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November 08, 2010
Company continues streak of new contract wins and maintains guidance for 2010
SEATTLE, Nov. 8 -- Global supercomputer leader Cray Inc. today announced financial results for the third quarter ended September 30, 2010. Revenue for the quarter was $42.8 million compared to $58.6 million in the prior year period. The company reported a net loss for the quarter of ($18.8 million) or ($0.55) per share compared to a net loss of ($2.1 million) or ($0.06) per share in the third quarter of 2009.
Total gross profit margin for the third quarter was 25 percent, compared to 39 percent in the third quarter of 2009. Product margin in the third quarter of 2010 was 22 percent, which was driven by a limited number of transactions. The third quarter 2010 service margin of 29 percent was negatively impacted by a delayed Custom Engineering (CE) contract.
Operating expenses increased in the third quarter of 2010 to $29.2 million compared to $27.1 million in the prior year period. As expected, third quarter 2010 operating expenses were higher than in the first and second quarters of 2010 due to R&D reimbursement milestones passed in the first two quarters of 2010. The third quarter 2010 results included non-cash items of $2.3 million for depreciation and amortization and $1.1 million related to stock compensation expense.
Revenue for the nine-month period ending September 30, 2010 was $100.0 million compared with $195.8 million in the prior year period. As previously disclosed, this is consistent with expectations for revenue concentration late in the year driven by the introduction of the Cray XE6 supercomputer in mid-2010. For the first nine months of the year, total operating expenses were $65.1 million compared to $72.5 million in the prior year period. Net loss was ($37.0 million) or ($1.08) per share for the first nine months of 2010, compared to a net loss of ($3.6 million) or ($0.11) per share in the prior year period. The nine-month period ending September 30, 2010 results included non-cash items of $6.8 million for depreciation and amortization and $3.6 million related to stock compensation expense.
As of September 30, 2010, cash balances totaled $73.5 million. Inventory at the end of the third quarter was $149.3 million, including $108.2 million at customer sites.
"While we have a lot of work left to do, we remain on track to deliver strong results for 2010, including revenue growth and profitability for the year," said Peter Ungaro, president and CEO of Cray. "We have been shipping our new Cray XE6 supercomputers for the past several months and we are in the installation and acceptance process for all of the largest systems included in our 2010 outlook. In addition to our continued strength at the high-end of the supercomputing market, including exciting new wins at the University of Stuttgart and the University of Chicago, I am also pleased with the progress of our Custom Engineering initiative and the leverage it drives in our business model. Our momentum continues to build with the recent release of our latest generation Cray XE6 supercomputer and its two major upgrades planned for next year, and with our growing CE business we are positioned for continued growth and profitability."
A wide range of results remains possible for 2010. Many variables may impact our results, but one significant item is the timing of customer acceptances of our Cray XT6 and Cray XE6 supercomputers at several customer sites.
Assuming successful customer acceptances in 2010 as currently planned, we continue to anticipate revenue in the range of $305 to $325 million for 2010. Gross margins for 2010 are expected to be in the low to mid-30 percent range. Operating expenses are expected to be lower in 2010 than in 2009, driven primarily by lower outside services and higher R&D co-funding credits. Based on this outlook, we expect to be profitable for 2010.
Cash balances are expected to increase significantly from third quarter levels by the end of the first quarter of 2011.
Based on the current outlook for 2010, Cray expects its revenue to grow and to be profitable in 2011. The company's 2011 outlook will be impacted directly by actual results for 2010. Actual results for any future period are subject to large fluctuations given the nature of Cray's business.
Conference Call Information
Cray will host a conference call today, Monday, November 8, 2010, at 1:30 p.m. PST (4:30 p.m. EST) to discuss 2010 third quarter financial results. To access the call, dial into the conference at least 10 minutes prior to the beginning of the call at 1-877-941-3896. International callers should dial 1-480-629-9771. To listen to the live audio webcast, go to the Investors section of the Cray website at http://investors.cray.com.
If you are unable to attend the live conference call, an audio webcast replay will be available in the Investors section of the Cray website for 180 days. If you do not have Internet access, a replay of the call will be available by dialing 1-800-406-7325, international callers dial 1-303-590-3030, and entering the access code 4384158. The conference call replay will be available for 72 hours, beginning at 4:30 p.m. PST on Monday, November 8, 2010.
About Cray Inc.
As a global leader in supercomputing, Cray (NASDAQ: CRAY) provides highly advanced supercomputers and world-class services and support to government, industry and academia. Cray technology is designed to enable scientists and engineers to achieve remarkable breakthroughs by accelerating performance, improving efficiency and extending the capabilities of their most demanding applications. Cray's Adaptive Supercomputing vision is focused on delivering innovative next-generation products that integrate diverse processing technologies into a unified architecture, allowing customers to surpass today's limitations and meeting the market's continued demand for realized performance. Go to www.cray.com for more information.
Source: Cray Inc.
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