Emulex: Fiscal 4Q12 Financial Results

Emulex Corporation announced preliminary results for its fourth quarter and full fiscal year 2012, which ended on July 1, 2012.

Fiscal 2012 Financial Highlights

• Record net revenues of $501.8 million, an increase of 11% year-over-year
• Net revenues for our 10GbE-based products increased over 70% year-over-year
• Repurchased $20 million of common shares during the first quarter of fiscal 2012
• Cash and investments increased $46.6 million to $229.9 million

Fourth Quarter Financial Highlights

• Net revenues of $129.0 million, an increase of 5% year-over-year
• Net revenues of 10GbE-based products grew more than 25% year-over-year
• Network Connectivity Products (NCP) net revenues of $88.0 million, or 68% of net revenues
• Storage Connectivity Products (SCP) net revenues of $32.8 million, or 26% of net revenues
• Advanced Technology and Other Products (ATP) net revenues of $8.2 million, or 6% of net revenues
• GAAP gross margins of 30% and non-GAAP gross margins of 64%
• GAAP operating loss of $25.5 million, or 20% of total net revenues, and non-GAAP operating income of $26.5 million, or 21% of total net revenues
• GAAP net loss of $28.8 million and non-GAAP net income of $23.2 million
• GAAP loss per share of $0.33 and non-GAAP diluted earnings per share of $0.26

Fourth Quarter Business Highlights

• Announced LightPulse 16GFC HBA design wins with Dell for a broad range of Dell servers, storage and switches
• Announced LightPulse 16GFC HBA design wins with EMC Select for use with EMC storage arrays
• Introduced OneConnect (OC)e12000 Network Xceleration family of 10GbE High Performance Networking (HPN) solutions that provide performance for financial trading, cyber/network security, video streaming and digital content delivery, in partnership with Myricom
• Announced OneConnect 10GbE Network Xceleration solution with FastStack Sniffer10G increased system security for the latest release of the Open Information Security Foundation (OISF) open source Suricata engine and that Emulex is now an OISF Consortium member
• Joined the Network Intelligence (NI) Alliance, an organization created for collaboration around next-generation network intelligence solutions, including Emulex OneConnect Network Xceleration HPN solutions
• Named to CRN’s 2012 Virtualization 100 list, an annual list published by UBM Channel’s CRN that helps Solution Providers identify and evaluate virtualization products and programs
• Recognized as ‘perfect quality supplier of the year’ by Lenovo, an honor among Lenovo’s server and storage providers, for providing quality products and making contributions in achieving customer satisfaction
• Appointed Beatriz Infante to the Emulex board of directors

Preliminary Financial Results
In the fourth quarter, total net revenues increased 5% from the comparable quarter of last year, and 3% sequentially reaching $129.0 million. On a GAAP basis, Emulex recorded a net loss of $28.8 million, or $0.33 per share, compared to a GAAP net loss of $15.7 million, or $0.18 per share, in Q4 of fiscal 2011. The fourth quarter preliminary results include a charge of $38.5 million related to the partial patent litigation settlement. Non-GAAP net income for the fourth quarter was $23.2 million, or $0.26 per diluted share, representing a 62% increase from $14.4 million in the comparable quarter of the prior fiscal year.

CEO Jim McCluney commented: "2012 was our second consecutive year delivering double digit top line revenue growth. I’m proud of our team’s execution to meet our corporate objective of record revenues for the year, exceeding $500 million for the first time in our more than 30 year history."

"It’s great to have so many OEMs now in production with our 16GFC technology, solidifying our time-to-market advantage over our nearest Fibre Channel competitor. With these wins and the momentum we have in the x86 market, we are well positioned to gain overall market share during the 16GFC transition, which is expected to account for 30% of all HBA port shipments in calendar 20131," McCluney concluded.

Business Outlook
Although actual results may vary depending on a variety of factors, many of which are outside the company’s control, including uncertainty related to the macro IT spending environment, the timing of new server launches by our customers, and the results and related costs of ongoing patent litigation, Emulex is providing guidance for its first fiscal quarter ending September 30, 2012. For the first quarter of fiscal 2013, Emulex is forecasting total net revenues in the range of $118-$122 million. The company expects non-GAAP earnings per diluted share of $0.14-$0.16 in the first quarter. GAAP estimates for the first quarter reflect approximately $0.13 per diluted share in expected charges arising primarily from amortization of intangibles, stock-based compensation and the royalties, mitigation expenses and license fees associated with the Broadcom patent litigation. First quarter results will reflect the payment of the $58 million partial patent litigation settlement. Of this settlement, $38.5 million was charged to the fourth quarter of 2012 and the balance will be amortized over the term of the license.