Cray Reports Third Quarter 2014 Financial Results

October 28, 2014

SEATTLE, Wash., Oct. 28 — Global supercomputer leader Cray Inc. today announced financial results for the third quarter ended September 30, 2014.

All figures in this release are based on U.S. GAAP unless otherwise noted. A reconciliation of GAAP to non-GAAP measures is included in the financial tables in this press release. Given the nature of the business, the Company’s results can fluctuate dramatically quarter-to-quarter.

Revenue for the quarter was $159.4 million, compared to $54.4 million in the third quarter of 2013. The Company reported net income for the quarter of $7.4 million, or $0.18 per diluted share, compared to a net loss of $11.0 million, or $0.29 per diluted share in the prior year period. Non-GAAP net income was $10.0 million, or $0.25 per diluted share for the quarter, compared to a non-GAAP net loss of $13.5 million, or $0.35 per diluted share for the same period last year.

Overall gross profit margin for the third quarter of 2014 was 30%, compared to 38% for the third quarter of 2013. Total non-GAAP gross profit margin for the third quarter of 2014 was 31%, compared to 39% for the third quarter of 2013.

Operating expenses for the third quarter of 2014 were $43.1 million, compared to $38.0 million for the prior year period. Non-GAAP operating expenses for the third quarter of 2014 were $39.8 million, compared to $36.2 million for the prior year period. The increase in 2014 GAAP and non-GAAP operating expenses was driven largely by the Company’s investments in big data.

As of September 30, 2014, cash, investments and restricted cash totaled $142 million, compared to $212 million at June 30, 2014. Working capital at the end of the third quarter of 2014 was $293 million, compared to $301 million at the end of the second quarter of 2014.

“We had a strong quarter, led by the completion of one of our largest systems ever in Europe at the European Centre for Medium-Range Weather Forecasts,” said Peter Ungaro, president and CEO of Cray. “We’re on a strong run of new contract awards, including winning the largest international contract we’ve ever been awarded at the Met Office in the UK, and we’re on pace to have another record year. We’re also in the middle of refreshing our entire product line top-to-bottom in the second half of 2014, with recent updates to our flagship XC supercomputer and CS cluster system, a new data analytics solution in our Urika family and an upgrade to our Sonexion storage solution on the way. While we still have work left to do in the fourth quarter, I’m pleased with where we stand and in our ability to deliver strong results again this year, continuing our growth and momentum in the exciting supercomputing and big data markets.”

Outlook

A wide range of results remains possible for 2014. A significant portion of our expected fourth quarter revenue is dependent on several large systems which are currently anticipated to be accepted late in the fourth quarter. These acceptances are complex with much work left to do. Assuming successful acceptance of these systems, the Company anticipates revenue to be in the range of $600 million for the year. Non-GAAP gross margin for 2014 is anticipated to be in the 33-34% range. Total non-GAAP operating expenses for the year are anticipated to be about $175 million. Based on this outlook, the Company expects to be profitable on both a GAAP and non-GAAP basis for 2014.

The Company’s 2014 effective non-GAAP tax rate is expected to be about 10%.

While it is very early in our planning process, for 2015 we expect annual revenue to continue to grow. Revenue is expected to ramp quarterly during the year, with about $50 million in the first quarter. Based on this outlook, we expect to improve our GAAP and non-GAAP operating profit margin for 2015.

Actual results for any future period are subject to large fluctuations given the nature of Cray’s business.

Recent Highlights

  • In October, Cray was awarded a $128 million contract to provide the Met Office in the UK with multiple Cray XC supercomputers and Cray Sonexion storage systems. Consisting of three phases spanning multiple years, system deliveries are expected between 2014 and 2017, with major deliveries beginning in 2015.
  • In October, Cray launched the Urika-XA big data analytics system. The Cray Urika-XA system is a pre-integrated, open platform for high-performance big data analytics, providing customers with the benefits of a turnkey analytics appliance combined with a flexible, open platform that can be modified for future analytics workloads. The platform enables organizations to gain insight and capture business value rapidly through advanced analytics, using either the pre-configured Hadoop and Spark frameworks or user-installed analytic tools.
  • In September, Cray launched the latest generation of its high-end supercomputing system and cluster solution, the Cray XC40 supercomputer and Cray CS400 cluster supercomputer. Both are available and shipping now. The Cray XC40 is also available with the Company’s new DataWarp technology, which is an applications I/O accelerator that addresses the growing performance gap between compute resource and disk-based storage.
  • In September, Cray was awarded a $26 million contract by the Department of Defense High Performance Computing Modernization Program. Scheduled for installation in late 2014, the Cray XC40 supercomputer and Cray Sonexion storage system will be located at the U.S. Army Research Laboratory.
  • In September, Cray announced that it was awarded a $13 million contract to provide the PDC Center for High Performance Computing at the KTH Royal Institute of Technology in Stockholm, Sweden with a Cray XC40 supercomputer.
  • In August, Cray announced the launch of the Cray CS-Storm — a high-density accelerator compute system based on the Cray CS300 cluster supercomputer. Featuring up to eight NVIDIA Tesla GPU accelerators and a peak performance of more than 11 teraflops per node, the Cray CS-Storm system is one of the most powerful single-node cluster architectures available today.
  • In September, Cray announced that supercomputing industry veteran Steve Scott had rejoined the Company as senior vice president and chief technology officer. With more than two decades of supercomputing experience at Cray, NVIDIA and Google, Scott returned to Cray to help define the technology that will drive the Company’s next generation of supercomputing and big data solutions.

Conference Call Information

Cray will host a conference call today, Tuesday, October 28, 2014 at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss its third quarter financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at (866) 362-9806. International callers should dial (765) 889-6838. 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. A telephonic replay of the call will also be available by dialing (855) 859-2056, international callers dial (404) 537-3406, and entering the access code 24139652. The conference call replay will be available for 72 hours, beginning at 4:45 p.m. PDT on Tuesday, October 28, 2014.

About Cray Inc.

Global supercomputing leader Cray Inc. provides innovative systems and solutions enabling scientists and engineers in industry, academia and government to meet existing and future simulation and analytics challenges. Leveraging more than 40 years of experience in developing and servicing the world’s most advanced supercomputers, Cray offers a comprehensive portfolio of supercomputers and big data storage and analytics solutions delivering unrivaled performance, efficiency and scalability. 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 meet the market’s continued demand for realized performance. Go to www.cray.com for more information.

Source: Cray Inc.

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