Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact: | |
Preston Romm | Kirsten Garvin |
Chief Financial Officer | Director of Investor Relations |
Tel: 760-931-5500 | Tel: 760-476-3811 |
Email: investors@dothill.com | Email: kirsten.garvin@dothill.com |
Dot Hill Reports Third Quarter 2005 Results
Company meets revenue, exceeds EPS guidance
CARLSBAD, Calif. – October 26, 2005 – Dot Hill Systems Corp. (NASDAQ:HILL) today announced financial results for the third fiscal quarter ended September 30, 2005. Net revenue was $53.6 million for the third quarter of 2005, compared to $57.0 million for the third quarter of 2004 and $65.9 million for the second quarter of 2005. Net loss for the third quarter of 2005 was $1.3 million, or a loss of $0.03 per share on a fully diluted basis. This compares to third quarter 2004 net income of $3.5 million or $0.07 per share on a fully diluted basis and second quarter 2005 net income of $3.3 million or $0.07 per share on a fully diluted basis. The figures for the third quarter of 2005 met or exceeded company guidance set on July 27, 2005 of net revenue in the range of $50 to $54 million and a net loss in the range of $0.04 and $0.06 per share on a fully diluted basis.
Gross profit for the third quarter of 2005 decreased to 23.0 percent as compared to third quarter 2004 gross profit of 25.8 percent and second quarter 2005 gross profit of 24.5 percent. The lower gross profit percentage can be attributed, principally to the decrease in volume of product shipments.
“During this third quarter, Dot Hill laid the foundation necessary to achieve our aggressive goal of doubling our revenue by the end of 2007,” said James Lambert, Dot Hill’s chief executive officer. “We invested in research and development in order to bring to market new products which will serve as the cornerstones of our relationships with all of our customers. Those efforts included the incorporation of our own controller technology and data management service software into our systems. We increased production of prototype and test units during the third quarter and augmented our engineering staff to accelerate product release cycles. We also invested in our infrastructure by implementing a new ERP software package. This will help us to improve internal controls and streamline business processes. As we stated previously, these investments will continue through the fourth quarter of 2005.
“While these investments led, in the short-term, (as anticipated) to a loss, we believe they will help to fuel the growth of the company. In fact, many of the investments and efforts have already paid off. Due in large part to our attractive product roadmap, one of our key customers, Sun Microsystems, extended and expanded our
agreement until January 2011. Sun also awarded us a new OEM product agreement which will incorporate Dot Hill’s proprietary controller technology and data management services software.
“Also in the third quarter, we announced an OEM agreement with Network Appliance to design and develop general purpose disk arrays for a variety of NetApp products. We are also engaged in promising discussions with several high-quality prospects, all of whom are impressed by our new products as well as our reputation for outstanding customer service. In the coming quarters, Dot Hill will focus on bringing new products to market and executing on these exciting new opportunities. We have demonstrated our ability to execute our strategies in the past, and we look forward to these opportunities in the future.”
“Dot Hill increased its cash position for the quarter to $123.3 million in cash, cash equivalents and short-term investments as of September 30, 2005, which equates to approximately $2.79 per share,” said Preston Romm, Dot Hill’s chief financial officer. “Based on the company’s current market visibility, anticipated product prototype production for new and existing customers and continued ERP software implementation, the company is targeting net revenue for the fourth quarter of 2005 in the range of $57 to $61 million and a loss of $0.03 to $0.05 per share on a non-taxed basis.”
The third quarter 2005 financial results conference call is scheduled to take place on October 26, 2005 at 4:30 p.m. ET. Please join us for a live audio webcast at www.dothill.com in the Investor Relations section. If you prefer to join via telephone, please dial 866-825-3308 (U.S.) or 617-213-8062 (International) at least five minutes prior to the start of the call and enter passcode 71011345. A replay of the webcast will be available on the Dot Hill web site following the conference call. For a telephone replay, dial 888-286-8010 (U.S.) or 617-801-6888 (International) and enter passcode 93985630.
Dot Hill is a market leader in providing flexible storage offerings and responsive service and support to OEMs and system integrators, from engagement through end-of-life. Founded in 1984, Dot Hill has more than two decades of expertise in developing high-quality, competitively priced storage products. Focused on delivering global 24 X 7 X 365 technical support, Dot Hill has more than 100,000 systems in use worldwide and numerous OEM and indirect partners. With its patented technology and award-winning SANnet® II and RIO Xtreme™ families of storage and its Dot Hill Storage Services, Dot Hill makes storage easy. Headquartered in Carlsbad, Calif., Dot Hill has offices in China, Germany, Israel, Japan, Netherlands, United Kingdom and the United States. More information is available at www.dothill.com.
Dot Hill, the Dot Hill logo, SANnet, SANpath, SANscape, RIVA and RIO Xtreme are trademarks of Dot Hill Systems Corp. All other products and names mentioned herein are trademarks or registered trademarks of their respective owners.
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: Dot Hill’s financial and operating results for the fourth quarter of 2005 and beyond; the impact of Dot Hill’s recent customer wins on Dot Hill’s future financial results; the launch and final integration dates of new products; the ability to improve internal controls and business processes; the ability to accelerate product release cycles; the strength of Dot Hill’s relationships with existing customers; and Dot Hill’s future success in forming and maintaining OEM relationships. The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: 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; unforeseen technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the forms 8-K, 10-K and 10-Q most recently filed by Dot Hill. 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.
DOT HILL SYSTEMS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE OPERATIONS
(Unaudited - - In Thousands, Except Per Share Amounts)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2004 | | 2005 | | 2004 | | 2005 | |
| | | | | | | | | |
Net Revenue | | $ | 56,956 | | $ | 53,616 | | $ | 173,859 | | $ | 177,524 | |
Cost of Goods Sold | | 42,288 | | 41,263 | | 130,071 | | 135,749 | |
Gross Profit | | 14,668 | | 12,353 | | 43,788 | | 41,775 | |
| | | | | | | | | |
Operating Expenses: | | | | | | | | | |
Sales and marketing | | 3,994 | | 5,180 | | 12,274 | | 14,920 | |
Research and development | | 4,825 | | 6,280 | | 13,388 | | 16,335 | |
General and administrative | | 2,709 | | 3,036 | | 7,327 | | 8,370 | |
Restructuring, net | | 7 | | — | | (384 | ) | — | |
In-process research and development | | — | | — | | 4,700 | | — | |
Total operating expenses | | 11,535 | | 14,496 | | 37,305 | | 39,625 | |
Operating income (loss) | | 3,133 | | (2,143 | ) | 6,483 | | 2,150 | |
| | | | | | | | | |
Other Income (Expense): | | | | | | | | | |
Interest income | | 421 | | 791 | | 1,427 | | 2,236 | |
Interest expense | | (69 | ) | — | | (355 | ) | (47 | ) |
Gain (loss) on foreign currency transactions, net | | 98 | | (122 | ) | 252 | | (185 | ) |
Other income (expense), net | | 19 | | 7 | | (1 | ) | 93 | |
Total other income, net | | 469 | | 676 | | 1,323 | | 2,097 | |
Income (Loss) Before Income Taxes | | 3,602 | | (1,467 | ) | 7,806 | | 4,247 | |
Income Tax Expense (Benefit) | | 151 | | (192 | ) | 243 | | 124 | |
Net Income (Loss) | | $ | 3,451 | | $ | (1,275 | ) | $ | 7,563 | | $ | 4,123 | |
| | | | | | | | | |
Net Income (Loss) Per Share: | | | | | | | | | |
Basic | | $ | 0.08 | | $ | (0.03 | ) | $ | 0.17 | | $ | 0.09 | |
Diluted | | $ | 0.07 | | $ | (0.03 | ) | $ | 0.16 | | $ | 0.09 | |
| | | | | | | | | |
Weighted Average Shares Used to Calculate Net Income (Loss) Per Share: | | | | | | | | | |
Basic | | 43,511 | | 43,949 | | 43,403 | | 43,832 | |
Diluted | | 46,188 | | 43,949 | | 46,489 | | 45,613 | |
| | | | | | | | | |
Comprehensive Income: | | | | | | | | | |
Net income (loss) | | $ | 3,451 | | $ | (1,275 | ) | $ | 7,563 | | $ | 4,123 | |
Foreign currency translation adjustments | | 17 | | 46 | | 18 | | 192 | |
Net unrealized gain (loss) on short-term investments | | 94 | | 51 | | (284 | ) | 30 | |
Comprehensive income (loss) | | $ | 3,562 | | $ | (1,178 | ) | $ | 7,297 | | $ | 4,345 | |
DOT HILL SYSTEMS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - - In Thousands Except Per Share Amounts)
| | December 31,
2004 | | September 30,
2005 | |
| | | | | |
ASSETS | | | | | |
Current Assets: | | | | | |
Cash and cash equivalents | | $ | 67,496 | | $ | 90,001 | |
Short-term investments | | 58,690 | | 33,293 | |
Accounts receivable, net of allowance of $491 and $1,241 | | 40,788 | | 35,488 | |
Inventories | | 3,671 | | 2,898 | |
Prepaid expenses and other | | 2,273 | | 3,898 | |
Total current assets | | 172,918 | | 165,578 | |
Property and equipment, net | | 7,859 | | 7,308 | |
Goodwill | | 57,111 | | 57,111 | |
Other intangible assets, net | | 7,712 | | 5,563 | |
Other assets | | 967 | | 394 | |
Total assets | | $ | 246,567 | | $ | 235,954 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
Current Liabilities: | | | | | |
Accounts payable | | $ | 40,512 | | $ | 24,068 | |
Accrued compensation | | 3,338 | | 3,738 | |
Accrued expenses | | 3,309 | | 3,149 | |
Deferred revenue | | 779 | | 1,449 | |
Income taxes payable | | 532 | | 289 | |
Other liabilities | | 923 | | — | |
Current portion of restructuring accrual | | 141 | | 86 | |
Total current liabilities | | 49,534 | | 32,779 | |
Restructuring accrual, net of current portion | | 37 | | — | |
Other long-term liabilities | | 169 | | 217 | |
Total liabilities | | 49,740 | | 32,996 | |
| | | | | |
Commitments and Contingencies | | | | | |
| | | | | |
Stockholders’ Equity: | | | | | |
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued or outstanding | | — | | — | |
Common stock, $0.001 par value, 100,000 shares authorized, 43,656 and 44,113 shares issued and outstanding at December 31, 2004 and September 30, 2005, respectively | | 44 | | 44 | |
Additional paid-in capital | | 277,102 | | 278,880 | |
Deferred compensation | | (8 | ) | — | |
Accumulated other comprehensive loss | | (462 | ) | (240 | ) |
Accumulated deficit | | (79,849 | ) | (75,726 | ) |
Total stockholders’ equity | | 196,827 | | 202,958 | |
Total liabilities and stockholders’ equity | | $ | 246,567 | | $ | 235,954 | |
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