sTec, Inc. (Nasdaq:STEC) announced today the Company's financial
results for the first quarter ended March 31, 2013.
Revenue for the first quarter of 2013 was $22.0 million, a
decrease of 56.3% from $50.4 million for the first quarter of 2012
and a decrease of 37.3% from $35.1 million for the fourth quarter
of 2012.
GAAP gross profit margin was 26.8% for the first quarter of
2013, compared to 35.9% for the first quarter of 2012 and 32.2% for
the fourth quarter of 2012. GAAP diluted loss per share was $0.54
for the first quarter of 2013, compared to $0.23 for the first
quarter of 2012 and $0.50 for the fourth quarter of 2012.
Non-GAAP gross profit margin was 27.7% for the first quarter of
2013, compared to 36.4% for the first quarter of 2012 and 32.8% for
the fourth quarter of 2012. Non-GAAP diluted loss per share was
$0.41 for the first quarter of 2013, compared to $0.17 for the
first quarter of 2012 and $0.35 for the fourth quarter of 2012.
A reconciliation of GAAP to non-GAAP results is provided in the
tables included in this release.
Business Outlook
"Our results were in-line with the guidance that we provided for
the first quarter of 2013 as we continue to work towards the
objective of diversifying our market presence and expanding our
customer base through our new go-to-market strategy," said Mark
Moshayedi, sTec's CEO and President.
Go-to-market strategy for now and for the
long-term
"Based on the evolving dynamics of our industry, we have
implemented a new go-to-market strategy. Focusing our efforts on
selling SSDs as a component to a limited set of OEM customers in a
market that has attracted much larger and more vertically
integrated competitors has created challenges for us. In response
to these changing dynamics, we are making significant investments
in the people, tools and resources necessary to transition
from an OEM-centric model to a more-balanced and diversified sales
model. One of our high priority initiatives is to become more
recognized and valued to end-users. To that end, we have re-branded
the company, launched a global channel program and have hired
enterprise sales and marketing personnel with expertise in systems
and applications. As we continue to execute our plan, our target is
to achieve a sales mix by year-end with about half of our revenue
coming from traditional OEM customers and the other half coming
from non-OEM customers, including global channel partners and
direct enterprise customers. Longer-term, our goal is to have our
customer base as widely distributed as possible."
Taking advantage of changes in market
dynamics
Jeff Janukowicz, research director, Solid State Drives and
Enabling Technologies at IDC expects that "by 2016, just under half
of all enterprise storage capacity shipped will be through
non-system OEM channels, including shipments directly to hyperscale
cloud datacenters, ODMs, and specialized system integrators."
"Our model of targeting end-customers is right in alignment with
this trend," continued Mark Moshayedi. IT managers have become more
sophisticated and the problems of managing their traditional
storage architectures more acute. As a result, companies are
choosing to tailor their datacenters to be better optimized for
their applications. In these instances, pre-configured solutions
rarely match the customers' needs. The capabilities of our
enterprise sales team allow us to deliver value to customers
through a solutions-based approach. The combination of systems,
applications and SSD expertise that we deliver to the customer
gives us a unique advantage in the marketplace. But more
importantly, it allows us to solve our customers' most critical
problems with our solutions."
Guidance
sTec's current expectation for the second quarter of 2013 is as
follows:
- Revenue to range from $23 million to $26 million.
- Non-GAAP diluted loss per share to range from $0.41 to
$0.43.
sTec's projected non-GAAP loss per share results exclude
employee stock compensation expense, litigation costs and other
items that the Company does not consider indicative of its
underlying business performance.
Conference Call
sTec will hold an open conference call to discuss results for
the first quarter of 2013. The call will take place today at 1:30
p.m., Pacific/ 4:30 p.m., Eastern. The call-in numbers for the
conference are (877) 645-6380 (United States and Canada) and (914)
495-8562 (International).
Webcast
This call will be webcast. The webcast can be accessed by
clicking on "Company" near the top, right-hand side of the
Company's home page at www.stec-inc.com. Then click on "Investor
Relations," followed by "Presentations & Web Events."
Replay
The webcast will also be archived and available for replay
beginning approximately two hours after the live call
concludes.
About sTec, Inc.
sTec, Inc. is a leading global provider of enterprise-class
solid-state storage solutions designed for the ever-growing
performance, reliability and endurance requirements of today's
advanced data centers. The industry's first company to deploy
solid-state drives (SSDs) into large-scale enterprise environments,
sTec offers the industry's widest range of solid-state storage
solutions, which protect critical information for major business
and government organizations worldwide. Headquartered in Santa Ana,
California, sTec also serves the embedded and military/aerospace
markets with SSDs for industrial and rugged environments. For more
information, visit www.stec-inc.com.
"For information about sTec and to subscribe to the Company's
"Email Alerts" service, please click on "Company" near the top,
right-hand side of the Company's home page at www.stec-inc.com.
Then click on "Investor Relations," followed by "Email Alerts."
The sTec, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079
sTec and the sTec logo are either registered trademarks or
trademarks of sTec, Inc. in the United States and certain other
countries. All other trademarks or brand names referred to herein
are the property of their respective owners.
Use of Non-GAAP Financial Information. To
supplement the consolidated financial results prepared in
accordance with U.S. Generally Accepted Accounting Principles
("GAAP"), sTec uses non-GAAP financial measures (non-GAAP gross
profit, non-GAAP gross profit percentage, non-GAAP operating
expenses, non-GAAP operating loss, non-GAAP operating margin
percentage, non-GAAP loss and non-GAAP diluted loss per share) that
exclude employee stock compensation expense, employee severance,
securities litigation related costs, SEC investigation and
litigation costs, and intellectual property litigation costs.
Management excludes these items because it believes that the
non-GAAP measures enhance an investor's overall understanding of
sTec's financial performance and future prospects by being more
reflective of the Company's core, recurring operational activities
and to be more comparable with the results of the Company over
various periods. Management uses non-GAAP financial measures
internally for strategic decision making, forecasting future
results and evaluating current performance. Guidance is provided
only on a non-GAAP basis due to the inherent difficulty of
forecasting the timing or amount of such items. Difficulties in
forecasting the non-GAAP items include the timing of issuing
employee stock compensation, which could impact the valuation and
related expense, and the timing of employee severance payments.
These items could be materially significant to the Company's GAAP
results in any period. By disclosing non-GAAP financial measures,
management intends to provide investors with a more meaningful,
consistent comparison of the Company's core operating results and
trends for the periods presented. Non-GAAP financial measures are
not prepared in accordance with GAAP; therefore, the information is
not necessarily comparable to other companies' financial
information and should be considered as a supplement to, not a
substitute for, or superior to, the corresponding measures
calculated in accordance with GAAP. A complete reconciliation
between GAAP and non-GAAP information referred to in this release
is provided in tables included in this release. Certain amounts
reported in prior releases may have been reclassified to conform to
the current quarter's non-GAAP presentation.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995. This release contains
forward-looking statements that involve risks and uncertainties,
including, but not limited to, statements concerning the rapidly
evolving dynamics of the enterprise storage and server markets;
growing acceptance, adoption and qualification of SSDs within the
enterprise storage and server markets; the launch, marketing,
qualification and production of the Company's product and solution
initiatives; the qualification and sale of the Company's products
and solutions into emerging SSD system vendors, enterprises and
non-traditional end-user customers, along with OEM customers;
diversifying the Company's customer base and changing sales mix;
leveraging the Company's global channel program and growing sales
and marketing infrastructure; recruiting seasoned personnel; the
capabilities, performance, cost advantages, and benefits of
Company's products and solutions, and developing technologies;
anticipated increase in sales of the Company's products and
solutions; the future financial performance and outlook of the
Company; and expected second quarter of 2013 revenue and loss per
share. Such forward-looking statements are based on current
expectations and involve inherent risks and uncertainties,
including factors that could delay, divert or change any of them,
and could cause actual outcomes and results to differ materially
from current expectations. Although the Company believes that the
forward-looking statements contained in this release are
reasonable, it can give no assurance that its expectations will be
fulfilled. Additional important factors which could cause actual
results to differ materially from those expressed or implied in the
forward-looking statements are detailed in filings with the
Securities and Exchange Commission made from time to time by the
Company, including its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, and its Current Reports on Form 8-K. Special
attention is directed to the portions of those documents entitled
"Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The information
contained in this press release is a statement of the Company's
present intention, belief or expectation. The Company may change
its intention, belief, or expectation, at any time and without
notice, based upon any changes in such factors, in the Company's
assumptions or otherwise. Except as required by law, the Company
undertakes no obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of
unanticipated events.
sTec,
INC. |
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS |
(in thousands, except
per share amounts) |
|
|
|
|
|
|
|
March 31, 2013 |
December 31,
2012 |
ASSETS: |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 132,932 |
$ 158,232 |
Accounts receivable, net of allowances of
$5,688 at March 31, 2013 and $6,248 at December 31,
2012 |
7,926 |
13,515 |
Inventory |
42,090 |
41,760 |
Insurance claim receivable |
-- |
20,563 |
Other current assets |
7,957 |
10,212 |
Total current
assets |
190,905 |
244,282 |
|
|
|
Leasehold interest in land |
2,491 |
2,503 |
Property, plant and equipment, net |
28,586 |
30,343 |
Goodwill |
1,682 |
1,682 |
Long-term intangible assets, net |
4,742 |
5,144 |
Other long-term assets |
5,818 |
5,817 |
Total assets |
$ 234,224 |
$ 289,771 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 8,115 |
$ 6,818 |
Accrued and other liabilities |
18,100 |
51,586 |
Total current
liabilities |
26,215 |
58,404 |
Other long-term liabilities |
4,977 |
6,185 |
Commitments and contingencies |
-- |
-- |
Shareholders' Equity: |
|
|
Preferred stock, $0.001 par value, 20,000
shares authorized, no shares issued and outstanding |
-- |
-- |
Common stock, $0.001 par value, 100,000
shares authorized, 46,810 shares issued and outstanding as of March
31, 2013 and 46,805 shares issued and outstanding as of
December 31, 2012 |
47 |
47 |
Additional paid-in capital |
153,580 |
150,263 |
Retained earnings |
49,405 |
74,872 |
Total shareholders'
equity |
203,032 |
225,182 |
Total liabilities and
shareholders' equity |
$ 234,224 |
$ 289,771 |
|
|
|
sTec,
INC. |
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
(in thousands, except
per share amounts) |
|
|
|
|
|
|
Quarter Ended
March 31, |
|
2013 |
2012 |
Net revenues |
$ 22,025 |
$ 50,415 |
Cost of revenues |
16,132 |
32,323 |
Gross profit |
5,893 |
18,092 |
|
|
|
Sales and marketing |
6,554 |
6,656 |
General and administrative |
12,102 |
9,214 |
Research and development |
12,653 |
16,103 |
Total operating expenses |
31,309 |
31,973 |
|
|
|
Operating loss |
(25,416) |
(13,881) |
Other income, net |
41 |
231 |
Loss from operations before income
taxes |
(25,375) |
(13,650) |
Provision (benefit) for income
taxes |
92 |
(2,961) |
Net loss |
(25,467) |
(10,689) |
Comprehensive loss |
$ (25,467) |
$ (10,689) |
|
|
|
Net loss per share: |
|
|
Basic |
$ (0.54) |
$ (0.23) |
Diluted |
$ (0.54) |
$ (0.23) |
|
|
|
Shares used in per share computation: |
|
|
Basic |
46,808 |
46,140 |
Diluted |
46,808 |
46,140 |
sTec, INC.
NON-GAAP RECONCILIATIONS
The non-GAAP financial measures included in the following tables
are non-GAAP gross profit, non-GAAP gross profit percentage,
non-GAAP operating expenses, non-GAAP operating loss, non-GAAP
operating margin percentage, non-GAAP loss and non-GAAP diluted
loss per share, which adjust for the following items: (a) employee
stock compensation expense, (b) employee severance, (c) securities
litigation related costs, (d) SEC investigation and litigation
costs and (e) intellectual property litigation costs. Management
believes these non-GAAP financial measures enhance an investor's
overall understanding of the Company's financial performance and
future prospects by being more reflective of the Company's core,
recurring operational activities and are more comparable with the
results of the Company over various periods. Management uses
non-GAAP financial measures internally for strategic decision
making, forecasting future results and evaluating current
performance. Non-GAAP financial measures are not prepared in
accordance with GAAP; therefore, the information is not necessarily
comparable to other companies' financial information and should be
considered as a supplement to, not a substitute for, or superior
to, the corresponding measures calculated in accordance with
GAAP.
Details of the items excluded from GAAP financial results in
calculating non-GAAP financial measures and explanatory footnotes
are as follows:
a) Employee stock compensation costs incurred in connection with
Accounting Standards Codification ("ASC") 718, "Compensation --
Stock Compensation," are comprised on non-cash expenses related to
equity compensation provided to employees, officers and
directors. Management believes non-cash stock compensation
costs should be excluded when evaluating core operations and
current performance.
b) Employee severance relates to costs incurred in conjunction
with the termination of certain employees. As an
accommodation, the Company provides compensation in the form of
severance to certain employees subject to termination without
cause. Management believes that severance costs should be
excluded when evaluating core operations and current
performance.
c) In the fourth quarter of 2009 and first quarter of 2010,
certain securities class action and shareholder derivative lawsuits
were filed against the Company and certain officers and directors
of the Company. These costs represent the legal fees related
to these class action securities and shareholder derivative actions
that have not been covered by the Company's Directors and Officers
insurance policies and include indemnifiable legal costs advanced
on behalf of these officers and directors. Management believes
these legal fees should be excluded when evaluating core operations
and current performance.
d) The SEC initiated in the fourth quarter of 2009 an
investigation of the Company and certain officers in connection
with trading in the Company's securities, which on July 19,
2012 resulted in the SEC filing a civil action against the
Company's Founder, Manouch Moshayedi. The SEC also notified
the Company that it would not bring an enforcement action against
the Company or any of its other officers. These costs
represent the legal fees related to this investigation and related
civil action that have not been covered by the Company's Directors
and Officers insurance policies and include indemnifiable legal
costs advanced on behalf of these officers. Management
believes these legal fees should be excluded when evaluating core
operations and current performance.
e) On September 7, 2011, Solid State Storage Solutions,
Inc. filed a patent infringement suit against the Company and
several other defendants. According to the complaint, the
patents relate to solid-state drives employing a controller chip
and a plurality of NAND flash devices. On December 19, 2012,
the Company resolved this matter pursuant to a confidential
agreement that releases the Company from past claims and precludes
the plaintiff from again claiming that the Company's products
infringe their patents. On January 2, 2013, the U.S.
District Court for the Eastern District of Texas approved the
parties' joint motion to dismiss the matter with prejudice.
Management believes that legal fees and expenses incurred in
conjunction with this lawsuit should be excluded when evaluating
core operations and current performance.
f) The amount represents the estimated income tax effect of the
non-GAAP adjustments. The Company calculates the tax effect of
non-GAAP adjustments by applying an applicable estimated
jurisdictional tax rate to each specific non-GAAP item.
sTec,
INC. |
SCHEDULE RECONCILING
GAAP NET LOSS TO NON-GAAP NET LOSS |
($ in thousands, except
per share amounts) |
(unaudited) |
|
|
|
|
|
|
|
For the Quarters
Ended |
|
March 31, |
March 31, |
December 31, |
|
2013 |
2012 |
2012 |
GAAP net loss |
$ (25,467) |
$ (10,689) |
$ (23,155) |
|
|
|
|
The GAAP amounts have been adjusted
to exclude the following items (non-GAAP
adjustments): |
|
|
|
|
|
|
|
Excluded from cost of revenues: |
|
|
|
Employee stock compensation (a) |
$ 203 |
$ 221 |
$ 223 |
Employee severance (b) |
-- |
52 |
-- |
Total excluded from cost of sales |
203 |
273 |
223 |
|
|
|
|
Excluded from operating expenses: |
|
|
|
Employee stock compensation (a) |
3,112 |
3,440 |
3,468 |
Employee severance (b) |
343 |
275 |
430 |
Securities litigation related costs
(c) |
243 |
200 |
8 |
SEC investigation and litigation costs
(d) |
2,585 |
4 |
1,102 |
IP litigation costs (e) |
23 |
115 |
1,831 |
Total excluded from operating
expenses |
6,306 |
4,034 |
6,839 |
|
|
|
|
Total excluded from cost of revenues,
operating expenses and other (expense) income before income
taxes |
6,509 |
4,307 |
7,062 |
|
|
|
|
Income tax effect on non-GAAP adjustments
(f) |
(68) |
(1,499) |
(51) |
Total excluded from cost of revenues and
operating expenses after taxes |
6,441 |
2,808 |
7,011 |
|
|
|
|
Non-GAAP net loss |
$ (19,026) |
$ (7,881) |
$ (16,144) |
|
|
|
|
GAAP diluted loss per share |
$ (0.54) |
$ (0.23) |
$ (0.50) |
Impact of non-GAAP adjustments on diluted
loss per share |
0.13 |
0.06 |
0.15 |
Non-GAAP diluted loss per share |
$ (0.41) |
$ (0.17) |
$ (0.35) |
|
|
|
|
(a) - (f) See corresponding footnotes
above. |
|
|
|
|
|
|
|
|
sTec,
INC. |
SELECTED NON-GAAP
FINANCIAL INFORMATION |
($ in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
For the Quarters
Ended |
|
March 31, |
March 31, |
December 31, |
|
2013 |
2012 |
2012 |
|
|
|
|
GAAP gross profit |
$ 5,893 |
$ 18,092 |
$ 11,304 |
Employee stock compensation (a) |
203 |
221 |
223 |
Employee severance (b) |
-- |
52 |
-- |
Non-GAAP gross profit |
$ 6,096 |
$ 18,365 |
$ 11,527 |
|
|
|
|
GAAP gross profit % |
26.8% |
35.9% |
32.2% |
Effect of reconciling item on gross
profit % |
0.9% |
0.5% |
0.6% |
Non-GAAP gross profit % |
27.7% |
36.4% |
32.8% |
|
|
|
|
GAAP operating expenses |
$ 31,309 |
$ 31,973 |
$ 35,294 |
Employee stock compensation (a) |
(3,112) |
(3,440) |
(3,468) |
Employee severance (b) |
(343) |
(275) |
(430) |
Securities litigation related costs
(c) |
(243) |
(200) |
(8) |
SEC investigation and litigation costs
(d) |
(2,585) |
(4) |
(1,102) |
IP litigation costs (e) |
(23) |
(115) |
(1,831) |
Non-GAAP operating expenses |
$ 25,003 |
$ 27,939 |
$ 28,455 |
|
|
|
|
GAAP operating loss |
$ (25,416) |
$ (13,881) |
$ (23,990) |
Employee stock compensation (a) |
3,315 |
3,661 |
3,691 |
Employee severance (b) |
343 |
327 |
430 |
Securities litigation related costs
(c) |
243 |
200 |
8 |
SEC investigation and litigation costs
(d) |
2,585 |
4 |
1,102 |
IP litigation costs (e) |
23 |
115 |
1,831 |
Non-GAAP operating loss |
$ (18,907) |
$ (9,574) |
$ (16,928) |
|
|
|
|
GAAP operating margin % |
-115.4% |
-27.5% |
-68.3% |
Effect of reconciling items on operating
margin % |
29.6% |
8.5% |
20.1% |
Non-GAAP operating margin % |
-85.8% |
-19.0% |
-48.2% |
|
|
|
|
|
|
|
|
(a) - (e) Refer to the corresponding
footnotes above. |
|
|
|
CONTACT: sTec, Inc.
Mitch Gellman, Vice President of Investor Relations
(949) 260-8328
ir@stec-inc.com
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