HPCwire: Cray Reports Loss for Third Quarter 2009

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October 29, 2009

Cray Reports Loss for Third Quarter 2009

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Company projects annual operating profit in 2009 and 2010

SEATTLE, Oct. 29 -- Global supercomputer leader Cray Inc. today announced financial results for the third quarter ended Sept. 30, 2009. Revenue for the quarter was $58.6 million compared to $54.6 million in the prior year period, an increase of 7 percent. The company reported a net loss for the quarter of ($2.1 million) or ($0.06) per share compared to net income of $3.6 million or $0.11 per share in the third quarter of 2008.

Total gross profit margin for the third quarter of 2009 was 39 percent compared to 51 percent in the third quarter of 2008. Product margin for the third quarter of 2009 was 23 percent and was negatively impacted by a $4.5 million write down (a 14 percent product margin impact) for inventory purchased in 2008 as part of a last-time buy. Service margin was 59 percent in the third quarter of 2009 and benefited from the execution of a contract that allowed us to recognize approximately $3.9 million of revenue for work performed in the prior quarter.

Operating expenses for the third quarter were $27.1 million compared to $22.3 million in the prior year period. As previously anticipated, third quarter 2009 operating expenses increased due to a delayed milestone on a co-funded development contract. Also included in third quarter 2009 results were non-cash items of $1.8 million for gross depreciation and amortization and $1.2 million related to stock compensation expense.

For the nine month period ended September 30, 2009, Cray reported total revenue of $195.8 million compared to $127.5 million in the prior year period, an increase of 54 percent. Net loss was ($3.6 million) or ($0.11) per share for the nine months ended September 30, 2009 compared to a net loss of ($14.8 million) or ($0.45) per share for the nine month period ended September 30, 2008. The 2009 year-to-date net income results include $4.6 million of stock compensation and $1.7 million of non-cash items related to recent changes in accounting guidelines applicable to our convertible notes.

As of September 30, 2009, cash and short-term investments totaled $67.8 million.

"We are building a strong base for our future, targeting profitable operations in 2009 following a major growth year in 2008. This has been driven by the performance of our XT5 supercomputers and custom engineering initiative," said Peter Ungaro, president and CEO of Cray. "We've made significant strides in expanding our addressable market by bringing out several new products and services to complement our high-end supercomputers -- with more planned over the coming months. All of this has put us in an excellent position to continue to be the technology leader in high performance computing and drive strong revenue growth into the future."

Outlook

For 2009, Cray now expects revenue in the range of $285 million, including about $90 million in service revenue. Overall gross profit margin for the year is expected to be approximately 36 percent. Operating expenses for 2009, assuming completion of a co-funded development milestone in the fourth quarter, are anticipated to be in the range of $98 million. Based on achieving this outlook, we anticipate a modest operating income for 2009. Results for the year include approximately $6 million of stock-based compensation.

For 2010, Cray expects its revenue to continue to grow, perhaps modestly, and expects to be profitable. Revenue is expected to be heavily weighted to late in the year, driven by the timing of new product introductions.

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