Analyst Conference Call Summary

Dot Hill
HILL

conference date: May 5, 2011 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2011 (first quarter 2011)


Forward-looking statements

Overview: Within prior guidance, rebuilding after planned termination of NetApp relationship.

Basic data (GAAP) :

Revenues were $49.2 million, down 25% sequentially from $65.4 million, down 18% from $60.0 million year-earlier.

Net income was negative $1.2 million, down sequentially from $0.3 million, but up from negative $6.4 million year-earlier.

EPS was negative $0.02, down sequentially from $0.01, but up from negative $0.12 year-earlier.

Guidance:

Q2 revenue between $49 and $53 million. Non-GAAP EPS from negative $0.02 to positive $0.02. Gross margin (non-GAAP) 25.5 to 26.5%. Cash ending between $42 and $46 million. Operating expense up for additional engineering investment.

Conference Highlights:

"Gross margin percent and cash flow exceeded our expectations, operating expenses were at teh low end of guidance, and we delivered a small non-GAAP profit for the quarter." Solid quarter, although revenue came in at low end of guidance.

Dot Hill had a planned exit from its relationship with OEM NetApp in Q4 2010. Excluding NetApp income from Q1 2010, revenue grew 18% y/y. The NetApp business had been a drag on margins. GAAP gross margin increased to 24.6% from 13.5% year-earlier. Non-GAAP gross margin improved to 25.9% from 22.0% year-earlier.

Non-GAAP net income was $0.1 million, down sequentially from $2.0 million, but up from negative $4.8 million year-earlier. Non-GAAP EPS was $0.00. EBITDA was $0.7 million, up from negative $4.3 million year-earlier.

Improved margins reflected a more favorable product mix, in addition to having no negative margin NetApp business.

Cash and equivalents balance ended at $46.3 million, up $0.6 million in the quarter. Cash flow from operations was $1.0 million.

Cost of goods sold was $37.1 million, leaving gross profit of $12.1 million. Operating expenses were $13.3 million, including: $8.0 million R&D, $3.0 million sales and marketing, $2.3 million general and administrative. GAAP operating loss was $1.2 million. Negligible income tax expense.

LSI's storage division Engenio is being acquired by NetApp. This should provide some opportunities for later in 2011 or 2012.

HP revenue grew over 20% y/y. Lenovo, Samsung, and Tektronics showed strong ramps as well. Software revenue (AssuredUVS) grew 68% sequentially, largely from Xiotech. Channel revenues were disappointing, flat q/q. Believes channel will show sales growth in Q2 based on orders seen to date.

No obvious effects from Japan, but bought some specific inventory to be safe.

Q1 revenue down sequentially, excluding NetApp, on usual seasonality and some weakness in channel sales, which was $1.2 million both in Q4 and in Q1.

Q&A:

Gross margin target was 26% by year end, will you raise that? There are a lot of variables in gross margins. We already saw the big improvement from exiting NetApp. We will let you know if this changes.

LSI customers? We are in active discussions with several of them at this time. But there are no guarantees we will get their business. Some discussions are around becoming a second source.

HP % in quarter? 76% of revenues.

Engineering investment details? We are taping out an ASIC in Q2, and there is a milestone payment that is coming due. If we gain new OEMs that require customer development, that would be an additional expense. We would not bid any deals at a margin less than we have with HP. Also, higher revenues, if they come, would drive margins up because we are ready to produce larger volumes on our current setup.

We did get some orders late in Q1 that we were not able to ship in the quarter.

How is Dot Hill doing relative to the competition? The storage industry was slightly below guidance in Q1 as a whole. Believes EMC grew 18% y/y, but that included an acquisition. IBM storage was up 10% y/y. To compete with the larger players we have to sell a top-of-class product. We show that through our sales with HP. At the same time we have to be priced competitively. On the other hand the field has consolidated.

Share count increasing? Shareholders did vote to increase shares by 8 million for employee incentives. We issues 4 million shares to acquire Cloverleaf. We have seen no insider selling of shares.

OpenIcon Analyst Conference Summaries Main Page
Dot Hill Investor Relations page
www.dothill.com
Openicon Main Dot Hill page

Search

More Analyst Conference Pages:

 
 ADBE
 AKAM
 ALTR
 AMAT
 AMD
 AMGN
 ANSV
 BIIB
 CELG
 CSCO
 DNA
 DNDN
 GILD
 GOOG
 HILL
 HPQ
 INTC
 MCHP
 MRVL
 MSFT
 MXIM
 NOVL
 NVDA
 ORCL
 ONXX
 RACK
 RHT
 TTMI
 XLNX
 YHOO

 

Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2011 William P. Meyers