OCZ Technology: Fiscal 4Q11 Financial Results

OCZ Technology Group, Inc. reports its fourth quarter (Q4’11) and year-end results for the fiscal year 2011, which ended on February 28, 2011.

Financial Highlights

• Fiscal fourth quarter 2011 SSD revenue increased by 380% year over year to $58.2 million compared to $12.1 million in fourth quarter 2010, representing 90% of net revenue
• Reported second sequential quarter of non-GAAP operating profit
• Fiscal year 2011 revenue of $190.1 million increased 32% over fiscal year 2010 with SSD revenue increasing by 206% to $133.2 million compared to $43.5 million in fiscal year 2010
• Strong global SSD demand with EMEA SSD sales of $30.9 million in the fiscal fourth quarter of 2011, up 768% from $3.6 million in fourth quarter 2010
• Company raised $34 million during fiscal year 2011, and recently received approximately $94 million in net proceeds from the April public follow-on offering

Net revenue in Q4’11 was a record $64.6 million, and increased nearly 100% compared with revenue of $32.4 million reported in Q4’10, and increased 21% compared with the $53.2 million reported in Q3’11. For fiscal year 2011, revenue was $190.1 million, an increase of 32% from the $144.0 million reported for fiscal year 2010.

SSD revenues reached a record $58.2 million in Q4’11, an increase of 380% over Q4’10 SSD revenues of $12.1 million, and a 40% increase sequentially over Q3’11 SSD revenues of $41.5 million. For the fiscal year 2011, SSD revenues increased over 200% to $133.2 million, compared to fiscal year 2010 SSD revenues of $43.5 million.

"Fiscal 2011 was a transformational year for OCZ. We discontinued our unprofitable DRAM module products in order to focus on SSDs, began shipments to our first Tier 1 OEM, and achieved our second sequential quarter of positive non-GAAP operating income," said Ryan Petersen, CEO of OCZ Technology. "We have been focused on building the OEM and enterprise segments of our business; the recent public follow-on offering added about $94 million to our cash position and will provide important support for this growing base of customers."

Petersen added: "Looking forward into fiscal 2012, we expect that our recent acquisition of Indilinx will expand our market opportunities, positively impact gross margins as our controller technology is vertically integrated into our product portfolio, and accelerate our development of next generation SSD products."

Reporting on a GAAP basis, which includes certain items related to the accelerated discontinuation of the Company’s DRAM products, the acquisition of certain intellectual property, changes in warrant derivative valuation, and other non cash charges, GAAP operating loss for Q4’11 was $0.5 million compared to GAAP operating loss of $6.0 million in Q4’10. Non-GAAP operating profit for Q4’11 was $0.1 million and includes an operating loss of $1.7 million associated with the discontinued memory products in Q4’11 compared to a non-GAAP operating loss of $3.8 million in Q4’10.

GAAP net loss for Q4’11 was $9.3 million or $0.27 loss per share compared to a GAAP net loss of $6.5 million or $0.31 loss per share in Q4’10. GAAP net loss for fiscal year 2011 was $30.0 million or $1.05 loss per share. This compares to a GAAP net loss of $13.5 million or $0.64 loss per share in fiscal year 2010.

Non-GAAP net loss for Q4’11 was $0.8 million, or $0.02 loss per share and includes a net loss of $1.8 million associated with the discontinued memory products in Q4’11 as compared to non-GAAP net loss for Q4’10 of $4.3 million, or $0.20 loss per share. A reconciliation between GAAP and non-GAAP information is contained in the tables below.

Recent Business Highlights:

• Acquired Indilinx Co., Ltd, a privately-held fabless provider of SSD controllers and firmware, making OCZ one of only a few SSD manufacturers with captive controller production
• Began shipping mass production quantities of Vertex 3 family of SSDs, which are rated at up to 75K 4K random write IOPS and utilize the newest 2xnm synchronous mode MLC NAND Flash
• Introduced the Z-Drive R3 PCI-Express SSD solution for enterprise and OEM, which utilize OCZ’s proprietary Virtualized Controller Architecture (VCA) technology
• Introduced the Helios Family of SAS 6GBPs enterprise Class SSDs, which utilize our proprietary VCA architecture, and achieves a new capacity benchmark of 1TB in a standard format SSD
• Launched the VeloDrive PCI-Express SSD, which is designed to meet the needs of Storage Architects, providing unparalleled versatility and simplified integration while optimizing high-performance computing and storage applications
• Received accolades and media reviews for the Vertex 3 and RevoDrive X2 line of SSDs, including Maximum PC’s SSD showdown where the Vertex 3 beat competing drives and received the publication’s top honor

 Quarterly Net Revenue by product groups
 and by major geographic area ($000)’s (Unaudited):

Business Outlook:

• OCZ expects revenue for fiscal year 2012, ending February 28, 2012, to be in the range of $300−$330 million, an increase of approximately 60%−75% from the $190 million reported in fiscal year 2011
• As a result of the Indilinx acquisition that closed on March 28, 2011, OCZ expects its gross margin to increase by 2%−4% within 12 months due to integration of Indilinx controllers into a greater range of OCZ products as well as increased sales of controller products
• OCZ expects that the additional working capital raised in the April public follow-on offering will contribute to improved profitability and support increased OEM Sales
• OCZ plans to continue to invest in its R&D and Marketing efforts in order to further build upon its leadership position
• Long term, non-GAAP model of gross margins of 28%-32% and operating income of 13%-17%

To read the earnings call transcript