August 01, 2013
SEATTLE, Wash., Aug. 1 -- Global supercomputer leader Cray Inc. today announced financial results for the second quarter ended June 30, 2013. Revenue for the quarter was $84.5 million compared to $84.2 million in the prior year period. Cray reported a net loss for the quarter of $0.2 million or $0.00 per share compared to net income of $147.4 million or $3.91 diluted income per share in the second quarter of 2012. Net loss results for the second quarter of 2013 were positively impacted by a $9.3 million tax benefit which resulted from the partial release of the valuation allowance held against Cray's deferred tax assets. 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.
All figures in this release are based on U.S. GAAP unless otherwise noted. A reconciliation of GAAP measures to non-GAAP measures is included with the financial tables of this press release. Non-GAAP net loss, which adjusts for selected unusual and non-cash items, was $7.0 million or $0.19 per share for the second quarter of 2013, compared to non-GAAP net income of $12.8 million or $0.34 per share for the second quarter of 2012.
Revenue for the six-month period ended June 30, 2013 was $164.0 million compared with $196.5 million in the prior year period. Non-GAAP net loss for the first six months of 2013 was $15.4 million, compared to non-GAAP net income of $21.8 million for the prior year period.
Total gross profit margin for the second quarter of 2013 was 32% compared to 41% for the second quarter of 2012. Non-GAAP total gross profit margin for the second quarter of 2013 was 33% compared to 41% for the second quarter of 2012. For the second quarter of 2013, product margin was 24% and service margin was 54%. Product margin for the second quarter of 2013 was negatively impacted in part by higher than anticipated costs on a single, large installation. Without the additional costs associated with this installation, product margin for the quarter would have been 8 percentage points higher, at 32%, and total gross profit margin would have been 6 percentage points higher, at 38%.
Operating expenses for the second quarter of 2013 were $36.6 million, compared to $22.1 million in the prior year period. Second quarter of 2012 operating expenses benefited from $15 million in R&D co-funding credits related to the Company's DARPA contract, which was completed in 2012. Non-GAAP operating expenses for the second quarter of 2013 were $35.0 million compared to $20.9 million in the prior year period.
The second quarter of 2013 operating results included $3.5 million for depreciation. Non-cash, pre-tax items excluded for non-GAAP purposes for the second quarter of 2013 were $0.6 million for amortization of acquired and other intangibles, $0.1 million for purchase accounting adjustments, and $1.6 million for stock compensation expense.
As of June 30, 2013, cash and investments totaled $253 million compared to $251 million as of March 31, 2013. Working capital increased during the second quarter to $285 million compared to $283 million at the end of the first quarter.
"We had a good second quarter, with continued progress across each of our different product offerings, and we ended the first half of the year ahead of our revenue track," said Peter Ungaro, President and CEO of Cray. "Our supercomputing business continues to be strong, highlighted by several exciting new wins around the world in the last few months, including flagship wins at both the European Centre for Medium-Range Weather Forecasts and the ARCHER project for the UK national supercomputing facility. In big data, we recently launched our Cray Cluster Connect offering, a complete, end-to-end high performance storage solution for any x86 Linux cluster. On the analytics front, we had a number of exciting wins in our YarcData group, signing up new customers across several of our key market segments for our Urika real-time data discovery platform. We're in a strong competitive position right now and I'm really excited about the momentum we've built throughout our business. With an increase to our outlook today, we're anticipating strong revenue growth of more than 20% for the year and solid profitability."
2013 Outlook While a wide range of results remains possible for 2013, we expect revenue to be approximately $520 million for the year. Revenue in the third quarter is expected to be about $90 million. For 2013, total gross profit margin is anticipated to be in the mid-30% range. Total operating expenses for 2013 are expected to be in the range of $160 million. Non-GAAP adjustments to pre-tax earnings are anticipated to be over $10 million in 2013, driven by stock-based compensation and acquisition related expenses. Based on this outlook, we expect to be profitable on a GAAP and non-GAAP basis for 2013.
Following a partial release of Cray's deferred tax asset valuation allowance in the second quarter of 2013, the Company expects to record an income tax benefit for the year. Based on this outlook, due to Cray's substantial net operating loss carryforwards, the annual income tax provision is expected to be largely non-cash and the effective non-GAAP tax rate is expected to be 7-10%.
Actual results for any future period are subject to large fluctuations given the nature of Cray's business.
About Cray Inc.
Global supercomputing leader Cray Inc. provides innovative systems and solutions enabling scientists and engineers in industry, academia and government to meet existing and future simulation and analytics challenges. Leveraging 40 years of experience in developing and servicing the world's most advanced supercomputers, Cray offers a comprehensive portfolio of high performance computing (HPC) systems, storage, and Big Data solutions delivering unrivaled performance, efficiency and scalability. 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.
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