Cray Inc. Reports Third Quarter Financial Results
Company Exceeds Q3 Revenue Target and Anticipates Strong 2016 Growth
/EINPresswire.com/ -- SEATTLE, WA -- (Marketwired) -- 10/29/15 -- Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today announced financial results for the third quarter ended September 30, 2015.
All figures in this release are based on U.S. GAAP unless otherwise noted. A reconciliation of GAAP to non-GAAP measures is included in the financial tables in this press release.
Revenue for the third quarter of 2015 was $191.4 million, which compares with $159.4 million in the third quarter of 2014. Net income for the third quarter of 2015 was $10.9 million, or $0.27 per diluted share, compared to net income of $7.4 million, or $0.18 per diluted share in the third quarter of 2014. Non-GAAP net income was $19.5 million, or $0.48 per diluted share for the third quarter of 2015, compared to non-GAAP net income of $10.0 million, or $0.25 per diluted share for the same period last year.
Overall gross profit margin for the third quarter of 2015 was 34%, compared to 30% for the third quarter of 2014. Total non-GAAP gross profit margin for the third quarter of 2015 was 35%, compared to 31% for the third quarter of 2014.
Operating expenses for the third quarter of 2015 were $47.9 million, compared to $43.1 million for the third quarter of 2014. Non-GAAP operating expenses for the third quarter of 2015 were $45.1 million, compared to $39.8 million for the third quarter of 2014.
Cash, investments and restricted cash was $207 million as of September 30, 2015, compared to $103 million as of June 30, 2015. Working capital increased at the end of the third quarter of 2015 to $371 million compared with $355 million at the end of the second quarter.
"We had an excellent quarter as we outperformed our revenue target and delivered strong operating results," said Peter Ungaro, president and CEO of Cray. "Our momentum in the market continues to build as we were awarded several new contracts around the world. We are also releasing our preliminary 2016 outlook today, with continued expectations for strong growth and increasing profitability. I'm very pleased with our performance this year and where we are at as we head into the final stretch of 2015, as well as with our opportunity to drive continued success into the future."
Outlook
A wide range of results remains possible for 2015. A significant portion of our expected fourth quarter revenue is dependent on a few large, complex systems which are currently anticipated to be accepted late in the quarter. Assuming successful acceptance of these systems, we expect revenue to be approximately $715 million for the year. For 2015, non-GAAP gross margin is expected to be in the 30-33% range and total non-GAAP operating expenses are anticipated to be in the range of $180 million. Based on this outlook, we expect our GAAP and non-GAAP operating profit margin to improve significantly for 2015 as compared to 2014.
While it is very early in our 2016 planning process, we currently expect revenue for the year to be in the $825 million range. Revenue is expected to be heavily weighted to the fourth quarter of the year. Non-GAAP gross margin for 2016 is expected to improve and to be in the low-to-mid 30% range. Non-GAAP operating expenses for 2016, when compared to 2015, are anticipated to grow 13-15%. Based on this outlook, we expect to improve our GAAP and non-GAAP operating profit margin for 2016 as compared to 2015.
Our 2015 and 2016 effective non-GAAP tax rate is expected to be about 10%.
Actual results for any future period are subject to large fluctuations and a wide range of results remains possible given the nature of our business.
Recent Highlights
- In October, a new performance benchmark was achieved using the Cray CS-Storm cluster supercomputer and Stone Ridge Technology's ECHELON reservoir simulation software. By leveraging Cray's unique architecture scaling across multiple GPUs in the Cray CS-Storm, ECHELON is one of the most productive reservoir simulators currently on the market.
- In October, Cray announced the creation of the Cray Europe, Middle East and Africa (EMEA) Research Lab based out of Cray's EMEA headquarters in Bristol, England. The Cray EMEA Research Lab will foster the development of deep technical collaborations with key customers and partners, and will serve as the focal point for the Company's technical engagements with the European HPC ecosystem.
- In September, Cray was awarded a contract to provide a Cray XC40 supercomputer to the Yukawa Institute for Theoretical Physics (YITP) at Kyoto University in Japan. The two-cabinet Cray XC40 system is expected to be delivered in 2015 and will provide the YITP user community with a supercomputer that occupies one-fourth of the physical footprint of the Institute's previous system and a 4x improvement in overall compute performance.
- During the third quarter, a growing list of the world's leading meteorological centers continued to run their complex, data-intensive climate and weather models on Cray supercomputers. The Swiss National Supercomputing Centre installed a Cray CS-Storm cluster supercomputer to power its operational numerical weather forecasts. In Denmark, the Danish Meteorological Institute (DMI) selected a Cray XC supercomputer and a Cray Sonexion 2000 storage system.
Conference Call Information
Cray will host a conference call today, Thursday, October 29, 2015 at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss its third quarter financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at (866) 362-9806. International callers should dial (765) 889-6838 and use the conference ID #66699015. To listen to the audio webcast, go to the Investors section of the Cray website at www.cray.com/company/investors.
If you are unable to attend the live conference call, an audio webcast replay will be available in the Investors section of the Cray website for 180 days. A telephonic replay of the call will also be available by dialing (855) 859-2056, international callers dial (404) 537-3406, and entering the conference ID #6669905. The conference call replay will be available for 72 hours, beginning at 4:45 p.m. PDT on Thursday, October 29, 2015.
Use of Non-GAAP Financial Measures
This press release contains "non-GAAP financial measures" under the rules of the U.S. Securities and Exchange Commission. A reconciliation of U.S. generally accepted accounting principles, or GAAP, to non-GAAP results is included in the financial tables included in this press release. Management believes that the non-GAAP financial measures that we have set forth provide additional insight for analysts and investors and facilitate an evaluation of Cray's financial and operational performance that is consistent with the manner in which management evaluates Cray's financial performance. However, these non-GAAP financial measures have limitations as an analytical tool, as they exclude the financial impact of transactions necessary or advisable for the conduct of Cray's business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. Hence, to compensate for these limitations, management does not review these non-GAAP financial metrics in isolation from its GAAP results, nor should investors. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements, and is not intended to represent a measure of performance in accordance with, or disclosures required by GAAP. These measures are adjusted as described in the reconciliation of GAAP to non-GAAP numbers at the end of this release, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review and consider this non-GAAP information as well as the GAAP financial results that are disclosed in Cray's SEC filings.
Additionally, we have not quantitatively reconciled the non-GAAP guidance measures disclosed under "Outlook" to their corresponding GAAP measures because we do not provide specific guidance for the various reconciling items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles, costs related to acquisitions, purchase accounting adjustments, and gain on significant asset sales, as certain items that impact these measures have not occurred, are out of our control or cannot be reasonably predicted. Accordingly, reconciliations to the non-GAAP guidance measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact our financial results.
About Cray Inc.
Global supercomputing leader Cray Inc. (NASDAQ: CRAY) provides innovative systems and solutions enabling scientists and engineers in industry, academia and government to meet existing and future simulation and analytics challenges. Leveraging more than 40 years of experience in developing and servicing the world's most advanced supercomputers, Cray offers a comprehensive portfolio of supercomputers and big data storage and analytics solutions delivering unrivaled performance, efficiency and scalability. Cray's Adaptive Supercomputing vision is focused on delivering innovative next-generation products that integrate diverse processing technologies into a unified architecture, allowing customers to meet the market's continued demand for realized performance. Go to www.cray.com for more information.
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but not limited to, statements related to Cray's financial guidance and expected operating results and its product development, sales and delivery plans. These statements involve current expectations, forecasts of future events and other statements that are not historical facts. Inaccurate assumptions as well as known and unknown risks and uncertainties can affect the accuracy of forward-looking statements and cause actual results to differ materially from those anticipated by these forward-looking statements. Factors that could affect actual future events or results include, but are not limited to, the risk that Cray does not achieve the operational or financial results that it expects, the risk that the systems ordered by customers are not delivered when expected, do not perform as expected once delivered or have technical issues that must be corrected before acceptance, the risk that the acceptance process for delivered systems is not completed, or customer acceptances are not received, when expected or at all, the risk that Cray's big data products, including storage, are not as successful as expected, the risk that Cray is not able to successfully complete its planned product development efforts in a timely fashion or at all, the risk that Cray is not able to achieve anticipated gross margin or expense levels, the risk that planned future third-party processors are not available with the performance expected or when expected, the risk that Cray will not be able to secure orders for Cray systems to be accepted in 2016 when or at the levels expected, the risk that certain customers do not make expected future optional purchases under their current contracts and such other risks as identified in Cray's quarterly report on Form 10-Q for the period ended September 30, 2015, and from time to time in other reports filed by Cray with the U.S. Securities and Exchange Commission. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. Cray undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change Cray's expectations.
CRAY, and the stylized CRAY mark and SONEXION are registered trademarks of Cray Inc. in the United States and other countries, and CS-Storm and the XC family of supercomputers are trademarks of Cray Inc. Other trademarks used in this report are the property of their respective owners.
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2015 2014 2015 2014
-------- -------- -------- --------
Revenue:
Product $157,692 $133,461 $368,370 $225,224
Service 33,721 25,945 88,848 74,439
-------- -------- -------- --------
Total revenue 191,413 159,406 457,218 299,663
-------- -------- -------- --------
Cost of revenue:
Cost of product revenue 105,242 96,080 266,787 164,019
Cost of service revenue 20,289 14,796 50,928 40,173
-------- -------- -------- --------
Total cost of revenue 125,531 110,876 317,715 204,192
-------- -------- -------- --------
Gross profit 65,882 48,530 139,503 95,471
-------- -------- -------- --------
Operating expenses:
Research and development, net 24,989 22,503 67,282 69,313
Sales and marketing 16,132 14,808 42,096 39,843
General and administrative 6,729 5,813 19,304 16,542
-------- -------- -------- --------
Total operating expenses 47,850 43,124 128,682 125,698
-------- -------- -------- --------
Income (loss) from operations 18,032 5,406 10,821 (30,227)
Other income (expense), net (152) (101) 334 (1,084)
Interest income, net 337 72 1,114 217
-------- -------- -------- --------
Income (loss) before income
taxes 18,217 5,377 12,269 (31,094)
Income tax (expense) benefit (7,362) 1,994 (5,027) 18,779
-------- -------- --------
Net income (loss) $ 10,855 $ 7,371 $ 7,242 $(12,315)
======== ======== ======== ========
Basic net income (loss) per
common share $ 0.28 $ 0.19 $ 0.18 $ (0.32)
======== ======== ======== ========
Diluted net income (loss) per
common share $ 0.27 $ 0.18 $ 0.18 $ (0.32)
======== ======== ======== ========
Basic weighted average shares
outstanding 39,382 38,783 39,164 38,538
======== ======== ======== ========
Diluted weighted average shares
outstanding 40,322 40,276 40,589 38,538
======== ======== ======== ========
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share amounts)
September December
30, 31,
2015 2014
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 190,089 $ 112,633
Restricted cash 1,636 16,874
Short-term investments 14,346 16,289
Accounts and other receivables, net 143,412 165,113
Inventory 229,942 143,632
Deferred tax asset 31,429 36,073
Prepaid expenses and other current assets 22,326 17,948
--------- ---------
Total current assets 633,180 508,562
Long-term investments 663 -
Long-term investment in sales-type lease, net 22,534 31,089
Property and equipment, net 32,107 34,793
Service spares, net 2,650 1,868
Goodwill 14,182 14,182
Intangible assets other than goodwill, net 2,990 3,895
Deferred tax assets 42,279 41,414
Other non-current assets 17,556 15,631
--------- ---------
TOTAL ASSETS $ 768,141 $ 651,434
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,172 $ 48,699
Accrued payroll and related expenses 15,608 16,054
Other accrued liabilities 16,433 16,285
Deferred revenue 159,775 65,910
--------- ---------
Total current liabilities 261,988 146,948
Long-term deferred revenue 35,527 47,588
Other non-current liabilities 2,309 3,044
--------- ---------
TOTAL LIABILITIES 299,824 197,580
Shareholders' equity:
Preferred stock - Authorized and undesignated,
5,000,000 shares; no shares issued or outstanding - -
Common stock and additional paid-in capital, par
value $.01 per share - Authorized, 75,000,000
shares; issued and outstanding 40,618,865 and
40,822,377 shares, respectively 606,181 598,390
Accumulated other comprehensive income 7,716 6,503
Accumulated deficit (145,580) (151,039)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 468,317 453,854
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 768,141 $ 651,434
========= =========
CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)
Three Months Ended September 30, 2015
-----------------------------------------------
Net Operating Diluted Gross Operating
Income Income EPS Profit Expenses
-------- --------- -------- -------- ---------
GAAP $ 10.9 $ 18.0 $ 0.27 $ 65.9 $ 47.9
Share-based compensation (1) 2.7 2.7 0.1 2.6
Purchase accounting
adjustments (2) 0.1 0.1 0.1
Amortization of acquired
intangibles (2) 0.7 0.7 0.5 0.2
Items impacting tax
provision (4) 5.1
-------- --------- -------- -------- ---------
Total reconciling items $ 8.6 $ 3.5 $ 0.21 $ 0.7 $ 2.8
Non-GAAP $ 19.5 $ 21.5 $ 0.48 $ 66.6 $ 45.1
======== ========= ======== ======== =========
Three Months Ended September 30, 2014
-----------------------------------------------
Net Operating Diluted Gross Operating
Income Income EPS Profit Expenses
-------- --------- -------- -------- ---------
GAAP $ 7.4 $ 5.4 $ 0.18 $ 48.5 $ 43.1
Share-based compensation (1) 2.1 2.1 0.1 2.0
Purchase accounting
adjustments (2) 0.3 0.3 0.3
Amortization of acquired
intangibles (2) 0.6 0.6 0.5 0.1
Severance costs (3) 1.8 1.8 0.6 1.2
Items impacting tax
provision (4) (2.2)
-------- --------- -------- -------- ---------
Total reconciling items $ 2.6 $ 4.8 $ 0.07 $ 1.5 $ 3.3
Non-GAAP $ 10.0 $ 10.2 $ 0.25 $ 50.0 $ 39.8
======== ========= ======== ======== =========
Notes
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets and other acquisition-related charges
(3) Adjustments to exclude non-recurring severance costs
(4) Adjustments associated with the tax impact on reconciling items, benefits related to Cray's net operating loss carryforwards and changes in Cray's valuation allowance held against deferred tax assets
CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)
Nine Months Ended September 30, 2015
----------------------------------------------
Net Operating Diluted Gross Operating
Income Income EPS Profit Expenses
------- --------- ------- ------- ---------
GAAP $ 7.2 $ 10.8 $ 0.18 $ 139.5 $ 128.7
Share-based compensation (1) 8.6 8.6 0.4 8.2
Purchase accounting
adjustments (2) 0.4 0.4 0.4
Amortization of acquired
intangibles (2) 1.9 1.9 1.5 0.4
Items impacting tax
provision (4) 2.7
------- --------- ------- ------- ---------
Total reconciling items $ 13.6 $ 10.9 $ 0.33 $ 2.3 $ 8.6
Non-GAAP $ 20.8 $ 21.7 $ 0.51 $ 141.8 $ 120.1
======= ========= ======= ======= =========
Nine Months Ended September 30, 2014
----------------------------------------------
Net Operating Diluted Gross Operating
Loss Loss EPS Profit Expenses
------- --------- ------- ------- ---------
GAAP $ (12.3) $ (30.2) $ (0.32) $ 95.5 $ 125.7
Share-based compensation (1) 7.6 7.6 0.4 7.2
Purchase accounting
adjustments (2) 0.6 0.6 0.6
Amortization of acquired
intangibles (2) 1.8 1.8 1.5 0.3
Severance costs (3) 1.8 1.8 0.6 1.2
Items impacting tax
provision (4) (15.7)
------- --------- ------- ------- ---------
Total reconciling items $ (3.9) $ 11.8 $ (0.10) $ 3.1 $ 8.7
Non-GAAP $ (16.2) $ (18.4) $ (0.42) $ 98.6 $ 117.0
======= ========= ======= ======= =========
Notes
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets and other acquisition-related charges
(3) Adjustments to exclude non-recurring severance costs
(4) Adjustments associated with the tax impact on reconciling items, benefits related to Cray's net operating loss carryforwards and changes in Cray's valuation allowance held against deferred tax assets
CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)
Three Months Ended September 30, 2015
-------------------------------------------
Product Service Total
------------- ------------- -------------
Gross Gross Gross Gross Gross Gross
Profit Margin Profit Margin Profit Margin
------ ------ ------ ------ ------ ------
GAAP $ 52.5 33% $ 13.4 40% $ 65.9 34%
Share-based compensation (1) 0.1 0.1
Purchase accounting
adjustments (2) 0.1 0.1
Amortization of acquired
intangibles (2) 0.5 0.5
------ ------ ------ ------ ------ ------
Total reconciling items $ 0.6 1% $ 0.1 -% $ 0.7 1%
Non-GAAP $ 53.1 34% $ 13.5 40% $ 66.6 35%
====== ====== ====== ====== ====== ======
Three Months Ended September 30, 2014
-------------------------------------------
Product Service Total
------------- ------------- -------------
Gross Gross Gross Gross Gross Gross
Profit Margin Profit Margin Profit Margin
------ ------ ------ ------ ------ ------
GAAP $ 37.4 28% $ 11.1 43% $ 48.5 30%
Share-based compensation (1) 0.1 0.1
Purchase accounting
adjustments (2) 0.3 0.3
Amortization of acquired
intangibles (2) 0.5 0.5
Severance costs (3) 0.6 0.6
------ ------ ------ ------ ------ ------
Total reconciling items $ 0.8 1% $ 0.7 3% $ 1.5 1%
Non-GAAP $ 38.2 29% $ 11.8 46% $ 50.0 31%
====== ====== ====== ====== ====== ======
Notes
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets and other acquisition-related charges
(3) Adjustments to exclude non-recurring severance costs
CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)
Nine Months Ended September 30, 2015
-------------------------------------------
Product Service Total
------------- ------------- -------------
Gross Gross Gross Gross Gross Gross
Profit Margin Profit Margin Profit Margin
------ ------ ------ ------ ------ ------
GAAP $101.6 28% $ 37.9 43% $139.5 31%
Share-based compensation (1) 0.2 0.2 0.4
Purchase accounting
adjustments (2) 0.4 0.4
Amortization of acquired
intangibles (2) 1.5 1.5
------ ------ ------ ------ ------ ------
Total reconciling items $ 2.1 -% $ 0.2 -% $ 2.3 -%
Non-GAAP $103.7 28% $ 38.1 43% $141.8 31%
====== ====== ====== ====== ====== ======
Nine Months Ended September 30, 2014
-------------------------------------------
Product Service Total
------------- ------------- -------------
Gross Gross Gross Gross Gross Gross
Profit Margin Profit Margin Profit Margin
------ ------ ------ ------ ------ ------
GAAP $ 61.2 27% $ 34.3 46% $ 95.5 32%
Share-based compensation (1) 0.2 0.2 0.4
Purchase accounting
adjustments (2) 0.6 0.6
Amortization of acquired
intangibles (2) 1.5 1.5
Severance costs (3) 0.6 0.6
------ ------ ------ ------ ------ ------
Total reconciling items $ 2.3 1% $ 0.8 1% $ 3.1 1%
Non-GAAP $ 63.5 28% $ 35.1 47% $ 98.6 33%
====== ====== ====== ====== ====== ======
Notes
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets and other acquisition-related charges
(3) Adjustments to exclude non-recurring severance costs
CRAY INC. AND SUBSIDIARIES
Reconciliation of GAAP to non-GAAP Net Income (Loss)
(Unaudited; in millions except per share amounts and percentages)
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
2015 2014 2015 2014
------ ------ ------ ------
GAAP Net Income (Loss) $ 10.9 $ 7.4 $ 7.2 $(12.3)
Non-GAAP adjustments impacting gross
profit:
Share-based compensation (1) 0.1 0.1 0.4 0.4
Purchase accounting adjustments (2) 0.1 0.3 0.4 0.6
Amortization of acquired and other
intangibles (2) 0.5 0.5 1.5 1.5
Severance costs (3) - 0.6 - 0.6
------ ------ ------ ------
Total adjustments impacting gross profit 0.7 1.5 2.3 3.1
Non-GAAP gross margin percentage 35% 31% 31% 33%
Non-GAAP adjustments impacting operating
expenses:
Share-based compensation (1) 2.6 2.0 8.2 7.2
Amortization of acquired intangibles (2) 0.2 0.1 0.4 0.3
Severance costs (3) - 1.2 - 1.2
------ ------ ------ ------
Total adjustments impacting operating
expenses 2.8 3.3 8.6 8.7
Items impacting tax provision (4) 5.1 (2.2) 2.7 (15.7)
Non-GAAP Net Income (Loss) $ 19.5 $ 10.0 $ 20.8 $(16.2)
====== ====== ====== ======
Non-GAAP Diluted Net Income (Loss) per
common share $ 0.48 $ 0.25 $ 0.51 $(0.42)
====== ====== ====== ======
Diluted weighted average shares 40.3 40.3 40.6 38.5
Notes
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets and other acquisition-related charges
(3) Adjustments to exclude non-recurring severance costs
(4) Adjustments associated with the tax impact on reconciling items, benefits related to Cray's net operating loss carryforwards and changes in Cray's valuation allowance held against deferred tax assets
Cray Media:
Nick Davis
206/701-2123
pr@cray.com
Investors:
Paul Hiemstra
206/701-2044
ir@cray.com
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