Xyratex: Fiscal 1Q13 Financial Results

(in US$ million)	1Q12	1Q13
Revenues	295.7	195.6
*Growth*		-34%
Net income (loss)	10.9	(5.1)

Xyratex Ltd announced results for the first fiscal quarter ended February 28, 2013.

Revenues for the first quarter were $195.6 million, a decrease of 34% compared to revenues of $295.7 million for the same period in the prior year.

For the first quarter, GAAP net loss was $5.1 million, or $0.19 per share, compared to GAAP net income of $10.9 million, or $0.38 per diluted share, in the same period last year. Non-GAAP net loss was $3.6 million, or $0.13 per share, compared to non-GAAP net income of $11.4 million, or $0.40 per diluted share, in the same quarter a year ago(1).

Gross profit margin in the first quarter was 18.9%, compared to 17.9% in the same period last year and 14.5% in the prior quarter. The increase from the prior quarter primarily reflects variation in product and customer mix in both its Enterprise Storage Solutions and Capital Equipment business segments.

During the first quarter, the company declared and paid a one-time special dividend and accelerated its quarterly dividend, paying both in December 2012 at a total cost of $56.3 million. The company’s cash balance amounted to $92.8 million at the end of the first quarter compared to $117.2 million at the end of the prior quarter.

The company also announced that its board of directors has approved a quarterly cash dividend of $0.075 per share, unchanged from the prior quarterly dividend. The dividend will be payable on May 2, 2013 to shareholders of record as of the close of business on April 18, 2013. This dividend represents a quarterly payout of approximately $2.1 million in aggregate, or $8.4 million on an annualized basis.

"We had a solid first quarter with revenues above our expectations. We are focused on being responsive to our customers’ requirements and on improving operating efficiencies in both of our business units as we go forward in 2013," said Ernie Sampias, interim CEO of Xyratex.

Business Outlook

Revenue in the second fiscal quarter of 2013 is projected to be in the range of $190 million to $220 million.
Fully diluted earnings per share is anticipated to be between a loss of $0.21 and earnings of $0.03 on a GAAP basis in the second quarter. On a non-GAAP basis, fully diluted earnings per share is anticipated to be between a loss of $0.15 and earnings of $0.09. Non-GAAP earnings per share excludes amortization of intangible assets, equity compensation expense, specified non-recurring items and related taxation expense.

Comments

Abstracts of the earning call transcript:

Richard Charles Pearce,
CFO, GM of Capital Equipment and Director:

"Sales of our Enterprise Data Storage Solutions products in the first quarter were $176.5 million, representing a decrease of $95.5 million or 35% compared to the first quarter of last year and down to 12% compared with $200.1 million in our prior fiscal quarter. The reduction from the prior quarter, as we have discussed previously, primarily reflects the proportional product volume shift as our annually declining contract with our previous largest customer, NetApp.

"Sales of our Capital Equipment products in the first quarter were $19.1 million, down 19% compared to the first quarter of last year and down 71% compared with our prior fiscal quarter. We often experience low revenue in our first quarter due to seasonality in the HDD market. We have experienced a good level of customer orders in the first quarter and expect to record significantly higher revenues in the remaining three quarters of fiscal 2013.

"Storage spending rebounded in the December quarter for the broader storage industry, and we remain optimistic about spending trends through 2013 and beyond.

"We entered this year with an established and growing business with IBM, two major new product programs ramping with HP 3PAR and with the yet to be named new Tier 1 customer, a new and growing relationship with Microsoft and a range of emerging customer partnerships.

"We added six new ClusterStor customers this quarter. And this included our first customer in Asia, a new market for ClusterStor and one where we are seeing increasing opportunities; two new customers within the U.S. government, which is a key segment for us; another large U.S. academic customer; and two new large European research facilities.

"We are in the process of consolidating our North American operations to Mexico from Northern California, and we expect this to be completed by mid-year."