EX-99.1 2 a32854exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1
FOR IMMEDIATE RELEASE
     
Contact:    
Hanif Jamal
  Kirsten Garvin
Chief Financial Officer
  Director of Investor Relations
Tel: 760-931-5500
  Tel: 760-476-3811
Email: investors@dothill.com
  Email: kirsten.garvin@dothill.com
Dot Hill Reports Second Quarter 2007 Results
CARLSBAD, Calif. – August 9, 2007 – Dot Hill Systems Corp. (NASDAQ:HILL) today announced financial results for the second quarter ended June 30, 2007. For the second quarter of 2007, net revenue was $56.2 million, compared to $66.3 million for the second quarter of 2006 and $53.4 million for the first quarter of 2007.
Net loss for the second quarter of 2007 was $3.7 million, or $0.08 per fully diluted share. This compares to a second quarter 2006 net loss of $6.6 million, or $0.15 per fully diluted share, and a first quarter 2007 net loss of $6.0 million, or $0.13 per fully diluted share.
The net revenue figures for second quarter of 2007 were within, and net loss per share beat guidance provided by the company in May 2007.
Gross margin for the second quarter of 2007 was 12.3 percent as compared to second quarter 2006 gross margin of 20.8 percent and first quarter 2007 gross margin of 12.5 percent. The quarter-to-quarter gross margin performance is consistent with guidance set on the company’s earnings call in May 2007 where it noted that gross margin percentage for the first quarter of 2007 had exceeded expectations and predicted that gross margin percentage for the second quarter of 2007 would be flat or decline slightly as a result of anticipated product mix.
“The company exited the second quarter of 2007 with cash and cash equivalents totaling $88.4 million, as compared to the first quarter 2007 balance of $95.9 million,” said Hanif Jamal, Dot Hill’s chief financial officer. “Our largest OEM customer contributed just over 65 percent of total net revenues for the second quarter of 2007, which is down from 84 percent for the second quarter of 2006 and 76 percent for the first quarter of 2007. At the same time, revenue from customers other than our largest OEM customer grew to $19.5 million, an increase of 84 percent from the second quarter of 2006 and 52 percent from the first quarter of 2007. We also exited the quarter with a strong backlog of $12.3 million.
“The company is targeting third quarter of 2007 net revenue in the range of $50 to $54 million and a net loss per share in the range of $0.09 to $0.14 on a fully diluted basis. We remain cautious with respect to our near-term guidance while we continue our transitions on a number of corporate objectives.”
“During the second quarter of 2007, Dot Hill made progress on many fronts,” said Dana Kammersgard, president and chief executive officer of Dot Hill. “We essentially completed the shift from a predominantly US-based supply chain to an offshore manufacturing model with our partners MiTAC and Synnex for our 2000 series products and began initial shipments of these products to customers.

 

 

All that remains to complete this transition is for us to ship the planned buffer inventory that we had built at our previous contract manufacturer. Late in the quarter, we commenced production shipments of a couple of products to one of our large OEM customers, and we added six new OEMs for our new 2000 series products during the quarter as well, thus advancing our revenue diversification goals. We also began shipping the 2330 iSCSI storage product to a select group of customers.
“We believe that Dot Hill took some major steps to advance the goals of our ‘Quiet R/Evolution’, which include transforming the company from a dependency on a single customer to a diverse revenue stream, from a technology integrator to a technology innovator and from an onshore supply chain to a predominantly offshore supply chain. While these transitions create unpredictability, we believe they will facilitate the company’s to return to profitability.”
Dot Hill’s second quarter 2007 financial results conference call is scheduled to take place on August 9, 2007 at 4:30 p.m. ET. Please join us for a live audio webcast at www.dothill.com in the Investor Relations section. If you prefer to join via telephone, please dial 877-407-8035 (U.S.) or 201-689-8035 (International) at least five minutes prior to the start of the call. A replay of the webcast will be available on the Dot Hill web site following the conference call. For a telephone replay, dial 877-660-6853 (U.S.) or 201-612-7415 (International) and enter account number 286, then passcode 250886.
About Dot Hill
Delivering innovative technology and global support, Dot Hill empowers the OEM community to bring unique storage solutions to market, quickly, easily and cost-effectively. Offering high performance and industry-leading uptime, Dot Hill’s RAID technology is the foundation for best-in-class storage solutions offering enterprise-class security, availability and data protection. The company’s products are in use today by the world’s leading service and equipment providers, common carriers, advanced technology and telecommunications companies as well as government agencies. Dot Hill solutions are certified to meet rigorous industry standards and military specifications, as well as RoHS and WEEE international environmental standards. Headquartered in Carlsbad, Calif., Dot Hill has offices and/or representatives in China, Germany, Japan, Netherlands, United Kingdom and the United States. For more information, visit us at http://www.dothill.com.
Statements contained in this press release regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such statements include statements regarding: Potential changes to the financial results reported in this press release; Dot Hill’s anticipated financial results for the third quarter of 2007; continued diversification of Dot Hill’s revenue stream; the addition of new OEM customers; the transition of Dot Hill’s supply chain to lower cost providers; improvement of product margins; and continued cost reductions.
The risks that contribute to the uncertain nature of the forward-looking statements include, among other things: the risk that actual financial results for the second quarter 2007 as included in Dot Hill’s Quarterly Report on Form 10-Q for the three months and six months ended June 30,

 

 

2007 may be different from the financial results reported in this press release; the risk that actual financial results for the third quarter 2007 may be different from the financial guidance provided in this press release; the fact that no Dot Hill customer agreements provide for mandatory minimum purchase requirements; the risk that one or more of Dot Hill’s OEM or other customers may cancel or reduce orders, not order as forecasted or terminate their agreements with Dot Hill; the risk that Dot Hill’s new products may not prove to be popular; the risk that one or more of Dot Hill’s suppliers or subcontractors may fail to perform or may terminate their agreements with Dot Hill; unforeseen technological, intellectual property, personnel or engineering issues; and the additional risks set forth in the forms 8-K, 10-K and 10-Q most recently filed by Dot Hill. All forward-looking statements contained in this press release speak only as of the date on which they were made. Dot Hill undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

 

 

DOT HILL SYSTEMS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In Thousands, Except Per Share Amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2007     2006     2007  
NET REVENUE
   $ 66,265     $ 56,199     $ 124,951     $ 109,640  
COST OF GOODS SOLD
     52,495       49,275       100,020       96,042  
 
                        
GROSS PROFIT
     13,770       6,924       24,931       13,598  
 
                        
OPERATING EXPENSES:
                                
Sales and marketing
     4,144       3,871       8,297       7,779  
Research and development
     12,120       4,797       21,832       10,871  
General and administrative
     3,971       3,322       10,124       6,992  
Legal settlement
     3,350       —       3,350       —  
 
                        
Total operating expenses
     23,585       11,990       43,603       25,642  
 
                        
OPERATING LOSS
     (9,815 )     (5,066 )     (18,672 )     (12,044 )
 
                        
OTHER INCOME:
                                
Interest income, net
     1,400       1,231       2,712       2,539  
 
                        
LOSS BEFORE INCOME TAXES
     (8,415 )     (3,835 )     (15,960 )     (9,505 )
INCOME TAX EXPENSE (BENEFIT)
     (1,789 )     (93 )     (4,359 )     199  
 
                        
NET LOSS
   $ (6,626 )   $ (3,742 )   $ (11,601 )   $ (9,704 )
 
                        
NET LOSS PER SHARE:
                                
Basic
   $ (0.15 )   $ (0.08 )   $ (0.26 )   $ (0.21 )
 
                        
Diluted
   $ (0.15 )   $ (0.08 )   $ (0.26 )   $ (0.21 )
 
                        
WEIGHTED AVERAGE SHARES USED TO CALCULATE NET LOSS PER SHARE:
                                
Basic
     44,632       45,472       44,575       45,315  
 
                        
Diluted
     44,632       45,472       44,575       45,315  
 
                        
COMPREHENSIVE LOSS:
                                
Net loss
   $ (6,626 )   $ (3,742 )   $ (11,601 )   $ (9,704 )
Foreign currency translation adjustments
     (160 )     163       (200 )     (441 )
Net unrealized gain on short-term investments
     9       —       35       —  
 
                        
Comprehensive loss
   $ (6,777 )   $ (3,579 )   $ (11,766 )   $ (10,145 )
 
                        

 

 

DOT HILL SYSTEMS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Amounts)
(Unaudited)
                 
    December 31,     June 30,  
    2006     2007  
ASSETS
                
Current Assets:
                
Cash and cash equivalents
   $ 99,663     $ 88,397  
Accounts receivable, net of allowance of $629 and $472
     39,758       37,736  
Inventories
     2,210       3,038  
Prepaid expenses and other
     5,039       4,201  
 
            
Total current assets
     146,670       133,372  
Property and equipment, net
     9,738       9,164  
Goodwill
     40,725       40,725  
Other intangible assets, net
     4,382       3,212  
Other assets
     136       276  
 
            
Total assets
   $ 201,651     $ 186,749  
 
            
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current Liabilities:
                
Accounts payable
   $ 31,099     $ 27,742  
Accrued compensation
     3,231       3,083  
Accrued expenses
     8,652       5,808  
Deferred revenue
     521       579  
Income taxes payable
     226       221  
 
            
Total current liabilities
     43,729       37,433  
Other long-term liabilities
     2,010       2,387  
 
            
Total liabilities
     45,739       39,820  
 
            
Commitments and Contingencies (Note 10)
                
Stockholders’ Equity:
                
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued or outstanding
     —       —  
Common stock, $0.001 par value, 100,000 shares authorized, 45,009 and 45,596 shares issued and outstanding at December 31, 2006 and June 30, 2007, respectively
     45       46  
Additional paid-in capital
     290,705       292,323  
Accumulated other comprehensive loss
     (814 )     (1,255 )
Accumulated deficit
     (134,024 )     (144,185 )
 
            
Total stockholders’ equity
     155,912       146,929  
 
            
Total liabilities and stockholders’ equity
   $ 201,651     $ 186,749  
 
            

 

 

DOT HILL SYSTEMS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2007     2006     2007  
Cash Flows From Operating Activities:
                                
Net loss
   $ (6,626 )   $ (3,742 )   $ (11,601 )   $ (9,704 )
Adjustments to reconcile net loss to net cash used in operating activities:
                                
Depreciation and amortization
     1,813       1,647       3,472       3,422  
Loss on disposal of property and equipment
     52       166       71       166  
Provision for doubtful accounts
     (12 )     (41 )     3       (41 )
Stock-based compensation expense
     833       752       2,061       977  
Deferred taxes
     (3,219 )     —       (5,789 )     —  
Changes in operating assets and liabilities:
                                
Accounts receivable
     (4,468 )     60       (14,708 )     2,169  
Inventories
     802       (631 )     713       (826 )
Prepaid expenses and other assets
     721       (317 )     124       725  
Legal settlement receivable
     (5,720 )     —       (5,720 )     —  
Accounts payable
     2,169       (3,407 )     9,656       (3,824 )
Accrued compensation and expenses
     (255 )     (755 )     589       (3,005 )
Legal settlement payable
     10,500       —       10,500       —  
Deferred revenue
     (112 )     (20 )     (998 )     8  
Income taxes payable
     (18 )     (143 )     (51 )     15  
Restructuring accrual
     (11 )     —       (45 )     —  
Other long-term liabilities
     (113 )     (81 )     1,243       (65 )
 
                        
Net cash used in operating activities
     (3,664 )     (6,512 )     (10,480 )     (9,983 )
 
                        
Cash Flows From Investing Activities:
                                
Purchases of property and equipment
     (1,351 )     (969 )     (2,993 )     (1,914 )
Sales and maturities of short-term investments
     11,300       —       19,075       —  
Purchases of short-term investments
     (1,484 )     —       (10,337 )     —  
 
                        
Net cash provided by (used in) investing activities
     8,465       (969 )     5,745       (1,914 )
 
                        
Cash Flows From Financing Activities:
                                
Proceeds from sale of stock to employees
     —       —       603       508  
Proceeds from exercise of stock options and warrants
     371       40       722       134  
 
                        
Net cash provided by financing activities
     371       40       1,325       642  
 
                        
Effect of Exchange Rate Changes on Cash
     70       (75 )     67       (11 )
 
                        
Net Increase (Decrease) in Cash and Cash Equivalents
     5,242       (7,516 )     (3,343 )     (11,266 )
Cash and Cash Equivalents, beginning of period
     100,218       95,913       108,803       99,663  
 
                        
Cash and Cash Equivalents, end of period
   $ 105,460     $ 88,397     $ 105,460     $ 88,397  
 
                        
Supplemental Disclosures of Cash Flow Information:
                                
Cash paid for interest
   $ —     $ —     $ —     $ —  
 
                        
Cash paid for income taxes
   $ 30     $ 47     $ 49     $ 172  
 
                        
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Construction in progress costs incurred but not paid
   $ 764     $ 350     $ 801     $ 350  
 
                        
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