Compellent: Fiscal 4Q08 Financial Results

(in US$ millions)	4Q07	4Q08	FY07	FY08
Revenues	16.9	27.0	51.2	90.9
*Growth*		+60%		*+78*%
Net income (loss)	(1.8)	1.4	(7.8)	(0.4)

Compellent Technologies, Inc. announced financial results for its fourth quarter ended December 31, 2008. Compellent’s fourth quarter performance reflects the continued demand for the company’s innovative approach which allows end user customers to store data more efficiently and maximize their IT budget dollars.

Highlights include:

Revenue of $27.0 million represented the 13th consecutive quarterly increase. Revenue grew 60 percent from the fourth quarter of 2007 and 10 percent sequentially from the third quarter of 2008.
GAAP earnings were $1.3 million, or $0.04 per share. Adjusting for the non-cash expense of stock compensation, non-GAAP quarterly profit was $2.0 million, or $0.06 per share.
End users totaled 1,278 at December 31, 2008 compared with 740 at year-end 2007.
Cash and investments totaled $100.3 million at December 31, 2008, exceeding $100.0 million for the first time.

“There is a flight to efficiency in the storage market. Companies cannot quit storing data, but they can limit the storage spend through our innovative technologies. Customers are responding to this message,” said Phil Soran, President and CEO of Compellent. “As the requirements for data storage continue to grow, our easy-to- use, energy- and manpower-efficient offering has demonstrated that we can effectively reduce costs by providing superior data storage solutions. The result for Compellent has been consistent growth in revenue, profitability and cash generation.”

Additional financial highlights include:

GAAP net income was $1.3 million in the fourth quarter of 2008, compared with a GAAP net loss of ($1.8) million in the fourth quarter of 2007 and GAAP net income of $464,000 in the third quarter of 2008. Adjusting for the non-cash expense of stock compensation expense, non-GAAP net income for the fourth quarter of 2008 totaled $2.0 million compared to a non-GAAP net loss of ($1.5) million in the fourth quarter of 2007.
Operating profit was $698,000 in the fourth quarter of 2008, compared with an operating loss of ($2.8) million in the fourth quarter of 2007 and an operating loss of ($168,000) in the third quarter of 2008.
For the full year ended December 31, 2008, revenue totaled $90.9 million, up 78 percent compared with the full year 2007. GAAP net loss for the full year 2008 was ($416,000), or $(0.01) per share, compared with a GAAP net loss of ($7.8) million, or $(0.77) per share, for the comparable year in 2007. Adjusting for the non-cash expense of stock compensation expense, non-GAAP net income for 2008 totaled $1.8 million compared to a non-GAAP net loss of ($7.1) million 2007.
Gross margin was 54.9 percent in the fourth quarter of 2008, an increase of 3.5 percentage points from 51.4 percent in the fourth quarter of 2007.

“We entered the first quarter of 2009 with strong momentum, and while we are cautious about the current economic environment, we are optimistic that demand for cost-effective storage will remain a priority for IT managers in the upcoming year. In addition, our business model with channel-assisted sales and virtual manufacturing provides significant financial and operational advantages in the current environment,” concluded Mr. Soran.

Comments

Here are some abstracts of the conference call transcript:

Philip Soran, President and CEO:

"During the fourth quarter, we ended 192 new end-users, bringing our total end-user customers to 1,278.
"The competitive for really hasn’t changed much, you almost see EMC which has a great sales presence out there. Very frequently, [inaudible] is number two competitor we’ll see and probably maybe a little more than we used to is HP [inaudible] assisted is some of the business partners we have and also from the international business we have. So, those are the top three we see on a very frequent basis.
"In kind of talking about futures, which is the SSD and the Live Lines something. We usually do that as just one was just so our customers could plan and anticipate those kind of features and then also you have logged the virtualization announcements that we’re going on last Fall. We want to make sure people are aware of the impact of something like a Live Line could have on that. So, first of all the SSD, things are going well in the development front there. It’s a very exciting technology. I would say it’s a very expensive technology so customers tend to get very excited until they see potential cost of [inaudible] drives and then luckily they get excited again when they realized that with us they can tie that into a tiered storage with their automated tiered storage. So, we think we can do implement solid state architectures for about 10% of the cost on what a competitive offering could. The reason being is we can only put the active blocks of data on the solid state and keep inactive down on spinning media, which is a lot more efficient. So, I hope it will see a nice acceptance of customers of that. I think, the price are going to have to continue to drop before you see a mass exodus to solid state, but that’s an exciting one. And then on the Live Line front, it’s a really enterprise feature for us. It’s really can be exciting than the continuous operations arena and it really ties right in to all the virtualization players be able to kind of dynamically and automatically move the data along with moving applications and servers with the server virtualization partners."

Jack Judd, CFO:

"Our end-users at the end of the quarter totaled 478 compared to 741 the year earlier. Our revenue from the 15 end-users measured on the year to date basis was 37% of product revenue and new end-users made up 63% of product revenue.
"We currently expect revenue to increase to approximately $28 million in the first quarter of 2009 compared to $18.3 million in the same quarter of 2008, a forecast of growth rate of 53%. We project our quarterly non-GAAP EPS to be between $0.02 and $0.04 per share."