STEC, Inc. (Nasdaq:STEC) announced today the Company's financial
results for the first quarter ended March 31, 2011.
Revenue for the first quarter of 2011 was $94.9 million, an
increase of 144.6% from $38.8 million for the first quarter of 2010
and an increase of 1.1% from $93.9 million for the fourth quarter
of 2010.
GAAP gross profit margin was 42.4% for the first quarter of
2011, compared to 34.0% for the first quarter of 2010 and 45.2% for
the fourth quarter of 2010. GAAP diluted earnings per share from
continuing operations was $0.27 for the first quarter of 2011,
compared to a GAAP diluted loss per share from continuing
operations of $0.11 for the first quarter of 2010 and GAAP diluted
earnings per share from continuing operations of $0.34 for the
fourth quarter of 2010.
Non-GAAP gross profit margin was 42.5% for the first quarter of
2011, compared to 34.2% for the first quarter of 2010 and 45.3% for
the fourth quarter of 2010. Non-GAAP diluted earnings per share
from continuing operations was $0.32 for the first quarter of 2011,
compared to a non-GAAP diluted loss per share from continuing
operations of $0.08 for the first quarter of 2010 and non-GAAP
diluted earnings per share from continuing operations of $0.35 for
the fourth quarter of 2010.
The favorable financial results comparisons between the first
quarter of 2011 and the first quarter of 2010 were impacted by the
inventory carryover from 2009 into 2010 by one of our largest
customers.
A reconciliation of GAAP to non-GAAP results is provided in the
tables included in this release.
Business Outlook
"Our performance in the first quarter of 2011 produced one of
the finest first-quarter financial results in STEC's history," said
Manouch Moshayedi, STEC's Chairman and CEO. "The solid momentum
from the second half of 2010 carried over into the first quarter of
2011 offsetting the typical seasonality trend.
"I am also pleased with the introduction of qualification
samples of our next-generation ZeusIOPS® SSDs in the first quarter
of 2011, marking an important milestone in the transition of our
flagship product line based on controllers using FPGAs to
controllers using ASICs. This transition is important since it will
enable us to realize cost advantages over previous designs using
more expensive FPGAs. We are further driving down the cost of our
products by using MLC components - enhanced by our CellCare™
technology. By applying this proprietary technology, we are
able to achieve Enterprise-level endurance in our SSDs using
standard MLC Flash. We believe that the increasing use of MLC
will continue to drive adoption of SSDs in the Enterprise
markets.
"It is important to note that the same ASIC design used in our
ZeusIOPS SSDs is also being leveraged in our PCIe product line due
out later this year. This allows us to optimize our
engineering resources and technological advancements across a
greater range of products. With the introduction of our latest
generation of ZeusIOPS products, our MACH family of products, and
the anticipated addition of our PCIe products, we will provide the
marketplace with what we believe is the broadest portfolio of SSD
solutions covering the Enterprise-storage spectrum."
Guidance
"While the recent earthquake and tsunami in Japan have not
significantly impacted our access to Flash memory or other key
components, some of our customers have experienced supply chain
disruptions. Consequently, we anticipate that some of our
customers whose supply chains have significant exposure to the most
impacted areas of Japan may postpone or reduce their orders for our
products in the second quarter of 2011. Due to these
unforeseen factors, we are providing a wider than usual range of
revenue and EPS targets for the second quarter of 2011. We expect
that the shortage of materials experienced by these customers will
be resolved in the coming quarters."
Taking this into consideration, STEC's current expectation for
the second quarter of 2011 is as follows:
- Revenue to range from $80 million to $90 million.
- Diluted non-GAAP income per share to range from $0.21 to
$0.30.
STEC's projected non-GAAP earnings per share results exclude
employee stock compensation expense 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 2011. 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 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 and then click "Email Alerts."
The STEC, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079
STEC, the STEC logo, ZeusIOPS, and CellCare are either
registered trademarks or trademarks of STEC, Inc. in the United
States and certain other countries. All other trademarks
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 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 income, 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 contract
termination settlement proceeds. 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 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 growing
acceptance, adoption and qualification of SSDs within the
Enterprise storage markets; anticipated postponement or reduction
of sales due to the impact of the recent earthquake and tsunami in
Japan on some of STEC's customers; expected cost advantages; the
benefits from CellCare and other developing technologies; the
capabilities and performance of STEC's products; the rapidly
evolving storage industry; and expected second quarter 2011 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
per share amounts) |
|
|
|
|
March 31, 2011 |
December 31,
2010 |
ASSETS: |
|
|
Current Assets: |
|
|
Cash and cash equivalents |
$ 190,819 |
$ 170,457 |
Accounts receivable, net of
allowances of $4,073 at March 31, 2011 and |
|
|
$3,853 at December 31,
2010 |
40,847 |
47,831 |
Inventory |
81,669 |
88,968 |
Other current assets |
4,726 |
4,606 |
Total current
assets |
318,061 |
311,862 |
|
|
|
Leasehold interest in land |
2,584 |
2,596 |
Property, plant and equipment, net |
33,466 |
35,037 |
Goodwill |
1,682 |
1,682 |
Other long-term assets |
4,940 |
5,173 |
Deferred income taxes |
13,554 |
9,304 |
Total
assets |
$ 374,287 |
$ 365,654 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
Current Liabilities: |
|
|
Accounts payable |
$ 10,408 |
$ 25,762 |
Accrued and other
liabilities |
15,147 |
13,470 |
Total current
liabilities |
25,555 |
39,232 |
|
|
|
Long-term income taxes payable |
5,948 |
4,248 |
|
|
|
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, 51,413 shares issued |
|
|
issued and outstanding as of
March 31, 2011 and 51,046 shares issued |
|
|
and outstanding as of
December 31, 2010 |
51 |
51 |
Additional paid-in capital |
175,589 |
169,127 |
Retained earnings |
167,144 |
152,996 |
Total shareholders'
equity |
342,784 |
322,174 |
Total liabilities and
shareholders' equity |
$ 374,287 |
$ 365,654 |
|
STEC,
INC. |
UNAUDITED CONDENSED
CONSOLIDATED INCOME STATEMENTS |
(in thousands, except
per share amounts) |
|
|
|
Quarter Ended
March 31, |
|
2011 |
2010 |
Net revenues |
$ 94,944 |
$ 38,809 |
Cost of revenues |
54,671 |
25,623 |
Gross profit |
40,273 |
13,186 |
|
|
|
Sales and marketing |
5,666 |
3,796 |
General and administrative |
7,409 |
6,939 |
Research and development |
12,000 |
9,654 |
Special charges |
-- |
(66) |
Total operating expenses |
25,075 |
20,323 |
|
|
|
Operating income (loss) |
15,198 |
(7,137) |
Other expense |
47 |
134 |
Income (loss) from operations
before income taxes |
15,151 |
(7,271) |
|
|
|
Provision (benefit) for income taxes |
1,003 |
(1,918) |
Net income (loss) |
14,148 |
(5,353) |
|
|
|
Net income (loss) per share: |
|
|
Basic |
$ 0.28 |
$ (0.11) |
Diluted |
$ 0.27 |
$ (0.11) |
|
|
|
Shares used in per share computation: |
|
|
Basic |
51,225 |
50,314 |
Diluted |
52,691 |
50,314 |
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 income, non-GAAP
operating margin percentage, non-GAAP income from continuing
operations and non-GAAP diluted earnings 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)
contract termination settlement proceeds. 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 are as follows:
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 U.S.-based 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 the Company's 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) During the fourth quarter of 2010, the Company received
proceeds in conjunction with a settlement received from a customer
related to a termination of a contract. Since the contract
settlement proceeds are non-recurring, management believes that it
should be excluded when evaluating core operations.
STEC,
INC. |
Schedule Reconciling
GAAP Income From Continuing Operations to Non-GAAP Income From
Continuing Operations |
($ in thousands, except
per share amounts) |
(unaudited) |
|
|
|
For the Quarters
Ended |
|
March 31, |
March 31, |
December 31, |
|
2011 |
2010 |
2010 |
GAAP income from continuing operations |
$ 14,148 |
$ (5,353) |
$ 17,498 |
|
|
|
|
The non-GAAP amounts have been
adjusted to exclude the |
|
|
|
following
items: |
|
|
|
|
|
|
|
Excluded from cost of sales: |
|
|
|
Employee stock compensation
(a) |
$ 99 |
$ 91 |
$ 95 |
|
99 |
91 |
95 |
Excluded from operating expenses: |
|
|
|
Employee stock compensation
(a) |
2,672 |
1,762 |
2,554 |
Employee severance (b) |
-- |
84 |
-- |
Special charges - restructuring
costs (c) |
-- |
(66) |
413 |
|
2,672 |
1,780 |
2,967 |
Excluded from other income: |
|
|
|
Contract termination settlement
proceeds (d) |
-- |
-- |
(2,000) |
|
-- |
-- |
(2,000) |
|
|
|
|
Total non-GAAP adjustments before income
tax |
2,771 |
1,871 |
1,062 |
Income tax effect on non-GAAP
adjustments |
(129) |
(494) |
(83) |
|
|
|
|
Net effect of adjustments to GAAP net
income |
2,642 |
1,377 |
979 |
Non-GAAP income from continuing
operations |
$ 16,790 |
$ (3,976) |
$ 18,477 |
|
|
|
|
GAAP diluted earnings per share from
continuing operations |
$ 0.27 |
$ (0.11) |
$ 0.34 |
Impact of non-GAAP adjustments on diluted
earnings per share |
0.05 |
0.03 |
0.01 |
Non-GAAP diluted earnings per share from
continuing operations |
$ 0.32 |
$ (0.08) |
$ 0.35 |
|
|
|
|
(a) - (d) See corresponding footnotes
above. |
|
|
|
|
|
|
|
STEC,
INC. |
Selected Non-GAAP
Financial Information |
($ in
thousands) |
(unaudited) |
|
|
|
For the Quarters
Ended |
|
March 31, |
March 31, |
December 31 |
|
2011 |
2010 |
2010 |
|
|
|
|
GAAP gross profit |
$ 40,273 |
$ 13,186 |
$ 42,488 |
Employee stock compensation
(a) |
99 |
91 |
95 |
Non-GAAP gross profit |
$ 40,372 |
$ 13,277 |
$ 42,583 |
|
|
|
|
GAAP gross profit % |
42.4% |
34.0% |
45.2% |
Effect of reconciling item on
gross profit % |
0.1% |
0.2% |
0.1% |
Non-GAAP gross profit % |
42.5% |
34.2% |
45.3% |
|
|
|
|
GAAP operating expenses |
$ 25,075 |
$ 20,323 |
$ 25,687 |
Employee stock compensation
(a) |
(2,672) |
(1,762) |
(2,554) |
Employee severance (b) |
-- |
(84) |
-- |
Special charges - restructuring
costs (c) |
-- |
66 |
(413) |
Non-GAAP operating expenses |
$ 22,403 |
$ 18,543 |
$ 22,720 |
|
|
|
|
GAAP operating income (loss) |
$ 15,198 |
$ (7,137) |
$ 16,801 |
Employee stock compensation
(a) |
2,771 |
1,853 |
2,649 |
Employee severance (b) |
-- |
84 |
-- |
Special charges - restructuring
costs (c) |
-- |
(66) |
413 |
Non-GAAP operating income |
$ 17,969 |
$ (5,266) |
$ 19,863 |
|
|
|
|
GAAP operating margin % |
16.0% |
-18.4% |
17.9% |
Effect of reconciling items on
operating margin % |
2.9% |
4.8% |
3.2% |
Non-GAAP operating margin % |
18.9% |
-13.6% |
21.1% |
|
|
|
|
(a) - (c) 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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