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Dot Hill Systems Beats on Q4 Earnings, Revenues In Line - Analyst Blog

Zacks Equity Research

Dot Hill Systems Corp.’s HILL fourth-quarter 2014 adjusted earnings per share (excluding all one-time items but including stock-based compensation) came in at 12 cents, beating the Zacks Consensus Estimate of 10 cents per share. Also, adjusted earnings increased from 6 cents reported in the year-ago quarter.
 

Dot Hill Systems Corporation - Earnings Surprise | FindTheCompany

Quarter Details

Dot Hill reported non-GAAP revenues of $68.2 million, which increased 14.2% from the year-ago quarter and roughly came in line with the Zacks Consensus Estimate. The increase in revenues was primarily attributed to new customer addition and product launches.

Revenues from the vertical market came in at $38.5 million, up from $18.9 million reported in the year-ago quarter. The year-over-year increase was primarily due to higher revenues from new customers and seasonality factors. However, revenues from server OEM (Original Equipment Manufacturer) were $29.7 million in the fourth-quarter, down 27% year over year, primarily due to lower-than-expected revenues from customers.

The company’s adjusted gross margin (excluding all one-time items but including stock-based compensation) increased 193 basis points (bps) on a year-over-year basis to 33.9%, primarily due to a higher revenue base.

Dot Hill’s adjusted operating margin (excluding all one-time items but including stock-based compensation) increased 567 bps from the year-ago quarter to 11.4%, primarily due to lower operating expenses as a percentage of revenues (down 374 bps on a year-over-year basis). Total operating expenses increased a marginal 0.9% from the year-ago quarter and came in at $15.6 million.

The company’s adjusted net income (excluding all one-time items but including stock-based compensation) came in at $7.8 million, which increased from $3.5 million reported in the year-ago quarter.

Dot Hill exited the fourth quarter with cash and cash equivalents of approximately $42.5 million compared with $42.4 million in the prior quarter. Receivables were $43.3 million versus $36.9 million in the prior quarter.

Dot Hill’s balance sheet does not comprise any long-term debt. The company reported cash flow from operations of $2.1 million for the three months ended Dec 31, 2014.

Guidance

For the first quarter of 2015, Dot Hill expects non-GAAP revenues in the range of $55 million to $59 million. Non-GAAP earnings are expected to be in the range of 4 cents to 7 cents. The Zacks Consensus Estimate is pegged at 3 cents per share.

For 2015, Dot Hill expects non-GAAP revenues in the range of $230 million to $270 million (mid-point $250 million). The Zacks Consensus Estimate is pegged at $247 million. Non-GAAP earnings are expected to be in the range of 25 cents to 35 cents. The Zacks Consensus Estimate is pegged at 21 cents per share.

Our Take

Dot Hill reported modest fourth-quarter 2014 results and provided encouraging first-quarter and fiscal 2015 guidance. The company’s bottom line surpassed the Zacks Consensus Estimate while the top line matched the same. The year-over-year comparisons were favorable, primarily attributed to new customer addition and product launches.

Nonetheless, the company remains encouraged by the traction in vertical markets and expects to generate strong revenues from these in the near future.

We believe that with the growing need for advanced storage solutions, Dot Hill will witness increasing demand for data generation and data sharing activities. Moreover the company’s product launches and expected growth in the deal pipeline will boost its revenues, going forward.

However, a volatile spending atmosphere and competition from EMC Corporation EMC and NetApp, Inc. NTAP remain concerns.

Currently, Dot Hill shares sport a Zacks Rank #1 (Strong Buy). Another stock worth considering in the technology sector is Avago Technologies Limited AVGO, also with a Zacks Rank #1.
 


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