Company exceeds net revenue guidance range and attains record revenue figures CARLSBAD, Calif., Aug. 6
CARLSBAD, Calif., Aug. 6 /PRNewswire-FirstCall/ -- Dot Hill Systems Corp.
(Nasdaq: HILL) today announced financial results for the second quarter ended
June 30, 2008. For the second quarter of 2008, net revenue was $71.0 million
(a record for the company's quarterly net revenue), compared to $56.2 million
for the second quarter of 2007, and $52.8 million for the first quarter of
2008, which included a reduction in net revenue of $2.3 million associated
with a warrant issued to Hewlett-Packard.
Net revenue for the second quarter of 2008 exceeded the guidance range of
$66 to $70 million that the company provided on June 26, 2008.
For the second quarter of 2008, net loss was $7.4 million, or $0.16 per
fully diluted share. This compares to a net loss of $3.7 million for the
second quarter of 2007, or $0.08 per fully diluted share, and a first quarter
2008 net loss of $6.1 million, or $0.13 per fully diluted share, which
included the Hewlett-Packard warrant of $2.3 million and the proceeds from a
legal settlement of $3.8 million.
On a non-GAAP basis after excluding share-based compensation expense,
foreign currency translation losses and severance costs, net loss for the
second quarter of 2008 was $6.0 million, or $0.13 per fully diluted share, and
was within the $0.12 to $0.16 net loss per share range issued by the company
on June 26, 2008.
Gross margin for the second quarter of 2008 was 10.2 percent as compared
to second quarter 2007 gross margin of 12.3 percent and first quarter 2008
gross margin of 7.9 percent. The company attributes the decrease in gross
margin percentage on a year-over-year basis primarily to a change in product
and customer sales mix, as the company's higher margin net revenue from Sun
Microsystems have declined over the past year, while shipments of the
company's lower margin Series 2000 and Series 5000 products to NetApp,
Hewlett-Packard and other customers have increased. Excluding share-based
compensation expense and severance costs, non-GAAP gross margin for the second
quarter of 2008 was 10.6 percent.
"We are pleased with our accomplishments during the second quarter of
2008," said Dana Kammersgard, president and chief executive officer, Dot Hill.
"Overall, we had a strong quarter as we achieved record net revenue, with
three of our OEM customers each generating in excess of 20 percent of our
total net revenue. Additionally, we experienced 34 percent sequential net
revenue growth and 26 percent net revenue growth on a year-over-year basis.
We remain keenly focused on improving margins and reducing costs to reach our
goal of sustainable profitability."
The company exited the second quarter of 2008 with cash and cash
equivalents of $62.1 million, with no outstanding debt. This compares to the
first quarter 2008 balance of cash and cash equivalents of $77.4 million, and
no outstanding debt. The sequential decrease in cash and cash equivalents was
due primarily to operating losses and increased working capital requirements
associated with the significant increase in accounts receivable from
Hewlett-Packard.
The company is targeting third quarter 2008 net revenue in the range of
$73 to $78 million and a net loss per fully diluted share in the range of
$0.06 to $0.10 on a non-GAAP basis, which excludes share-based compensation
expense, foreign currency gains or losses, severance and restructuring
expenses.
Dot Hill's second quarter 2008 financial results conference call is
scheduled to take place on August 6, 2008 at 4:30 p.m. ET. Please join us for
a live audio webcast at http://www.dothill.com in the Investor Relations
section. If you prefer to join via telephone, please dial 877-627-6555 (U.S.)
or 719-325-4892 (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, dial 888-203-1112
(U.S.) or 719-457-0820 (International) and enter passcode 8017422.
About Non-GAAP Financial Measures
This press release contains financial results that exclude the effects of
stock-based compensation expense, severance costs and foreign currency
adjustments and are not in accordance with U.S. generally accepted accounting
principles (GAAP). The company believes that these non-GAAP financial measures
provide meaningful supplemental information to both management and investors
that are indicative of the company's core operating results and facilitates
comparison of operating results across reporting periods. 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 expected financial results in accordance with GAAP.
About Dot Hill
Delivering innovative technology and global support, Dot Hill empowers the
OEM community to bring unique storage solutions to market, quickly, easily and
cost-effectively. Offering high performance and industry-leading uptime, Dot
Hill's RAID technology is the foundation for best-in-class storage solutions
offering enterprise-class security, availability and data protection. The
company's products are in use today by the world's leading service and
equipment providers, common carriers, advanced technology and
telecommunications companies as well as government agencies. Dot Hill
solutions are certified to meet rigorous industry standards and military
specifications, as well as RoHS and WEEE international environmental
standards. Headquartered in Carlsbad, Calif., Dot Hill has offices and/or
representatives in China, Germany, Japan, United Kingdom and the United
States. For more information, visit us at http://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: Dot Hill's projected financial results for the
third quarter of 2008; Dot Hill's ability to achieve profitability; and
continued diversification of Dot Hill's revenue stream. 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 third
quarter of 2008 may be different from the financial guidance provided in this
press release; 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 form 10-K and subsequent reports most recently filed with the
Securities and Exchange Commission 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.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008
NET REVENUE $56,199 $71,027 $109,640 $123,853
COST OF GOODS SOLD49,275 63,80596,042 112,465
GROSS PROFIT 6,9247,22213,59811,388
OPERATING EXPENSES:
Sales and marketing3,8713,647 7,779 7,919
Research and development 4,7977,12510,87114,549
General and administrative 3,3223,939 6,992 6982
Legal settlement -- -(3,836)
Total operating expenses 11,990 14,71125,64225,614
OPERATING LOSS(5,066) (7,489) (12,044) (14,226)
OTHER INCOME:
Interest income, net 1,231 358 2,539 1,066
Other income (expense), net-- -79
TOTAL OTHER INCOME, NET1,231 358 2,539 1,145
LOSS BEFORE INCOME TAXES (3,835) (7,131) (9,505) (13,081)
INCOME TAX EXPENSE (BENEFIT) (93) 239 199 398
NET LOSS $(3,742) $(7,370) $(9,704) $(13,479)
NET LOSS PER SHARE:
Basic and diluted $(0.08) $(0.16) $(0.21) $(0.29)
WEIGHTED AVERAGE SHARES USED TO
CALCULATE NET LOSS PER SHARE:
Basic and diluted 45,472 46,05545,31546,005
COMPREHENSIVE LOSS:
Net loss $(3,742) $(7,370) $(9,704) $(13,479)
Foreign currency translation
adjustments 163 130 (441) (101)
Net unrealized gain on short-term
investments-
Comprehensive loss $(3,579) $(7,240) $(10,145) $(13,580)
DOT HILL SYSTEMS CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Amounts)
2007 2008
ASSETS
Current Assets:
Cash and cash equivalents $82,358 $62,082
Accounts receivable, net of allowance of $629
and $302 32,445 46,458
Inventories 9,013 13,584
Prepaid expenses and other 3,9684,534
Total current assets 127,784 126,658
Property and equipment, net9,5998,231
Intangible assets, net 2,2801,467
Other assets 264 225
Total assets$139,927 $136,581
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $28,472 $36,004
Accrued compensation 3,1153,237
Accrued expenses 6,2274,684
Deferred revenue 1,4091,196
Income taxes payable 143 488
Total current liabilities 39,366 45,609
Other long-term liabilities 4,1323,616
Total liabilities 43,498 49,225
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.001 par value, 10,000 shares
authorized, no shares issued and outstanding at
December 31, 2007 and June 30, 2008, respectively --
Common stock, $.001 par value, 100,000 shares
authorized, 45,009 and 45,785 shares issued and
outstanding at December 31, 2007 and June 30,
2008, respectively 46 46
Additional paid-in capital 294,193 298,701
Accumulated other comprehensive loss(3,100) (3,202)
Accumulated deficit (194,710)(208,189)
Total stockholders' equity96,429 87,356
Total liabilities and stockholders' equity $139,927 $136,581
DOT HILL SYSTEMS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
20072008 2007 2008
Cash Flows Related to Operating
Activities:
Net loss $(3,742) $(7,369) $(9,704) $(13,479)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,6471,5263,422 2,991
Loss on disposal of property and
equipment 166 62 16657
Provision for doubtful accounts (41) 51 (41) (120)
Issue of warrant to customer --- 2,282
Share-based compensation expense752 898 977 1,563
Changes in operating assets and
liabilities:
Accounts receivable 60 (9,819) 2,169 (13,851)
Inventories(631) 843 (826) (4,547)
Prepaid expenses and other assets (317) 96 725 (530)
Accounts payable (3,407) 383 (3,824)7,370
Accrued compensation and other
expenses (755) (1,327) (3,005) (1,448)
Deferred revenue(20) (77) 8 (228)
Income taxes payable (143) 219 15 345
Other liabilities (81)(153) (65) (516)
Net cash used in operating activities (6,512) (14,667) (9,983) (20,111)
Cash flows related to investing
activities
Purchase of property and equipment (969)(597) (1,914) (865)
Net cash used in investing activities(969)(597) (1,914) (865)
Cash flows related to financing
activities
Proceeds from exercise of stock
options and warrants40- 134 198
Proceeds from sale of stock to
employees-- 508 465
Net cash provided by financing
activities40- 642 663
Effect of exchange rate changes on cash (75) (60) (11) 37
Net decrease in cash and cash
equivalents (7,516) (15,324) (11,266) (20,276)
Cash and cash equivalents beginning of
period95,913 77,406 99,66382,358
Cash and cash equivalents end of
period $88,397 $62,082 $88,397 $62,082
Supplemental disclosures of cash flow
information
Construction in progress costs
incurred but not paid 350 133 350 275
Cash paid for income taxes 47 21 17256
DOT HILL SYSTEMS CORP.
RECONCILIATION TABLE OF NON-GAAP MEASURES
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2007 2008 2007 2008
Net loss $(3,742) $(7,369) $(9,704) $(13,479)
Effect of currency (gain)/loss (21) 250 (262) (44)
Effect of share-based compensation 751 898 977 1,563
Effect of issuance of warrant to
customer- - - 2,282
Effect of legal settlement - - - (3,836)
Effect of severance costs 51 18658508
Net loss as adjusted $(2,961) $(6,035) $(8,931) $(13,006)
Net loss per share:
Basic and diluted $(0.07) $(0.13) $(0.20)$(0.28)
Weighted average shares used to
calculate net loss per share:
Basic and diluted 45,47246,05545,315 46,005
Net revenue$56,199 $71,027 $109,640 $123,853
Effect of issuance of warrant to
customer- - - 2,282
Net revenue as adjusted$56,199 $71,027 $109,640 $126,135
Gross profit$6,924$7,222 $13,598$11,388
Effect of issuance of warrant to
customer- - - 2,282
Effect of share-based compensation 68 108 170204
Effect of severance costs- 175 -224
Gross profit as adjusted$6,992$7,505 $13,768$14,098
SOURCE Dot Hill Systems Corp.
