STEC, Inc. (Nasdaq:STEC) announced today the Company's financial
results for the second quarter ended June 30, 2010.
Revenue for the second quarter of 2010 was $61.3 million, a
decrease of 29.1% from $86.4 million for the second quarter of 2009
and an increase of 58.0% from $38.8 million for the first quarter
of 2010.
GAAP gross profit margin was 42.6% for the second quarter of
2010, compared to 50.0% for the second quarter of 2009 and 34.0%
for the first quarter of 2010. GAAP diluted earnings per share from
continuing operations was $0.06 for the second quarter of 2010,
compared to GAAP diluted earnings per share from continuing
operations of $0.38 for the second quarter of 2009 and an $0.11
GAAP diluted loss per share from continuing operations for the
first quarter of 2010.
Non-GAAP gross profit margin was 42.7% for the second quarter of
2010, compared to 50.1% for the second quarter of 2009 and 34.2%
for the first quarter of 2010. Non-GAAP diluted earnings per share
from continuing operations was $0.09 for the second quarter of
2010, compared to non-GAAP diluted earnings per share from
continuing operations of $0.42 for the second quarter of 2009 and a
non-GAAP diluted loss per share from continuing operations of $0.08
for the first quarter of 2010. A reconciliation of GAAP to non-GAAP
results is provided in tables included in this release.
Business Outlook
"I am very pleased with our second quarter results," said
Manouch Moshayedi, STEC's Chairman and Chief Executive Officer.
"After a challenging first quarter, we have rebounded quite well
and surpassed our revenue and EPS guidance for the second quarter.
As anticipated, the inventory carryover situation at our largest
customer was resolved during the second quarter. In addition, we
are seeing increased interest in the use of SSDs in Enterprise
applications and it is very encouraging to see adoption of SSDs
increase not only at our largest customers but also across most
other Enterprise-storage customers."
Today, STEC's product roadmap is very strong with a variety of
SLC- and MLC-based Zeus and MACH products in development and in
qualification at the Company's customers. STEC has remained the
sole supplier of enterprise class SSDs to its Enterprise Data
Storage customers even though it has been more than three and
one-half years since STEC first sold its ZeusIOPS SSD product.
STEC's advantage is due in large part to the complexity of the
products and the rigorous specifications that Enterprise-storage
customers demand. In order to solidify STEC's long-term prospects
and competitive position, the Company continues to invest
aggressively in R&D.
Mr. Moshayedi continued, "We are also encouraged by a growing
number of OEM customers that have launched or are in the process of
developing Automated Data Tiering Software solutions. This software
optimizes SSD performance in storage systems; a factor which we
believe will help enable the transition towards SSD technology on a
larger scale. We believe future systems shipped by our customers
that include such software will most likely also include SSDs as a
standard component of the system."
Guidance
STEC's current expectation for the third quarter of 2010 is as
follows:
- Revenue to range from $78 million to $80 million.
- Diluted non-GAAP earnings per share to range from $0.18 to
$0.20
STEC's projected non-GAAP earnings per share results exclude
employee stock compensation expense and may also exclude 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 second quarter 2010. 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 the red "Investors" tab at the top of the home page at
www.stec-inc.com. Then click on the "Audio Presentations"
button.
Replay
The webcast will also be archived and available for replay
beginning approximately two hours after the live call
concludes.
About STEC, Inc. (Nasdaq:STEC)
STEC, Inc. is a leading global provider of solid-state drive
technologies and solutions tailored to meet the high-performance,
high-reliability needs of original equipment manufacturers (OEMs).
With headquarters in Santa Ana, California and locations worldwide,
STEC leverages almost two decades of solid-state drive knowledge
and experience to deliver the industry's most comprehensive line of
solid-state drives to the storage industry.
For information about STEC and to subscribe to the Company's
"Email Alerts" service, please visit STEC's web site at
www.stec-inc.com, click on the red "Investors" tab at the top of
the home page. Then click "Email Alerts."
The STEC, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079
Use of Non-GAAP Financial Information
To supplement the consolidated financial results prepared in
accordance with Generally Accepted Accounting Principles ("GAAP"),
STEC uses non-GAAP financial measures (non-GAAP gross profit,
non-GAAP operating expenses, non-GAAP operating income, non-GAAP
income from continuing operations before income taxes, non-GAAP
income from continuing operations and non-GAAP diluted earnings per
share from continuing operations) that exclude employee stock
compensation, employee severance, special charges for restructuring
and Malaysia government incentive grant income. 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, delays in transitioning
operations to our Malaysia facility, which could impact
restructuring costs and the timing of receiving incentive grant
income from the Malaysian government. These items could be
materially significant in 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 continued product research and development, future
adoption of SSDs within the Enterprise environment, anticipated
increased activity from STEC's customers, and expected third
quarter 2010 revenue and earnings 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 STEC
believes that the forward-looking statements contained in this
release are reasonable, it can give no assurance that its
expectations will be fulfilled. 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 STEC,
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 STEC's present
intention, belief or expectation. STEC may change its intention,
belief, or expectation, at any time and without notice, based upon
any changes in such factors, in STEC's assumptions or otherwise.
STEC 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
share and per share amounts) |
|
|
|
|
|
|
|
June 30, 2010 |
December 31,
2009 |
ASSETS: |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 142,902 |
$ 135,658 |
Short-term investments |
5,000 |
10,000 |
Accounts receivable, net of allowances of
$2,944 at June 30, 2010 and $3,557 at December 31, 2009 |
40,666 |
78,373 |
Inventory |
66,844 |
42,739 |
Other current assets |
5,211 |
2,840 |
Total current
assets |
260,623 |
269,610 |
|
|
|
Leasehold interest in land |
2,521 |
2,543 |
Property, plant and equipment, net |
36,237 |
39,911 |
Intangible assets |
179 |
292 |
Goodwill |
1,682 |
1,682 |
Other long-term assets |
4,881 |
5,076 |
Deferred income taxes |
12,768 |
6,448 |
Total assets |
$ 318,891 |
$ 325,562 |
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY: |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 20,840 |
$ 29,911 |
Accrued and other liabilities |
11,125 |
14,070 |
Total current
liabilities |
31,965 |
43,981 |
|
|
|
Long-term income taxes payable |
3,084 |
2,986 |
Total liabilities |
35,049 |
46,967 |
|
|
|
Commitments and contingencies |
-- |
-- |
Shareholders' Equity: |
|
|
Preferred stock, $0.001 par value,
20,000,000 shares authorized, no shares issued and outstanding |
-- |
-- |
Common stock, $0.001 par value,
100,000,000 shares authorized, 50,765,640 shares issued and
outstanding as of June 30, 2010 and 50,284,438 shares issued and
outstanding as of December 31, 2009 |
51 |
50 |
Additional paid-in capital |
161,899 |
154,087 |
Retained earnings |
121,892 |
124,458 |
Total shareholders'
equity |
283,842 |
278,595 |
Total liabilities and
shareholders' equity |
$ 318,891 |
$ 325,562 |
|
STEC,
INC. |
UNAUDITED CONDENSED
CONSOLIDATED INCOME STATEMENTS |
(in thousands, except
per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
June 30, |
Six Months Ended
June 30, |
|
2010 |
2009 |
2010 |
2009 |
Net revenues |
$ 61,348 |
$ 86,350 |
$ 100,157 |
$ 149,886 |
Cost of revenues |
35,226 |
43,177 |
60,849 |
83,680 |
Gross profit |
26,122 |
43,173 |
39,308 |
66,206 |
|
|
|
|
|
Sales and marketing |
4,807 |
5,031 |
8,603 |
9,803 |
General and administrative |
7,099 |
6,714 |
14,038 |
14,080 |
Research and development |
10,366 |
5,423 |
20,020 |
10,943 |
Special charges |
18 |
1,996 |
(48) |
3,173 |
Total operating expenses |
22,290 |
19,164 |
42,613 |
37,999 |
Operating income (loss) |
3,832 |
24,009 |
(3,305) |
28,207 |
Other income |
523 |
614 |
389 |
602 |
Income (loss) from continuing operations
before income taxes |
4,355 |
24,623 |
(2,916) |
28,809 |
(Provision) benefit for income taxes |
(1,418) |
(5,260) |
500 |
(6,252) |
Income (loss) from continuing
operations |
2,937 |
19,363 |
(2,416) |
22,557 |
Discontinued operations: |
|
|
|
|
Loss from operations of Consumer
Division |
(258) |
-- |
(258) |
(356) |
Benefit for income taxes |
108 |
-- |
108 |
141 |
Loss from discontinued operations |
(150) |
-- |
(150) |
(215) |
Net income (loss) |
$ 2,787 |
$ 19,363 |
$ (2,566) |
$ 22,342 |
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
Basic: |
|
|
|
|
Continuing operations |
$ 0.06 |
$ 0.40 |
$ (0.05) |
$ 0.46 |
Discontinued operations |
-- |
-- |
-- |
-- |
Total |
$ 0.06 |
$ 0.40 |
$ (0.05) |
$ 0.46 |
Diluted: |
|
|
|
|
Continuing operations |
$ 0.06 |
$ 0.38 |
$ (0.05) |
$ 0.45 |
Discontinued operations |
-- |
-- |
-- |
-- |
Total |
$ 0.06 |
$ 0.38 |
$ (0.05) |
$ 0.45 |
|
|
|
|
|
Shares used in per share computation: |
|
|
|
|
Basic |
50,673 |
48,871 |
50,495 |
48,654 |
Diluted |
51,463 |
50,702 |
50,495 |
49,883 |
The non-GAAP financial measures included in the following tables
are non-GAAP gross profit, non-GAAP income (loss) from continuing
operations and non-GAAP diluted earnings (loss) per share from
continuing operations, which adjust for the following items: (a)
employee stock compensation expense, (b) employee severance, (c)
special charges related to restructuring costs and (d) Malaysia
government incentive grant income. 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 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.
The items excluded from GAAP financial results in calculating
non-GAAP financial results, are set forth below:
a) Employee stock compensation costs incurred in connection with
Accounting Standards Codification 718, "Compensation – Stock
Compensation," have been excluded as management omits these
expenses when evaluating its core operating activities, for
strategic decision making, forecasting future results and
evaluating current performance.
b) Employee severance relates to one-time costs incurred related
to the termination of certain employees. The Company provides
compensation to certain employees as an accommodation upon
termination of employment without cause. Management believes
that excluding severance costs from operating results provides
investors with a better means for measuring current Company
performance.
c) Special charges relate to a restructuring plan that the
Company implemented during the first quarter of 2009. The Company
completed the first phase of the restructuring plan at the end of
the first quarter of 2010 and started the second phase of the
restructuring plan in the second quarter of 2010. These
charges include expenses related to a reduction in our workforce
and asset impairment charges. The special charges primarily
impacted U.S.-based operations and employees as part of the overall
transition of certain operations to the Company's facility in
Penang, Malaysia. Management believes that costs incurred in
connection with the restructuring plan, which were primarily
related to workforce reduction severance costs and consolidation of
facilities expenses are non-recurring in nature and should be
excluded when evaluating core operations.
d) Malaysia government grant incentive income relates to
proceeds received from the Ministry of International Trade and
Industry ("MITI") in Malaysia. The grants are provided by MITI
as incentive for the Company incurring research and development
expenses and employee training costs for its operations in
Malaysia. Since the grants represent reimbursement of expenses
which were previously included by the Company as a non-GAAP item
under Malaysia start-up costs, the Company has reversed the related
grant reimbursement income from its second quarter of 2009 and 2010
non-GAAP results.
STEC,
INC. |
Schedule Reconciling
GAAP Income (Loss) From Continuing Operations to Non-GAAP Income
(Loss) From Continuing Operations |
($ in thousands, except
per share amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
For the Quarters
Ended |
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
GAAP income (loss) from continuing
operations |
$ 2,937 |
$ 19,363 |
$ (5,353) |
|
|
|
|
The non-GAAP amounts have been adjusted to
exclude the |
|
|
|
following items: |
|
|
|
|
|
|
|
Excluded from cost of revenues: |
|
|
|
Employee stock compensation (a) |
101 |
72 |
91 |
|
101 |
72 |
91 |
|
|
|
|
Excluded from operating expenses: |
|
|
|
Employee stock compensation (a) |
2,078 |
965 |
1,762 |
Employee severance (b) |
-- |
-- |
84 |
Special charges - restructuring costs
(c) |
18 |
1,996 |
(66) |
|
2,096 |
2,961 |
1,780 |
Excluded from other income: |
|
|
|
Malaysia government incentive grant
income (d) |
(328) |
(560) |
-- |
|
|
|
|
Total non-GAAP adjustments before income
tax |
1,869 |
2,473 |
1,871 |
Income tax effect on non-GAAP
adjustments |
(384) |
(536) |
(494) |
|
|
|
|
Net effect of adjustments to GAAP net income
(loss) |
1,485 |
1,937 |
1,377 |
Non-GAAP income (loss) from continuing
operations |
$ 4,422 |
$ 21,300 |
$ (3,976) |
|
|
|
|
GAAP diluted earnings (loss) per share from
continuing operations |
$ 0.06 |
$ 0.38 |
$ (0.11) |
Impact of non-GAAP adjustments on diluted
earnings (loss) per share |
$ 0.03 |
$ 0.04 |
$ 0.03 |
Non-GAAP diluted earnings (loss) per share
from continuing operations |
$ 0.09 |
$ 0.42 |
$ (0.08) |
|
|
|
|
(a) - (d) See corresponding footnotes
above. |
|
|
|
|
STEC,
INC. |
Schedule Reconciling
Reported Financial Ratios |
(unaudited) |
|
|
|
|
|
|
|
|
|
For the Quarters
Ended |
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
GAAP gross profit |
42.6% |
50.0% |
34.0% |
Effect of reconciling item on gross
profit |
0.1% |
0.1% |
0.2% |
Non-GAAP gross profit |
42.7% |
50.1% |
34.2% |
|
STEC,
INC. |
Selected Non-GAAP
Financial Information |
($ in
thousands) |
(unaudited) |
|
|
|
|
|
For the Quarters
Ended |
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
|
|
|
|
GAAP gross profit |
$ 26,122 |
$ 43,173 |
$ 13,186 |
Employee stock compensation
(a) |
101 |
72 |
91 |
Non-GAAP gross profit |
$ 26,223 |
$ 43,245 |
$ 13,277 |
|
|
|
|
(a) - 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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