SGI Reports Third Quarter Fiscal Year 2008 Results
Order Momentum Continues; Strong Q4 Start with Significant Wins
SUNNYVALE, Calif., May 6 -- SGI (NASDAQ:SGIC)
today announced financial results for the third quarter of fiscal 2008, which ended March 28, 2008.
The Company's Webcast and conference call to discuss results is Tuesday, May 6 at 2:00 p.m. PDT. The Webcast and presentation materials will be available on the SGI Investors Relations Web page at the time of the call, at http://www.sgi.com/company_info/investors/.
Third Quarter FY08 Highlights
Overall in its third quarter, SGI:
-- Grew orders 50 percent over orders received in the third quarter of the
prior year
-- Grew backlog to $134 million as of March 28, 2008, an 80 percent
increase over the beginning of the company's fiscal year on a
comparable basis
-- Accelerated its software strategy with acquisition of key IP assets
formerly owned by Linux Networx
"We have made great strides in continuing to execute on our strategy this quarter," said Bo Ewald, SGI Chief Executive Officer. "We saw a 50 percent increase in orders compared to the third quarter of last year, acquired significant software assets to strengthen our business and accelerate development of our Industrial Strength Linux Environment, announced a new support solutions program to reinforce our services offerings, and continued building on solid traction in our core markets. And with new significant customer wins in April, the fourth quarter is off to a strong start as well."
In this press release, SGI uses certain pro forma financial measures that are not calculated in accordance with GAAP, or non-GAAP financial measures. These measures are referred to as "pro forma" in this press release. In addition, the company uses bookings and backlog to measure performance. Bookings, also referred to as orders, reflect authorized orders for SGI products and professional services accepted in the period that are expected to ship in the next twelve months. Backlog is the cumulative bookings for which the company has not yet recognized revenue. Management believes that these non-GAAP financial measures, bookings and backlog are useful to investors because they facilitate period to period comparisons of SGI performance and because they help investors view the company's results of operations through the eyes of management and the company's lenders. SGI's credit line covenants, management reporting and incentive plans are measured against certain of these non-GAAP financial measures.
GAAP Q3 Results
GAAP revenue for the third quarter was $79.1 million, compared to $90.1 million in the second quarter. The third quarter GAAP operating loss was $40.6 million, compared to $30.8 million in the second quarter of fiscal 2008. GAAP operating expenses were $59.2 million for the third quarter of 2008, as compared to $58.6 million for the second quarter of fiscal 2008.
Pro Forma Q3 Results
Pro forma revenue was $80.9 million in the third quarter of fiscal 2008, compared with $109.1 million in the second quarter of fiscal 2008. Backlog at the end of the third quarter of 2008 grew to $133.9 million compared to $95.8 million at the end of the second quarter of fiscal 2008, the highest backlog level in the past five quarters.
"We are on track with growth in bookings, with much of the growth being attributable to significant wins and large long-term installations," said Kathy Lanterman, SGI Chief Financial Officer. "As we have said, our challenge is the revenue conversion cycle for these long-term orders, where revenue is not recognized for several months or quarters after we receive an order. We expect our operating results to improve as our growing backlog starts converting to revenue over the next two quarters."
Pro forma revenue excludes the impact of fresh-start accounting and the deferral of the company's recognition of revenues for certain of the company's transactions where software is more than incidental to the overall solution pursuant to AICPA Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2"). Pro forma gross margin for the third quarter, which is adjusted for similar items, was 26.9 percent compared with 35.7 percent in the second quarter of fiscal 2008. Pro forma operating expenses, which exclude restructuring and reorganization-related expenses, the non-cash impact of the acquisition of IP assets of Linux Networx, stock-based compensation expense and the impact of fresh start accounting, were $52.7 million in the third quarter of fiscal 2008 compared with $55.3 million in the second quarter of fiscal 2008. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of fiscal 2008, as defined in the company's debt agreements, were a loss of $25.7 million, compared with an $11.0 million loss for the second quarter of fiscal 2008.
A reconciliation of the non-GAAP financial measures used in this press release to the company's GAAP results of operations, including an illustration of the impact of the company's fresh start accounting and the impact of the implementation of SOP 97-2, is attached to this press release and is also available at http://www.sgi.com/company_info/investors.
Strong Start to Fourth Quarter
SGI also reported that it has secured several major domestic and international wins during the fourth quarter to date. These included:
-- NASA chose SGI to supply its next major supercomputer, a 20,480-core,
20TB SGI(R) Altix(R) ICE system, after a competitive evaluation the
space agency launched last year. The new supercomputer will support
NASA's aeronautics, science, space operations and space exploration
initiatives, including its plan to resume manned missions to the moon
and eventually manned exploration of Mars.
-- SGI entered into a multi-year agreement with total contract payments to
SGI expected to be more than $25M with a major national European
supercomputing center to equip the institution with high-performance
SGI computing and storage solutions. The systems will be used to drive
multiple applications and manage massive amounts of data.
-- SGI also will provide a large European weather service with an
extensive data warehouse solution, which will run Oracle 10g and Oracle
Clusterware. The solution incorporates SGI Altix 4700 and SGI Altix
450 servers, and will enable the weather service to analyze more than
30 years of meteorological data -- a challenge that represents 360
terabytes of user data.
"We believe this quarter's wins show significant momentum for SGI across multiple geographies and product lines," added Ewald. "Our ability to prevail in many exceptionally competitive sales situations shows that customers recognize the value of open-standards-based solutions that deliver superior price/performance and leading energy efficiency."
Recent SGI Announcements
-- Virtu VN200: A high density, highly scalable visualization system that
can fully incorporate leading edge visualization capabilities into the
full line of SGI Altix, SGI Altix XE and SGI Altix ICE servers.
-- InfiniteStorage 4600: A new flagship RAID storage system that augments
the InfiniteStorage product line and helps organizations meet the
escalating bandwidth and I/O demands of today's performance-driven
applications.
-- Virtualized Storage Migration Solution: The new solution allows
enterprises to choose the storage device that best suits their needs
-- an advantage that can lead to better data utilization and
significantly lower ownership costs. The new solution also allows
enterprises to migrate data without disrupting operations.
-- Climate Savers: SGI joined the Climate Savers Computing Initiative, a
nonprofit group of consumers, businesses and conservation organizations
dedicated to improving the power efficiency and reducing the energy
consumption of computers.
-- Support Solutions Plus: Through this new services support program, SGI
provides a single, centralized contact for technical support, secured
site management, and parts logistics requirements for many other
vendors' products as well as SGI products.
-- SGI Altix ICE enhancements: This quarter Altix ICE boasts new blade
enclosures and blade options that increase the performance density of
the platform by including improvements to memory, bandwidth and
interconnect performance, and an enhanced cluster management
environment, as well as make use of the next-generation InfiniBand chip
technology.
-- The NBA and SGI announced a multi-year extension of their relationship
to expand the league's groundbreaking digital workflow and media
management system, the NBA Digital Media Management System. The
extended relationship will enable NBA to accelerate and double the
historical digital archiving effort by ingesting 60,000 hours of video
content each year.
Conference Call
SGI will conduct a conference call today at 2 p.m. PT to provide additional details. The webcast and presentation materials are available at http://www.sgi.com/company_info/investors/. The conference call can be accessed by dialing (877) 495-0297 or (706) 643-9931 for participants outside of North America, conference ID: 45113222. An audio replay of this call will be available after 5 p.m. PT today at (800) 642-1687 or (706) 645-9291 (passcode: 45113222) and will be available until May 13, 2008 midnight PT. After May 13, 2008, the call will be available as an archived webcast. All links to the archived webcast, presentation materials and audio replay are available through the SGI web site at http://www.sgi.com/company_info/investors/.
SGI - Innovation for Results(TM)
SGI (NASDAQ:SGIC)
is a leader in high-performance computing. SGI delivers a complete range of high-performance server, visualization and storage solutions along with industry-leading professional services and support that enable its customers to overcome the challenges of complex data-intensive workflows and accelerate breakthrough discoveries, innovation and information transformation. SGI helps customers solve significant challenges, whether it's enhancing the quality of life through drug research, designing and manufacturing safer and more efficient cars and airplanes, studying global climate change, providing technologies for homeland security and defense, or helping enterprises manage large amounts of data. With offices worldwide, the company is headquartered in Sunnyvale, California, and can be found on the Web at sgi.com.
(C) 2008 SGI. All rights reserved. SGI, the SGI cube, the SGI logo and Altix are registered trademarks of SGI in the United States and/or other countries worldwide. All other registered trademarks mentioned herein are the property of their respective owners.
This press release contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth herein, including increased demands on our working capital due to growth in backlog, in particular for large deals; our ability to raise additional capital in the future on commercially attractive terms or at all, which would restrict our growth and impair our ability to operate; our historical losses and possible failure to attain profitability on a quarterly, annual or sustained basis and risks related to the impact on our business of cost reduction initiatives to be effected in the coming quarters to bring costs more in line with current revenues; our operating results continuing to fluctuate significantly and continuing to be difficult to predict; our stock continuing to have extremely low trading volume and price volatility; our failure to continue growth in bookings, delays in the conversion of backlog to revenue due to application of SOP 97-2, shipment delays and the other risks and uncertainties discussed under the caption "Risk Factors" and elsewhere in SGI's Form 10-K or Form 10-Q most recently filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. SGI disclaims any intent or obligation to update these forward-looking statements.
MEDIA CONTACT
Marla Robinson
marlar at sgi.com
256.773.2371
SGI PR HOTLINE
650.933.7777
SGI PR FACSIMILE
650.933.0714
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Predecessor
Successor Company Company
Nine Six Three
Months Months Months
Three Months Ended Ended Ended Ended
Mar. 28, Mar. 30, Mar. 28, Mar. 30, Sep. 28,
2008 2007 2008 2007 2006
Product and
other revenue $29,592 $56,117 $110,194 $114,797 $45,229
Product revenue
from related
party (1) 6,340 2,454 14,747 7,456 15,377
Global services
revenue 43,146 52,475 135,333 96,516 61,199
Total revenue 79,078 111,046 260,274 218,769 121,805
Costs and expenses:
Cost of product
and other revenue 32,038 41,330 104,668 101,248 42,710
Cost of global
services revenue 28,446 33,025 81,645 62,412 32,265
Research and
development (2) 16,520 14,186 44,280 29,170 16,007
Selling, general
and
administrative 42,484 42,017 127,871 83,623 42,359
Other operating
expense, net 230 358 425 3,243 3,926
Total costs and
expenses 119,718 130,916 358,889 279,696 137,267
Operating loss (40,640) (19,870) (98,615) (60,927) (15,462)
Interest expense (2,049) (1,430) (5,051) (3,432) (7,688)
Interest expense
from related
parties (1,921) (1,406) (4,861) (2,562) -
Interest and other
income (expense),
net (3) 4,996 174 (2,357) 1,373 11,391
Loss before
reorganization items
and income taxes (39,614) (22,532) (110,884) (65,548) (11,759)
Reorganization items,
net - - - - 340,397
Income (loss) before
income taxes (39,614) (22,532) (110,884) (65,548) 328,638
Income tax provision 119 488 7,218 1,166 2,382
Net income (loss) $(39,733) $(23,020) $(118,102) $(66,714) $326,256
Net income (loss)
per share:
Basic $(3.49) $(2.07) $(10.53) $(6.00) $1.20
Diluted $(3.49) $(2.07) $(10.53) $(6.00) $0.77
Weighted-average
shares used to
compute net income
(loss) per share:
Basic 11,372 11,125 11,215 11,125 271,563
Diluted 11,372 11,125 11,215 11,125 423,875
(1) Represents product sales to SGI Japan, a related party of which we
owned a 10% interest at March 28, 2008 and at September 29, 2006.
(2) The three-month period ended March 28, 2008 includes approximately $2
million of in-process research and development resulting form our
acquisition of certain assets formerly owned by Linux Networx, Inc.
(3) The three-month period ended March 28, 2008 includes a gain of
approximately $4 million on the sale of our investment in MicroUnity
Systems Engineering, Inc. The nine-month period ended March 28, 2008
includes a write-down of approximately $6 million of our equity
investment in SGI Japan to the estimated fair value of the investment,
which was approximately $15 million at March 28, 2008. The three-month
period ended September 29, 2006 includes a pre-tax gain of
approximately $10 million on the sale of a portion of the Predecessor
Company's investment in SGI Japan.
SILICON GRAPHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
March 28, June 29,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $42,731 $69,887
Short-term marketable investments 22 223
Short-term restricted investments 9,460 6,763
Accounts receivable, net 46,939 47,643
Inventories 73,394 54,354
Prepaid expenses 8,923 6,153
Other current assets 52,486 49,576
Total current assets 233,955 234,599
Restricted investments 434 302
Property and equipment, net 43,085 43,392
Other intangibles, net 60,860 71,264
Other non-current assets, net 71,948 59,501
Total assets $410,282 $409,058
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $22,070 $14,387
Accrued compensation 36,886 35,382
Income taxes payable 3,915 2,209
Other current liabilities 43,897 44,420
Current portion of long-term debt 8,513 261
Current portion of deferred revenue 110,590 84,798
Current portion of restructuring liability 1,075 1,410
Total current liabilities 226,946 182,867
Long-term debt 124,000 85,000
Non-current portion of deferred revenue 57,882 32,362
Other non-current liabilities 25,997 24,370
Total liabilities 434,825 324,599
Total stockholders' equity (deficit) (24,543) 84,459
Total liabilities and stockholders' equity $410,282 $409,058
Calculation of Non-GAAP Quarterly Results of Operations and Adjusted EBITDA
Successor Company
Three Months Ended: 28-Mar 28-Dec 28-Sep 29-Jun 30-Mar 29-Dec
-08 -07 -07 -07 -07 -06
(in thousands)
Total revenue
(GAAP) $79,078 $90,111 $91,085 $122,295 $111,046 $107,723
Plus: Fresh-start
accounting
adjustments 2,046 2,094 3,835 5,472 8,329 15,877
SOP 97-2
revenue
deferrals (1) (253) 16,935 25,813 13,726 10,392 10,544
Non-GAAP total
revenue 80,871 109,140 120,733 141,493 129,767 134,144
Cost of revenue
(GAAP) 60,484 62,248 63,581 90,148 74,355 89,305
Plus: Fresh-start
accounting
adjustments (1,492) (3,834) (2,762) (6,644) (4,703) (12,549)
SOP 97-2
revenue
deferrals (1) 286 11,794 18,576 8,213 3,574 6,293
Depreciation &
amortization -
Linux Networx (45) - - - - -
Stock-based
compensation
expense (84) 8 (87) (57) (45) (12)
Non-GAAP cost of
revenue 59,149 70,216 79,308 91,660 73,181 83,037
Research and
development expense
(GAAP) 16,520 14,464 13,296 14,870 14,186 14,984
Plus: Fresh-start
accounting
adjustments (108) (12) 47 65 52 (348)
Depreciation &
amortization -
Linux Networx (60) - - - - -
Write-off of in-
process R&D -
Linux Networx (2,400) - - - - -
Stock-based
compensation
expense (320) (253) (309) (257) (200) (58)
Non-GAAP research
and development
expense 13,632 14,199 13,034 14,678 14,038 14,578
Selling, general and
administrative
expenses (GAAP) 42,484 44,163 41,224 41,697 42,017 41,606
Plus: Fresh-start
accounting
adjustments (2,545) (2,525) (2,076) (2,580) (2,587) (2,635)
Restructuring and
bankruptcy
related expenses - - - - - -
Goodwill
impairment - - - - - -
Depreciation &
amortization -
Linux Networx (118) - - - - -
Stock-based
compensation
expense (705) (530) (718) (581) (949) (54)
Non-GAAP selling,
general and
administrative
expenses 39,116 41,108 38,430 38,536 38,481 38,917
Other operating
expenses (GAAP) 230 20 175 358 358 2,885
Plus: Restructuring and
bankruptcy
related expenses (230) (20) (175) (358) (358) (2,885)
Non-GAAP other
operating
expenses - - - - - -
Operating expenses
(GAAP) 59,234 58,647 54,695 56,925 56,561 59,475
Plus: Fresh-start
accounting
adjustments (2,653) (2,537) (2,029) (2,515) (2,535) (2,983)
Stock-based
compensation
expense (1,025) (783) (1,027) (838) (1,149) (112)
Goodwill
impairment - - - - - -
Depreciation &
amortization -
Linux Networx (178) - - - - -
Write-off of
in-process R&D
- Linux
Networx (2,400) - - - - -
Restructuring
and bankruptcy
related
expenses (230) (20) (175) (358) (358) (2,885)
Non-GAAP
operating
expenses 52,748 55,307 51,464 53,214 52,519 53,495
Operating
income
(loss) (GAAP) (40,640) (30,784) (27,191) (24,778) (19,870) (41,057)
Plus: Fresh-start
accounting
adjustments 6,191 8,465 8,626 14,631 15,567 31,409
SOP 97-2
revenue
deferrals (1) (539) 5,141 7,237 5,513 6,818 4,251
Stock-based
compensation
expense 1,109 775 1,114 895 1,194 124
Goodwill
impairment - - - - - -
Depreciation &
amortization -
Linux Networx 223 - - - - -
Write-off of in-
process R&D -
Linux Networx 2,400 - - - - -
Restructuring and
bankruptcy
related
expenses 230 20 175 358 358 2,885
Non-GAAP operating
income
(loss) (2): (31,026) (16,383) (10,039) (3,381) 4,067 (2,388)
Plus: Depreciation 5,375 5,414 6,224 6,169 6,128 6,552
Adjusted
EBITDA (25,651) (10,969) (3,815) 2,788 10,195 4,164
Predecessor Company
Three Months Ended: 29-Sep 30-Jun 31-Mar 30-Dec 30-Sep
-06 -06 -06 -05 -05
(in thousands)
Total revenue
(GAAP) $121,805 $115,708 $105,562 $136,796 $160,739
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (1) 5,154 13,476 2,112 7,597 8,938
Non-GAAP total
revenue 126,959 129,184 107,674 144,393 169,677
Cost of revenue
(GAAP) 74,975 70,532 68,227 80,952 100,722
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (1) 2,795 4,675 1,334 3,366 4,810
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense 7 22 (53) (71) (228)
Non-GAAP cost
of revenue 77,777 75,229 69,508 84,247 105,304
Research and
development
expense (GAAP) 16,007 18,220 20,838 21,254 23,365
Plus: Fresh-start
accounting
adjustments - - - - -
Depreciation &
amortization
- Linux
Networx - - - - -
Write-off of in-
process R&D -
Linux Networx - - - - -
Stock-based
compensation
expense 5 32 (112) (231) (300)
Non-GAAP research
and development
expense 16,012 18,252 20,726 21,023 23,065
Selling, general and
administrative
expenses (GAAP) 42,359 42,903 59,722 57,627 59,865
Plus: Fresh-start
accounting
adjustments - - - - -
Restructuring
and bankruptcy
related expenses - - (3,452) (6,413) (2,082)
Goodwill
impairment - - (8,386) - -
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense (134) (64) (344) (381) (455)
Non-GAAP selling,
general and
administrative
expenses 42,225 42,839 47,540 50,833 57,328
Other operating
expenses (GAAP) 3,926 (7,694) 11,550 10,114 7,185
Plus: Restructuring and
bankruptcy
related
expenses (3,926) 7,694 (11,550) (10,114) (7,185)
Non-GAAP other
operating
expenses - - - - -
Operating
expenses
(GAAP) 62,292 53,429 92,110 88,995 90,415
Plus: Fresh-start
accounting
adjustments - - - - -
Stock-based
compensation
expense (129) (32) (456) (612) (755)
Goodwill
impairment - - (8,386) - -
Depreciation &
amortization
- Linux
Networx - - - - -
Write-off of in-
process R&D -
Linux Networx - - - - -
Restructuring
and bankruptcy
related
expenses (3,926) 7,694 (15,002) (16,527) (9,267)
Non-GAAP
operating
expenses 58,237 61,091 68,266 71,856 80,393
Operating income
(loss) (GAAP) (15,462) (8,253) (54,775) (33,151) (30,398)
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (1) 2,359 8,801 778 4,231 4,128
Stock-based
compensation
expense 122 10 509 683 983
Goodwill
impairment - - 8,386 - -
Depreciation &
amortization
- Linux
Networx - - - - -
Write-off of in-
process R&D -
Linux Networx - - - - -
Restructuring
and bankruptcy
related
expenses 3,926 (7,694) 15,002 16,527 9,267
Non-GAAP
operating income
(loss) (2): (9,055) (7,136) (30,100) (11,710) (16,020)
Plus: Depreciation 6,467 10,003 10,898 11,959 13,379
Adjusted
EBITDA (2,588) 2,867 (19,202) 249 (2,641)
Three Months Ended: FY2007 FY2006
(in thousands)
Total revenue (GAAP) $462,869 $518,805
Plus: Fresh-start accounting adjustments 29,678 -
SOP 97-2 revenue deferrals (1) 39,816 32,123
Non-GAAP total revenue 532,363 550,928
Cost of revenue (GAAP) 328,783 320,433
Plus: Fresh-start accounting adjustments (23,896) -
SOP 97-2 revenue deferrals (1) 20,875 14,185
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense (107) (330)
Non-GAAP cost of revenue 325,655 334,288
Research and development expense (GAAP) 60,047 83,677
Plus: Fresh-start accounting adjustments (231) -
Depreciation & amortization -
Linux Networx - -
Write-off of in-process R&D -
Linux Networx - -
Stock-based compensation expense (510) (611)
Non-GAAP research and development expense 59,306 83,066
Selling, general and administrative
expenses (GAAP) 167,679 220,117
Plus: Fresh-start accounting adjustments (7,802) -
Restructuring and bankruptcy related
expenses - (11,947)
Goodwill impairment - (8,386)
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense (1,718) (1,244)
Non-GAAP selling, general and
administrative expenses 158,159 198,540
Other operating expenses (GAAP) 7,527 21,155
Plus: Restructuring and bankruptcy related
expenses (7,527) (21,155)
Non-GAAP other operating expenses - -
Operating expenses (GAAP) 235,253 324,949
Plus: Fresh-start accounting adjustments (8,033) -
Stock-based compensation expense (2,228) (1,855)
Goodwill impairment - (8,386)
Depreciation & amortization -
Linux Networx - -
Write-off of in-process R&D -
Linux Networx - -
Non-GAAP operating expenses 217,465 281,606
Operating income (loss) (GAAP) (101,167) (126,577)
Plus: Fresh-start accounting adjustments 61,607 -
SOP 97-2 revenue deferrals (1) 18,941 17,938
Stock-based compensation expense 2,335 2,185
Goodwill impairment - 8,386
Depreciation & amortization -
Linux Networx - -
Write-off of in-process R&D -
Linux Networx - -
Restructuring and bankruptcy related
expenses 7,527 33,102
Non-GAAP operating income (loss) (2): (10,757) (64,966)
Plus: Depreciation 25,316 46,239
Adjusted EBITDA 14,559 (18,727)
Calculation of Non-GAAP Revenues by Reporting Segment(1)
Successor Company
Three Months Ended: 28-Mar 28-Dec 28-Sep 29-Jun 30-Mar 29-Dec
-08 -07 -07 -07 -07 -06
(in thousands)
Core systems:
Server
products
(GAAP) $22,703 $23,282 $31,627 $47,926 $32,692 $40,954
Plus: Fresh-start
accounting
adjustments 306 196 22 332 1,100 1,109
SOP 97-2
revenue
deferrals (2) (346) 12,324 20,887 6,067 4,857 4,075
Non-GAAP server
products
revenue 22,663 35,802 52,536 54,325 38,649 46,138
Storage
products
revenue (GAAP) 8,374 13,505 8,233 14,486 12,063 10,920
Plus: Fresh-start
accounting
adjustments - - - 293 - 320
SOP 97-2
revenue
deferrals (2) 203 2,303 3,377 5,392 2,676 3,834
Non-GAAP storage
products
revenue 8,577 15,808 11,610 20,171 14,739 15,074
Non-GAAP core
systems
revenue 31,240 51,610 64,146 74,496 53,388 61,212
Legacy systems:
Legacy
systems
(GAAP) 4,855 6,626 5,736 11,846 13,816 11,808
Plus: Fresh-start
accounting
adjustments - - - - 37 1,952
SOP 97-2
revenue
deferrals (2) (348) 1,190 424 259 634 895
Non-GAAP legacy
systems
revenue 4,507 7,816 6,160 12,105 14,487 14,655
Non-GAAP
products
revenue 35,747 59,426 70,306 86,601 67,875 75,867
Global services:
Customer
support
(GAAP) 35,163 40,193 38,231 39,332 37,527 35,080
Plus: Fresh-start
accounting
adjustments 1,345 1,898 3,813 4,789 6,545 12,228
SOP 97-2
revenue
deferrals (2) (316) (2,215) 77 677 159 231
Non-GAAP
customer
support
revenue 36,192 39,876 42,121 44,798 44,231 47,539
Professional
services (GAAP) 7,983 6,505 7,258 8,705 14,948 8,961
Plus: Fresh-start
accounting
adjustments 395 - - 58 647 268
SOP 97-2
revenue
deferrals (2) 554 3,333 1,048 1,331 2,066 1,509
Non-GAAP
professional
services
revenue 8,932 9,838 8,306 10,094 17,661 10,738
Non-GAAP global
services
revenue 45,124 49,714 50,427 54,892 61,892 58,277
Non-GAAP
revenue $80,871 $109,140 $120,733 $141,493 $129,767 $134,144
Predecessor Company
Three Months Ended: 29-Sep 30-Jun 31-Mar 30-Dec 30-Sep
-06 -06 -06 -05 -05
(in thousands)
Core systems:
Server
products
(GAAP) $34,914 $21,168 $20,484 $28,182 $53,993
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (2) 2,304 3,895 30 2,485 2,524
Non-GAAP server
products
revenue 37,218 25,063 20,514 30,667 56,517
Storage
products
revenue
(GAAP) 12,750 13,134 11,798 11,185 13,816
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (2) 1,584 1,288 854 2,070 2,766
Non-GAAP storage
products
revenue 14,334 14,422 12,652 13,255 16,582
Non-GAAP core
systems revenue 51,552 39,485 33,166 43,922 73,099
Legacy systems:
Legacy systems
(GAAP) 12,942 14,701 13,810 27,095 22,729
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (2) (580) 7,169 1,338 2,933 2,940
Non-GAAP
legacy
systems
revenue 12,362 21,870 15,148 30,028 25,669
Non-GAAP
products
revenue 63,914 61,355 48,314 73,950 98,768
Global services:
Customer
support (GAAP) 48,396 49,552 52,053 55,304 57,174
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (2) 144 1,299 (190) (317) 97
Non-GAAP
customer
support
revenue 48,540 50,851 51,863 54,987 57,271
Professional
services
(GAAP) 12,803 17,153 7,417 15,030 13,027
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (2) 1,702 (175) 80 426 611
Non-GAAP
professional
services
revenue 14,505 16,978 7,497 15,456 13,638
Non-GAAP
global
services
revenue 63,045 67,829 59,360 70,443 70,909
Non-GAAP
revenue $126,959 $129,184 $107,674 $144,393 $169,677
Three Months Ended: FY2007 FY2006
(in thousands)
Core systems:
Server products (GAAP) $156,486 $123,827
Plus: Fresh-start accounting adjustments 2,541 -
SOP 97-2 revenue deferrals (2) 17,303 8,934
Non-GAAP server products revenue 176,330 132,761
Storage products revenue (GAAP) 50,219 49,933
Plus: Fresh-start accounting adjustments 613 -
SOP 97-2 revenue deferrals (2) 13,486 6,978
Non-GAAP storage products revenue 64,318 56,911
Non-GAAP core systems revenue 240,648 189,672
Legacy systems:
Legacy systems (GAAP) 50,412 78,335
Plus: Fresh-start accounting adjustments 1,989 -
SOP 97-2 revenue deferrals (2) 1,208 14,380
Non-GAAP legacy systems revenue 53,609 92,715
Non-GAAP products revenue 294,257 282,387
Global services:
Customer support (GAAP) 160,335 214,083
Plus: Fresh-start accounting adjustments 23,562 -
SOP 97-2 revenue deferrals (2) 1,211 889
Non-GAAP customer support revenue 185,108 214,972
Professional services (GAAP) 45,417 52,627
Plus: Fresh-start accounting adjustments 973 -
SOP 97-2 revenue deferrals (2) 6,608 942
Non-GAAP professional services revenue 52,998 53,569
Non-GAAP global services revenue 238,106 268,541
Non-GAAP revenue $532,363 $550,928
(1) For each of the periods indicated, non-GAAP core systems revenue is
obtained by adding non-GAAP server products revenue and non-GAAP
storage products revenue, non-GAAP products revenue is obtained by
adding non-GAAP core systems revenue and non-GAAP legacy systems
revenue, non-GAAP global services revenue is obtained by adding
non-GAAP customer support revenue and non-GAAP professional services
revenue and non-GAAP revenue is obtained by adding non-GAAP products
revenue and non-GAAP global services revenue. This table includes a
reconciliation of each listed component to the comparable GAAP
figures.
(2) The non-GAAP adjustments for SOP 97-2 are indicative of the revenue
results the company would have recorded without the effect of
SOP 97-2, although these are unaudited adjustments. We believe that
this presentation more closely matches the results that would have
been recorded had SAB 104 been applied, in which case the revenue for
the hardware components of the arrangement would have been recorded
when those deliverables were completed, and the primary remaining
deliverable is customer support. Generally, this presentation matches
the timing of billings to customers for the hardware deliverables, and
therefore allows more transparency to cashflows.
Successor Company
Three Months 28-Mar 28-Dec 28-Sep 29-Jun 30-Mar 29-Dec
Ended: -08 -07 -07 -07 -07 -06
(in thousands)
Products revenue
(GAAP) $35,932 $43,413 $45,596 $74,258 $58,571 $63,682
Plus: Fresh-start
accounting
adjustments 306 196 22 625 1,137 3,381
SOP 97-2
revenue
deferrals(1) (491) 15,817 24,688 11,718 8,167 8,804
Non-GAAP
products
revenue 35,747 59,426 70,306 86,601 67,875 75,867
Global services
revenue (GAAP) 43,146 46,698 45,489 48,037 52,475 44,041
Plus: Fresh-start
accounting
adjustments 1,740 1,898 3,813 4,847 7,192 12,496
SOP 97-2
revenue
deferrals(1) 238 1,118 1,125 2,008 2,225 1,740
Non-GAAP
global
services
revenue 45,124 49,714 50,427 54,892 61,892 58,277
Total revenue
(GAAP) 79,078 90,111 91,085 122,295 111,046 107,723
Plus: Fresh-start
accounting
adjustments 2,046 2,094 3,835 5,472 8,329 15,877
SOP 97-2
revenue
deferrals(1) (253) 16,935 25,813 13,726 10,392 10,544
Non-GAAP
total
revenue 80,871 109,140 120,733 141,493 129,767 134,144
Products cost of
revenue (GAAP) 32,038 34,938 37,692 61,114 41,330 59,918
Plus: Fresh-start
accounting
adjustments(1,588) (3,789) (2,718) (6,814) (5,329) (12,875)
SOP 97-2
revenue
deferrals(1) (50) 9,913 18,092 7,966 2,454 5,318
Depreciation &
amortization
- Linux
Networx (24) - - - - -
Stock-based
compensation
expense (39) (34) (27) (24) (21) (6)
Non-GAAP
products cost
of revenue 30,337 41,028 53,039 62,242 38,434 52,355
Global services
cost of revenue
(GAAP) 28,446 27,310 25,889 29,034 33,025 29,387
Plus: Fresh-start
accounting
adjustments 96 (45) (44) 170 626 326
SOP 97-2
revenue
deferrals(1) 336 1,881 484 247 1,120 975
Depreciation &
amortization
- Linux
Networx (21) - - - - -
Stock-based
compensation
expense (45) 42 (60) (33) (24) (6)
Non-GAAP
global
services
cost of
revenue 28,812 29,188 26,269 29,418 34,747 30,682
Cost of revenue
(GAAP) 60,484 62,248 63,581 90,148 74,355 89,305
Plus: Fresh-start
accounting
adjustments(1,492) (3,834) (2,762) (6,644) (4,703) (12,549)
SOP 97-2
revenue
deferrals(1) 286 11,794 18,576 8,213 3,574 6,293
Depreciation
& amortization
- Linux
Networx (45) - - - - -
Stock-based
compensation
expense (84) 8 (87) (57) (45) (12)
Non-GAAP cost
of revenue 59,149 70,216 79,308 91,660 73,181 83,037
Products gross
profit (GAAP) 3,894 8,475 7,904 13,144 17,241 3,764
Plus: Fresh-start
accounting
adjustments 1,894 3,985 2,740 7,439 6,466 16,256
SOP 97-2
revenue
deferrals(1) (441) 5,904 6,596 3,752 5,713 3,486
Depreciation &
amortization
- Linux
Networx 24 - - - - -
Stock-based
compensation
expense 39 34 27 24 21 6
Non-GAAP
products
gross
profit 5,410 18,398 17,267 24,359 29,441 23,512
Non-GAAP
products
gross
profit
margin 15.1% 31.0% 24.6% 28.1% 43.4% 31.0%
Global services
gross profit
(GAAP) 14,700 19,388 19,600 19,003 19,450 14,654
Plus: Fresh-start
accounting
adjustments 1,644 1,943 3,857 4,677 6,566 12,170
SOP 97-2
revenue
deferrals(1) (98) (763) 641 1,761 1,105 765
Depreciation
& amortization
- Linux
Networx 21 - - - - -
Stock-based
compensation
expense 45 (42) 60 33 24 6
Non-GAAP global
services
gross
profit 16,312 20,526 24,158 25,474 27,145 27,595
Non-GAAP
global
services
gross profit
margin 36.1% 41.3% 47.9% 46.4% 43.9% 47.4%
Gross profit
(GAAP) 18,594 27,863 27,504 32,147 36,691 18,418
Plus: Fresh-start
accounting
adjustments 3,538 5,928 6,597 12,116 13,032 28,426
SOP 97-2
revenue
deferrals(1) (539) 5,141 7,237 5,513 6,818 4,251
Depreciation &
amortization
- Linux
Networx 45 - - - - -
Stock-based
compensation
expense 84 (8) 87 57 45 12
Non-GAAP gross
profit 21,722 38,924 41,425 49,833 56,586 51,107
Non-GAAP gross
profit
margin 26.9% 35.7% 34.3% 35.2% 43.6% 38.1%
Predecessor Company
Three Months
Ended: 29-Sep-06 30-Jun-06 31-Mar-06 30-Dec-05 30-Sep-05
(in thousands)
Products revenue
(GAAP) $60,606 $49,003 $46,092 $66,462 $90,538
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 3,308 12,352 2,222 7,488 8,230
Non-GAAP
products
revenue 63,914 61,355 48,314 73,950 98,768
Global services
revenue (GAAP) 61,199 66,705 59,470 70,334 70,201
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 1,846 1,124 (110) 109 708
Non-GAAP global
services
revenue 63,045 67,829 59,360 70,443 70,909
Total revenue
(GAAP) 121,805 115,708 105,562 136,796 160,739
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 5,154 13,476 2,112 7,597 8,938
Non-GAAP total
revenue 126,959 129,184 107,674 144,393 169,677
Products cost of
revenue (GAAP) 42,710 36,218 35,042 43,517 62,550
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 2,114 4,518 1,180 2,941 4,215
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense - 4 (14) (24) (54)
Non-GAAP
products
cost of
revenue 44,824 40,740 36,208 46,434 66,711
Global services cost
of revenue (GAAP) 32,265 34,314 33,185 37,435 38,172
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 681 157 154 425 595
Depreciation &
amortization
- Linux Networx - - - - -
Stock-based
compensation
expense 7 18 (39) (47) (174)
Non-GAAP global
services cost
of revenue 32,953 34,489 33,300 37,813 38,593
Cost of revenue
(GAAP) 74,975 70,532 68,227 80,952 100,722
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals (1) 2,795 4,675 1,334 3,366 4,810
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense 7 22 (53) (71) (228)
Non-GAAP cost
of revenue 77,777 75,229 69,508 84,247 105,304
Products gross
profit (GAAP) 17,896 12,785 11,050 22,945 27,988
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 1,194 7,834 1,042 4,547 4,015
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense - (4) 14 24 54
Non-GAAP
products
gross profit 19,090 20,615 12,106 27,516 32,057
Non-GAAP
products
gross profit
margin 29.9% 33.6% 25.1% 37.2% 32.5%
Global services
gross profit
(GAAP) 28,934 32,391 26,285 32,899 32,029
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 1,165 967 (264) (316) 113
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense (7) (18) 39 47 174
Non-GAAP global
services
gross profit 30,092 33,340 26,060 32,630 32,316
Non-GAAP global
services gross
profit margin 47.7% 49.2% 43.9% 46.3% 45.6%
Gross profit (GAAP) 46,830 45,176 37,335 55,844 60,017
Plus: Fresh-start
accounting
adjustments - - - - -
SOP 97-2
revenue
deferrals(1) 2,359 8,801 778 4,231 4,128
Depreciation &
amortization
- Linux
Networx - - - - -
Stock-based
compensation
expense (7) (22) 53 71 228
Non-GAAP
gross
profit 49,182 53,955 38,166 60,146 64,373
Non-GAAP
gross
profit
margin 38.7% 41.8% 35.4% 41.7% 37.9%
Three Months Ended: FY2007 FY2006
(in thousands)
Products revenue (GAAP) $257,117 $252,095
Plus: Fresh-start accounting adjustments 5,143 -
SOP 97-2 revenue deferrals (1) 31,997 30,292
Non-GAAP products revenue 294,257 282,387
Global services revenue (GAAP) 205,752 266,710
Plus: Fresh-start accounting adjustments 24,535 -
SOP 97-2 revenue deferrals (1) 7,819 1,831
Non-GAAP global services revenue 238,106 268,541
Total revenue (GAAP) 462,869 518,805
Plus: Fresh-start accounting adjustments 29,678 -
SOP 97-2 revenue deferrals (1) 39,816 32,123
Non-GAAP total revenue 532,363 550,928
Products cost of revenue (GAAP) 205,072 177,327
Plus: Fresh-start accounting adjustments (25,018) -
SOP 97-2 revenue deferrals (1) 17,852 12,854
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense (51) (88)
Non-GAAP products cost of revenue 197,855 190,093
Global services cost of revenue (GAAP) 123,711 143,106
Plus: Fresh-start accounting adjustments 1,122 -
SOP 97-2 revenue deferrals (1) 3,023 1,331
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense (56) (242)
Non-GAAP global services cost of revenue 127,800 144,195
Cost of revenue (GAAP) 328,783 320,433
Plus: Fresh-start accounting adjustments (23,896) -
SOP 97-2 revenue deferrals (1) 20,875 14,185
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense (107) (330)
Non-GAAP cost of revenue 325,655 334,288
Products gross profit (GAAP) 52,045 74,768
Plus: Fresh-start accounting adjustments 30,161 -
SOP 97-2 revenue deferrals (1) 14,145 17,438
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense 51 88
Non-GAAP products gross profit 96,402 92,294
Non-GAAP products gross profit margin 32.8% 32.7%
Global services gross profit (GAAP) 82,041 123,604
Plus: Fresh-start accounting adjustments 23,413 -
SOP 97-2 revenue deferrals (1) 4,796 500
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense 56 242
Non-GAAP global services gross profit 110,306 124,346
Non-GAAP global services gross profit
margin 46.3% 46.3%
Gross profit (GAAP) 134,086 198,372
Plus: Fresh-start accounting adjustments 53,574 -
SOP 97-2 revenue deferrals (1) 18,941 17,938
Depreciation & amortization -
Linux Networx - -
Stock-based compensation expense 107 330
Non-GAAP gross profit 206,708 216,640
Non-GAAP gross profit margin 38.8% 39.3%
Calculation of Non-GAAP Quarterly Products Standard Profit Margin
Successor Company
Three Months
Ended: 28-Mar-08 28-Dec-07 28-Sep-07 29-Jun-07 30-Mar-07
(in thousands)
Total products
revenue (GAAP) $35,932 $43,413 $45,596 $74,258 $58,571
Less:
Other revenue (1,015) (286) (395) (810) (248)
Plus:
Fresh-start
accounting
adjustments 306 196 22 625 1,137
SOP 97-2 revenue
deferrals (491) 15,817 24,688 11,718 8,167
Non-GAAP total
products revenue 34,732 59,140 69,911 85,791 67,627
Products standard
cost of revenue
(GAAP) 20,549 24,919 28,163 48,084 32,497
Plus:
Fresh-start
accounting
adjustments (441) (2,521) (1,555) (5,144) (3,736)
SOP 97-2 revenue
deferrals (50) 9,913 18,092 7,966 2,454
Non-GAAP products
standard cost of
revenue 20,058 32,311 44,700 50,906 31,215
Products
standard margin
(GAAP) 14,368 18,208 17,038 25,364 25,826
Plus:
Fresh-start
accounting
adjustments 747 2,717 1,577 5,769 4,873
SOP 97-2 revenue
deferrals (441) 5,904 6,596 3,752 5,713
Non-GAAP
products
standard margin 14,674 26,829 25,211 34,885 36,412
Non-GAAP
products
standard margin 42.2% 45.4% 36.1% 40.7% 53.8%
Calculation of Non-GAAP Revenue by Reporting Segment
Successor Company
Three Months Ended: 28-Mar-08 28-Dec-07 28-Sep-07 29-Jun-07
(in thousands)
Core systems:
Shared memory products
(GAAP) $15,031 $19,312 $21,318 $43,526
Plus: Fresh-start accounting
adjustments 306 196 22 332
SOP 97-2 revenue
deferrals (1,949) 6,167 16,788 4,955
Non-GAAP shared memory
products revenue 13,388 25,675 38,128 48,813
Cluster products (GAAP) $7,672 $3,970 $10,309 $4,400
Plus: Fresh-start accounting
adjustments - - - -
SOP 97-2 revenue deferrals 1,603 6,157 4,099 1,112
Non-GAAP cluster products
revenue 9,275 10,127 14,408 5,512
Storage products revenue
(GAAP) 8,374 13,505 8,233 14,486
Plus: Fresh-start accounting
adjustments - - - 293
SOP 97-2 revenue deferrals 203 2,303 3,377 5,392
Non-GAAP storage products
revenue 8,577 15,808 11,610 20,171
Non-GAAP core systems
revenue 31,240 51,610 64,146 74,496
Legacy system
