Sphere 3D Reports Third Quarter Fiscal Year 2017 Financial Results
November 09 2017 - 4:05PM
Sphere 3D Corp. (NASDAQ:ANY), a containerization,
virtualization, and data management solutions provider, today
reported financial results for its third quarter ended September
30, 2017.
“This quarter we grew revenue by 17% year-over-year and 12%
sequentially from the previous quarter; both signs of the strategic
and financial progress we have made,” said Eric Kelly, chairman and
chief executive officer of Sphere3D. “In addition, I am proud
of the progress we have made toward the goal of achieving
profitability, evident by the improvement in our adjusted EBITDA of
84% year-over-year and 77% sequentially from the previous
quarter. These solid financial results are driven by our
improved business operations and the growing market recognition of
both our virtualization and storage products.”
Third Quarter 2017 Financial Results:
Financial Highlights |
Three Months Ended |
Three Months Ended |
Nine Months Ended |
Nine Months Ended |
(in millions) |
September 30, 2017 |
September 30, 2016 |
September 30, 2017 |
September 30, 2016 |
|
|
|
|
|
Net revenue |
$21.7 |
$18.5 |
$62.9 |
$57.7 |
Gross profit |
$6.7 |
$5.2 |
$19.0 |
$16.9 |
Gross margin (%) |
31.1% |
28.0% |
30.2% |
29.3% |
Adjusted EBITDA (1) |
$(0.6) |
$(4.0) |
$(4.2) |
$(11.7) |
Net loss |
$(3.5) |
$(43.3) |
$(18.8) |
$(61.0) |
(1)
Non-GAAP financial 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 third quarter of 2017 was $21.7 million,
compared to $18.5 million for the third quarter of 2016, which
represented a 17% year-over-year growth in revenue.
- Product revenue for the third quarter of 2017 was $19.6
million, compared to $16.5 million for the third quarter of 2016,
representing a 19% year-over-year growth. •
Disk systems revenue was $14.1 million, compared to $11.1
million for the third quarter of 2016. Disk systems is defined as
RDX, SnapServer family, virtual desktop infrastructure, and
Glassware derived products. • Tape archive
product revenue was $5.5 million, compared to $5.4 million for the
third quarter of 2016.
- Service revenue was $2.1 million, compared to $2.0 million in
the third quarter of 2016, representing a 5% year-over year
growth.
- Gross margin for the third quarter of 2017 was 31.1%, compared
to 28.0% for the third quarter of 2016. Non-GAAP gross margin
for the third quarter of 2017 was 33.7%, compared to 31.1% for the
third 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 third quarter of 2017 were $11.2
million, compared to $47.8 million for the third quarter of
2016. Included in the operating expenses for the third
quarter of 2016 were $34.4 million in impairment of goodwill and
acquired intangible assets.
- Share-based compensation expense for the third quarter of 2017
was $2.0 million, compared to $2.7 million for the third quarter of
2016. Depreciation and amortization was $1.5 million in the third
quarter of 2017 and 2016.
- Net loss for the third quarter of 2017 was $3.5 million, or a
net loss of $0.59 per share, compared to a net loss of $43.3
million, or a net loss of $21.10 per share, in the third quarter of
2016.
- Adjusted EBITDA for the third quarter of 2017 was a net loss of
$0.6 million, or a net loss of $0.11 per share, based on 5.9
million weighted average shares outstanding, compared to adjusted
EBITDA net loss of $4.0 million, or net loss of $1.96 per share
based on 2.1 million weighted average shares outstanding for the
third quarter of 2016. 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.
- The preceding financial results for the third quarter of 2017
include contribution from our acquisition in January 2017.
Nine Months Ended September 30, 2017 Financial
Results:
- Net revenue for the first nine months of 2017 was $62.9
million, compared to $57.7 million for the first nine months of
2016 which represented a 9% year-over-year growth in revenue.
- Product revenue for the first nine months of 2017 was $56.2
million, compared to $51.2 million for the first nine months of
2016, representing a 10% year-over-year growth. •
Disk systems revenue was $40.6 million, compared to $35.1
million for the first nine months of 2016. Disk systems is defined
as RDX, SnapServer family, virtual desktop infrastructure, and
Glassware derived products. • Tape archive
product revenue was $15.6 million compared to $16.1 million for the
first nine months of 2016.
- Service revenue for the first nine months was $6.7 million,
compared to $6.5 million in the first nine months of 2016,
representing a 3% year-over-year growth.
- Gross margin for the first nine months of 2017 was 30.2%,
compared to 29.3% for the first nine months of 2016. Non-GAAP
gross margin for the first nine months of 2017 was 32.9%, compared
to 32.4% for the first nine months of 2016.
- Operating expenses for the first nine months of 2017 were $34.3
million, compared to $75.4 million for the first nine months of
2016. Included in the operating expenses for the first nine months
of 2016 were $34.4 million in impairment of goodwill and acquired
intangible assets.
- Share-based compensation expense for the first nine months of
2017 was $5.6 million, compared to $7.4 million for the first nine
months of 2016. Depreciation and amortization was $4.6 million in
the first nine months of 2017, compared to $4.7 million in the
first nine months of 2016.
- Net loss for the first nine months of 2017 was $18.8 million,
or a net loss of $4.28 per share, compared to a net loss of $61.0
million, or a net loss of $31.22 per share, in the first nine
months of 2016.
- Adjusted EBITDA for the first nine months of 2017 was a net
loss of $4.2 million, or a net loss of $0.96 per share, based on
4.4 million weighted average shares outstanding, compared to
adjusted EBITDA net loss of $11.7 million, or net loss of $5.97 per
share based on 2.0 million weighted average shares outstanding for
the first nine months of 2016. 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.
- The preceding financial results for the first nine months of
2017 include contribution from our acquisition in January
2017.
Shares outstanding and per share numbers contained in this
release reflect our 1-for-25 reverse share split that was effected
in July 2017.
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, impairment of goodwill and acquired intangible assets,
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, 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.
PST (5:00 p.m. EST) to discuss the Company’s 2017 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 7799158. 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 7799158. 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-premise implementations through its global reseller network and
professional services organization. Sphere 3D, along
with its wholly owned subsidiaries Overland Storage,
and Tandberg Data, has a strong portfolio of brands,
including Overland-Tandberg, 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, @HVEconneXions and @ovltb
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 obtain additional debt or
equity financing or to refinance our debt; any increase in our cash
needs; the Company’s ability to maintain listing with the NASDAQ
Capital Market; our ability to successfully integrate the UCX and
HVE ConneXions business with Sphere 3D’s other businesses;
unforeseen changes in the course of our business or the business of
our 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 our 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, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
Net
revenue |
|
$ |
21,679 |
|
|
$ |
18,459 |
|
|
$ |
62,855 |
|
|
$ |
57,670 |
|
Cost
of revenue |
|
|
14,946 |
|
|
|
13,289 |
|
|
|
43,904 |
|
|
|
40,746 |
|
Gross
profit |
|
|
6,733 |
|
|
|
5,170 |
|
|
|
18,951 |
|
|
|
16,924 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
4,586 |
|
|
|
5,259 |
|
|
|
14,090 |
|
|
|
17,582 |
|
|
Research and
development |
|
|
1,793 |
|
|
|
2,222 |
|
|
|
5,460 |
|
|
|
6,930 |
|
|
General and
administrative |
|
|
4,840 |
|
|
|
5,874 |
|
|
|
14,743 |
|
|
|
16,474 |
|
|
Impairment of
goodwill and acquired intangible assets |
|
|
- |
|
|
|
34,398 |
|
|
|
- |
|
|
|
34,398 |
|
|
|
|
|
11,219 |
|
|
|
47,753 |
|
|
|
34,293 |
|
|
|
75,384 |
|
Loss
from operations |
|
|
(4,486 |
) |
|
|
(42,583 |
) |
|
|
(15,342 |
) |
|
|
(58,460 |
) |
|
Interest
expense |
|
|
(519 |
) |
|
|
(322 |
) |
|
|
(2,770 |
) |
|
|
(770 |
) |
|
Interest expense
- related party |
|
|
(614 |
) |
|
|
(572 |
) |
|
|
(1,912 |
) |
|
|
(2,425 |
) |
|
Other income
(expense), net |
|
|
2,642 |
|
|
|
(104 |
) |
|
|
2,223 |
|
|
|
626 |
|
Loss
before income taxes |
|
|
(2,977 |
) |
|
|
(43,581 |
) |
|
|
(17,801 |
) |
|
|
(61,029 |
) |
Provision for (benefit from) income taxes |
|
|
504 |
|
|
|
(289 |
) |
|
|
1,002 |
|
|
|
(53 |
) |
Net
loss |
|
$ |
(3,481 |
) |
|
$ |
(43,292 |
) |
|
$ |
(18,803 |
) |
|
$ |
(60,976 |
) |
|
|
|
|
|
|
|
|
|
|
Net
loss per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.59 |
) |
|
$ |
(21.10 |
) |
|
$ |
(4.28 |
) |
|
$ |
(31.22 |
) |
|
|
|
|
|
|
|
|
|
|
Shares used in computing |
|
|
|
|
|
|
|
|
net
loss per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
5,901 |
|
|
|
2,052 |
|
|
|
4,396 |
|
|
|
1,953 |
|
|
|
|
|
|
|
|
|
|
|
SPHERE 3D
CORP. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
2017 |
|
2016 |
|
|
|
(Unaudited) |
|
(Unaudited) |
ASSETS |
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,866 |
|
$ |
5,056 |
Accounts receivable |
|
|
13,063 |
|
|
11,591 |
Inventories |
|
|
8,605 |
|
|
10,002 |
Other
current assets |
|
|
1,707 |
|
|
3,621 |
|
Total current
assets |
|
|
27,241 |
|
|
30,270 |
Property and equipment, net |
|
|
2,854 |
|
|
3,058 |
Intangible assets, net |
|
|
45,340 |
|
|
47,728 |
Goodwill |
|
|
11,590 |
|
|
11,068 |
Other
assets |
|
|
807 |
|
|
432 |
|
Total assets |
|
$ |
87,832 |
|
$ |
92,556 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current liabilities |
|
$ |
67,452 |
|
$ |
42,854 |
Long-term debt — related party, net |
|
|
- |
|
|
24,401 |
Long-term deferred tax liabilities |
|
|
3,188 |
|
|
3,100 |
Other
long-term liabilities |
|
|
3,519 |
|
|
1,755 |
Shareholders' equity |
|
|
13,673 |
|
|
20,446 |
|
Total liabilities
and equity |
|
$ |
87,832 |
|
$ |
92,556 |
|
|
|
|
|
|
SPHERE 3D
CORP. |
|
NON-GAAP
RECONCILIATIONS |
|
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
|
September 30, |
|
September 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
21,679 |
|
|
$ |
18,459 |
|
|
$ |
62,855 |
|
|
$ |
57,670 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit -
GAAP |
|
$ |
6,733 |
|
|
$ |
5,170 |
|
|
$ |
18,951 |
|
|
$ |
16,924 |
|
|
Intangible asset
amortization |
|
|
570 |
|
|
|
577 |
|
|
|
1,700 |
|
|
|
1,753 |
|
|
Gross Profit -
Non -GAAP |
|
$ |
7,303 |
|
|
$ |
5,747 |
|
|
$ |
20,651 |
|
|
$ |
18,677 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentages |
|
|
|
|
|
|
|
|
|
GAAP |
|
|
31.1 |
% |
|
|
28.0 |
% |
|
|
30.2 |
% |
|
|
29.3 |
% |
|
Non-GAAP |
|
|
33.7 |
% |
|
|
31.1 |
% |
|
|
32.9 |
% |
|
|
32.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,481 |
) |
|
$ |
(43,292 |
) |
|
$ |
(18,803 |
) |
|
$ |
(60,976 |
) |
|
Less: |
|
|
|
|
|
|
|
|
|
Interest |
|
|
1,133 |
|
|
|
894 |
|
|
|
4,682 |
|
|
|
3,195 |
|
|
Provision for (benefit from) income taxes |
|
|
504 |
|
|
|
(289 |
) |
|
|
1,002 |
|
|
|
(53 |
) |
|
Impairment of goodwill and acquired intangible assets |
|
|
- |
|
|
|
34,398 |
|
|
|
- |
|
|
|
34,398 |
|
|
Acquisition costs |
|
|
- |
|
|
|
- |
|
|
|
34 |
|
|
|
- |
|
|
Depreciation and amortization |
|
|
1,517 |
|
|
|
1,540 |
|
|
|
4,574 |
|
|
|
4,694 |
|
|
Share-based compensation |
|
|
1,981 |
|
|
|
2,733 |
|
|
|
5,647 |
|
|
|
7,436 |
|
|
Loss on revaluation of investment |
|
|
- |
|
|
|
- |
|
|
|
1,145 |
|
|
|
- |
|
|
Warrant revaluation gain |
|
|
(2,283 |
) |
|
|
- |
|
|
|
(2,518 |
) |
|
|
(348 |
) |
|
Adjusted
EBITDA |
|
$ |
(629 |
) |
|
$ |
(4,016 |
) |
|
$ |
(4,237 |
) |
|
$ |
(11,654 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.59 |
) |
|
$ |
(21.10 |
) |
|
$ |
(4.28 |
) |
|
$ |
(31.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss
per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.11 |
) |
|
$ |
(1.96 |
) |
|
$ |
(0.96 |
) |
|
$ |
(5.97 |
) |
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
|
|
|
net loss and
adjusted EBITDA per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
5,901 |
|
|
|
2,052 |
|
|
|
4,396 |
|
|
|
1,953 |
|
|
|
|
|
|
|
|
|
|
|
|
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, impairment of goodwill and acquired
intangible assets, 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
GroupLauren SloaneTel: +1 415-217-2632Lauren@blueshirtgroup.com
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