Exhibit 99.1
Rackable Systems, Inc. Announces
First Quarter 2006 Financial Results; Achieved record quarterly
revenue of $84.4 million and GAAP EPS of $0.23 and Non-GAAP EPS of $0.30
MILPITAS, Calif.--(BUSINESS WIRE)--April 27, 2006--Rackable
Systems, Inc., (NASDAQ:RACK) a provider of servers and storage
products for scale out data center deployments, today announced
financial results for the first quarter of 2006.
Total revenue for the first quarter of 2006 was $84.4 million, up
1.6% from $83.1 million in the fourth quarter of 2005, and up 176.8%
from $30.5 million in the first quarter of 2005. GAAP operating income
for the quarter was $9.3 million or 11.0% of revenue, compared to
$12.2 million or 14.7% of revenue for the fourth quarter of 2005, and
compared to an operating income of $949,000 or 3.1% of revenue in the
same period a year ago. Gross margins for the quarter were 23.1%,
compared to 24.9% in the fourth quarter of 2005, and compared to 19.4%
in the first quarter a year ago.
In the first quarter of fiscal 2006, we adopted the Statement of
Financial Accounting Standards No. 123R, Share-Based Payment (FAS
123R), which requires that stock-based compensation be recorded in our
financial statements. GAAP net income for the first quarter of 2006
was $6.0 million or $0.23 per diluted share, compared to GAAP net
income of $7.3 million or $0.32 per diluted share in the previous
quarter and compared to a GAAP net loss of $4.4 million or $(0.84) per
share in the first quarter of 2005.
Non-GAAP net income for the quarter was $7.9 million or $0.30 per
diluted share, compared to non-GAAP net income of $724,000 or $0.04
per share in the same period one year ago. These non-GAAP financial
measures exclude stock-based compensation expense, the amortization of
patents and customer list, change in fair value of embedded
derivatives in preferred stock, dividends on preferred stock recorded
as interest expense and the related tax effect of the applicable
items. The reconciliation between GAAP and non-GAAP and net income
(loss) is provided in the financial tables accompanying this press
release.
"We are very pleased with our Q1 results and are continuing to see
strong demand for our products," said Chief Executive Officer, Tom
Barton.
Use of Non-GAAP Financial Measures
The non-GAAP financial measures discussed in the text of this
press release and accompanying non-GAAP supplemental information
represent financial measures used by Rackable Systems' management to
evaluate the operating performance of the company and to conduct its
business operations. Non-GAAP financial measures discussed in this
press release exclude stock-based compensation, the amortization of
patents and customer list in connection with the acquisition of old
Rackable, change in fair value of embedded derivatives in preferred
stock, dividends on preferred stock recorded as interest expense and
the related tax effect of the applicable items. Management uses the
non-GAAP financial measures for planning purposes, including the
preparation of operating budgets and to determine appropriate levels
of operating and capital investments. Management also believes that
the non-GAAP financial measures provide additional insight for
analysts and investors in evaluating the company's financial and
operational performance. However, these non-GAAP financial measures
are not intended to be an alternative to financial measures prepared
in accordance with GAAP and should not be considered in isolation from
our GAAP results of operations. Pursuant to the requirements of SEC
Regulation G, a detailed reconciliation between the company's GAAP and
non-GAAP financial results is provided in this press release and
investors are advised to carefully review and consider this
information as well as the GAAP financial results that are disclosed
in the company's SEC filings.
Conference Call Information
Rackable Systems will discuss these financial results and its
outlook for the second quarter and full year of 2006 in a conference
call at 1:30 p.m. PDT, 4:30 p.m. EDT, today. The public is invited to
listen to a live web cast of Rackable Systems' conference call on the
investor relations section of the company's website at
www.rackable.com. For investors unable to participate in the live
conference call, an audio replay will be available on April 27, 2006,
at approximately 4:30 p.m. PDT and will remain available until May 2,
2006 at 9:00 p.m. PDT. To access the audio replay, dial 888-203-1112
or 719-457-0820 and enter confirmation code 3639834. A web cast replay
of the call will be available on the Investor Relations section at
www.rackable.com approximately two hours after the conclusion of the
call and will remain available until the company's next earnings call.
About Rackable Systems
Rackable Systems, Inc. is a provider of servers and storage
products for scale out data center deployments. The company's servers
are designed to provide benefits in the areas of density, thermal
efficiency, serviceability, power distribution and remote management.
Founded in 1999 and based in Milpitas, California, Rackable Systems
serves Internet, semiconductor design, enterprise software, federal
government, entertainment, financial services, oil and gas exploration
and biotechnology customers worldwide.
Copyright(C) 2006 Rackable Systems, Inc. All rights reserved.
Rackable Systems is a registered trademark of Rackable Systems, Inc.
in the U.S. Rackable Systems and its logo are trademarks in the U.S.
and certain other countries. All other brands, names or trademarks
mentioned may be trademarks of their respective owners.
RACKABLE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, April 1,
------------- ------------
2005 2006
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and short-term
investments $54,164 $208,216
Accounts receivable, net of allowance for
doubtful accounts 49,700 48,294
Inventories 40,649 60,034
Deferred income taxes 6,504 7,414
Deferred cost of sales 8,665 740
Prepaids and other current assets 4,111 8,461
------------- ------------
Total current assets 163,793 333,159
PROPERTY AND EQUIPMENT--Net 2,588 3,490
INTANGIBLE ASSETS--Net 9,421 9,094
OTHER ASSETS 240 213
------------- ------------
TOTAL $176,042 $345,956
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other payables $29,083 $50,708
Accrued expenses 7,434 6,720
Income taxes payable 3,179 -
Deferred revenue 11,771 2,880
------------- ------------
Total current liabilities 51,467 60,308
DEFERRED INCOME TAXES 304 304
DEFERRED RENT 28 22
DEFERRED REVENUE 978 1,231
------------- ------------
Total liabilities 52,777 61,865
STOCKHOLDERS' EQUITY 123,265 284,091
------------- ------------
TOTAL $176,042 $345,956
============= ============
RACKABLE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
----------------------
April 2, April 1,
2005 2006
---------- -----------
REVENUE $30,489 $84,392
COST OF REVENUE 24,562 64,898
---------- -----------
GROSS MARGIN 5,927 19,494
---------- -----------
OPERATING EXPENSES:
Research and development 348 1,798
Sales and marketing 2,981 4,848
General and administrative 1,649 3,530
---------- -----------
Total operating expenses 4,978 10,176
---------- -----------
INCOME FROM OPERATIONS 949 9,318
OTHER INCOME (EXPENSE)--Net:
Change in fair value of embedded derivatives
in preferred stock (4,192) -
Interest income 2 664
Interest expense (782) -
Other income--net - 244
---------- -----------
Total other income (expense)--net (4,972) 908
---------- -----------
INCOME (LOSS) BEFORE INCOME TAX PROVISION (4,023) 10,226
INCOME TAX PROVISION (333) (4,254)
---------- -----------
NET INCOME (LOSS) $(4,356) $5,972
========== ===========
NET INCOME (LOSS) PER SHARE
Basic $(0.84) $0.25
========== ===========
Diluted $(0.84) $0.23
========== ===========
SHARES USED IN COMPUTING NET INCOME (LOSS) PER
SHARE
Basic 5,205,699 24,274,396
========== ===========
Diluted 5,205,699 26,234,692
========== ===========
Stock-based compensation is included in the following cost and
expense categories by period (in thousands):
Three Months Ended
---------------------------
April 2, April 1,
2005 2006
------------ ------------
Cost of revenue $25 $706
Research and development 17 511
Sales and marketing 65 854
General and administrative 32 686
------------ ------------
TOTAL $139 $2,757
============ ============
RACKABLE SYSTEMS, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
----------------------
April 2, April 1,
2005 2006
----------- ----------
NET INCOME (LOSS) - As Reported $(4,356) $5,972
Add back (deduct):
STOCK-BASED COMPENSATION 139 2,757
AMORTIZATION OF PATENTS AND CUSTOMER LIST 359 359
CHANGE IN FAIR VALUE OF EMBEDDED DERIVATIVES
IN PREFERRED STOCK 4,192 -
DIVIDENDS ON PREFERRED STOCK RECORDED AS
INTEREST EXPENSE 597 -
ADJUSTMENT TO TAX PROVISION (1) (207) (1,203)
----------- ----------
NON-GAAP NET INCOME $724 $7,885
=========== ==========
SHARES USED IN COMPUTING NET INCOME
(LOSS) PER SHARE
BASIC - As Reported 5,205,699 24,274,396
=========== ==========
BASIC - Non-GAAP 5,205,699 24,274,396
=========== ==========
DILUTED - As Reported 5,205,699 26,234,692
=========== ==========
DILUTED - Non-GAAP 16,305,581 26,234,692
=========== ==========
NET INCOME (LOSS) PER SHARE
BASIC - As Reported $(0.84) $0.25
=========== ==========
BASIC - Non-GAAP $0.14 $0.32
=========== ==========
DILUTED - As Reported $(0.84) $0.23
=========== ==========
DILUTED - Non-GAAP $0.04 $0.30
=========== ==========
(1) The provision for income taxes used in arriving at the non-GAAP
net income was computed using an income tax rate of 42.7% and 40.9%
for the three months ended April 2, 2005 and April 1, 2006,
respectively.
CONTACT: Rackable Systems, Inc.
Todd Ford, 408-240-8088
investorrelations@rackable.com
or
Sapphire Investor Relations, LLC
Erica Mannion, 212-766-1800 (Investor Relations)
investorrelations@rackable.com