Sphere 3D Reports Second Quarter Fiscal Year 2016 Financial Results
August 11 2016 - 4:07PM
Sphere 3D Corp. (NASDAQ:ANY), a containerization,
virtualization, and data management solutions provider, today
reported financial results for its second quarter ended June 30,
2016.
“Through our focus and consistent efforts to drive adoption of
our storage and virtualization technologies, Sphere3D remains
poised for growth in the second half of the year,” said Eric Kelly
chairman and chief executive officer of Sphere3D. “The
expanding pipeline combined with our initial customer engagements
provide confidence that our market strategy is enabling the company
to win marquee customers who realize the advantages of our
vertically integrated portfolio of hybrid Cloud, Cloud and
on-premise solutions.”
Second Quarter 2016 Financial Results:
- Net revenue for the second quarter of 2016 was $19.6 million,
compared to $18.4 million for the second quarter of 2015.
- Product revenue for the second quarter of 2016 was $17.5
million, compared to $15.6 million for the second quarter of
2015.
- Disk systems revenue was $11.8 million, compared to $8.6
million for the second quarter of 2015. Disk systems is
defined as RDX, SnapServer family, V3 virtual desktop
infrastructure, and Glassware-derived products.
- Tape archive revenue was $5.7 million, compared to $7.0 million
for the second quarter of 2015.
- Service revenue was $2.1 million, compared to $2.8 million for
the second quarter of 2015.
- Gross margin for the second quarter of 2016 was 29.6%, compared
to 31.5% for the second quarter of 2015. Non-GAAP gross
margin for the second quarter of 2016 was 32.6% compared to 34.9%
for the second quarter of 2015. 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 second quarter of 2016 were $13.8
million, compared to $14.4 million for the second quarter of
2015.
- Share-based compensation expense for the second quarter of 2016
was $2.1 million, compared to $0.6 million for the second quarter
of 2015. Depreciation and amortization was $1.6 million in the
second quarter of 2016, compared to $1.9 million in the second
quarter of 2015.
- Adjusted EBITDA for the second quarter of 2016 was a net loss
of $4.6 million, or an adjusted EBITDA net loss of $0.09 per share,
based on 49.4 million weighted average shares outstanding, compared
to adjusted EBITDA net loss of $5.3 million, or adjusted EBITDA net
loss of $0.15 per share, based on 35.9 million weighted average
shares outstanding for the second quarter of 2015. Adjusted EBITDA
is a non-GAAP measure presented as net loss before interest
expense, income taxes, depreciation and amortization, share-based
compensation and warrant liability revaluation. 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.
- Net loss for the second quarter of 2016 was $9.6 million, or a
net loss of $0.19 per share, compared to a net loss of $8.9
million, or a net loss of $0.25 per share, in the second quarter of
2015.
- Cash and cash equivalents at June 30,
2016 were $4.3 million. In April 2016, the Company
entered into a Credit Agreement with Opus Bank for a term loan in
the amount of $10.0 million and a credit facility in the amount of
$10.0 million. A portion of the proceeds were used for pay
off of the Company’s two credit facilities in April 2016, which
were recorded as current debt at March 31, 2016, and the remainder
of the proceeds will be used for working capital and general
business requirements. These prior credit facilities were
terminated upon repayment of the outstanding balances. In
April 2016, the Company modified its convertible note with a
related party, pursuant to which the holder made an additional
advance of $5.0 million to the Company, bringing the outstanding
balance to $24.5 million. At June 30, 2016, the Company had
$8.2 million outstanding under its credit facility, $10.0 million
outstanding under its term loan, and $24.5 million outstanding
under its convertible note from a related party.
The preceding financial results for the second quarter of 2016
include contribution from our purchase of RDX assets from Imation
in August 2015.
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, depreciation and amortization, share-based compensation and
warrant liability revaluation. 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 its business. Management believes it is useful
for itself and investors to review, as applicable, both GAAP
information and these 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 2:00
p.m. PDT (5:00 p.m. EDT) to discuss the Company’s 2016 second
quarter financial results. To access the call, dial (844)
268-1747 (Toll Free) or (918) 559-5655 (International) and give the
participant pass code 56320724. 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 56320724. The replay will be available beginning
approximately two hours after the call and will remain available
for one week.
About Sphere 3DSphere 3D Corp. (NASDAQ:ANY)
delivers data management, and desktop and application
virtualization solutions via hybrid Cloud, Cloud and on-premise
implementations through its global reseller network. Sphere
3D, along with its wholly-owned subsidiaries Overland Storage and
Tandberg Data, has a strong portfolio of brands including Glassware
2.0™, NEO®, RDX®, SnapCLOUD™, SnapScale®, SnapServer®, SnapSync™
and V3®. For more information, visit www.sphere3d.com. Follow
us on Twitter @Sphere3D, @overlandstorage, and @tandbergdata
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, our inability to comply with the covenants in
our credit facilities or to obtain additional debt or equity
financing; any increase in our future cash needs; the Company’s
ability to regain compliance with the minimum bid price requirement
of the NASDAQ Global Market; the Company’s ability to transfer the
listing of its common stock to the NASDAQ Capital Market if it is
not able to regain compliance with the NASDAQ Global Market listing
standards and its ability to maintain listing with such market;
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; 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 |
|
Six Months
Ended |
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net
revenue |
|
$ |
19,592 |
|
|
$ |
18,402 |
|
|
$ |
39,211 |
|
|
$ |
38,500 |
|
|
Cost
of revenue |
|
|
13,794 |
|
|
|
12,597 |
|
|
|
27,457 |
|
|
|
26,754 |
|
|
Gross
profit |
|
|
5,798 |
|
|
|
5,805 |
|
|
|
11,754 |
|
|
|
11,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
6,270 |
|
|
|
5,496 |
|
|
|
12,323 |
|
|
|
11,110 |
|
|
|
Research and
development |
|
|
2,266 |
|
|
|
2,724 |
|
|
|
4,708 |
|
|
|
4,914 |
|
|
|
General and
administrative |
|
|
5,289 |
|
|
|
6,133 |
|
|
|
10,600 |
|
|
|
11,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,825 |
|
|
|
14,353 |
|
|
|
27,631 |
|
|
|
27,950 |
|
|
Loss
from operations |
|
|
(8,027 |
) |
|
|
(8,548 |
) |
|
|
(15,877 |
) |
|
|
(16,204 |
) |
|
|
Interest expense
- related party |
|
|
(925 |
) |
|
|
(777 |
) |
|
|
(1,853 |
) |
|
|
(1,318 |
) |
|
|
Interest
expense |
|
|
(336 |
) |
|
|
(83 |
) |
|
|
(448 |
) |
|
|
(161 |
) |
|
|
Other income
(expense), net |
|
|
(229 |
) |
|
|
680 |
|
|
|
730 |
|
|
|
(534 |
) |
|
Loss
before income taxes |
|
|
(9,517 |
) |
|
|
(8,728 |
) |
|
|
(17,448 |
) |
|
|
(18,217 |
) |
|
Provision for taxes |
|
|
98 |
|
|
|
128 |
|
|
|
236 |
|
|
|
181 |
|
|
Net
loss |
|
$ |
(9,615 |
) |
|
$ |
(8,856 |
) |
|
$ |
(17,684 |
) |
|
$ |
(18,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share: |
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing |
|
|
|
|
|
|
|
|
|
net
loss per share: |
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
49,444 |
|
|
|
35,892 |
|
|
|
47,596 |
|
|
|
35,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SPHERE 3D
CORP. |
SELECTED BALANCE SHEETS
INFORMATION |
(In
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
(Unaudited) |
|
(Unaudited) |
ASSETS |
|
|
|
|
Cash
and cash equivalents |
|
$ |
4,324 |
|
|
$ |
8,661 |
|
Accounts receivable |
|
|
12,302 |
|
|
|
13,401 |
|
Inventories |
|
|
12,034 |
|
|
|
11,326 |
|
Other
current assets |
|
|
2,417 |
|
|
|
3,155 |
|
|
Total current
assets |
|
|
31,077 |
|
|
|
36,543 |
|
Property and equipment, net |
|
|
3,620 |
|
|
|
3,972 |
|
Intangible assets, net |
|
|
51,630 |
|
|
|
54,019 |
|
Goodwill |
|
|
44,296 |
|
|
|
44,132 |
|
Other
assets |
|
|
451 |
|
|
|
445 |
|
|
Total assets
|
|
$ |
131,074 |
|
|
$ |
139,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current liabilities |
|
$ |
23,662 |
|
|
$ |
46,397 |
|
Long-term debt — related party, net |
|
|
24,094 |
|
|
|
19,500 |
|
Long-term debt, net |
|
|
17,155 |
|
|
|
- |
|
Long-term deferred tax liabilities |
|
|
2,821 |
|
|
|
2,755 |
|
Other
long-term liabilities |
|
|
1,813 |
|
|
|
2,319 |
|
Shareholders' equity |
|
|
61,529 |
|
|
|
68,140 |
|
|
Total liabilities
and equity |
|
$ |
131,074 |
|
|
$ |
139,111 |
|
|
|
|
|
|
|
SPHERE 3D
CORP. |
|
NON-GAAP
RECONCILIATIONS |
|
(In thousands except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Six Months
Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
19,592 |
|
|
$ |
18,402 |
|
|
$ |
39,211 |
|
|
$ |
38,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit -
GAAP |
|
$ |
5,798 |
|
|
$ |
5,805 |
|
|
$ |
11,754 |
|
|
$ |
11,746 |
|
|
Intangible asset
amortization |
|
|
592 |
|
|
|
625 |
|
|
|
1,176 |
|
|
|
1,257 |
|
|
Gross Profit -
Non -GAAP |
|
$ |
6,390 |
|
|
$ |
6,430 |
|
|
$ |
12,930 |
|
|
$ |
13,003 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentages |
|
|
|
|
|
|
|
|
|
GAAP |
|
|
29.6 |
% |
|
|
31.5 |
% |
|
|
30.0 |
% |
|
|
30.5 |
% |
|
Non-GAAP |
|
|
32.6 |
% |
|
|
34.9 |
% |
|
|
33.0 |
% |
|
|
33.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(9,615 |
) |
|
$ |
(8,856 |
) |
|
$ |
(17,684 |
) |
|
$ |
(18,398 |
) |
|
Less: |
|
|
|
|
|
|
|
|
|
Interest |
|
|
1,261 |
|
|
|
860 |
|
|
|
2,301 |
|
|
|
1,479 |
|
|
Provision for taxes |
|
|
98 |
|
|
|
128 |
|
|
|
236 |
|
|
|
181 |
|
|
Depreciation and amortization |
|
|
1,578 |
|
|
|
1,935 |
|
|
|
3,154 |
|
|
|
3,928 |
|
|
Share-based compensation |
|
|
2,141 |
|
|
|
587 |
|
|
|
4,703 |
|
|
|
1,322 |
|
|
Warrant revaluation gain |
|
|
(22 |
) |
|
|
- |
|
|
|
(348 |
) |
|
|
- |
|
|
Adjusted
EBITDA |
|
$ |
(4,559 |
) |
|
$ |
(5,346 |
) |
|
$ |
(7,638 |
) |
|
$ |
(11,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net loss
per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.09 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
|
|
|
net loss and
adjusted EBITDA per share: |
|
|
|
|
|
|
|
|
|
Basic
and diluted |
|
49,444 |
|
|
|
35,892 |
|
|
|
47,596 |
|
|
|
35,450 |
|
|
|
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,
share-based compensation, and warrant revaluation gain. 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.
Investor Contact:
The Blueshirt Group
Mike Bishop
Tel: +1 415-217-4968
mike@blueshirtgroup.com
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