FUSION-IO, INC. 
By SALT LAKE CITY, April 23, 2014 /PRNewswire/ -- Fusion-io (NYSE: FIO) today announced its financial results for its fiscal third quarter ended March 31, 2014.
-- Revenue: $100.5 million
-- GAAP Gross Margin of 51.0% and Non-GAAP Gross Margin of 52.4%
-- GAAP Net Loss per Diluted Share: $0.29
-- Non-GAAP Net Loss per Diluted Share: $0.10
-- Cash and Cash Equivalents: $225.1 million
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FISCAL THIRD QUARTER 2014 GAAP FINANCIAL RESULTS
Fusion-io reported revenue of $100.5 million for the fiscal third quarter of 2014, compared to $87.7 million for the same quarter of 2013. Net loss for the fiscal third quarter of 2014 was $30.7 million, or a net loss per diluted share of $0.29, compared to a net loss of $20.0 million, or a net loss per diluted share of $0.21, in the fiscal third quarter of 2013. Gross margin for the fiscal third quarter of 2014 was 51.0%. Operating margin for the fiscal third quarter of 2014 was a negative 30.1%.
FISCAL THIRD QUARTER 2014 NON-GAAP FINANCIAL RESULTS
Non-GAAP net loss for the fiscal third quarter of 2014 was $10.5 million, or a net loss per diluted share of $0.10, compared to non-GAAP net loss of $3.2 million, or a net loss per diluted share of $0.03 in the same quarter of 2013. Non-GAAP gross margin for the fiscal third quarter of 2014 was 52.4%. Non-GAAP operating margin for the fiscal third quarter of 2014 was a negative 16.7%. A complete reconciliation of GAAP to non-GAAP results is set forth in the attachment to this press release.
"We are pleased to deliver 6% sequential revenue growth this quarter while making investments in the team, technology and partnerships that we believe will drive the business forward," said Shane Robison, Fusion-io chairman and chief executive officer. "In Q3, we evolved our solutions-based go-to-market strategy through close collaboration with our OEM and ISV partners to offer our customers significant performance gains while lowering their datacenter operating expense."
Ted Hull, Fusion-io chief financial officer, added: "We have a healthy balance sheet with $225 million in cash and cash equivalents that gives us strategic flexibility to invest in our market-leading in-server acceleration solutions as well as in the growth of our all-flash and hybrid appliances. Our ability to offer end-to-end flash memory solutions creates value for customers and differentiates us in the industry, while further diversifying our business."
OTHER FINANCIAL HIGHLIGHTS
-- Cash and cash equivalents totaled $225.1 million at the end of fiscal
third quarter 2014, a decrease of $18.8 million from the prior
quarter-end.
-- Inventory was $72.7 million at the end of fiscal third quarter 2014, a
decrease of $7.7 million from the prior quarter-end.
-- Capital expenditures were $2.9 million in fiscal third quarter 2014 and
$8.7 million fiscal year-to-date.
-- Cash used in operations was $18.8 million in fiscal third quarter 2014
and $22.9 million fiscal year-to-date.
RECENT BUSINESS HIGHLIGHTS
-- On April 15, Fusion-io announced collaboration with Microsoft to
optimize performance for new in-memory capabilities built into Microsoft
SQL Server 2014. Fusion ioMemory fits natively with SQL Server 2014 to
provide a 4x improvement in transactions per second and a significant
reduction in data latencies that translates to faster insights at lower
costs for Microsoft customers.
-- On April 2, Fusion-io announced collaboration with Oracle on the
development of flash-aware interfaces for MySQL, including NVM
Compression and Atomic Writes, interfaces which allow MySQL to deliver
up to 4x more flash endurance by streamlining commands to help optimize
databases for persistent flash memory architectures.
-- On April 2, Fusion-io also announced partnerships with Percona and
MariaDB/SkySQL and the availability of NVM Compression, a breakthrough
software feature unique to Fusion-io that enables applications like
databases to leverage the native capabilities of flash as a memory to
reduce the amount of space needed to store data without hindering
performance.
-- In early February, Fusion-io announced the general availability of
Fusion ioVDI software for VMware Horizon View hosted virtual desktop
environments, as well as comprehensive updates to its suite of
virtualization solutions which maximize performance and efficiency from
in-server to hybrid flash acceleration.
-- On February 6, Fusion-io announced that the all-flash ION Accelerator
appliance and ioControl Hybrid Storage appliance are being offered as
fully integrated solutions from Fusion-io value added resellers (VARs)
for accelerating enterprise applications including Oracle, SAP HANA, and
Microsoft SQL Server, as well as virtualization workloads.
BUSINESS OUTLOOK
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements supersede all prior statements regarding fiscal 2014 financial results.
Fourth quarter of fiscal year 2014:
-- Revenue is expected to be in-line to slightly up sequentially.
-- Non-GAAP gross margin is expected to be 52 to 54%.
-- Non-GAAP operating margin of approximately negative 13 to 17%.
-- Diluted shares outstanding are expected to be approximately 108 million
shares.
NON-GAAP FINANCIAL MEASURES
Fusion-io uses certain non-GAAP financial measures in this release. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. Reconciliation between non-GAAP and GAAP measures can be found in the accompanying tables and on the investor relations page of our website at www.fusionio.com. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures differ from GAAP measures with the same captions, may differ from non-GAAP financial measures with the same or similar captions that are used by other companies, and do not reflect a comprehensive system of accounting.
Fusion-io's management uses the non-GAAP financial measures in the accompanying schedules to gain an understanding of Fusion-io's comparative operating performance and future prospects, and utilizes these measures in its internal financial statements for purposes of its internal budgets and financial goals. Management also believes that the exclusion of the items described below provides an additional measure of the company's operating results and facilitates comparisons of Fusion-io's core operating performance against prior periods and business model objectives. Management believes that investors should have access to the same set of tools that management uses to analyze Fusion-io's results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP. Fusion-io endeavors to compensate for the limitation of the non-GAAP measures presented by also providing the most directly comparable GAAP measures and descriptions of the reconciling items and adjustments to derive the non-GAAP measures.
For all periods presented:
-- Non-GAAP gross margin is calculated as non-GAAP gross profit divided by
GAAP revenue. Non-GAAP gross profit consists of GAAP gross profit
excluding the effects of stock-based compensation expense, amortization
of intangible assets, and litigation settlement related expenses.
-- Non-GAAP operating margin is calculated as non-GAAP (loss) income from
operations divided by GAAP revenue. Non-GAAP (loss) income from
operations consists of GAAP loss from operations excluding the effects
of stock-based compensation expense, amortization of intangible assets,
acquisition related expenses, and litigation settlement related
expenses.
-- Non-GAAP net (loss) income is calculated as GAAP net loss excluding the
effects of stock-based compensation expense, amortization of intangible
assets, acquisition related expenses, tax provision adjustments related
to stock-based awards, and litigation settlement related expenses.
-- Non-GAAP net (loss) income per diluted share is calculated as non-GAAP
net (loss) income divided by GAAP weighted-average diluted shares
outstanding for the three months ended March 31, 2013 and for the three
and nine months ended March 31, 2014 and is calculated as non-GAAP net
(loss) income divided by non-GAAP weighted-average diluted shares
outstanding for the nine months ended March 31, 2013. Non-GAAP
weighted-average diluted shares outstanding is calculated as GAAP
weighted-average diluted shares outstanding including the dilutive
impact due to stock options, restricted stock awards, and restricted
stock units.
The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures. With respect to our expectations under "Business Outlook" above, reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability and low visibility with respect to the charges which are excluded from these non-GAAP measures. The effects of stock-based compensation expense specific to non-employee common stock options are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant impact on our GAAP financial results.
RECLASSIFICATION
Certain expense amounts previously reported as cost of revenue, sales and marketing, research and development, and general and administrative expenses have been reclassified within those categories to conform to fiscal year 2014 presentation. The reclassifications did not change amounts previously reported as income (loss) from operations and net income (loss).
TODAY'S CONFERENCE CALL
Fusion-io will host an investor conference call and live webcast today, Wednesday, April 23, 2014, at 5:00 p.m. EDT to discuss these financial results. To access the conference call, dial 1.888.771.4371 or 1.847.585.4405 for international callers. The access code is 3700 4909. A listen-only live webcast will be accessible on the investor relations page of our website at www.fusionio.com and will be archived and available on this site for at least three months. A telephone replay of the conference call will be available through Wednesday, April 30, 2014. To access the replay, please dial 1.888.843.7419 or 1.630.652.3042 for international callers. The access code is 3700 4909. This press release and the financial information discussed on today's conference call are available on the investor relations page of our website at www.fusionio.com.
ABOUT FUSION-IO
Fusion-io delivers the world's data faster. Our Fusion ioMemory platform and software defined storage solutions accelerate virtualization, databases, cloud computing, big data and performance applications. From e-commerce retailers to the world's social media leaders and Fortune Global 500 companies, our customers are improving the performance and efficiency of their data centers with Fusion-io technology to accelerate the critical applications of the information economy.
NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but are not limited to, statements concerning financial guidance for our fourth quarter of our fiscal year 2014, our progress on our go-to-market strategy, the effect of our efforts to diversify our customer base, our strategic flexibility, our expectations as to recent management changes, our sales execution efforts, our expectations regarding the market opportunity, expectations concerning our product portfolio and our strategic partnerships, and benefits and value of our products and solutions to our customers and end users. These statements are based on current expectations and assumptions regarding future events and business performance and involve certain risks and uncertainties that could cause actual results to differ materially from those contained, anticipated, or implied in any forward-looking statement, including, but not limited to, risks associated with changes in the demand for our products, our expectation that large and concentrated purchases by a limited number of customers will continue to represent a substantial majority of our revenue and our ability to sustain or increase our revenue from our large customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers, the risk that expected large transactions anticipated to close in one fiscal quarter may be delayed until a subsequent quarter or indefinitely, the continued adoption by customers of our ioMemory platform products, growing our sales through OEMs, resellers and channel partners and maintaining our relationships with OEMs, resellers and channel partners, including the timely qualification of our products for promotion and sale by our OEMs, long and unpredictable sales cycles, changes in the competitive dynamics of our markets, including the potential for increased pressure on the pricing of our products, reduced gross margins, increased sales and marketing expenses, the potential that we or our customers may not realize the benefits we currently expect from our acquisitions of ID7 and NexGen Storage, our ability to develop or acquire new products to meet customer needs and expectations, including additional software solutions to be integrated with our storage memory products, our acquisition and strategic partner strategy and disruptions in our business, operations and financial results as a result of acquisitions and strategic partner relationships, as well as the risks inherent in the integration and combination of complex products and technologies from acquisitions, undetected errors, defects or security vulnerabilities in our products, worldwide economic conditions and the impact these conditions have on levels of spending on datacenter technology like ours, our ability to recruit and retain new executive officers, and such other risks set forth in the registration statements and reports that Fusion-io files with the U.S. Securities and Exchange Commission, which are available on the Investor Relations section of our website at www.fusionio.com. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or will occur. Fusion-io undertakes no obligation to update publicly any forward-looking statement for any reason after the date of this press release.
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Contacts
Stefanie Cannon Nancy Fazioli
Fusion-io Communications Fusion-io Investor Relations
408.597.1494 408.416.5779
prteam@fusionio.com ir@fusionio.com
Fusion-io, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
2013 2014 2013 2014
---- ---- ---- ----
Revenue $87,650 $100,528 $326,334 $281,322
Cost of
revenue
(1), (2),
(5) 39,521 49,291 133,734 127,319
------ ------ ------- -------
Gross profit 48,129 51,237 192,600 154,003
Operating
expenses:
Sales and
marketing
(1), (2) 33,584 39,334 88,837 109,621
Research and
development
(1), (2) 26,035 30,548 71,767 86,746
General and
administrative
(1), (3),
(5) 16,977 11,617 45,120 36,660
Total
operating
expenses 76,596 81,499 205,724 233,027
------ ------ ------- -------
Loss from
operations (28,467) (30,262) (13,124) (79,024)
Other income
(expense):
Interest
income 82 23 295 92
Interest
expense (44) (45) (92) (157)
Other
(expense)
income (40) (27) (54) 182
--- --- --- ---
Loss before
income
taxes (28,469) (30,311) (12,975) (78,907)
Income tax
benefit
(expense)
(4) 8,422 (343) (1,407) (944)
----- ---- ------ ----
Net loss $(20,047) $(30,654) $(14,382) $(79,851)
======== ======== ======== ========
Net loss per
common
share:
Basic $(0.21) $(0.29) $(0.15) $(0.77)
Diluted $(0.21) $(0.29) $(0.15) $(0.77)
Weighted-
average
number of
shares:
Basic 96,805 106,541 95,621 103,736
Diluted 96,805 106,541 95,621 103,736
(1) Includes
stock-
based
compensation
expenses,
as follows:
Cost of
revenue $132 $156 $269 $469
Sales and
marketing 2,663 3,062 7,370 8,016
Research and
development 4,891 4,453 13,979 12,519
General and
administrative 5,422 3,758 19,308 12,814
Total stock-
based
compensation
expenses $13,108 $11,429 $40,926 $33,818
======= ======= ======= =======
(2) Includes
amortization
of
intangible
assets, as
follows:
Cost of
revenue $75 $1,306 $75 $3,918
Sales and
marketing - 81 - 243
Research and
development 656 656 1,968 1,968
Total
amortization
of
intangible
assets $731 $2,043 $2,043 $6,129
==== ====== ====== ======
(3) Includes
acquisition
related
expenses $559 $ - $559 $36
(4) Includes
tax
provision
adjustments
related to
stock-
based
awards $(4,377) $6,706 $(10,572) $16,368
(5) Includes
litigation
settlement
related
expenses,
as follows:
Cost of
revenue $4,052 $ - $4,052 $ -
General and
administrative 2,805 - 2,805 -
Total
litigation
settlement
related
expenses $6,857 $ - $6,857 $ -
====== =============== ====== ==============
Fusion-io, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30, March 31,
2013 2014
---- ----
Assets
Current assets:
Cash and cash equivalents $238,351 $225,146
Accounts receivable, net 69,107 74,211
Inventories 71,160 72,659
Prepaid expenses and other
current assets 9,530 11,339
----- ------
Total current assets 388,148 383,355
Property and equipment,
net 35,272 31,656
Restricted cash 4,860 179
Intangible assets, net 28,268 21,591
Goodwill 149,467 149,467
Other assets 1,433 1,098
----- -----
Total assets $607,448 $587,346
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $14,170 $27,703
Accrued and other current
liabilities 44,425 46,886
Deferred revenue 24,848 19,779
------ ------
Total current liabilities 83,443 94,368
Deferred revenue, less
current portion 14,167 18,389
Other liabilities 19,421 15,200
Commitments and contingencies
Stockholders' equity:
Common stock 20 21
Additional paid-in capital 599,292 648,376
Accumulated other
comprehensive loss (110) (372)
Accumulated deficit (108,785) (188,636)
Total stockholders' equity 490,417 459,389
------- -------
Total liabilities and
stockholders' equity $607,448 $587,346
======== ========
Fusion-io, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
2013 2014 2013 2014
---- ---- ---- ----
Operating activities:
Net loss $(20,047) $(30,654) $(14,382) $(79,851)
Adjustments to reconcile net loss to net
cash provided by (used in)
operating activities:
Depreciation
and
amortization 4,005 5,872 10,768 17,666
Stock-based
compensation 13,108 11,429 40,926 33,818
Excess tax
benefit
from stock-
based
awards 8,945 (3) (448) (8)
Other non-
cash items 11 1,415 11 1,440
Changes in operating assets and
liabilities:
Accounts
receivable,
net 5,492 (23,797) 6,244 (5,104)
Inventories 3,096 7,681 (11,632) (1,499)
Prepaid
expenses
and other
assets 890 (174) 59 26
Accounts
payable (48) 6,986 (704) 13,533
Accrued and
other
liabilities (5,653) 1,773 8,588 (2,074)
Deferred
revenue (2,879) 713 6,382 (847)
------ --- ----- ----
Net cash
provided by
(used in)
operating
activities 6,920 (18,759) 45,812 (22,900)
Investing activities:
Business
acquisition,
net of cash
acquired (5,861) - (5,861) -
Purchases of
property
and
equipment (2,186) (2,896) (10,898) (8,732)
------ ------ ------- ------
Net cash
used in
investing
activities (8,047) (2,896) (16,759) (8,732)
Financing activities:
Repayment of
notes
payable (623) - (623) -
Proceeds
from
exercises
of stock
options 866 2,092 7,002 12,583
Issuance of restricted stock awards and
restricted stock units,
net of
repurchases (838) (863) (2,715) (2,661)
Proceeds from issuance of common stock
under employee stock
purchase
plan 1,720 1,669 5,093 5,298
Excess tax
benefit
from stock
option
exercises (8,945) 3 448 8
Change in
restricted
cash (4,843) - (4,843) 3,181
------ --- ------ -----
Net cash
(used in)
provided by
financing
activities (12,663) 2,901 4,362 18,409
Effect of
exchange
rate
changes on
cash and
cash
equivalents (88) (56) (7) 18
--- --- --- ---
Net
(decrease)
increase in
cash and
cash
equivalents (13,878) (18,810) 33,408 (13,205)
Cash and
cash
equivalents
at
beginning
of period 368,525 243,956 321,239 238,351
------- ------- ------- -------
Cash and
cash
equivalents
at end of
period $354,647 $225,146 $354,647 $225,146
======== ======== ======== ========
Fusion-io, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
Three Months
Ended Nine Months Ended
March 31, March 31,
--------- ---------
2013 2014 2013 2014
---- ---- ---- ----
Reconciliation of
Gross Profit and
Gross Margin on
a GAAP Basis to
Gross Profit and
Gross Margin on
a Non-GAAP
Basis:
Gross profit on a
GAAP basis $48,129 $51,237 $192,600 $154,003
Stock-based
compensation 132 156 269 469
Amortization of
intangible
assets 75 1,306 75 3,918
Litigation
settlement
related expenses 4,052 - 4,052 -
Gross profit on a
non-GAAP basis $52,388 $52,699 $196,996 $158,390
======= ======= ======== ========
Revenue $87,650 $100,528 $326,334 $281,322
Gross margin on a
GAAP basis 54.9% 51.0% 59.0% 54.7%
Gross margin on a
non-GAAP basis 59.8% 52.4% 60.4% 56.3%
Reconciliation of
Operating Loss
and Operating
Margin on a GAAP
Basis to
Operating (Loss)
Income and
Operating Margin
on a Non-GAAP
Basis:
Operating loss on
a GAAP basis $(28,467) $(30,262) $(13,124) $(79,024)
Stock-based
compensation 13,108 11,429 40,926 33,818
Amortization of
intangible
assets 731 2,043 2,043 6,129
Acquisition
related expenses 559 - 559 36
Litigation
settlement
related expenses 6,857 - 6,857 -
Operating (loss)
income on a non-
GAAP basis $(7,212) $(16,790) $37,261 $(39,041)
======= ======== ======= ========
Revenue $87,650 $100,528 $326,334 $281,322
Operating margin
on a GAAP basis -32.5% -30.1% -4.0% -28.1%
Operating margin
on a non-GAAP
basis -8.2% -16.7% 11.4% -13.9%
Reconciliation of
Net Loss on a
GAAP Basis to
Net (Loss)
Income on a Non-
GAAP Basis:
Net loss on a
GAAP basis $(20,047) $(30,654) $(14,382) $(79,851)
Stock-based
compensation 13,108 11,429 40,926 33,818
Amortization of
intangible
assets 731 2,043 2,043 6,129
Acquisition
related expenses 559 - 559 36
Tax provision
adjustments
related to
stock-based
awards (4,377) 6,706 (10,572) 16,368
Litigation
settlement
related expenses 6,857 - 6,857 -
Net (loss) income
on a non-GAAP
basis $(3,169) $(10,476) $25,431 $(23,500)
======= ======== ======= ========
Fusion-io, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
2013 2014 2013 2014
---- ---- ---- ----
Reconciliation of
Diluted Net Loss
per Share on a
GAAP Basis to
Diluted Net
(Loss) Income
per Share on a
Non-GAAP Basis:
Diluted net loss
per share on a
GAAP basis $(0.21) $(0.29) $(0.15) $(0.77)
Stock-based
compensation 0.14 0.11 0.42 0.32
Amortization of
intangible
assets 0.01 0.02 0.02 0.06
Acquisition
related expenses 0.01 - 0.01 -
Tax provision
adjustments
related to
stock-based
awards (0.05) 0.06 (0.11) 0.16
Litigation
settlement
related expenses 0.07 - 0.07 -
Impact of
difference in
number of GAAP
and non-GAAP
diluted shares - - (0.03) -
Diluted net
(loss) income
per share on a
non-GAAP basis $(0.03) $(0.10) $0.23 $(0.23)
====== ====== ===== ======
Reconciliation of
GAAP Diluted
Weighted-
Average Number
of Shares to
Non-GAAP
Diluted
Weighted-
Average Number
of Shares:
GAAP diluted
weighted-
average number
of shares 96,805 106,541 95,621 103,736
Dilutive impact
due to stock
options,
restricted stock
awards,
and restricted
stock units - - 13,009 -
Non-GAAP diluted
weighted-
average number
of shares 96,805 106,541 108,630 103,736
====== ======= ======= =======
SOURCE Fusion-io
