Emulex: Fiscal 4Q11 Financial Results

  
Emulex Corporation announced results for its fourth fiscal quarter ended July 3, 2011.

Fourth Quarter Financial Highlights

• Total net revenues of $123.4 million, an increase of 20% year-over-year, and 10% sequentially
• 1010GbE products totaled more than 13% of net revenues
• Host Server Product (HSP) net revenues were $97.2 million, or 79% of net revenues, an increase of 34% year-over-year, and 15% sequentially
• Embedded Storage Product (ESP) net revenues were $26.1 million, or 21% of net revenues, a decrease of 14% year over year, and 4% sequentially
• GAAP gross margins of 57% and non-GAAP gross margins of 65%
• GAAP operating loss of $8.3 million, or 7% of total net revenues, and non-GAAP operating income of $12.3 million, or 10% of total net revenues
• GAAP net loss of $15.7 million and non-GAAP net income of $14.4 million
• GAAP loss per share of $0.18 and non-GAAP diluted earnings per share of $0.16
• Cash, cash equivalents and investments at the end of the quarter were $183.4 million, a sequential increase of $0.5 million

Fiscal 2011 Financial Highlights

• Total net revenues of $452.5 million, an increase of 13% year-over-year
• HSP net revenues of $353.2 million, an increase of 22% year-over-year
• ESP net revenues of $99.1 million, a decrease of 10% year-over-year
• GAAP gross margins of 56% and non-GAAP gross margins of 64%
• GAAP operating loss of $48.8 million, or 11% of total net revenues, and non- GAAP operating income of $44.4 million, or 10% of total net revenues
• GAAP net loss of $83.6 million and non-GAAP net income of $47.0 million
• GAAP loss per share of $0.97 and non-GAAP diluted earnings per share of $0.54
• Completed acquisition and integration of ServerEngines Corporation

Fourth Quarter Business Highlights

• Recognized as market leader in 10GbE LAN on Motherboard (LOM) revenues by Crehan Research and the Dell’Oro Group for the first quarter of 2011
• Announced OEM sampling of the EmulexEngine (XE) 201 I/O controller, the industry’s first converged fabric controller that provides 16Gb/s Fibre Channel, FCoE, 10GbE and 40GbE connectivity in a single quad port ASIC
• Announced two new Virtual Fabric Adapters based on Emulex’s next-generation OneConnect Universal Converged Network Adapter (UCNA) technology, for IBM BladeCenter systems
• Announced a new FlexFabric Adapter mezzanine card, based on Emulex’s next-generation OneConnect UCNA technology, for HP Integrity server blades
• Announced LightPulse 8Gb/s FC HBA support for Cisco UCS C-Series servers and MDS Fibre Channel switches
• Announced availability of next-generation OneConnect UCNAs for EMC Enterprise and Unified Storage Systems
• Announced availability of the Pilot 3 integrated Baseboard Management Controllers (iBMC) and certification across Intel’s new S1200BT server lineup supporting the Intel Xeon processor E3-1200 family
• Emulex OneConnect UCNAs and LightPulse Fibre Channel HBAs certified for new VMware vSphere 5 environments
• Emulex named HP AllianceONE Converged Infrastructure Ecosystem Networking Partner of the Year
• Emulex OneCommand Vision honored by the TechAmerica Orange County High-Tech Innovation Awards in the software category
• Emulex OneConnect UCNAs named 2011 Network Infrastructure Product of the Year by Network Computing magazine and Connectivity Product of the Year by Storage Magazine, both for the second consecutive year
• Network Products Guide named Emulex’s OneConnect UCNAs, OneSecure Encryption Solution and Management Mind Meld book winners of the 6th Annual 2011 Hot Companies and Best Products Awards

Financial Results
In the fourth quarter, total net revenues increased 10% sequentially and 20% from the comparable quarter of last year, reaching $123.4 million. The fourth quarter GAAP net loss was $15.7 million, or $0.18 per share, compared to a GAAP net loss of $18.6 million, or $0.21 per share reported, in Q3 of fiscal 2011, and a GAAP net loss of $2.5 million, or $0.03 per share, in Q4 of fiscal 2010. Non-GAAP net income for the fourth quarter was $14.4 million, or $0.16 per diluted share. Non-GAAP net income increased 54% sequentially from the $9.4 million reported in the third quarter, and increased 7% from $13.5 million in the comparable quarter of the last fiscal year. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

CEO Jim McCluney commented: "Exceeding the high-end of both our revenue and earnings guidance for the fourth quarter was an exceptional finish to a dynamic year for Emulex. During the year we completed the acquisition of Server Engines and began to monetize our R&D investments with the launch of our market-leading OneConnect UCNAs and LOMs across the leading server OEMs. Year-over-year, revenue growth in our Host Server Products continued to accelerate, coming in at approximately 34% for the quarter, led by 10GbE products, which more than tripled over last year," McCluney continued.

"As we begin fiscal 2012, we have completed our planned site consolidations ahead of schedule, and we are positioned to not only continue to deliver strong top-line revenue growth, but also to achieve even stronger earnings growth as we move into the next server refresh cycle," concluded McCluney.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the Company’s control, including the timing of new server launches by our customers, Emulex is providing guidance for its first fiscal quarter ending October 2, 2011. For the first quarter of fiscal 2012, Emulex is forecasting total net revenues in the range of $114-$118 million. The Company expects non-GAAP earnings per diluted share could amount to $0.10-$0.12 in the first quarter. On a GAAP basis, Emulex expects a loss per share of $0.02-$0.04 in the first quarter. GAAP estimates for the first quarter reflect approximately $0.14 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation and expenses related to site closures.