OCZ: Preliminary Fiscal 1Q14 Financials Results

OCZ Technology Group, Inc. announces selected preliminary financial results for the first quarter ended May 31, 2013, subject to customary closing and audit procedures.

Preliminary revenue for the first quarter of fiscal 2014 is estimated to be between $50 and $55 million. The sequential decrease in revenue was primarily due to the continued tight supply of NAND flash. The company’s revenue mix continued to shift towards the mainstream and higher-end client markets, as well as enterprise and OEM solutions as the company continued to focus on these end markets. At the end of the quarter there was an additional $23 million of shippable backlog that was unrealized in the quarter due to supply constraints.

Gross margin continued to improve and is estimated to be between 17% and 20% for the first fiscal quarter as revenue generated from enterprise solutions increased sequentially. The company continued to reduce its operating expenses by further reducing non critical spending. The company’s break-even level continues to improve due to these actions.

Operating expenses for the first quarter are estimated to be between $20 and $22 million, which include restatement related expenses of approximately $1.5 million and stock compensation charges of approximately $2 million. Cash flow improved as we reduced our quarterly cash usage to approximately $6 million in the quarter. Cash ended the quarter between $6 and $7 million with total debt outstanding of $10 million. The company expects that it will require access to additional capital which it is currently in the process of securing.

"The results for our first quarter of fiscal 2014 reflects the company’s strategy to focus on strategic market opportunities where we add value and offer differentiated solutions for our customers," stated Ralph Schmitt, CEO, OCZ, "We had record enterprise sales during the quarter which were greater than $25 million of our overall sales. We continue to build our pipeline of opportunities in this focus market. We also introduced our first appliance based product called ZD-XL. This total solution takes advantage of all the company’s hardware and software IP and offers an innovative and easy to deploy system solution to our customers."

Balance sheet improved as OCZ continues to drive down inventory levels to $35 to $40 million and channel inventory remained lean which ended the quarter below $20 million.

"We expect to continue to experience supply constraints of NAND in the second quarter but have established strong supply commitments to adequately meet demand in the third and fourth quarters," continued Schmitt. "Our goal remains to break even in this fiscal year."

Over first quarter, the company introduced three key products beginning with Version 1.3 of its VXL Cache and Virtualization Software at the CeBit Show in Hannover, Germany in March 2013. This new software release works in conjunction with the Z-Drive R4 PCIe SSD Series to further evolve the solution’s synchronous data mirroring capabilities and automatic server failover mechanisms to enable ‘SAN-less,’ highly available, fault tolerant environments based entirely on virtualized host flash. Additionally, VXL 1.3 features an automatic cache warm-up scheduler that allows critical data to be pre-loaded in Z-Drive R4 SSD flash cache to ensure that this important data is available at the precise time that the application needs it.

In April 2013, new ZD-XL SQL Accelerator became a finalist for the Best of Interop award in the Data Center & Storage category, and in May 2013, at the show in Las Vegas, earned the prestigious award. The product is a plug-and-play, integrated hardware/software enterprise solution that accelerates SQL Server database performance by up to 25x, and provides simple best practice wizards for quick and easy deployment. SQL Server OLTP and OLAP workloads benefit from accelerated flash performance via caching policies that ensure high hit ratios for the most relevant SQL data. This cache mechanism also employs pre-warming cache logic which loads critical data to cache in advance of SQL I/O access to it. The tight integration of flash hardware, acceleration software, firmware and driver delivers an immediate performance boost, reduced TCO and improved productivity for customers.

Also in May 2013, OCZ released its Vertex 450 SATA III SSD Series featuring the proprietary Barefoot 3 M10 Series controller. Replacing 25nm-based Vertex 4 SSDs, the Vertex 450 uses 20nm NAND flash process geometry to deliver superior, cost-effective solid-state storage and features for mainstream client computing applications. The powerful and feature-rich Barefoot 3 M10 controller was designed in-house by OCZ and delivers high-speed sequential transfers and consistent sustained performance over time regardless of whether the file formats are compressed or uncompressed resulting in faster file transfers, boot-ups and a more responsive storage experience. An advanced suite of flash management tools that analyze and dynamically adapt to NAND flash cell wear to heighten data integrity over the long term is also included. The Vertex 450 has been positively reviewed and also recently showcased at the Computex Show/Taiwan in June 2013.

Over this first quarter, OCZ also announced technological developments with key enterprise vendors that included Mellanox Technologies, Ltd., NETGEAR, Inc. and Accusys Inc.

The Mellanox collaboration includes a Mellanox ConnectX-3 EN, 40 GbE NIC that works in conjunction with ZD-XL SQL Accelerator to deliver high-speed data replication and HA services of SQL Server installations through Microsoft AlwaysOn capabilities.

OCZ’s 100GB capacity enterprise Deneva 2 SATA III-based SSDs were qualified on NETGEAR ReadyDATA 516, 6-bay desktop NAS devices designed specifically for SMBs that do not utilize a data center or for branch offices requiring powerful on-site storage capabilities. Deneva 2 SSDs help deliver complete ‘data center storage in a box’ functionality in a simplified design at a price that is cost-effective for small business sites.

Enterprise Deneva 2 SSDs supporting 480GB storage capacities were also qualified for the Accusys ExaSAN 8-bay RAID system and the second qualification of Deneva 2 SSDs for this platform. The ExaSAN B08S2-P2 RAID storage system is a cost-effective, high-performance, small form factor DAS solution that is pre-installed to support up to eight Deneva 2 SSDs (either 240GB or 480GB capacities). With Deneva 2 SSDs implemented, terabytes of storage capacity are available for demanding high definition editing applications as large 2K or 4K files can be stored easily while delivering file copies, migrations and transfers at high-speed.