Dot Hill Reports Fourth Quarter and Full Year 2012 Results

Dot Hill Reports Fourth Quarter and Full Year 2012 Results

LONGMONT, Colo., March 14, 2013 (GLOBE NEWSWIRE) -- Dot Hill Systems Corp.
(Nasdaq:HILL) reported financial results for the fourth quarter and year ended
December 31, 2012.

Non-GAAP Financial and Operational Highlights:

  *Net revenue from Vertical Markets grew 38% on a year-over-year basis
    compared to 2011;
  *The Company's Server OEM annual revenue, excluding its largest customer,
    was up almost 12% in 2012 from 2011;
  *Fourth quarter 2012 gross margins were 28.3%, compared to 25.4% for the
    same period in 2011.

"Our vertical markets grew over 38% annually, which is an impressive growth
rate by most any measure and especially in light of the headwinds our industry
has faced throughout the year," said Dana Kammersgard, president and CEO, Dot
Hill Systems. "We believe this is clear evidence that our strategic
initiatives are beginning to work."

"In addition, on our third quarter conference call, we reported three new OEM
wins and several more in our pipeline," Kammersgard continued. "I am pleased
to report today that we now have won a total of 11 new opportunities that are
in various stages of contract negotiations, customization, and/or launch
preparation."

Fourth Quarter 2012 GAAP Financial Detail (includes the results of both
discontinued and continuing operations):

The Company recognized GAAP net revenue of $44.1 million for the fourth
quarter of 2012, compared to $47.0 million for the fourth quarter of 2011 and
$48.2 million for the third quarter of 2012.

GAAP gross margin for the fourth quarter of 2012 was 17.8% compared to 17.6%
for the fourth quarter of 2011 and 25.3% for the third quarter of 2012.

GAAP operating expenses for the fourth quarter of 2012 were $12.6 million,
compared to $15.0 million for the fourth quarter of 2011 and $15.1 million in
the third quarter of 2012.

GAAP net loss for the fourth quarter of 2012 was $5.0 million, or $0.09 per
share, as compared to a net loss of $6.6 million, or $0.12 per share, in the
fourth quarter of 2011, and a net loss $3.0 million, or $0.05 per share, in
the third quarter of 2012.

Full Year 2012 GAAP Financial Detail (includes the results of both
discontinued and continuing operations):

The Company recognized GAAP net revenue of $194.9 million for the full year of
2012, compared to $197.5 million for the full year of 2011. GAAP gross margin
for 2012 was 23.7%, compared to 21.1% in 2011. GAAP operating expenses for
2012 were $60.4 million compared to $63.5 million in 2011.GAAP net loss for
the full year of 2012 was $15.0 million, compared to a GAAP net loss of $22.0
million for the full year of 2011.

Fourth Quarter 2012 Non-GAAP Financial Detail:

The Company recognized non-GAAP net revenue of $46.2 million in the fourth
quarter of 2012, compared to $48.0 million for the fourth quarter of 2011 and
$48.2 million for the third quarter of 2012.

Non-GAAP gross margin was 28.3% for the fourth quarter of 2012, compared to
25.4% for the fourth quarter of 2011 and 26.4% for the third quarter of 2012.
The year-over-year improvement in gross margin was largely attributable to a
more favorable product and customer mix.

Total non-GAAP operating expenses for the fourth quarter of 2012 were $14.7
million, as compared to $12.3 million for the fourth quarter of 2011 and $14.2
million for the third quarter of 2012.

Non-GAAP net loss for the fourth quarter of 2012 was $2.0 million, or $0.03
per share, as compared to a fourth quarter of 2011 non-GAAP net loss of $0.1
million, or $0.00 per share, and a third quarter 2012 non-GAAP net loss of
$1.7 million, or $0.03 per share. Non-GAAP EBITDA for the fourth quarter of
2012 was negative $1.0 million compared to positive $0.1 million for the
fourth quarter of 2011 and negative $0.9 million for the third quarter of
2012.

Full-Year 2012 Non-GAAP Financial Detail:

Non-GAAP net revenue was $196.7 million for 2012, compared to $196.8 million
for 2011.Non-GAAP gross margin was 27.9% for 2012, compared to 26.4% for
2011.The increase in non-GAAP gross margin was primarily due to increased
diversification of our revenues in both customer and product mix.Total
non-GAAP operating expenses for 2012 were $57.8 million, compared to $48.8
million for 2011. The increase in non-GAAP operating expenses was largely due
to incremental engineering investments to support new customer customizations
and launch preparation, as well as the development of our next generation
entry-level product line due to launch this summer.

Non-GAAP net loss for 2012 was $3.7 million, or $0.06 per share, as compared
to a 2011 non-GAAP net income of $3.0 million, or $0.05 per share. Non-GAAP
EBITDA for 2012 was negative $0.4 million compared to positive $5.4 million
for 2011.

Balance Sheet and Cash:

The company exited 2012 with cash and cash equivalents of $40.3 million
compared to $46.2 million at the end of 2011 and $40.5 million at the end of
the third quarter of 2012.

First Quarter 2013 Outlook:

Non-GAAP net revenues for the first quarter of 2013 are expected to be in the
range of $43 million to $46 million.The non-GAAP loss per share is expected
to be in the range of $0.02 to $0.04.

"Despite global economic and industry specific headwinds, I remain excited
about our prospects and opportunities as we begin 2013 with a strong new
customer pipeline, a very competitive midrange product offering and a planned
launch of our next generation entry-level product line in the summer," stated
Hanif Jamal, chief financial officer, Dot Hill Systems.

Conference Call Information:

Dot Hill's fourth quarter 2012 financial results conference call is scheduled
to take place on Thursday, March 14, 2013 at 11:00 am ET.Please join the
Company for a live audio webcast at www.dothill.com in the Investor Relations
section, or via telephone, please dial 877-303-3196 (U.S.) or 408-427-3864
(International) at least five minutes prior to the start of the call.A replay
of the webcast is scheduled to be available for one week on the Dot Hill web
site following the conference call.For a telephone replay, dial 855-859-2056
(U.S.) or 404-537-3406 (International) and enter conference ID# 15791055.

About Non-GAAP Financial Measures

In 2011 and/or 2012, the Company's non-GAAP financial measures exclude the
impact of stock-based compensation expense, legal settlements and their
associated expenses, intangible asset amortization, restructuring and
severance charges, charges or credits for contingent consideration
adjustments, charges for impairment of goodwill and other long-lived assets,
contra-revenue charges from the extension of customer warrants, the
recognition of deferred and amortized revenue and costs related to a long-term
software contract which were deferred in the Company's GAAP financial
statements, specific and significant warranty claims arising from a supplier's
defective products, impacts associated with the AssuredUVS software business,
which the Company has substantially closed down, and the effects of foreign
currency gains or losses.The Company believes that these non-GAAP financial
measures provide meaningful supplemental information to both management and
investors that is indicative of the Company's core operating results and
facilitates comparison of operating results across reporting periods.The
Company used these non-GAAP measures when evaluating its financial results as
well as for internal resource management, planning and forecasting
purposes.These non-GAAP measures should not be viewed in isolation from or as
a substitute for the Company's financial results in accordance with GAAP. A
reconciliation of GAAP to non-GAAP measures is attached to this press release.

About Dot Hill

Delivering innovative technology and global support, Dot Hill empowers the OEM
and channels community to bring unique storage solutions to market, quickly,
easily and cost-effectively.Offering high performance and industry-leading
uptime, Dot Hill's RAID technology is the foundation for best-in-class storage
solutions offering enterprise-class security, availability and data
protection.The Company's products are in use today by the world's leading
service and equipment providers, common carriers and advanced technology and
telecommunications companies, as well as government agencies and small and
medium enterprise customers.Dot Hill solutions are certified to meet rigorous
industry standards and military specifications, as well as RoHS and WEEE
international environmental standards.Headquartered in Longmont, Colorado,
Dot Hill has offices and/or representatives in China, Germany, Japan, United
Kingdom, Singapore and the United States. For more information, visit us at
http://www.dothill.com.

The Dot Hill Systems Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=13870

Statements contained in this press release regarding matters that are not
historical facts are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act.Because such statements are subject
to risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements.Such statements
include statements regarding future opportunities for additional business and
the stage of such opportunities relative to a final binding agreement,
prospects for Dot Hill's continued growth, and Dot Hill's projected financial
results for the first quarter of 2013.The risks that contribute to the
uncertain nature of the forward-looking statements include, among other
things: the risk that actual financial results for the first quarter of 2013
may be different from the financial guidance provided in this press release;
the risks associated with macroeconomic factors that are outside of Dot Hill's
control; the risk that projected future opportunities may never fully develop
into ongoing business relationships and/or binding contractual agreements; the
fact that no Dot Hill customer agreements provide for mandatory minimum
purchase requirements; the risk that one or more of Dot Hill's OEM or other
customers may cancel or reduce orders, not order as forecasted or terminate
their agreements with Dot Hill; the risk that Dot Hill's new products may not
prove to be popular; the risk that one or more of Dot Hill's suppliers or
subcontractors may fail to perform or may terminate their agreements with Dot
Hill; the risk that Vertical Markets' sales may not ramp as expected;
unforeseen product quality, technological, intellectual property, personnel or
engineering issues and any costs that may result from such issues; and the
additional risks set forth in Dot Hill's most recent Form 10-Q and Form10-K
filings with the Securities and Exchange Commission. All forward-looking
statements contained in this press release speak only as of the date on which
they were made.Dot Hill undertakes no obligation to update such statements to
reflect events that occur or circumstances that exist after the date on which
they were made.

HILL-F

DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands, except per share amounts)

                   Three Months Ended               Twelve Months Ended
                   December   September  December   December 31, December 31,
                    31, 2011   30, 2012   31, 2012   2011         2012
                                                             
Net revenue         $47,037  $48,249  $44,147  $197,461   $194,908
Cost of goods sold  38,743    36,025    36,270    155,828     148,678
Gross profit        8,294     12,224    7,877     41,633      46,230
Operating expenses:                                           
Research and        9,113     9,348     5,973     35,551      34,940
development
Sales and marketing 3,426     3,558     3,718     13,876      14,189
General and         2,430     2,305     2,819     9,268       10,665
administrative
Restructuring       13        (130)     95        668         639
charge (recoveries)
Goodwill impairment --       --       --       4,140       --
charge
Total operating     14,982    15,081    12,605    63,503      60,433
expenses
Operating loss      (6,688)   (2,857)   (4,728)   (21,870)    (14,203)
Other income                                                  
(expense):
Interest income     45        8         8         16          17
(expense), net
Other income        (44)      (12)      (13)      (41)        (15)
(expense), net
Total other income  1         (4)       (5)       (25)        2
(expense), net
Loss before income  (6,687)   (2,861)   (4,733)   (21,895)    (14,201)
taxes
Income tax expense  (61)      153       287       129         749
Net loss            $(6,626) $(3,014) $(5,020) $(22,024)  $(14,950)
                                                             
Net loss per basic  $(0.12)  $(0.05)  $(0.09)  $(0.40)    $(0.26)
and diluted share
                                                             
Shares used to
compute net loss    55,357    57,327    57,501    54,908      56,954
per basic and
diluted share


DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)

                                          December 31, December 31,
                                          2011         2012
                                                      
Assets                                                 
Current assets:                                        
Cash and cash equivalents                  $46,168    $40,315
Accounts receivable, net                   31,697      25,025
Inventories                                5,251       5,037
Prepaid expenses and other assets          7,896       5,810
Total current assets                       91,012      76,187
Property and equipment, net                4,972       7,147
Intangible assets, net                     2,601       --
Other assets                               294         603
Total assets                               $98,879    $83,937
                                                      
Liabilities and stockholders' equity                   
Current liabilities:                                   
Accounts payable                           $31,434    $22,659
Accrued compensation                       5,049       4,863
Accrued expenses                           10,860      8,325
Deferred revenue                           883         2,889
Restructuring accrual                      1,328       365
Current portion of long-term note payable  71          2,800
Total current liabilities                  49,625      41,901
Other long-term liabilities                552         3,261
Total liabilities                          50,177      45,162
                                                      
Stockholders' equity:                                  
Preferred stock                            --         --
Common stock                               58          58
Additional paid-in capital                 321,681     326,576
Accumulated other comprehensive loss       (3,662)     (3,533)
Accumulated deficit                        (269,375)   (284,326)
Total stockholders' equity                 48,702      38,775
Total liabilities and stockholders' equity $98,879    $83,937


DOT HILL SYSTEMS CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands)

                                      Three Months Ended
                                      December 31, September 30, December 31,
                                       2011         2012          2012
                                                               
Cash Flows From Operating Activities:                           
Net loss                               $(6,626)   $(3,014)    $(5,020)
Adjustments to reconcile net loss to
net cash provided by (used in)                                  
operating activities:
Depreciation and amortization          845          869           699
Provision for bad debt expense         --         (13)         13
Stock-based compensation expense       1,390        897           750
Issuance of warrant to customer        1,007        --           --
(Gain) Loss on write-off of fixed      --          68            (68)
assets
Changes in operating assets and
liabilities, net of effects of                                  
business acquisition:
Accounts receivable                    (6,748)      (1,230)       3,269
Inventories                            (57)         (751)         369
Prepaid expenses and other assets      (2,512)      (2,127)       673
Accounts payable                       9,824        4,414         (4,266)
Accrued compensation and other         4,370        503           1,107
expenses
Deferred revenue                       (35)         (222)         1,637
Restructuring accrual                  (238)        (590)         (184)
Other long-term liabilities            (109)        607           1,707
Net cash provided by (used in)         1,111        (589)         686
operating activities
                                                               
Cash Flows From Investing Activities:                           
Purchases of property and equipment    (469)        (1,489)       (1,698)
Proceeds from sale of property and     --         --          74
equipment
Net cash used in investing activities  (469)        (1,489)       (1,624)
                                                               
Cash Flows From Financing Activities:                           
Principal payment of note and loan     (193)        --           0
payable
Cash proceeds from borrowings on       --         1,800         1,000
credit facility (current period)
Shares withheld for tax purposes       (78)        (10)          (45)
Common stock issued under stock plans  28           306          --
Net cash provided by (used in)         (243)        2,096         955
financing activities
                                                               
Effect of Exchange Rate Changes on     97           25            (244)
Cash and Cash Equivalents
Net Increase (Decrease) in Cash and    496          43            (227)
Cash Equivalents
Cash and Cash Equivalents, beginning   45,672       40,499        40,542
of period
Cash and Cash Equivalents, end of      $46,168    $40,542     $40,315
period
                                                               
Supplemental Disclosures of Non-Cash                            
Investing and Financing Activities:
Capital assets acquired but not paid   $1,540     $507        $477


DOT HILL SYSTEMS CORP.
UNAUDITED RECONCILIATION OF CONSOLIDATED NON-GAAP MEASURES
(INCLUDES RESULTS FROM BOTH DISCONTINUED AND CONTINUING OPERATIONS)
(In thousands, except per share amounts)

                   Three Months Ended               Twelve Months Ended
                   December   September  December   December 31, December 31,
                    31, 2011   30, 2012   31, 2012   2011         2012
                                                             
Net revenue, as     $47,037  $48,249  $44,147  $197,461   $194,908
reported
Effect of ITC       (16)      (26)      (128)     (1,634)     (360)
revenue
Effect of long term --       --       2,141     --         2,141
contract SW revenue
Effect of issuance
of warrant to       1,007     --       --       1,007       --
customer
Non-GAAP net        $48,028  $48,223  $46,160  $196,834   $196,689
revenue
                                                             
Gross profit, as    $8,294   $12,224  $7,877   $41,633    $46,230
reported
Effect of
stock-based         158       144       135       828         618
compensation
Effect of severance --       60        4         13          71
costs
Effect of issuance
of warrant to       1,007     --       --       1,007       --
customer
Effect of gain from --       --       --       (555)       --
insurance recovery
Effect of power
supply component    1,970     --       --       4,270       --
failures
Effect of ITC       (16)      (26)      (128)     (1,634)     (360)
revenue
Effect of ITC       293       70        128       1,418       673
expenses
Effect of long term --       --       2,141     --         2,141
contract SW revenue
Effect of long term --       --       2,885     --         2,885
contract SW cost
Effect of
intangible asset    --       --       --       2,928       1,647
impairment
Effect of
intangible asset    493       245       --       2,054       952
amortization
Non-GAAP gross      $12,199  $12,717  $13,042  $51,962    $54,857
profit
                                                             
Operating expenses, $14,982  $15,081  $12,605  $63,503    $60,433
as reported
Effect of currency  (147)     133       (341)     254         (555)
gain (loss)
Effect of
stock-based         (1,232)   (753)     (615)     (4,557)     (3,105)
compensation
Effect of
contingent          (21)      --       --       (21)        5
consideration
adjustment
Effect of ITC       (1,233)   (301)     (147)     (5,429)     (1,585)
expenses
Effect of goodwill  --       --       --       (4,140)     --
impairment
Effect of long term
contract SW         --       --       3,562     --         3,562
deferred cost
Effect of
restructuring       (13)      130       (95)      (668)       (639)
(charge) recoveries
Effect of legal
fees related to     --       (40)      (9)       --         (49)
power supply
component failure
Effect of severance --       (11)      (237)     (113)       (257)
costs
Non-GAAP operating  $12,336  $14,239  $14,723  $48,829    $57,810
expenses
                                                             
Net loss, as        $(6,626) $(3,014) $(5,020) $(22,024)  $(14,950)
reported
Effect of currency  147       (133)     341       (254)       555
(gain) loss
Effect of
stock-based         1,390     897       750       5,385       3,724
compensation
Effect of issuance
of warrant to       1,007     --       --       1,007       --
customer
Effect of
contingent          21        --       --       21          (5)
consideration
adjustment
Effect of
restructuring       13        (130)     95        668         639
charge (recoveries)
Effect of
intangible asset    493       245       --       2,054       952
amortization
Effect of gain from --       --       --       (555)       --
insurance recovery
Effect of power
supply component    1,970     40        9         4,270       49
failures
Effect of ITC       1,526     370       275       6,847       2,258
expenses
Effect of ITC       (16)      (26)      (128)     (1,634)     (360)
revenue
Effect of long term --       --       2,141     --         2,141
contract SW revenue
Effect of long term --       --       2,885     --         2,885
contract SW cost
Effect of long term
contract SW         --       --       (3,562)   --         (3,562)
deferred cost
Effect of
intangible          --       --       --       2,928       1,647
impairment
Effect of goodwill  --       --       --       4,140       --
impairment
Effect of severance --       71        241       126         327
costs
Non-GAAP net income $(75)    $(1,680) $(1,973) $2,979     $(3,700)
(loss)
                                                             
Non-GAAP net income                                           
(loss) per share
Basic and diluted   $(0.00)  $(0.03)  $(0.03)  $0.05      $(0.06)
Weighted average
shares used to
calculate net                                                 
income (loss) per
share:
Basic               55,357    57,327    57,501    54,908      56,954
Diluted             55,357    57,327    57,501    55,488      56,954
                                                             
Non-GAAP net income $(75)    $(1,680) $(1,973) $2,979     $(3,700)
(loss)
Interest expense    8         12         12         43          38
less ITC
Income tax expense  (61)      153        287        129         749
Depreciation less   219       626        697        2,205       2500
ITC
Non-GAAP EBITDA     $91      $(889)   $(977)   $5,356     $(413)


DOT HILL SYSTEMS CORP.
NON-GAAP REVENUE DETAIL BY MARKET
(In thousands)

              Three Months Ended                    Twelve Months Ended
              December 31, September 30, December  December 31, December 31,
               2011         2012          31, 2012  2011         2012
                                                             
HP             $32,446     $32,860     $29,869 $145,757   $130,253
Other Server   4,214        3,666        3,831    10,022      11,193
OEMs
Total Server   $36,660      $36,526     $33,700 $155,779   $141,446
OEMs
Vertical       10,194       10,261       11,056   34,909      48,352
Markets
Service        1,173        1,436        1,404    6,146       6,891
Total Non-GAAP $48,027     $48,223     $46,160 $196,834   $196,689
Revenue

CONTACT: Hanif Jamal
         Chief Financial Officer
         Tel: 303-845-3377
         Email: investors@dothill.com
        
         Jodi Bochert
         Investor Relations
         Tel: 303-845-3469
         Email: investors@dothill.com
        
         Becky Herrick & Kirsten Chapman
         LHA Investor Relations
         Tel: 415-433-3777
         Email: dothill@lhai.com

Dot Hill Systems Corporation Logo
 
Press spacebar to pause and continue. Press esc to stop.