Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today
announced financial results for the third quarter ended September
30, 2012. Revenue for the quarter was $35.7 million compared to
$36.7 million in the prior year period. The Company reported a net
loss for the quarter of ($5.2 million) or ($0.14) diluted loss per
share compared to a net loss of ($12.2 million) or ($0.35) per
share in the third quarter of 2011.
Revenue for the nine-month period ended September 30, 2012 was
$232.2 million compared with $144.5 million in the prior year
period. Net income was $147.2 million or $3.92 diluted income per
share for the first nine months of 2012 compared to a net loss of
($16.7 million) or ($0.48) per share in the prior year period.
Excluding the $139.1 million pre-tax gain from a development
program divestiture to Intel in the second quarter of 2012,
operating income for the first nine months of 2012 was $12.8
million, compared to an operating loss of ($16.1 million) in the
prior year period.
The first nine months of 2012 operating results included
non-cash costs of $6.1 million for depreciation and amortization
and $4.2 million related to stock compensation expense.
Total gross profit margin for the third quarter of 2012 was 48%
compared to 44% for the third quarter of 2011. For the third
quarter of 2012, product margin was 43% and service margin was
54%.
Operating expenses for the third quarter of 2012 were $25.3
million compared to $28.6 million in the prior year period. The
third quarter of 2012 results also included non-cash costs of $2.0
million for depreciation and amortization and $1.8 million for
stock compensation expense. Gross margins and operating expenses
benefited from a partial reduction of the Company's year-to-date
incentive-based compensation accrual.
As of September 30, 2012, cash and investments totaled $283
million compared to $223 million as of June 30, 2012.
Separately today, the Company announced it signed a definitive
agreement to acquire Appro International, Inc., a leading provider
of cluster solutions in the high performance computing market, for
approximately $25 million in cash, which assumes at least a $3.5
million net working capital balance at closing, with no debt. The
transaction is expected to close relatively soon, possibly in the
next few days or weeks, subject to customary closing
conditions.
"We made good progress on our strategic roadmap in the third
quarter, highlighted by several significant wins around the world
for our new Cray XC30 supercomputer, previously called Cascade,
which we launched yesterday," said Peter Ungaro, president and CEO
of Cray. "We are also very excited by the opportunities created
with our planned acquisition of Appro. When taken together with our
three growth initiatives which continue to make solid gains in the
market, we are building a broad portfolio of offerings across the
HPC and Big Data markets, providing us with multiple high growth
opportunities."
Ungaro added, "We recently achieved a major milestone by
completing installation and beginning the acceptance process at
both the University of Illinois for their Blue Waters supercomputer
and at Oak Ridge National Laboratory for their Titan system -- both
are central to our 2012 outlook. While we still have a lot of work
left to do in order to get these systems fully accepted, it is
exciting to have installed two of the largest supercomputers on the
planet. With continued progress we are positioned to deliver very
strong results for the year."
Outlook
A wide range of results remains possible for 2012. While many
variables may impact our results, the most significant is the
timing of the acceptances of the Blue Waters and Titan
supercomputers, which together could represent roughly $180 million
in product revenue. These are two of the largest systems we have
ever built and both are on tight timelines due to previous delays
of third-party components. Assuming acceptance of these systems
occurs in 2012, as currently planned, we anticipate total revenue
to be in the range of $450 million for the year.
For 2012, overall gross margins are anticipated to be in the 35%
range and total operating expenses are expected to be about $120
million. Based on this outlook, we expect to be solidly profitable
for 2012, independent of the $139 million pre-tax gain on the
development program divestiture that occurred during the second
quarter.
The impact of the planned acquisition of Appro is not included
in our 2012 outlook as the transaction is not yet closed.
The Company's 2012 effective income tax rate is currently
projected to be about 5-8%, but is dependent on a number of
variables.
For 2013, while it is very early in the annual budgeting cycle,
based on the current outlook for 2012 and assuming successful
completion of the Appro acquisition in 2012 as planned, we expect
revenue to grow slightly as compared to 2012. Gross margins for
2013 are anticipated to be in the mid-30% range. Total operating
expenses for 2013 are anticipated to increase significantly
year-over-year due to increased investments in our storage and big
data initiatives, completion of our DARPA program, annual
compensation increases, as well as the Appro acquisition. The
acquisition is expected to contribute at least $60 million in
revenue and add about $15 million in operating expenses in 2013
(excluding potential purchase cost adjustments). Based on this
outlook, we expect to be profitable for 2013.
The Company's 2013 effective income tax rate is currently
projected to be about 40% but is dependent on a number of
variables. Due to the Company's substantial net operating loss
carryforwards, the quarterly and annual income tax provision is
expected to be largely non-cash.
Actual results for any future period are subject to large
fluctuations given the nature of Cray's business.
Recent Highlights
- Today, November 9, Cray announced plans to acquire Appro
International.
- In November, Cray formally launched its next generation
high-end system, the Cray XC30 supercomputer, previously code-named
"Cascade". Cray has signed more than $100 million in contracts for
this new system to be installed at sites around the world.
- In November, YarcData, Cray's subsidiary in Big Data graph
analytics, announced two new contracts for uRiKA graph appliances.
Oak Ridge will use a uRiKA graph appliance in a healthcare fraud
detection program, and Pittsburgh Supercomputing Center recently
deployed a uRiKA system called "Sherlock" to be used in a wide
range of scientific research projects, including gene biology,
social network analysis and cybersecurity. During the third
quarter, YarcData launched the uRiKA Fall 2012 Release, adding
substantial new standards-based capabilities that reduce uRiKA's
"time-to-production" with new features that enhance uRiKA's
ease-of-use and ability to manage the graph analytics appliance
within the enterprise.
- In November, Cray announced that the Cray XE6 and Cray XE6m
supercomputers are now available with the new AMD Opteron 6300
Series processor, using AMD's next-generation "Piledriver"
core.
- In October, Cray launched a new series of production hybrid
supercomputers -- the Cray XK7 system -- in conjunction with the
debut of the Cray XK7 supercomputer nicknamed "Titan" located at
Oak Ridge. Titan is capable of more than 20 petaflops and is the
world's most powerful supercomputer for open science.
- In October, through an agreement with SystemFabricWorks, Cray
expanded its storage and data management team with the addition of
key individuals from SystemFabricWorks, a recognized leader in
storage interconnect solutions and software. As part of the Blue
Waters supercomputer, Cray recently installed a 36-cabinet, 25
petabyte Sonexion storage system which is expected to deliver more
than one terabyte-per-second of I/O bandwidth performance to more
than 25,000 compute nodes.
- In October, Cray announced that Indiana University plans to
replace its largest supercomputer system with a next generation
Cray XK supercomputer. Once installed, the system named Big Red II
is expected to be the fastest university-owned supercomputer in the
U.S.
- In September, Cray was awarded a contract to provide the Swiss
National Supercomputing Centre with a 750 teraflop Cray XC30
supercomputer and a next-generation Cray Sonexion storage
system.
- In August, Cray was awarded a contract to install a Cray XE6m
at the University of Miami which will be used to study hydrocarbon
research in the Gulf of Mexico in the wake of the Deepwater Horizon
incident and Hurricane Isaac.
- In August, Cray announced it would add NVIDIA Kepler GPUs to
its new Cray XC30 supercomputer. This future functionality comes in
addition to Cray's previously disclosed future support of Intel's
Xeon Phi coprocessor.
Conference Call Information
Cray will host a conference call today, Friday, Nov. 9, 2012 at
5:00 a.m. PST (8:00 a.m. EST) to discuss its third quarter 2012
financial results. To access the call, please dial into the
conference at least 10 minutes prior to the beginning of the call
at 1- 855-894-4205 and provide the conference ID #65020258. To
listen to the audio webcast, go to the Investors section of the
Cray website at http://investors.cray.com.
If you are unable to attend the live conference call, an audio
webcast replay will be available in the Investors section of the
Cray website for 180 days. For those without Internet access, a
replay of the conference call will also be available by dialing
(855) 859-2056, and entering the conference ID #65020258. The
conference call replay will be available for 72 hours, beginning at
8:00 a.m. PST (11:00 a.m. EST) on Friday, Nov. 9, 2012.
About Cray Inc.
As a global leader in supercomputing, Cray provides highly
advanced supercomputers and world-class services and support to
government, industry and academia. Cray technology is designed to
enable scientists and engineers to achieve remarkable breakthroughs
by accelerating performance, improving efficiency and extending the
capabilities of their most demanding applications. Cray's Adaptive
Supercomputing vision is focused on delivering innovative
next-generation products that integrate diverse processing
technologies into a unified architecture, allowing customers to
surpass today's limitations and meeting the market's continued
demand for realized performance. Go to www.cray.com for more
information.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934
and Section 27A of the Securities Act of 1933, including, but not
limited to, statements related to Cray's financial guidance and
expected future operating results, Cray's planned customer
acceptances, the expected timing and consummation of the
acquisition of Appro, the expected benefits of the potential
acquisition of Appro and Cray's product delivery and product
development plans. These statements involve current expectations,
forecasts of future events and other statements that are not
historical facts. Inaccurate assumptions as well as known and
unknown risks and uncertainties can affect the accuracy of
forward-looking statements and cause actual results to differ
materially from those anticipated by these forward-looking
statements. Factors that could affect actual future events or
results include, but are not limited to, the risk that Cray does
not achieve the operational or financial results that it expects,
the risk that customer acceptances, particularly the planned
customer acceptances that would represent approximately $180
million in product revenue, are not received in 2012 as expected or
at all, the risk that the acquisition of Appro is not consummated
when expected, or at all, the risk that Cray is not able to realize
the expected benefits of the acquisition of Appro, the risk that
the systems ordered by customers are not delivered when expected or
do not perform as expected once delivered, the risk that Cray is
not able to successfully complete its planned product development
efforts, including those related to its Cray XC30 supercomputer,
within the planned timeframes or at all, the risk that Cray's
growth initiatives are not successful, the risk that Cray is not
able to achieve anticipated gross margin or expense levels, and
such other risks as identified in the Company's quarterly report on
Form 10-Q for the period ended September 30, 2012, and from time to
time in other reports filed by Cray with the U.S. Securities and
Exchange Commission. You should not rely unduly on these
forward-looking statements, which apply only as of the date of this
release. Cray undertakes no duty to publicly announce or report
revisions to these statements as new information becomes available
that may change the Company's expectations.
Cray is a registered trademark of Cray Inc. in the United States
and other countries and Cray XC30, Cascade, uRiKA, Cray XE6, Cray
XE6m, Cray XK7, Sonexion and Cray XK are trademarks of Cray Inc.
Other product and service names mentioned herein are the trademarks
of their respective owners.
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
REVENUE:
Product $ 18,313 $ 15,988 $ 182,806 $ 80,338
Service 17,426 20,717 49,423 64,154
--------- --------- --------- ---------
Total revenue 35,739 36,705 232,229 144,492
--------- --------- --------- ---------
COST OF REVENUE:
Cost of product revenue 10,474 11,151 107,545 54,106
Cost of service revenue 7,933 9,270 27,701 31,148
--------- --------- --------- ---------
Total cost of revenue 18,407 20,421 135,246 85,254
--------- --------- --------- ---------
Gross profit 17,332 16,284 96,983 59,238
--------- --------- --------- ---------
OPERATING EXPENSES:
Research and development, net 15,483 17,949 46,126 42,869
Sales and marketing 6,495 6,233 24,601 18,962
General and administrative 3,324 3,693 13,425 11,607
Restructuring 0 687 0 1,863
--------- --------- --------- ---------
Total operating expenses 25,302 28,562 84,152 75,301
Net gain on sale of interconnect
hardware development program 0 0 139,068 0
--------- --------- --------- ---------
Income (Loss) from
operations (7,970) (12,278) 151,899 (16,063)
Other income (expense), net 108 13 573 (337)
Interest income, net 108 20 144 60
--------- --------- --------- ---------
Income (Loss) before income
taxes (7,754) (12,245) 152,616 (16,340)
Income tax (expense) benefit 2,603 13 (5,381) (335)
--------- --------- --------- ---------
Net Income (Loss) $ (5,151) $ (12,232) $ 147,235 $ (16,675)
========= ========= ========= =========
Basic net income (loss) per
common share $ (0.14) $ (0.35) $ 4.06 $ (0.48)
========= ========= ========= =========
Diluted net income (loss) per
common share $ (0.14) $ (0.35) $ 3.92 $ (0.48)
========= ========= ========= =========
Basic weighted average shares 36,999 35,279 36,300 35,035
Diluted weighted average
shares 36,999 35,279 37,516 35,035
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
September 30, December 31,
2012 2011
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 228,251 $ 50,411
Restricted cash 3,500 3,776
Short-term investments 30,697 -
Accounts and other receivables, net 22,120 72,381
Inventory 169,246 97,881
Prepaid expenses and other current assets 13,041 12,932
------------- -------------
Total current assets 466,855 237,381
Long-term investments 20,087 -
Property and equipment, net 20,602 16,462
Service inventory, net 1,411 1,611
Deferred tax assets 13,083 13,352
Other non-current assets 12,694 14,293
------------- -------------
TOTAL ASSETS $ 534,732 $ 283,099
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,131 $ 38,328
Accrued payroll and related expenses 13,497 11,270
Other accrued liabilities 4,170 5,414
Deferred revenue 99,655 44,636
------------- -------------
Total current liabilities 178,453 99,648
Long-term deferred revenue 29,431 14,184
Other non-current liabilities 2,607 2,453
------------- -------------
TOTAL LIABILITIES 210,491 116,285
Shareholders' equity:
Preferred stock - -
Common stock and additional paid-in capital 575,216 564,148
Accumulated other comprehensive income 5,604 6,480
Accumulated deficit (256,579) (403,814)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 324,241 166,814
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 534,732 $ 283,099
============= =============
Cray Media: Nick Davis 206/701-2123 pr@cray.com Investors: Paul
Hiemstra 206/701-2044 ir@cray.com
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