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Emulex: Fiscal 3Q12 Financial Results

Storage connectivity products at $27.9 million, 22% of sales, up 33% Y/Y

(in US$ million) 3Q11 3Q12  9 mo. 11   9 mo. 12
 Revenues 112.1 125.7 329.2  372.8
 Growth   12%   13%
 Net income (loss)  (18.3) 8.7 (67.9) 16.5

Emulex Corporation announced results for its third quarter of fiscal 2012, which ended on April 1, 2012.

Third Quarter Financial Highlights

  • Net revenues of $125.7 million, an increase of 12% year-over-year
  • Net revenues for our 10Gb Ethernet products more than doubled year-over-year, exceeding 20% of net revenues, compared to 15% in the prior quarter and 12% in Q3 of fiscal 2011
  • Network Connectivity Products (NCP) net revenues of $91.1 million, or 73% of net revenues, an increase of 9% year-over-year
  • Storage Connectivity Products (SCP) net revenues of $27.9 million, or 22% of net revenues, an increase of 33% year-over-year
  • Advanced Technology and Other Products (ATP) net revenues of $6.8 million, or 5% of net revenues, a decrease of 6% year-over-year
  • GAAP gross margins of 59% and non-GAAP gross margins of 64%
  • GAAP operating income of $8.1 million, or 6% of total net revenues, and non-GAAP operating income of $21.4 million, or 17% of total net revenues
  • GAAP net income of $8.7 million and non-GAAP net income of $18.5 million
  • GAAP diluted earnings per share of $0.10 and non-GAAP diluted earnings per share of $0.21
  • Cash, cash equivalents and investments at the end of the quarter of $201.5 million

Third Quarter Business Highlights

  • OneCommand Vision 2.0 named one of the 2011 Products of the Year in the Storage Management Tools category by the editors of TechTarget’s Storage Media Group. The award selection was based on innovation, performance, ease of integration into existing environments, ease of use, and manageability
  • Announced OneCommand Vision supports the new Microsoft System Center 2012, enabling a common toolset to manage private and public cloud application and services in a single-pane-of-glass
  • Emulex Connect Partner Program named to CRN’s 2012 Partner Programs Guide for excellence in its overall channel program and awarded a 5-Star Partner rating
  • John Alfieri, Emulex VP, Americas channel sales, honored as one of CRN’s 2012 Channel Chiefs

Financial Results
In the third quarter, total net revenues increased 12% from the comparable quarter of last year, reaching $125.7 million. Third quarter net income on a GAAP basis was $8.7 million, or $0.10 per diluted share, compared to a GAAP net loss of $18.3 million, or $0.21 per share, in Q3 of fiscal 2011. Non-GAAP net income for the third quarter was $18.5 million, or $0.21 per diluted share, representing a 98% increase from $9.4 million in the comparable quarter of the prior fiscal year.

For the first nine months of fiscal 2012, total net revenues of $372.8 million represent an increase of 13% over the comparable period of the prior year. GAAP net income for the period was $16.5 million, compared to a GAAP loss of $67.9 million for the first nine months of fiscal 2011. Non-GAAP net income increased 62% to a total of $53.0 million compared to $32.6 million for the first nine months of fiscal 2011. Reconciliations between GAAP and non-GAAP results are included in the accompanying financial data.

CEO Jim McCluney commented: "I’m particularly pleased with the strength of our results in light of the seasonal weakness that is typically associated with our third fiscal quarter. The continuing expansion of our core markets drove year-over-year revenue growth in excess of 10% for the fifth consecutive quarter, and once again exceeded the high end of our guidance."

"We look forward to a strong finish to the fiscal year and are optimistic that we will be able to show double digit year-over-year revenue growth for the second consecutive year, and have the opportunity to surpass the half billion dollar annual revenue mark for the first time," McCluney concluded.

Business Outlook
For the fourth quarter of fiscal 2012, Emulex is forecasting total net revenues in the range of $126-$130 million. The company expects non-GAAP earnings per diluted share of $0.21-$0.23 in the fourth quarter. On a GAAP basis, Emulex expects earnings per diluted share could amount to $0.09-$0.11 in the fourth quarter. GAAP estimates for the fourth quarter reflect approximately $0.12 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation and the royalties and mitigation expenses associated with the Broadcom patent litigation.

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