Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Jul. 31, 2019 | |
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2019 | |
Document Transition Report | false | |
Entity File Number | 0-26820 | |
Entity Registrant Name | CRAY INC. | |
Entity Incorporation, State or Country Code | WA | |
Entity Tax Identification Number | 93-0962605 | |
Entity Address, Address Line One | 901 Fifth Avenue, Suite 1000 | |
Entity Address, Postal Zip Code | 98164 | |
Entity Address, City or Town | Seattle, | |
Entity Address, State or Province | WA | |
City Area Code | 206 | |
Local Phone Number | 701-2000 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | CRAY | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Emerging Growth company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 41,414,306 | |
Entity Central Index Key | 0000949158 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | |
Current assets: | |||
Cash and cash equivalents | $ 147,533 | $ 228,434 | |
Restricted cash | [1] | 3,772 | 1,300 |
Accounts and other receivables, net | 76,501 | 87,819 | |
Inventory | 88,035 | 80,360 | |
Prepaid expenses and other current assets | 25,053 | 22,331 | |
Total current assets | 340,894 | 420,244 | |
Long-term restricted cash | [1] | 13,847 | 16,030 |
Property and equipment, net | 38,290 | 35,737 | |
Operating lease right-of-use assets | 32,656 | 0 | |
Goodwill | 14,182 | 14,182 | |
Intangible assets other than goodwill, net | 2,602 | 3,178 | |
Other non-current assets | 17,200 | 27,761 | |
TOTAL ASSETS | 459,671 | 517,132 | |
Current liabilities: | |||
Accounts payable | 30,098 | 32,847 | |
Accrued payroll and related expenses | 20,462 | 23,703 | |
Accrued and other liabilities | 13,206 | 10,805 | |
Customer contract liabilities | 54,353 | 61,983 | |
Total current liabilities | 118,119 | 129,338 | |
Long-term customer contract liabilities | 23,077 | 32,021 | |
Long-term operating lease liabilities | 39,845 | 0 | |
Other non-current liabilities | 2,384 | 12,394 | |
TOTAL LIABILITIES | 183,425 | 173,753 | |
Shareholders’ equity: | |||
Preferred stock — Authorized and undesignated, 5,000,000 shares; no shares issued or outstanding | 0 | 0 | |
Common stock and additional paid-in capital, par value $.01 per share — Authorized, 75,000,000 shares; issued and outstanding 41,337,879 and 40,893,807 shares, respectively | 654,948 | 647,045 | |
Accumulated other comprehensive income | 1,534 | 3,208 | |
Accumulated deficit | (380,236) | (306,874) | |
TOTAL SHAREHOLDERS’ EQUITY | 276,246 | 343,379 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 459,671 | $ 517,132 | |
[1] | Restricted cash primarily associated with certain letters of credit to secure customer prepayments and other customer related obligations. |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock and additional paid-in capital, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock and additional paid-in capital, shares authorized | 75,000,000 | 75,000,000 |
Common stock and additional paid-in capital, shares issued | 41,337,879 | 40,893,807 |
Common stock and additional paid-in capital, shares outstanding | 41,337,879 | 40,893,807 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenue: | ||||
Total revenue | $ 68,699 | $ 120,203 | $ 140,245 | $ 199,797 |
Cost of revenue: | ||||
Total cost of revenue | 44,752 | 82,396 | 90,274 | 135,038 |
Gross profit | 23,947 | 37,807 | 49,971 | 64,759 |
Operating expenses: | ||||
Research and development, net | 37,171 | 29,382 | 72,957 | 59,274 |
Sales and marketing | 14,919 | 15,218 | 29,194 | 30,883 |
General and administrative | 15,890 | 5,624 | 21,832 | 11,403 |
Restructuring | 0 | 0 | 0 | 476 |
Total operating expenses | 67,980 | 50,224 | 123,983 | 102,036 |
Loss from operations | (44,033) | (12,417) | (74,012) | (37,277) |
Other income, net | 272 | 430 | 25 | 48 |
Interest income, net | 1,223 | 667 | 2,148 | 1,380 |
Loss before income taxes | (42,538) | (11,320) | (71,839) | (35,849) |
Income tax benefit (expense) | (22) | 370 | (141) | (109) |
Net loss | $ (42,560) | $ (10,950) | $ (71,980) | $ (35,958) |
Basic net loss per common share (in dollars per share) | $ (1.03) | $ (0.27) | $ (1.75) | $ (0.89) |
Diluted net loss per common share (in dollars per share) | $ (1.03) | $ (0.27) | $ (1.75) | $ (0.89) |
Basic weighted average shares outstanding (in shares) | 41,191 | 40,616 | 41,069 | 40,527 |
Diluted weighted average shares outstanding (in shares) | 41,191 | 40,616 | 41,069 | 40,527 |
Product | ||||
Revenue: | ||||
Total revenue | $ 29,924 | $ 83,379 | $ 64,082 | $ 127,833 |
Cost of revenue: | ||||
Total cost of revenue | 23,424 | 65,274 | 49,526 | 99,319 |
Service | ||||
Revenue: | ||||
Total revenue | 38,775 | 36,824 | 76,163 | 71,964 |
Cost of revenue: | ||||
Total cost of revenue | $ 21,328 | $ 17,122 | $ 40,748 | $ 35,719 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (42,560) | $ (10,950) | $ (71,980) | $ (35,958) |
Other comprehensive income (loss), net of tax: | ||||
Unrealized gain on available-for-sale investments | 0 | 9 | 0 | 7 |
Foreign currency translation adjustments | (52) | (1,185) | 156 | (1,159) |
Unrealized gain (loss) on cash flow hedges | (912) | 2,306 | (1,761) | 1,074 |
Reclassification adjustments on cash flow hedges included in net loss | 143 | 633 | 143 | 1,109 |
Other comprehensive income (loss) | (821) | 1,763 | (1,462) | 1,031 |
Comprehensive loss | $ (43,381) | $ (9,187) | $ (73,442) | $ (34,927) |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Shareholders' Equity Statement - USD ($) $ in Thousands | Total | Common stock and additional paid-in capital: | Accumulated other comprehensive income: | Accumulated deficit: |
Balance at Dec. 31, 2017 | $ 400,297 | $ 633,408 | $ 915 | $ (234,026) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Exercise of stock options | 1,792 | |||
Restricted shares issued for compensation, net of forfeitures and taxes | (1,552) | (1,017) | ||
Share-based compensation | 6,134 | |||
Other comprehensive income (loss) | 1,031 | 1,031 | ||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | 0 | 0 | ||
Net loss | (35,958) | (35,958) | ||
Balance at Jun. 30, 2018 | 370,727 | 639,782 | 1,946 | (271,001) |
Balance at Mar. 31, 2018 | 378,878 | 637,783 | 183 | (259,088) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Exercise of stock options | 255 | |||
Restricted shares issued for compensation, net of forfeitures and taxes | (1,448) | (963) | ||
Share-based compensation | 3,192 | |||
Other comprehensive income (loss) | 1,763 | 1,763 | ||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | 0 | 0 | ||
Net loss | (10,950) | (10,950) | ||
Balance at Jun. 30, 2018 | 370,727 | 639,782 | 1,946 | (271,001) |
Balance at Dec. 31, 2018 | 343,379 | 647,045 | 3,208 | (306,874) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Exercise of stock options | 1,569 | |||
Restricted shares issued for compensation, net of forfeitures and taxes | (1,433) | (1,594) | ||
Share-based compensation | 7,767 | |||
Other comprehensive income (loss) | (1,462) | (1,462) | ||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | (212) | (212) | 212 | |
Net loss | (71,980) | (71,980) | ||
Balance at Jun. 30, 2019 | 276,246 | 654,948 | 1,534 | (380,236) |
Balance at Mar. 31, 2019 | 317,672 | 651,441 | 2,355 | (336,124) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Exercise of stock options | 740 | |||
Restricted shares issued for compensation, net of forfeitures and taxes | (1,334) | (1,552) | ||
Share-based compensation | 4,101 | |||
Other comprehensive income (loss) | (821) | (821) | ||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | 0 | 0 | ||
Net loss | (42,560) | (42,560) | ||
Balance at Jun. 30, 2019 | $ 276,246 | $ 654,948 | $ 1,534 | $ (380,236) |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows $ in Thousands | 6 Months Ended | ||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | ||
Operating activities: | |||
Net loss | $ (71,980) | $ (35,958) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 7,608 | 8,269 | |
Share-based compensation expense | 7,767 | 6,134 | |
Other | 577 | (384) | |
Cash provided (used) due to changes in operating assets and liabilities: | |||
Accounts and other receivables | 11,407 | 46,484 | |
Inventory | (9,561) | 32,755 | |
Prepaid expenses and other assets | 7,429 | 6,056 | |
Accounts payable | (2,628) | (40,264) | |
Accrued payroll and related expenses and other liabilities | (5,403) | 3,777 | |
Customer contract liabilities | (16,396) | (27,049) | |
Net cash used in operating activities | (71,180) | (180) | |
Investing activities: | |||
Sales/maturities of available-for-sale investments | 0 | 7,000 | |
Cash received in strategic transaction | 0 | 1,584 | |
Purchases of property and equipment | (7,952) | (3,275) | |
Net cash provided by (used in) investing activities | (7,952) | 5,309 | |
Financing activities: | |||
Purchase of employee restricted shares to fund related statutory tax withholding | (3,027) | (2,569) | |
Proceeds from exercises of stock options | 1,569 | 1,792 | |
Net cash used in financing activities | (1,458) | (777) | |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (22) | (185) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (80,612) | 4,167 | |
Cash, cash equivalents and restricted cash: | |||
Beginning of period | 245,764 | 140,320 | |
End of period | 165,152 | 144,487 | |
Cash and cash equivalents | 147,533 | ||
Restricted cash | 3,772 | [1] | |
Long-term restricted cash | 13,847 | [1] | |
Supplemental disclosure of cash flow information: | |||
Cash paid for income taxes | 308 | 401 | |
Non-cash investing and financing activities: | |||
Inventory transfers to fixed assets and service spares | $ 1,261 | $ 5,503 | |
[1] | Restricted cash primarily associated with certain letters of credit to secure customer prepayments and other customer related obligations. |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Note 1— Basis of Presentation In these notes, the Company and its wholly-owned subsidiaries are collectively referred to as the “Company.” In the opinion of management, the accompanying Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, Statements of Shareholders’ Equity and Statements of Cash Flows have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. Management believes that all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Interim results are not necessarily indicative of results for a full year. The information included in this quarterly report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018 . The Company’s revenue, results of operations and cash balances are likely to fluctuate significantly from quarter to quarter. These fluctuations are due to such factors as the high average sales prices and limited number of sales of the Company’s products, the timing of purchase orders and product deliveries, the revenue recognition accounting policy of generally not recognizing product revenue until customer acceptance and other contractual provisions have been fulfilled and the timing of payments for product sales, maintenance services, government research and development funding and purchases of inventory. Given the nature of the Company’s business, its revenue, receivables and other related accounts are likely to be concentrated among a relatively small number of customers. Pending Merger with Hewlett Packard Enterprise Company On May 16, 2019, the Company entered into an agreement and plan of merger, (the “Merger Agreement”), with Hewlett Packard Enterprise Company, a Delaware corporation (“HPE”), and Canopy Merger Sub, Inc., a Washington corporation and a wholly owned subsidiary of HPE (“Merger Sub”). Pursuant to the terms of the Merger Agreement, and subject to the conditions specified in the Merger Agreement, Merger Sub will merge with and into the Company, and the Company will become a wholly owned subsidiary of HPE (such transaction, the “Merger”). If the Merger is completed, the Company’s shareholders will be entitled to receive $35.00 in cash, without interest and less any withholding taxes required by applicable law, for each share of the Company’s common stock owned by them as of immediately prior to the effective time of the Merger, except with respect to Company shareholders who have properly demanded statutory dissenters’ rights with respect to the Merger. The consummation of the Merger is subject to certain conditions, including (i) approval of the Merger Agreement by holders of not less than a majority of the outstanding shares of the Company’s common stock; (ii) the absence of any temporary restraining order, preliminary or permanent injunction, or any law or other judgment enacted, issued, promulgated, enforced or entered into by any governmental authority of competent jurisdiction that is then in effect and has the effect of making the Merger illegal or otherwise prevents or prohibits the consummation of the Merger; (iii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), as well as all other required approvals, consents or clearances as may be required under the competition, merger control, antitrust or similar law of certain non-U.S. jurisdictions; (iv) the accuracy of the Company’s, HPE’s and Merger Sub’s respective representations and warranties, subject to specified materiality qualifications; (v) the absence of a Material Adverse Effect (as defined in the Merger Agreement); and (vi) other customary conditions. The consummation of the Merger is not subject to a financing condition and the Company expects HPE to finance the payment of the applicable consideration in the Merger with cash on hand, existing financing facilities and/or other debt financing. The special meeting of the Company’s shareholders to vote on the approval of the Merger Agreement is scheduled to be held on August 27, 2019. The Company anticipates that the closing of the transactions contemplated by the Merger Agreement is expected to occur in the next 3 ½ to 6 ½ months, subject to the Company’s shareholders approving the Merger Agreement at the special meeting, all regulatory approvals being received and all other conditions set forth in the Merger Agreement being either satisfied or waived. On June 14, 2019, the Company and HPE filed their respective notification and report forms pursuant to the HSR Act with the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission. On July 15, 2019, HPE voluntarily withdrew its notification and report form for administrative reasons and refiled it on July 17, 2019. The Company expects that the waiting period under the HSR Act will, absent a second request, expire or be terminated on or before August 16, 2019. For additional information related to the Merger and the Merger Agreement, please refer to the Company’s Current Report on Form 8-K filed with the SEC on May 16, 2019 and the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on June 25, 2019. Upon completion of the Merger, shares of the Company’s common stock will cease trading on The Nasdaq Global Select Market. The Company recorded transaction-related costs of $7.6 million principally for legal and investment banker fees associated with the pending Merger, during the three months ended June 30, 2019. These costs are recorded in general and administrative expenses included in the condensed consolidated statement of operations for the three months ended June 30, 2019. Retention bonuses of approximately $17 million have also been granted to employees. Payment of these bonuses is contingent on completion of the transaction and continued service of the employees through the closing of the Merger. Additional transaction-related costs are expected to be incurred through the closing of the Merger. The Company may be required to pay HPE a $46.0 million termination fee if the Merger Agreement is terminated in accordance with certain circumstances provided therein. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. New Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases: Topic 842 (ASU 2016-02), which replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (“ROU”) assets and corresponding lease liabilities on the balance sheet. The new standard initially required application with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. In July 2018, this requirement was amended with the issuance of Accounting Standards Update No. 2018-11, Leases: Topic 842: Targeted Improvements (ASU 2018-11), which permits an additional (and optional) transition method to adopt the new leases standard. The Company adopted ASU 2016-02 and related ASUs, collectively ASC 842, on January 1, 2019 using the optional transition method. Consequently, periods before January 1, 2019 will continue to be reported in accordance with the prior accounting guidance, ASC 840, Leases. The Company elected the package of practical expedients, which permits the Company to retain prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. The Company also elected the practical expedient to combine lease and non-lease components for all of its leases other than net lease real estate leases. Adoption of ASC 842 resulted in the recording of ROU assets and lease liabilities of $34.4 million and $46.6 million , respectively, as of January 1, 2019. The difference between ROU assets and lease liabilities relates to liabilities of $12.2 million for deferred rent and lease incentives liabilities that were included on the Company’s Condensed Consolidated Balance Sheets prior to adoption of ASC 842. These amounts were eliminated at the time of adoption and are included in the lease liabilities number above. Adoption of ASC 842 did not have a material impact on the Company’s consolidated net earnings and had no impact on cash flows. In August 2017, FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The new standard simplifies and expands the eligible hedging strategies for financial and nonfinancial risks. It also enhances the transparency of how hedging results are presented and disclosed. Further, the new standard provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings. The Company adopted ASU 2017-12 on January 1, 2019. Adoption of ASU 2017-12 did not have a material impact on the Company’s consolidated financial statements. Upon adoption of ASU 2017-12, the Company revised its accounting policy for foreign currency derivatives from the policy included in the Notes to Consolidated Financial Statements in its annual report on Form 10-K for year ended December 31, 2018. The revised accounting policy for foreign currency derivatives is included below. In February 2018, FASB issued Accounting Standards Update No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The new standard amends ASC 220 to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires entities to provide certain disclosures regarding stranded tax effects. The Company adopted ASU 2018-02 on January 1, 2019. At the time of adoption, the Company reclassified $0.2 million of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to accumulated deficit. Adoption of ASU 2018-02 did not have a material impact on the Company’s consolidated financial statements. In August 2018, FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The new standard makes various modifications to the disclosure requirements on fair value measurement in Topic 820. The Company adopted ASU 2018-13 on January 1, 2019. Adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. Revised Accounting Policies Foreign Currency Derivatives The Company uses foreign currency exchange contracts to manage certain foreign currency exposures. Foreign currency exchange contracts are cash flow hedges of the Company’s foreign currency exposures on certain revenue contracts and are recorded at the contract’s fair value. Most of the Company’s foreign currency exchange contracts are designated as cash flow hedges for the purposes of hedge accounting treatment and any gains or losses on the foreign currency exchange contract is initially reported in “Accumulated other comprehensive income,” a component of shareholders’ equity, with a corresponding asset or liability recorded based on the fair value of the foreign currency exchange contract. When the hedged transaction is recognized, any unrecognized gains or losses on the hedged transaction are reclassified into results of operations in the same period and presented in the same income statement line item as the earnings effect of the hedged item. The Company excludes the changes in fair value of the contract related to forward points from the assessment of hedge effectiveness and the gains and losses associated with the excluded component are presented in the same line of the income statement for the hedged item. For hedging relationships executed before the date of adoption of ASU 2017-12, the gains and losses associated with the excluded components are recognized currently in earnings. The amortization approach is used for hedging relationships executed after the date of adoption of ASU 2017-02. Cash flows from foreign currency exchange contracts accounted for as cash flow hedges are classified in the same category as the cash flows from the items being hedged. The Company typically dedesignates its cash flow hedges for the purposes of hedge accounting treatment when the receivable related to the hedged cash flow is recorded. Unrealized gains or losses related to foreign currency exchange contracts that are not designated as cash flow hedges for the purposes of hedge accounting treatment are recorded in other income (expense) in the Condensed Consolidated Statements of Operations and are generally offset by foreign currency adjustments on related receivables. The Company does not use derivative financial instruments for speculative purposes. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Note 2— Revenue Recognition The Company’s performance obligations are satisfied over time as work is performed or at a point in time. The majority of the Company’s revenue is recognized at a point in time when products are accepted, installed or delivered. Most of the Company’s revenue is derived from long-term contracts that can span several years. Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the Company’s systems or services. In general, this does not occur until the products have been shipped or services provided to the customer, risk of loss has transferred to the customer, and, where applicable, a customer acceptance has been obtained. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes that the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. Contracts are often modified to account for changes in contract specifications and requirements. To determine the proper revenue recognition method for contract modifications, the Company evaluates whether the contract modification should be accounted for as a separate contract, part of an existing contract, or termination of an existing contract and the creation of a new contract. This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s estimate of the standalone selling price of each distinct good or service in the contract. The Company determines the transaction price by reviewing the established contractual terms and other relevant information. Contracts can include penalty clauses and contracts with government customers may not be fully funded, both of which represent variable consideration. Generally, the Company includes both the funded and unfunded portions of a contract with a government customer in the transaction price, as most often it is deemed the contract will become fully funded. The Company also assesses the likelihood of certain penalties that would result in contract price reductions and, if deemed probable, the transaction price is adjusted. The majority of the Company’s contracts include multiple promised goods and services, which are assessed at contract inception. Each distinct good or service is identified as a performance obligation, which may be an individual good or service or a bundle of goods or services. In order to determine whether the promises are distinct, the Company assesses the use of its products and services by its customers to determine whether the customer can benefit from the good or service on its own or from other readily available resources, and whether the promised transfer of goods or services is separately identifiable from other promises in the contract. The majority of the Company’s revenues are from product solutions which include supercomputers, storage, and data analytics systems, each of which are usually separate performance obligations. Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Product revenue is typically recognized upon customer acceptance, or upon installation or delivery if formal acceptance is not required. Service revenue is typically recognized over time and consists mainly of system maintenance, analyst services, and engineering services, each of which are usually separate performance obligations. System maintenance commences upon customer acceptance or installation, depending on the contract terms, and revenue is recognized ratably over the remaining term of the maintenance contract. On-site analysts provide specialized services to customers, the revenue for which is recognized ratably over the contract period. Service revenue is recognized on a straight-line basis over the service period as the services are available continuously to the customer. Revenue from engineering services can be recognized as services are performed or as milestones are achieved, depending on the terms of the contract and nature of services performed. If, in a contract, the customer has an option to acquire additional goods or services, that option gives rise to a performance obligation if the option provides a material right to the customer that it would not receive without entering into that contract. Revenue from purchase options can be recognized as those future goods or services are transferred or when the option expires. The Company performs an assessment to determine whether a significant financing component is present in a contract. If a contract is determined to include a significant financing component, the interest rate used in the calculation is based on the prevailing interest rates at contract inception and the entity’s creditworthiness. When the period between providing a good or service to the customer is expected to be less than one year from payment, the Company applies the practical expedient and does not adjust the consideration for the effects of a significant financing component. Occasionally, the Company’s contracts include noncash consideration. This typically consists of returned parts when a system is upgraded or de-installed. Noncash consideration is measured at contract inception at estimated fair value. The total transaction price is allocated to each performance obligation identified in the contract based on its relative standalone selling price. The Company does not have directly observable standalone selling prices for the majority of its performance obligations due to a relatively small number of customer contracts that differ in system size and contract terms which can be due to infrequently selling each performance obligation separately, not pricing products within a narrow range, or only having a limited sales history, such as in the case of certain advanced and emerging technologies. When a directly observable standalone selling price is not available, the Company estimates the standalone selling price. In determining the estimated standalone selling price, the Company uses the cost to provide the product or service plus a margin, or considers other factors. When using cost plus a margin, the Company considers the total cost of the product or service, including customer-specific and geographic factors as appropriate. The Company also considers the historical margins of the product or service on previous contracts and several other factors including any changes to pricing methodologies, competitiveness of products and services, and cost drivers that would cause future margins to differ from historical margins. The Company sometimes offers discounts to its customers. As these discounts are offered on bundles of goods and services, the discounts are applied to all performance obligations in the contract on a pro-rata basis. The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers (in thousands) and includes both short-term and long-term portions: June 30, December 31, 2018 Change Contract receivables $ 67,214 $ 78,634 $ (11,420 ) Contract assets 5,793 6,404 (611 ) Contract liabilities 77,430 94,004 (16,574 ) Contract receivables consist of amounts billed to customers and include the Company's investment in a sales type lease, a portion of which is due beyond one year. Generally, billing occurs subsequent to product revenue recognition and payment is expected within 30 days. Contract assets primarily relate to the Company's rights to consideration for work completed but not billed where right to payment is not just subject to the passage of time. Contract assets become contract receivables when the rights become unconditional. The Company sometimes receives advances or deposits from customers before revenue is recognized, resulting in customer contract liabilities (formerly deferred revenue). These assets and liabilities are reported on the Condensed Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period. The Company’s payment terms vary from contract to contract. Contracts may require payment before, at or after the Company’s performance obligations have been satisfied. For the six month period ended June 30, 2019 , the Company recognized $35.1 million in revenues from the contract liability balance at the beginning of the period. The Company’s incremental direct costs of obtaining a contract come primarily from sales commissions, a portion of which are payable upon contract signing. These commissions are generally capitalized upon payment and expensed at the time of revenue recognition. These deferred commissions are included in prepaid expenses in the Condensed Consolidated Balance Sheet. As of June 30, 2019 and December 31, 2018 , the Company had $4.2 million and $2.0 million , respectively, of deferred commissions. For the three and six months ended June 30, 2019 , the Company recognized $0.8 million and $1.8 million , respectively, in commissions expense. For the three and six months ended June 30, 2018 , the Company recognized $1.5 million and $2.6 million , respectively, in commissions expense. The Company’s remaining performance obligations reflect the deliverables within contracts with customers that will have revenue recognized in a future period (this may also be referred to as backlog). Due to the nature of the Company’s business and the size of individual transactions, forecasting the timing and total amount of revenue recognition is subject to significant uncertainties. As of June 30, 2019 , the Company has an aggregate of $639 million in remaining performance obligations stemming from a mixture of system contracts with their related service obligations and other service obligations. Included in this balance are $0.2 million in losses resulting from hedged foreign currency transactions, which offset the related increase in revenue from currency fluctuations. These losses will be reclassified from accumulated other comprehensive income to revenue in the period the related transactions are recognized as revenue. These obligations are anticipated to be recognized as revenue over approximately the next six years . The Company estimates that about 60% of these obligations are expected to be recognized as revenue in the next 18 months , with the remainder thereafter. The Company’s previously announced contract to build the Frontier exascale system for the Oak Ridge National Laboratory, which is valued in excess of $500 million , is not included in the amounts above as it is subject to a Go/No-Go provision and is therefore not considered a performance obligation. The Company’s revenue is presented on a disaggregated basis in “Note 13-Segment Information” in the Notes to Condensed Consolidated Financial Statements in this quarterly report on Form 10-Q. |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | Note 3— Fair Value Measurement Based on the observability of the inputs used in the valuation techniques used to determine the fair value of certain financial assets and liabilities, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The following table presents information about the Company’s financial assets that have been measured at fair value as of June 30, 2019 , and indicates the level within the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Assets: Cash, cash equivalents and restricted cash $ 165,152 $ 165,152 $ — Foreign currency exchange contracts (1) 2,400 — 2,400 Assets measured at fair value at June 30, 2019 $ 167,552 $ 165,152 $ 2,400 Liabilities: Foreign currency exchange contracts (2) 111 $ — 111 Liabilities measured at fair value at June 30, 2019 $ 111 $ — $ 111 (1) Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. (2) Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Consolidated Balance Sheets. Foreign Currency Derivatives The Company may enter into foreign currency derivatives to hedge future cash receipts on certain sales transactions that are payable in foreign currencies. As of June 30, 2019 and December 31, 2018 , the Company had outstanding foreign currency exchange contracts that were designated and accounted for as cash flow hedges of anticipated future cash receipts on sales contracts payable in foreign currencies. The outstanding notional amounts were approximately (in millions): June 30, December 31, 2018 Canadian Dollars (CAD) 6.5 54.4 Japanese Yen (JPY) 711.5 — Singapore Dollars (SGD) 1.8 — The Company had hedged foreign currency exposure related to these designated cash flow hedges of approximately $12.9 million as of June 30, 2019 and $41.6 million as of December 31, 2018 . As of June 30, 2019 and December 31, 2018 , the Company had outstanding foreign currency exchange contracts that had been dedesignated for the purposes of hedge accounting treatment. The Company dedesignates cash flow hedges when the receivable related to the hedged cash flow is recorded. The outstanding notional amounts were approximately (in millions): June 30, December 31, 2018 British Pounds (GBP) 13.1 24.8 Canadian Dollars (CAD) 47.9 — Korean Won (KRW) — 4,446.5 Singapore Dollars (SGD) — 2.0 The foreign currency exposure related to these contracts was approximately $55.8 million as of June 30, 2019 and $40.6 million as of December 31, 2018 . Unrealized gains or losses related to these dedesignated contracts are recorded in other expense in the Condensed Consolidated Statements of Operations and are generally offset by foreign currency adjustments on related receivables. These foreign currency exchange contracts are considered to be economic hedges. Cash receipts associated with the foreign currency exchange contracts are expected to be received from 2019 through 2022, during which time the revenue on the associated sales contracts is expected to be recognized, or in the case of receivables denominated in a foreign currency, the receivables balances will be collected. Any gain or loss on hedged foreign currency will be recognized at the time of customer acceptance, or in the case of receivables denominated in a foreign currency, over the period during which hedged receivables denominated in a foreign currency are outstanding. Fair values of derivative instruments designated as cash flow hedges (in thousands): Balance Sheet Location Fair Value Fair Value Prepaid expenses and other current assets $ — $ 1,296 Other non-current assets — 137 Other accrued liabilities (62 ) — Other non-current liabilities (6 ) — Total fair value of derivative instruments designated as cash flow hedges $ (68 ) $ 1,433 Fair values of derivative instruments not designated as cash flow hedges (in thousands): Balance Sheet Location Fair Value Fair Value Prepaid expenses and other current assets $ 1,941 $ 1,894 Other non-current assets 459 1,242 Accrued and other liabilities (43 ) (63 ) Total fair value of derivative instruments not designated as cash flow hedges $ 2,357 $ 3,073 The following table shows the impact on product revenue of foreign currency exchange contracts that were designated as cash flow hedges (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Total amounts of product revenue presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded $ 29,924 $ 83,379 $ 64,082 127,833 Amount of gain (loss) recognized in other comprehensive income included in the assessment of effectiveness (171 ) 2,939 (1,020 ) 2,183 Amount of loss reclassified from accumulated other comprehensive income to product revenue (143 ) (633 ) (143 ) (1,109 ) Amount excluded from effectiveness testing recognized as an increase in product revenue based on changes in fair value 63 — 119 — Amount excluded from effectiveness testing recognized in earnings based on an amortization approach 6 — 6 — The following table shows the impact on other expense of losses on foreign currency exchange contracts that were not designated as cash flow hedges. These amounts increased other income for all periods presented (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Other income, net $ 442 $ 3,501 $ 16 $ 1,590 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 6 Months Ended |
Jun. 30, 2019 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income | Note 4— Accumulated Other Comprehensive Income The following table shows the impact on product revenue of reclassification adjustments from accumulated other comprehensive income resulting from hedged foreign currency transactions recorded by the Company for the three and six months ended June 30, 2019 and 2018 (in thousands). The reclassification adjustments decreased product revenue for the three and six months ended June 30, 2019 and 2018. Three Months Ended Six Months Ended 2019 2018 2019 2018 Gross of tax reclassifications $ (143 ) $ (633 ) $ (143 ) $ (1,109 ) Net of tax reclassifications $ (143 ) $ (633 ) $ (143 ) $ (1,109 ) The following tables show the changes in accumulated other comprehensive income by component for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended June 30, 2019 Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 1,024 $ 1,331 $ 2,355 Current-period change, net of tax (52 ) (769 ) (821 ) Ending balance $ 972 $ 562 $ 1,534 Income tax expense (benefit) associated with current-period change $ — $ — $ — Three Months Ended June 30, 2018 Unrealized Loss on Investments Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (9 ) $ 1,637 $ (1,445 ) 183 Current-period change, net of tax 9 (1,185 ) 2,939 1,763 Ending balance $ — $ 452 $ 1,494 $ 1,946 Income tax expense (benefit) associated with current-period change $ — $ — $ — $ — Six Months Ended June 30, 2019 Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 606 $ 2,602 $ 3,208 Current-period change, net of tax 156 (1,618 ) (1,462 ) Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 210 (422 ) (212 ) Ending balance $ 972 $ 562 $ 1,534 Income tax expense (benefit) associated with current-period change $ — $ — $ — Six Months Ended June 30, 2018 Unrealized Loss on Investments Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (7 ) $ 1,611 $ (689 ) $ 915 Current-period change, net of tax 7 (1,159 ) 2,183 1,031 Ending balance $ — $ 452 $ 1,494 $ 1,946 Income tax expense (benefit) associated with current-period change $ — $ — $ — $ — |
Loss Per Share (EPS)
Loss Per Share (EPS) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Loss Per Share (EPS) | Note 5— Loss Per Share ("EPS") Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares, excluding unvested restricted stock, outstanding during the period. Diluted EPS is computed by dividing net loss available to common shareholders by the weighted average number of common and potential common shares outstanding during the period, which includes the additional dilution related to conversion of stock options, unvested restricted stock and unvested restricted stock units as computed under the treasury stock method. For the three and six months ended June 30, 2019 and 2018 , outstanding stock options, unvested restricted stock and unvested restricted stock units were antidilutive because of the net losses and, as such, their effect has not been included in the calculation of diluted EPS. For the three and six months ended June 30, 2019 , potential gross common shares of 3.1 million , were antidilutive and not included in computing diluted EPS. For the three and six months ended June 30, 2018 , potential gross common shares of and 3.0 million , were antidilutive and not included in computing diluted EPS. An additional 0.5 million performance vesting restricted stock and performance vesting restricted stock units were excluded from the computation of potential common shares for each of the three and six months ended June 30, 2019 and 2018 , because the conditions for vesting had not been met as of the balance sheet date. |
Accounts and Other Receivables,
Accounts and Other Receivables, Net | 6 Months Ended |
Jun. 30, 2019 | |
Receivables [Abstract] | |
Accounts and Other Receivables, Net | Note 6— Accounts and Other Receivables, Net Net accounts and other receivables consisted of the following (in thousands): June 30, December 31, 2018 Trade accounts receivable $ 49,285 $ 63,414 Current contract assets 4,003 4,391 Advance billings 2,924 1,832 Short-term investment in sales-type lease 12,607 12,462 Other receivables 7,699 6,708 76,518 88,807 Allowance for doubtful accounts (17 ) (988 ) Accounts and other receivables, net $ 76,501 $ 87,819 Contract assets represent amounts where the Company has recognized revenue in advance of the contractual billing terms. Advance billings represent billings made based on contractual terms for which revenue has not been recognized. As of June 30, 2019 and December 31, 2018 , accounts receivable included $12.0 million and $25.6 million , respectively, that resulted from sales to the U.S. government and system acquisitions primarily funded by the U.S. government (“U.S. Government”). Of these amounts, $2.4 million and $1.5 million were unbilled and included in contract assets as of June 30, 2019 and December 31, 2018 , respectively, based upon contractual billing arrangements with these customers. As of June 30, 2019 , two non-U.S. Government customer accounted for 35% of total accounts and other receivables. As of December 31, 2018 , two non-U.S. Government customers accounted for 28% of total accounts and other receivables. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | Note 7— Leases The Company leases certain equipment and facilities used in operations under operating leases in its normal course of business. The Company’s leases have remaining lease terms of 1 to 11 years , some of which include options to extend the leases for up to 5 years , and some of which include options to terminate the leases within 1 to 5 years . The exercise of these options is at the Company’s sole discretion. The Company has not included these options to extend or terminate in its calculation of right-of-use assets or lease liabilities as it is not reasonably certain to exercise these options. The Company’s lease agreements do not contain any residual value guarantees, material restrictions or covenants. Operating lease cost for the three and six months ended June 30, 2019 was $1.9 million and $3.7 million , respectively. The Company has elected the practical expedient for short-term leases. Operating lease cost for the Company’s short-term leases for the three and six months ended June 30, 2019 was immaterial. Supplemental cash flow information related to operating leases for the three and six months ended June 30, 2019 was as follows (in thousands): Three Months Ended Six Months Ended 2019 2019 Cash paid for amounts included in the measurement of operating lease liabilities: $ 2,081 $ 4,119 Operating right-of-use assets obtained in exchange for lease obligations: $ 116 $ 465 Supplemental balance sheet information related to operating leases as of June 30, 2019 was as follows (in thousands, except lease term and discount rate): June 30, Operating lease right-of-use assets $ 32,656 Current portion of operating lease liabilities, included in accrued and other liabilities $ 4,664 Long-term operating lease liabilities 39,845 Total operating lease liabilities $ 44,509 Weighted average remaining lease term (in years): 8.72 Weighted average discount rate (1): 6.76 % (1) Where the Company could not determine the rate inherent in the lease, its incremental borrowing rate was calculated using LIBOR plus a spread for similar companies. As of June 30, 2019 , maturities of operating lease liabilities were as follows (in thousands): 2019 (less than 1 year) $ 4,143 2020 8,184 2021 7,979 2022 7,628 2023 6,731 Thereafter 30,046 Total lease payments 64,711 Less: interest (20,202 ) Present value of lease liabilities $ 44,509 Sales-type Lease The Company has a sales-type lease with one non-U.S. Government customer, under which it receives quarterly payments over the term of the lease, which expires in September 2020. The lease is denominated in British Pounds and the Company has entered into certain foreign currency exchange contracts that act as an economic hedge for the foreign currency exposure associated with this arrangement. Interest income for the sales-type lease for the three and six months ended June 30, 2019 was $0.1 million and $0.3 million , respectively. The following table shows the components of the net investment in the sales-type lease as of June 30, 2019 and December 31, 2018 (in thousands): June 30, December 31, 2018 Total minimum lease payments to be received $ 18,169 $ 25,543 Less: executory costs (2,123 ) (2,985 ) Net minimum lease payments receivable 16,046 22,558 Less: unearned income (242 ) (510 ) Net investment in sales-type lease 15,804 22,048 Less: long-term investment in sales-type lease included in other non-current assets (3,197 ) (9,586 ) Investment in sales-type lease included in accounts and other receivables $ 12,607 $ 12,462 As of June 30, 2019 , minimum lease payments related to our sales-type lease for each of the succeeding two fiscal years are as follows (in thousands): 2019 (less than 1 year) $ 7,274 2020 10,895 Total minimum lease payments to be received $ 18,169 |
Leases | Note 7— Leases The Company leases certain equipment and facilities used in operations under operating leases in its normal course of business. The Company’s leases have remaining lease terms of 1 to 11 years , some of which include options to extend the leases for up to 5 years , and some of which include options to terminate the leases within 1 to 5 years . The exercise of these options is at the Company’s sole discretion. The Company has not included these options to extend or terminate in its calculation of right-of-use assets or lease liabilities as it is not reasonably certain to exercise these options. The Company’s lease agreements do not contain any residual value guarantees, material restrictions or covenants. Operating lease cost for the three and six months ended June 30, 2019 was $1.9 million and $3.7 million , respectively. The Company has elected the practical expedient for short-term leases. Operating lease cost for the Company’s short-term leases for the three and six months ended June 30, 2019 was immaterial. Supplemental cash flow information related to operating leases for the three and six months ended June 30, 2019 was as follows (in thousands): Three Months Ended Six Months Ended 2019 2019 Cash paid for amounts included in the measurement of operating lease liabilities: $ 2,081 $ 4,119 Operating right-of-use assets obtained in exchange for lease obligations: $ 116 $ 465 Supplemental balance sheet information related to operating leases as of June 30, 2019 was as follows (in thousands, except lease term and discount rate): June 30, Operating lease right-of-use assets $ 32,656 Current portion of operating lease liabilities, included in accrued and other liabilities $ 4,664 Long-term operating lease liabilities 39,845 Total operating lease liabilities $ 44,509 Weighted average remaining lease term (in years): 8.72 Weighted average discount rate (1): 6.76 % (1) Where the Company could not determine the rate inherent in the lease, its incremental borrowing rate was calculated using LIBOR plus a spread for similar companies. As of June 30, 2019 , maturities of operating lease liabilities were as follows (in thousands): 2019 (less than 1 year) $ 4,143 2020 8,184 2021 7,979 2022 7,628 2023 6,731 Thereafter 30,046 Total lease payments 64,711 Less: interest (20,202 ) Present value of lease liabilities $ 44,509 Sales-type Lease The Company has a sales-type lease with one non-U.S. Government customer, under which it receives quarterly payments over the term of the lease, which expires in September 2020. The lease is denominated in British Pounds and the Company has entered into certain foreign currency exchange contracts that act as an economic hedge for the foreign currency exposure associated with this arrangement. Interest income for the sales-type lease for the three and six months ended June 30, 2019 was $0.1 million and $0.3 million , respectively. The following table shows the components of the net investment in the sales-type lease as of June 30, 2019 and December 31, 2018 (in thousands): June 30, December 31, 2018 Total minimum lease payments to be received $ 18,169 $ 25,543 Less: executory costs (2,123 ) (2,985 ) Net minimum lease payments receivable 16,046 22,558 Less: unearned income (242 ) (510 ) Net investment in sales-type lease 15,804 22,048 Less: long-term investment in sales-type lease included in other non-current assets (3,197 ) (9,586 ) Investment in sales-type lease included in accounts and other receivables $ 12,607 $ 12,462 As of June 30, 2019 , minimum lease payments related to our sales-type lease for each of the succeeding two fiscal years are as follows (in thousands): 2019 (less than 1 year) $ 7,274 2020 10,895 Total minimum lease payments to be received $ 18,169 |
Inventory - (Notes)
Inventory - (Notes) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Note 8— Inventory Inventory consisted of the following (in thousands): June 30, December 31, 2018 Components and subassemblies $ 34,165 $ 42,390 Work in process 12,294 17,429 Finished goods 41,576 20,541 Total $ 88,035 $ 80,360 Finished goods inventory of $41.6 million and $16.0 million was located at customer sites pending acceptance as of June 30, 2019 and December 31, 2018 , respectively. At June 30, 2019 , the U.S. Government accounted for $12.7 million of finished goods inventory and one non-U.S. Government customer accounted for $27.0 million of finished goods inventory. At December 31, 2018 , the U.S. Government accounted for $13.9 million of finished goods inventory. The Company wrote off $0.6 million and $3.8 million of excess and obsolete inventory during the three and six months ended June 30, 2019 . The Company did not write off any inventory during the three and six months ended June 30, 2018 . |
Customer Contract Liabilities
Customer Contract Liabilities | 6 Months Ended |
Jun. 30, 2019 | |
Contract with Customer, Liability [Abstract] | |
Contract Liabilities | Note 9— Customer Contract Liabilities Liabilities from contracts with customers consisted of the following (in thousands): June 30, December 31, 2018 Contract liability - product $ 5,916 $ 5,667 Contract liability - service 71,514 88,337 Total contract liabilities 77,430 94,004 Less: long-term contract liabilities (23,077 ) (32,021 ) Current contract liabilities $ 54,353 $ 61,983 As of June 30, 2019 and December 31, 2018 , the U.S. Government accounted for $22.3 million and $29.8 million , respectively, of total customer contract liabilities. As of June 30, 2019 and December 31, 2018 , no non-U.S. government customers accounted for more than 10% of total customer contract liabilities. |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Note 10— Contingencies The Company is subject to patent lawsuits brought by Raytheon Company (“Raytheon”). A first suit was brought by Raytheon on September 25, 2015 in the Eastern District of Texas (Civil Action No. 2:15-cv-1554) asserting infringement of four patents owned by Raytheon (“First Action”). Two of the originally asserted patents relate to computer hardware alleged to be encompassed by Cray’s current and past products (the “Hardware Patents”), and the two remaining asserted patents relate to features alleged to be performed by certain third-party software that Cray optionally includes as part of its product offerings (the “Software Patents”). A second suit was brought by Raytheon on April 22, 2016 in the Eastern District of Texas (Civil Action No. 2:16-cv-423) asserting infringement of five patents owned by Raytheon (“Second Action”. In the Second Action, all five asserted patents relate to features alleged to be performed by certain third-party software that Cray optionally includes as part of its product offerings. On September 21, 2017, the United States Court of Appeals for the Federal Circuit granted Cray’s petition for writ of mandamus and overturned the trial court’s determination that venue in the First Action was proper in the Eastern District of Texas. Accordingly on April 5, 2018, the trial court ordered that the First Action should be transferred to the Western District of Wisconsin, as had been requested by Cray, which was effective on April 30, 2018 (Civil Action No. 3:18-cv-00318-wmc). After transfer, Raytheon indicated its desire to withdraw its claims for infringement of the Hardware Patents. The Wisconsin court, upon joint motion of the parties, dismissed with prejudice the counts related to the Hardware Patents, and Raytheon has served on the Company and filed with the court covenants not to sue for infringement of the Hardware Patents. The Texas court, upon joint motion of the parties, transferred the Second Action to the Northern District of California (Civil Action No. 3:18-cv-03388-RS). Per joint motion of the parties, the California court has stayed the Second Action pending resolution of the First Action. In the First Action, the Wisconsin court held a summary judgment hearing on January 10, 2019. Respecting Cray’s contentions that Raytheon’s claims of infringement of the Software Patents fail as a matter of law, on April 15, 2019, the Wisconsin court, by opinion and order, granted Cray’s motion for summary judgment and directed judgment in favor of Cray regarding Raytheon’s claims of infringement of the Software Patents. On May 15, 2019, Cray filed a motion seeking attorneys fees under 35 U.S.C. § 285 which provides that the Court in “exceptional cases may award reasonable attorney fees to the prevailing party.” That motion is currently pending. On May 24, 2019, Raytheon filed a notice of appeal with the Court of Appeals for the Federal Circuit of the Wisconsin court’s April 15, 2019 order granting Cray’s motion for summary judgment that the Software Patents were not infringed. No decision on the appeal is expected until 2020. The Company will continue to vigorously defend these actions including the appeal of the favorable decision by the Wisconsin court in the First Action. The probable outcome of the described litigation cannot be determined, nor can the Company estimate a range of potential loss (or gain from a potential recovery of attorney’s fees). Based on its review of the matters to date, the Company notes that its defenses have to date prevailed in the First Action, and the Company believes that it has valid defenses in the Second Action. As a result, the Company considers the likelihood of a material loss related to these matters to be remote. The Company is also subject to putative shareholder class action lawsuits in connection with the Merger Agreement. On June 19, 2019, a putative shareholder class action complaint was filed in the Superior Court of the State of Washington for King County against Cray and the individual members of Cray’s Board of Directors, captioned Keith v. Cray Inc., et al. , Case No. 19-2-16273-2 SEA (the “Keith Complaint”), asserting that the Board of Directors breached its fiduciary duties in connection with the proposed transaction with HPE by, among other things, allegedly conducting a flawed and conflicted sales process and by causing to be disseminated a materially incomplete and misleading proxy statement. On June 24, 2019, a similar putative shareholder class action complaint was filed in the Superior Court of the State of Washington for Snohomish County against Cray and the individual members of Cray’s Board of Directors, captioned Delman v. Ungaro, et al. , Case No. 19-2-05756-31 (the “Delman Complaint”). On July 10, 2019, another similar putative shareholder class action complaint was filed in the Superior Court of the State of Washington for King County against Cray and the individual members of Cray’s Board of Directors, captioned Rapacki v. Cray, et al. , Case No. 19-2-18093-5 SEA (the “Rapacki Complaint” and together with the Keith Complaint and the Delman Complaint, the “State Court Actions”). On June 20, 2019, a putative shareholder class action complaint was filed in the United States District Court, District of Delaware, against Cray, the individual members of Cray’s Board of Directors, HPE and Merger Sub, captioned Davie v. Cray Inc. et al. , Case No. 1:19-cv-01148-UNA (the “Davie Complaint”). On June 21, 2019, another putative shareholder class action complaint was filed in the same court against Cray, the individual members of Cray’s Board of Directors, HPE and Merger Sub, captioned Kent v. Cray Inc. et al. , Case No. 1:19-cv-01157-UNA (the “Kent Complaint”), and on June 24, 2019, an individual action was filed in the same court against the same defendants, captioned Stein v. Cray Inc. et al. , Case No. 1:19-cv-01188-UNA (the “Stein Complaint” and together with the Davie Complaint and Kent Complaint, the “Delaware Complaints”). On July 2, 2019, a putative shareholder class action complaint was filed in the United States District Court for the Western District of Washington against Cray and the individual members of Cray’s Board of Directors, captioned Epstein v. Cray Inc., et al. , Case No. [2:19-cv-01026] (the “Epstein Complaint” and together with the Delaware Complaints, the “Federal Court Actions”). The Federal Court Actions each assert that defendants violated Sections 14(a) and 20(a) of the Exchange Act by making untrue statements of material fact and omitting certain material facts related to the contemplated merger in the proxy statement. The State Court Actions and the Federal Court Actions seek, among other things, an order enjoining defendants from consummating the Merger, money damages and an award of attorneys’ and experts’ fees. The probable outcome of the State Court Actions and the Federal Court Actions cannot be determined, nor can the Company estimate a range of potential loss. The Company believes that the lawsuits are without merit and intends to vigorously defend those actions. As a result, the Company considers the likelihood of a material loss related to these matters to be remote. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Note 11— Share-Based Compensation The Company accounts for its share-based compensation based on an estimate of fair value of the grant on the date of grant. In determining the fair value of stock options, the Company uses the Black-Scholes option pricing model. The following key weighted average assumptions were employed in the calculation for the six month period ended June 30, 2019 and the three and six month periods ended June 30, 2018. There were no stock option grants during the three month period ended June 30, 2019: Three Months Ended Six Months Ended 2018 2019 2018 Risk-free interest rate 2.85% 2.47% 2.85% Expected dividend yield —% —% —% Volatility 48.93% 48.04% 48.93% Expected life 4.0 years 4.0 years 4.0 years Weighted average Black-Scholes value of options granted $11.13 $9.05 $11.13 The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company does not anticipate declaring dividends in the foreseeable future. Volatility is based on historical data. The expected life of an option is based on the assumption that options will be exercised, on average, about two years after vesting occurs. The Company recognizes compensation expense for only the portion of options that are expected to vest. Therefore, management applies an estimated forfeiture rate that is derived from historical employee termination data and adjusted for expected future employee turnover rates. The estimated forfeiture rate applied to the Company’s stock option grants during the three and six months ended June 30, 2019 and 2018 was 8.0% . If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods. The Company’s stock price volatility, option lives and expected forfeiture rates involve management’s best estimates at the time of such determination, which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the vesting period or requisite service period of the option. The Company typically issues stock options with a four year vesting period (the requisite service period) and amortizes the fair value of stock options (stock compensation cost) ratably over the requisite service period. A summary of the Company’s year-to-date stock option activity and related information follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Outstanding at December 31, 2018 1,877,602 $ 18.81 Grants 20,000 $ 22.62 Exercises (260,232 ) $ 6.03 Canceled and forfeited (5,006 ) $ 14.61 Outstanding at June 30, 2019 1,632,364 $ 20.90 5.5 Exercisable at June 30, 2019 1,326,280 $ 20.29 4.9 Available for grant at June 30, 2019 (1) 2,958,018 (1) Using the plan’s fungible ratio of 1.55 :1 for full-value awards, 1,908,399 shares were available for restricted stock awards, stock bonus awards, restricted stock units, performance shares or performance units. As of June 30, 2019 , there was $22.9 million of aggregate intrinsic value of outstanding stock options, including $19.5 million of aggregate intrinsic value of exercisable stock options. Intrinsic value represents the total pretax intrinsic value for all “in-the-money” options ( i.e. , the difference between the Company’s closing stock price on the last trading day of its second quarter of 2019 and the exercise price, multiplied by the number of shares of common stock underlying the stock options) that would have been received by the option holders had all option holders exercised their options on June 30, 2019 . During the three and six months ended June 30, 2019 , stock options covering 65,332 and 260,232 shares of common stock, respectively, with a total intrinsic value of $1.1 million and $4.7 million , respectively, were exercised. During the three and six months ended June 30, 2018 , stock options covering 20,699 and 192,814 shares of common stock, respectively, with a total intrinsic value of $0.3 million and $2.7 million , respectively, were exercised. The fair value of unvested restricted stock and unvested restricted stock units is based on the market price of a share of the Company’s common stock on the date of grant and is amortized over the vesting period. A summary of the Company’s unvested restricted stock grants and changes during the six months ended June 30, 2019 is as follows: Service Vesting Restricted Shares Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2018 34,269 $ 27.64 Granted 32,208 $ 34.69 Forfeited — $ — Vested (34,269 ) $ 27.64 Outstanding at June 30, 2019 32,208 $ 34.69 The estimated forfeiture rate applied to the Company’s restricted stock grants during the three and six months ended June 30, 2019 and 2018 , was 8.0% . The aggregate fair value of restricted stock vested during the three and six months ended June 30, 2019 , was $0.9 million and $0.9 million , respectively. The aggregate fair value of restricted stock vested during the three and six months ended June 30, 2018 , was $1.9 million and $2.0 million , respectively. A summary of the Company’s unvested restricted stock unit grants and changes during the six months ended June 30, 2019 is as follows: Service Vesting Restricted Stock Units Performance Vesting Restricted Stock Units Total Restricted Stock Units Units Weighted Average Grant Date Fair Value Units Weighted Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2018 1,166,308 $ 23.07 482,485 $ 30.13 1,648,793 $ 25.14 Granted 544,700 $ 26.28 — $ — 544,700 $ 26.28 Forfeited (28,039 ) $ 22.21 — $ — (28,039 ) $ 22.21 Vested (242,050 ) $ 23.84 — $ — (242,050 ) $ 23.84 Outstanding at June 30, 2019 1,440,919 $ 24.17 482,485 $ 30.13 1,923,404 $ 25.66 The estimated forfeiture rate applied to the Company’s service vesting restricted stock unit grants during the three and six months ended June 30, 2019 and 2018 , was 8.0% . The aggregate fair value of restricted stock units vested during the three and six months ended June 30, 2019 , was $5.4 million and $5.8 million , respectively. The aggregate fair value of restricted stock units vested during the three and six months ended June 30, 2018 , was $4.7 million and $5.1 million , respectively. Restricted stock units are not outstanding shares and do not have any voting or dividend rights. At the time of vesting, a share of common stock representing each restricted stock unit vested will be issued by the Company. The performance vesting restricted stock units are subject to performance measures that are currently not considered “probable” of attainment and as such, no compensation cost has been recorded for these units. The period for which the performance measures of the performance vesting restricted stock units can be satisfied ends at the end of 2019. Under certain conditions, the performance vesting restricted shares vest upon a change in control. Based on the size of the Company’s merger with HPE, approximately 241 thousand performance vesting restricted stock units will ultimately vest, the majority of which require a one year service period by the holders subsequent to the close of our merger with HPE. Including performance-based equity awards, the Company had $41.5 million of total unrecognized compensation cost related to unvested stock options, unvested restricted stock and unvested restricted stock units as of June 30, 2019 . Excluding the $14.5 million of unrecognized compensation cost related to unvested restricted stock units that are subject to performance measures that are currently not considered “probable” of attainment, unrecognized compensation cost is $27.0 million . No compensation expense is recognized for unvested restricted stock units subject to performance measures that are not considered “probable” of attainment. Unrecognized compensation cost related to unvested stock options and unvested non-performance-based restricted stock is expected to be recognized over a weighted average period of 3.1 years. The following table sets forth the gross share-based compensation cost resulting from stock options, unvested restricted stock and unvested restricted stock units that were recorded in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Cost of product revenue $ 139 $ 110 $ 264 $ 216 Cost of service revenue 115 103 223 200 Research and development, net 1,354 1,101 2,523 1,961 Sales and marketing 1,044 744 1,833 1,478 General and administrative 1,449 1,134 2,924 2,279 Total $ 4,101 $ 3,192 $ 7,767 $ 6,134 |
Taxes
Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Taxes | Note 12— Taxes The Company’s effective tax rates for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended 2019 2018 2019 2018 Effective tax rates (0.1)% 3% (0.2)% (0.3)% The difference between the expected statutory tax rate of 21% and the actual tax rates for the three and six months ended June 30, 2019 and 2018 , was attributable to the Company’s decision to continue to provide a full valuation allowance against its U.S. federal deferred tax assets offset, in part, by foreign taxes. As of June 30, 2019 , the Company continued to provide a full valuation allowance against its U.S. federal deferred tax assets and against the majority of its deferred tax assets arising in state and foreign jurisdictions as the realization of such assets is not considered to be more likely than not at this time. The Company’s conclusion about the realizability of its deferred tax assets, and therefore the appropriateness of the valuation allowance, is reviewed quarterly and could change in future periods depending on the Company’s future assessment of all available evidence in support of the likelihood of realization of its deferred tax assets. If the Company’s conclusion about the realizability of its deferred tax assets and therefore the appropriateness of its valuation allowance changes in a future period, it could record a substantial tax benefit in its Condensed Consolidated Statements of Operations when that occurs. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Note 13— Segment Information The Company has the following reportable segments: Supercomputing, Storage and Data Management, Maintenance and Support, and Engineering Services and Other. The Company’s reportable segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer, who is the Chief Operating Decision Maker, in determining how to allocate the Company’s resources and evaluate performance. The segments are determined based on several factors, including the Company’s internal operating structure, the manner in which the Company’s operations are managed, client base, similar economic characteristics and the availability of separate financial information. Supercomputing Supercomputing includes a suite of highly advanced, tightly integrated and cluster supercomputer systems which are used by large research and engineering centers in universities, government laboratories, and commercial institutions. Supercomputing also includes the ongoing maintenance of these systems as well as system analysts. Storage and Data Management Storage and Data Management offers Cray DataWarp and ClusterStor (formerly branded Sonexion), as well as other third-party storage products and their ongoing maintenance as well as system analysts. Maintenance and Support Maintenance and Support provides ongoing maintenance of Cray supercomputers, big data storage and analytics systems, as well as system analysts. Engineering Services and Other Engineering Services and Other includes analytics and artificial intelligence-driven systems as well as Custom Engineering. The following data presents the Company's operating segment revenues disaggregated by primary geographic market, which is determined based on a customer's geographic location (in thousands). Regions represent Europe, the Middle East, and Africa (“EMEA”); Asia-Pacific and Japan; and the United States, Canada, and Latin America (“Americas”). Revenues were reduced by $0.1 million for the three and six months ended June 30, 2019 and $0.6 million and $1.1 million for the three and six months ended June 30, 2018 related to hedging gains and losses which do not represent revenues recognized from contracts with customers. Americas EMEA Asia Pacific & Japan Total Three Months Ended June 30, 2019 Supercomputing $ 36,860 $ 9,082 $ 4,890 $ 50,832 Storage and Data Management 6,288 2,613 1,764 10,665 Maintenance and Support 22,376 7,388 6,433 36,197 Engineering Services and Other 4,433 71 2,698 7,202 Elimination of inter-segment revenue (22,376 ) (7,388 ) (6,433 ) (36,197 ) Total revenue $ 47,581 $ 11,766 $ 9,352 $ 68,699 Americas EMEA Asia Pacific & Japan Total Three Months Ended June 30, 2018 Supercomputing $ 44,318 $ 14,148 $ 43,305 $ 101,771 Storage and Data Management 6,876 3,268 2,817 12,961 Maintenance and Support 21,117 7,752 5,425 34,294 Engineering Services and Other 5,189 58 224 5,471 Elimination of inter-segment revenue (21,117 ) (7,752 ) (5,425 ) (34,294 ) Total revenue $ 56,383 $ 17,474 $ 46,346 $ 120,203 Americas EMEA Asia Pacific & Japan Total Six Months Ended June 30, 2019 Supercomputing $ 72,542 $ 14,064 $ 14,533 $ 101,139 Storage and Data Management 19,346 4,753 3,652 27,751 Maintenance and Support 43,730 14,448 13,346 71,524 Engineering Services and Other 8,047 352 2,956 11,355 Elimination of inter-segment revenue (43,730 ) (14,448 ) (13,346 ) (71,524 ) Total revenue $ 99,935 $ 19,169 $ 21,141 $ 140,245 Americas EMEA Asia Pacific & Japan Total Six Months Ended June 30, 2018 Supercomputing $ 64,927 $ 22,806 $ 69,904 $ 157,637 Storage and Data Management 14,914 7,444 11,356 33,714 Maintenance and Support 41,663 15,241 10,224 67,128 Engineering Services and Other 7,910 118 418 8,446 Elimination of inter-segment revenue (41,663 ) (15,241 ) (10,224 ) (67,128 ) Total revenue $ 87,751 $ 30,368 $ 81,678 $ 199,797 The following table presents gross profit for the Company’s operating segments for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Gross Profit: Supercomputing $ 16,010 $ 29,051 $ 32,555 $ 47,172 Storage and Data Management 4,324 5,316 11,503 12,349 Maintenance and Support 15,910 17,871 32,583 32,946 Engineering Services and Other 3,613 3,440 5,913 5,238 Elimination of inter-segment gross profit (15,910 ) (17,871 ) (32,583 ) (32,946 ) Total gross profit $ 23,947 $ 37,807 $ 49,971 $ 64,759 Revenue and cost of revenue is the only discrete financial information the Company prepares for its segments. Other financial results or assets are not separated by segment. Sales to the U.S. Government totaled approximately $25.6 million and $61.6 million for the three and six months ended June 30, 2019 , respectively, compared to approximately $42.5 million and $61.4 million for the three and six months ended June 30, 2018 , respectively. For the six months ended June 30, 2019 , one non-U.S. Government customer accounted for 14% of total revenue. For the six months ended June 30, 2018 , one non-U.S. Government customer, which was located in Japan, accounted for 17% of total revenue. For the six months ended June 30, 2018, total revenue in Japan accounted for 26% |
Basis of Presentation - (Polici
Basis of Presentation - (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. |
New Accounting Pronouncements | New Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases: Topic 842 (ASU 2016-02), which replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use (“ROU”) assets and corresponding lease liabilities on the balance sheet. The new standard initially required application with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. In July 2018, this requirement was amended with the issuance of Accounting Standards Update No. 2018-11, Leases: Topic 842: Targeted Improvements (ASU 2018-11), which permits an additional (and optional) transition method to adopt the new leases standard. The Company adopted ASU 2016-02 and related ASUs, collectively ASC 842, on January 1, 2019 using the optional transition method. Consequently, periods before January 1, 2019 will continue to be reported in accordance with the prior accounting guidance, ASC 840, Leases. The Company elected the package of practical expedients, which permits the Company to retain prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced before January 1, 2019. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. The Company also elected the practical expedient to combine lease and non-lease components for all of its leases other than net lease real estate leases. Adoption of ASC 842 resulted in the recording of ROU assets and lease liabilities of $34.4 million and $46.6 million , respectively, as of January 1, 2019. The difference between ROU assets and lease liabilities relates to liabilities of $12.2 million for deferred rent and lease incentives liabilities that were included on the Company’s Condensed Consolidated Balance Sheets prior to adoption of ASC 842. These amounts were eliminated at the time of adoption and are included in the lease liabilities number above. Adoption of ASC 842 did not have a material impact on the Company’s consolidated net earnings and had no impact on cash flows. In August 2017, FASB issued Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12). The new standard simplifies and expands the eligible hedging strategies for financial and nonfinancial risks. It also enhances the transparency of how hedging results are presented and disclosed. Further, the new standard provides partial relief on the timing of certain aspects of hedge documentation and eliminates the requirement to recognize hedge ineffectiveness separately in earnings. The Company adopted ASU 2017-12 on January 1, 2019. Adoption of ASU 2017-12 did not have a material impact on the Company’s consolidated financial statements. Upon adoption of ASU 2017-12, the Company revised its accounting policy for foreign currency derivatives from the policy included in the Notes to Consolidated Financial Statements in its annual report on Form 10-K for year ended December 31, 2018. The revised accounting policy for foreign currency derivatives is included below. In February 2018, FASB issued Accounting Standards Update No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The new standard amends ASC 220 to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires entities to provide certain disclosures regarding stranded tax effects. The Company adopted ASU 2018-02 on January 1, 2019. At the time of adoption, the Company reclassified $0.2 million of stranded tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to accumulated deficit. Adoption of ASU 2018-02 did not have a material impact on the Company’s consolidated financial statements. In August 2018, FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). The new standard makes various modifications to the disclosure requirements on fair value measurement in Topic 820. The Company adopted ASU 2018-13 on January 1, 2019. Adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. |
Foreign Currency Derivatives | Foreign Currency Derivatives The Company uses foreign currency exchange contracts to manage certain foreign currency exposures. Foreign currency exchange contracts are cash flow hedges of the Company’s foreign currency exposures on certain revenue contracts and are recorded at the contract’s fair value. Most of the Company’s foreign currency exchange contracts are designated as cash flow hedges for the purposes of hedge accounting treatment and any gains or losses on the foreign currency exchange contract is initially reported in “Accumulated other comprehensive income,” a component of shareholders’ equity, with a corresponding asset or liability recorded based on the fair value of the foreign currency exchange contract. When the hedged transaction is recognized, any unrecognized gains or losses on the hedged transaction are reclassified into results of operations in the same period and presented in the same income statement line item as the earnings effect of the hedged item. The Company excludes the changes in fair value of the contract related to forward points from the assessment of hedge effectiveness and the gains and losses associated with the excluded component are presented in the same line of the income statement for the hedged item. For hedging relationships executed before the date of adoption of ASU 2017-12, the gains and losses associated with the excluded components are recognized currently in earnings. The amortization approach is used for hedging relationships executed after the date of adoption of ASU 2017-02. Cash flows from foreign currency exchange contracts accounted for as cash flow hedges are classified in the same category as the cash flows from the items being hedged. The Company typically dedesignates its cash flow hedges for the purposes of hedge accounting treatment when the receivable related to the hedged cash flow is recorded. Unrealized gains or losses related to foreign currency exchange contracts that are not designated as cash flow hedges for the purposes of hedge accounting treatment are recorded in other income (expense) in the Condensed Consolidated Statements of Operations and are generally offset by foreign currency adjustments on related receivables. The Company does not use derivative financial instruments for speculative purposes. |
Revenue Recognition | The Company’s performance obligations are satisfied over time as work is performed or at a point in time. The majority of the Company’s revenue is recognized at a point in time when products are accepted, installed or delivered. Most of the Company’s revenue is derived from long-term contracts that can span several years. Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the Company’s systems or services. In general, this does not occur until the products have been shipped or services provided to the customer, risk of loss has transferred to the customer, and, where applicable, a customer acceptance has been obtained. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes that the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. Contracts are often modified to account for changes in contract specifications and requirements. To determine the proper revenue recognition method for contract modifications, the Company evaluates whether the contract modification should be accounted for as a separate contract, part of an existing contract, or termination of an existing contract and the creation of a new contract. This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company’s estimate of the standalone selling price of each distinct good or service in the contract. The Company determines the transaction price by reviewing the established contractual terms and other relevant information. Contracts can include penalty clauses and contracts with government customers may not be fully funded, both of which represent variable consideration. Generally, the Company includes both the funded and unfunded portions of a contract with a government customer in the transaction price, as most often it is deemed the contract will become fully funded. The Company also assesses the likelihood of certain penalties that would result in contract price reductions and, if deemed probable, the transaction price is adjusted. The majority of the Company’s contracts include multiple promised goods and services, which are assessed at contract inception. Each distinct good or service is identified as a performance obligation, which may be an individual good or service or a bundle of goods or services. In order to determine whether the promises are distinct, the Company assesses the use of its products and services by its customers to determine whether the customer can benefit from the good or service on its own or from other readily available resources, and whether the promised transfer of goods or services is separately identifiable from other promises in the contract. The majority of the Company’s revenues are from product solutions which include supercomputers, storage, and data analytics systems, each of which are usually separate performance obligations. Revenue is recognized when obligations under the terms of a contract with a customer are satisfied. Product revenue is typically recognized upon customer acceptance, or upon installation or delivery if formal acceptance is not required. Service revenue is typically recognized over time and consists mainly of system maintenance, analyst services, and engineering services, each of which are usually separate performance obligations. System maintenance commences upon customer acceptance or installation, depending on the contract terms, and revenue is recognized ratably over the remaining term of the maintenance contract. On-site analysts provide specialized services to customers, the revenue for which is recognized ratably over the contract period. Service revenue is recognized on a straight-line basis over the service period as the services are available continuously to the customer. Revenue from engineering services can be recognized as services are performed or as milestones are achieved, depending on the terms of the contract and nature of services performed. If, in a contract, the customer has an option to acquire additional goods or services, that option gives rise to a performance obligation if the option provides a material right to the customer that it would not receive without entering into that contract. Revenue from purchase options can be recognized as those future goods or services are transferred or when the option expires. The Company performs an assessment to determine whether a significant financing component is present in a contract. If a contract is determined to include a significant financing component, the interest rate used in the calculation is based on the prevailing interest rates at contract inception and the entity’s creditworthiness. When the period between providing a good or service to the customer is expected to be less than one year from payment, the Company applies the practical expedient and does not adjust the consideration for the effects of a significant financing component. Occasionally, the Company’s contracts include noncash consideration. This typically consists of returned parts when a system is upgraded or de-installed. Noncash consideration is measured at contract inception at estimated fair value. The total transaction price is allocated to each performance obligation identified in the contract based on its relative standalone selling price. The Company does not have directly observable standalone selling prices for the majority of its performance obligations due to a relatively small number of customer contracts that differ in system size and contract terms which can be due to infrequently selling each performance obligation separately, not pricing products within a narrow range, or only having a limited sales history, such as in the case of certain advanced and emerging technologies. When a directly observable standalone selling price is not available, the Company estimates the standalone selling price. In determining the estimated standalone selling price, the Company uses the cost to provide the product or service plus a margin, or considers other factors. When using cost plus a margin, the Company considers the total cost of the product or service, including customer-specific and geographic factors as appropriate. The Company also considers the historical margins of the product or service on previous contracts and several other factors including any changes to pricing methodologies, competitiveness of products and services, and cost drivers that would cause future margins to differ from historical margins. The Company sometimes offers discounts to its customers. As these discounts are offered on bundles of goods and services, the discounts are applied to all performance obligations in the contract on a pro-rata basis. |
Revenue Recognition - (Tables)
Revenue Recognition - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Contract Receivables, Contract Assets, and Contract Liabilities from Contracts with Customers | The following table provides information about contract receivables, contract assets, and contract liabilities from contracts with customers (in thousands) and includes both short-term and long-term portions: June 30, December 31, 2018 Change Contract receivables $ 67,214 $ 78,634 $ (11,420 ) Contract assets 5,793 6,404 (611 ) Contract liabilities 77,430 94,004 (16,574 ) |
Fair Value Measurement - (Table
Fair Value Measurement - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Company's Financial Assets and Liabilities Measured at Fair Value and the Hierarchy of the Valuation Inputs | The following table presents information about the Company’s financial assets that have been measured at fair value as of June 30, 2019 , and indicates the level within the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Fair Value Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Assets: Cash, cash equivalents and restricted cash $ 165,152 $ 165,152 $ — Foreign currency exchange contracts (1) 2,400 — 2,400 Assets measured at fair value at June 30, 2019 $ 167,552 $ 165,152 $ 2,400 Liabilities: Foreign currency exchange contracts (2) 111 $ — 111 Liabilities measured at fair value at June 30, 2019 $ 111 $ — $ 111 (1) Included in “Prepaid expenses and other current assets” and “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets. (2) Included in “Other accrued liabilities” and “Other non-current liabilities” on the Company’s Consolidated Balance Sheets. |
Schedule of Notional Amounts of Outstanding Derivative Positions | As of June 30, 2019 and December 31, 2018 , the Company had outstanding foreign currency exchange contracts that had been dedesignated for the purposes of hedge accounting treatment. The Company dedesignates cash flow hedges when the receivable related to the hedged cash flow is recorded. The outstanding notional amounts were approximately (in millions): June 30, December 31, 2018 British Pounds (GBP) 13.1 24.8 Canadian Dollars (CAD) 47.9 — Korean Won (KRW) — 4,446.5 Singapore Dollars (SGD) — 2.0 As of June 30, 2019 and December 31, 2018 , the Company had outstanding foreign currency exchange contracts that were designated and accounted for as cash flow hedges of anticipated future cash receipts on sales contracts payable in foreign currencies. The outstanding notional amounts were approximately (in millions): June 30, December 31, 2018 Canadian Dollars (CAD) 6.5 54.4 Japanese Yen (JPY) 711.5 — Singapore Dollars (SGD) 1.8 — |
Fair Values of Derivative Instruments and Balance Sheet Location | Fair values of derivative instruments designated as cash flow hedges (in thousands): Balance Sheet Location Fair Value Fair Value Prepaid expenses and other current assets $ — $ 1,296 Other non-current assets — 137 Other accrued liabilities (62 ) — Other non-current liabilities (6 ) — Total fair value of derivative instruments designated as cash flow hedges $ (68 ) $ 1,433 Fair values of derivative instruments not designated as cash flow hedges (in thousands): Balance Sheet Location Fair Value Fair Value Prepaid expenses and other current assets $ 1,941 $ 1,894 Other non-current assets 459 1,242 Accrued and other liabilities (43 ) (63 ) Total fair value of derivative instruments not designated as cash flow hedges $ 2,357 $ 3,073 |
Schedule of Foreign Exchange Contracts, Statement of Financial Position | The following table shows the impact on product revenue of foreign currency exchange contracts that were designated as cash flow hedges (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Total amounts of product revenue presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded $ 29,924 $ 83,379 $ 64,082 127,833 Amount of gain (loss) recognized in other comprehensive income included in the assessment of effectiveness (171 ) 2,939 (1,020 ) 2,183 Amount of loss reclassified from accumulated other comprehensive income to product revenue (143 ) (633 ) (143 ) (1,109 ) Amount excluded from effectiveness testing recognized as an increase in product revenue based on changes in fair value 63 — 119 — Amount excluded from effectiveness testing recognized in earnings based on an amortization approach 6 — 6 — |
Derivatives Not Designated as Hedging Instruments | The following table shows the impact on other expense of losses on foreign currency exchange contracts that were not designated as cash flow hedges. These amounts increased other income for all periods presented (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Other income, net $ 442 $ 3,501 $ 16 $ 1,590 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Reclassification from Accumulated Other Comprehensive Income (Loss) | The following table shows the impact on product revenue of reclassification adjustments from accumulated other comprehensive income resulting from hedged foreign currency transactions recorded by the Company for the three and six months ended June 30, 2019 and 2018 (in thousands). The reclassification adjustments decreased product revenue for the three and six months ended June 30, 2019 and 2018. Three Months Ended Six Months Ended 2019 2018 2019 2018 Gross of tax reclassifications $ (143 ) $ (633 ) $ (143 ) $ (1,109 ) Net of tax reclassifications $ (143 ) $ (633 ) $ (143 ) $ (1,109 ) |
Schedule of Accumulated Other Comprehensive Income (Loss) | The following tables show the changes in accumulated other comprehensive income by component for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended June 30, 2019 Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 1,024 $ 1,331 $ 2,355 Current-period change, net of tax (52 ) (769 ) (821 ) Ending balance $ 972 $ 562 $ 1,534 Income tax expense (benefit) associated with current-period change $ — $ — $ — Three Months Ended June 30, 2018 Unrealized Loss on Investments Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (9 ) $ 1,637 $ (1,445 ) 183 Current-period change, net of tax 9 (1,185 ) 2,939 1,763 Ending balance $ — $ 452 $ 1,494 $ 1,946 Income tax expense (benefit) associated with current-period change $ — $ — $ — $ — Six Months Ended June 30, 2019 Foreign Currency Translation Adjustments Unrealized Gain on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ 606 $ 2,602 $ 3,208 Current-period change, net of tax 156 (1,618 ) (1,462 ) Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 210 (422 ) (212 ) Ending balance $ 972 $ 562 $ 1,534 Income tax expense (benefit) associated with current-period change $ — $ — $ — Six Months Ended June 30, 2018 Unrealized Loss on Investments Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Cash Flow Hedges Accumulated Other Comprehensive Income Beginning balance $ (7 ) $ 1,611 $ (689 ) $ 915 Current-period change, net of tax 7 (1,159 ) 2,183 1,031 Ending balance $ — $ 452 $ 1,494 $ 1,946 Income tax expense (benefit) associated with current-period change $ — $ — $ — $ — |
Accounts and Other Receivable_2
Accounts and Other Receivables, Net - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Receivables [Abstract] | |
Accounts and Other Receivables, Net | Net accounts and other receivables consisted of the following (in thousands): June 30, December 31, 2018 Trade accounts receivable $ 49,285 $ 63,414 Current contract assets 4,003 4,391 Advance billings 2,924 1,832 Short-term investment in sales-type lease 12,607 12,462 Other receivables 7,699 6,708 76,518 88,807 Allowance for doubtful accounts (17 ) (988 ) Accounts and other receivables, net $ 76,501 $ 87,819 |
Leases - (Tables)
Leases - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Lease Cash Flows | Supplemental cash flow information related to operating leases for the three and six months ended June 30, 2019 was as follows (in thousands): Three Months Ended Six Months Ended 2019 2019 Cash paid for amounts included in the measurement of operating lease liabilities: $ 2,081 $ 4,119 Operating right-of-use assets obtained in exchange for lease obligations: $ 116 $ 465 |
Lease Assets and Liabilities | Supplemental balance sheet information related to operating leases as of June 30, 2019 was as follows (in thousands, except lease term and discount rate): June 30, Operating lease right-of-use assets $ 32,656 Current portion of operating lease liabilities, included in accrued and other liabilities $ 4,664 Long-term operating lease liabilities 39,845 Total operating lease liabilities $ 44,509 Weighted average remaining lease term (in years): 8.72 Weighted average discount rate (1): 6.76 % (1) Where the Company could not determine the rate inherent in the lease, its incremental borrowing rate was calculated using LIBOR plus a spread for similar companies. |
Operating Lease Liability Maturity | As of June 30, 2019 , maturities of operating lease liabilities were as follows (in thousands): 2019 (less than 1 year) $ 4,143 2020 8,184 2021 7,979 2022 7,628 2023 6,731 Thereafter 30,046 Total lease payments 64,711 Less: interest (20,202 ) Present value of lease liabilities $ 44,509 |
Components of the Net Investment in the Sales-type Lease | The following table shows the components of the net investment in the sales-type lease as of June 30, 2019 and December 31, 2018 (in thousands): June 30, December 31, 2018 Total minimum lease payments to be received $ 18,169 $ 25,543 Less: executory costs (2,123 ) (2,985 ) Net minimum lease payments receivable 16,046 22,558 Less: unearned income (242 ) (510 ) Net investment in sales-type lease 15,804 22,048 Less: long-term investment in sales-type lease included in other non-current assets (3,197 ) (9,586 ) Investment in sales-type lease included in accounts and other receivables $ 12,607 $ 12,462 |
Minimum Lease Payments to be Received | As of June 30, 2019 , minimum lease payments related to our sales-type lease for each of the succeeding two fiscal years are as follows (in thousands): 2019 (less than 1 year) $ 7,274 2020 10,895 Total minimum lease payments to be received $ 18,169 |
Inventory - (Tables)
Inventory - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | Inventory consisted of the following (in thousands): June 30, December 31, 2018 Components and subassemblies $ 34,165 $ 42,390 Work in process 12,294 17,429 Finished goods 41,576 20,541 Total $ 88,035 $ 80,360 |
Customer Contract Liabilities -
Customer Contract Liabilities - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Contract with Customer, Liability [Abstract] | |
Liability from Contract with Customer | Liabilities from contracts with customers consisted of the following (in thousands): June 30, December 31, 2018 Contract liability - product $ 5,916 $ 5,667 Contract liability - service 71,514 88,337 Total contract liabilities 77,430 94,004 Less: long-term contract liabilities (23,077 ) (32,021 ) Current contract liabilities $ 54,353 $ 61,983 |
Share-Based Compensation - (Tab
Share-Based Compensation - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Option Valuation Assumptions | The following key weighted average assumptions were employed in the calculation for the six month period ended June 30, 2019 and the three and six month periods ended June 30, 2018. There were no stock option grants during the three month period ended June 30, 2019: Three Months Ended Six Months Ended 2018 2019 2018 Risk-free interest rate 2.85% 2.47% 2.85% Expected dividend yield —% —% —% Volatility 48.93% 48.04% 48.93% Expected life 4.0 years 4.0 years 4.0 years Weighted average Black-Scholes value of options granted $11.13 $9.05 $11.13 |
Stock Option Activity | A summary of the Company’s year-to-date stock option activity and related information follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Outstanding at December 31, 2018 1,877,602 $ 18.81 Grants 20,000 $ 22.62 Exercises (260,232 ) $ 6.03 Canceled and forfeited (5,006 ) $ 14.61 Outstanding at June 30, 2019 1,632,364 $ 20.90 5.5 Exercisable at June 30, 2019 1,326,280 $ 20.29 4.9 Available for grant at June 30, 2019 (1) 2,958,018 (1) Using the plan’s fungible ratio of 1.55 :1 for full-value awards, 1,908,399 shares were available for restricted stock awards, stock bonus awards, restricted stock units, performance shares or performance units. |
Restricted Stock Activity | A summary of the Company’s unvested restricted stock unit grants and changes during the six months ended June 30, 2019 is as follows: Service Vesting Restricted Stock Units Performance Vesting Restricted Stock Units Total Restricted Stock Units Units Weighted Average Grant Date Fair Value Units Weighted Units Weighted Average Grant Date Fair Value Outstanding at December 31, 2018 1,166,308 $ 23.07 482,485 $ 30.13 1,648,793 $ 25.14 Granted 544,700 $ 26.28 — $ — 544,700 $ 26.28 Forfeited (28,039 ) $ 22.21 — $ — (28,039 ) $ 22.21 Vested (242,050 ) $ 23.84 — $ — (242,050 ) $ 23.84 Outstanding at June 30, 2019 1,440,919 $ 24.17 482,485 $ 30.13 1,923,404 $ 25.66 A summary of the Company’s unvested restricted stock grants and changes during the six months ended June 30, 2019 is as follows: Service Vesting Restricted Shares Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2018 34,269 $ 27.64 Granted 32,208 $ 34.69 Forfeited — $ — Vested (34,269 ) $ 27.64 Outstanding at June 30, 2019 32,208 $ 34.69 |
Allocation of Share-Based Compensation | The following table sets forth the gross share-based compensation cost resulting from stock options, unvested restricted stock and unvested restricted stock units that were recorded in the Company’s Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Cost of product revenue $ 139 $ 110 $ 264 $ 216 Cost of service revenue 115 103 223 200 Research and development, net 1,354 1,101 2,523 1,961 Sales and marketing 1,044 744 1,833 1,478 General and administrative 1,449 1,134 2,924 2,279 Total $ 4,101 $ 3,192 $ 7,767 $ 6,134 |
Taxes - (Tables)
Taxes - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Effective Tax Rates | The Company’s effective tax rates for the three and six months ended June 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended 2019 2018 2019 2018 Effective tax rates (0.1)% 3% (0.2)% (0.3)% |
Segment Information - (Tables)
Segment Information - (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Revenue by Geographic Location | Engineering Services and Other includes analytics and artificial intelligence-driven systems as well as Custom Engineering. The following data presents the Company's operating segment revenues disaggregated by primary geographic market, which is determined based on a customer's geographic location (in thousands). Regions represent Europe, the Middle East, and Africa (“EMEA”); Asia-Pacific and Japan; and the United States, Canada, and Latin America (“Americas”). Revenues were reduced by $0.1 million for the three and six months ended June 30, 2019 and $0.6 million and $1.1 million for the three and six months ended June 30, 2018 related to hedging gains and losses which do not represent revenues recognized from contracts with customers. Americas EMEA Asia Pacific & Japan Total Three Months Ended June 30, 2019 Supercomputing $ 36,860 $ 9,082 $ 4,890 $ 50,832 Storage and Data Management 6,288 2,613 1,764 10,665 Maintenance and Support 22,376 7,388 6,433 36,197 Engineering Services and Other 4,433 71 2,698 7,202 Elimination of inter-segment revenue (22,376 ) (7,388 ) (6,433 ) (36,197 ) Total revenue $ 47,581 $ 11,766 $ 9,352 $ 68,699 Americas EMEA Asia Pacific & Japan Total Three Months Ended June 30, 2018 Supercomputing $ 44,318 $ 14,148 $ 43,305 $ 101,771 Storage and Data Management 6,876 3,268 2,817 12,961 Maintenance and Support 21,117 7,752 5,425 34,294 Engineering Services and Other 5,189 58 224 5,471 Elimination of inter-segment revenue (21,117 ) (7,752 ) (5,425 ) (34,294 ) Total revenue $ 56,383 $ 17,474 $ 46,346 $ 120,203 Americas EMEA Asia Pacific & Japan Total Six Months Ended June 30, 2019 Supercomputing $ 72,542 $ 14,064 $ 14,533 $ 101,139 Storage and Data Management 19,346 4,753 3,652 27,751 Maintenance and Support 43,730 14,448 13,346 71,524 Engineering Services and Other 8,047 352 2,956 11,355 Elimination of inter-segment revenue (43,730 ) (14,448 ) (13,346 ) (71,524 ) Total revenue $ 99,935 $ 19,169 $ 21,141 $ 140,245 Americas EMEA Asia Pacific & Japan Total Six Months Ended June 30, 2018 Supercomputing $ 64,927 $ 22,806 $ 69,904 $ 157,637 Storage and Data Management 14,914 7,444 11,356 33,714 Maintenance and Support 41,663 15,241 10,224 67,128 Engineering Services and Other 7,910 118 418 8,446 Elimination of inter-segment revenue (41,663 ) (15,241 ) (10,224 ) (67,128 ) Total revenue $ 87,751 $ 30,368 $ 81,678 $ 199,797 |
Information on Operating Segments | The following table presents gross profit for the Company’s operating segments for the three and six months ended June 30, 2019 and 2018 (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Gross Profit: Supercomputing $ 16,010 $ 29,051 $ 32,555 $ 47,172 Storage and Data Management 4,324 5,316 11,503 12,349 Maintenance and Support 15,910 17,871 32,583 32,946 Engineering Services and Other 3,613 3,440 5,913 5,238 Elimination of inter-segment gross profit (15,910 ) (17,871 ) (32,583 ) (32,946 ) Total gross profit $ 23,947 $ 37,807 $ 49,971 $ 64,759 |
Basis of Presentation - Narrati
Basis of Presentation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | May 16, 2019 | Jan. 01, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Merger Price | $ 35 | |||
Operating lease right-of-use assets | $ 32,656 | $ 0 | ||
Operating lease liability | 44,509 | |||
Deferred rent and lease incentive liability | $ 12,200 | |||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | (212) | |||
Legal Fees | 7,600 | |||
Accrued Bonuses | 17,000 | |||
Potential Merger Related Costs | $ 46,000 | |||
Accounting Standards Update 2016-02 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Operating lease right-of-use assets | $ 34,400 | |||
Operating lease liability | 46,600 | |||
Accounting Standards Update 2018-02 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | $ 200 |
Revenue Recognition - Contract
Revenue Recognition - Contract Receivables, Contract Assets, and Contract Liabilities from Contracts with Customers (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | ||
Contract receivables | $ 67,214 | $ 78,634 |
Contract assets | 5,793 | 6,404 |
Contract liabilities | 77,430 | $ 94,004 |
Change | ||
Contract receivables | (11,420) | |
Contract assets | (611) | |
Contract liabilities | $ (16,574) |
Revenue Recognition - Narrative
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||||
Revenue recognized | $ 35.1 | ||||
Deferred commissions | $ 4.2 | 4.2 | $ 2 | ||
Recognized commissions expense | 0.8 | $ 1.5 | 1.8 | $ 2.6 | |
Revenues with remaining performance obligations | 639 | 639 | |||
Losses resulting from hedged foreign currency transactions | 0.2 | ||||
Go/No Go | |||||
Revenue Recognition, Multiple-deliverable Arrangements [Line Items] | |||||
Revenues with remaining performance obligations | $ 500 | $ 500 |
Revenue Recognition - Remaining
Revenue Recognition - Remaining Performance Obligation (Details) | Jun. 30, 2019 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-06-30 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction, percent | 60.00% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-09-30 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction, period | 18 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-06-30 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction, period | 6 years |
- Fair Value (Details)
- Fair Value (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash, cash equivalents and restricted cash | $ 165,152 |
Foreign currency exchange contracts | 2,400 |
Assets measured at fair value at June 30, 2019 | 167,552 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 111 |
Accrued Liabilities, Fair Value Disclosure | 111 |
Quoted Prices in Active Markets (Level 1) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash, cash equivalents and restricted cash | 165,152 |
Foreign currency exchange contracts | 0 |
Assets measured at fair value at June 30, 2019 | 165,152 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 0 |
Accrued Liabilities, Fair Value Disclosure | 0 |
Significant Other Observable Inputs (Level 2) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash, cash equivalents and restricted cash | 0 |
Foreign currency exchange contracts | 2,400 |
Assets measured at fair value at June 30, 2019 | 2,400 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 111 |
Accrued Liabilities, Fair Value Disclosure | $ 111 |
Fair Value Measurement - Deriva
Fair Value Measurement - Derivative Instruments and Hedging Activities Disclosure (Details) $ in Thousands, ₩ in Millions, ¥ in Millions, £ in Millions, $ in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | |||||||||||||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019JPY (¥) | Jun. 30, 2019SGD ($) | Jun. 30, 2019KRW (₩) | Jun. 30, 2019CAD ($) | Jun. 30, 2019GBP (£) | Dec. 31, 2018USD ($) | Dec. 31, 2018JPY (¥) | Dec. 31, 2018SGD ($) | Dec. 31, 2018KRW (₩) | Dec. 31, 2018CAD ($) | Dec. 31, 2018GBP (£) | |
Derivative [Line Items] | |||||||||||||||
Foreign currency exposure on hedged foreign currency contracts | $ 12,900 | $ 12,900 | $ 41,600 | ||||||||||||
Foreign currency exposure on dedesignated foreign currency contracts | 55,800 | 55,800 | 40,600 | ||||||||||||
Other accrued liabilities | (62) | (62) | 0 | ||||||||||||
Other non-current liabilities | (2,384) | (2,384) | (12,394) | ||||||||||||
Total amounts of product revenue presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded | 68,699 | $ 120,203 | 140,245 | $ 199,797 | |||||||||||
Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Other non-current liabilities | (6) | (6) | 0 | ||||||||||||
Total fair value of derivative instruments not designated as cash flow hedges | (68) | (68) | 1,433 | ||||||||||||
Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Total fair value of derivative instruments not designated as cash flow hedges | 2,357 | 2,357 | 3,073 | ||||||||||||
Prepaid expenses and other current assets | Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative asset, current | 0 | 0 | 1,296 | ||||||||||||
Prepaid expenses and other current assets | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative asset, current | 1,941 | 1,941 | 1,894 | ||||||||||||
Other non-current assets | Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative asset, noncurrent | 0 | 0 | 137 | ||||||||||||
Other non-current assets | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative asset, noncurrent | 459 | 459 | 1,242 | ||||||||||||
Accrued and other liabilities | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative liability, current | (43) | (43) | $ (63) | ||||||||||||
Foreign Exchange Contract | Cash Flow Hedging | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Amount of loss reclassified from accumulated other comprehensive income to product revenue | (143) | (633) | (143) | (1,109) | |||||||||||
Amount excluded from effectiveness testing recognized as an increase in product revenue based on changes in fair value | 63 | 0 | 119 | 0 | |||||||||||
Amount excluded from effectiveness testing recognized as an increase in product revenue based on changes in fair value | (171) | 2,939 | (1,020) | 2,183 | |||||||||||
Foreign Currency Amortization | 6 | 0 | 6 | 0 | |||||||||||
Product | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Total amounts of product revenue presented in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded | 29,924 | 83,379 | 64,082 | 127,833 | |||||||||||
Other Expense | Foreign Exchange Contract | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | $ 442 | $ 3,501 | $ 16 | $ 1,590 | |||||||||||
British Pounds (GBP) | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | £ | £ 13.1 | £ 24.8 | |||||||||||||
Canada, Dollars | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | $ 6.5 | $ 54.4 | |||||||||||||
Canada, Dollars | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | $ 47.9 | $ 0 | |||||||||||||
Japan, Yen | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | ¥ | ¥ 711.5 | ¥ 0 | |||||||||||||
Singapore, Dollars | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | $ 1.8 | $ 0 | |||||||||||||
Singapore, Dollars | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | $ 0 | $ 2 | |||||||||||||
Korea (North), Won | Not Designated as Hedging Instrument | |||||||||||||||
Derivative [Line Items] | |||||||||||||||
Derivative, notional amount | ₩ | ₩ 0 | ₩ 4,446.5 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Gross of tax reclassifications | $ (143) | $ (633) | $ (143) | $ (1,109) |
Net of tax reclassifications | (143) | (633) | (143) | (1,109) |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 2,355 | 183 | 3,208 | 915 |
Current-period change, net of tax | (821) | 1,763 | (1,462) | 1,031 |
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | (212) | |||
Ending balance | 1,534 | 1,946 | 1,534 | 1,946 |
Income tax expense (benefit) associated with current-period change | 0 | 0 | 0 | 0 |
Foreign Currency Translation Adjustments | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 1,024 | 1,637 | 606 | 1,611 |
Current-period change, net of tax | (52) | (1,185) | 156 | (1,159) |
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | 210 | |||
Ending balance | 972 | 452 | 972 | 452 |
Income tax expense (benefit) associated with current-period change | 0 | 0 | 0 | 0 |
Unrealized Gain on Cash Flow Hedges | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | 1,331 | (1,445) | 2,602 | (689) |
Current-period change, net of tax | (769) | 2,939 | (1,618) | 2,183 |
Reclassification of stranded tax effects resulting from adoption of ASU 2018-02 | (422) | |||
Ending balance | 562 | 1,494 | 562 | 1,494 |
Income tax expense (benefit) associated with current-period change | $ 0 | 0 | $ 0 | 0 |
Unrealized Loss on Investments | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (9) | (7) | ||
Current-period change, net of tax | 9 | 7 | ||
Ending balance | 0 | 0 | ||
Income tax expense (benefit) associated with current-period change | $ 0 | $ 0 |
Loss Per Share (EPS) - Narrativ
Loss Per Share (EPS) - Narrative (Details) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Service Vesting Restricted Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 3.1 | 3 | 3.1 | 3 |
Performance Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share (in shares) | 0.5 | 0.5 | 0.5 | 0.5 |
Accounts and Other Receivable_3
Accounts and Other Receivables, Net - Narrative (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | $ 76,518 | $ 88,807 |
Allowance for doubtful accounts | (17) | (988) |
Accounts and other receivables, net | 76,501 | 87,819 |
Trade accounts receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | 49,285 | 63,414 |
Current contract assets | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | 4,003 | 4,391 |
Advance billings | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | 2,924 | 1,832 |
Short-term investment in sales-type lease | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | 12,607 | 12,462 |
Other receivables | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, gross | $ 7,699 | $ 6,708 |
Non-US Government Customers | Accounts Receivable | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Concentration risk (as a percent) | 35.00% | 28.00% |
Government Contracts Concentration Risk | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, net | $ 12,000 | $ 25,600 |
Government Contracts Concentration Risk | Unbilled Revenues | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts and other receivables, net | $ 2,400 | $ 1,500 |
Leases - Narrative (Details)
Leases - Narrative (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Lessee, Lease, Description [Line Items] | ||
Operating lease renewal term (in years) | 5 years | 5 years |
Operating lease cost | $ 1.9 | $ 3.7 |
Sales-type lease interest income | $ 0.1 | $ 0.3 |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term (in years) | 1 year | 1 year |
Operating lease option to terminate (in years) | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease term (in years) | 11 years | 11 years |
Operating lease option to terminate (in years) | 5 years |
Leases - Lease Cash Flows (Deta
Leases - Lease Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Leases [Abstract] | ||
Cash paid for amounts included in the measurement of operating lease liabilities: | $ 2,081 | $ 4,119 |
Operating right-of-use assets obtained in exchange for lease obligations: | $ 116 | $ 465 |
Leases - Lease Assets and Liabi
Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 32,656 | $ 0 |
Current portion of operating lease liabilities, included in accrued and other liabilities | 4,664 | |
Long-term operating lease liabilities | 39,845 | $ 0 |
Total operating lease liabilities | $ 44,509 | |
Weighted average remaining lease term (in years) | 8 years 8 months 19 days | |
Weighted average discount rate | 6.76% |
Leases - Operating Lease Liabil
Leases - Operating Lease Liability Maturity (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Leases [Abstract] | |
2019 (less than 1 year) | $ 4,143 |
2020 | 8,184 |
2021 | 7,979 |
2022 | 7,628 |
2023 | 6,731 |
Thereafter | 30,046 |
Total lease payments | 64,711 |
Less: interest | (20,202) |
Present value of lease liabilities | $ 44,509 |
Leases - Net investment (Detail
Leases - Net investment (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Total minimum lease payments to be received | $ 18,169 | |
Less: executory costs | (2,123) | |
Net minimum lease payments receivable | 16,046 | |
Less: unearned income | (242) | |
Net investment in sales-type lease | 15,804 | |
Less: long-term investment in sales-type lease included in other non-current assets | (3,197) | |
Investment in sales-type lease included in accounts and other receivables | 12,607 | |
Total minimum lease payments to be received | $ 25,543 | |
Less: executory costs | (2,985) | |
Net minimum lease payments receivable | 22,558 | |
Less: unearned income | (510) | |
Net investment in sales-type lease | 22,048 | |
Less: long-term investment in sales-type lease included in other non-current assets | (9,586) | |
Investment in sales-type lease included in accounts and other receivables | $ 12,462 | |
2019 (less than 1 year) | 7,274 | |
2020 | $ 10,895 |
Inventory - Narrative (Details)
Inventory - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Inventory [Line Items] | |||
Components and subassemblies | $ 34,165 | $ 34,165 | $ 42,390 |
Work in process | 12,294 | 12,294 | 17,429 |
Finished goods | 41,576 | 41,576 | 20,541 |
Total | 88,035 | 88,035 | 80,360 |
Inventory write-down | 600 | 3,800 | |
Located at Customer Sites | |||
Inventory [Line Items] | |||
Finished goods | 41,600 | 41,600 | 16,000 |
Government Contracts Concentration Risk | Finished Goods Inventory | |||
Inventory [Line Items] | |||
Finished goods | 12,700 | 12,700 | $ 13,900 |
Non-US Government Customers | Finished Goods Inventory | |||
Inventory [Line Items] | |||
Finished goods | $ 27,000 | $ 27,000 |
Customer Contract Liabilities_2
Customer Contract Liabilities - Narrative (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Disaggregation of Revenue [Line Items] | ||
Contract liabilities | $ 77,430 | $ 94,004 |
Less: long-term contract liabilities | (23,077) | (32,021) |
Current contract liabilities | 54,353 | 61,983 |
Product | ||
Disaggregation of Revenue [Line Items] | ||
Contract liabilities | 5,916 | 5,667 |
Service | ||
Disaggregation of Revenue [Line Items] | ||
Contract liabilities | 71,514 | 88,337 |
Government Contracts Concentration Risk | ||
Disaggregation of Revenue [Line Items] | ||
Contract liabilities | $ 22,300 | $ 29,800 |
Contingencies - Narrative (Deta
Contingencies - Narrative (Details) - Pending Litigation - patent | Apr. 22, 2016 | Sep. 25, 2015 |
Civil Action No. 3:18-cv-00318-wmc | ||
Loss Contingencies [Line Items] | ||
Loss contingency, patents allegedly infringed, number | 4 | |
Civil Action No. 3:18-cv-00318-wmc | Patents Related to Company's Computer Hardware | ||
Loss Contingencies [Line Items] | ||
Loss contingency, patents allegedly infringed, number | 2 | |
Civil Action No. 3:18-cv-00318-wmc | Patents Related to Third Party's Computer Software | ||
Loss Contingencies [Line Items] | ||
Loss contingency, patents allegedly infringed, number | 2 | |
Civil Action No. 3:18-cv-03388-RS | ||
Loss Contingencies [Line Items] | ||
Loss contingency, patents allegedly infringed, number | 5 | |
Civil Action No. 3:18-cv-03388-RS | Patents Related to Third Party's Computer Software | ||
Loss Contingencies [Line Items] | ||
Loss contingency, patents allegedly infringed, number | 5 |
Share-Based Compensation - Assu
Share-Based Compensation - Assumptions (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk rree interest rate minimum | 2.85% | 2.47% | 2.85% | |
Expected dividend yield | 0.00% | 0.00% | 0.00% | |
Volatility | 48.93% | 48.04% | 48.93% | |
Expected life | 4 years | 4 years | 4 years | |
Weighted average Black-Scholes value of options granted (in dollars per share) | $ 11.13 | $ 9.05 | $ 11.13 | |
Expected average period options will be exercised after vesting | 2 years | |||
Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Estimated forfeiture rate | 8.00% | 8.00% | 8.00% | 8.00% |
Employee Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Estimated forfeiture rate | 8.00% | 8.00% | 8.00% | |
Award vesting period | 4 years | |||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Estimated forfeiture rate | 8.00% | 8.00% | 8.00% | 8.00% |
Share-Based Compensation - Opti
Share-Based Compensation - Options (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Outstanding beginning of the period (in shares) | 1,877,602 | |||
Grants (in shares) | 20,000 | |||
Exercises (in shares) | (65,332) | (20,699) | (260,232) | (192,814) |
Canceled and forfeited (in shares) | (5,006) | |||
Outstanding end of the period (in shares) | 1,632,364 | 1,632,364 | ||
Exercisable end of the period (in shares) | 1,326,280 | 1,326,280 | ||
Available for grant end of the period (in shares) | 2,958,018 | 2,958,018 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||||
Outstanding beginning of the period (in dollars per share) | $ 18.81 | |||
Grants (in dollars per share) | 22.62 | |||
Exercises (in dollars per share) | 6.03 | |||
Canceled and forfeited (in dollars per share) | 14.61 | |||
Outstanding end of the period (in dollars per share) | $ 20.90 | 20.90 | ||
Exercisable end of the period (in dollars per share) | $ 20.29 | $ 20.29 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||||
Outstanding, weighted average remaining contractual term (in years) | 5 years 6 months | |||
Exercisable, weighted average remaining contractual term (in years) | 4 years 10 months 24 days | |||
Fungible ratio | 155.00% | |||
Fungible shares available for grant (in shares) | 1,908,399 | 1,908,399 | ||
Outstanding, aggregate intrinsic value | $ 22.9 | $ 22.9 | ||
Exercisable, aggregate intrinsic value | 19.5 | 19.5 | ||
Intrinsic value of options exercised | $ 1.1 | $ 0.3 | $ 4.7 | $ 2.7 |
Share-Based Compensation - Rest
Share-Based Compensation - Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Service Vesting Restricted Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||||
Outstanding beginning of the period (in shares) | 34,269 | |||
Granted (in shares) | 32,208 | |||
Forfeited (in shares) | 0 | |||
Vested (in shares) | (34,269) | |||
Outstanding end of the period (in shares) | 32,208 | 32,208 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||||
Outstanding beginning of the period (in dollars per share) | $ 27.64 | |||
Granted (in dollars per share) | 34.69 | |||
Forfeited (in dollars per share) | 0 | |||
Vested (in dollars per share) | 27.64 | |||
Outstanding end of the period (in dollars per share) | $ 34.69 | $ 34.69 | ||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract] | ||||
Fair value of restricted stock vested in period | $ 0.9 | $ 1.9 | $ 0.9 | $ 2 |
Share-Based Compensation - Re_2
Share-Based Compensation - Restricted Stock Units (Details) - Restricted Stock Units (RSUs) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||||
Outstanding beginning of the period (in shares) | 1,648,793 | |||
Granted (in shares) | 544,700 | |||
Forfeited (in shares) | (28,039) | |||
Vested (in shares) | (242,050) | |||
Outstanding end of the period (in shares) | 1,923,404 | 1,923,404 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||||
Outstanding beginning of the period (in dollars per share) | $ 25.14 | |||
Granted (in dollars per share) | 26.28 | |||
Forfeited (in dollars per share) | 22.21 | |||
Vested (in dollars per share) | 23.84 | |||
Outstanding end of the period (in dollars per share) | $ 25.66 | $ 25.66 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Additional Disclosures [Abstract] | ||||
Estimated forfeiture rate | 8.00% | 8.00% | 8.00% | 8.00% |
Fair value of restricted stock units vested in period | $ 5.4 | $ 4.7 | $ 5.8 | $ 5.1 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | 241,000 | 241,000 | ||
Service Vesting Restricted Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||||
Outstanding beginning of the period (in shares) | 1,166,308 | |||
Granted (in shares) | 544,700 | |||
Forfeited (in shares) | (28,039) | |||
Vested (in shares) | (242,050) | |||
Outstanding end of the period (in shares) | 1,440,919 | 1,440,919 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||||
Outstanding beginning of the period (in dollars per share) | $ 23.07 | |||
Granted (in dollars per share) | 26.28 | |||
Forfeited (in dollars per share) | 22.21 | |||
Vested (in dollars per share) | 23.84 | |||
Outstanding end of the period (in dollars per share) | $ 24.17 | $ 24.17 | ||
Performance Vesting Restricted Stock Units | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||||
Outstanding beginning of the period (in shares) | 482,485 | |||
Granted (in shares) | 0 | |||
Forfeited (in shares) | 0 | |||
Vested (in shares) | 0 | |||
Outstanding end of the period (in shares) | 482,485 | 482,485 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||||
Outstanding beginning of the period (in dollars per share) | $ 30.13 | |||
Granted (in dollars per share) | 0 | |||
Forfeited (in dollars per share) | 0 | |||
Vested (in dollars per share) | 0 | |||
Outstanding end of the period (in dollars per share) | $ 30.13 | $ 30.13 |
- Aggregate (Details)
- Aggregate (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Unrecognized compensation expense | $ 41,500 | $ 41,500 | ||
Unrecognized compensation expense period of recognition | 3 years 1 month 6 days | |||
Share-based compensation expense | 4,101 | $ 3,192 | $ 7,767 | $ 6,134 |
Performance Shares | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Unrecognized compensation expense | 14,500 | 14,500 | ||
Service Vesting Restricted Shares | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Unrecognized compensation expense | 27,000 | 27,000 | ||
Research and development, net | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Share-based compensation expense | 1,354 | 1,101 | 2,523 | 1,961 |
Sales and marketing | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Share-based compensation expense | 1,044 | 744 | 1,833 | 1,478 |
General and administrative | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Share-based compensation expense | 1,449 | 1,134 | 2,924 | 2,279 |
Product | Cost of Sales | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Share-based compensation expense | 139 | 110 | 264 | 216 |
Service | Cost of Sales | ||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | ||||
Share-based compensation expense | $ 115 | $ 103 | $ 223 | $ 200 |
Taxes - Narrative (Details)
Taxes - Narrative (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rates (as a percent) | (0.10%) | 3.00% | (0.20%) | (0.30%) |
Expected statutory tax rate (as a percent) | 21.00% | 21.00% | 21.00% | 21.00% |
Segment Information - Disaggreg
Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 68,699 | $ 120,203 | $ 140,245 | $ 199,797 |
Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 47,581 | 56,383 | 99,935 | 87,751 |
EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 11,766 | 17,474 | 19,169 | 30,368 |
Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 9,352 | 46,346 | 21,141 | 81,678 |
Supercomputing | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 50,832 | 101,771 | 101,139 | 157,637 |
Supercomputing | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 36,860 | 44,318 | 72,542 | 64,927 |
Supercomputing | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 9,082 | 14,148 | 14,064 | 22,806 |
Supercomputing | Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 4,890 | 43,305 | 14,533 | 69,904 |
Storage and Data Management | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 10,665 | 12,961 | 27,751 | 33,714 |
Storage and Data Management | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 6,288 | 6,876 | 19,346 | 14,914 |
Storage and Data Management | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 2,613 | 3,268 | 4,753 | 7,444 |
Storage and Data Management | Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 1,764 | 2,817 | 3,652 | 11,356 |
Maintenance and Support | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 36,197 | 34,294 | 71,524 | 67,128 |
Maintenance and Support | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 22,376 | 21,117 | 43,730 | 41,663 |
Maintenance and Support | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 7,388 | 7,752 | 14,448 | 15,241 |
Maintenance and Support | Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 6,433 | 5,425 | 13,346 | 10,224 |
Engineering Services and Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 7,202 | 5,471 | 11,355 | 8,446 |
Engineering Services and Other | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 4,433 | 5,189 | 8,047 | 7,910 |
Engineering Services and Other | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 71 | 58 | 352 | 118 |
Engineering Services and Other | Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 2,698 | 224 | 2,956 | 418 |
Elimination of inter-segment revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | (36,197) | (34,294) | (71,524) | (67,128) |
Elimination of inter-segment revenue | Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | (22,376) | (21,117) | (43,730) | (41,663) |
Elimination of inter-segment revenue | EMEA | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | (7,388) | (7,752) | (14,448) | (15,241) |
Elimination of inter-segment revenue | Asia Pacific & Japan | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ (6,433) | $ (5,425) | $ (13,346) | $ (10,224) |
Revenue | JAPAN | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration Risk (as a percent) | 14.00% | 17.00% |
Segment Information - Business
Segment Information - Business Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Total gross profit | $ 23,947 | $ 37,807 | $ 49,971 | $ 64,759 |
Supercomputing | ||||
Segment Reporting Information [Line Items] | ||||
Total gross profit | 16,010 | 29,051 | 32,555 | 47,172 |
Storage and Data Management | ||||
Segment Reporting Information [Line Items] | ||||
Total gross profit | 4,324 | 5,316 | 11,503 | 12,349 |
Maintenance and Support | ||||
Segment Reporting Information [Line Items] | ||||
Total gross profit | 15,910 | 17,871 | 32,583 | 32,946 |
Engineering Services and Other | ||||
Segment Reporting Information [Line Items] | ||||
Total gross profit | 3,613 | 3,440 | 5,913 | 5,238 |
Elimination of inter-segment revenue | ||||
Segment Reporting Information [Line Items] | ||||
Total gross profit | $ (15,910) | $ (17,871) | $ (32,583) | $ (32,946) |
Segment Information - Geographi
Segment Information - Geographical Segment Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019USD ($)Customers | Jun. 30, 2018USD ($)Customers | Jun. 30, 2019USD ($)Customers | Jun. 30, 2018USD ($)Customers | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | $ 68,699 | $ 120,203 | $ 140,245 | $ 199,797 |
Government Contracts Concentration Risk | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | $ 25,600 | $ 42,500 | $ 61,600 | $ 61,400 |
Revenue | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, number of customers | Customers | 1 | 1 | 1 | 1 |
Revenue | JAPAN | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration Risk (as a percent) | 14.00% | 17.00% | ||
Total revenue | JAPAN | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration Risk (as a percent) | 26.00% |
Segment Information - Narrative
Segment Information - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting [Abstract] | ||||
Increase (Decrease) in Revenue | $ 0.1 | $ 0.6 | $ (0.1) | $ 1.1 |