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sTec Announces First Quarter 2013 Results

sTec Announces First Quarter 2013 Results

SANTA ANA, Calif., May 8, 2013 (GLOBE NEWSWIRE) -- sTec, Inc. (Nasdaq:STEC)
announced today the Company's financial results for the first quarter ended
March 31, 2013.

Revenue for the first quarter of 2013 was $22.0 million, a decrease of 56.3%
from $50.4 million for the first quarter of 2012 and a decrease of 37.3% from
$35.1 million for the fourth quarter of 2012.

GAAP gross profit margin was 26.8% for the first quarter of 2013, compared to
35.9% for the first quarter of 2012 and 32.2% for the fourth quarter of 2012.
GAAP diluted loss per share was $0.54 for the first quarter of 2013, compared
to $0.23 for the first quarter of 2012 and $0.50 for the fourth quarter of
2012.

Non-GAAP gross profit margin was 27.7% for the first quarter of 2013, compared
to 36.4% for the first quarter of 2012 and 32.8% for the fourth quarter of
2012. Non-GAAP diluted loss per share was $0.41 for the first quarter of 2013,
compared to $0.17 for the first quarter of 2012 and $0.35 for the fourth
quarter of 2012.

A reconciliation of GAAP to non-GAAP results is provided in the tables
included in this release.

Business Outlook

"Our results were in-line with the guidance that we provided for the first
quarter of 2013 as we continue to work towards the objective of diversifying
our market presence and expanding our customer base through our new
go-to-market strategy," said Mark Moshayedi, sTec's CEO and President.

Go-to-market strategy for now and for the long-term

"Based on the evolving dynamics of our industry, we have implemented a new
go-to-market strategy. Focusing our efforts on selling SSDs as a component to
a limited set of OEM customers in a market that has attracted much larger and
more vertically integrated competitors has created challenges for us. In
response to these changing dynamics, we are making significant investments in
the people, tools and resources necessaryto transition from an OEM-centric
model to a more-balanced and diversified sales model. One of our high priority
initiatives is to become more recognized and valued to end-users. To that end,
we have re-branded the company, launched a global channel program and have
hired enterprise sales and marketing personnel with expertise in systems and
applications. As we continue to execute our plan, our target is to achieve a
sales mix by year-end with about half of our revenue coming from traditional
OEM customers and the other half coming from non-OEM customers, including
global channel partners and direct enterprise customers. Longer-term, our goal
is to have our customer base as widely distributed as possible."

Taking advantage of changes in market dynamics

Jeff Janukowicz, research director, Solid State Drives and Enabling
Technologies at IDC expects that "by 2016, just under half of all enterprise
storage capacity shipped will be through non-system OEM channels, including
shipments directly to hyperscale cloud datacenters, ODMs, and specialized
system integrators."

"Our model of targeting end-customers is right in alignment with this trend,"
continued Mark Moshayedi. IT managers have become more sophisticated and the
problems of managing their traditional storage architectures more acute. As a
result, companies are choosing to tailor their datacenters to be better
optimized for their applications. In these instances, pre-configured solutions
rarely match the customers' needs. The capabilities of our enterprise sales
team allow us to deliver value to customers through a solutions-based
approach. The combination of systems, applications and SSD expertise that we
deliver to the customer gives us a unique advantage in the marketplace. But
more importantly, it allows us to solve our customers' most critical problems
with our solutions."

Guidance

sTec's current expectation for the second quarter of 2013 is as follows:

  *Revenue to range from $23 million to $26 million.
  *Non-GAAP diluted loss per share to range from $0.41 to $0.43.

sTec's projected non-GAAP loss per share results exclude employee stock
compensation expense, litigation costs and other items that the Company does
not consider indicative of its underlying business performance.

Conference Call

sTec will hold an open conference call to discuss results for the first
quarter of 2013. The call will take place today at 1:30 p.m., Pacific/ 4:30
p.m., Eastern. The call-in numbers for the conference are (877) 645-6380
(United States and Canada) and (914) 495-8562 (International).

Webcast

This call will be webcast. The webcast can be accessed by clicking on
"Company" near the top, right-hand side of the Company's home page at
www.stec-inc.com. Then click on "Investor Relations," followed by
"Presentations & Web Events."

Replay

The webcast will also be archived and available for replay beginning
approximately two hours after the live call concludes.

About sTec, Inc.

sTec, Inc. is a leading global provider of enterprise-class solid-state
storage solutions designed for the ever-growing performance, reliability and
endurance requirements of today's advanced data centers. The industry's first
company to deploy solid-state drives (SSDs) into large-scale enterprise
environments, sTec offers the industry's widest range of solid-state storage
solutions, which protect critical information for major business and
government organizations worldwide. Headquartered in Santa Ana, California,
sTec also serves the embedded and military/aerospace markets with SSDs for
industrial and rugged environments. For more information, visit
www.stec-inc.com.

"For information about sTec and to subscribe to the Company's "Email Alerts"
service, please click on "Company" near the top, right-hand side of the
Company's home page at www.stec-inc.com. Then click on "Investor Relations,"
followed by "Email Alerts."

The sTec, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=1079

sTec and the sTec logo are either registered trademarks or trademarks of sTec,
Inc. in the United States and certain other countries. All other trademarks or
brand names referred to herein are the property of their respective owners.

Use of Non-GAAP Financial Information. To supplement the consolidated
financial results prepared in accordance with U.S. Generally Accepted
Accounting Principles ("GAAP"), sTec uses non-GAAP financial measures
(non-GAAP gross profit, non-GAAP gross profit percentage, non-GAAP operating
expenses, non-GAAP operating loss, non-GAAP operating margin percentage,
non-GAAP loss and non-GAAP diluted loss per share) that exclude employee stock
compensation expense, employee severance, securities litigation related costs,
SEC investigation and litigation costs, and intellectual property litigation
costs. Management excludes these items because it believes that the non-GAAP
measures enhance an investor's overall understanding of sTec's financial
performance and future prospects by being more reflective of the Company's
core, recurring operational activities and to be more comparable with the
results of the Company over various periods. Management uses non-GAAP
financial measures internally for strategic decision making, forecasting
future results and evaluating current performance. Guidance is provided only
on a non-GAAP basis due to the inherent difficulty of forecasting the timing
or amount of such items. Difficulties in forecasting the non-GAAP items
include the timing of issuing employee stock compensation, which could impact
the valuation and related expense, and the timing of employee severance
payments. These items could be materially significant to the Company's GAAP
results in any period. By disclosing non-GAAP financial measures, management
intends to provide investors with a more meaningful, consistent comparison of
the Company's core operating results and trends for the periods presented.
Non-GAAP financial measures are not prepared in accordance with GAAP;
therefore, the information is not necessarily comparable to other companies'
financial information and should be considered as a supplement to, not a
substitute for, or superior to, the corresponding measures calculated in
accordance with GAAP. A complete reconciliation between GAAP and non-GAAP
information referred to in this release is provided in tables included in this
release. Certain amounts reported in prior releases may have been reclassified
to conform to the current quarter's non-GAAP presentation.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995. This release contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, statements concerning the
rapidly evolving dynamics of the enterprise storage and server markets;
growing acceptance, adoption and qualification of SSDs within the enterprise
storage and server markets; the launch, marketing, qualification and
production of the Company's product and solution initiatives; the
qualification and sale of the Company's products and solutions into emerging
SSD system vendors, enterprises and non-traditional end-user customers, along
with OEM customers; diversifying the Company's customer base and changing
sales mix; leveraging the Company's global channel program and growing sales
and marketing infrastructure; recruiting seasoned personnel; the capabilities,
performance, cost advantages, and benefits of Company's products and
solutions, and developing technologies; anticipated increase in sales of the
Company's products and solutions; the future financial performance and outlook
of the Company; and expected second quarter of 2013 revenue and loss per
share. Such forward-looking statements are based on current expectations and
involve inherent risks and uncertainties, including factors that could delay,
divert or change any of them, and could cause actual outcomes and results to
differ materially from current expectations. Although the Company believes
that the forward-looking statements contained in this release are reasonable,
it can give no assurance that its expectations will be fulfilled. Additional
important factors which could cause actual results to differ materially from
those expressed or implied in the forward-looking statements are detailed in
filings with the Securities and Exchange Commission made from time to time by
the Company, including its Annual Report on Form 10-K, its Quarterly Reports
on Form 10-Q, and its Current Reports on Form 8-K. Special attention is
directed to the portions of those documents entitled "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The information contained in this press release is a statement of
the Company's present intention, belief or expectation. The Company may change
its intention, belief, or expectation, at any time and without notice, based
upon any changes in such factors, in the Company's assumptions or otherwise.
Except as required by law, the Company undertakes no obligation to release
publicly any revisions to any forward-looking statements to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.

sTec, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
                                                           
                                                           
                                             March 31, 2013 December31, 2012
ASSETS:                                                     
Current Assets:                                             
Cash and cash equivalents                     $132,932     $158,232
Accounts receivable, net of allowances of
$5,688 at March 31, 2013and $6,248 at        7,926         13,515
December31, 2012
Inventory                                     42,090        41,760
Insurance claim receivable                    --           20,563
Other current assets                          7,957         10,212
Total current assets                          190,905       244,282
                                                           
Leasehold interest in land                    2,491         2,503
Property, plant and equipment, net            28,586        30,343
Goodwill                                      1,682         1,682
Long-term intangible assets, net              4,742         5,144
Other long-term assets                        5,818         5,817
Total assets                                  $234,224     $289,771
                                                           
LIABILITIES AND SHAREHOLDERS' EQUITY:                       
Current Liabilities:                                        
Accounts payable                              $8,115       $6,818
Accrued and other liabilities                 18,100        51,586
Total current liabilities                     26,215        58,404
Other long-term liabilities                   4,977         6,185
Commitments and contingencies                 --           --
Shareholders' Equity:                                       
Preferred stock, $0.001 par value, 20,000
shares authorized, no shares issued and       --           --
outstanding
Common stock, $0.001 par value, 100,000
shares authorized, 46,810 shares issued and
outstanding as of March 31, 2013 and 46,805   47            47
shares issued and outstanding as of
December31, 2012
Additional paid-in capital                    153,580       150,263
Retained earnings                             49,405        74,872
Total shareholders' equity                    203,032       225,182
Total liabilities and shareholders' equity    $234,224     $289,771




sTec, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share amounts)
                                                    
                                         
                                         Quarter Ended March 31,
                                         2013        2012
Net revenues                              $22,025   $50,415
Cost of revenues                          16,132     32,323
Gross profit                             5,893      18,092
                                                    
Sales and marketing                      6,554      6,656
General and administrative               12,102     9,214
Research and development                 12,653     16,103
Total operating expenses                 31,309     31,973
                                                    
Operating loss                           (25,416)   (13,881)
Other income, net                        41         231
Loss from operations before income taxes (25,375)   (13,650)
Provision (benefit) for income taxes     92         (2,961)
Net loss                                 (25,467)   (10,689)
Comprehensive loss                       $(25,467) $(10,689)
                                                    
Net loss per share:                                  
Basic                                    $(0.54)   $(0.23)
Diluted                                  $(0.54)   $(0.23)
                                                    
Shares used in per share computation:                
Basic                                     46,808     46,140
Diluted                                   46,808     46,140

                                  sTec, INC.

                           NON-GAAP RECONCILIATIONS

The non-GAAP financial measures included in the following tables are non-GAAP
gross profit, non-GAAP gross profit percentage, non-GAAP operating expenses,
non-GAAP operating loss, non-GAAP operating margin percentage, non-GAAP loss
and non-GAAP diluted loss per share, which adjust for the following items: (a)
employee stock compensation expense, (b) employee severance, (c) securities
litigation related costs, (d) SEC investigation and litigation costs and (e)
intellectual property litigation costs. Management believes these non-GAAP
financial measures enhance an investor's overall understanding of the
Company's financial performance and future prospects by being more reflective
of the Company's core, recurring operational activities and are more
comparable with the results of the Company over various periods. Management
uses non-GAAP financial measures internally for strategic decision making,
forecasting future results and evaluating current performance. Non-GAAP
financial measures are not prepared in accordance with GAAP; therefore, the
information is not necessarily comparable to other companies' financial
information and should be considered as a supplement to, not a substitute for,
or superior to, the corresponding measures calculated in accordance with GAAP.

Details of the items excluded from GAAP financial results in calculating
non-GAAP financial measures and explanatory footnotes are as follows:

  a) Employee stock compensation costs incurred in connection with Accounting
  Standards Codification ("ASC") 718, "Compensation -- Stock Compensation,"
  are comprised on non-cash expenses related to equity compensation provided
  to employees, officers and directors.Management believes non-cash stock
  compensation costs should be excluded when evaluating core operations and
  current performance.

  b) Employee severance relates to costs incurred in conjunction with the
  termination of certain employees.As an accommodation, the Company provides
  compensation in the form of severance to certain employees subject to
  termination without cause.Management believes that severance costs should
  be excluded when evaluating core operations and current performance.

  c) In the fourth quarter of 2009 and first quarter of 2010, certain
  securities class action and shareholder derivative lawsuits were filed
  against the Company and certain officers and directors of the Company.These
  costs represent the legal fees related to these class action securities and
  shareholder derivative actions that have not been covered by the Company's
  Directors and Officers insurance policies and include indemnifiable legal
  costs advanced on behalf of these officers and directors. Management
  believes these legal fees should be excluded when evaluating core operations
  and current performance.

  d) The SEC initiated in the fourth quarter of 2009 an investigation of the
  Company and certain officers in connection with trading in the Company's
  securities, which on July19, 2012 resulted in the SEC filing a civil action
  against the Company's Founder, Manouch Moshayedi.The SEC also notified the
  Company that it would not bring an enforcement action against the Company or
  any of its other officers.These costs represent the legal fees related to
  this investigation and related civil action that have not been covered by
  the Company's Directors and Officers insurance policies and include
  indemnifiable legal costs advanced on behalf of these officers.Management
  believes these legal fees should be excluded when evaluating core operations
  and current performance.

  e)On September 7, 2011, Solid State Storage Solutions, Inc. filed a patent
  infringement suit against the Company and several other
  defendants.According to the complaint, the patents relate to solid-state
  drives employing a controller chip and a plurality of NAND flash devices.On
  December 19, 2012, the Company resolved this matter pursuant to a
  confidential agreement that releases the Company from past claims and
  precludes the plaintiff from again claiming that the Company's products
  infringe their patents.On January2, 2013, the U.S. District Court for the
  Eastern District of Texas approved the parties' joint motion to dismiss the
  matter with prejudice. Management believes that legal fees and expenses
  incurred in conjunction with this lawsuit should be excluded when evaluating
  core operations and current performance.

  f) The amount represents the estimated income tax effect of the non-GAAP
  adjustments.The Company calculates the tax effect of non-GAAP adjustments
  by applying an applicable estimated jurisdictional tax rate to each specific
  non-GAAP item.

sTec, INC.
SCHEDULE RECONCILING GAAP NET LOSS TO NON-GAAP NET LOSS
($ in thousands, except per share amounts)
(unaudited)
                                                               
                                         
                                         For the Quarters Ended
                                         March 31,   March 31,   December 31,
                                         2013        2012        2012
GAAP net loss                             $(25,467) $(10,689) $(23,155)
                                                               
The GAAP amounts have been adjusted to
exclude the following items (non-GAAP                           
adjustments):
                                                               
Excluded from cost of revenues:                                 
Employee stock compensation (a)           $203      $221      $223
Employee severance (b)                    --         52         --
Total excluded from cost of sales         203        273        223
                                                               
Excluded from operating expenses:                               
Employee stock compensation (a)           3,112      3,440      3,468
Employee severance (b)                    343        275        430
Securities litigation related costs (c)   243        200        8
SEC investigation and litigation costs    2,585      4          1,102
(d)
IP litigation costs (e)                   23         115        1,831
Total excluded from operating expenses    6,306      4,034      6,839
                                                               
Total excluded from cost of revenues,
operating expenses and other (expense)    6,509      4,307      7,062
income before income taxes
                                                               
Income tax effect on non-GAAP adjustments (68)       (1,499)    (51)
(f)
Total excluded from cost of revenues and  6,441      2,808      7,011
operating expenses after taxes
                                                               
Non-GAAP net loss                         $(19,026) $(7,881)  $(16,144)
                                                               
GAAP diluted loss per share               $(0.54)   $(0.23)   $(0.50)
Impact of non-GAAP adjustments on diluted 0.13       0.06       0.15
loss per share
Non-GAAP diluted loss per share           $(0.41)   $(0.17)   $(0.35)
                                                               
(a) - (f)See corresponding footnotes                           
above.
                                                               


sTec, INC.
SELECTED NON-GAAP FINANCIAL INFORMATION
($ in thousands)
(unaudited)
                                                               
                                         
                                         For the Quarters Ended
                                         March 31,   March 31,   December 31,
                                         2013        2012        2012
                                                               
GAAP gross profit                         $5,893    $18,092   $11,304
Employee stock compensation (a)           203        221        223
Employee severance (b)                    --         52         --
Non-GAAP gross profit                     $6,096    $18,365   $11,527
                                                               
GAAP gross profit %                       26.8%       35.9%       32.2%
Effect of reconciling item on gross       0.9%        0.5%        0.6%
profit %
Non-GAAP gross profit %                   27.7%       36.4%       32.8%
                                                               
GAAP operating expenses                   $31,309   $31,973   $35,294
Employee stock compensation (a)           (3,112)    (3,440)    (3,468)
Employee severance (b)                    (343)      (275)      (430)
Securities litigation related costs (c)   (243)      (200)      (8)
SEC investigation and litigation costs    (2,585)    (4)        (1,102)
(d)
IP litigation costs (e)                   (23)       (115)      (1,831)
Non-GAAP operating expenses               $25,003   $27,939   $28,455
                                                               
GAAP operating loss                       $(25,416) $(13,881) $(23,990)
Employee stock compensation (a)           3,315      3,661      3,691
Employee severance (b)                    343        327        430
Securities litigation related costs (c)   243        200        8
SEC investigation and litigation costs    2,585      4          1,102
(d)
IP litigation costs (e)                   23         115        1,831
Non-GAAP operating loss                   $(18,907) $(9,574)  $(16,928)
                                                               
GAAP operating margin %                   -115.4%     -27.5%      -68.3%
Effect of reconciling items on operating  29.6%       8.5%        20.1%
margin %
Non-GAAP operating margin %               -85.8%      -19.0%      -48.2%
                                                               
                                                               
(a) - (e) Refer to the corresponding                            
footnotes above.

CONTACT: sTec, Inc.
         Mitch Gellman, Vice President of Investor Relations
         (949) 260-8328
         ir@stec-inc.com

sTec, Inc.