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Tuesday January 27, 9:00 am Eastern Time
Company Press Release
SOURCE: MTI Technology Corporation
MTI Reports Third Quarter Fiscal 1998 Results; MTI's Revenues
Grow 39% Over Prior Year's Third Quarter
ANAHEIM, Calif., Jan. 27 /PRNewswire/ -- MTI(TM) Technology Corporation (Nasdaq: MTIC - news)
today reported net income for the third quarter of fiscal 1998 ended January 3, 1998, of $5.1 million, or 17
cents per share, compared to net income of $1.8 million, or 7 cents per share, in the same quarter of the
previous year, and $4.1 million, or 14 cents per share for the immediately preceding quarter. Total revenue for
the third quarter rose 39% to $54.0 million, compared to $38.9 million for last year's third quarter, and
increased 15% compared to $46.8 million for the second quarter of fiscal 1998. Net product revenue for the
third quarter was $44.8 million, compared to $30.7 million in the third quarter last year, and $38.0 million for
the immediately preceding quarter.
Service revenue for the third quarter of $9.2 million represented a 12% increase over the $8.2 million reported
in the third quarter of the previous year, and a 5% increase over the $8.8 million reported in the immediately
preceding quarter.
The gross profit margin for the third quarter was 34.5% compared to 32.5% for the same period last year, and
35.6% for the second quarter of fiscal 1998.
IN THE QUARTER ENDED JANUARY 3, 1998, THE COMPANY ADOPTED STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS NO. 128, ''EARNINGS PER SHARE.'' ALL PRIOR
PERIODS HAVE BEEN RESTATED ACCORDINGLY.
Revenue Trend:
The Company completed the third quarter with approximately 94% of product revenue derived from the sale of
products for the Open Systems environment, compared to approximately 74% and 92% for the third quarter of
last year and the second quarter of fiscal 1998, respectively.
''I am extremely pleased with the overall results for the third quarter, particularly in the growth of our core
server business,'' said Earl Pearlman, MTI president and chief executive officer. ''Top line revenue growth
improved in all major categories, including servers, tape libraries, software and service. One of our major
milestones set at the beginning of this fiscal year was to achieve quarterly revenue in excess of $50.0 million. I
would like to express my appreciation and gratitude to all the employees at MTI for their considerable efforts
towards the successful attainment of this goal. As I stated last quarter, our revenue growth and improved
financial performance provides MTI with increased capability to more aggressively pursue our tactical and
strategic objectives. In turn, the achievement of these objectives will provide greater opportunity for MTI to
further distinguish itself as a leading provider of high-performance storage solutions.''
''We are aggressively pursuing our product development plans, and have begun adding additional research and
development resources, as well as field sales personnel, in anticipation of what we believe will be a very
dynamic data storage market during calendar 1998. In addition, within the next two months we plan to bring
online our new Customer Response Center in an effort to provide state-of-the-art service and support to our
domestic customers. Our primary focus will continue to be the requirements and needs of our customers, and by
maintaining this focus, I believe MTI will further strengthen its position as a leading provider of scaleable,
high-performance storage solutions for the Open Systems and DEC/VMS markets,'' said Earl Pearlman, MTI
president and chief executive officer.
Expense Overview:
Selling, general and administrative expenses for the third quarter were $10.5 million, compared to $8.6 million
for the third quarter last year, and $9.8 million for the immediately preceding quarter.
The increase of $1.9 million over the same quarter of the previous year was primarily the result of an increase in
compensation-related sales costs due to increased staff and higher revenues.
Research and development expenses for the third quarter were $3.1 million, compared to $2.4 million in the
same quarter last year and $2.9 million in the immediately prior quarter. The increase in expenses year-to-year
was primarily due to increases in project development costs, and the beneficial effect of approximately $0.3
million of non-refundable expense funding received during the third quarter of fiscal 1997 by the Company as
part of an arrangement with NFT Ventures, Inc. (''NFT''), the Company's largest stockholder and an affiliate of
the Company's Chairman. The arrangement has terminated, and, accordingly, no such benefit was received
during the third quarter of fiscal 1998.
Balance Sheet Summary:
Cash on hand at the end of the third quarter of fiscal 1998 was $5.2 million, compared to $3.5 million at the end
of the prior fiscal year, despite a pay down of bank debt and notes payable of $1.3 million. Trade accounts
receivable increased $11.6 million from the end of the prior fiscal year, primarily as the result of an increase in
sales. Inventories increased $4.2 million, or approximately 28% from the end of fiscal 1997, primarily as the
result of an increase in customer-held evaluation and loaner units, and increases in trade inventories held in both
the domestic and European operations. Trade payables and accrued liabilities increased $7.7 million from the
end of fiscal 1997, primarily as a result of increased accounts payable related to the increase in both trade and
Field Service parts inventories.
MTI's mission is to be the premier provider of high-performance, cross- platform storage solutions for the
enterprise. MTI integrates distributed data management software, modular storage systems and on-site service
to meet the mass storage needs of its customers.
This press release includes forward-looking statements which are subject to change including statements
regarding MTI's beliefs as to the future market for its products and its plans for product development and its
Customer Response Center. The actual results may differ materially from those described in any
forward-looking statement.
The computer industry in general, and the market for the Company's products in particular, is characterized by
rapidly changing technology, evolving industry standards and frequent new product introductions, resulting in
short product life cycles. Accordingly, the Company believes that its future success will depend in part on its
ability to enhance existing products and to develop new products that maintain technological leadership, meet a
wide range of changing customer needs and achieve market acceptance. In particular, the Company believes it
must continue to respond quickly to customers' needs for innovative storage and data management solutions.
Lack of market acceptance for the Company's existing or new products or services, the Company's failure to
introduce new products or services in a timely or cost effective manner, or its failure to increase functionality of
existing products or remain price competitive, would materially adversely affect the Company's operating
results. There can be no assurance that the Company will be successful in its product or service development
efforts. In addition, there can be no assurance that the Company's products or services, even if successfully
developed, will achieve timely market acceptance. Additional information on potential factors that could affect
the Company's financial results are included in the Company's Annual Report to the SEC on Form 10-K for the
year ended April 5, 1997.
Headquartered in Anaheim, CA, the Company offers services and support from more than 40 offices in the
United States and Europe. MTI may be reached by phone: 800-999-9MTI, fax: 714-693-2256 or e-mail:
info@mti.com. Information can also be accessed via MTI On-Line, the Company's World Wide Web server
on the Internet at: mti.com.
MTI, Gladiator and StorageWare are trademarks of MTI Technology Corporation. All other reference
trademarks may be the property of others.
MTI TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME*
(Unaudited)
FY98 Q3 FY97 Q3 FY98 Q2
Net product revenue $44,773 $30,695 $37,983
Service revenue 9,216 8,213 8,813
Total revenue 53,989 38,908 46,796
Product cost of revenue 29,691 21,095 24,998
Service cost of revenue 5,684 5,155 5,161
Total cost of revenue 35,375 26,250 30,159
Gross profit 18,614 12,658 16,637
34.5% 32.5% 35.6%
Operating expenses:
Selling, general and administrative 10,489 8,572 9,762
Research and development 3,144 2,426 2,883
Total operating expenses 13,633 10,998 12,645
Operating income 4,981 1,660 3,992
Interest and other income, net 626 257 605
Income before income taxes 5,607 1,917 4,597
Income tax expense 528 150 508
Net income $5,079 $1,767 $4,089
Net income per share:
Basic $0.19 $0.07 $0.16
Diluted $0.17 $0.07 $0.14
Weighted average shares used in
per share computation:
Basic 27,199 25,691 25,957
Diluted 30,508 26,770 29,598
* In thousands, except per share data
CONDENSED CONSOLIDATED STATEMENTS OF INCOME*
(Unaudited)
FY98 FY97
Nine Months Nine Months
Net product revenue $118,014 $86,452
Service revenue 26,546 25,144
Total revenue 144,560 111,596
Product cost of revenue 77,694 61,158
Service cost of revenue 15,737 15,057
Total cost of revenue 93,431 76,215
Gross profit 51,129 35,381
35.4% 31.7%
Operating expenses:
Selling, general and administrative 29,950 25,321
Research and development 9,007 7,093
Total operating expenses 38,957 32,414
Operating income 12,172 2,967
Interest and other income, net 1,790 788
Income before income taxes 13,962 3,755
Income tax expense 1,700 300
Net income $12,262 $3,455
Net income per share:
Basic $0.47 $0.13
Diluted $0.42 $0.13
Weighted average shares used in
per share computation:
Basic 26,323 25,597
Diluted 29,126 26,220
* In thousands, except per share data
MTI TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS*
(Unaudited)
January 3, 1998 April 5, 1997
ASSETS
Cash $5,201 $3,487
Short-term investments -- 850
Trade accounts receivable, net 43,467 31,899
Inventories 18,808 14,637
Other current assets 6,285 3,822
Total current assets 73,761 54,695
Goodwill and intangibles, net 13,213 15,027
Fixed assets and other non-current assets, net 14,674 13,870
Total assets $101,648 $83,592
LIABILITIES & STOCKHOLDERS' EQUITY
Bank line and current portion of debt $22,622 $23,953
Trade payables and accrued liabilities 37,673 29,969
Deferred income 9,892 13,040
Total current liabilities 70,187 66,962
Long-term debt, less current maturities -- 6
Other non-current liabilities 60 247
Total liabilities 70,247 67,215
Total stockholders' equity 31,401 16,377
Total liabilities & stockholders' equity $101,648 $83,592
* In thousands
SOURCE: MTI Technology Corporation
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