Global supercomputer leader Cray Inc. (NASDAQ: CRAY) today
announced financial results for the second quarter ended June 30,
2012. Revenue for the quarter was $84.2 million compared to $67.9
million in the prior year period. The Company reported net income
for the quarter of $147.4 million or $3.91 diluted income per share
compared to a net loss of ($3.0 million) or ($0.08) per share in
the second quarter of 2011. The second quarter of 2012 operating
results included a $139.1 million pre-tax gain, which resulted from
the sale of the Company's interconnect hardware development program
to Intel Corporation.
Revenue for the six-month period ended June 30, 2012 was $196.5
million compared with $107.8 million in the prior year period. Net
income was $152.4 million or $4.12 diluted income per share for the
first half of 2012 compared to a net loss of ($4.4 million) or
($0.13) per share in the prior year period. Operating income for
the first six months of 2012, excluding the $139.1 million pre-tax
gain from the asset sale to Intel, was $20.8 million.
The first half of 2012 results included non-cash items of $4.0
million for depreciation and amortization and $2.4 million related
to stock compensation expense.
Total gross profit margin for the second quarter of 2012 was 41%
compared to 38% for the second quarter of 2011. For the second
quarter of 2012, product margin was 42% and service margin was
35%.
Operating expenses for the second quarter of 2012 were $22.1
million compared to $28.7 million in the prior year period. The
Company's second quarter and first half of 2012 results were
impacted by higher accrued incentive-based compensation due to
strong operating results, as well as increased spending toward our
growth initiatives compared to 2011. Second quarter of 2012
operating expenses benefited from $15 million in R&D co-funding
credits related to the Company's DARPA contract. The second quarter
of 2012 results also included non-cash items of $2.1 million for
depreciation and amortization and $1.2 million for stock
compensation expense.
Cray's effective tax rate for the first half of the year was 5%
and benefited from the recognition of a capital loss and the
partial release of a valuation allowance provided against deferred
tax assets. The deferred tax asset balance primarily resulted from
net operating loss carryforwards that were generated in previous
periods.
As of June 30, 2012, cash balances totaled $223 million compared
to $112 million as of March 31, 2012. Working capital increased by
$168 million during the second quarter to $315 million as of June
30, 2012.
"We had a very strong quarter, led by the acceptance of our
first petaflops system at a large commercial customer and the
completion of a $140 million asset sale," said Peter Ungaro,
president and CEO of Cray. "During the first half of the year, we
made good progress on each of our three growth initiatives while
also delivering strong operating results. We were recently awarded
a number of exciting new wins for our next-generation
supercomputer, called 'Cascade', which is planned for general
availability next year. We have a lot of work left to do in order
to achieve our outlook for this year, but our business is in
excellent shape as we continue to build on our strong market
position now and into the future."
2012 Outlook
A wide range of results remains possible for 2012. While many
variables may impact our results, one significant item is the
timing of a single planned customer acceptance, which would
represent approximately $150 million in product revenue. This is
the largest system we have ever built and its acceptance is
dependent on several items, including third-party components, all
on a tight timeline due to previous delays. Assuming acceptance of
this system occurs in 2012, as currently planned, we continue to
anticipate total revenue to be in the range of $430-$450 million
for the year.
Revenue in the third quarter of 2012 is expected to be about $30
million. For the year, overall gross margins are anticipated to be
in the 35 percent 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 sale of our interconnect hardware development
program that occurred during the second quarter.
The Company's 2012 effective income tax rate is currently
projected to be about 5-8% but is dependent on a number of
variables.
Actual results for any future period are subject to large
fluctuations given the nature of Cray's business.
Recent Highlights
- In July, Cray announced it was awarded a contract to deliver a
next-generation Cray supercomputer, code-named "Cascade", and a
next-generation Cray Sonexion storage system to the Pawsey Centre
in Perth, Australia. The contract is valued at more than $21
million.
- In July, Cray announced it was awarded a contract to provide
the Finnish IT Center for Science with a "Cascade" supercomputer.
Consisting of product and services, the multi-year, multi-phase
contract is valued at more than $12 million, and a vast majority of
the system is expected to be delivered in 2014.
- In June, Cray announced it will install a "Cascade" system and
a next-generation Cray Sonexion storage system at the Department of
Energy's National Energy Research Scientific Computing Center
(NERSC). The multi-year, multi-phase procurement is valued at more
than $40 million.
- In June, Cray announced that its "Cascade" systems will be
available with Intel's new Intel Xeon Phi coprocessors. The Intel
Xeon Phi product family is based on Intel's Many Integrated Core
architecture, which is designed for highly parallel workloads.
- In June, as part of Cray's technical enterprise/midrange growth
initiative, Cray announced it was awarded a new contract by the
Department of Defense High Performance Computing Modernization
Program to deliver a new Cray XE6m supercomputer to the Naval
Research Laboratory in Monterey, California. The initial system
contract is valued at more than $16 million in product revenue. The
contract also calls for Cray to significantly upgrade the program's
three existing Cray XE6 supercomputers.
- In June, Cray's YarcData subsidiary launched a $100,000 Graph
Analytics Challenge. The contest is designed to showcase the
increasing applicability and adoption of graph analytics in solving
Big Data problems.
- During the second quarter, Cray delivered and received
acceptance on Cray Sonexion 1300 storage subsystems in the energy,
government and academic market segments. Cray has now shipped over
50 petabytes of storage capacity in 2012.
- During the second quarter, Cray completed two different
development milestones totaling $15 million in R&D credits for
its Defense Advanced Research Projects Agency (DARPA) contract
related to the development of its next-generation "Cascade"
supercomputer.
Conference Call Information
Cray will host a conference call today, Tuesday, July 31, 2012
at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss its second 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 enter the access code 14743057. 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. If you do not have Internet access, a
replay of the call will be available by dialing 1-855-859-2056, and
entering the access code 14743057. The conference call replay will
be available for 72 hours, beginning at 4:30 p.m. PDT on Tuesday,
July 31, 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 and Cray's 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 acceptance that would represent approximately $150 million
in product revenue, are not received in 2012 as expected or at all,
the risk that planned updates to third-party processors, including
NVIDIA's next generation "Kepler" GPUs, are not available with the
performance expected or when expected, the risk that Cray will
continue to have further supply issues related to a key component
and will not be able to secure components that meet Cray's
specifications in sufficient quantities on time, 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 next-generation "Cascade"
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 and obtain acceptance of its remaining
DARPA co-funded development milestone and earn R&D co-funding
credits at the currently-contracted amount when expected or at all,
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 June
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 Sonexion 1300, YarcData, Cray XE6m and
Cray XE6 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 Six Months Ended
June 30, June 30,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
REVENUE:
Product $ 68,516 $ 47,654 $ 164,493 $ 64,350
Service 15,667 20,266 31,997 43,437
--------- --------- --------- ---------
Total revenue 84,183 67,920 196,490 107,787
--------- --------- --------- ---------
COST OF REVENUE:
Cost of product revenue 39,521 31,638 97,071 42,955
Cost of service revenue 10,167 10,528 19,768 21,878
--------- --------- --------- ---------
Total cost of revenue 49,688 42,166 116,839 64,833
--------- --------- --------- ---------
Gross profit 34,495 25,754 79,651 42,954
--------- --------- --------- ---------
OPERATING EXPENSES:
Research and development, net 6,893 18,464 30,643 24,920
Sales and marketing 10,233 6,373 18,106 12,729
General and administrative 4,971 3,777 10,101 7,914
Restructuring 0 58 0 1,176
--------- --------- --------- ---------
Total operating expenses 22,097 28,672 58,850 46,739
Net gain on sale of interconnect
hardware development program 139,068 0 139,068 0
--------- --------- --------- ---------
Income (loss) from
operations 151,466 (2,918) 159,869 (3,785)
Other income (expense), net 245 193 465 (350)
Interest income, net 37 23 36 40
--------- --------- --------- ---------
Income (loss) before income
taxes 151,748 (2,702) 160,370 (4,095)
Income tax expense (4,326) (256) (7,984) (348)
--------- --------- --------- ---------
Net income (loss) $ 147,422 $ (2,958) $ 152,386 $ (4,443)
========= ========= ========= =========
Basic net income (loss) per
common share $ 4.05 $ (0.08) $ 4.24 $ (0.13)
========= ========= ========= =========
Diluted net income (loss)
per common share $ 3.91 $ (0.08) $ 4.12 $ (0.13)
========= ========= ========= =========
Basic weighted average
shares 36,367 35,040 35,947 34,911
Diluted weighted average
shares 37,682 35,040 36,956 34,911
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
June 30, December 31,
2012 2011
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 219,459 $ 50,411
Restricted cash 3,500 3,776
Accounts and other receivables, net 101,695 72,381
Inventory 131,537 97,881
Prepaid expenses and other current assets 11,986 12,932
------------- -------------
Total current assets 468,177 237,381
Property and equipment, net 16,624 16,462
Service inventory, net 1,506 1,611
Deferred tax assets 13,042 13,352
Other non-current assets 13,014 14,293
------------- -------------
TOTAL ASSETS $ 512,363 $ 283,099
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,153 $ 38,328
Accrued payroll and related expenses 19,603 11,270
Other accrued liabilities 12,754 5,414
Deferred revenue 83,316 44,636
------------- -------------
Total current liabilities 152,826 99,648
Long-term deferred revenue 29,631 14,184
Other non-current liabilities 2,494 2,453
------------- -------------
TOTAL LIABILITIES 184,951 116,285
Shareholders' equity:
Common stock and additional paid-in capital 572,672 564,148
Accumulated other comprehensive income 6,168 6,480
Accumulated deficit (251,428) (403,814)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 327,412 166,814
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 512,363 $ 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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