Violin Memory: Fiscal 1Q16 Financial Results

(in $ million)	1Q15	1Q16	Growth
Revenue	18.1	12.1	*-33%*
Net income (loss)	(30.1)	(26.5)

Violin Memory, Inc. announced financial results for the first fiscal quarter ended April 30, 2015.

First Quarter Fiscal 2016 Financial Highlights

revenue of $12.1 million
GAAP gross margin of 43%
non-GAAP gross margin of 48%
GAAP net loss of $0.28 per share
non-GAAP net loss of $0.22 per share

“Our first quarter results were unsatisfactory as we continued to experience the short-term effects of transitioning customers to our new Flash Storage Platform solutions,” said Kevin DeNuccio, president and CEO. “We believe that this transitional headwind is now beginning to subside, and we are off to the strongest quarterly start to date with recognizable revenue already approaching 90% of our first quarter total.“

“We remain confident in our strategy, underscored by the rapidly growing number of customers and opportunity pipeline for our new products, which more than doubled in the first quarter. Additionally, we have taken action to improve our execution and expect revenue to grow substantially in the second quarter,” added DeNuccio.

First Quarter Fiscal 2016 Financial Results

revenue was $12.1 million, 41% lower sequentially compared to $20.5 million reported in the fourth quarter of fiscal 2015, and 33% lower compared to $18.1 million reported in the first quarter of fiscal year 2015.
GAAP gross margin was 43% compared to (50%) reported in the fourth quarter of fiscal 2015 and compared to 53% reported in the first quarter of fiscal year 2015.
non-GAAP gross margin was 48% compared to 50% reported in the fourth quarter of fiscal 2015 and compared to 52% reported in the first quarter of fiscal year 2015.
GAAP net loss was $26.5 million, or $0.28 per share, compared to fourth quarter fiscal 2015 GAAP net loss of $46.8 million, or $0.50 per share and compared to first quarter fiscal 2015 GAAP net loss of $30.1 million, or $0.35 per share.
GAAP net loss included stock-based compensation expense of $5.3 million.
Excluding special items, first quarter fiscal 2016 non-GAAP net loss was $21.2 million, or $0.22 per share, compared to fourth quarter fiscal 2015 non-GAAP net loss of $18.1 million, or $0.19 per share, and compared to first quarter fiscal 2015 non-GAAP net loss of $21.1 million, or $0.25 per share.
Cash and cash equivalents, restricted cash, and short-term investments totaled $131.2 million as of April 30, 2015.

Comments

Violin is clearly not satisfied with 1FQ16 performance and for good reasons.

Revenue for the quarter at $12.1 million is largely below guidance of $21 million to $24 million, and being down 33% Y/Y and 41% sequentially, with net losses more than twice more than sales.

The company was never profitable since its inception in 2005 and is far to come back to positive net income.

Revenue from the Americas decreased quarterly by $1 million to $8 million, Europe by a huge $6.3 million to $1.6 million, and AsiaPac by $1.2 million to $2.3 million.

Headcount at the end of the first quarter was 323, down from 329 at year end. The decrease primarily relates to the closure of a small engineering office located in New Jersey partially offset by some hiring in Santa Clara facility.

The problem of Violin is the slow transition for customers from the ols 6000 Series, with sales dropping 60% sequentially, to FSP array introduced last February.

Similar to prior quarters, approximately 10% to 15% of revenue came from new customers and over half of the revenue was direct with end-user customers which is more than what the firm typically sees.

The arrival FSP could reverse the trend very soon. The number of the FSP customers doubled in this first quarter, while sales growing to nearly half of product revenue. May revenue for the company was $6.8 million, with nearly all attributable to FSP. This represents the strongest revenue performance of the first month of any quarter-to-date, partly due to the closing of a large transaction with an unknown top customer that did not complete their qualification of the FSP until May.

Consequently Violin forecasts revenue for next quarter in the range of $16 million to $20 million or a Q/Q increase between 32% and or 65%.