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Cray Inc (CRAY)

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Cray (CRAY)

Q3 2012 Earnings Call

November 09, 2012 8:00 am ET

Executives

Paul Hiemstra

Peter J. Ungaro - Chief Executive Officer, President and Director

Brian C. Henry - Chief Financial Officer and Executive Vice President

Analysts

Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division

Glenn Hanus - Needham & Company, LLC, Research Division

Presentation

Operator

Good morning. My name is Tanisha, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Cray Quarter 3 Earnings Conference Call. [Operator Instructions]

Mr. Paul Hiemstra, you may begin your conference.

Paul Hiemstra

Good morning. I'd like to thank everyone for joining us today. Participating from Cray are Peter Ungaro, President and Chief Executive Officer; and Brian Henry, Executive Vice President and Chief Financial Officer.

This call is being broadcast live on the Internet and recorded for replay purposes. A replay will be available shortly after the call. You can access the replay by dialing 1 (855) 859-2056. You must then enter the conference ID 65020258. The replay will also be available in the investor relations section of the Cray website for 180 days at www.cray.com.

I'd like to remind each of you that today's conference call will contain forward-looking statements that are based on our current expectations. Forward-looking statements include statements about our financial guidance and expected future operating results, our planned customer acceptances, our planned acquisition of Appro and the expected benefits of the potential acquisition, our product development and new product introduction plans, our ability to expand and penetrate our addressable market and other statements that are not historical facts. These statements are only predictions, and actual results may vary materially from those projected. Please refer to Cray's documents filed with the SEC from time to time concerning factors that could affect the company and these forward-looking statements.

With that, I would like to turn the call over to Peter Ungaro.

Peter J. Ungaro

Thanks, Paul. And thank you, all, for joining the call today. I'll begin with some highlights of our third quarter results and take you through the acquisition we announced this morning, then I'll turn it over to Brian, who will take us through our financial performance and outlook. And I'll wrap up by discussing our plans for the rest of the year and open up the call for Q&A.

We built momentum in the quarter, highlighted by several exciting wins worldwide in our high-end supercomputing business and continued advancements on our large system installations. Our results were in line with our expectations, and we made good progress in each of our growth initiatives.

On the product side of our business, we were selected to deliver a next-generation system to the Swiss National Supercomputing Centre, also known as CSCS. We just launched this system Thursday as the Cray XC30, which was previously codenamed Cascade. As you can tell from our announcement and the positive reaction we received, we expect the XC30 to be very successful in the marketplace. It brings new hardware and software technologies together in a way that is more flexible than anything else on the market, continuing along our adaptive supercomputing vision that we laid out a number of years ago.

We're also very excited to be a couple of months ahead of our original development plans for the XC30, and we'll be shipping early systems later this year instead of in the first quarter of 2013. That's great news as we already have over $100 million in XC orders to fill.

Sticking with our market-leading high-end systems, we recently announced that Indiana University plans to replace its Big Red system with one new Cray XK7 supercomputers that we just announced last week. Their system is expected to be one of the fastest university-owned and funded supercomputers in the U.S. when it is put into production next year.

In our technical enterprise initiative, which we used to call Midrange, we had a number of wins at new Cray customers, including Texas A&M and at the University of Miami where they will use an XE6m to study hydrocarbon research from the Gulf of Mexico. We installed and received acceptance on several other systems, including at the Stevens Institute in New Jersey; and a naval research laboratory in California; and internationally at the Saha Institute of India; the Centre for Analysis, Scientific Computing and Applications in the Netherlands; and at a government customer outside of the U.S. In addition, during the last few months, we secured a number of new contracts from various government customers for systems and services spanning each of our business units.

Our Big Data graph analytics team, YarcData, made good progress on several fronts. We were awarded a new contract to deliver a uRiKA graph appliance to Oak Ridge National Laboratory, which they plan to use for a healthcare fraud detection program. And the Pittsburgh Supercomputing Center deployed a new uRiKA system called Sherlock to be used in a wide range of projects, including life sciences, virtual network analysis and cybersecurity.

We're also extremely excited that Gartner published a research report on YarcData highlighting that the big data market is much more than relational databases and dedupe, validating specifically that the uRiKA appliance is a solution to previously infeasible graph discovery problems. This report adds to a number of positive reviews we received from key influencers in the big data marketplace.

On the product development side, we recently announced the uRiKA fall 2012 release. This upgrade boosts functionality and performance on complex graph analytic inquiries. We're making this system even easier to use and adopt within the enterprise environment. This release transitions us from early customers into production-ready systems.

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