Silicon Graphics International Corp (SGI)

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Silicon Graphics International Corp. (SGI)

F3Q11 (Qtr End 03/25/11) Earnings Call

May 3, 2011 2:30 pm ET


Jason Golz - IR

Mark Barrenechea - CEO

Jim Wheat - CFO


Brian Freed - Wunderlich Securities

Shebly Seyrafi - FBN Securities

Rajesh Ghai - ThinkEquity

Brian Freed - Wunderlich Securities

Bill Smith - William Smith & Company



Good day ladies and gentlemen and welcome to the Silicon Graphics International Corp. third quarter 2011 financial results conference. (Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. Jason Golz, Investor Relations for SGI.

Jason Golz

Thank you for joining us to discuss our third quarter fiscal year 2011 financial earnings results. On the call with me today are Mark Barrenechea, SGI's Chief Executive Officer; and Jim Wheat, our Chief Financial Officer.

Our third quarter fiscal 2011 financial results were released just after today's market close. Our press release and earnings slide presentation is available on the Investor Relations section of our website at We have arranged for an audio replay of today's call, which will also be available through our website for five days.

A replay of the webcast will be available two hours after the conclusion of today's earnings call and will be available until the next call. The date of this call is May 3, 2011. This call is the property of SGI, and any recording, reproduction or transmission of this conference call without the expressed prior written consent of SGI is strictly prohibited.

Before I turn the call over to Mark, I'd like to call your attention to the Safe Harbor disclosure in our earnings release regarding forward-looking information.

Today's conference call may include forward-looking statements and projections, including financial projections for FY '11 and FY '12, market growth and product development plans. There can be no assurance that we will achieve these projected results and we ask that you refer to our most recent filings with the SEC for important risk factors that could cause actual results to differ materially from these projections. We do not take any obligations to update our forward-looking statements unless required to do so by law.

To obtain copies of our latest SEC filings, please visit or visit our website at Additionally, we note that we continue to use and refer to certain non-GAAP measures. The non-GAAP figures we present in today's call are also contained in our earnings release along with a reconciliation to the applicable GAAP metric.

Separately, we are pleased to let you know that SGI will be presenting at the Annual JMP Securities Research Conference in San Francisco on May 10 and at Baird's 2011 Growth Stock Conference on May 11 in Chicago. We invite you to join us by webcast if you are unable to attend these conferences.

Also, we will have a presence at the International Supercomputing Conference, June 19 through June 23 in Hamburg, Germany.

I'd now like to turn the call over to Mark Barrenechea, SGI's CEO.

Mark Barrenechea

Welcome everyone to our FY '11 Q3 earnings call. This was the strongest March quarter and fastest start to a calendar year we've experienced to-date. Our strategy of technical computing is working as evidenced by our results.

On a non-GAAP basis, revenues were $135.8 million; margins were 29.9%, OpEx was essentially flat quarter-over-quarter at $40.1 million. We grew our cash 20% to $133.8 million and generated $13.7 million of cash from operations. I note, this is a 10% free cash flow yield over revenue. We generated $0.07 of EPS.

Our revenue mix metrics were all in line with our expectations. Products represented 72%, services represented 28%. As a percent of product, storage was 32%, compute was 68%. Public sector contributed 48%, Cloud 21%, manufacturing 11%.

Domestic contributions were 66%, International 33%, Direct 79% and Channel 21%. Storage was slightly higher within the quarter due to solid contributions from our COPAN product line.

Our ongoing strategic business is diversifying our book of business by customer, by industry, by geography. More paths to revenue will create an even stronger foundation for our business results in the long term.

This quarter, I'd like to highlight our geographic distribution. We won business in U.S. Federal, U.S. Commercial, Canada, Brazil, U.K., Germany, France, Japan, China, India, Korea, Singapore, Australia, Israel, Netherlands, Denmark, Norway, Ireland, Switzerland and Eastern Europe.

Specific customer highlights included Amazon, the Department of Defense, NASA, 3M - I note on 3M, it's one of our first UV windows wins - University of Delaware, Carbonite, Complete Genomics, the Nuclear-Test-Ban Treaty Organization, Meteo France, Iwate University, the Genome Institute of Singapore and Semiconductor Energy Laboratory of Japan. It was just a good quarter on these dimensions.

I'd like to spend a few moments on our core segments and our core competencies, which are really the underpinnings for our growth strategy. SGI is focused on technical computing. This is a market we defined last year, and positioned the company within. Customers are responding well. To say this simply that our business applications that our technical applications and the underlying compute, storage and network requirements for these two markets are very different.

Technical computing requires the extremes of scale and speed. We deliver leading compute and storage products for technical computing with the services that integrate our products and third party products into complete solutions. As well, the services that ensure customers receive a stellar production experience.

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