OCZ: Fiscal 2Q11 Financial Results

OCZ Technology Group, Inc. reports its fiscal 2011 second quarter results, which ended on August 31, 2010.

On a GAAP basis, net revenue for Q2’11 totaled $38.0 million, compared to $37.8 million reported in fiscal 2010’s second quarter. Revenue in the Company’s core SSD product line totaled $20.2 million, an increase of 81% from the $11.1 million reported in Q2’10.

In August, the Company announced the strategic transition away from certain unprofitable commodity DRAM module products. Pro forma revenue for the Company’s continuing products was $29.5 million for the quarter, compared to $23.1 million in Q2’10.

This change has allowed the Company to focus on building its position in its core market for high-performance SSDs, which are commonly used in servers and enterprise storage arrays. SSD’s represented 69% of the Company’s ongoing business in Q2’11.

On a GAAP basis, which includes the results of the aforementioned discontinued products and related write-offs, net income for Q2’11 was a loss of $7.6 million, or $0.29 per fully diluted share, compared to a loss of $1.7 million, or $0.08 per share in Q2’10. Non-GAAP net loss for Q2’11 was $2.5 million, or $0.09 per fully diluted share, compared to a non-GAAP net loss for Q2’10 of $1.6 million, or $0.08 per share. Reconciliation between GAAP and non-GAAP information is contained in the table below.

"In the second quarter of fiscal 2011, we benefited from continued growth in our enterprise and server SSD business," said Ryan Petersen, Chief Executive Officer of OCZ Technology Group. "We are pleased with the fast paced growth of both our client and enterprise SSD product lines, and the progress we have made in transitioning from unprofitable legacy commodity DRAM products."

Recent Financial Highlights

• SSD unit sales ramped from an average of 15,000 units per month in Q1’11 to over 54,000 units in August, a unit increase of 265%
• SSD revenue increased to $20.2 million in Q2’11, a 81% increase from $11.1 million in Q2’10, and represented 51% sequential growth from $13.3 million reported in Q1’11
• Non-GAAP gross margin increased to 18.0% in Q2’11 from 15.0% in Q1’11
• Non-GAAP net loss decreased to $2.5 million in Q2’11 from $2.7 million in Q1’11

Recent Business Highlights:

• Launch of OCZ-developed High Speed Data Link (HSDL SSD) interface, which allows speeds up to 2.4 x that of current Fiber Channel interfaces; notable acclaim received from industry leading trade press
• Launch of OCZ Ibis Series Enterprise HSDL-equipped SSD, with up to 125K Random Write IOPS with prices below $3 per GB
• Commenced production shipments of eMLC-based drives to enterprise SAN customers
• Selection of OCZ Enterprise class SSDs by SGI Inc., for use in a range of SGI Supercomputing products as well as their Rackable line of servers
• OCZ’s RevoDrive PCI-E SSD continues to win accolades from top tier publications including "Editors Choice" awards from Hot Hardware and PC Perspective
• Appointment of industry veteran, Richard Singh, as Sr. Vice President of Sales
• Showcased wide array of SSD products at the 2010 Flash Memory Summit
• Over 30 new client wins for OCZ SSD Product lines

Business Overview:
"We are strongly positioned to continue growing our SSD revenues and move forward with a focus on continuing to deliver market leading high performance SSD products to our customers," said Ryan Petersen, Chief Executive Officer of OCZ Technology. "The discontinuance of our commodity memory products has allowed us to aggressively reallocate resources towards SSD growth."

Mr. Petersen concluded: "As our SSD growth plans continue to exceed expectations, we plan to increase our investment in research and development in order to further solidify our leadership role in SSD technology. We similarly plan to increase our sales and marketing efforts to enable our Tier 1 partners to implement currently available OCZ developed and proprietary technologies and interfaces into their products."

Guidance:
For fiscal 2011, OCZ’s prior revenue guidance was in the range of $165 million to $180 million, reflecting the impact of the discontinued DRAM products that were announced concurrent with the above revenue guidance range.

To read the earnings call transcript