OCZ: Fiscal 2Q14 Financial Results
Revenue at $34 million, net loss at $26 million
This is a Press Release edited by StorageNewsletter.com on October 16, 2013 at 2:51 pm| (in US$ million) | 2Q13 | 2Q14 | 6 mo. 13 | 6 mo. 14 |
| Revenues | 88.6 | 33.5 | 165.1 | 88.8 |
| Growth | -62% | -46% | ||
| Net income (loss) | (33.2) | (26.1) | (57.7) | (39.3) |
OCZ Technology Group, Inc. reports its second quarter (Q2’14) results which ended on August 31, 2013.
“Revenue and gross margins declined in the second quarter as revenue for our client SSD products continued to be impacted by our challenges in procuring flash. Revenue from our enterprise solutions accounted for roughly half of our SSD revenue, compared to about 60% in the first quarter, as a major data center customer completed its installation during the quarter,” said Ralph Schmitt, CEO, OCZ. “This has been a difficult quarter as demand for our products continues to be greater than our ability to supply, given our capital constraints.”
“Over the course of the quarter we continued to add strategic channel partners that help extend the reach of both our high-end client products and enterprise solutions worldwide. During the second fiscal quarter we also announced the availability of our PCIe-based ZD-XL SQL accelerator which is a new way for OCZ to go to market with a total solution consisting of both our enterprise solid state storage and virtualization software. This innovative product is primarily targeted at our channel partners and offers an optimized plug-and-play storage system solution for enterprise customers,” added Schmitt.
Revenue for the second quarter of 2014 was $33.5 million compared to revenue of $55.3 million for the first quarter of 2014 and revenue of $88.6 million for the second quarter of 2013.
Gross margin for the second quarter of 2014 was 4.2% compared to a gross margin of 14.7% for the first quarter of 2014 and a gross margin loss of (4.6%) for the second quarter of 2013. Gross margins declined on a sequential basis primarily due to increased costs and decreasing sales prices in our mainstream client business. Enterprise margins remained consistent in the quarter.
Operating expenses for the second quarter of 2014 were $20.5 million, compared to operating expenses of $19.7 million for the first quarter of 2014 and operating expenses of $26.6 million for the second quarter of 2013. Operating expenses for the second quarter of 2014 include restatement related expenses of $3.4 million compared to $1.7 million in the first quarter of 2014.
Cash and cash equivalents at the end of second quarter of 2014 were $10.6 million compared to $5.0 million at the end of the first quarter of 2014. The increase in cash primarily reflects the issuance of $13.1 million of convertible debentures partially offset by cash used to finance our on-going operations.
2Q14 Highlights:
- Announced the availability of the ZD-XL SQL Accelerator, an integrated hardware/software storage solution that accelerates and optimizes SQL Server database applications in enterprise environments
- Expanded the partnership with SED International, a multinational distributor of computer technology products. SED is now authorized to distribute OCZ’s complete portfolio of SSDs and power supply products throughout the U.S. region
- Raised $13.1 million in a private placement
- Announced partnership with TechData and its complete portfolio of enterprise and high-end client solid state storage solutions are now distributed by Tech Data in North America and Latin America
- Signed Joint Harvest to distribute its complete portfolio of solid state drives and power supplies in China
- Announced an agreement in principle to settle the shareholder derivative litigation
Subsequent Highlights:
- Announced an agreement in principle to settle the consolidated shareholder class action litigation
- Unveiled the upcoming Aeon Series 3.5″ SSD, a Non-Volatile Memory (NVM) SAS drive targeted to meet the stringent requirements of latency sensitive applications currently being mired by legacy HDD infrastructures
- Unveiled the upcoming smaller form factor Z-Drive R4 PCIe 4500 SSD Series which supports the Open Compute Project
- Introduced enterprise SATA III SSDs based on 19nm NAND flash process geometry to the popular Deneva 2 Series. These new Deneva 2 models deliver improved features and superior TCO) for enterprise customers
Business Outlook and Commentary:
“Due to uncertainties in being able to procure forecasted flash amounts and credit constraints, we will not be providing guidance for the fiscal third quarter of 2014, ending November 30, 2013. It is our belief that at this point we cannot accurately predict the outcome of our efforts to resolve these issues,” stated Schmitt. “We continue to engage with interested parties in the various strategic options available to the company, including additional financing initiatives and strategic alternatives and plan on providing an update to discuss progress regarding flash availability, credit, and our strategic activities when appropriate.”
Comments
Abstracts the earnings call transcript: Ralph Schmitt, CEO: "During this quarter we were still struggling to secure flash allocation and certain of our vendors started restricting our credit limits. This primarily affected our client business as we were unable to get enough products and the flash we did procure was at uncompetitive prices. "Our enterprise business has not been material impacted by the flash availability. The revenues for the second quarter of 2014 was $33.5 million, down 39% sequentially compared to revenue of $55.3 million for the first quarter of 2014, primarily due to the previously mentioned issues surrounding our client business. "As flash has become more readily available in the market, the pricing environment in the client business has also become more challenging which is impacting our ability to compete based on our costs. Our enterprise business also declined, but still accounted for half of our SSD revenues. "This decline was primarily due to the completion of a datacenter installation with one of our major customers. The rest of our enterprise business through the channel grew in the quarter as we continue to get further traction with our products. "Taking a look at the second quarter revenue by geographies based on shipping destination. The U.S. accounted for 55% of the total versus 64% in Q1. EMEA was 35% of revenue versus 22% in Q1 and the rest of the world was 10% compared to 14% in Q1. "We had only one greater 10% customer which is our largest international distributor. "On the client side, we are not sitting still either, looking for new ways to engage in the market in a profitable manner. We’ve closed on an OEM arrangement in order to enable a large consumer product company to enter a portion of the client SSD market. More details on this and other opportunities in this market are going to be coming out in the coming months. "Our volume is still dominated by SATA. Again, rough numbers, I don’t have exact numbers in front of me. Seems like I have every breakout, but that breakout, it’s about 70% SATA and then split evenly 15% and 15% between SAS and PCIe." Rafael Torres, CFO: "We had a higher allocation of labor and overhead cost associated with our Taiwan manufacturing facility as shipments in revenues declined; margins are impacted as manufacturing costs are absorbed by fewer unit volumes."
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