CRAY
$34.98
Cray
$.03
.09%
Earnings Details
2nd Quarter June 2019
Friday, August 2, 2019 4:05:00 PM
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Summary

Cray (CRAY) Recent Earnings

Cray (CRAY) reported a 2nd Quarter June 2019 loss of $0.75 per share on revenue of $68.7 million. The consensus estimate was a loss of $0.64 per share on revenue of $72.2 million. Revenue fell 42.8% compared to the same quarter a year ago.

Cray Inc designs, develops, and supports high-performance computer systems, commonly known as supercomputers and/or clusters, and provide storage solutions, software and engineering services related to HPC systems.

Results
Reported Earnings
($0.75)
Earnings Whisper
-
Consensus Estimate
($0.64)
Reported Revenue
$68.7 Mil
Revenue Estimate
$72.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cray Inc. Reports Second Quarter 2019 Financial Results

SEATTLE, Aug. 02, 2019 (GLOBE NEWSWIRE) -- Global supercomputer leader Cray Inc. (Nasdaq: CRAY) today announced financial results for its second quarter ended June 30, 2019.

All figures in this release are based on U.S. GAAP unless otherwise noted. A reconciliation of GAAP to non-GAAP measures is included in the financial tables in this press release.

Revenue for the second quarter of 2019 was $69 million, compared to $120 million in the second quarter of 2018. Net loss for the second quarter of 2019 was $43 million, or $1.03 per diluted share, compared to net loss of $11 million, or $0.27 per diluted share in the second quarter of 2018. Non-GAAP net loss was $31 million, or $0.75 per diluted share for the second quarter of 2019, compared to non-GAAP net loss of $8 million, or $0.20 per diluted share in the second quarter of 2018.

Overall gross profit margin on a GAAP and non-GAAP basis for the second quarter of 2019 was 35% and 36%, respectively, compared to 31% and 32%, on a GAAP and non-GAAP basis in the second quarter of 2018, respectively.

Operating expenses for the second quarter of 2019 were $68 million, compared to $50 million in the second quarter of 2018. Non-GAAP operating expenses for the second quarter of 2019 were $57 million, compared to $47 million in the second quarter of 2018, with the increase primarily driven by higher R&D costs. Non-GAAP adjustments for the second quarter of 2019 include $7.6 million in costs related to our pending merger with Hewlett Packard Enterprise Company (“HPE”).

As of June 30, 2019, cash and restricted cash totaled $165 million. Working capital at the end of the second quarter of 2019 was $223 million, compared to $263 million at the end of the first quarter of 2019.

No Quarterly Conference Call
As previously announced on May 17, 2019, Cray entered into an agreement and plan of merger with HPE to acquire all the issued and outstanding common shares of Cray for $35 per share in cash. Due to the pending merger, Cray will not hold an earnings conference call.

Use of Non-GAAP Financial Measures
This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission (“SEC”). A reconciliation of U.S. generally accepted accounting principles, or GAAP, to non-GAAP results is included in the financial tables included in this press release. Management believes that the non-GAAP financial measures that we have set forth provide additional insight for analysts and investors and facilitate an evaluation of Cray’s financial and operational performance that is consistent with the manner in which management evaluates Cray’s financial performance. However, these non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary or advisable for the conduct of Cray’s business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. Hence, to compensate for these limitations, management does not review these non-GAAP financial metrics in isolation from its GAAP results, nor should investors. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with or disclosures required by GAAP. These measures are adjusted as described in the reconciliation of GAAP to non-GAAP numbers at the end of this release, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent, or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review and consider this non-GAAP information as well as the GAAP financial results that are disclosed in Cray’s SEC filings.

About Cray Inc.
Cray Inc. (Nasdaq:CRAY) combines computation and creativity so visionaries can keep asking questions that challenge the limits of possibility. Drawing on more than 45 years of experience, Cray develops the world’s most advanced supercomputers, pushing the boundaries of performance, efficiency and scalability. Cray continues to innovate today at the convergence of data and discovery, offering a comprehensive portfolio of supercomputers, high-performance storage, data analytics and artificial intelligence solutions. Go to www.cray.com for more information.

CRAY and the stylized CRAY mark are registered trademarks of Cray Inc. in the United States and other countries.

 
CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
 
  Three Months Ended
June 30,
 Six Months Ended
June 30,
  2019 2018 2019 2018
Revenue:        
Product $29,924  $83,379  $64,082  $127,833 
Service 38,775  36,824  76,163  71,964 
Total revenue 68,699  120,203  140,245  199,797 
Cost of revenue:        
Cost of product revenue 23,424  65,274  49,526  99,319 
Cost of service revenue 21,328  17,122  40,748  35,719 
Total cost of revenue 44,752  82,396  90,274  135,038 
Gross profit 23,947  37,807  49,971  64,759 
Operating expenses:        
Research and development, net 37,171  29,382  72,957  59,274 
Sales and marketing 14,919  15,218  29,194  30,883 
General and administrative 15,890  5,624  21,832  11,403 
Restructuring       476 
Total operating expenses 67,980  50,224  123,983  102,036 
Loss from operations (44,033) (12,417) (74,012) (37,277)
         
Other income (expense), net 272  430  25  48 
Interest income, net 1,223  667  2,148  1,380 
Loss before income taxes (42,538) (11,320) (71,839) (35,849)
Income tax benefit (expense) (22) 370  (141) (109)
Net loss $(42,560) $(10,950) $(71,980) $(35,958)
         
Basic net loss per common share $(1.03) $(0.27) $(1.75) $(0.89)
Diluted net loss per common share $(1.03) $(0.27) $(1.75) $(0.89)
         
Basic weighted average shares outstanding 41,191  40,616  41,069  40,527 
Diluted weighted average shares outstanding 41,191  40,616  41,069  40,527 


CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share data)
 
  June 30,
 2019
 December 31,
 2018
ASSETS    
Current assets:    
Cash and cash equivalents $147,533  $228,434 
Restricted cash 3,772  1,300 
Accounts and other receivables, net 76,501  87,819 
Inventory 88,035  80,360 
Prepaid expenses and other current assets 25,053  22,331 
Total current assets 340,894  420,244 
     
Long-term restricted cash 13,847  16,030 
Property and equipment, net 38,290  35,737 
Operating lease right-of-use assets 32,656   
Goodwill 14,182  14,182 
Intangible assets other than goodwill, net 2,602  3,178 
Other non-current assets 17,200  27,761 
TOTAL ASSETS $459,671  $517,132 
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable $30,098  $32,847 
Accrued payroll and related expenses 20,462  23,703 
Other accrued liabilities 13,206  10,805 
Customer contract liabilities 54,353  61,983 
Total current liabilities 118,119  129,338 
     
Long-term customer contract liabilities 23,077  32,021 
Long-term operating lease liabilities 39,845   
Other non-current liabilities 2,384  12,394 
TOTAL LIABILITIES 183,425  173,753 
     
Shareholders’ equity:    
Preferred stock — Authorized and undesignated, 5,000,000 shares; no shares issued or outstanding    
Common stock and additional paid-in capital, par value $.01 per share — Authorized, 75,000,000 shares; issued and outstanding 41,337,879 and 40,893,807 shares, respectively 654,948  647,045 
Accumulated other comprehensive income 1,534  3,208 
Accumulated deficit (380,236) (306,874)
TOTAL SHAREHOLDERS’ EQUITY 276,246  343,379 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $459,671  $517,132 


CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)
 
   Three Months Ended June 30, 2019
   Net Loss Diluted EPS Operating Loss Gross Profit Operating Expenses
GAAP  $(42.6) $(1.03) $(44.0) $23.9  $68.0 
            
Share-based compensation (1)4.1    4.1  0.3  3.8 
Amortization of acquired and other intangibles (2)0.2    0.2  0.2   
Transaction costs related to the pending merger with HPE (3)7.6    7.6    7.6 
Income tax on reconciling items (4)(2.6)        
Other items impacting tax provision (5)2.3         
Total reconciling items  11.6  0.28  11.9  0.5  11.4 
            
Non-GAAP  $(31.0) $(0.75) $(32.1) $24.4  $56.6 
            
   Three Months Ended June 30, 2018
   Net Loss Diluted EPS Operating Loss Gross Profit Operating Expenses
GAAP  $(11.0) $(0.27) $(12.4) $37.8  $50.2 
            
Share-based compensation (1)3.2    3.2  0.2  3.0 
Amortization of acquired and other intangibles (2)0.3    0.3  0.2  0.1 
Income tax on reconciling items (4)(0.7)        
Other items impacting tax provision (5)0.1         
Total reconciling items  2.9  0.07  3.5  0.4  3.1 
            
Non-GAAP  $(8.1) $(0.20) $(8.9) $38.2  $47.1 
            
Notes           
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments to exclude non-recurring transaction costs related to the pending merger with HPE
(4) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21%
(5) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (3) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets.


CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)
 
   Six Months Ended June 30, 2019
   Net Loss Diluted EPS Operating Loss Gross Profit Operating Expenses
GAAP  $(72.0) $(1.75) $(74.0) $50.0  $124.0 
            
Share-based compensation (1)7.7    7.7  0.5  7.2 
Amortization of acquired and other intangibles (2)0.5    0.5  0.4  0.1 
Transaction costs related to the pending merger with HPE
 (3)7.6    7.6    7.6 
Income tax on reconciling items (5)(3.4)        
Other items impacting tax provision (6)3.0         
Total reconciling items  15.4  0.37  15.8  0.9  14.9 
            
Non-GAAP  $(56.6) $(1.38) $(58.2) $50.9  $109.1 
            
            
   Six Months Ended June 30, 2018
   Net Loss Diluted EPS Operating Loss Gross Profit Operating Expenses
GAAP  $(36.0) $(0.89) $(37.3) $64.8  $102.0 
            
Share-based compensation (1)6.1    6.1  0.4  5.7 
Amortization of acquired and other intangibles (2)0.5    0.5  0.4  0.1 
Restructuring (4)0.5    0.5    0.5 
Income tax on reconciling items (5)(1.5)        
Other items impacting tax provision (6)0.8         
Total reconciling items  6.4  0.16  7.1  0.8  6.3 
            
Non-GAAP  $(29.6) $(0.73) $(30.2) $65.6  $95.7 
            
Notes           
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments to exclude non-recurring transaction costs related to the pending merger with HPE
(4) Adjustments to exclude restructuring costs
(5) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21%
(6) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (4) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets.


CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)
 
   Three Months Ended June 30, 2019
   Product Service Total
   Gross Profit Gross Margin Gross Profit Gross Margin Gross Profit Gross Margin
GAAP  $6.5  22% $17.4  45% $23.9  35%
              
Share-based compensation (1)0.2    0.1    0.3   
Amortization of acquired and other intangibles (2)0.2        0.2   
Total reconciling items  0.4  1% 0.1  % 0.5  1%
              
Non-GAAP  $6.9  23% $17.5  45% $24.4  36%
              
              
   Three Months Ended June 30, 2018
   Product Service Total
   Gross Profit Gross Margin Gross Profit Gross Margin Gross Profit Gross Margin
GAAP  $18.1  22% $19.7  54% $37.8  31%
              
Share-based compensation (1)0.1    0.1    0.2   
Amortization of acquired and other intangibles (2)0.2        0.2   
Total reconciling items  0.3  % 0.1  % 0.4  1%
              
Non-GAAP  $18.4  22% $19.8  54% $38.2  32%
              
Notes             
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets


CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)
 
   Six Months Ended June 30, 2019
   Product Service Total
   Gross Profit Gross Margin Gross Profit Gross Margin Gross Profit Gross Margin
GAAP.  $14.6  23% $35.4  46% $50.0  36%
              
Share-based compensation (1)0.3    0.2    0.5   
Amortization of acquired and other intangibles (2)0.4        0.4   
Total reconciling items  0.7  1% 0.2  % 0.9  %
              
Non-GAAP  $15.3  24% $35.6  46% $50.9  36%
              
              
   Six Months Ended June 30, 2018
   Product Service Total
   Gross Profit Gross Margin Gross Profit Gross Margin Gross Profit Gross Margin
GAAP  $28.5  22% $36.3  50% $64.8  32%
              
Share-based compensation (1)0.2    0.2    0.4   
Amortization of acquired and other intangibles (2)0.4        0.4   
Total reconciling items  0.6  1% 0.2  1% 0.8  1%
              
Non-GAAP  $29.1  23% $36.5  51% $65.6  33%
              
Notes             
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets


CRAY INC. AND SUBSIDIARIES

Reconciliation of GAAP to non-GAAP Net Loss
(Unaudited; in millions except per share amounts and percentages)

   Three Months Ended
June 30,
 Six Months Ended
June 30,
   2019 2018 2019 2018
GAAP Net Loss  $(42.6) $(11.0) $(72.0) $(36.0)
          
Non-GAAP adjustments impacting gross profit:         
Share-based compensation (1)0.3  0.2  0.5  0.4 
Amortization of acquired and other intangibles (2)0.2  0.2  0.4  0.4 
Total adjustments impacting gross profit  0.5  0.4  0.9  0.8 
          
Non-GAAP gross margin percentage  36% 32% 36% 33%
          
Non-GAAP adjustments impacting operating expenses:         
Share-based compensation (1)3.8  3.0  7.2  5.7 
Amortization of acquired and other intangibles (2)  0.1  0.1  0.1 
Restructuring (3)      0.5 
Transaction costs related to the pending merger with HPE (4)7.6    7.6   
Total adjustments impacting operating expenses  11.4  3.1  14.9  6.3 
          
Non-GAAP adjustments impacting tax provision:         
Income tax on reconciling items (5)(2.6) (0.7) (3.4) (1.5)
Other items impacting tax provision (6)2.3  0.1  3.0  0.8 
   (0.3) (0.6) (0.4) (0.7)
          
Non-GAAP Net Loss  $(31.0) $(8.1) $(56.6) $(29.6)
          
Non-GAAP Diluted Net Loss per common share  $(0.75) $(0.20) $(1.38) $(0.73)
          
Diluted weighted average shares  41.1  40.6  41.1  40.5 
          
Notes         
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments to exclude restructuring costs
(4) Adjustments to exclude non-recurring transaction costs related to the pending merger with HPE
(5) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21%
(6) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (5) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets.


Cray Media: Investors:
Diana Brodskiy Paul Hiemstra
415/306-6199 206/701-2044
pr@cray.com ir@cray.com
   

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Source: Cray Inc