Isilon Systems Announces 2009 Fourth Quarter and Annual Financial Results
Achieves First Non-GAAP Profitable Quarter with Record Revenue and Gross Margin
SEATTLE, Feb. 4 /PRNewswire-FirstCall/ -- Isilon® Systems (Nasdaq: ISLN) today announced its financial results for the fourth quarter and year ended December 31, 2009. Revenue for the fourth quarter was $37.5 million, up 23% sequentially compared to $30.5 million in the third quarter of 2009 and up 18% from $31.8 million in the fourth quarter of 2008. Revenue for the year ended December 31, 2009 was $123.9 million, up 8% from $114.4 million in 2008.
"Isilon's fourth quarter set records for revenue, gross margin, income and new customers. These results, coupled with increasing operating leverage, led to Isilon's first profitable quarter," said Sujal Patel, President and Chief Executive Officer, Isilon Systems. "While we're certainly gratified that we've achieved this important milestone, we're even more pleased with the validation of our business model that these results provide. We will continue to sharpen our focus on driving long-term growth by broadening the markets we're able to successfully address and by creating innovative products and solutions that align directly with the rapidly evolving needs of enterprise storage buyers."
Financial results for the fourth quarter and full year of 2009 included the following:
- Gross margin for the fourth quarter of 2009 was 57.6%, compared with 56.9% in the third quarter of 2009 and 57.1% in the fourth quarter of 2008.
- Net income for the fourth quarter of 2009 was $0.1 million, or $0.00 per share, compared with net loss of $4.9 million, or $0.08 per share in the third quarter of 2009. Net loss in the fourth quarter of 2008 was $4.3 million, or $0.07 per share. Non-GAAP net income for the fourth quarter of 2009 was $1.6 million, or $0.02 per share, compared with non-GAAP net loss of $1.4 million, or $0.02 per share in the third quarter of 2009. Non-GAAP net loss in the fourth quarter of 2008 was $2.8 million, or $0.04 per share.
- Cash flows generated from operations in the fourth quarter of 2009 were a positive $2.5 million compared with $0.9 million in the third quarter of 2009 and $2.7 million in the fourth quarter of 2008. Cash flows from operations in the fourth quarter of 2009 were reduced by a $2.0 million payment as part of the previously announced proposed settlement of the securities class action litigation.
Conference Call
Isilon management will host a conference call today at 5:30 a.m. PT (8:30 a.m. ET) to discuss Isilon's fourth quarter and annual financial results. The conference call will be webcast on the Investor Relations section of Isilon's website at www.isilon.com/company/, where it will be archived. In addition, the live conference call will be accessible by telephone at 866-578-5771 or 617-213-8055, passcode 50345515.
A replay of the call will be available by telephone approximately two hours after the call ends until 9:00 p.m. PT (12:00 midnight ET), February 11, 2010, at 888-286-8010 or 617-801-6888. The replay passcode is 31196675.
About Isilon Systems
Isilon Systems (NASDAQ: ISLN) is the proven leader in scale-out NAS. Our clustered storage and data management solutions drive unique business and economic value for customers by maximizing the performance of their mission-critical applications, workflows and processes. Isilon enables enterprises and research organizations world-wide to manage large and rapidly growing amounts of file-based data in a highly-scalable, easy-to-manage, and cost-effective way. Information about Isilon can be found at http://www.isilon.com.
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements prepared in accordance with GAAP, this press release includes non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), and non-GAAP income (loss) per share. Isilon provides non-GAAP information to enhance investors' overall understanding of the company's current financial performance and the company's prospects for the future and to aid in comparing current operating results with those of past periods. The company believes the non-GAAP measures provide useful information to management and investors by excluding certain items that may not be indicative of Isilon's core operating results and business outlook.
Non-GAAP gross margin, non-GAAP income (loss) from operations, non-GAAP net income (loss), and non-GAAP income (loss) per share exclude charges related to stock-based compensation expenses, restructuring charges and expenses related to the settlement of our shareholder litigation. Isilon excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that Isilon does not believe reflect core operating results. Stock-based compensation expense is dependent on a number of factors over which management has limited control and is not a factor management utilizes in operating the business. Non-GAAP results also exclude a restructuring charge related to expenses incurred during the second quarter in connection with a reduction in the company's workforce, and charges from the settlement of the shareholder class action incurred during the third quarter. The restructuring and legal settlement charges are excluded because management believes that they are not indicative of on-going results.
These non-GAAP measures are not calculated in accordance with GAAP and should be considered supplemental to, and not a substitute for, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Isilon believes that non-GAAP measures have inherent limitations in that they do not reflect all of the amounts associated with Isilon's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Isilon's results of operations in conjunction with the corresponding GAAP measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP measures. Except as noted above, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the exclusion or inclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent.
A table following the financial statements provides a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures used by management.
Safe Harbor for Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the validation of our business model and our ability to broaden our markets and offer products that align with the needs of enterprise storage buyers. These statements are not guarantees of future performance, but are based on management's expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve risks, uncertainties, and assumptions. If the risks or uncertainties ever materialize, or the assumptions prove incorrect, our actual results may differ materially from those expressed or implied by our forward-looking statements. There can be no assurances that forward-looking statements will be achieved. Important factors that could cause actual results to differ materially from those indicated in forward-looking statements include the following: risks associated with anticipated growth in file-based content; competitive factors, including changes in the competitive environment, pricing pressures, sales cycle time and increased competition; our ability to build and expand our direct sales operations and improve our reseller distribution channels; our ability to build sales backlogs and improve sales linearity; general economic and industry conditions, including expenditure trends for storage-related products; new product introductions and our ability to develop and deliver innovative products; our ability to provide high-quality service and support offerings; our reliance on a limited number of suppliers and our ability to forecast demand for our products and potential shortages or price fluctuations in our supply chain; risks associated with international operations; and macro-economic conditions. These and other important risk factors and assumptions are detailed in documents filed with the Securities and Exchange Commission, including our report on Form 10-Q for the quarter ended September 30, 2009, our Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission, and could cause actual results to vary from expectations. The Company makes no commitment to revise or update any forward-looking statements in order to reflect subsequent events or circumstances.
Isilon Systems, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Revenue:
Product $29,191 $25,119 $93,722 $91,946
Services 8,340 6,665 30,189 22,476
----- ----- ------ ------
Total revenue 37,531 31,784 123,911 114,422
------ ------ ------- -------
Cost of revenue:
Product 12,170 10,035 41,861 36,775
Services (1) 3,747 3,590 15,719 13,213
----- ----- ------ ------
Total cost of
revenue 15,917 13,625 57,580 49,988
------ ------ ------ ------
Gross profit 21,614 18,159 66,331 64,434
------ ------ ------ ------
Operating expenses:
Research and
development (1) 5,520 6,261 23,668 24,049
Sales and
marketing (1) 13,095 11,817 45,538 47,363
General and
administrative (1) 3,052 4,397 14,232 19,700
Restructuring charges - - 357 -
Legal settlement - - 2,000 -
--- --- ----- ---
Total operating
expenses 21,667 22,475 85,795 91,112
------ ------ ------ ------
Loss from operations (53) (4,316) (19,464) (26,678)
Interest income and other 103 209 805 2,069
--- --- --- -----
Income (loss) before income
tax expense 50 (4,107) (18,659) (24,609)
Income tax benefit (expense) 90 (226) (214) (469)
--- ---- ---- ----
Net income (loss) $140 $(4,333) $(18,873) $(25,078)
==== ======= ======== ========
Net income (loss) per share,
basic $0.00 $(0.07) $(0.29) $(0.40)
===== ====== ====== ======
Net income (loss) per share,
diluted $0.00 $(0.07) $(0.29) $(0.40)
===== ====== ====== ======
Shares used in computing
basic net income (loss)
per share 64,888 63,760 64,362 63,318
Shares used in computing
diluted net income (loss)
per share 68,077 63,760 64,362 63,318
(1) Includes stock-based
compensation as follows:
Cost of revenue $50 $- $253 $124
Research and
development 356 377 1,613 1,165
Sales and marketing 539 602 1,878 2,257
General and
administrative 509 560 2,045 2,359
Isilon Systems, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
As of
-------
December 31, December 31,
2009 2008
------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $23,135 $34,342
Marketable securities 56,019 43,441
Trade receivables, net of
allowances of $314 and $250,
respectively 20,824 14,436
Inventories 5,636 12,433
Other current assets 5,819 4,243
----- -----
Total current assets 111,433 108,895
Property and equipment, net 6,660 11,295
----- ------
Total assets $118,093 $120,190
======== ========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $7,313 $9,779
Accrued liabilities 5,155 4,188
Accrued compensation and related
benefits 6,828 5,879
Deferred revenue 24,421 18,209
------ ------
Total current liabilities 43,717 38,055
Deferred revenue, net of current
portion 13,380 8,954
Deferred rent, net of current
portion 2,717 3,158
----- -----
Total liabilities 59,814 50,167
------ ------
Commitments and contingencies
Stockholders' equity:
Common stock 1 1
Additional paid-in capital 205,192 197,685
Accumulated other comprehensive
income (loss) (373) 5
Accumulated deficit (146,541) (127,668)
-------- --------
Total stockholders' equity 58,279 70,023
------ ------
Total liabilities and
stockholders' equity $118,093 $120,190
======== ========
Isilon Systems, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended Year Ended
-------------------- ------------
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Cash flows from
operating activities
Net income (loss) $140 $(4,333) $(18,873) $(25,078)
Adjustments to
reconcile net
income (loss)
to net cash
provided by
(used in)
operating activities:
Depreciation and
amortization 1,242 1,565 5,871 6,255
Amortization
(accretion) of
discount
(premium) on
marketable
securities 186 29 513 (112)
Stock-based
compensation
expense 1,456 1,539 5,789 5,905
Changes in
operating
assets and
liabilities:
Accounts
receivable,
net (2,875) 722 (6,394) 5,715
Inventories 331 (1,915) 6,798 (3,112)
Other current
assets (1,308) 1,514 (1,314) 1,370
Accounts
payable (1,438) 70 (2,278) (1,624)
Accrued
liabilities,
compensation
payable and
deferred rent (512) 66 1,365 (464)
Deferred revenue 5,245 3,449 10,639 8,952
----- ----- ------ -----
Net cash provided
by (used in)
operating
activities 2,467 2,706 2,116 (2,193)
----- ----- ----- ------
Cash flows from
investing
activities
Purchases of
property and
equipment (269) (1,982) (1,752) (6,576)
Purchases of
marketable
securities (36,930) (21,694) (72,022) (53,359)
Proceeds from sales
and maturities of
marketable
securities 27,400 8,500 58,575 57,177
------ ----- ------ ------
Net cash used in
investing
activities (9,799) (15,176) (15,199) (2,758)
------ ------- ------- ------
Cash flows from
financing
activities
Proceeds from the
exercise of stock
options 197 30 866 483
Proceeds from
employee stock
purchase plan - - 897 -
Repurchases of
unvested common
stock - - - (13)
--- --- --- ---
Net cash provided
by financing
activities 197 30 1,763 470
--- --- ----- ---
Effect of exchange
rate changes on
cash and cash
equivalents 3 (129) 113 (176)
--- ---- --- ----
Net decrease in
cash and cash
equivalents (7,132) (12,569) (11,207) (4,657)
Cash and cash
equivalents at
beginning of
period 30,266 46,911 34,342 38,999
------ ------ ------ ------
Cash and cash
equivalents at end
of period $23,134 $34,342 $23,135 $34,342
======= ======= ======= =======
Isilon Systems, Inc.
Reconciliation of GAAP to non-GAAP results
(in thousands, except percentages and per share data)
Net
income
(loss)
per
common
Income share,
(loss) Net basic
Gross Operating from income and
margin % Expenses operations (loss) diluted
-------- ---------- ---------- ------- -------
Three Months Ended
December 31, 2009
GAAP 57.6% $21,667 $(53) $140 $0.00
Adjustments:
Stock-based
compensation 0.1 (1,404) 1,454 1,454 0.02
--- ------ ----- ----- ----
Non-GAAP 57.7% $20,263 $1,401 $1,594 $0.02
==== ======= ====== ====== =====
September 30, 2009
GAAP 56.9% $22,308 $(4,945) $(4,867) $(0.08)
Adjustments:
Stock-based
compensation 0.2 (1,365) 1,425 1,425 0.03
Legal settlement - (2,000) 2,000 2,000 0.03
--- ------ ----- ----- ----
Non-GAAP 57.1% $18,943 $(1,520) $(1,442) $(0.02)
==== ======= ======= ======= ======
December 31, 2008
GAAP 57.1% $22,475 $(4,316) $(4,333) $(0.07)
Adjustments:
Stock-based
compensation - (1,539) 1,539 1,539 0.03
--- ------ ----- ----- ----
Non-GAAP 57.1% $20,936 $(2,777) $(2,794) $(0.04)
==== ======= ======= ======= ======
Twelve Months Ended
December 31, 2009
GAAP 53.5% $85,795 $(19,464) $(18,873) $(0.29)
Adjustments:
Stock-based
compensation 0.2 (5,536) 5,789 5,789 0.09
Restructuring
charges - (357) 357 357 0.00
Legal settlement - (2,000) 2,000 2,000 0.03
--- ------ ----- ----- ----
Non-GAAP 53.7% $77,902 $(11,318) $(10,727) $(0.17)
==== ======= ======== ======== ======
December 31, 2008
GAAP 56.3% $91,112 $(26,678) $(25,078) $(0.40)
Adjustments:
Stock-based
compensation 0.1 (5,781) 5,905 5,905 0.10
--- ------ ----- ----- ----
Non-GAAP 56.4% $85,331 $(20,773) $(19,173) $(0.30)
==== ======= ======== ======== ======
SOURCE Isilon Systems
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