SGI, née Rackable, filed their 10-Q report with the SEC earlier this week that details the preliminary assessment of their financial performance during the second fiscal quarter of ’09, and their first quarter since the SGI purchase was complete. We already knew from their press release last week what the general timbre of the news was going to be, but the 10-Q has more details. The results are preliminary because the company is undergoing audit.
It is important to remember when you read these results that, from Rackable’s point of view, the SGI deal was an asset purchase. So when you see Q2 2009 results compared to Q2 2008, that comparison is of today’s SGI with last year’s Rackable; last year’s SGI is not reported. This makes reasoning about comparisons like revenue before and after the sale a little more difficult.
From the press release
The company expects GAAP revenue for the second quarter of 2009 to be in the range of $55 – $60 million, compared to $44.4 million for the first quarter of 2009 and $75.8 million in the second quarter of 2008. The company expects non-GAAP revenue for the second quarter of 2009 to be in the range of $57 – $62 million.
Remember the GAAP/non-GAAP thing doesn’t necessarily have to be hand-waving to hide bad news (I’ve written about this before with respect to SGI), its just a way of acknowledging that (for example) you can have cash in the bank account (non-GAAP) that you can’t report to the markets because of revenue recognition rules for certain types of transactions (GAAP).
That $75.8M comparison from this quarter last year is for Rackable; SGI’s revenue last year in this quarter was actually quite a bit higher at nearly $94M, and SGI closed out the final quarter of 2008 with nearly $83M in revenue. At first glance you might expect, since Rackable’s customer base (Microsoft, Yahoo!, others) didn’t substantially overlap with SGI’s HPC business, something over $100M in revenue for the combined company. That we didn’t see it may reflect a shift in how the new company is doing business, and this is consistent with some of what we’ve heard out of SGI lately. It’s also necessary, since the old company was (obviously) losing money. It’s too early to say whether that shift will create a profitable company.
Preliminary results indicate that it did not create a profitable company in Q2. Preliminary results show a loss of $814,000. This is actually quite a bit better than the old SGI’s results, which were typically in the $30-50M loss per quarter range (see the pink sheets linked above). It’s also better than Rackable was doing; it lost nearly $28M in the same period last year. But, don’t get too excited. The company is taking a one time credit for buying SGI’s assets at a discount to their intrinsic value — an accounting trick (legitimate though not indicative of performance) that makes their results look about $19.8M better than they otherwise would have (I think: I had to dig this out of the 10-Q myself, and I’d love for someone who knows better to validate this).