CARLSBAD, Calif., May 7 /PRNewswire-FirstCall/ -- Dot Hill Systems Corp. today announced GAAP financial results for the first quarter of 2009. The company ended the first quarter of 2009 with net revenue of $53.9 million, as compared to $52.8 million for the first quarter of 2008 and $72.4 million for the fourth quarter of 2008. Included in the first quarter of 2008 net revenue was a reduction in revenue of $2.3 million associated with a warrant issued to Hewlett-Packard. Gross margin for the first quarter of 2009 was 17.2 percent, compared to 7.9 percent in the first quarter of 2008 and 13.9 percent in the fourth quarter of 2008. Gross margin for the first quarter of 2008 was negatively impacted by the $2.3 million revenue reduction associated with the warrant issued to Hewlett-Packard.
Operating expense for the first quarter of 2009 was $12.6 million, as compared to $10.9 million in the first quarter of 2008 and $18.9 million in the fourth quarter of 2008. Included in the first quarter of 2009 operating expenses was $0.7 million in share-based compensation expense, $0.1 million in restructuring expenses and $0.1 million in foreign currency losses. Included in first quarter 2008 operating expenses was a $3.8 million legal settlement benefit, $0.7 million in share-based compensation expense, $0.3 million in severance expenses and a foreign currency gain of $0.3 million. Fourth quarter 2008 operating expenses included an impairment charge of $5.4 million against long-lived assets and intangibles, $0.7 million in share-based compensation expense, $0.8 million in restructuring expenses and $0.4 million in foreign currency gains.
Net loss for the first quarter of 2009 was $3.3 million, or $0.07 cents per fully diluted share, as compared to $6.1 million, or $0.13 per fully diluted share in the first quarter of 2008 and $8.6 million, or $0.19 per fully diluted share in the fourth quarter of 2008.
On a non-GAAP basis, for the first quarter of 2009, Dot Hill posted net revenue of $53.9 million, which compares to non-GAAP net revenue of $55.1 million for the first quarter of 2008 and $72.4 million for the fourth quarter of 2008. For the first quarter of 2009, non-GAAP net revenue was below the guidance range of $56 to $63 million that the company provided on February 26, 2009, but was within the preliminary net revenue range provided by the company on April 14, 2009. The slight decline in year-over-year revenue was due to the economic downturn along with declines in revenues from Sun that were partially offset by increases in revenues from Hewlett-Packard. The sequential decline in revenues is largely attributed to the economic downturn and seasonal trends. Included in first quarter 2008 non-GAAP revenue is $2.3 million associated with a warrant issued to Hewlett-Packard, which for GAAP purposes is accounted for as a reduction to revenue.
Non-GAAP gross margin was 17.4 percent for the first quarter of 2009, as compared to 12.0 percent for the first quarter of 2008 and 14.0 percent for the fourth quarter of 2008. The year-over-year and sequential improvement in gross margin percentage was due primarily to the progress made in reducing product costs during the quarter. In addition, the company stated that certain of its telecommunications and government customers exceeded forecasts in the first quarter of 2009 at higher than average margins. Included in fourth quarter 2008 gross margin is an accrued payment of $1.3 million from one of the company's customers as a partial offset to price reductions the company had given them.
Total non-GAAP operating expenses for the first quarter of 2009 were $11.7 million, as compared to $14.2 million for the first quarter of 2008 and $12.5 million for the fourth quarter of 2008. The sequential decrease in operating expenses was due in part to a reduction of approximately $450,000 in depreciation and amortization resulting from the impairment of some of the company's long-lived assets and intangibles in the fourth quarter of 2008. In addition, in the first quarter of 2009, the company started to benefit from the impact of the cost-reduction measures that it took during the fourth quarter of 2008, which included headcount reductions as well as reductions in discretionary expenses.
Non-GAAP net loss for the first quarter of 2009 was $2.3 million, or $0.05 per fully diluted share as compared to a first quarter 2008 net loss of $7.0 million, or $0.15 per fully diluted share and fourth quarter 2008 net loss of $2.1 million, or $0.05 per fully diluted share. The net loss for the first quarter of 2009 was better than the $0.06 to $0.11 net loss per fully diluted share guidance range that the company provided on February 26, 2009 and at the favorable end of the preliminary range the company provided on April 14, 2009.
The company exited the first quarter of 2009 with cash and cash equivalents of $54.3 million and a $0.8 million note payable associated with the purchase of intellectual property assets from Ciprico. This compares to a December 31, 2008 cash and cash equivalents balance of $56.9 million and the Ciprico-related note payable of $0.9 million.
"Overall, we had a solid quarter and managed areas within our control with good discipline," said Hanif Jamal, Dot Hill's senior vice president and chief financial officer. "Our product cost reduction initiatives, operating expense controls and management of our cash have been well executed and resulted in a third consecutive quarter of non-GAAP gross margin improvements, a fourth consecutive quarter of non-GAAP operating expense reductions and a total cash burn of just $2.2 million over the past two quarters, combined."
The company will not provide second quarter 2009 guidance, citing its inability to rely on forecasts from its OEM customers due to the uncertain macroeconomic conditions.
"I am pleased with the achievements of our team as we executed well across the business during the first quarter of 2009," said Dana Kammersgard, Dot Hill's president and chief executive officer. "Our engineering and operations team achieved product cost reductions that were two to three times higher than historical norms. We won our first piece of business for RAIDCore with a Tier-1 server OEM and we were also first to market to launch and ship products based on a 2U, 24-drive RAID array that supports 2.5 inch hard disk drives and solid state disks."
The company also stated that it is still finalizing its first quarter 2009 financial results and is currently evaluating levels of raw materials in its supply chain. At the present time the company does not expect any changes to these financial results before it files its Form 10-Q with the Securities and Exchange Commission.
Dot Hill's first quarter 2009 financial results conference call is scheduled to take place on May 7, 2009 at 4:30 p.m. ET. Please join us for a live audio webcast at http://www.dothill.com/ in the Investor Relations section. If you prefer to join via telephone, please dial 888-690-2879 (U.S.) or 913-312-6679 (International) at least five minutes prior to the start of the call. A replay of the webcast is scheduled to be available on the Dot Hill web site following the conference call. For a telephone replay, dial 888-203-1112 (U.S.) or 719-457-0820 (International) and enter passcode 8421688.
About Non-GAAP Financial Measures
This press release contains financial results that exclude the effects of share-based compensation expense, severance costs, restructuring costs, long-lived asset impairment charges, foreign currency gains or losses, the effects of legal settlements and the issuance of a warrant to a customer, and are not in accordance with U.S. generally accepted accounting principles (GAAP). 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 expected 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 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. Dot Hill solutions are certified to meet rigorous industry standards and military specifications, as well as RoHS and WEEE international environmental standards. Headquartered in Carlsbad, Calif., Dot Hill has offices and/or representatives in China, Germany, Japan, United Kingdom 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. The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: 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; unforeseen technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the form 10-K 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.
DOT HILL SYSTEMS CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except Per Share Amounts) Three Months Ended March 31, --------- 2008 2009 ---- ---- NET REVENUE $52,826 $53,889 COST OF GOODS SOLD 48,660 44,629 ------ ------ GROSS PROFIT 4,166 9,260 ----- ----- OPERATING EXPENSES: Sales and marketing 4,272 2,566 Research and development 7,424 7,151 General and administrative 3,043 2,769 Restructuring charge - 85 Legal settlement (3,836) - ------- --- Total operating expenses 10,903 12,571 ------ ------ OPERATING LOSS (6,737) (3,311) ------- ------- OTHER INCOME: Interest income, net 708 72 Other income (expense), net 79 (20) --- ---- Total other income, net 787 52 --- --- LOSS BEFORE INCOME TAXES (5,950) (3,259) INCOME TAX EXPENSE 160 33 --- --- NET LOSS $(6,110) $(3,292) ======== ======== NET LOSS PER SHARE: Basic and diluted $(0.13) $(0.07) ======= ======= WEIGHTED AVERAGE SHARES USED TO CALCULATE NET LOSS PER SHARE: Basic and diluted 45,956 46,722 ====== ====== COMPREHENSIVE LOSS: Net loss $(6,110) $(3,292) Foreign currency translation (gain) loss (231) 126 ----- --- Comprehensive loss $(6,341) $(3,166) ======== ======== DOT HILL SYSTEMS CORP. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) December 31, March 31, ----------- -------- 2008 2009 ---- ---- ASSETS Current Assets: Cash and cash equivalents $56,580 $54,299 Accounts receivable, net of allowance of $287 and $415 41,035 33,288 Inventories 14,127 12,772 Prepaid expenses and other 4,796 4,036 ----- ----- Total current assets 116,808 104,395 Property and equipment, net 2,410 2,396 Intangible assets, net 4,164 3,880 Other assets 515 274 --- --- Total assets $123,897 $110,945 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $31,050 $20,814 Accrued compensation 3,217 3,368 Accrued expenses 5,212 4,905 Deferred revenue 1,121 2,205 Restructuring accrual 681 537 Short term note payable 249 252 Income taxes payable 17 75 --- --- Total current liabilities 41,547 32,156 Long term note payable 607 543 Other long-term liabilities 5,091 3,741 ----- ----- Total liabilities 47,245 36,440 ------ ------ Commitments and Contingencies Stockholders' Equity: Preferred stock, $.001 par value, 10,000 shares authorized, no shares issued and outstanding at December 31, 2008 and March 31, 2009 - - Common stock, $.001 par value, 100,000 shares authorized, 46,308 and 48,380 shares issued and outstanding at December 31, 2008 and March 31, 2009, respectively 46 47 Additional paid-in capital 300,555 301,573 Accumulated other comprehensive loss (3,474) (3,348) Accumulated deficit (220,475) (223,767) -------- -------- Total stockholders' equity 76,652 74,505 ------ ------ Total liabilities and stockholders' equity $123,897 $110,945 ======== ======== DOT HILL SYSTEMS CORP. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Three Months Ended March 31, --------- 2008 2009 ---- ---- Cash Flows From Operating Activities: Net loss $(6,110) $(3,292) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,465 712 Gain on disposal of property and equipment (5) - (Reduction) provision in bad debt reserve (171) 128 Share-based compensation expense 665 742 Issuance of warrant to customer 2,282 - Changes in operating assets and liabilities: Accounts receivable (4,032) 7,573 Inventories (5,390) 1,350 Prepaid expenses and other assets (626) 990 Accounts payable 6,987 (9,954) Accrued compensation and other expenses (121) 145 Deferred revenue (151) (300) Income taxes payable 126 59 Restructuring accrual - (142) Other long-term liabilities (363) (245) ----- ----- Net cash used in operating activities (5,444) (2,234) ------- ------- Cash Flows From Investing Activities: Purchases of property and equipment (268) (482) ----- ----- Net cash used in investing activities (268) (482) ---- ---- Cash Flows From Financing Activities: Principal payment of note payable - (61) Proceeds from exercise of stock options and warrants 198 - Proceeds from sale of stock to employees 465 277 --- --- Net cash provided by financing activities 663 216 --- --- Effect of Exchange Rate Changes on Cash 97 (51) --- --- Net Decrease in Cash and Cash Equivalents (4,952) (2,551) Cash and Cash Equivalents, beginning of period 82,358 56,850 ------ ------ Cash and Cash Equivalents, end of period $77,406 $54,299 ======= ======= Supplemental Disclosures of Cash Flow Information: Cash paid for interest $- $- === === Cash paid for income taxes $35 $20 === === Supplemental Disclosures of Non-Cash Investing and Financing Activities: Construction-in-progress costs incurred but not paid $142 $101 ==== ==== DOT HILL SYSTEMS CORP. UNAUDITED RECONCILIATION TABLE OF NON-GAAP MEASURES (In Thousands, Except Per Share Amounts) Three Months Ended March 31, --------- 2008 2009 ---- ---- Net loss $(6,110) $(3,292) Effect of currency (gain) loss (294) 140 Effect of share-based compensation 665 742 Effect of issuance of warrant to customer 2,282 - Effect of legal settlement (3,836) - Effect of restructuring charge - 85 Effect of severance costs 322 4 --- --- Net loss as adjusted $(6,971) $(2,321) ======= ======= Net loss per share: Basic and diluted $(0.15) $(0.05) ====== ====== Weighted average shares used to calculate net loss per share: Basic and diluted 45,956 46,722 ====== ====== Net revenue $52,826 $53,889 Effect of issuance of warrant to customer 2,282 - ----- --- Net revenue as adjusted $55,108 $53,889 ======= ======= Gross profit $4,166 $9,260 Effect of issuance of warrant to customer 2,282 - Effect of share-based compensation 96 93 Effect of severance costs 50 - --- --- Gross profit as adjusted $6,594 $9,353 ====== ====== DOT HILL SYSTEMS CORP. UNAUDITED RECONCILIATION TABLE OF NON-GAAP MEASURES: EBITDA (In Thousands) Three Months Ended March 31, --------- 2008 2009 ---- ---- Net loss $(6,971) $(2,321) Interest expense - 20 Income taxes 160 33 Depreciation 1,058 428 Amortization 407 284 --- --- EBITDA $(5,346) $(1,556) ======== ========
Dot Hill Systems Corp.
CONTACT: Hanif Jamal, Chief Financial Officer of Dot Hill Systems Corp.,
+1-760-931-5500, investors@dothill.com
Web Site: http://www.dothill.com/
