Sphere 3D Corp. (NASDAQ:ANY), a containerization, virtualization,
and data management solutions provider, today reported financial
results for its first quarter ended March 31, 2017.
“This quarter we continued to see the results from the strategic
initiatives we implemented in the second half of 2016,” said Eric
Kelly, chairman and chief executive officer of Sphere 3D.
“Through the restructuring and execution on the virtualization
strategy, specifically through our acquisition of HVE and UCX, we
are able to deliver new large deals for our converged and
virtualization product offerings. Meanwhile, our storage products
continued to perform well in the market in the first quarter. We
continue to make progress towards positioning the Company for
revenue growth and financial stability.”
First Quarter 2017 Financial Results:
Financial Highlights |
Three Months Ended |
(in millions) |
March 31, 2017 |
March 31, 2016 |
|
|
|
Net revenue |
$21.7 |
$19.6 |
Gross profit |
$6.8 |
$6.0 |
Gross margin (%) |
31.4% |
30.4% |
Adjusted EBITDA (1) |
$(1.0) |
$(3.1) |
Net loss |
$(7.8) |
$(8.1) |
(1) Non-Gaap measure as defined below. See the “Use of GAAP and
Non-GAAP Financial Measures” and “Non-GAAP Reconciliations”
sections of this announcement below.
- Net revenue for the first quarter of 2017 was $21.7 million,
compared to $19.6 million for the first quarter of 2016.
- Product revenue for the first quarter of 2017 was $19.4
million, compared to $17.3 million for the first quarter of 2016.
- Disk systems revenue was $15.0 million, compared to $12.2
million for the first quarter of 2016. Disk systems is defined as
RDX, SnapServer family, virtual desktop infrastructure, and
Glassware derived products.
- Tape archive product revenue was $4.4 million compared to $5.1
million for the first quarter of 2016.
- Service revenue was $2.3 million in the first quarter of 2017
and the first quarter of 2016.
- Gross margin for the first quarter of 2017 was 31.4%, compared
to 30.4% for the first quarter of 2016. Non-GAAP gross margin
for the first quarter of 2017 was 34.0%, compared to 33.3% for the
first quarter of 2016. 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 first quarter of 2017 were $11.6
million, compared to $13.8 million for the first quarter of
2016.
- Share-based compensation expense for the first quarter of 2017
was $2.2 million, compared to $2.6 million for the first quarter of
2016. Depreciation and amortization was $1.5 million in the first
quarter of 2017, compared to $1.6 million in the first quarter of
2016.
- Adjusted EBITDA for the first quarter of 2017 was a net loss of
$966,000, or a net loss of $0.01 per share, based on 77.9 million
weighted average shares outstanding, compared to adjusted EBITDA
net loss of $3.1 million, or net loss of $0.07 per share based on
45.7 million weighted average shares outstanding for the first
quarter of 2016. Adjusted EBITDA is a non-GAAP measure presented as
net loss before interest expense, income taxes, acquisition costs,
depreciation and amortization, share-based compensation, loss on
revaluation of investment, and warrant revaluation gain. 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 first quarter of 2017 was $7.8 million, or a
net loss of $0.10 per share, compared to a net loss of $8.1
million, or a net loss of $0.18 per share, in the first quarter of
2016.
- The preceding financial results for the first quarter of 2017
include contribution from our acquisition in January 2017.
Board Appointment:
Today the Company simultaneously announced the appointment of
Duncan McEwan to its board of directors, effective as of May 10,
2017. Mr. McEwan currently serves as president of Diligent
Inc., a consulting company he founded in 1991 specializing in
M&A and strategic advice for technology-based
clients.
“We’d like to welcome Duncan to our board of directors.
Duncan’s experience working with technology companies, specifically
cloud-based software, will augment the strength of our board and
his insight will be instrumental as the Company works to drive
growth,” said Mr. Kelly.
Previously, Mr. McEwan was Executive Vice President and Chief
Strategy Officer of Call-Net Enterprises Inc., a provider of
long-distance telephone services until it merged into Rogers
Communication Inc. (2004-2005); President and Chief Operating
Officer of Sprint Canada Inc., an integrated, national
telecommunications provider (2001-2004); Chief Executive Officer of
Northpoint Canada Communications, a provider of high-speed data and
Internet (DSL) lines (2000-2001); President and Chief Executive
Officer of Canadian Satellite Communications (Cancom)
(1996-2000). Mr. McEwan has been Chairman of the Board of
Geminare, Inc. since 2010, an emerging global leader in business
continuity and cloud-based software systems, and has previously
served on a number of other public and private company boards. Mr.
McEwan is a graduate of the University of Toronto.
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,
share-based compensation, loss on revaluation of investment, and
warrant revaluation gain. 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, the Company’s 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 does the Company.
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 2017 first
quarter financial results. To access the call, dial (844)
268-1747 (Toll Free) or (918) 559-5655 (International) and give the
participant pass code 7884183. 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 7884183. 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 containerization, virtualization,
and data management solutions via hybrid cloud, cloud and
on-premises implementations through its global reseller network and
professional services organization. Sphere 3D, along with its
wholly owned subsidiaries Overland Storage and Tandberg
Data, have a strong portfolio of brands, including HVE
ConneXions and UCX ConneXions, dedicated to helping
customers achieve their IT goals. 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 the
decision by our customers to continue to purchase our products and
services; 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; our ability to successfully
integrate the UCX and HVE ConneXions business with Sphere 3D's
other businesses; our ability to regain compliance with the
NASDAQ minimum closing bid price requirement between now and July
31, 2017; our inability to take other actions to regain compliance
with the NASDAQ minimum closing bid price requirement; our ability
to maintain compliance with other NASDAQ Capital Market listing
requirements; 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 |
|
|
|
March 31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
(Unaudited) |
|
Net revenue |
$ |
21,738 |
|
$ |
19,619 |
|
Cost of revenue |
|
14,907 |
|
|
13,663 |
|
Gross profit |
|
6,831 |
|
|
5,956 |
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
Sales and marketing |
|
4,797 |
|
|
6,053 |
|
Research and development |
|
1,771 |
|
|
2,442 |
|
General and administrative |
|
4,989 |
|
|
5,311 |
|
|
|
11,557 |
|
|
13,806 |
|
Loss from
operations |
|
(4,726 |
) |
|
(7,850 |
) |
Interest expense |
|
(1,190 |
) |
|
(112 |
) |
Interest expense - related party |
|
(660 |
) |
|
(928 |
) |
Other (expense) income, net |
|
(927 |
) |
|
959 |
|
Loss before income
taxes |
|
(7,503 |
) |
|
(7,931 |
) |
Provision for
taxes |
|
306 |
|
|
138 |
|
Net loss |
$ |
(7,809 |
) |
$ |
(8,069 |
) |
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
Basic and diluted |
$ |
(0.10 |
) |
$ |
(0.18 |
) |
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
net loss per
share: |
|
|
|
|
|
|
Basic and diluted |
|
77,942 |
|
|
45,748 |
|
|
|
SPHERE 3D CORP. |
|
SELECTED BALANCE SHEETS
INFORMATION |
|
(In thousands) |
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
6,904 |
|
$ |
5,056 |
|
Accounts
receivable |
|
13,013 |
|
|
11,591 |
|
Inventories |
|
10,728 |
|
|
10,002 |
|
Other current
assets |
|
2,780 |
|
|
3,621 |
|
Total current assets |
|
33,425 |
|
|
30,270 |
|
Property and equipment,
net |
|
2,893 |
|
|
3,058 |
|
Intangible assets,
net |
|
47,723 |
|
|
47,728 |
|
Goodwill |
|
11,590 |
|
|
11,068 |
|
Other assets |
|
671 |
|
|
432 |
|
Total assets |
$ |
96,302 |
|
$ |
92,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Current
liabilities |
$ |
69,082 |
|
$ |
42,854 |
|
Long-term debt -
related party, net |
|
- |
|
|
24,401 |
|
Long-term deferred tax
liabilities |
|
3,110 |
|
|
3,100 |
|
Other long-term
liabilities |
|
4,631 |
|
|
1,755 |
|
Shareholders'
equity |
|
19,479 |
|
|
20,446 |
|
Total liabilities and equity |
$ |
96,302 |
|
$ |
92,556 |
|
|
|
SPHERE 3D CORP. |
|
NON-GAAP RECONCILIATIONS |
|
(In thousands except per share
data) |
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Revenue |
$ |
21,738 |
|
|
$ |
19,619 |
|
|
|
|
|
|
|
|
|
Gross Profit -
GAAP |
$ |
6,831 |
|
|
$ |
5,956 |
|
|
Intangible asset
amortization |
|
566 |
|
|
|
584 |
|
|
Gross Profit - Non
-GAAP |
$ |
7,397 |
|
|
$ |
6,540 |
|
|
|
|
|
|
|
|
|
Gross Margin
Percentages |
|
|
|
|
|
|
GAAP |
|
31.4 |
% |
|
|
30.4 |
% |
|
Non-GAAP |
|
34.0 |
% |
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
Net loss |
$ |
(7,809 |
) |
|
$ |
(8,069 |
) |
|
Less: |
|
|
|
|
|
|
Interest |
|
1,850 |
|
|
|
1,040 |
|
|
Provision for taxes |
|
306 |
|
|
|
138 |
|
|
Acquisition costs |
|
34 |
|
|
|
- |
|
|
Depreciation and amortization |
|
1,526 |
|
|
|
1,576 |
|
|
Share-based compensation |
|
2,169 |
|
|
|
2,562 |
|
|
Loss on revaluation of investment |
|
1,145 |
|
|
|
- |
|
|
Warrant revaluation gain |
|
(187 |
) |
|
|
(326 |
) |
|
Adjusted EBITDA |
$ |
(966 |
) |
|
$ |
(3,079 |
) |
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
Basic and diluted |
$ |
(0.10 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
Adjusted net loss per
share: |
|
|
|
|
|
|
Basic and diluted |
$ |
(0.01 |
) |
|
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
net loss
and adjusted EBITDA per share: |
|
|
|
|
|
|
Basic and diluted |
|
77,942 |
|
|
|
45,748 |
|
|
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,
acquisition costs, depreciation and amortization, share-based
compensation, loss on revaluation of investment, 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
Lauren Sloane
Tel: +1 415-217-2632
Lauren@blueshirtgroup.com
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