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Dot Hill Reports Fourth Quarter and Full Year 2010 Results
Mar 03, 2011 (03:03 PM EST)
Company reports a fourth quarter 2010 non-GAAP profit of $0.04 per share, sequential and year-over-year revenue growth and continued improvement in non-GAAP gross margin.
LONGMONT, Colo., March 3, 2011 /PRNewswire/ -- Dot Hill Systems Corp. (Nasdaq: HILL) today announced financial results for the fourth quarter and year ended December 31, 2010.
Financial and Operational Highlights:
Fourth Quarter 2010 Financial Detail:
The Company recognized net revenue of $65.4 million for the fourth quarter of 2010, compared to $62.6 million for the fourth quarter of 2009 and $61.6 million for the third quarter of 2010. GAAP gross margin for the fourth quarter of 2010 was 21%, compared to 14.3% for the fourth quarter of 2009 and 18.3% for the third quarter of 2010. GAAP operating expenses for the fourth quarter of 2010 were $13.3 million, as compared to $14.0 million for the fourth quarter of 2009 and $12.6 million in the third quarter of 2010.
GAAP net profit for the fourth quarter of 2010 was $0.3 million, or $0.01 per share, as compared to a net loss of $5.0 million, or $0.11 per share, in the fourth quarter of 2009, and $1.3 million, or $0.02 per share, in the third quarter of 2010.
Excluding revenues from the terminated NetApp relationship, net revenues from the fourth quarter of 2010 would have been $52.9 million as compared to $42.7 million in the fourth quarter of 2009 and $44.8 million in the third quarter of 2010 which represents growth of 23.9% on a year-over-year basis and 18.1% on a quarter over quarter basis.
Non-GAAP gross margin was 22% for the fourth quarter of 2010, compared to 14.5% for the fourth quarter of 2009 and 19.3% for the third quarter of 2010. The improvement in gross margin was largely attributable to a more favorable product and customer mix. Total non-GAAP operating expenses for the fourth quarter of 2010 were $12.2 million, as compared to $11.8 million for the fourth quarter of 2009 and $11.7 million for the third quarter of 2010.
Non-GAAP net profit for the fourth quarter of 2010 was 2.0 million, or $0.04 per share, as compared to a fourth quarter of 2009 non-GAAP net loss of $2.7 million, or ($0.06) per share, and a third quarter 2010 non-GAAP net profit of $0.2 million, or $0.00 per share. Non-GAAP EBITDA for the fourth quarter of 2010 was $2.6 million compared to negative $2.1 million for the fourth quarter of 2009 and $0.7 million for the third quarter of 2010.
"All in all I am pleased with the progress we made in 2010," said Hanif Jamal, Dot Hill's senior vice president and chief financial officer. "This progress is evidenced by the sequential improvement in non-GAAP gross margin and EPS during 2010 which culminated with the company today reporting a $0.04 non-GAAP EPS for the fourth quarter."
Full-Year 2010 Financial Detail:
The Company recognized net revenue of $252.5 million for the full year of 2010, compared to $234.4 million for the year ended 2009. GAAP gross margin for 2010 was 17 percent, compared to 16.1 percent in 2009. GAAP operating expenses for 2010 were $55.9 million compared to $51.7 million in 2009. GAAP net loss for 2010 was $13.3 million, or $0.25 per share, as compared to a net loss of $13.6 million, or $0.29 per share, in 2009.
Non-GAAP gross margin was 18% for 2010, compared to 16.3% for 2009. The increase in non-GAAP gross margin was primarily due to product cost reductions, reduced overhead expenses and a more favorable customer and product mix. Total non-GAAP operating expenses for 2010 were $51.1 million, as compared to $45.7 million for 2009. The increase in non-GAAP operating expenses was due primarily to incremental expenses to support the company's strategic investments in channel development and expenses associated with the company's AssuredUVS business acquired from Cloverleaf Communications Inc. in January 2010.
Non-GAAP net loss for 2010 was $6.0 million, or $0.11 per share, as compared to a 2009 non-GAAP net loss of $7.3 million, or $0.15 per share. Non-GAAP EBITDA for 2010 was negative $3.7 million compared to negative $5.5 million for 2009.
"Throughout 2010, we made solid, incremental progress in our transformation from a low margin, entry level, OEM storage array provider to a storage solutions company with a broader range of higher margin products and routes to market as we added to our software offerings and continued to build out our branded channels," said Dana Kammersgard, Dot Hill's president and chief executive officer. "At our Analyst Day in November, I called this 'A New Beginning.' In many ways, I feel that we are strategically better positioned, and a very different company today than we were even just a year ago. 2010 was certainly a landmark year for the data storage industry with a heightened level of merger and acquisition activity which I believe will result in voids in the marketplace which we will work aggressively to fill in 2011."
Balance Sheet and Cash:
The company exited 2010 with cash and cash equivalents of $45.7 million compared to $57.6 million at the end of 2009 and $41.8 million at the end of the third quarter of 2010. The year-over-year decrease was primarily attributable to the company's 2010 net loss and the acquisition of Cloverleaf Communications Inc.
First Quarter 2011 and Full Year 2011 Outlook:
The Company is targeting first quarter 2011 net revenue in the range of $49 million to $53 million and a non-GAAP EPS in the range of a loss of $0.02 to a profit of $0.02.
"The expected sequential decline in both revenue and non-GAAP EPS is due primarily to the termination of the NetApp business coupled with normal seasonality" said Mr. Jamal. "Hence I believe it is more meaningful to compare our revenue guidance with the Q410 revenues without NetApp of $52.9 million and Q110 revenues of $41.6 million. At the mid-point of our guidance range we are expecting a 3.2% sequential decline in revenue and a 22.6% year over year growth in revenue. Gross margin percentage is expected to improve on a non-GAAP basis to between 23% and 24% as we expect a more favorable customer sales mix in the quarter," said Mr. Jamal. "Operating expenses are expected to increase to be between $12.5 million and $13 million as we continue to invest in our channel program and product development. Consequently, we expect cash and cash equivalents at the end of the first quarter of 2011 to be in the range of $42 to $46 million."
The company is targeting full year 2011 revenue of $207 million to $220 million and non-GAAP EPS of $0.01 to $0.08.
Conference Call Information:
Dot Hill's fourth quarter 2010 financial results conference call is scheduled to take place on Thursday, March 3, 2011 at 4:30 p.m. ET. Please join us for a live audio webcast at www.dothill.com in the Investor Relations section. If you prefer to join via telephone, please dial (877) 303 or (408) 427-3864 (International) at least five minutes prior to the start of the call. A replay of the webcast is scheduled to be available for one week on the Dot Hill web site following the conference call. For a telephone replay, dial (800) 642-1687(U.S.) or (706) 645-9291 (International) and enter conference ID# 44423830.
About Non-GAAP Financial Measures
This press release contains financial results that exclude the effects of share-based compensation expense, severance costs, restructuring costs, intangible asset amortization, transaction expenses associated with our acquisition of Cloverleaf Communications Inc., contingent consideration adjustments, and foreign currency gains or losses, and are not in accordance with U.S. generally accepted accounting principles (GAAP). In addition, as a result of exiting our relationship with NetApp on or about November 30, 2010, the company will also be presenting standalone non-GAAP revenue metrics to exclude the historical revenue attributable to NetApp in order to better compare revenue from its ongoing business. The Company believes that these non-GAAP financial measures provide meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company used these non-GAAP measures when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. These non-GAAP measures should not be viewed in isolation from or as a substitute for the Company's financial results in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is attached to this press release.
About Dot Hill
Delivering innovative technology and global support, Dot Hill empowers the OEM and channels community to bring unique storage solutions to market, quickly, easily and cost-effectively. Offering high performance and industry-leading uptime, Dot Hill's RAID technology is the foundation for best-in-class storage solutions offering enterprise-class security, availability and data protection. The Company's products are in use today by the world's leading service and equipment providers, common carriers and advanced technology and telecommunications companies, as well as government agencies and small and medium enterprise customers. Dot Hill solutions are certified to meet rigorous industry standards and military specifications, as well as RoHS and WEEE international environmental standards. Headquartered in Longmont, Colorado, Dot Hill has offices and/or representatives in China, Germany, Japan, United Kingdom, Singapore, Israel and the United States. For more information, visit us at http://www.dothill.com.
Statements contained in this press release regarding matters that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such statements include statements regarding Dot Hill's projected financial results for the first quarter of and full year of 2011 and thereafter, Dot Hill's ability to achieve profitability and Dot Hill's ability to take advantage of technology transitions to win new customers. The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: the risk that actual financial results for the first quarter and full year of 2011 may be different from the financial guidance provided in this press release; the risks associated with macroeconomic factors that are outside of Dot Hill's control; the fact that no Dot Hill customer agreements provide for mandatory minimum purchase requirements; the risk that one or more of Dot Hill's OEM or other customers may cancel or reduce orders, not order as forecasted or terminate their agreements with Dot Hill; the risk that Dot Hill's new products may not prove to be popular; the risk that one or more of Dot Hill's suppliers or subcontractors may fail to perform or may terminate their agreements with Dot Hill; the risk that Dot Hill may have difficulties integrating the business acquired from Cloverleaf Communications, Inc.; the risk that sales through channel partners may not ramp as expected; unforeseen product quality, technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the form 10-Q most recently filed with the Securities and Exchange Commission by Dot Hill. All forward-looking statements contained in this press release speak only as of the date on which they were made. Dot Hill undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.
SOURCE Dot Hill Systems Corp.