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July 31, 2012
SEATTLE, WA, July 31 -- Global supercomputer leader Cray Inc. today announced financial results for the second quarter ended June 30, 2012. Revenue for the quarter was $84.2 million compared to $67.9 million in the prior year period. The Company reported net income for the quarter of $147.4 million or $3.91 diluted income per share compared to a net loss of ($3.0 million) or ($0.08) per share in the second quarter of 2011. The second quarter of 2012 operating results included a $139.1 million pre-tax gain, which resulted from the sale of the Company’s interconnect hardware development program to Intel Corporation.
Revenue for the six-month period ended June 30, 2012 was $196.5 million compared with $107.8 million in the prior year period. Net income was $152.4 million or $4.12 diluted income per share for the first half of 2012 compared to a net loss of ($4.4 million) or ($0.13) per share in the prior year period. Operating income for the first six months of 2012, excluding the $139.1 million pre-tax gain from the asset sale to Intel, was $20.8 million.
The first half of 2012 results included non-cash items of $4.0 million for depreciation and amortization and $2.4 million related to stock compensation expense.
Total gross profit margin for the second quarter of 2012 was 41% compared to 38% for the second quarter of 2011. For the second quarter of 2012, product margin was 42% and service margin was 35%.
Operating expenses for the second quarter of 2012 were $22.1 million compared to $28.7 million in the prior year period. The Company’s second quarter and first half of 2012 results were impacted by higher accrued incentive-based compensation due to strong operating results, as well as increased spending toward our growth initiatives compared to 2011. Second quarter of 2012 operating expenses benefited from $15 million in R&D co-funding credits related to the Company’s DARPA contract. The second quarter of 2012 results also included non-cash items of $2.1 million for depreciation and amortization and $1.2 million for stock compensation expense.
Cray’s effective tax rate for the first half of the year was 5% and benefited from the recognition of a capital loss and the partial release of a valuation allowance provided against deferred tax assets. The deferred tax asset balance primarily resulted from net operating loss carryforwards that were generated in previous periods.
As of June 30, 2012, cash balances totaled $223 million compared to $112 million as of March 31, 2012. Working capital increased by $168 million during the second quarter to $315 million as of June 30, 2012.
“We had a very strong quarter, led by the acceptance of our first petaflops system at a large commercial customer and the completion of a $140 million asset sale,” said Peter Ungaro, president and CEO of Cray. “During the first half of the year, we made good progress on each of our three growth initiatives while also delivering strong operating results. We were recently awarded a number of exciting new wins for our next-generation supercomputer, called ‘Cascade’, which is planned for general availability next year. We have a lot of work left to do in order to achieve our outlook for this year, but our business is in excellent shape as we continue to build on our strong market position now and into the future.”
A wide range of results remains possible for 2012. While many variables may impact our results, one significant item is the timing of a single planned customer acceptance, which would represent approximately $150 million in product revenue. This is the largest system we have ever built and its acceptance is dependent on several items, including third-party components, all on a tight timeline due to previous delays. Assuming acceptance of this system occurs in 2012, as currently planned, we continue to anticipate total revenue to be in the range of $430-$450 million for the year.
Revenue in the third quarter of 2012 is expected to be about $30 million. For the year, overall gross margins are anticipated to be in the 35 percent range and total operating expenses are expected to be about $120 million. Based on this outlook, we expect to be solidly profitable for 2012, independent of the $139 million pre-tax gain on the sale of our interconnect hardware development program that occurred during the second quarter.
The Company’s 2012 effective income tax rate is currently projected to be about 5-8% but is dependent on a number of variables.
Actual results for any future period are subject to large fluctuations given the nature of Cray’s business.
· In July, Cray announced it was awarded a contract to deliver a next-generation Cray supercomputer, code-named “Cascade”, and a next-generation Cray Sonexion storage system to the Pawsey Centre in Perth, Australia. The contract is valued at more than $21 million.
· In July, Cray announced it was awarded a contract to provide the Finnish IT Center for Science with a “Cascade” supercomputer. Consisting of product and services, the multi-year, multi-phase contract is valued at more than $12 million, and a vast majority of the system is expected to be delivered in 2014.
· In June, Cray announced it will install a “Cascade” system and a next-generation Cray Sonexion storage system at the Department of Energy’s National Energy Research Scientific Computing Center (NERSC). The multi-year, multi-phase procurement is valued at more than $40 million.
· In June, Cray announced that its “Cascade” systems will be available with Intel’s new Intel Xeon Phi coprocessors. The Intel Xeon Phi product family is based on Intel’s Many Integrated Core architecture, which is designed for highly parallel workloads.
· In June, as part of Cray’s technical enterprise/midrange growth initiative, Cray announced it was awarded a new contract by the Department of Defense High Performance Computing Modernization Program to deliver a new Cray XE6m supercomputer to the Naval Research Laboratory in Monterey, California. The initial system contract is valued at more than $16 million in product revenue. The contract also calls for Cray to significantly upgrade the program’s three existing Cray XE6 supercomputers.
· In June, Cray’s YarcData subsidiary launched a $100,000 Graph Analytics Challenge. The contest is designed to showcase the increasing applicability and adoption of graph analytics in solving Big Data problems.
· During the second quarter, Cray delivered and received acceptance on Cray Sonexion 1300 storage subsystems in the energy, government and academic market segments. Cray has now shipped over 50 petabytes of storage capacity in 2012.
· During the second quarter, Cray completed two different development milestones totaling $15 million in R&D credits for its Defense Advanced Research Projects Agency (DARPA) contract related to the development of its next-generation “Cascade” supercomputer.
Conference Call Information
Cray will host a conference call today, Tuesday, July 31, 2012 at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss its second quarter 2012 financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at 1- 855-894-4205 and enter the access code 14743057. To listen to the 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 1-855-859-2056, and entering the access code 14743057. The conference call replay will be available for 72 hours, beginning at 4:30 p.m. PDT on Tuesday, July 31, 2012.
About Cray Inc.
As a global leader in supercomputing, 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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