Fourth Quarter and Fiscal Year 2014 Financial Results Released by SGI
MILPITAS, Calif., Aug. 6 — SGI, the trusted leader in high performance computing and data analytics, today reported financial results for its fiscal fourth quarter and year ended Jun. 27, 2014.
Total revenue for the fiscal fourth quarter was $142 million, which compares with $124 million in the previous quarter and $171 million in the fourth fiscal quarter of 2013. For fiscal year 2014, total revenue was $530 million, down from $767 million in fiscal year 2013, primarily as a result of the company’s strategic exit from legacy cloud infrastructure accounts and a decline in its Federal business.
GAAP net loss for the fourth quarter was $10 million, or $(0.30) per share, which compares with a GAAP net loss of $22 million, or $(0.64) per share, in the prior quarter, and GAAP net loss of $4 million, or $(0.13) per share, in the fourth quarter of fiscal 2013. Non-GAAP net loss for the quarter was $0.5 million, or $(0.01) per share, which compares with a non-GAAP net loss of $7 million, or $(0.22) per share, in the prior quarter and non-GAAP net income of $6 million, or $0.17 per diluted share, in the year-ago period.
For fiscal year 2014, GAAP net loss was $53 million, or $(1.54) per share, which compares with a net loss of $3 million, or $(0.09) per share in fiscal 2013. On a non-GAAP basis, the company reported a full-year net loss of $13 million, or $(0.39) per share, which compares with net income of $12 million, or $0.36 per diluted share, in fiscal year 2013.
- Core revenue was $141 million, up 15% from $122 million in the prior quarter and up 12% from $125 million in the same quarter a year ago. For the year, core revenue was $501 million, down 7% from $542 million in fiscal 2013 solely due to declines in the company’s Federal business. Core revenue includes HPC, high performance data analytics and data management, and services, but excludes revenue related to legacy cloud infrastructure and “low-margin deals” in prior periods.
- Core revenue in the company’s Federal business, which includes U.S. government customers, system integrators, and higher education institutions, was $37 million, down 18% from $45 million in the prior quarter and down 45% from $67 million in the same quarter one year ago. For the year, core revenue in Federal was $203 million, down 28% from $282 million in fiscal 2013. The decline for the year was driven primarily by disruptions in Federal spending, particularly in certain intelligence-related programs. Bookings for new programs in the company’s core Federal business increased substantially in the fiscal fourth quarter, and the company believes that its Federal revenue is positioned to grow in fiscal 2015.
- Outside of the Federal business (commercial and non-U.S. public sector), core revenue was $103 million, up 34% from $77 million in the prior quarter and up 78% from $58 million in the same quarter a year ago. For the year, core revenue in this sector of the business was $298 million, up 15% from $260 million in fiscal 2013.
- Revenue related to the legacy cloud, which is generally commodity servers for public cloud infrastructure, was less than $2 million, which compares with approximately $2 million in the prior quarter and $46 million in the fiscal fourth quarter of 2013.
“Results for the quarter were at the high end of our expectations for revenue, margins and cash flow. We executed well on several large system deployments that were critical to our revenue performance in the quarter. We also saw a significant increase in bookings in our Federal business, which we believe bodes well for growth in fiscal 2015,” said Jorge Titinger, president and CEO of SGI. “Looking ahead, our goal is to win approximately $700 million of business in fiscal 2015, reflecting significant increases in our HPC pipeline and in our expected win rate on multiple key large HPC deals. Because these large deals have long deployment cycles, a range of revenue outcomes for the year are possible; we therefore currently expect revenue for the year in the range of $525 to $575 million, reflecting core revenue growth of 5% to 15% for the full year. This outlook includes only a modest contribution from our new UV300 HANA appliance, which we expect will begin to generate new revenue in the second half of FY15, positioning us for strong growth in FY16 and beyond.”
- On Aug. 6, SGI announced that the SGI UV 2000 became the first single-node SMP to exceed 100 GTEPS, as verified by the Graph 500 benchmark test for measuring large data volume processing by supercomputers. In addition to this new performance world record, the Green Graph 500 test also revealed the SGI UV 2000 to be the commercial supercomputer with the lowest power-consumption figures. The record-setting benchmarks were conducted on the SGI UV 2000 recently installed at the Institute of Mathematics for Industry at Kyushu University in Japan.
- On Jul. 6, SGI announced that Semiconductor Energy Laboratory (SEL) in Japan has selected SGI for a new, large-scale research and development installation, which will be used to facilitate the research and development of semiconductor technologies, combines SGI’s large-scale shared-memory SGI UV 2000 server and SGI ICE X blade-type cluster server into a unified, large-scale system.
- On Jun. 24, SGI announced that its SGI ICE X supercomputer platform garnered 4 of the top 5 most efficient supercomputer rankings for standard x86-based systems, including the #1 position, as reported on the newly released TOP500 list, demonstrating SGI’s technical ability to help customers achieve their goals without the performance compromise of less efficient systems.
- On Jun. 20, UK Atomic Weapons Establishment (AWE) launched SGI ICE X Systems to accelerate research and scientific modelling for UK Defense Organization. SGI system enables AWE to quickly advance research and development, encompassing the entire life cycle of nuclear warheads, from initial concept, assessment and design through component manufacture and assembly, in-service support, decommissioning and then disposal. The SGI ICE X system at AWE ranks #40 on the TOP500 list.
- On Jun. 3, SGI previewed a single-node in-memory appliance at the SAPPHIRE NOW conference. Using the scalable shared memory architecture of SGI’s next-generation SGI UV system together with SAP HANA, the new in-memory appliance from SGI is designed to streamline database management for single large node environments, which require extremely high capacity and scale to meet the needs of in-memory databases.
SGI provides high-performance computing and data management solutions to large government, higher education, and commercial customers. Any given customer deal can include a varying mix of compute and storage hardware, software, and services, and generally will carry terms that result in most of the product revenue associated with the deal being recognized upon final shipment or acceptance of the system. The timing of booking, installation, and acceptance of large deals is difficult to predict and can cause significant swings in quarterly revenue. The company derives a substantial portion of its revenue from the U.S. government and from third parties and educational institutions that receive funding from the U.S. government. Government shutdowns, protracted Federal budget deliberations, and other disruptions in the timely funding or acceptance of government-related programs can impact the award, deployment, and final acceptance of systems. Management provides guidance on revenue and other items based on its current expectations of the timing of revenue and associated costs; however, there can be no assurance that revenues and associated costs will be recognized according to expected schedules and management assumes no obligation to update its guidance if the timing of revenues or other circumstances in the business differ from current expectations.
The company is providing the following outlook for the fiscal year ending Jun. 26, 2015 and the fiscal first quarter ending Sep. 26, 2014:
- The company’s goal is to win approximately $700 million of business in fiscal 2015, including several relatively large deals with long deployment cycles. As a result, a range of revenue outcomes for the year is possible. The company currently expects total revenue for the year in the range of $525 to $575 million. This revenue outlook would compare with core revenue of $501 million in fiscal 2014, representing revenue growth of approximately 5% to 15%. Revenue for the fiscal year is expected to be back-end loaded, with 40% to 45% of revenue in the first half of the year.
- On a GAAP basis, the company expects to report a loss for the year of $15 to $28 million, or $(0.43) to $(0.79) per share. The company expects to be profitable on a non-GAAP basis for the full year. Non-GAAP net income for the fiscal year is expected to exclude approximately $25 million of adjustments, including stock-based compensation expense, restructuring and severance costs, intangibles amortization and other items. EPS calculations assume 36 million weighted average shares outstanding.
- For the fiscal first quarter, total revenue is expected to be in the range of $115 million to $125 million.
- GAAP net loss for the fiscal first quarter is expected to be in the range of $11 to $13 million, or $(0.31) to $(0.37) per share. Non-GAAP net loss for the fiscal first quarter is expected to be in the range of $4.5 to $6.5 million, or $(0.13) to $(0.19) per share. Non-GAAP net income for the fiscal first quarter is expected to exclude approximately $6 million of adjustments, including stock-based compensation expense, restructuring and severance costs, intangibles amortization and other items. EPS calculations for the fiscal first quarter assume 34.5 million weighted average shares outstanding.
Webcast and Conference Call Information
Management will host a conference call and a live webcast of the earnings conference call will be available on the Investor Relations section of the Company’s website at investors.sgi.com beginning at 1:30 p.m. PT (4:30 p.m. ET). A replay of the webcast will be available approximately two hours after the conclusion of the call and will remain available until the next earnings call.
The public can also listen to the 1:30 p.m. PT (4:30 p.m. ET) earnings conference call by dialing (888) 463-5422 (toll-free) or (970) 315-0484 (international). An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available for five days and can be accessed by dialing (855) 859-2056 (toll-free) or (404) 537-3406 (international) and entering the confirmation code: 72921173.
SGI is a global leader in high performance solutions for compute, data analytics and data management that enable customers to accelerate time to discovery, innovation, and profitability. Visit sgi.com for more information.