Violin Memory®, Inc., (NYSE:VMEM), a global pioneer of award-winning all-flash storage platform solutions for primary storage and active workloads, today announced financial results for the second fiscal quarter ended July 31, 2015.

Second Quarter Fiscal 2016 Financial Highlights

  • Second quarter fiscal 2016 revenue of $15.3 million
  • Second quarter fiscal 2016 GAAP1 gross margin of 43%
  • Second quarter fiscal 2016 non-GAAP2 gross margin of 47%
  • Second quarter fiscal 2016 GAAP net loss of $0.25 per share
  • Second quarter fiscal 2016 non-GAAP net loss of $0.19 per share

“Our second quarter revenue grew substantially, driven by significantly higher sales of Flash Storage Platform™ primary storage solutions to Fortune Global 500 and Fortune 1000-ranked enterprises,“ said Kevin DeNuccio, president and chief executive officer, Violin Memory. “While our top-line result came in below prior guidance, our continued strong focus on financial management contributed to a bottom line result better than the consensus3 view.”

With renewed growth in the second quarter and improving execution, we anticipate continued growth over the next several quarters fueled by new Flash Storage Platform wins and repeat purchases as customers begin to expand their initial Flash Storage Platform installations,” added DeNuccio.

Second Quarter Fiscal 2016 Financial Results

Second quarter fiscal 2016 revenue was $15.3 million, 26% higher sequentially compared to $12.1 million reported in the first quarter of fiscal 2016, and 18% lower compared to $18.6 million reported in the second quarter of fiscal year 2015.

Second quarter fiscal 2016 GAAP gross margin was 43% compared to 43% reported in the first quarter of fiscal 2016 and compared to 52% reported in the second quarter of fiscal year 2015.

Second quarter fiscal 2016 non-GAAP gross margin was 47% compared to 48% reported in the first quarter of fiscal 2016 and compared to 55% reported in the second quarter of fiscal year 2015.

Second quarter fiscal 2016 GAAP net loss was $24.4 million, or $0.25 per share, compared to first quarter fiscal 2016 GAAP net loss of $26.5 million, or $0.28 per share and compared to second quarter fiscal 2015 GAAP net loss of $8.4 million, or $0.09 per share.

Second quarter fiscal 2016 non-GAAP net loss was $18.4 million, or $0.19 per share, compared to first quarter fiscal 2016 non-GAAP net loss of $21.2 million, or $0.22 per share, and compared to second quarter fiscal 2015 non-GAAP net loss of $19.0 million, or $0.21 per share.

Cash and cash equivalents, restricted cash and short-term investments totaled $120.2 million as of July 31, 2015.

Business Outlook

The Company will provide third quarter fiscal year 2016 guidance during today’s conference call. Guidance will be posted on Violin Memory’s investor relations website at investor.violin-memory.com following the conclusion of the conference call.

All forward-looking non-GAAP measures exclude estimates for items such as stock-based compensation expense, amortization of acquired intangibles, restructuring and related costs, impairment charges and litigation settlements. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

1 Generally Accepted Accounting Principles.

2 A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

3 Consensus earnings estimate refers to non-GAAP net loss per share for the fourth quarter of fiscal 2015 as published by FactSet Research Systems Inc.

Violin Memory Conference Call Information

Violin Memory will host a conference call today at 2:00 p.m. pacific time to discuss financial results and business highlights. This call will be webcast and can be accessed via the Violin Memory website at investor.violin-memory.com. A replay will be available following the call on the same website for one week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) using ID #98920351.

Non-GAAP Financial Measures

To supplement the reader's overall understanding of both its reported results presented in accordance with U.S. generally accepted accounting principles ("GAAP") and its outlook, the Company also presents non-GAAP measures of gross profit, gross margin, operating expenses, net loss and net loss per share. The Company uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors as a supplement to GAAP measures in evaluating its ongoing operational performance and trends. As the calculation of non-GAAP financial measures differs between companies, the non-GAAP financial measures used by the Company may not be comparable to similarly titled measures used by other companies. As a result, the Company does not use, nor does it intend to use, the non-GAAP financial measures when assessing the Company's performance against that of other companies.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

The Company defines non-GAAP gross profit, operating expenses, net loss and net loss per share as the respective GAAP balances, adjusted for stock-based compensation expense, gain on sale of the PCIe product line, litigation settlements, restructuring charges investments and amortization of acquired intangibles.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the following: the Company’s ability to transition customers to the Company’s new Flash Storage Platform solutions and improve the transition; the Company’s ability to increase sales of its Flash Storage Platform to Fortune Global 500 and Fortune 1000-ranked enterprises; the Company’s ability to continue to manage its financial performance; the Company’s anticipation of continued growth going forward; the possibility of a revenue breakout in the next several quarters; customers’ expansion of their initial Flash Storage Platform installations; and the Company’s business plans and strategy. There are a number of risks and uncertainties that could affect the Company’s performance and financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Report on Form 10-Q for the first quarter of fiscal year 2016 which was filed with the SEC on June 9, 2015, and is available on the Company’s investor relations website at investor.violin-memory.com and on the SEC’s website at www.sec.gov. All forward-looking statements in this press release are based on information available to the Company as of the date hereof, and the Company does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Violin Memory, Inc.

Business in a Flash. Violin Memory, the industry pioneer in All Flash Arrays, is the agile innovator, transforming the speed of business with enterprise-grade data services software on its leadership Flash Storage Platforms™. Violin Concerto™ OS 7 delivers complete data protection and data reduction services and consistent high performance in a storage operating system fully integrated with Violin’s patented Flash Fabric Architecture™ for cloud, enterprise and virtualized business and mission-critical storage applications. Violin Flash Storage Platforms are designed for primary storage applications at costs below traditional hard disk arrays and accelerate breakthrough CAPEX and OPEX savings while helping customers build the next generation data center. Violin Flash Storage Platforms and All Flash Arrays enhance business agility while revolutionizing data center economics. Founded in 2005, Violin Memory is headquartered in Santa Clara, California. For more information, visit www.violin-memory.com. Follow us on Twitter at twitter.com/violinmemory.

All Violin Memory news releases (financial, acquisitions, manufacturing, products, technology, etc.) are issued exclusively by Business Wire and are immediately thereafter posted on the company's external website. For more information about Violin Memory, including Violin Memory’s trademarks, visit www.violin-memory.com.

         
VIOLIN MEMORY, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
 
Three Months Ended Six Months Ended
July 31, April 30, July 31, July 31, July 31,
2015 2015 2014 2015 2014
Revenue:
Product revenue $ 9,847 $ 6,823 $ 14,188 $ 16,670 $ 26,961
Service revenue   5,456     5,278     4,405     10,734     9,765  
Total revenue   15,303     12,101     18,593     27,404     36,726  
Cost of revenue:
Cost of product revenue (1) 5,872 4,230 6,934 10,102 13,600
Cost of service revenue (1)   2,831     2,721     1,971     5,552     3,869  
Total cost of revenue   8,703     6,951     8,905     15,654     17,469  
Gross profit   6,600     5,150     9,688     11,750     19,257  
Operating expenses:
Sales and marketing (1) 13,655 13,440 15,107 27,095 31,340
Research and development (1) 10,580 11,526 12,994 22,106 28,830
General and administrative (1) 4,708 5,151 5,154 9,859 10,986
Gain on sale of PCIe product line - - (17,448 ) - (17,448 )
Restructuring charges - - 1,306 - 3,062
Litigation settlement   -     -     652   -   652  
Total operating expenses   28,943     30,117     17,765     59,060     57,422  
Loss from operations (22,343 ) (24,967 ) (8,077 ) (47,310 ) (38,165 )
Other income (expense), net (303 ) 256 (181 ) (47 ) (62 )
Interest expense   (1,694 )   (1,750 )   (124 )   (3,444 )   (292 )
Loss before income taxes (24,340 ) (26,461 ) (8,382 ) (50,801 ) (38,519 )
Income taxes   42     41     30     83     36  
Net loss $ (24,382 ) $ (26,502 ) $ (8,412 ) $ (50,884 ) $ (38,555 )

Net loss per share of common stock, basic and diluted

$ (0.25 ) $ (0.28 ) $ (0.09 ) $ (0.53 ) $ (0.43 )

Shares used in computing net loss per share of common stock, basic and diluted

  96,588     95,478     91,410     96,042     88,839  

(1) Includes stock-based compensation expense as follows:

Cost of product revenue $ 270 $ 251 $ 279 $ 521 $ 458
Cost of service revenue 334 335 93 669 180
Sales and marketing 1,475 806 1,191 2,280 2,628
Research and development 1,977 1,977 1,834 3,955 6,100
General and administrative   1,902     1,891     1,419     3,794     3,090  
$ 5,958   $ 5,260   $ 4,816   $ 11,219   $ 12,456  

         
VIOLIN MEMORY, INC.
Condensed Consolidated Balance Sheets
(Unaudited; in thousands)
 
 
Assets

July 31,
2015

January 31,
2015

Current assets:
Cash and cash equivalents $ 43,451 $ 93,432
Restricted cash 10,000 2,300
Short-term investments 66,707 60,483
Accounts receivable, net 5,742 15,080
Inventory 13,002 10,322
Other current assets   3,776     5,949  
Total current assets 142,678 187,566
Property and equipment, net 9,036 9,863
Intangibles and other assets   9,529     10,806  
$ 161,243   $ 208,235  
 
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Short-term borrowings $ 13,723 $ 10,000
Accounts payable 5,859 11,065
Accrued liabilities 14,837 18,024
Deferred revenue, current   15,350     15,635  
Total current liabilities   49,769     54,724  
Convertible senior notes 120,000 120,000
Deferred revenue 7,571 10,398
Long-term liabilities   979     1,707  
Total liabilities   178,319     186,829  
 
Stockholders’ equity (deficit):
Preferred stock - -
Common stock 10 9
Additional paid-in capital 494,847 482,674
Accumulated other comprehensive income 476 248
Accumulated deficit   (512,409 )   (461,525 )
Total stockholders’ equity (deficit)   (17,076 )   21,406  
$ 161,243   $ 208,235  

       
VIOLIN MEMORY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
 
Six Months Ended
July 31, July 31,
2015 2014
 
Cash flows from operating activities:
Net loss $ (50,884 ) $ (38,555 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,697 5,861
Gain on sale of PCIe product line - (17,448 )
Accretion of debt issuance costs to interest expense 878 (194 )
Provision for excess and obsolete inventory - 606
Stock-based compensation 11,219 12,456
Changes in operating assets and liabilities, net:
Accounts receivable 9,338 8,995
Inventory (2,496 ) 2,972
Other assets 2,058 (1,682 )
Accounts payable (5,597 ) (3,589 )
Accrued liabilities (3,915 ) (16,008 )
Deferred revenue   (3,112 )   (787 )
Net cash used in operating activities   (37,814 )   (47,373 )
 
Cash flows from investing activities:
Purchase of property and equipment (3,149 ) (3,572 )
Proceeds from sale of PCIe product line - 23,000
Increase in restricted cash (7,700 ) (2,300 )
Purchase of investments (41,139 ) (11,214 )
Maturity of investments   34,915     47,195  
Net cash provided by (used in) investing activities   (17,073 )   53,109  
 
Cash flows from financing activities:
Proceeds from line of credit 17,723 17,326
Repayment of line of credit (14,000 ) (7,500 )
Proceeds from issuance of common stock 955 2,416
Taxes paid related to net share settlement of equity awards   -     (3,212 )
Net cash provided by financing activities   4,678     9,030  
Effect of exchange rates on cash and cash equivalents   228     (195 )
Net increase (decrease) in cash and cash equivalents (49,981 ) 14,571

Cash and cash equivalents at beginning of year

  93,432     40,273  
Cash and cash equivalents at end of period $ 43,451   $ 54,844  

       
VIOLIN MEMORY, INC.
Reconciliation of GAAP to Non-GAAP Measures
(In thousands, except per share data)
 
Three Months Ended
July 31, April 30, July 31,
2015 2015 2014
(Unaudited)
 
Gross profit (GAAP) $ 6,600 $ 5,150 $ 9,688
Stock-based compensation 604 586 372
Amortization of acquired intangibles   -     14     111  
Gross profit (Non-GAAP) $ 7,204   $ 5,750   $ 10,171  
 
Operating expenses (GAAP) $ 28,943 $ 30,117 $ 17,765
Stock-based compensation (5,354 ) (4,674 ) (4,444 )
Gain on sale of PCIe product line - - 17,448
Restructuring charges - - (1,306 )
Litigation settlement   -     -     (652 )
Operating expenses (Non-GAAP) $ 23,589   $ 25,443   $ 28,811  
 
Net loss (GAAP) $ (24,382 ) $ (26,502 ) $ (8,412 )
Stock-based compensation 5,958 5,260 4,816
Restructuring charges - - 1,306
Amortization of acquired intangibles - 14 111
Litigation settlement - - 652
Gain on sale of PCIe product line   -     -     (17,448 )
Net loss (Non-GAAP) $ (18,424 ) $ (21,228 ) $ (18,975 )
 
Net loss per common share, basic and diluted (GAAP) $ (0.25 ) $ (0.28 ) $ (0.09 )
Stock-based compensation 0.06 0.06 0.05
Restructuring charges - - 0.01
Amortization of acquired intangibles - 0.00 0.00
Litigation settlement - - 0.01
Gain on sale of PCIe product line   -     -     (0.19 )
Net loss per common share, basic and diluted (Non-GAAP) $ (0.19 ) $ (0.22 ) $ (0.21 )