SANTA ANA, Calif., Nov. 1, 2004 (PRIMEZONE) -- SimpleTech, Inc. (Nasdaq:STEC), a designer, manufacturer and marketer of custom and open-standard memory solutions based on Flash memory and DRAM technologies, today announced its financial results for the third quarter and the nine months ended September 30, 2004.
During the third quarter of 2004, SimpleTech achieved the
following financial results:
-- Increased revenue by 33% to $75.0 million from $56.5 million
in the prior quarter;
-- Expanded gross margin to 17.9% from 14.6% in the prior
quarter;
-- Increased stacking memory revenue to $33.9 million from
$17.2 million in the prior quarter;
-- Improved operating leverage leading to an increase in
operating margin to 6.4% from 1.8% in the prior quarter;
-- Improved quarterly inventory turn days to 38 days from 60
days in the prior quarter; and
-- Improved quarterly accounts receivable turn days to 37 days
from 45 days in the prior quarter.
Revenues for the third quarter of 2004 were $75.0 million, an increase of 33% from $56.5 million for the second quarter of 2004, and an increase of 30% from $57.5 million for the third quarter of 2003. Gross margin increased from 14.6% in the second quarter of 2004 to 17.9% in the third quarter of 2004, due primarily to improved inventory turns, greater absorption of manufacturing costs and greater access to competitively priced components during the third quarter of 2004 compared to the second quarter of 2004.
Income per diluted share for the third quarter of 2004 was $0.06, compared to income per diluted share from continuing operations of $0.02 for the second quarter of 2004 and $0.04 for the third quarter of 2003. Cash, cash equivalents and short-term marketable securities remained relatively flat at $75.6 million at September 30, 2004 compared to $77.8 million at June 30, 2004. Order backlog increased from $11.0 million at June 30, 2004 to $13.0 million at September 30, 2004. During the third quarter of 2004, the Company repurchased 749,309 shares of common stock under its previously announced stock repurchase program at an average price, including commissions, of $3.56 per share.
Business Segments
Consumer and OEM Divisions
Revenues from Consumer Division customers comprised 48% of total revenues in the third quarter of 2004 compared to 58% in the second quarter of 2004. Revenues from OEM Division customers comprised 52% of total revenues in the third quarter of 2004 compared to 42% in the second quarter of 2004. The increase in OEM Division revenues resulted primarily from growth in the OEM stacking memory business. The OEM Division's stacking memory business nearly doubled in the third quarter of 2004 due to greater customer demand and market share gains at existing customers in the server and telecom sectors.
Business Outlook
"The initiatives we commenced in the second quarter of 2004 to streamline our operating expenses, coupled with significant market share gains in our stacking memory business, led to greater profitability in the third quarter of 2004," said Manouch Moshayedi, Chief Executive Officer of SimpleTech. "We believe that we have navigated our company into a position of strength and our outlook for the remainder of 2004 and 2005 is bright.
"We believe that changing industry dynamics will also bode well for the future growth and profitability of our business. In the past year, the NAND Flash market dynamics have been very challenging, evidenced by periods of component shortages and periods of aggressive retail price cutting. We have yet to fully realize the benefit of the emergence of new NAND Flash semiconductor providers who are expected to broaden our supply base. As new supply of NAND Flash chips comes on line in the next several quarters, we expect to benefit from improved access to competitively-priced components enabling us to target additional NAND Flash market opportunities.
"The DRAM industry continues to experience relative price stability and the outlook for 2005 from DRAM chip manufacturers continues to be positive. In the past five quarters, we have experienced a significant increase in demand for our stacking memory products from customers in the networking and server market sectors. Our high-capacity stacking memory products are used by our customers in their high-end switching equipment and enterprise servers where maximizing memory content in the device is a priority.
"I am also very pleased that we are able to report to you execution on some of the goals that we discussed in recent quarters, namely, increased revenues, expanded gross margin, and of course, increased profitability. Our third quarter 2004 revenues increased by approximately 33% over the prior quarter. Such significant top line growth often results in a net usage of cash due to increased working capital requirements, however, our cash position stayed relatively stable at approximately $76 million. Our inventory position was also relatively stable at approximately $26 million at the end of the third quarter of 2004.
"After growing revenues by more than 30% sequentially in the third quarter of 2004, we believe we will be able to maintain our market share gains achieved with our customers. We expect our revenues for the fourth quarter of 2004 to increase to a range from $76 million to $78 million. We expect diluted earnings per share for the fourth quarter of 2004 to a range from $0.06 to $0.07."
Conference Call
SimpleTech, Inc. will hold an open conference call to discuss results for the third quarter of 2004. The call will take place today at 2:00 p.m., Pacific/5:00 p.m., Eastern. The call-in numbers for the conference are 1-800-781-3662 (United States and Canada) and 1-706-643-7710 (International).
Webcast
This call is being webcast by CCBN and can be accessed at www.simpletech.com, then click on "Investors Relations."
About SimpleTech, Inc. (Nasdaq:STEC)
SimpleTech, Inc., designs, manufactures and markets custom and open-standard memory solutions based on Flash and DRAM memory technologies. Headquartered in Santa Ana, California, the company offers a comprehensive line of over 2,500 products and specializes in developing high-density memory modules, memory cards and storage drives. For information about SimpleTech, Inc., and to subscribe to the company's "Email Alert" service, please visit our web site at www.simpletech.com, click "Investor Relations" and then Email Alert.
Safe Harbor
This release may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning our enthusiasm about our outlook for the remainder of 2004 and 2005, expected future growth and profitability due to changing industry dynamics, expected benefits to our business and broaden supply base due to the emergence of new NAND Flash semiconductor providers, ability to benefit from improved access to competitively-priced components that will enable us to target additional NAND Flash market opportunities, positive outlook for 2005 from DRAM chip manufacturers; our ability to maintain market share gains, and revenue and earnings per share guidance for the fourth quarter of 2004. Actual results may differ materially from the results predicted. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under "Risk Factors" in filings with the Securities and Exchange Commission made from time to time by SimpleTech, including its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. Other factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include the following risks: the cost of raw materials may fluctuate widely in the future, the emergence of new NAND Flash semiconductor providers may not result in better access to competitively-priced components or allow us to target additional market opportunities, excess availability of DRAM or Flash memory could reduce component pricing resulting in lower average selling prices and gross profit, DRAM or Flash memory supply may tighten requiring suppliers to place their customers, including us, on limited component allocation, any interruption of or delay in supply from any of the semiconductor manufacturing facilities that supply products to us, higher than expected operating expenses, new and changing technologies may limit the applications of our products, our inability to become more competitive in new and existing markets, our inability to maintain and increase market share, difficulty competing in sectors characterized by aggressive pricing and low margins, higher than anticipated product returns, inventory write-downs, price protection and rebate charges, new customer and supplier relationships may not be implemented successfully and we may not repurchase any additional shares under our previously announced stock repurchase plan. SimpleTech undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
The SimpleTech company logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1079
SimpleTech, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
2004 2003
-------- --------
ASSETS:
Current Assets:
Cash, cash equivalents and
marketable securities $ 75,642 $ 76,394
Accounts receivable, net of
allowances of $1,157 at September
30, 2004 and $1,129 at December 31,
2003 36,432 33,036
Inventory, net 26,495 26,704
Deferred income taxes 2,582 1,087
Other current assets 1,238 2,236
-------- --------
Total current assets 142,389 139,457
Furniture, fixtures and equipment,
net 6,718 9,263
Intangible assets 393 372
Deferred income taxes 3,527 4,577
-------- --------
Total assets $153,027 $153,669
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 20,782 $ 20,388
Accrued and other liabilities 4,206 4,957
-------- --------
Total liabilities 24,988 25,345
Shareholders' Equity:
Common stock 47 48
Additional paid-in capital 120,995 122,777
Retained earnings 6,997 5,499
-------- --------
Total shareholders' equity 128,039 128,324
-------- --------
Total liabilities and shareholders'
equity $153,027 $153,669
======== ========
SimpleTech, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
---- ---- ---- ----
Revised - Revised -
--------- ---------
Note 1 Note 1
------ ------
Net revenues $ 75,016 $ 57,470 $197,815 $143,133
Cost of revenues 61,565 47,655 164,579 118,522
-------- -------- -------- --------
Gross profit 13,451 9,815 33,236 24,611
-------- -------- -------- --------
Sales and marketing 4,979 4,144 14,174 13,602
General and
administrative 2,460 2,567 7,537 7,117
Research and
development 1,192 613 3,005 1,812
-------- -------- -------- --------
Total operating
expenses 8,631 7,324 24,716 22,531
-------- -------- -------- --------
Operating income 4,820 2,491 8,520 2,080
Interest and other, net 291 100 692 376
-------- -------- -------- --------
Income (loss) from
continuing operations
before provision
(benefit) for income
taxes 5,111 2,591 9,212 2,456
Provision (benefit) for
income taxes 2,038 896 3,613 672
-------- -------- -------- --------
Income from continuing
operations $ 3,073 $ 1,695 $ 5,599 $ 1,784
========
Loss from discontinued
operations before
benefit for income
taxes (2,152) (7,115) (6,084)
Benefit for income
taxes (855) (3,013) (2,398)
-------- -------- --------
Loss from discontinued
operations $ (1,297) $ (4,102) $ (3,686)
-------- -------- --------
Net (loss) income $ 398 $ 1,497 $ (1,902)
======== ======== ========
Net income (loss) per
share:
Basic:
Continuing operations $ 0.06 $ 0.04 $ 0.12 $ 0.05
Discontinued operations $ -- $ (0.03) $ (0.09) $ (0.10)
-------- -------- -------- --------
Total $ 0.06 $ 0.01 $ 0.03 $ (0.05)
======== ======== ======== ========
Diluted:
Continuing operations $ 0.06 $ 0.04 $ 0.11 $ 0.04
Discontinued operations $ -- $ (0.03) $ (0.08) $ (0.09)
-------- -------- -------- --------
Total $ 0.06 $ 0.01 $ 0.03 $ (0.05)
======== ======== ======== ========
Shares used in
computation of net
income (loss) per share:
Basic 47,712 38,978 47,816 38,909
======== ======== ======== ========
Diluted 48,730 42,015 49,609 40,534
======== ======== ======== ========
Note 1 -- We revised our previously issued consolidated
financial statements for the quarter and nine months
ended September 30, 2003. In the quarter ended
Septermber 30, 2003, the revision had no impact on
revenues or gross profit, decreased operating expenses
by $106,000 and increased increased net income by
$65,000. In the nine months ended September 30, 2003,
the revision had no impact on revenues, increased gross
profit by $141,000, decreased operating expenses by
$344,000 and reduced net loss by $290,000. For details
regarding the revision, see Note 2 to our Consolidated
Financial Statements in our 2003 Form 10-K, which was
filed with the SEC on March 31, 2004.