149,256 |
|
| | | | | |
|
| | | | |
| GAAP gross profit from continuing operations | $ | 16,873 |
| | $ | 16,023 |
| | $ | 16,962 |
| | $ | 48,320 |
| | $ | 48,250 |
|
| GAAP gross margin % from continuing operations | 32.1 | % | | 33.2 | % | | 32.5 | % | | 32.7 | % | | 32.5 | % |
| GAAP gross profit (loss) from discontinued operations | 18 |
| | — |
| | — |
| | (102 | ) | | — |
|
| GAAP gross profit from continuing and discontinued operations | $ | 16,891 |
| | $ | 16,023 |
| | $ | 16,962 |
| | $ | 48,218 |
| | $ | 48,250 |
|
| GAAP gross margin % from continuing and discontinued operations | 32.1 | % | | 33.2 | % | | 32.5 | % | | 32.6 | % | | 32.5 | % |
| Stock-based compensation | 75 |
| | 95 |
| | 98 |
| | 254 |
| | 257 |
|
| Severance costs | 17 |
| | 2 |
| | — |
| | 40 |
| | 75 |
|
| Power supply component failures | (6 | ) | | — |
| | (100 | ) | | (782 | ) | | (100 | ) |
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| AssuredUVS expenses | — |
| | — |
| | — |
| | 140 |
| | — |
|
| Long-term software contract royalties | 286 |
| | 203 |
| | (150 | ) | | 1,237 |
| | 706 |
|
| Long-term software contract costs | 88 |
| | 117 |
| | 50 |
| | 433 |
| | 290 |
|
| Non-GAAP gross profit | $ | 17,333 |
| | $ | 16,440 |
| | $ | 16,860 |
| | $ | 49,500 |
| | $ | 49,478 |
|
| Non-GAAP gross margin % | 32.8 | % | | 33.9 | % | | 32.4 | % | | 33.2 | % | | 33.1 | % |
| | | | | |
|
| | | | |
| GAAP sales and marketing expenses from continuing operations | $ | 3,512 |
| | $ | 3,843 |
| | $ | 3,522 |
| | $ | 9,807 |
| | $ | 10,659 |
|
| GAAP contribution margin from continuing operations | $ | 13,361 |
| | $ | 12,180 |
| | $ | 13,440 |
| | $ | 38,513 |
| | $ | 37,591 |
|
| GAAP contribution margin % from continuing operations | 25.4 | % | | 25.3 | % | | 25.8 | % | | 26.1 | % | | 25.3 | % |
| Stock-based compensation | (65 | ) | | (99 | ) | | (102 | ) | | (213 | ) | | (273 | ) |
| Severance costs | (4 | ) | | — |
| | — |
| | (9 | ) | | (42 | ) |
| Non-GAAP sales and marketing expenses | $ | 3,443 |
| | $ | 3,744 |
| | $ | 3,420 |
| | $ | 9,585 |
| | $ | 10,344 |
|
| Non-GAAP contribution margin | $ | 13,890 |
| | $ | 12,696 |
| | $ | 13,440 |
| | $ | 39,915 |
| | $ | 39,134 |
|
| Non-GAAP contribution margin % | 26.3 | % | | 26.2 | % | | 25.9 | % | | 26.8 | % | | 26.2 | % |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| GAAP operating expenses from continuing operations | $ | 14,996 |
| | $ | 16,034 |
| | $ | 16,874 |
| | $ | 44,816 |
| | $ | 48,576 |
|
| GAAP operating expenses from discontinued operations | 36 |
| | — |
| | — |
| | 350 |
| | — |
|
| GAAP operating expenses from continuing and discontinued operations | $ | 15,032 |
| | $ | 16,034 |
| | $ | 16,874 |
| | $ | 45,166 |
| | $ | 48,576 |
|
| Currency (loss) gain | (4 | ) | | 28 |
| | (116 | ) | | (365 | ) | | (15 | ) |
| Stock-based compensation | (485 | ) | | (959 | ) | | (668 | ) | | (1,663 | ) | | (2,140 | ) |
| AssuredUVS expenses | (35 | ) | | — |
| | — |
| | (383 | ) | | — |
|
| Long-term software contract deferred costs | (41 | ) | | — |
| | — |
| | 365 |
| | — |
|
| Legal settlement | — |
| | — |
| | (1,000 | ) | | — |
| | (1,000 | ) |
| Legal fees related to power supply component failure | — |
| | — |
| | — |
| | (2 | ) | | — |
|
| Severance costs | (8 | ) | | — |
| | (11 | ) | | (90 | ) | | (95 | ) |
| Non-GAAP operating expenses | $ | 14,459 |
| | $ | 15,103 |
| | $ | 15,079 |
| | $ | 43,028 |
| | $ | 45,326 |
|
| | | | | |
|
| | | | |
| GAAP net income (loss) from continuing operations | $ | 1,775 |
| | $ | (78 | ) | | $ | 40 |
| | $ | 3,304 |
| | $ | (450 | ) |
| GAAP net loss from discontinued operations | (18 | ) | | — |
| | — |
| | (452 | ) | | — |
|
| GAAP net income (loss) from continuing and discontinued operations | $ | 1,757 |
| | $ | (78 | ) | | $ | 40 |
| | $ | 2,852 |
| | $ | (450 | ) |
| Currency loss (gain) | 4 |
| | (28 | ) | | 116 |
| | 365 |
| | 15 |
|
| Stock-based compensation | 560 |
| | 1,054 |
| | 766 |
| | 1,917 |
| | 2,397 |
|
| Restructuring recoveries | 35 |
| | — |
| | — |
| | 25 |
| | — |
|
| Power supply component failures | (6 | ) | | — |
| | (100 | ) | | (780 | ) | | (100 | ) |
| AssuredUVS expenses | — |
| | — |
| | — |
| | 498 |
| | — |
|
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| Other income | — |
| | (17 | ) | | — |
| | — |
| | (27 | ) |
| Long-term software contract royalties | 286 |
| | 203 |
| | (150 | ) | | 1,237 |
| | 706 |
|
| Long-term software contract costs | 88 |
| | 117 |
| | 50 |
| | 433 |
| | 290 |
|
| Long-term software contract deferred costs | 41 |
| | — |
| | — |
| | (365 | ) | | — |
|
| Legal settlement | — |
| | — |
| | 1,000 |
| | — |
| | 1,000 |
|
| Severance costs | 25 |
| | 2 |
| | 11 |
| | 130 |
| | 170 |
|
| Non-GAAP net income | $ | 2,772 |
| | $ | 1,253 |
| | $ | 1,733 |
| | $ | 6,272 |
| | $ | 4,001 |
|
| | | | | |
| | | | |
| Non-GAAP net income per share | | | | |
|
| | | | |
| Basic and diluted | $ | 0.05 |
| | $ | 0.02 |
| | $ | 0.03 |
| | $ | 0.11 |
| | $ | 0.06 |
|
| Weighted average shares used to calculate net income per share: | | | | |
|
| | | | |
| Basic | 58,736 |
| | 60,159 |
| | 60,396 |
| | 58,376 |
| | 60,021 |
|
| Diluted | 60,062 |
| | 63,806 |
| | 63,755 |
| | 58,879 |
| | 63,767 |
|
| | | | | |
|
| | | | |
| Non-GAAP net income | $ | 2,772 |
| | $ | 1,253 |
| | $ | 1,733 |
| | $ | 6,272 |
| | $ | 4,001 |
|
| Interest expense less AssuredUVS | 1 |
| | 4 |
| | 4 |
| | 16 |
| | 26 |
|
| Income tax expense | 100 |
| | 74 |
| | 46 |
| | 183 |
| | 121 |
|
| Depreciation less AssuredUVS | 852 |
| | 932 |
| | 989 |
| | 2,315 |
| | 2,880 |
|
| Non-GAAP EBITDA | $ | 3,725 |
| | $ | 2,263 |
| | $ | 2,772 |
| | $ | 8,786 |
| | $ | 7,028 |
|
|
| | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES FOR NET REVENUE FOR TRAILING 12 MONTHS |
| (In thousands) |
| | | | |
| | Q4 12 through Q3 13 | | Q4 13 through Q3 14 |
| Total GAAP net revenue from continuing operations | $ | 191,785 |
| | $ | 207,349 |
|
| GAAP revenue from discontinued operations | 168 |
| | 10 |
|
| Total GAAP net revenue, from continuing and discontinued operations | $ | 191,953 |
| | $ | 207,359 |
|
| AssuredUVS revenue | (168 | ) | | (10 | ) |
| Long-term software contract royalties | 3,378 |
| | 1,648 |
|
| Total non-GAAP net revenue | $ | 195,163 |
| | $ | 208,997 |
|
| | | | |
| Server OEM GAAP net revenue from continuing operations | $ | 127,267 |
| | $ | 124,849 |
|
| Long-term software contract royalties | 3,378 |
| | 1,648 |
|
| Server OEM non-GAAP net revenue | $ | 130,645 |
| | $ | 126,497 |
|
| | | | |
| Vertical Markets GAAP net revenue from continuing operations | $ | 64,518 |
| | $ | 82,500 |
|
| GAAP revenue from discontinued operations | 168 |
| | 10 |
|
| Vertical Markets GAAP net revenue, from continuing and discontinued operations | $ | 64,686 |
| | $ | 82,510 |
|
| AssuredUVS revenue | (168 | ) | | (10 | ) |
| Vertical Markets non-GAAP net revenue | $ | 64,518 |
| | $ | 82,500 |
|
|
| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES FOR SERVER OEM SEGMENT |
| (In thousands) |
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| September 30, 2013 |
| June 30, 2014 |
| September 30, 2014 |
| September 30, 2013 |
| September 30, 2014 |
| Server OEM GAAP net revenue from continuing operations | $ | 35,126 |
|
| $ | 27,463 |
|
| $ | 31,643 |
|
| $ | 94,909 |
|
| $ | 84,960 |
|
| Long-term software contract royalties | 286 |
|
| 203 |
|
| (150 | ) |
| 1,237 |
|
| 706 |
|
| Server OEM non-GAAP net revenue | $ | 35,412 |
|
| $ | 27,666 |
|
| $ | 31,493 |
|
| $ | 96,146 |
|
| $ | 85,666 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Server OEM GAAP gross profit from continuing operations | $ | 8,963 |
|
| $ | 6,783 |
|
| $ | 8,120 |
|
| $ | 25,089 |
|
| $ | 20,507 |
|
| Server OEM GAAP gross margin % from continuing operations | 25.5 | % |
| 24.7 | % |
| 25.7 | % |
| 26.4 | % |
| 24.1 | % |
| Stock-based compensation | 55 |
|
| 59 |
|
| 67 |
|
| 185 |
|
| 168 |
|
| Severance costs | 12 |
|
| 2 |
|
| — |
|
| 26 |
|
| 48 |
|
| Power supply component failures | (6 | ) |
| — |
|
| (100 | ) |
| (782 | ) |
| (100 | ) |
| Long-term software contract royalties | 286 |
|
| 203 |
|
| (150 | ) |
| 1,237 |
|
| 706 |
|
| Long-term software contract costs | 88 |
|
| 117 |
|
| 50 |
|
| 433 |
|
| 290 |
|
| Server OEM non-GAAP gross profit | $ | 9,398 |
|
| $ | 7,164 |
|
| $ | 7,987 |
|
| $ | 26,188 |
|
| $ | 21,619 |
|
| Server OEM non-GAAP gross margin % | 26.5 | % |
| 25.9 | % |
| 25.4 | % |
| 27.2 | % |
| 25.2 | % |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Server OEM GAAP sales and marketing expenses from continuing operations | $ | 493 |
|
| $ | 541 |
|
| $ | 516 |
|
| $ | 1,501 |
|
| $ | 1,539 |
|
| Server OEM GAAP contribution margin from continuing operations | $ | 8,470 |
|
| $ | 6,242 |
|
| $ | 7,604 |
|
| $ | 23,588 |
|
| $ | 18,968 |
|
| Server OEM GAAP contribution margin % from continuing operations | 24.1 | % |
| 22.7 | % |
| 24.0 | % |
| 24.9 | % |
| 22.3 | % |
| Stock-based compensation | (14 | ) |
| (21 | ) |
| (18 | ) |
| (45 | ) |
| (54 | ) |
| Severance costs | (1 | ) |
| — |
|
| — |
|
| (2 | ) |
| (9 | ) |
| Server OEM non-GAAP sales and marketing expenses | $ | 478 |
|
| $ | 520 |
|
| $ | 498 |
|
| $ | 1,454 |
|
| $ | 1,476 |
|
| Server OEM non-GAAP contribution margin | $ | 8,920 |
|
| $ | 6,644 |
|
| $ | 7,489 |
|
| $ | 24,734 |
|
| $ | 20,143 |
|
| Server OEM non-GAAP contribution margin % | 25.2 | % |
| 24.0 | % |
| 23.8 | % |
| 25.7 | % |
| 23.5 | % |
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Server OEM GAAP operating income for continuing operations | $ | 8,470 |
|
| $ | 6,242 |
|
| $ | 7,604 |
|
| $ | 23,588 |
|
| $ | 18,968 |
|
| Stock-based compensation | 69 |
|
| 80 |
|
| 85 |
|
| 230 |
|
| 222 |
|
| Severance costs | 13 |
|
| 2 |
|
| — |
|
| 28 |
|
| 57 |
|
| Power supply component failures | (6 | ) |
| — |
|
| (100 | ) |
| (782 | ) |
| (100 | ) |
| Long-term software contract royalties | 286 |
|
| 203 |
|
| (150 | ) |
| 1,237 |
|
| 706 |
|
| Long-term software contract costs | 88 |
|
| 117 |
|
| 50 |
|
| 433 |
|
| 290 |
|
| Server OEM non-GAAP operating income | $ | 8,920 |
|
| $ | 6,644 |
|
| $ | 7,489 |
|
| $ | 24,734 |
|
| $ | 20,143 |
|
|
| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES FOR VERTICAL MARKETS SEGMENT |
| (In thousands) |
| | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 |
| Vertical Markets GAAP net revenue from continuing operations | $ | 17,477 |
| | $ | 20,759 |
| | $ | 20,478 |
| | $ | 52,857 |
| | $ | 63,590 |
|
| GAAP revenue from discontinued operations | 18 |
| | — |
| | — |
| | 40 |
| | — |
|
| Vertical Markets GAAP net revenue from continuing and discontinued operations | $ | 17,495 |
| | $ | 20,759 |
| | $ | 20,478 |
| | $ | 52,897 |
| | $ | 63,590 |
|
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| Vertical Markets non-GAAP net revenue | $ | 17,477 |
| | $ | 20,759 |
| | $ | 20,478 |
| | $ | 52,857 |
| | $ | 63,590 |
|
| | | | | |
|
| | | | |
| Vertical Markets GAAP gross profit from continuing operations | $ | 7,910 |
| | $ | 9,240 |
| | $ | 8,842 |
| | $ | 23,231 |
| | $ | 27,743 |
|
| Vertical Markets GAAP gross margin % from continuing operations | 45.3 | % | | 44.5 | % | | 43.2 | % | | 44.0 | % | | 43.6 | % |
| Vertical Markets GAAP gross profit (loss) from discontinued operations | 18 |
| | — |
| | — |
| | (102 | ) | | — |
|
| Vertical Markets GAAP gross profit from continuing and discontinued operations | $ | 7,928 |
| | $ | 9,240 |
| | $ | 8,842 |
| | $ | 23,129 |
| | $ | 27,743 |
|
| Vertical Markets GAAP gross margin % from continuing and discontinued operations | 45.3 | % | | 44.5 | % | | 43.2 | % | | 43.7 | % | | 43.6 | % |
| Stock-based compensation | 20 |
| | 36 |
| | 31 |
| | 69 |
| | 90 |
|
| Severance costs | 5 |
| | — |
| | — |
| | 14 |
| | 26 |
|
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| AssuredUVS expenses | — |
| | — |
| | — |
| | 140 |
| | — |
|
| Vertical Markets non-GAAP gross profit | $ | 7,935 |
| | $ | 9,276 |
| | $ | 8,873 |
| | $ | 23,312 |
| | $ | 27,859 |
|
| Vertical Markets non-GAAP gross margin % | 45.4 | % | | 44.7 | % | | 43.3 | % | | 44.1 | % | | 43.8 | % |
| | | | | |
|
| | | | |
| Vertical Markets GAAP sales and marketing expenses from continuing operations | $ | 2,377 |
| | $ | 2,478 |
| | $ | 2,593 |
| | $ | 6,453 |
| | $ | 7,325 |
|
| Vertical Markets GAAP contribution margin from continuing operations | $ | 5,533 |
| | $ | 6,762 |
| | $ | 6,249 |
| | $ | 16,778 |
| | $ | 20,418 |
|
| Vertical Markets GAAP contribution margin % from continuing operations | 31.7 | % | | 32.6 | % | | 30.5 | % | | 31.7 | % | | 32.1 | % |
| Stock-based compensation | (29 | ) | | (45 | ) | | (51 | ) | | (97 | ) | | (129 | ) |
| Severance costs | (2 | ) | | — |
| | — |
| | (4 | ) | | (19 | ) |
| Vertical Markets non-GAAP sales and marketing expenses | $ | 2,346 |
| | $ | 2,433 |
| | $ | 2,542 |
| | $ | 6,352 |
| | $ | 7,177 |
|
| Vertical Markets non-GAAP contribution margin | $ | 5,589 |
| | $ | 6,843 |
| | $ | 6,331 |
| | $ | 16,960 |
| | $ | 20,682 |
|
| Vertical Markets non-GAAP contribution margin % | 32.0 | % | | 33.0 | % | | 30.9 | % | | 32.1 | % | | 32.5 | % |
| | | | | |
|
| | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Vertical Markets GAAP operating income for continuing operations | $ | 5,533 |
| | $ | 6,762 |
| | $ | 6,249 |
| | $ | 16,778 |
| | $ | 20,418 |
|
| Vertical Markets GAAP operating loss for discontinued operations | 18 |
| | — |
| | — |
| | (102 | ) | | — |
|
| Vertical Markets GAAP operating income for continuing and discontinued operations | $ | 5,551 |
| | $ | 6,762 |
| | $ | 6,249 |
| | $ | 16,676 |
| | $ | 20,418 |
|
| Stock-based compensation | 49 |
| | 81 |
| | 82 |
| | 166 |
| | 219 |
|
| Severance costs | 7 |
| | — |
| | — |
| | 18 |
| | 45 |
|
| AssuredUVS revenue | (18 | ) | | — |
| | — |
| | (40 | ) | | — |
|
| AssuredUVS expenses | — |
| | — |
| | — |
| | 140 |
| | — |
|
| Vertical Markets non-GAAP operating income | $ | 5,589 |
| | $ | 6,843 |
| | $ | 6,331 |
| | $ | 16,960 |
| | $ | 20,682 |
|
|
| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES FOR CORPORATE SEGMENT |
| (In thousands) |
| | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 |
| Corporate GAAP sales and marketing expenses from continuing operations | $ | 642 |
| | $ | 824 |
| | $ | 413 |
| | $ | 1,853 |
| | $ | 1,795 |
|
| Corporate GAAP contribution margin from continuing operations | $ | (642 | ) | | $ | (824 | ) | | $ | (413 | ) | | $ | (1,853 | ) | | $ | (1,795 | ) |
| Stock-based compensation | (22 | ) | | (33 | ) | | (33 | ) | | (71 | ) | | (90 | ) |
| Severance costs | (1 | ) | | — |
| | — |
| | (3 | ) | | (14 | ) |
| Corporate non-GAAP sales and marketing expenses | $ | 619 |
| | $ | 791 |
| | $ | 380 |
| | $ | 1,779 |
| | $ | 1,691 |
|
| Corporate non-GAAP contribution margin | $ | (619 | ) | | $ | (791 | ) | | $ | (380 | ) | | $ | (1,779 | ) | | $ | (1,691 | ) |
| | | | | |
|
| | | | |
| Corporate GAAP research and development expenses from continuing operations | $ | 8,972 |
| | $ | 9,340 |
| | $ | 9,516 |
| | $ | 26,593 |
| | $ | 28,332 |
|
| Stock-based compensation | (340 | ) | | (347 | ) | | (341 | ) | | (917 | ) | | (949 | ) |
| Long-term software contract deferred costs | (41 | ) | | — |
| | — |
| | 365 |
| | — |
|
| Severance costs | — |
| | — |
| | (11 | ) | | (77 | ) | | (51 | ) |
| Corporate non-GAAP research and development expenses | $ | 8,591 |
| | $ | 8,993 |
| | $ | 9,164 |
| | $ | 25,964 |
| | $ | 27,332 |
|
| | | | | |
|
| | | | |
Corporate GAAP general & administrative expenses from continuing operations | $ | 2,512 |
| | $ | 2,851 |
| | $ | 3,836 |
| | $ | 8,416 |
| | $ | 9,585 |
|
Corporate GAAP general & administrative expenses from discontinued operations | 36 |
| | — |
| | — |
| | 359 |
| | — |
|
Corporate GAAP general & administrative expenses from continuing and discontinued operations | $ | 2,548 |
| | $ | 2,851 |
| | $ | 3,836 |
| | $ | 8,775 |
| | $ | 9,585 |
|
| Currency loss (gain) | (4 | ) | | 28 |
| | (116 | ) | | (365 | ) | | (15 | ) |
| Stock-based compensation | (80 | ) | | (513 | ) | | (225 | ) | | (533 | ) | | (918 | ) |
| AssuredUVS expenses | (35 | ) | | — |
| | — |
| | (394 | ) | | — |
|
| Legal settlement | — |
| | — |
| | (1,000 | ) | | — |
| | (1,000 | ) |
| Legal fees related to power supply component failure | — |
| | — |
| | — |
| | (2 | ) | | — |
|
| Severance costs | (4 | ) | | — |
| | — |
| | (4 | ) | | (2 | ) |
| Corporate non-GAAP general & administrative expenses | $ | 2,425 |
| | $ | 2,366 |
| | $ | 2,495 |
| | $ | 7,477 |
| | $ | 7,650 |
|
| | | | | |
|
| | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Corporate GAAP operating loss from continuing operations | $ | (12,126 | ) | | $ | (13,015 | ) | | $ | (13,765 | ) | | $ | (36,862 | ) | | $ | (39,712 | ) |
| Corporate GAAP operating loss from discontinued operations | (36 | ) | | — |
| | — |
| | (359 | ) | | — |
|
| Corporate GAAP operating loss from continuing and discontinued operations | $ | (12,162 | ) | | $ | (13,015 | ) | | $ | (13,765 | ) | | $ | (37,221 | ) | | $ | (39,712 | ) |
| Currency loss (gain) | 4 |
| | (28 | ) | | 116 |
| | 365 |
| | 15 |
|
| Stock-based compensation | 442 |
| | 893 |
| | 599 |
| | 1,521 |
| | 1,957 |
|
| AssuredUVS expenses | 35 |
| | — |
| | — |
| | 394 |
| | — |
|
| Long-term software contract deferred costs | 41 |
| | — |
| | — |
| | (365 | ) | | — |
|
| Legal fees related to power supply component failure | — |
| | — |
| | — |
| | 2 |
| | — |
|
| Legal settlement | — |
| | — |
| | 1,000 |
| | — |
| | 1,000 |
|
| Severance costs | 5 |
| | — |
| | 11 |
| | 84 |
| | 67 |
|
| Corporate non-GAAP operating loss | $ | (11,635 | ) | | $ | (12,150 | ) | | $ | (12,039 | ) | | $ | (35,220 | ) | | $ | (36,673 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| DOT HILL SYSTEMS CORP. |
| UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES |
| (In thousands, except per share amounts) |
| | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2013 | | June 30, 2014 | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 |
| GAAP income (loss) per share from continuing operations | $ | 0.03 |
| | $ | (0.00 | ) | | $ | 0.00 |
| | $ | 0.06 |
| | $ | (0.01 | ) |
| GAAP loss per share from discontinued operations | (0.00 | ) | | — |
| | — |
| | (0.01 | ) | | — |
|
| GAAP income (loss) per share from continuing and discontinued operations* | $ | 0.03 |
| | $ | (0.00 | ) | | $ | 0.00 |
| | $ | 0.05 |
| | $ | (0.01 | ) |
| Currency loss | — |
| | (0.00 | ) | | 0.00 |
| | 0.01 |
| | 0.00 |
|
| Stock-based compensation | 0.01 |
| | 0.02 |
| | 0.01 |
| | 0.03 |
| | 0.04 |
|
| Power supply component failures | — |
| | — |
| | (0.00 | ) | | (0.01 | ) | | 0.00 |
|
| AssuredUVS expenses | — |
| | — |
| | — |
| | 0.01 |
| | — |
|
| Long-term software contract royalties | — |
| | 0.00 |
| | (0.00 | ) | | 0.02 |
| | 0.01 |
|
| Long-term software contract costs | — |
| | 0.00 |
| | 0.00 |
| | 0.01 |
| | 0.00 |
|
| Long-term software contract deferred costs | — |
| | — |
| | — |
| | (0.01 | ) | | — |
|
| Legal settlement | — |
| | — |
| | 0.02 |
| | — |
| | 0.02 |
|
| Other adjustments | 0.01 |
| | 0.00 |
| | — |
| | — |
| | (0.01 | ) |
| Non-GAAP income per share* | $ | 0.05 |
| | $ | 0.02 |
| | $ | 0.03 |
| | $ | 0.11 |
| | $ | 0.06 |
|
| | | | | |
| | | | |
| Weighted average shares used to calculate earnings per share: | | | | |
| | | | |
| Basic | 58,736 |
| | 60,159 |
| | 60,396 |
| | 58,376 |
| | 60,021 |
|
| Diluted | 60,062 |
| | 63,806 |
| | 63,755 |
| | 58,879 |
| | 63,767 |
|
| | | | | | | | | | |
| * Per share data may not always add to the total for the period because each figure is independently calculated. |
