SANTA ANA, Calif., Aug. 3, 2010 (GLOBE NEWSWIRE) -- STEC, Inc. (Nasdaq:STEC) announced today the Company's financial results for the second quarter ended June 30, 2010.
Revenue for the second quarter of 2010 was $61.3 million, a decrease of 29.1% from $86.4 million for the second quarter of 2009 and an increase of 58.0% from $38.8 million for the first quarter of 2010.
GAAP gross profit margin was 42.6% for the second quarter of 2010, compared to 50.0% for the second quarter of 2009 and 34.0% for the first quarter of 2010. GAAP diluted earnings per share from continuing operations was $0.06 for the second quarter of 2010, compared to GAAP diluted earnings per share from continuing operations of $0.38 for the second quarter of 2009 and an $0.11 GAAP diluted loss per share from continuing operations for the first quarter of 2010.
Non-GAAP gross profit margin was 42.7% for the second quarter of 2010, compared to 50.1% for the second quarter of 2009 and 34.2% for the first quarter of 2010. Non-GAAP diluted earnings per share from continuing operations was $0.09 for the second quarter of 2010, compared to non-GAAP diluted earnings per share from continuing operations of $0.42 for the second quarter of 2009 and a non-GAAP diluted loss per share from continuing operations of $0.08 for the first quarter of 2010. A reconciliation of GAAP to non-GAAP results is provided in tables included in this release.
Business Outlook
"I am very pleased with our second quarter results," said Manouch Moshayedi, STEC's Chairman and Chief Executive Officer. "After a challenging first quarter, we have rebounded quite well and surpassed our revenue and EPS guidance for the second quarter. As anticipated, the inventory carryover situation at our largest customer was resolved during the second quarter. In addition, we are seeing increased interest in the use of SSDs in Enterprise applications and it is very encouraging to see adoption of SSDs increase not only at our largest customers but also across most other Enterprise-storage customers."
Today, STEC's product roadmap is very strong with a variety of SLC- and MLC-based Zeus and MACH products in development and in qualification at the Company's customers. STEC has remained the sole supplier of enterprise class SSDs to its Enterprise Data Storage customers even though it has been more than three and one-half years since STEC first sold its ZeusIOPS SSD product. STEC's advantage is due in large part to the complexity of the products and the rigorous specifications that Enterprise-storage customers demand. In order to solidify STEC's long-term prospects and competitive position, the Company continues to invest aggressively in R&D.
Mr. Moshayedi continued, "We are also encouraged by a growing number of OEM customers that have launched or are in the process of developing Automated Data Tiering Software solutions. This software optimizes SSD performance in storage systems; a factor which we believe will help enable the transition towards SSD technology on a larger scale. We believe future systems shipped by our customers that include such software will most likely also include SSDs as a standard component of the system."
Guidance
STEC's current expectation for the third quarter of 2010 is as follows:
- Revenue to range from $78 million to $80 million.
- Diluted non-GAAP earnings per share to range from $0.18 to $0.20
STEC's projected non-GAAP earnings per share results exclude employee stock compensation expense and may also exclude other items that the Company does not consider indicative of its underlying business performance.
Conference Call
STEC will hold an open conference call to discuss results for the second quarter 2010. The call will take place today at 1:30 p.m., Pacific/ 4:30 p.m., Eastern. The call-in numbers for the conference are (877) 645-6380 (United States and Canada) and (914) 495-8562 (International).
Webcast
This call will be webcast. The webcast can be accessed by clicking on the red "Investors" tab at the top of the home page at www.stec-inc.com. Then click on the "Audio Presentations" button.
Replay
The webcast will also be archived and available for replay beginning approximately two hours after the live call concludes.
About STEC, Inc. (Nasdaq:STEC)
STEC, Inc. is a leading global provider of solid-state drive technologies and solutions tailored to meet the high-performance, high-reliability needs of original equipment manufacturers (OEMs). With headquarters in Santa Ana, California and locations worldwide, STEC leverages almost two decades of solid-state drive knowledge and experience to deliver the industry's most comprehensive line of solid-state drives to the storage industry.
For information about STEC and to subscribe to the Company's "Email Alerts" service, please visit STEC's web site at www.stec-inc.com, click on the red "Investors" tab at the top of the home page. Then click "Email Alerts."
The STEC, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1079
Use of Non-GAAP Financial Information
To supplement the consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), STEC uses non-GAAP financial measures (non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP income from continuing operations before income taxes, non-GAAP income from continuing operations and non-GAAP diluted earnings per share from continuing operations) that exclude employee stock compensation, employee severance, special charges for restructuring and Malaysia government incentive grant income. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of STEC's financial performance and future prospects by being more reflective of the Company's core, recurring operational activities and to be more comparable with the results of the Company over various periods. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Guidance is provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of such items. Difficulties in forecasting the non-GAAP items include the timing of issuing employee stock compensation, which could impact the valuation and related expense, delays in transitioning operations to our Malaysia facility, which could impact restructuring costs and the timing of receiving incentive grant income from the Malaysian government. These items could be materially significant in the Company's GAAP results in any period. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies' financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in tables included in this release. Certain amounts reported in prior releases may have been reclassified to conform to the current quarter's non-GAAP presentation.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning continued product research and development, future adoption of SSDs within the Enterprise environment, anticipated increased activity from STEC's customers, and expected third quarter 2010 revenue and earnings per share. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. Although STEC believes that the forward-looking statements contained in this release are reasonable, it can give no assurance that its expectations will be fulfilled. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed in filings with the Securities and Exchange Commission made from time to time by STEC, including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K. Special attention is directed to the portions of those documents entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The information contained in this press release is a statement of STEC's present intention, belief or expectation. STEC may change its intention, belief, or expectation, at any time and without notice, based upon any changes in such factors, in STEC's assumptions or otherwise. STEC 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.
| STEC, INC. | ||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (in thousands, except share and per share amounts) | ||||
| June 30, 2010 | December 31, 2009 | |||
| ASSETS: | ||||
| Current Assets: | ||||
| Cash and cash equivalents | $ 142,902 | $ 135,658 | ||
| Short-term investments | 5,000 | 10,000 | ||
|
Accounts receivable, net of allowances of $2,944 at June 30, 2010 and $3,557 at December 31, 2009 |
40,666 | 78,373 | ||
| Inventory | 66,844 | 42,739 | ||
| Other current assets | 5,211 | 2,840 | ||
| Total current assets | 260,623 | 269,610 | ||
| Leasehold interest in land | 2,521 | 2,543 | ||
| Property, plant and equipment, net | 36,237 | 39,911 | ||
| Intangible assets | 179 | 292 | ||
| Goodwill | 1,682 | 1,682 | ||
| Other long-term assets | 4,881 | 5,076 | ||
| Deferred income taxes | 12,768 | 6,448 | ||
| Total assets | $ 318,891 | $ 325,562 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||
| Current Liabilities: | ||||
| Accounts payable | $ 20,840 | $ 29,911 | ||
| Accrued and other liabilities | 11,125 | 14,070 | ||
| Total current liabilities | 31,965 | 43,981 | ||
| Long-term income taxes payable | 3,084 | 2,986 | ||
| Total liabilities | 35,049 | 46,967 | ||
| Commitments and contingencies | -- | -- | ||
| Shareholders' Equity: | ||||
|
Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding |
-- | -- | ||
|
Common stock, $0.001 par value, 100,000,000 shares authorized, 50,765,640 shares issued and outstanding as of June 30, 2010 and 50,284,438 shares issued and outstanding as of December 31, 2009 |
51 | 50 | ||
| Additional paid-in capital | 161,899 | 154,087 | ||
| Retained earnings | 121,892 | 124,458 | ||
| Total shareholders' equity | 283,842 | 278,595 | ||
| Total liabilities and shareholders' equity | $ 318,891 | $ 325,562 | ||
| STEC, INC. | ||||||
| UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS | ||||||
| (in thousands, except per share amounts) | ||||||
| Quarter Ended June 30, | Six Months Ended June 30, | |||||
| 2010 | 2009 | 2010 | 2009 | |||
| Net revenues | $ 61,348 | $ 86,350 | $ 100,157 | $ 149,886 | ||
| Cost of revenues | 35,226 | 43,177 | 60,849 | 83,680 | ||
| Gross profit | 26,122 | 43,173 | 39,308 | 66,206 | ||
| Sales and marketing | 4,807 | 5,031 | 8,603 | 9,803 | ||
| General and administrative | 7,099 | 6,714 | 14,038 | 14,080 | ||
| Research and development | 10,366 | 5,423 | 20,020 | 10,943 | ||
| Special charges | 18 | 1,996 | (48) | 3,173 | ||
| Total operating expenses | 22,290 | 19,164 | 42,613 | 37,999 | ||
| Operating income (loss) | 3,832 | 24,009 | (3,305) | 28,207 | ||
| Other income | 523 | 614 | 389 | 602 | ||
|
Income (loss) from continuing operations before income taxes |
4,355 | 24,623 | (2,916) | 28,809 | ||
| (Provision) benefit for income taxes | (1,418) | (5,260) | 500 | (6,252) | ||
| Income (loss) from continuing operations | 2,937 | 19,363 | (2,416) | 22,557 | ||
| Discontinued operations: | ||||||
| Loss from operations of Consumer Division | (258) | -- | (258) | (356) | ||
| Benefit for income taxes | 108 | -- | 108 | 141 | ||
| Loss from discontinued operations | (150) | -- | (150) | (215) | ||
| Net income (loss) | $ 2,787 | $ 19,363 | $ (2,566) | $ 22,342 | ||
| Net income (loss) per share: | ||||||
| Basic: | ||||||
| Continuing operations | $ 0.06 | $ 0.40 | $ (0.05) | $ 0.46 | ||
| Discontinued operations | -- | -- | -- | -- | ||
| Total | $ 0.06 | $ 0.40 | $ (0.05) | $ 0.46 | ||
| Diluted: | ||||||
| Continuing operations | $ 0.06 | $ 0.38 | $ (0.05) | $ 0.45 | ||
| Discontinued operations | -- | -- | -- | -- | ||
| Total | $ 0.06 | $ 0.38 | $ (0.05) | $ 0.45 | ||
| Shares used in per share computation: | ||||||
| Basic | 50,673 | 48,871 | 50,495 | 48,654 | ||
| Diluted | 51,463 | 50,702 | 50,495 | 49,883 | ||
The non-GAAP financial measures included in the following tables are non-GAAP gross profit, non-GAAP income (loss) from continuing operations and non-GAAP diluted earnings (loss) per share from continuing operations, which adjust for the following items: (a) employee stock compensation expense, (b) employee severance, (c) special charges related to restructuring costs and (d) Malaysia government incentive grant income. Management believes these non-GAAP financial measures enhance an investor's overall understanding of the Company's financial performance and future prospects by being more reflective of the Company's core, recurring operational activities and more comparable with the results of the Company over various periods. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies' financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
The items excluded from GAAP financial results in calculating non-GAAP financial results, are set forth below:
a) Employee stock compensation costs incurred in connection with Accounting Standards Codification 718, "Compensation – Stock Compensation," have been excluded as management omits these expenses when evaluating its core operating activities, for strategic decision making, forecasting future results and evaluating current performance.
b) Employee severance relates to one-time costs incurred related to the termination of certain employees. The Company provides compensation to certain employees as an accommodation upon termination of employment without cause. Management believes that excluding severance costs from operating results provides investors with a better means for measuring current Company performance.
c) Special charges relate to a restructuring plan that the Company implemented during the first quarter of 2009. The Company completed the first phase of the restructuring plan at the end of the first quarter of 2010 and started the second phase of the restructuring plan in the second quarter of 2010. These charges include expenses related to a reduction in our workforce and asset impairment charges. The special charges primarily impacted U.S.-based operations and employees as part of the overall transition of certain operations to the Company's facility in Penang, Malaysia. Management believes that costs incurred in connection with the restructuring plan, which were primarily related to workforce reduction severance costs and consolidation of facilities expenses are non-recurring in nature and should be excluded when evaluating core operations.
d) Malaysia government grant incentive income relates to proceeds received from the Ministry of International Trade and Industry ("MITI") in Malaysia. The grants are provided by MITI as incentive for the Company incurring research and development expenses and employee training costs for its operations in Malaysia. Since the grants represent reimbursement of expenses which were previously included by the Company as a non-GAAP item under Malaysia start-up costs, the Company has reversed the related grant reimbursement income from its second quarter of 2009 and 2010 non-GAAP results.
| STEC, INC. | |||||
| Schedule Reconciling GAAP Income (Loss) From Continuing Operations to Non-GAAP Income (Loss) From Continuing Operations | |||||
| ($ in thousands, except per share amounts) | |||||
| (unaudited) | |||||
| For the Quarters Ended | |||||
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
|||
| GAAP income (loss) from continuing operations | $ 2,937 | $ 19,363 | $ (5,353) | ||
| The non-GAAP amounts have been adjusted to exclude the | |||||
| following items: | |||||
| Excluded from cost of revenues: | |||||
| Employee stock compensation (a) | 101 | 72 | 91 | ||
| 101 | 72 | 91 | |||
| Excluded from operating expenses: | |||||
| Employee stock compensation (a) | 2,078 | 965 | 1,762 | ||
| Employee severance (b) | -- | -- | 84 | ||
| Special charges - restructuring costs (c) | 18 | 1,996 | (66) | ||
| 2,096 | 2,961 | 1,780 | |||
| Excluded from other income: | |||||
| Malaysia government incentive grant income (d) | (328) | (560) | -- | ||
| Total non-GAAP adjustments before income tax | 1,869 | 2,473 | 1,871 | ||
| Income tax effect on non-GAAP adjustments | (384) | (536) | (494) | ||
| Net effect of adjustments to GAAP net income (loss) | 1,485 | 1,937 | 1,377 | ||
| Non-GAAP income (loss) from continuing operations | $ 4,422 | $ 21,300 | $ (3,976) | ||
| GAAP diluted earnings (loss) per share from continuing operations | $ 0.06 | $ 0.38 | $ (0.11) | ||
| Impact of non-GAAP adjustments on diluted earnings (loss) per share | $ 0.03 | $ 0.04 | $ 0.03 | ||
| Non-GAAP diluted earnings (loss) per share from continuing operations | $ 0.09 | $ 0.42 | $ (0.08) | ||
| (a) - (d) See corresponding footnotes above. | |||||
| STEC, INC. | |||||
| Schedule Reconciling Reported Financial Ratios | |||||
| (unaudited) | |||||
| For the Quarters Ended | |||||
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
|||
| GAAP gross profit | 42.6% | 50.0% | 34.0% | ||
| Effect of reconciling item on gross profit | 0.1% | 0.1% | 0.2% | ||
| Non-GAAP gross profit | 42.7% | 50.1% | 34.2% | ||
| STEC, INC. | ||||||
| Selected Non-GAAP Financial Information | ||||||
| ($ in thousands) | ||||||
| (unaudited) | ||||||
| For the Quarters Ended | ||||||
|
June 30, 2010 |
June 30, 2009 |
March 31, 2010 |
||||
| GAAP gross profit | $ 26,122 | $ 43,173 | $ 13,186 | |||
| Employee stock compensation (a) | 101 | 72 | 91 | |||
| Non-GAAP gross profit | $ 26,223 | $ 43,245 | $ 13,277 | |||
| (a) - Refer to the corresponding footnotes above. | ||||||