Isilon: Fiscal 1Q09 Financial Results

Isilon Systems announced its financial results for the first quarter ended March 31, 2009. Revenue for the quarter was $26.9 million, up 11 percent compared with $24.1 million in the first quarter of 2008 and down 15 percent sequentially compared with $31.8 million in the fourth quarter of 2008.

"The first quarter of 2009 proved to be a time when global economic uncertainty and softening business conditions led customers to delay or reduce capital expenditures," said Sujal Patel, President and Chief Executive Officer, Isilon Systems. "Despite the challenging economic environment, Isilon extended its leadership of the scale-out NAS category by successfully introducing a broad expansion of our product offerings, deepening our presence in a wide range of important market segments and rounding out our senior leadership team. These important steps help ensure that we emerge from current economic conditions stronger and better positioned than ever for long-term success."

Isilon also announced that Bill Richter had been named Chief Financial Officer, having served in the role on an interim basis since October, 2007. "Through his own efforts and by building a world-class team, Bill proved to me and to Isilon’s Board that he’s the right person to lead Isilon’s finance and accounting organizations," said Patel.

On April 6, 2009, Isilon announced a cost reduction program that includes a reduction in workforce of approximately 10 percent. The program will cut approximately $1 million from the current quarterly operating expense structure and will result in a restructuring charge of approximately $850,000 in the second quarter of 2009.

Financial results for the first quarter of 2009
included the following:

• As previously announced, first quarter results included a non-cash inventory write-down of approximately $3.8 million, or $0.06 per share. This resulted from softening economic conditions and lower forecasted demand for existing products due to anticipated migration to a new suite of products announced by Isilon in March 2009.
• Gross margin for the first quarter of 2009 was 40.3 percent, compared with 57.1 percent in the fourth quarter of 2008 and 53.5 percent in the first quarter of 2008. Gross margin for the first quarter of 2009 was reduced by 14 percentage points due to the non-cash inventory write-down of $3.8 million discussed above.
• Net loss for the first quarter of 2009 was $10.4 million, or $0.16 per share compared with net loss of $4.3 million, or $0.07 per share in the fourth quarter of 2008. Net loss in the first quarter of 2008 was $10.1 million, or $0.16 per share. Non-GAAP net loss for the first quarter was $8.9 million, or $0.14 per share compared with non-GAAP net loss of $2.8 million, or $0.04 per share in the fourth quarter of 2008. Non-GAAP net loss in the first quarter of 2008 was $8.8 million, or $0.14 per share.
• GAAP and non-GAAP net loss for the first quarter of 2009 includes $3.8 million, or $0.06 per share, related to the inventory write down discussed above. GAAP and non-GAAP results for the first quarter of 2008 included $2.8 million, or $0.04 per share, in professional fees and expenses related to the Audit Committee investigation, which concluded in April 2008.
• As of March 31, 2009, cash, cash equivalents and marketable securities were $76.3 million, compared with $77.8 million as of December 31, 2008.