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Violin Memory: Fiscal 2FQ15 Financial Results

Sales up 3% sequentially, down 30% yearly

(in $ million) 2Q14 2Q15 6 mo. 14 6 mo. 15
Revenues 26.5 18.6 51.3 36.7
Growth   -30%   -28%
Net income (loss) (30.6) (8.4) (59.2) (38.6)

Violin Memory, Inc. announced financial results for the second fiscal quarter ended July 31, 2014.

Second Quarter Fiscal 2015 Financial Highlights

  • revenue of $18.6 million
  • GAAP gross margin of 52%
  • non-GAAP gross margin of 55%
  • GAAP net loss of $0.09 per share
  • non-GAAP net loss of $0.21 per share

I’m extremely pleased with the progress we made in the second quarter as we continued to execute through the transformative actions taken in the first quarter,” said Kevin DeNuccio, president and CEO, Violin. “Our results reflect the positive benefits we are beginning to realize from our transition, including a return to top-line growth and bottom line improvement.

“We’re starting to regain momentum, and anticipate increased growth in the second half of this fiscal year stemming from a rapidly growing market opportunity, our recent new product introductions and a more efficient go-to-market model.”

Second Quarter Fiscal 2015 Financial Results
Second quarter fiscal 2015 revenue was $18.6 million, 3% higher sequentially compared to $18.1 million reported in the first quarter of fiscal 2015, and 30% lower year over year compared to $26.5 million recorded in the second quarter of fiscal 2014.

Second quarter fiscal 2015 GAAP gross margin was 52%, compared to 53% reported in the first quarter of fiscal 2015, and compared to 42% recorded in the second quarter of fiscal 2014.

Second quarter fiscal 2015 non-GAAP gross margin was 55%, compared to 52% reported in the first quarter of fiscal 2015, and compared to 44% recorded in the second quarter of fiscal 2014.

Second quarter fiscal 2015 GAAP net loss was $8.4 million, or $0.09 per share, compared to first quarter fiscal 2015 GAAP net loss of $30.1 million, or $0.35 per share. Second quarter fiscal 2015 GAAP net loss included a gain on the sale of the PCIe product line of $17.4 million, or $0.19 per share. Second quarter fiscal 2015 GAAP net loss compares to second quarter fiscal 2014 GAAP net loss of $30.6 million, or $1.98 per share.

In addition to the gain on the sale of the PCIe product line, special items in the second quarter of fiscal 2015 were stock-based compensation expense of $4.8 million, restructuring charges of $1.3 million, litigation settlement expense of $0.7 million and amortization of acquired intangibles of $0.1 million.

Excluding special items, second quarter fiscal 2015 non-GAAP net loss was $19.0 million, or $0.21 per share, compared to first quarter fiscal 2015 non-GAAP net loss of $21.1 million, or $0.25 per share. Second quarter fiscal 2015 non-GAAP net loss compares to second quarter fiscal 2014 non-GAAP net loss of $25.4 million, or $1.64 per share.

Business Outlook

  • Fiscal year 2015 non-GAAP gross margin of 52% to 56%
  • Fiscal year 2015 non-GAAP operating expenses of $118 million to $122 million

Comments

Abstracts of the earnings call transcript:

Kevin DeNuccio, president and CEO:
"We continue to believe that revenue will begin to grow and accelerate in the second half supported by the most robust product set in our history, our strategic software relationships, a balanced go-to-market model and the increasing customer adoption of our vision of an all silicon data center.
"Sequentially, our second quarter revenues were up slight to $18.6 million or 3%. But excluding PCIe, we’re up 9%, representing a solid return to top-line growth and giving us further confidence that we correctly called the bottoms last quarter. Looking forward, we would expect to see similar revenue growth rate in Q3. Our sales indicatives also improved dramatically increasing for the first time in five quarters.
"Our bookings were strong, up 19% sequentially, suggesting that we are in fact gaining sales momentum. Gross margin was 55%, up from 53% in the first quarter and above the consensus estimate. Operating expenses were $28.8 million down 6% from the first quarter and below consensus estimate.
"We took steps in the second quarter to improve our price competitiveness by introducing a range of pay-as-you-grow options and launching our new 6100 series All Flash Array with a starting price below 100K. This significantly gives us broader reach as our ASPs have been nearly 250K previously.
"Our top three transactions in the quarter represented 36% of our product revenue with one transaction exceeding 10% of our total revenue.
"Our top transaction represents a very large strategic opportunity we were selected for primary storage use, on the basis of our ROI and total cost of ownership, after that customer had previously deployed Violin All Flash Arrays for two performance sensitive applications. The initial order was for nearly a petabyte of storage. And we anticipate a recurring quarterly revenue stream $7 million as this customer continues to migrate from risk to benefits of an all silicon data center."

Cory Sindelar, CFO:
"Excluding $1 million of service revenue in the first quarter related to PCIe cards, our array business grew 9% quarter-over-quarter and our product revenue was up 11%.
"From a geographical perspective, we saw strength in the Americas partially offset by weakness internationally. Specifically, the Americas generated $12.5 million of revenue in Q2, which represents an increase of $2.7 million from the $9.8 million in the prior quarter. In EMEA, we saw revenue of $3.7 million, a decrease of $900,000 from $4.6 million reported last quarter. In an APJ, we saw a decrease of $1.3 million to $2.4 million in Q2 from $3.7 million in Q1, which is mostly due to a decline in the PCIe revenue.
"16% of our revenue in the second quarter came from new customers, which is down slightly from 20% in the prior quarter. The top five transactions in the quarter accounted for 44% of product revenue, which is up from 41% in the prior quarter and only one of our top five customers this quarter was also a top five customers last quarter showing good diverse customer base.
"Total headcount at the end of the quarter was 328, down from 352 at the end of the first quarter. The decrease reflects an exit of our PCIe workforce of 30 offset by net hiring of six individuals.
"We finished the quarter with cash restricted cash and investments totaling a little more than $80 million, which was down approximately $7 million from the prior quarter and better than our guidance of $72 to $77 million."

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