SimpleTech Reports Financial Results For Third Quarter of 2006 with 38% Year-over-Year Revenue Growth and 250% Diluted Earnings Per Share Growth
biz.yahoo.com
Wednesday November 8, 4:05 pm ET
Third Quarter 2006 OEM Flash Revenue Grows to Record High of $24.8 Million; Order Backlog Increases by $11.6 Million to $39.6 Million from June 30, 2006
SANTA ANA, Calif., Nov. 8, 2006 (PRIMEZONE) -- SimpleTech, Inc. (NASDAQ:STEC) today announced its financial results for the third quarter ended September 30, 2006. Revenue for the third quarter of 2006 was $92.8 million, an increase of 17% from $79.5 million for the second quarter of 2006 and an increase of 38% from $67.2 million for the third quarter of 2005. Gross profit margin increased to 25.1% for the third quarter of 2006, compared to 24.8% in the second quarter of 2006 and 20.7% for the third quarter of 2005. Diluted earnings per share was $0.14 for the third quarter of 2006, compared to $0.10 for the second quarter 2006 and $0.04 for the third quarter of 2005.
Revenue growth in the third quarter of 2006 resulted from stronger than expected demand in every major product category; in particular, sales of customized Flash memory to OEMs, which grew to a quarterly record high. Increased gross profit margin and diluted earnings per share for the third quarter of 2006 were positively impacted by a product mix shift toward higher-margin OEM Flash products. Increased sequential revenues, coupled with a small decrease in operating expenses, resulted in improved operating leverage, yielding an operating margin of 11.4% in the third quarter of 2006, compared to 8.5% in the second quarter of 2006 and 3.7% in the third quarter of 2006. During the quarter, the company recorded approximately $825,000 of income from DRAM class action litigation settlements that reduced general and administrative expenses. The company expects to record approximately $1.1 million of additional income from these DRAM class action litigation settlements in the fourth quarter of 2006. Order backlog was $39.6 million on September 30, 2006, compared to $28.0 million on June 30, 2006 and $12.1 million on September 30, 2005.
The company previously announced that it will host its first-ever Analysts Day on November 10, 2006. The half-day event, to be held in New York City, will be a technology teach-in focusing on the company's current IP and technologies and how they apply to niche markets that fit the company's business model. Due to security procedures and space limitations at the venue, attendees must RSVP in advance with the company's Investor Relations department at ir@simpletech.com.
Business Segments
OEM Division
Revenue from OEM Division customers comprised 58% of total revenue for the third quarter of 2006, compared to 59% of total revenue for the second quarter of 2006 and 49% of total revenue for the third quarter of 2005. OEM Division revenue was $53.8 million for the third quarter of 2006 driven primarily by an increase in OEM Flash product revenue, which represented an increase of 14% from $47.3 million for the second quarter of 2006 and an increase of 64% from $32.8 million for the third quarter of 2005. The growth of the company's OEM Flash revenue as well as our overall profitability, in large part, are the result of continued investment in OEM Flash controller technology and custom firmware, and the company's hardware design capabilities.
Consumer Division
Revenue from Consumer Division customers comprised 42% of total revenue for the third quarter of 2006, compared to 41% of total revenue for the second quarter of 2006 and 51% of total revenue for the third quarter of 2005. Consumer Division revenue was $39.0 million for the third quarter of 2006, an increase of 21% from $32.2 million for the second quarter of 2006 and an increase of 13% from $34.4 million for the third quarter of 2005. Consumer Division revenue for the third quarter of 2006 was positively impacted by increased product revenues from our external storage and DRAM product lines and back-to-school seasonality.
Business Outlook
``Our continued success reflects the execution of our stated business model, and our now-proven ability to lead the market providing customized memory and storage solutions to OEM customers,'' said Manouch Moshayedi, SimpleTech's Chairman and CEO.
``During the third quarter of 2006 our business model continued to function remarkably well. Moreover, we continue to grow our base of both consumer and OEM customers. The changing product mix, with OEM Flash leading the way, resulted in increased revenue, gross profit margin, operating margin and earnings during the third quarter of 2006.
``Regarding market strategy, our OEM Division continues to focus on select niche markets. The results achieved for the third quarter of 2006 demonstrate that this strategy is succeeding. We continue to benefit from decreasing Flash chip prices. As NAND Flash chip prices fall, as they have significantly during the last few years, Flash-based solutions, which previously might have been cost prohibitive, become an attractive alternative to hard disk based solutions for many OEM applications. I believe this pricing dynamic, our ability to penetrate the OEM market and a growing order backlog illustrate a positive outlook for SimpleTech.
``As a result of these factors and achievements, we believe that we can sustain this marked improvement in our performance level and currently expect our revenue for the fourth quarter of 2006 to range from $95 million to $100 million, gross profit margin to remain relatively stable, and diluted earnings per share to range from $0.15 to $0.16. The company has in the past preannounced its quarterly earnings results when actual results were expected to differ materially from its prior guidance. The company no longer intends to preannounce its earnings results in future quarters in such circumstances and will only announce its quarterly results in its regularly scheduled earnings releases.'' |
