Silicon Graphics' CEO Discusses F4Q 2012 Results - Earnings Call Transcript

Silicon Graphics, Inc. (SGI)

F4Q 2012 Earnings Call

August 8, 2012 05:00 pm ET

Executives

Jorge Titinger – President & Chief Executive Officer

Bob Nikl – Executive Vice President & Chief Financial Officer

John Swenson – Vice President, Investor Relations & Treasurer

Analysts

Brian Freed – Wunderlich Securities

Alex Kurtz – Sterne Agee

Shebly Seyrafi – FBN Securities

Mike Shinnick – Wasatch Advisors

Tim Quinlisk – Mayo Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Silicon Graphics International Corporation’s FQ4 and F2012 financial results. (Operator instructions.) As a reminder, this conference call is being recorded. Now I’ll turn the call over to your host, John Swenson of Investor Relations. Please begin.

John Swenson

Thank you, and good afternoon everyone. I’m John Swenson, Vice President of Investor Relations and Treasurer for SGI. Welcome to our F4Q 2012 conference call for the period ended June 29, 2012. Joining me on today’s call our Jorge Titinger, SGI’s CEO; and Bob Nikl, CFO. I would also like to acknowledge Ben Liau, our Investor Relations Manager who will continue to support me and the Finance Team.

Today’s press release is available on the Investor Relations section of our website at www.investors.sgi.com. This call is being webcast and a replay of the webcast will be available on our website two hours after the conclusion of the call and will remain available until the next earnings call.

Please note the Safe Harbor disclosure in our earnings release regarding forward-looking information. Today’s conference call contains forward-looking statements including financial projections for our next fiscal quarter as well as F2013, market growth projections, and product development plans. There can be no assurance that we will achieve our financial objectives and we ask that you refer to our most recent filings with the SEC for important risk factors that could cause actual results to differ materially from these forward-looking statements.

All statements made on this conference call are made only as of today’s date. SGI undertakes no obligation to update the information in this conference call whether as a result of new information, future events or otherwise. To obtain copies of our latest SEC filings please visit www.SEC.gov or our website.

Also during today’s call we will make reference to several non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to GAAP financial measures in our earnings press release which again is posted on our website. Please note there is no accompanying slide presentation as part of this earnings call; however, all of the financial information is still available and we have included certain historical financial information in supplemental tables in the press release.

Now to our conference call: Jorge will provide highlights of the company’s performance for F4Q and outline our long-term strategic plan. Bob will give further detail on the company’s financial performance, guidance for F1Q 2013, our initial thoughts on the full year and our long-term target model. We will then take your questions. I would now like to turn the call over to Jorge Titinger, SGI’s CEO. Jorge?

Jorge Titinger

Thank you, John, and good afternoon to you all. I’m pleased to have the opportunity to update you after my first full quarter at SGI. Before I begin I would like to welcome Bob Nikl who joined the company in May. I’m excited to have Bob with us as he has more than thirty years of experience in CFO and other finance roles. He and I worked together at Verigy where as a team we realized significant operational improvements and great results for shareholders. I’m looking forward to achieving some of the same successes with Bob and the rest of the management team here at SGI.

Let me begin by providing some financial highlights for F4Q. Revenue for the quarter was $179 million, and our non-GAAP gross margin exceeded expectations at 26%. During the quarter, revenue recognition of one significant low-margin deal slipped in F1Q. This caused F4Q revenue to be at the low end of our guided range and also led to higher than expected gross margin. Cash increased by $16 million in the quarter, reflecting improvements in working capital and positive adjusted EBITDA performance.

Overall, our results in F4Q are a clear indication that are fundamental business is solid and improving. Although we still have challenges in front of us, including working through the remainder of the low margin deals that I discussed last quarter we believe we’re on the right path. With that as a backdrop I’d like to move towards our strategic plan and the steps we are taking to enhance our customer value proposition and long-term profitability.

When I spoke to you last quarter I shared a similar perspective that I had gained from my initial discussions with key customers, employees and investors. Their observations echoed the reasons that I was excited to join SGI, namely that the markets for our products are large and growing, our reputation as a leading provider of advanced solutions is solid, and our customers continue to turn to us to help solve our most complex technical challenges.

Three months later I am even more enthusiastic based on the trends that are apparent across our served markets. We see significant momentum in big data and HPC, as customers in the big data space need the speed and scale that HPC can provide. Starting from our current competitive position and looking at the industries we serve and the products and services we provide, we have a great many opportunities before us as we take the right strategic steps to capitalize on them while improving our financial discipline.

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