Exhibit 99.1
craylogoregistered2a01a01a12.jpg
Cray Media:
Investors:
Juliet McGinnis
Paul Hiemstra
206/701-2152
206/701-2044
pr@cray.com
ir@cray.com


CRAY INC. REPORTS SECOND QUARTER 2018 FINANCIAL RESULTS
Company expects 2018 revenue growth in the range of 15%
        
Seattle, WA - July 31, 2018 - Global supercomputer leader Cray Inc. (Nasdaq: CRAY) today announced financial results for its second quarter ended June 30, 2018.

All figures in this release are based on U.S. GAAP unless otherwise noted. A reconciliation of GAAP to non-GAAP measures is included in the financial tables in this press release.

Revenue for the second quarter of 2018 was $120.2 million, compared to $87.1 million in the second quarter of 2017. Net loss for the second quarter of 2018 was $11.0 million, or $0.27 per diluted share, compared to a net loss of $6.8 million, or $0.17 per diluted share in the second quarter of 2017. Non-GAAP net loss was $8.1 million, or $0.20 per diluted share for the second quarter of 2018, compared to non-GAAP net loss of $8.0 million, or $0.20 per diluted share in the second quarter of 2017.

For the second quarter of 2018, overall gross profit margin on a GAAP and non-GAAP basis was 31% and 32%, respectively, compared to 33% on a GAAP and non-GAAP basis in the second quarter of 2017.

Operating expenses for the second quarter of 2018 were $50.2 million, compared to $39.8 million in the second quarter of 2017. Non-GAAP operating expenses for the second quarter of 2018 were $47.1 million, compared to $37.5 million in the second quarter of 2017. Operating expenses for the second quarter of 2018 were impacted by lower research and development credits compared to the second quarter of 2017.

As of June 30, 2018, cash, investments, and restricted cash totaled $144 million. Working capital at the end of the second quarter was $325 million, compared to $332 million at March 31, 2018.

“Our second quarter was highlighted by a number of new AI wins, several installations of supercomputers and storage systems around the world, and expanded storage and AI offerings,” said Peter Ungaro, president and CEO of Cray. “We continue to see signs of improvement in our target market and, although it is still early to predict the extent of the rebound, I remain confident that our market is returning to growth. While we have work left to do, we remain focused on executing on our outlook for the remainder of 2018 and setting the company up for strong long-term growth.”

Outlook
For 2018, while a wide range of results remains possible, Cray expects revenue to be in the range of $450 million. For the third quarter of 2018, revenue is expected to be about $90 million. For 2018, GAAP and non-GAAP gross margins are expected to be in the low-30% range. Non-GAAP operating expenses for 2018 are expected to be in the range of $190 million. For 2018, non-GAAP adjustments are expected to total about $14 million, driven primarily by share-based compensation. For the year, GAAP operating

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expenses are anticipated to be about $12 million higher than non-GAAP operating expenses, and GAAP gross profit is expected to be about $2 million lower than non-GAAP gross profit.

Based on this outlook, Cray’s effective GAAP and non-GAAP tax rates for 2018 are both expected to be in the low-single digit range, on a percentage basis.

While a wide range of results remains possible and it is still early in the planning process, Cray expects 2019 annual revenue to grow modestly compared to its current 2018 outlook.

Actual results for any future periods are subject to large fluctuations given the nature of Cray’s business.

Recent Highlights
In July, Cray announced that it has delivered and installed an XC50 supercomputer at the National Astronomical Observatory of Japan (NAOJ). The supercomputer is the world’s most powerful system dedicated to astrophysical calculations.
In July, Cray announced that the Indian Institute of Technology Bombay has selected a Cray XC50 supercomputer and Cray ClusterStor scale-out Lustre storage system. The new solution will support IIT Bombay in its mission to deliver transformative education to create leaders and innovators.
In June, Cray announced a new AI workflow software suite and reference system configurations to jump-start AI and analytics deployments. The company introduced the Cray Urika-CS AI and Analytics software suite for the Cray CS series, and new Cray Accel AI reference configurations to help both IT and AI teams.
In June, Cray announced the ClusterStor L300F Lustre-based scalable flash storage solution, designed for applications that need high-performance scratch storage to quickly store and retrieve intermediate results. Also in June, Cray announced that the latest GENCI supercomputer in France, integrated by ATOS, will include a five petabyte Cray ClusterStor storage solution.
In June, Cray announced that it had partnered with UK Innovation Center Digital Catapult and its Machine Intelligence Garage to help organizations of all sizes speed the development of machine intelligence systems.
In May, Cray announced that the Japan Meteorological Agency was in the process of implementing two Cray XC50 supercomputers at its site in Kiyose, Tokyo. These systems are expected to deliver a combined peak performance of more than 18 petaflops.

Conference Call Information
Cray will host a conference call today, Tuesday, July 31, 2018 at 1:30 p.m. PT (4:30 p.m. ET) to discuss its second quarter ended June 30, 2018 financial results. To access the call, please dial into the conference at least 10 minutes prior to the beginning of the call at (855) 894-4205. International callers should dial (765) 889-6838 and use the conference ID #9872838. To listen to the audio webcast, go to the Investors section of the Cray website at www.cray.com/company/investors.

If you are unable to attend the live conference call, an audio webcast replay will be available in the Investors section of the Cray website for 180 days. A telephonic replay of the call will also be available by dialing (855) 859-2056, international callers dial (404) 537-3406, and entering the conference ID #9872838. The conference call replay will be available for 72 hours, beginning at 4:45 p.m. PT on Tuesday, July 31, 2018.

Use of Non-GAAP Financial Measures
This press release contains “non-GAAP financial measures” under the rules of the U.S. Securities and Exchange Commission (“SEC”). A reconciliation of U.S. generally accepted accounting principles, or

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GAAP, to non-GAAP results is included in the financial tables included in this press release. Management believes that the non-GAAP financial measures that we have set forth provide additional insight for analysts and investors and facilitate an evaluation of Cray’s financial and operational performance that is consistent with the manner in which management evaluates Cray’s financial performance. However, these non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary or advisable for the conduct of Cray’s business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. Hence, to compensate for these limitations, management does not review these non-GAAP financial metrics in isolation from its GAAP results, nor should investors. Non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with or disclosures required by GAAP. These measures are adjusted as described in the reconciliation of GAAP to non-GAAP numbers at the end of this release, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent, or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review and consider this non-GAAP information as well as the GAAP financial results that are disclosed in Cray’s SEC filings.

Additionally, we have not quantitatively reconciled the non-GAAP guidance measures disclosed under “Outlook” to their corresponding GAAP measures because we do not provide specific guidance for the various reconciling items such as share-based compensation, adjustments to the provision for income taxes, amortization of intangibles, costs related to acquisitions, purchase accounting adjustments, and gain on significant asset sales, as certain items that impact these measures have not occurred, are out of our control, or cannot be reasonably predicted. Accordingly, reconciliations to the non-GAAP guidance measures are not available without unreasonable effort. Please note that the unavailable reconciling items could significantly impact our financial results.
About Cray Inc.
Global supercomputing leader Cray Inc. (Nasdaq: CRAY) provides innovative systems and solutions enabling scientists and engineers in industry, academia, and government to meet existing and future simulation and analytics challenges. Leveraging more than 40 years of experience in developing and servicing the world’s most advanced supercomputers, Cray offers a comprehensive portfolio of supercomputers and big data storage and analytics solutions delivering unrivaled performance, efficiency, and scalability. Cray’s Adaptive Supercomputing vision is focused on delivering innovative next-generation products that integrate diverse processing technologies into a unified architecture allowing customers to meet the market’s continued demand for realized performance. Go to www.cray.com for more information.

Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, including, but not limited to, statements related to Cray’s financial guidance and expected operating results, Cray’s competitive position in the high-end supercomputing market and the timing and extent of a rebound in that market, Cray’s ability to grow in the future, and its product development, sales, and delivery plans. These statements involve current expectations, forecasts of future events, and other statements that are not historical facts. Inaccurate assumptions and estimates as well as known and unknown risks and uncertainties can affect the accuracy of forward-looking statements and cause actual results to differ materially from those anticipated by these forward-looking statements. Factors that could affect actual future events or results include, but are not limited to, the risk that Cray does not achieve the operational

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or financial results that it expects, the risk that Cray will not be able to secure orders for Cray systems to be accepted in the future when or at the levels expected, the risk that the segments of the high-end of the supercomputing market that Cray targets do not recover from the current downturn as early or as completely as expected or at all, the risk that the systems ordered by customers are not delivered when expected, do not perform as expected once delivered, or have technical issues that must be corrected before acceptance, the risk that the acceptance process for delivered systems is not completed, or customer acceptances are not received, when expected or at all, the risk that Cray is not able to successfully sell products and services in the big data, artificial intelligence, and commercial markets as expected or at all, the risk that Cray is not able to reach new customers through cloud services offerings as expected or at all, the risk that Cray is not able to expand and penetrate its addressable market as expected or at all, the risk that the expense and/or effort to address Cray systems at customer sites that have issues with third party components or with Cray components is material, the risk that Cray is not able to successfully complete its planned product development efforts in a timely fashion or at all, the risk that government funding to Cray for research and development projects is less than expected, the risk that new third-party processors and other components for our systems are not available with the anticipated performance, timing, or pricing, the risk that Cray is not able to achieve anticipated gross margin or expense levels, and such other risks as identified in Cray’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and from time to time in other reports filed by Cray with the SEC. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. Cray undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change Cray’s expectations.

###

Urika, CRAY and the stylized CRAY mark are registered trademarks of Cray Inc. in the United States and other countries, and Accel AI, ClusterStor, and the CS and XC families of supercomputers are trademarks of Cray Inc. 

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CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
 

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
Product
 
$
83,379

 
$
51,531

 
$
127,833

 
$
72,659

Service
 
36,824

 
35,604

 
71,964

 
73,507

Total revenue
 
120,203

 
87,135

 
199,797

 
146,166

Cost of revenue:
 
 
 
 
 
 
 
 
Cost of product revenue
 
65,274

 
39,515

 
99,319

 
54,266

Cost of service revenue
 
17,122

 
19,277

 
35,719

 
39,748

Total cost of revenue
 
82,396

 
58,792

 
135,038

 
94,014

Gross profit
 
37,807

 
28,343

 
64,759

 
52,152

Operating expenses:
 
 
 
 
 
 
 
 
Research and development, net
 
29,382

 
17,325

 
59,274

 
49,965

Sales and marketing
 
15,218

 
15,247

 
30,883

 
29,900

General and administrative
 
5,624

 
7,205

 
11,403

 
16,002

Restructuring
 

 

 
476

 

Total operating expenses
 
50,224

 
39,777

 
102,036

 
95,867

Loss from operations
 
(12,417
)
 
(11,434
)
 
(37,277
)
 
(43,715
)
 
 
 
 
 
 
 
 
 
Other income, net
 
430

 
155

 
48

 
1,197

Interest income, net
 
667

 
897

 
1,380

 
1,775

Loss before income taxes
 
(11,320
)
 
(10,382
)
 
(35,849
)
 
(40,743
)
Income tax benefit (expense)
 
370

 
3,542

 
(109
)
 
14,688

Net loss
 
$
(10,950
)
 
$
(6,840
)
 
$
(35,958
)
 
$
(26,055
)
 
 
 
 
 
 
 
 
 
Basic net loss per common share
 
$
(0.27
)
 
$
(0.17
)
 
$
(0.89
)
 
$
(0.65
)
Diluted net loss per common share
 
$
(0.27
)
 
$
(0.17
)
 
$
(0.89
)
 
$
(0.65
)
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
40,616

 
40,051

 
40,527

 
40,022

Diluted weighted average shares outstanding
 
40,616

 
40,051

 
40,527

 
40,022




5



CRAY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share data)
 
June 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
142,157

 
$
137,326

Restricted cash
1,300

 
1,964

Short-term investments

 
6,997

Accounts and other receivables, net
113,138

 
162,034

Inventory
148,153

 
186,307

Prepaid expenses and other current assets
23,134

 
25,015

Total current assets
427,882

 
519,643

 
 
 
 
Long-term restricted cash
1,030

 
1,030

Long-term investment in sales-type lease, net
16,409

 
23,367

Property and equipment, net
37,880

 
36,623

Goodwill
14,182

 
14,182

Intangible assets other than goodwill, net
3,760

 
4,345

Other non-current assets
18,536

 
19,567

TOTAL ASSETS
$
519,679

 
$
618,757

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
16,758

 
$
57,207

Accrued payroll and related expenses
16,994

 
18,546

Other accrued liabilities
10,885

 
9,471

Customer contract liabilities
58,575

 
80,119

Total current liabilities
103,212

 
165,343

 
 
 
 
Long-term customer contract liabilities
32,917

 
38,622

Other non-current liabilities
12,823

 
14,495

TOTAL LIABILITIES
148,952

 
218,460

 
 
 
 
Shareholders’ equity:
 
 
 
Preferred stock — Authorized and undesignated, 5,000,000 shares; no shares issued or outstanding

 

Common stock and additional paid-in capital, par value $.01 per share — Authorized, 75,000,000 shares; issued and outstanding 40,815,172 and 40,464,963 shares, respectively
639,782

 
633,408

Accumulated other comprehensive income
1,946

 
915

Accumulated deficit
(271,001
)
 
(234,026
)
TOTAL SHAREHOLDERS’ EQUITY
370,727

 
400,297

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
519,679

 
$
618,757


 


6



CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)

 
 
Three Months Ended June 30, 2018
 
 
Net Loss
 
Diluted EPS
 
Operating Loss
 
Gross Profit
 
Operating Expenses
GAAP
 
$
(11.0
)
 
$
(0.27
)
 
$
(12.4
)
 
$
37.8

 
$
50.2

 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
3.2

 
 
 
3.2

 
0.2

 
3.0

Amortization of acquired and other intangibles
(2)
0.3

 
 
 
0.3

 
0.2

 
0.1

Income tax on reconciling items
(3)
(0.7
)
 
 
 
 
 
 
 
 
Other items impacting tax provision
(4)
0.1

 
 
 
 
 
 
 
 
Total reconciling items
 
2.9

 
0.07

 
3.5

 
0.4

 
3.1

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
(8.1
)
 
$
(0.20
)
 
$
(8.9
)
 
$
38.2

 
$
47.1

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
Net Loss
 
Diluted EPS
 
Operating Loss
 
Gross Profit
 
Operating Expenses
GAAP
 
$
(6.8
)
 
$
(0.17
)
 
$
(11.4
)
 
$
28.3

 
$
39.8

 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
2.3

 
 
 
2.3

 
0.1

 
2.2

Amortization of acquired and other intangibles
(2)
0.1

 
 
 
0.1

 
 
 
0.1

Income tax on reconciling items
(3)
(1.0
)
 
 
 
 
 
 
 
 
Other items impacting tax provision
(4)
(2.6
)
 
 
 
 
 
 
 
 
Total reconciling items
 
(1.2
)
 
(0.03
)
 
2.4

 
0.1

 
2.3

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
(8.0
)
 
$
(0.20
)
 
$
(9.0
)
 
$
28.4

 
$
37.5

 
 
 
 
 
 
 
 
 
 
 
Notes
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21% for the current year period, and 35% for the prior year comparative period
(4) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (3) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets and any applicable change in tax law, including the Tax Cuts and Jobs Act of 2017.

7



CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except EPS)

 
 
Six Months Ended June 30, 2018
 
 
Net Loss
 
Diluted EPS
 
Operating Loss
 
Gross Profit
 
Operating Expenses
GAAP
 
$
(36.0
)
 
$
(0.89
)
 
$
(37.3
)
 
$
64.8

 
$
102.0

 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
6.1

 
 
 
6.1

 
0.4

 
5.7

Amortization of acquired and other intangibles
(2)
0.5

 
 
 
0.5

 
0.4

 
0.1

Restructuring
(3)
0.5

 
 
 
0.5

 
 
 
0.5

Income tax on reconciling items
(4)
(1.5
)
 
 
 
 
 
 
 
 
Other items impacting tax provision
(5)
0.8

 
 
 
 
 
 
 
 
Total reconciling items
 
6.4

 
0.16

 
7.1

 
0.8

 
6.3

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
(29.6
)
 
$
(0.73
)
 
$
(30.2
)
 
$
65.6

 
$
95.7

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Net Loss
 
Diluted EPS
 
Operating Loss
 
Gross Profit
 
Operating Expenses
GAAP
 
$
(26.1
)
 
$
(0.65
)
 
$
(43.7
)
 
$
52.2

 
$
95.9

 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
5.0

 
 
 
5.0

 
0.2

 
4.8

Amortization of acquired and other intangibles
(2)
0.3

 
 
 
0.3

 
 
 
0.3

Income tax on reconciling items
(4)
(2.0
)
 
 
 
 
 
 
 
 
Other items impacting tax provision
(5)
(13.7
)
 
 
 
 
 
 
 
 
Total reconciling items
 
(10.4
)
 
(0.26
)
 
5.3

 
0.2

 
5.1

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
(36.5
)
 
$
(0.91
)
 
$
(38.4
)
 
$
52.4

 
$
90.8

 
 
 
 
 
 
 
 
 
 
 
Notes
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments to exclude restructuring costs
(4) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21% for the current year period, and 35% for the prior year comparative period
(5) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (4) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets and any applicable change in tax law, including the Tax Cuts and Jobs Act of 2017.
CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)


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Three Months Ended June 30, 2018
 
 
Product
 
Service
 
Total
 
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
GAAP
 
$
18.1

 
22
%
 
$
19.7

 
54
%
 
$
37.8

 
31
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
0.1

 
 
 
0.1

 
 
 
0.2

 
 
Amortization of acquired and other intangibles
(2)
0.2

 
 
 

 
 
 
0.2

 
 
Total reconciling items
 
0.3

 
%
 
0.1

 
%
 
0.4

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
18.4

 
22
%
 
$
19.8

 
54
%
 
$
38.2

 
32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
Product
 
Service
 
Total
 
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
GAAP
 
$
12.0

 
23
%
 
$
16.3

 
46
%
 
$
28.3

 
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)

 
 
 
0.1

 
 
 
0.1

 
 
Total reconciling items
 

 
%
 
0.1

 
%
 
0.1

 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
12.0

 
23
%
 
$
16.4

 
46
%
 
$
28.4

 
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets

9



CRAY INC. AND SUBSIDIARIES
Reconciliation of Selected U.S. GAAP Measures to non-GAAP Measures
(Unaudited; in millions, except percentages)

 
 
Six Months Ended June 30, 2018
 
 
Product
 
Service
 
Total
 
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
GAAP
 
$
28.5

 
22
%
 
$
36.3

 
50
%
 
$
64.8

 
32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
0.2

 
 
 
0.2

 
 
 
0.4

 
 
Amortization of acquired and other intangibles
(2)
0.4

 
 
 

 
 
 
0.4

 
 
Total reconciling items
 
0.6

 
1
%
 
0.2

 
1
%
 
0.8

 
1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
29.1

 
23
%
 
$
36.5

 
51
%
 
$
65.6

 
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
Product
 
Service
 
Total
 
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
 
Gross Profit
 
Gross Margin
GAAP
 
$
18.4

 
25
%
 
$
33.8

 
46
%
 
$
52.2

 
36
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation
(1)
0.1

 
 
 
0.1

 
 
 
0.2

 
 
Total reconciling items
 
0.1

 
%
 
0.1

 
%
 
0.2

 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
$
18.5

 
25
%
 
$
33.9

 
46
%
 
$
52.4

 
36
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes
 
 
 
 
 
 
 
 
 
 
 
 
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets

10




CRAY INC. AND SUBSIDIARIES
Reconciliation of GAAP to non-GAAP Net Loss
(Unaudited; in millions except per share amounts and percentages)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
GAAP Net Loss
 
$
(11.0
)
 
$
(6.8
)
 
$
(36.0
)
 
$
(26.1
)
 
 
 
 
 
 
 
 
 
Non-GAAP adjustments impacting gross profit:
 
 
 
 
 
 
 
 
  Share-based compensation
(1)
0.2

 
0.1

 
0.4

 
0.2

  Amortization of acquired and other intangibles
(2)
0.2

 

 
0.4

 

Total adjustments impacting gross profit
 
0.4

 
0.1

 
0.8

 
0.2

 
 
 
 
 
 
 
 
 
Non-GAAP gross margin percentage
 
32
%
 
33
%
 
33
%
 
36
%
 
 
 
 
 
 
 
 
 
Non-GAAP adjustments impacting operating expenses:
 
 
 
 
 
 
 
 
  Share-based compensation
(1)
3.0

 
2.2

 
5.7

 
4.8

  Amortization of acquired and other intangibles
(2)
0.1

 
0.1

 
0.1

 
0.3

  Restructuring
(3)

 

 
0.5

 

Total adjustments impacting operating expenses
 
3.1

 
2.3

 
6.3

 
5.1

 
 
 
 
 
 
 
 
 
Non-GAAP adjustments impacting tax provision:
 
 
 
 
 
 
 
 
  Income tax on reconciling items
(4)
(0.7
)
 
(1.0
)
 
(1.5
)
 
(2.0
)
  Other items impacting tax provision
(5)
0.1

 
(2.6
)
 
0.8

 
(13.7
)
 
 
(0.6
)
 
(3.6
)
 
(0.7
)
 
(15.7
)
 
 
 
 
 
 
 
 
 
Non-GAAP Net Loss
 
$
(8.1
)
 
$
(8.0
)
 
$
(29.6
)
 
$
(36.5
)
 
 
 
 
 
 
 
 
 
Non-GAAP Diluted Net Loss per common share
 
$
(0.20
)
 
$
(0.20
)
 
$
(0.73
)
 
$
(0.91
)
 
 
 
 
 
 
 
 
 
Diluted weighted average shares
 
40.6

 
40.1

 
40.5

 
40.0

 
 
 
 
 
 
 
 
 
Notes
 
 
 
 
 
 
 
 
(1) Adjustments to exclude non-cash expenses related to share-based compensation
(2) Adjustments to exclude amortization of acquired intangible and other intangible assets
(3) Adjustments to exclude restructuring costs
(4) Adjustments associated with the estimated tax impact on non-GAAP reconciling items at our marginal U.S. tax rate of approximately 21% for the current year period, and 35% for the prior year comparative period
(5) As part of an alternative non-GAAP income measure, we have adjusted GAAP taxes as reported including the impact to the GAAP tax provision of the non-GAAP reconciling items (adjusted for note (4) above). And when applicable, we also adjust for changes related to the utilization or increase of our net operating loss carryforwards and for changes in our valuation allowance held against deferred tax assets and any applicable change in tax law, including the Tax Cuts and Jobs Act of 2017.

11

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