Xyratex: Fiscal 4Q09 Financial Results
Back to profit, strong outlook fo 1Q10
This is a Press Release edited by StorageNewsletter.com on January 13, 2010 at 3:33 pm| (in US$ millions) | 4Q08 | 4Q09 | Growth | FY08 | FY09 | Growth |
| Networked storage solutions | 222.3 | 203.4 | -9% | 855.8 | 762.0 | -11% |
| Storage infrastructure | 63.1 | 39.5 | -37% | 193.9 | 105.9 | -45% |
| Total Revenues | 285.4 | 243.0 | -15% | 1,050 | 867.9 | -17% |
| Net income (loss) | (55.7) | 1.6 | (47.9) | (16.4) |
Xyratex Ltd. announced results for the fourth quarter and fiscal year ended November 30, 2009.
Revenues for the fourth quarter were $243.0 million, a decrease of 14.9% compared to revenues of $285.4 million for the same period last year.
For the fourth quarter, GAAP net income was $1.6 million, or $0.05 per diluted share compared to a GAAP net loss of $55.7 million in the same period last year. Non-GAAP net income increased to $7.9 million, or a diluted earnings per share of $0.26, compared to non-GAAP net income of $0.4 million, or $0.02 per diluted share, in the same quarter a year ago.
Gross profit margin in the fourth quarter was 15.6%, compared to 12.5% in the same period last year and 16.7% in the prior quarter.
Revenues from sales of our Networked Storage Solutions (NSS) products were $203.4 million in the fourth quarter as compared to $222.3 million in the same quarter a year ago, a decrease of 8.5%. Gross profit margin in the Networked Storage Solutions business was 13.2% as compared to 8.4% a year ago. Revenues from sales of our Storage Infrastructure (SI) products were $39.5 million as compared to $63.1 million in the same quarter a year ago, a decrease of 37.4%. Gross profit margin in the Storage Infrastructure business was 28.7% as compared to 27.3% a year ago.
Revenues for fiscal year 2009 were $867.9 million, a decrease of 17.3%, compared to revenues of $1,049.7 million for fiscal year 2008. Revenues from sales of our NSS products were $762.0 million for the year as compared to $855.8 million in 2008, a decrease of 11.0%. Revenues from sales of our SI products were $105.9 million as compared to $193.9 million in 2008, a decrease of 45.4%.
GAAP net loss for fiscal year 2009 was $16.4 million or $0.56 per diluted share compared to a GAAP net loss of $47.9 million for fiscal year 2008. Non-GAAP net income for fiscal year 2009 decreased to $1.5 million, or a diluted earnings per share of $0.05, compared to non-GAAP net income of $16.2 million, or $0.54 per diluted share, for fiscal year 2008.
When comparing with the prior year it should be noted that the 2008 fourth quarter and full year results included some significant non-recurring charges related to the deterioration in the macroeconomic climate in that quarter. GAAP net loss and non-GAAP net income included additional inventory and vendor claim provisions totaling approximately $7 million. These charges reduced the NSS gross profit margin in the fourth quarter of fiscal 2008 by 3.2%. GAAP net loss also included non-cash charges totaling approximately $54 million, being an impairment of goodwill and a valuation allowance against the deferred tax asset.
"Although our Fiscal Year 2009 proved to be very challenging, I believe we delivered a good overall performance through reducing our cost base and supporting our customers’ changing needs. The results of the fourth quarter reflect the component supply issues, primarily related to semi conductors, that we have been working to address, which have constrained our NSS shipment capability through the second half of the year. I continue to be encouraged with the demand environment we are seeing for 2010 and believe that component supply will improve from the actions we are taking," said Steve Barber, CEO of Xyratex. "We are confident that the fundamentals within the markets we serve are improving and that our technology and strong execution will benefit us over the longer term."
Business Outlook
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. They reflect a significant improvement in the outlook for the SI business including customer forecasts of approximately $140 million for delivery in the first half of 2010.
- Revenue in the first quarter of 2010 is projected to be in the range $245 million to $285 million.
- Fully diluted earnings per share is anticipated to be between $0.24 and $0.52 on a GAAP basis in the first quarter. On a non-GAAP basis fully diluted earnings per share is anticipated to be between $0.32 and $0.60. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.
Comments
Abstracts of the earnings call transcript:
Richard Pearce, CFO:
"The fourth quarter results were impacted by a number of component supply constraints primarily related to semiconductors that prevented us from meeting our customer’s demand requirements. During the quarter we were impacted by both unexpected delay and key component lead times extending beyond expectations following the production capacity scale backs and working capital initiatives implemented by our suppliers earlier in the year.
"In addition to the economic factors affecting both the fourth quarter and full year ’09 over 2008, it should be noted that both periods were affected by our arrangement with our largest customer which commenced in January 2009, whereby up to 25% of their quarterly product volume can be manufactured under license by an alternative supplier.
"Head count at the end of the fourth quarter was 1,645 permanent employees, an increase of 30 or 2% as compared to the prior quarter, the majority of this increase being in our Malaysia facility where we are working to increase our engineering and purchasing capability."
Steve Barber, CEO:
"Demand for our NS products is expected to also improve as our Tier one customers and major Tier two customers continue to see strong demand from their end user customer base. We are taking proactive steps to establish future supply of key components in the supply chain to minimize the component supply constraints that impacted our fourth quarter revenues and our ability to support our customer’s demands.
"We shipped 436.9 pedabytes of external disk space storage in our fiscal fourth quarter representing a .8% growth over the prior quarter and 24.1% growth [audio break]. Based on recently published data, on the total pedabytes shipped in calendar third quarter ’09, we estimate that Xyratex once again maintained its position as a leading player in the market supplying 16.2% of capacity on an annual basis. For the full fiscal year, we shipped a total of 1,533.5 petabytes or more than 1.5 exabytes storage to our customers.
"Seagate announced within the quarter a potential $200 million increase in their fiscal year CapEx while Western Digital announced a $60 million increase in their fiscal year CapEx. Xyratex will benefit from this increase in spending in our first and second fiscal quarters of 2010.
"In December we reached a settlement agreement with Teradyne related to our U.S. patent infringement law suit as well as Teradyne’s two U.S. counter law suits. The settlement agreement is now under seal with the U.S. Federal Court and its terms are confidential."
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