Archive notice: This article was originally published on November 8, 2007. Links and embedded videos are preserved as part of the historical record.
In addition, SGI was able to win new customers in the business areas that the company has particularly in its sights as part of its growth strategy. The pro-forma result remained stable compared with the previous quarter. The targets with regard to revenue, cost development and cash were achieved.
“The first step toward further growth is increasing our order intake. The ‘bookings’ developed very pleasingly this quarter, with growth of 43 percent,” explains Bo Ewald, Chief Executive Officer of SGI. “I am especially encouraged by how the orders were composed. They came from all our target markets. The largest single order was under five million dollars. This fits well with our new strategy of expanding our customer base and not having to rely exclusively on a few very large orders.”
“Our pro-forma revenue is stable and we had our expenses firmly under control. The result thus corresponds to the targets. A growing share of our business consists of services and software with high added value. The rules for recognizing software revenue are therefore having an increasing effect on our accounting. Our results under US GAAP reflect this,” adds Kathy Lanterman, SGI Chief Financial Officer. “In the long term, this change in the business will also have an effect on more stable GAAP results.”
First-quarter results under US GAAP
In the first quarter of fiscal year 2008, the company generated revenue of 91.1 million dollars compared with 122.3 million dollars in the fourth quarter of 2007. The operating loss under US GAAP amounted to 27.2 million dollars. In the preceding quarter, it was 24.8 million dollars. Operating expenses amounted to 54.7 million dollars. In the fourth quarter of 2007, these had still amounted to 56.9 million dollars. The order backlog at the end of the first quarter of 2008 was 65 million dollars compared with 66.5 million dollars at the end of the fourth quarter of 2007.
Pro-forma results in the first quarter
SGI generated pro-forma revenue of 120.7 million dollars in the reporting period. In the fourth quarter of the previous fiscal year, revenue had been 141.5 million dollars. At that time, SGI had booked a major order with a volume of around 40 million dollars. The first quarter of 2008 brought SGI a major order with pro-forma revenue of 20 million dollars. If these two major orders are disregarded, the result for both quarters is an approximately equal level of revenue.
Under the designation “pro forma,” SGI reports some key figures that are not part of US accounting regulations (US GAAP). In addition, the company publishes order intake as a further key figure. This comprises the binding orders for SGI products and services during the reporting period. SGI’s management publishes these additional key figures for investors in order to make it easier for them to compare business results by quarter. They also offer a view of business performance from the perspective of management and investors. The credit lines granted to the company as well as management targets and bonus plans are based on key figures that are not calculated under US GAAP.
Pro-forma revenue does not take into account effects that resulted from the fresh start of accounting after the end of the insolvency proceedings. Nor do the deferrals of revenue from business transactions in which software constitutes a significant component of the overall solution come into play – in accordance with AICPA Statement of Position SOP 97-2, Software Revenue Recognition (“SOP 97-2”). The pro-forma gross margin for the first quarter, likewise adjusted for comparable items as above, reached 34.3 percent. In the fourth quarter, the profit margin had amounted to 35.2 percent, with this fluctuation attributable to the composition of the products sold. Excluding the costs of restructuring and the insolvency proceedings, share-based compensation expenses and the amortization of intangible assets, pro-forma operating expenses in Q1 2008 were 51.5 million dollars. In the fourth quarter of 2007, they had amounted to 53.2 million dollars. Earnings before interest, taxes, depreciation of tangible assets and amortization of intangible assets (EBITDA), in accordance with the company’s debt agreement, resulted in a loss of 3.8 million dollars. In the fourth quarter of 2007, SGI had achieved positive EBITDA of 2.8 million dollars.
