CARLSBAD, Calif., Feb 26, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Dot Hill Systems Corp. (Nasdaq: HILL) today announced financial results for the fourth quarter and year ended December 31, 2008. The company ended the fourth quarter of 2008 with GAAP net revenue of $72.4 million, gross margin of 13.9%, operating expenses of $18.9 million and a net loss of $8.6 million, or $0.19 cents per share. Included in the net loss are a non-cash impairment charge against our long-lived assets of $5.4 million, $0.7 million in share-based compensation expense, $0.8 million in restructuring expenses and $0.4 million in foreign currency gains.
For the year ended December 31, 2008, GAAP net revenue was $272.9 million, or 32% higher than the year ended December 31, 2007 GAAP net revenue of $207.1 million. Included in year ended December 31, 2008 net revenue was a reduction of $2.3 million associated with a warrant issued to Hewlett Packard. Gross margin for the year ended December, 31 2008 was 11.1%, down from 12.8% from the year ended December 31, 2007. Operating expenses were $57.6 million for the year ended December 31, 2008 compared to $91.8 million for the year ended December 31, 2007. The year ended December 31, 2008 operating expenses included a $5.4 million impairment for certain of our long-lived assets, $2.9 million in share-based compensation expense, $0.8 million in restructuring expenses, $0.5 million in severance expenses, $0.6 million in foreign currency gains and a $3.8 million legal settlement benefit. The year ended December 31, 2007 expenses included a goodwill impairment charge of $40.7 million, $2.4 million in share-based compensation expense, $1.0 million in severance expenses and $2.2 million in foreign currency gains. GAAP net loss was $25.8 million, or $0.56 per fully diluted share, for the year ended December 31, 2008 compared to a GAAP net loss of $60.2 million, or $1.32 per fully diluted share for the year ended December 31, 2007.
On a GAAP basis, for the fourth quarter of 2008, Dot Hill posted net revenue of $72.4 million which compares to GAAP net revenue of $76.6 million for the third quarter of 2008 and $51.8 million for the fourth quarter of 2007. For the fourth quarter of 2008, GAAP net revenue was in line with the guidance range of $70 to $76 million that the company provided on its November 6, 2008 earnings call. GAAP net revenue increased nearly 40% from the fourth quarter ended December 31, 2007 to the fourth quarter ended December 31, 2008. This growth was primarily attributable to the ramp in shipments to Hewlett-Packard and NetApp, partially offset by a decline in shipments to Sun.
Non-GAAP gross margin was 14.0% for the fourth quarter of 2008, a 2.2 percentage point improvement compared to non-GAAP gross margin of 11.8% for the third quarter of 2008 and 12.5% for the fourth quarter of 2007. The sequential quarterly and year-over-year improvement in non-GAAP gross margin percentage was due primarily to the progress made in reducing product costs during the fourth quarter of 2008. Total non-GAAP operating expenses for the fourth quarter of 2008 were $12.5 million, as compared to non-GAAP operating expenses of $12.6 million for the third quarter of 2008 and $12.8 million for the fourth quarter of 2007. Non-GAAP net loss for the fourth quarter of 2008 was $2.1 million, or $0.05 per share on a fully diluted basis. This compares to a non-GAAP net loss of $3.1 million for the third quarter of 2008, or $0.07 per fully diluted share, and a non-GAAP net loss of $4.7 million for the fourth quarter of 2007, or $0.10 per fully diluted share. The non-GAAP net loss for the fourth quarter of 2008 was at the positive end of the $0.05 to $0.10 fully diluted non-GAAP net loss per share guidance range that the company provided on November 6, 2008.
For the year ended December 31, 2008, non-GAAP net revenues were $275.2 million compared to non-GAAP net revenues of $207.1 million for the year ending December 31, 2007. The 33% increase in revenue was primarily due to growth in revenues from Hewlett Packard and NetApp, offset by a decline in Sun product revenue. Non-GAAP gross margin percentage declined to 12.1% for the year ended December 31, 2008 from 13.0% for the year ended December 31, 2007 due to the decline in higher margin Sun product revenues. Non-GAAP operating expenses increased to $53.0 million for the year ended December 31, 2008 from $50.4 million for the year ended December 31, 2007 mainly due to increases in engineering expenses associated with the launch of products for Hewlett Packard and the acquisition of RAIDCore assets from Ciprico, Inc. This increase was partially offset by declines in sales and marketing and general and administrative expenses. Non-GAAP net loss for the year ended December 31, 2008 declined slightly to $18.2 million, or $0.40 per fully diluted share, from $18.4 million, or $0.40 per fully diluted share, for the year ended December 31, 2007.
The company exited the fourth quarter of 2008 with cash and cash equivalents of $56.9 million and a $0.9 million note payable associated with the purchase of intellectual property assets from Ciprico. This compares to a third quarter of 2008 balance of cash and cash equivalents of $56.5 million with a $0.9 million note payable.
For the first quarter of 2009, the company is targeting net revenue in the range of $56 to $63 million on a GAAP basis and a net loss per fully diluted share in the range of $0.06 to $0.11 on a non-GAAP basis. "We expect revenues to decline from the fourth quarter of 2008 due primarily to the tough economic climate as well as due to normal seasonal factors," said Hanif Jamal, Senior Vice-President and Chief Financial Officer. "Gross margin percentage is expected to be flat to down slightly despite continued product cost reductions during the quarter. This is largely due to the projected lower revenue levels across which to offset fixed manufacturing overhead. Operating expenses are expected to be slightly lower due to actions we took in the fourth quarter of 2008. We expect cash and cash equivalents at the end of March 31, 2009 to be in the high $40 million to low $50 million range."
"I believe that we have now clearly demonstrated throughout 2008 that the transformation we started back in 2006 is on track" stated Dana Kammersgard, President and Chief Executive Officer. "We have the best product portfolio in our history, excellent relationships with some very strong customers, high quality, cost effective supply chain partners and a very competent and dedicated team. We entered 2009 with a strong balance sheet of nearly $57 million in cash and cash equivalents, minimal debt and a $30 million working capital facility."
Dot Hill will release final results on its fourth quarter 2008 earnings conference call scheduled for February 26, 2009 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 888-776-0847 (U.S.) or 913-312-1299 (International) at least five minutes prior to the start of the call. A replay of the webcast will 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 5904168.
About Non-GAAP Financial Measures
This press release contains financial results that exclude the effects of share-based compensation expense, severance costs, restructuring costs, goodwill and long lived asset impairment charges, foreign currency gains or losses, the effects of legal settlements and the issuance of warrants to customers, 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. Such statements include statements regarding: Dot Hill's projected financial results for the first quarter of 2009 and thereafter; Dot Hill's ability to achieve continued cost reductions; and the extent to which Dot Hill's cash and working capital will be sufficient to continue operations in the long term . 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 of 2009 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; unforeseen technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the form 10-K and subsequent reports 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. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2007 2008 2007 2008 NET REVENUE $51,764 $72,385 $207,095 $272,879 COST OF GOODS SOLD 45,454 62,326 180,662 242,491 GROSS PROFIT 6,310 10,059 26,433 30,388 OPERATING EXPENSES: Sales and marketing 4,483 2,969 15,939 13,878 Research and development 5,947 7,220 22,564 28,709 General and administrative 3,190 2,488 12,606 12,779 Restructuring charge - 813 - 813 Legal settlement - - - (4,036) Goodwill and long-lived asset impairment charge 40,725 5,432 40,725 5,432 Total operating expenses 54,345 18,922 91,834 57,575 OPERATING LOSS (48,035) (8,863) (65,401) (27,187) OTHER INCOME: Interest income, net 993 164 4,787 1,538 Other income (expense), net 209 13 209 74 TOTAL OTHER INCOME, NET 1,202 177 4,996 1,612 LOSS BEFORE INCOME TAXES (46,833) (8,686) (60,405) (25,575) INCOME TAX EXPENSE (BENEFIT) (432) (91) (177) 190 NET LOSS $(46,401) $(8,595) $(60,228) $(25,765) NET LOSS PER SHARE: Basic and diluted $(1.01) $(0.19) $(1.32) $(0.56) WEIGHTED AVERAGE SHARES USED TO CALCULATE NET LOSS PER SHARE: Basic and diluted 45,783 46,308 45,534 46,136 COMPREHENSIVE LOSS: Net loss $(46,401) $(8,595) $(60,228) $(25,765) Foreign currency translation adjustments (594) (246) (2,286) (374) Net unrealized gain on short-term investments 2 - - - Comprehensive loss $(46,993) $(8,841) $(62,514) $(26,139) DOT HILL SYSTEMS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands) 2007 2008 ASSETS Current Assets: Cash and cash equivalents $82,358 $56,850 Accounts receivable, net of allowance of $302 and $287 32,445 41,035 Inventories, net 9,013 14,127 Prepaid expenses and other 3,968 4,796 Total current assets 127,784 116,808 Property and equipment, net 9,599 2,410 Intangible assets, net 2,280 4,164 Other assets 264 515 Total assets $139,927 $123,897 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $28,472 $31,050 Accrued compensation 3,115 3,217 Accrued expenses 6,227 5,212 Deferred revenue 1,409 1,121 Restructuring accrual - 681 Short term note payable - 249 Income taxes payable 143 17 Total current liabilities 39,366 41,547 Long term note payable - 607 Other long-term liabilities 4,132 5,091 Total liabilities 43,498 47,245 Commitments and Contingencies Stockholders' Equity: Preferred stock, $.001 par value, 10,000 shares authorized, no shares issued and outstanding at December 31, 2007 and 2008, respectively - - Common stock, $.001 par value, 100,000 shares authorized, 45,785 and 46,306 shares issued and outstanding at December 31, 2007 and 2008, respectively 46 46 Additional paid-in capital 294,193 300,555 Accumulated other comprehensive loss (3,100) (3,474) Accumulated deficit (194,710) (220,475) Total stockholders' equity 96,429 76,652 Total liabilities and stockholders' equity $139,927 $123,897 DOT HILL SYSTEMS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2007 2008 2007 2008 Cash Flows Related to Operating Activities: Net loss $(46,401) $(8,595) $(60,228) $(25,765) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,542 1,453 6,573 5,838 Goodwill and long-lived asset impairment charge 40,725 5,432 40,725 5,432 Loss on disposal of property and equipment 55 6 268 63 Reduction for doubtful accounts (171) (3) (216) (156) Share-based compensation expense 704 660 2,351 2,884 Deferred taxes (16) - (16) - Issuance of warrant to customer - - - 2,282 Changes in operating assets and liabilities: Accounts receivable (5,140) 7,263 5,747 (8,303) Inventories (4,131) (1,499) (6,777) (5,077) Prepaid expenses and other assets 748 (979) 1,005 (1,021) Accounts payable 3,186 (4,377) (5,890) 2,333 Accrued compensation and other expenses 2,383 777 (261) (1,265) Deferred revenue 19 (60) 802 (311) Income taxes payable (95) (331) (84) (126) Restructuring accrual - 672 - 672 Other long-term liabilities (614) 337 1,723 190 Net cash provided by (used in) operating activities (7,206) 756 (14,280) (22,330) Cash flows from investing activities Purchase of property and equipment (671) (446) (4,447) (1,949) Sales and maturities of short-term investments 5,425 - 5,425 - Purchases of short-term investments - - (5,425) - Purchase of intangible assets - (63) - (2,545) Net cash provided by (used in) investing activities 4,754 (509) (4,447) (4,494) Cash flows from financing activities Proceeds from exercise of stock options and warrants 7 - 170 284 Proceeds from sale of stock to employees 1 - 968 912 Net cash provided by financing activities 8 - 1,138 1,196 Effect of exchange rate changes on cash 64 79 284 120 Net decrease in cash and cash equivalents (2,380) 326 (17,305) (25,508) Cash and cash equivalents beginning of period 84,738 56,524 99,663 82,358 Cash and cash equivalents end of period $82,358 $56,850 $82,358 $56,850 Supplemental disclosures of cash flow information Cash paid for income taxes 28 (11) 245 67 Cash paid for interest - - - - Supplemental disclosures of non-cash investing and financing activities: Construction in progress costs incurred but not paid 326 60 563 168 Contingent payment for intangible asset purchase - - - 1,070 Promissory note for intangible purchase - (63) - 855 DOT HILL SYSTEMS CORP. AND SUBSIDIARIES UNAUDITED RECONCILIATION TABLE OF NON-GAAP MEASURES (In Thousands) Three Months Ended Twelve Months Ended December 31 December 31, 2007 2008 2007 2008 Net loss $(46,401) $(8,595) $(60,228) $(25,765) Effect of currency gain (640) (401) (2,220) (586) Effect of share-based compensation 704 650 2,351 2,884 Effect of issuance of warrant to customer - - - 2,282 Effect of legal settlement - - - (3,836) Effect of goodwill and long-lived asset impairment charge 40,725 5,432 40,725 5,432 Effect of restructuring costs - 813 - 813 Effect of severance costs 866 - 974 533 Net loss as adjusted $(4,746) $(2,101) $(18,398) $(18,243) Net loss per share: Basic and diluted $(0.10) $(0.05) $(0.40) $(0.40) Weighted average shares used to calculate net loss per share: Basic and diluted 45,783 46,308 45,534 46,136 Net revenue $51,746 $72,385 $207,095 $272,879 Effect of issuance of warrant to customer - - - 2,282 Net revenue as adjusted $51,746 $72,385 $207,095 $275,161 Gross profit $6,310 $10,059 $26,433 $30,388 Effect of issuance of warrant to customer - - - 2,282 Effect of share-based compensation 112 67 354 368 Effect of severance costs 30 - 50 246 Gross profit as adjusted $6,452 $10,126 $26,837 $33,284
SOURCE Dot Hill Systems Corp.
Copyright (C) 2009 PR Newswire. All rights reserved