3PAR: Fiscal 3Q09 Financial Results

(in US$ millions)	3Q08	3Q09	9 mo. 08	9 mo. 09
Revenues	30.8	48.2	82.6	126.3
*Growth*		+57%		*+53%*
Net income (loss)	(1.9)	0.5	(8.9)	(0.1)

3PAR, Inc. reported results for the third quarter of fiscal year 2009, which ended December 31, 2008. Revenue for the third quarter was $48.2 million, an increase of 57% compared to revenue of $30.8 million for the same period a year ago, and an increase of 7% compared to $45.1 million in the prior quarter, which ended September 30, 2008.

For the third quarter of fiscal 2009, GAAP net income was $461,000, or $0.01 per share compared to GAAP net loss of $1.9 million, or ($0.05) per share for the same period in the prior year. Non-GAAP net income, which excludes the impact of stock-based compensation expense, for the third quarter of fiscal 2009 was $2.3 million, or $0.04 per share, compared to non-GAAP net loss of $664,000, or ($0.02) per share for the same period in the prior year.

"The strong financial results we report for the third quarter of fiscal 2009 result from a continued focus on fiscal discipline and reflect the unique value that 3PAR Utility Storage brings to organizations that need to do more with less in challenging economic times," said David Scott, Chief Executive Officer. "As datacenters have continued to look for new ways to economize, they have continued to turn to 3PAR to lower CAPEX and OPEX by reducing disk capacity purchases, energy costs, and storage administration effort by up to 80%."

Additional Third Quarter Fiscal 2009 Financial Information
3PAR reports operating income (loss), net income (loss), and earnings (loss) per share (EPS) on a GAAP and on a non-GAAP basis, which excludes the impact of stock-based compensation expense. The non-GAAP measures are described in greater detail below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

GAAP operating income for the third quarter of fiscal 2009 was $507,000, or 1% of revenue. This compares to GAAP operating loss of $1.4 million in the second quarter of fiscal 2009, or 3% of revenue. Non-GAAP operating income in the third quarter of fiscal 2009 was $2.4 million, or 5% of revenue. This compares to non-GAAP operating income of $291,000, or 1% of revenue, in the second quarter of fiscal 2009. GAAP net income for the third quarter of fiscal 2009 was $461,000 as compared to a GAAP net loss of $1.2 million in the second quarter of fiscal 2009. Non-GAAP net income in the third quarter of fiscal 2009 was $2.3 million, compared to $520,000 in the second quarter of fiscal 2009.
GAAP EPS for the third quarter of fiscal 2009 was $0.01 on 63.1 million diluted shares outstanding, compared to ($0.02) in the second quarter of fiscal 2009 on 60.6 million shares outstanding. Non-GAAP EPS in the third quarter of fiscal 2009 was $0.04 compared to $0.01 in the second quarter of fiscal 2009.
Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation. In the third and second quarters of fiscal 2009, the charges related to stock-based compensation were $1.9 million and $1.7 million, respectively.

Comments

Here are some abstracts of the conference call transcript.

David Scott, President and CEO:
"We have now served more that 1,000 systems to over 400 customers.
"From a product prospective, 41% of the disks customers ordered in this quarter were near line and 59% by the channel as compared to 52% and 48% respectively in the previous quarter.
"We will be planning to support solid state in our platform. The reason we do not have till today is because of our wide striping weakening. The problem obviously at this stage with solid state disk is it is still very expensive and is not kind of cost competitive compared with wide striping. The number of solutions where solid state disks other advantage which is latency is applicable to as remarkably small and still relatively insignificant."

Adriel Lares, CFO and VP of Finance:
"We generate 16% of revenue from customers outside the U.S., same as we reported in the previous quarter.
"As of December 31, 2008, cash, cash equivalents, and marketable securities totaled $100.6 million. This represents a $7.8 million decrease from the previous quarter.
"On a worldwide basis, 3PAR employed 572 full-time employees as of December 31, 2008 up from 533 full-time employees as of September 30, 2008 and 426 full-time employees as of December 31, 2007.
"We are increasing our full year fiscal 2009 revenue expectations to be between $178 million and $184 million from the range of between $171 million and $179 million that was provided in the previous quarter’s earnings call. This full year revenue guidance equates into the fourth quarter revenue guidance of between $42 million and $48 million.
"We have seen XIV sporadically in various deals, not as much as we would have expected. We fundamentally believe that the XIV platform has not necessarily been designed and optimized as a utility storage platform designed for utility computing environments and flexible workload consolidation, and so it maybe that there is somewhat of a mismatch of the type of opportunities that we are both coming going after. But we have not seen anything that gives us a view that is becoming a significant competitive threat in fact somewhat to the opposite of this stage.
"EMC by far is the number one competitor. Hitachi, number two. Probably, IBM number three, followed by HP, number four. NetApp is only in certain segments.
"The direct [sales] was about 69% and the indirect was about 31%. In the previous quarter, that was 73% and 27%, so in the ball parks of what they have been before."