Sphere 3D Reports Third Quarter 2015 Financial Results
November 16 2015 - 6:32AM
Sphere 3D Corp. (NASDAQ:ANY), a containerization, virtualization,
and data management solutions provider, today reported financial
results for its third quarter ended September 30, 2015.
"In the third quarter, we have made significant steps in the
market toward scaling and driving broad adoption of our Enterprise
Cloud infrastructure offerings," said Eric Kelly, CEO of Sphere 3D.
"We sequentially grew revenue despite some partner headwinds. We
believe we have positioned the company to drive revenue growth as
enterprises shift to using ANY device, on ANY network, on ANY
cloud, ANYwhere through our unique cloud-ready technologies like
the Glassware 2.0™ platform and SnapServer® / SnapCloud™
products."
Third Quarter 2015 Financial Results:
The following financial results for the third quarter of 2015
include contribution from the Overland Storage acquisition for the
full three months, and the contribution from the Imation RDX
acquisition since August 10th, 2015, which contribution is not
reflected in the comparative results for the third quarter of
2014.
- Net revenue for the third quarter of 2015 was $18.8 million,
compared to $1.5 million for the third quarter of 2014.
- Product revenue for the third quarter of 2015 was $16.1
million, compared to $1.3 million for the third quarter of 2014.
- Disk systems revenue was $10.1 million, compared to $1.3
million for the third quarter of 2014.
- Tape archive product revenue was $6.0 million compared to none
for the third quarter of 2014.
- Service revenue was $2.7 million, compared to $0.2 million in
the third quarter of 2014.
- Gross margin for the third quarter of 2015 was 29.2%, compared
to 37.1% for the third quarter of 2014. Non-GAAP gross margin
for the third quarter of 2015 was 33%. Our methodology for
determining non-GAAP gross margin, which excludes the effect of
intangible asset amortization from gross profit, is described in
the Use of GAAP and Non-GAAP Financial Measures section of this
announcement. See also "Non-GAAP Reconciliations" below.
- Operating expenses for the third quarter of 2015 were $14.5
million, compared to $4.0 million for the third quarter of 2014.
- Share-based compensation expense for the third quarter of 2015
was $2.7 million, compared to $0.8 million for the third quarter of
2014. Depreciation and amortization was $1.8 million in third
quarter of 2015, compared to $1.1 million in the third quarter of
2014.
- Net loss for the third quarter of 2015 was $10.2 million, or a
net loss of $0.26 per share, compared to a net loss of $3.5
million, or a net loss of $0.15 per share, in the third quarter of
2014.
- Adjusted EBITDA for the third quarter of 2015 was a net loss of
$4.6 million, or a net loss of $0.12 per share, based on 38.7
million weighted average shares outstanding, compared to adjusted
EBITDA net loss of $0.9 million, or net loss of $0.04 per share
based on 23.6 million weighted average shares outstanding for the
third quarter of 2014. Adjusted EBITDA is a non-GAAP measure
presented as net loss before interest expense, income taxes,
acquisition costs, depreciation and amortization and share-based
compensation. For additional information regarding the
non-GAAP financial measures discussed in this release, please see
"Use of GAAP and Non-GAAP Financial Measures" and "Non-GAAP
Reconciliations" below.
- Cash and cash equivalents at September 30, 2015 were $5.1
million, compared to $4.3 million at December 31, 2014. The
Company had $10.3 million outstanding under its credit facilities
($5.0 million of which is from related parties) and $19.5 million
outstanding under its notes from related parties as of September
30, 2015.
Recent Corporate and Business Highlights:
- As was announced on October 15, 2015, Sphere 3D's Glassware 2.0
powered Exosphere™ on Microsoft Azure, which is its scalable and
secure cloud application delivery solution targeted for 10,000
users and above, is now available through direct solutions sales
engagement. Also, G-Series Cloud on Azure (powered by
Glassware 2.0) is on track for general availability in the Azure
Marketplace by the end of November 2015.
- On October 15, 2015, Sphere 3D co-hosted with Microsoft a
Worldwide Infopedia webinar where Exosphere, G-Series, and
SnapCloud offerings on Azure were presented. Webinar attendees
included Microsoft partners, Microsoft salespeople, and end-user
customers.
- In October 2015, two planned product deployments over the next
three years were announced: 1) Sphere 3D signed a master
agreement with iPro to deploy virtualization solutions to over 200
healthcare locations, representing an estimated $13 million over
three years if fully implemented, and 2) Sphere 3D
partnered with the Region 6 Education Services Center in Texas to
offer technology modernization capabilities to over 8,000 public
schools, representing an estimated $20 million in revenue from the
deployment over the next three years.
- In October 2015, Sphere 3D launched a leasing program to give
partners an additional purchasing alternative to offer to its
customer base. The program applies to the entire portfolio of
Sphere 3D's on-premise products and is available to Sphere 3D
channel partners in North America.
- In November, 2015, Sphere 3D reported that its Board of
Directors granted inducement restricted stock units to a total of
11 individuals, for an aggregate 458,000 shares of its common
stock. These grants vest over a multi-year vesting period,
subject to the grantee's continued employment with the Company
through the applicable vesting date. The RSUs were granted as
an inducement material to employment in accordance with NASDAQ
Listing Rule 5635 (c)(4).
Use of GAAP and Non-GAAP Financial
Measures:
To supplement Sphere 3D's consolidated financial statements
presented in accordance with GAAP, the Company uses Adjusted
EBITDA, a non-GAAP financial measure that excludes from the
statement of operations the effects of interest expense, income
taxes, acquisition costs, depreciation and amortization and
share-based compensation. The Company also uses Non-GAAP gross
profit and Non-GAAP gross-margin, non-GAAP financial measures that
exclude the effect of intangible asset amortization. Sphere 3D uses
the above non-GAAP financial measures internally to understand,
manage and evaluate the business. Management believes it is useful
for itself and investors to review, as applicable, both GAAP
information and the non-GAAP measures in order to assess the
performance of continuing operations and for planning and
forecasting in future periods. The presentation of these non-GAAP
measures is intended to provide investors with an understanding of
the Company's operational results and trends that enables them to
analyze the base financial and operating performance and facilitate
period-to-period comparisons and analysis of operational trends.
Sphere 3D believes the presentation of these non-GAAP financial
measures is useful to investors in allowing for greater
transparency with respect to supplemental information used by
management in its financial and operational
decision-making. Non-GAAP financial measures should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered substitutes for or superior to GAAP
results. In addition, our non-GAAP financial measures may not be
comparable to similarly titled measures utilized by other companies
since such other companies may not calculate such measures in the
same manner as we do.
Investors are encouraged to review the reconciliation of these
non-GAAP financial measures to the most comparable GAAP measures,
which are provided in the attached table after the text of this
release.
Investor Conference Call:
Sphere 3D will host an investor conference call today at 8:30
a.m. EST (5:30 a.m. PST) to discuss the Company's 2015 third
quarter financial results. To access the call, dial (844)
268-1747 (Toll Free) or (918) 559-5655 (International) and give the
participant pass code 66959540. Participants are asked to call
the assigned number approximately 10 minutes before the conference
call begins. In addition, a live and archived webcast of the
conference call will be available at www.sphere3d.com in the
Investor Relations section. A replay of the conference call
will also be available via telephone by dialing (855) 859-2056
(Toll Free U.S. and Canada) or +1 (404) 537-3406 (International)
and entering replay access code 66959540. The replay will be
available beginning approximately two hours after the call and will
remain available for one week.
About Sphere 3D
Sphere 3D Corp. (NASDAQ:ANY) delivers containerization and
virtualization technologies along with data management products
that enable workload-optimized solutions. We achieve this through a
combination of containerized applications, virtual desktops,
virtual storage and physical hyper-converged platforms. Sphere 3D's
value proposition is simple and direct—we allow organizations to
deploy a combination of public, private or hybrid cloud strategies
while backing them up with state of the art storage
solutions. Sphere 3D, along with its wholly-owned subsidiaries
Overland Storage and Tandberg Data, has a strong portfolio of
brands including Glassware 2.0™, SnapCLOUD™, SnapScale®,
SnapServer®, V3, RDX®, and NEO®. For more information, visit
www.sphere3d.com.
Safe Harbor Statement
This press release contains forward-looking statements that
involve risks, uncertainties, and assumptions that are difficult to
predict. Actual results and the timing of events could differ
materially from those anticipated in such forward-looking
statements as a result of risks and uncertainties including,
without limitation, unforeseen changes in the course of Sphere 3D's
business or the business of its wholly-owned subsidiaries,
including, without limitation, Overland Storage and Tandberg Data;
any increase in Sphere 3D's cash needs or our inability to obtain
additional debt or equity financing; market adoption and
performance of our products; the level of success of our
collaborations and business partnerships; possible actions by
customers, partners, suppliers, competitors or regulatory
authorities; and other risks detailed from time to time in Sphere
3D's periodic reports contained in our Annual Information Form and
other filings with Canadian securities regulators (www.sedar.com)
and in prior periodic reports filed with the United States
Securities and Exchange Commission (www.sec.gov). Sphere 3D
undertakes no obligation to update any forward-looking statement,
whether written or oral, that may be made from time to time,
whether as a result of new information, future developments or
otherwise, except as required by law.
SPHERE 3D
CORP. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September
30, |
September
30, |
|
2015 |
2014 |
2015 |
2014 |
|
(Unaudited) |
(Unaudited) |
Net revenue |
$ 18,796 |
$ 1,484 |
$ 57,296 |
$ 4,002 |
Cost of revenue |
13,299 |
933 |
40,053 |
2,228 |
Gross profit |
5,497 |
551 |
17,243 |
1,774 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Sales and marketing |
6,145 |
1,217 |
17,255 |
2,302 |
Research and development |
2,423 |
-- |
7,337 |
-- |
General and administrative |
5,926 |
2,810 |
17,852 |
6,630 |
|
14,494 |
4,027 |
42,444 |
8,932 |
Loss from operations |
(8,997) |
(3,476) |
(25,201) |
(7,158) |
Interest expense - related party |
(798) |
-- |
(2,116) |
-- |
Interest expense |
(89) |
(97) |
(250) |
(214) |
Other income (expense), net |
(348) |
117 |
(882) |
87 |
Loss before income taxes |
(10,232) |
(3,456) |
(28,449) |
(7,285) |
(Benefit from) provision for income
taxes |
(2) |
-- |
179 |
-- |
Net loss |
$ (10,230) |
$ (3,456) |
$ (28,628) |
$ (7,285) |
|
|
|
|
|
Net loss per share: |
|
|
|
|
Basic and diluted |
$ (0.26) |
$ (0.15) |
$ (0.78) |
$ (0.32) |
|
|
|
|
|
Shares used in computing net loss per
share: |
|
|
|
|
Basic and diluted |
38,683 |
23,567 |
36,540 |
22,880 |
|
SPHERE 3D
CORP. |
SELECTED BALANCE SHEETS
INFORMATION |
(In
thousands) |
|
|
|
|
September 30, |
December 31, |
|
2015 |
2014 |
|
(Unaudited) |
(Unaudited) |
ASSETS |
|
|
Cash and cash equivalents |
$ 5,109 |
$ 4,258 |
Accounts receivable |
11,943 |
15,488 |
Inventories |
11,170 |
9,936 |
Other current assets |
2,986 |
2,457 |
Total current assets |
31,208 |
32,139 |
Property and equipment, net |
4,227 |
4,427 |
Intangible assets, net |
66,289 |
73,271 |
Goodwill |
41,755 |
38,821 |
Other assets |
492 |
605 |
Total assets |
$ 143,971 |
$ 149,263 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
Current liabilities |
$ 38,494 |
$ 37,051 |
Long-term debt — related party |
19,500 |
19,500 |
Long-term deferred tax liabilities |
4,332 |
4,387 |
Other long-term liabilities |
2,550 |
3,185 |
Shareholders' equity |
79,095 |
85,140 |
Total liabilities and
equity |
$ 143,971 |
$ 149,263 |
|
|
|
|
SPHERE 3D
CORP. |
NON-GAAP
RECONCILIATIONS |
(In thousands except
per share data) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September
30, |
September
30, |
|
2015 |
2014 |
2015 |
2014 |
|
(Unaudited) |
(Unaudited) |
|
|
|
|
|
Revenue |
$ 18,796 |
$ 1,484 |
$ 57,296 |
$ 4,002 |
|
|
|
|
|
Gross Profit - GAAP |
$ 5,497 |
$ 551 |
$ 17,243 |
$ 1,774 |
Intangible asset amortization |
704 |
-- |
1,961 |
-- |
Gross Profit - Non -GAAP |
$ 6,201 |
$ 551 |
$ 19,204 |
$ 1,774 |
|
|
|
|
|
Gross Margin Percentages |
|
|
|
|
GAAP |
29.2% |
37.1% |
30.1% |
44.3% |
Non-GAAP |
33.0% |
37.1% |
33.5% |
44.3% |
|
|
|
|
|
Net loss |
$ (10,230) |
$ (3,456) |
$ (28,628) |
$ (7,285) |
Less: |
|
|
|
|
Interest |
887 |
97 |
2,366 |
214 |
Tax |
(2) |
-- |
179 |
-- |
Acquisition costs |
218 |
530 |
218 |
858 |
Depreciation and amortization |
1,809 |
1,094 |
5,737 |
2,326 |
Share-based compensation |
2,695 |
792 |
4,017 |
2,595 |
Adjusted EBITDA |
$ (4,623) |
$ (943) |
$ (16,111) |
$ (1,292) |
|
|
|
|
|
Net loss per share: |
|
|
|
|
Basic and diluted |
$ (0.26) |
$ (0.15) |
$ (0.78) |
$ (0.32) |
|
|
|
|
|
Adjusted Net loss per share: |
|
|
|
|
Basic and diluted |
$ (0.12) |
$ (0.04) |
$ (0.44) |
$ (0.06) |
|
|
|
|
|
Shares used in computing net loss and
adjusted net loss per share: |
|
|
|
|
Basic and diluted |
38,683 |
23,567 |
36,540 |
22,880 |
Non-GAAP Financial Measures:
To supplement Sphere 3D's consolidated financial statements
presented in accordance with GAAP, the Company uses non-GAAP
financial measures that exclude from the statement of operations
the effects of interest expense, income taxes, depreciation and
amortization, acquisition costs and share-based compensation. These
non-GAAP financial measures are non-GAAP gross margin and adjusted
EBITDA. Sphere 3D uses the above non-GAAP financial measures
internally to understand, manage and evaluate the business.
Management believes it is useful for itself and investors to
review, as applicable, both GAAP information and the non-GAAP
measures in order to assess the performance of continuing
operations and for planning and forecasting in future periods. The
presentation of these non-GAAP measures is intended to provide
investors with an understanding of the Company's operational
results and trends that enables them to analyze the base financial
and operating performance and facilitate period-to-period
comparisons and analysis of operational trends. Sphere 3D believes
the presentation of these non-GAAP financial measures is useful to
investors in allowing for greater transparency with respect to
supplemental information used by management in its financial and
operational decision-making. Non-GAAP financial measures should be
considered in addition to results prepared in accordance with GAAP,
but should not be considered substitutes for or superior to GAAP
results. In addition, our non-GAAP financial measures may not be
comparable to similarly titled measures utilized by other companies
since such other companies may not calculate such measures in the
same manner as we do.
CONTACT: Investor Contact:
The Blueshirt Group
Mike Bishop
Tel: +1 415-217-4968
mike@blueshirtgroup.com
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