Sphere 3D Reports Fourth Quarter and Fiscal Year 2016 Financial Results
March 31 2017 - 7:02AM
Sphere 3D Corp. (NASDAQ:ANY), a containerization, virtualization,
and data management solutions provider, today reported financial
results for its fourth quarter and fiscal year ended December 31,
2016.
“In the fall of 2016 we articulated a plan to provide for a
solid foundation for growth,” said Eric Kelly, chairman and chief
executive officer of Sphere 3D. “Since then we have steadily
executed to achieve strategic milestones, including the cost
rationalization we highlighted in our recent corporate update (see
news March 13, 2017), as well as the strengthening of the balance
sheet . In addition, the acquisitions of HVE and UCX earlier this
year are driving a number of new customer wins, as have recently
been announced. These factors give us confidence that we have
positioned the Company for revenue growth and profitability.”
Fourth Quarter 2016 Financial Results:
- Net revenue for the fourth quarter of 2016 was $18.7 million,
compared to $18.9 million for the fourth quarter of
2015.
- Product revenue for the fourth quarter of 2016 was $16.8
million, compared to $16.6 million for the fourth quarter of 2015.
- Disk systems revenue was $11.6 million, compared to $11.2 million
for the fourth quarter of 2015. Disk systems is defined as RDX,
SnapServer family, V3 virtual desktop infrastructure, and Glassware
derived products. - Tape archive product revenue was $5.2 million
compared to $5.4 million for the fourth quarter of 2015. - Service
revenue was $1.9 million, compared to $2.3 million in the fourth
quarter of 2015.
- Gross margin for the fourth quarter of 2016 was 28.9%, compared
to 28.5% for the fourth quarter of 2015. Non-GAAP gross margin for
the fourth quarter of 2016 and 2015 was 31.9%. 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 fourth quarter of 2016 were $10.8
million, compared to $25.0 million for the fourth quarter of 2015.
Included in the operating expenses for the fourth quarter of 2015
was $10.7 million in impairment of acquired intangible
assets.
- Share-based compensation expense for the fourth quarter of 2016
was $1.7 million, compared to $3.1 million for the fourth quarter
of 2015. Depreciation and amortization was $1.5 million in fourth
quarter of 2016, compared to $1.7 million in the fourth quarter of
2015.
- Adjusted EBITDA for the fourth quarter of 2016 was a net loss
of $2.4 million, or a net loss of $0.05 per share, based on 52.4
million weighted average shares outstanding, compared to adjusted
EBITDA net loss of $4.4 million, or net loss of $0.10 per share
based on 42.2 million weighted average shares outstanding for the
fourth quarter of 2015. Adjusted EBITDA is a non-GAAP measure
presented as net loss before interest expense, income taxes,
impairment of goodwill and acquired intangible assets, acquisition
costs, depreciation and amortization, share-based compensation, 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 fourth quarter of 2016 was $7.5 million, or a
net loss of $0.14 per share, compared to a net loss of $18.6
million, or a net loss of $0.44 per share, in the fourth quarter of
2015.
Fiscal Year Financial Results:
- Net revenue for 2016 was $76.4 million, compared to net revenue
of $76.2 million for the full year of 2015.
- Product revenue for 2016 was $68.1 million, compared to product
revenue of $65.5 million for the full year of 2015. - Disk Systems
revenue was $46.8 million, compared to $39.8 million for the full
year of 2015. Disk systems is defined as RDX, SnapServer family, V3
virtual desktop infrastructure, and Glassware derived products. -
Tape archive revenue was $21.3 million, compared to $25.7 million
for the full year of 2015. - Service revenue was $8.3 million,
compared to $10.7 million for the full year of 2015.
- Gross margin for 2016 was 29.2% compared to 29.7% for
2015.
- Operating expenses for 2016 were $86.2 million, which included
$34.4 million in impairment of goodwill and acquired intangible
assets. Operating expenses for 2015 were $67.5 million, which
included $10.7 million in impairment of acquired intangible
assets.
- Share-based compensation expense for 2016 was $9.1 million,
compared to $7.2 million for 2015. Depreciation and amortization
was $6.2 million in 2016, compared to $7.5 million in 2015.
- On a non-GAAP basis, adjusted EBITDA (presented in the same
manner described above) for 2016 was a loss of $14.1 million, or a
net loss of $0.28 per share, based on 49.7 million shares
outstanding, compared to an adjusted EBITDA of a loss of $20.5
million in 2015, or a net loss of $0.54 per share, based on 38.0
million shares outstanding.
- Net loss for 2016 was $68.5 million which included $34.4
million in impairment of goodwill and acquired intangible assets,
or a loss of $1.38 per share, compared to a net loss of $47.2
million which included $10.7 million in impairment of acquired
intangible assets, or a loss of $1.24 per share for 2015.
- Cash and cash equivalents at December 31, 2016 were $5.1
million, compared to cash and cash equivalents of $8.7 million at
December 31, 2015.
The Company intends to return to its normal financial results
and conference call schedule with the first quarter of 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 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.
About Sphere 3D
Sphere 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, has 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 our
inability to comply with the covenants in our credit facilities,
refinance such 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 businesses with
our 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 our 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 |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Net revenue |
$ |
18,723 |
|
$ |
18,869 |
|
$ |
76,393 |
|
$ |
76,165 |
|
Cost of revenue |
|
13,308 |
|
|
13,493 |
|
|
54,054 |
|
|
53,546 |
|
Gross profit |
|
5,415 |
|
|
5,376 |
|
|
22,339 |
|
|
22,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
4,661 |
|
|
6,314 |
|
|
22,243 |
|
|
23,569 |
|
Research
and development |
|
1,864 |
|
|
2,579 |
|
|
8,794 |
|
|
9,916 |
|
General
and administrative |
|
4,254 |
|
|
5,419 |
|
|
20,728 |
|
|
23,271 |
|
Impairment of goodwill and acquired intangible assets |
|
- |
|
|
10,702 |
|
|
34,398 |
|
|
10,702 |
|
|
|
10,779 |
|
|
25,014 |
|
|
86,163 |
|
|
67,458 |
|
Loss from
operations |
|
(5,364 |
) |
|
(19,638 |
) |
|
(63,824 |
) |
|
(44,839 |
) |
Interest
expense - related party |
|
(681 |
) |
|
(594 |
) |
|
(3,106 |
) |
|
(2,710 |
) |
Interest
expense |
|
(1,211 |
) |
|
(105 |
) |
|
(1,981 |
) |
|
(355 |
) |
Other
(expense) income, net |
|
650 |
|
|
193 |
|
|
1,276 |
|
|
(689 |
) |
Loss before income
taxes |
|
(6,606 |
) |
|
(20,144 |
) |
|
(67,635 |
) |
|
(48,593 |
) |
Provision for (benefit
from) taxes |
|
878 |
|
|
(1,545 |
) |
|
825 |
|
|
(1,366 |
) |
Net loss |
$ |
(7,484 |
) |
$ |
(18,599 |
) |
$ |
(68,460 |
) |
$ |
(47,227 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
$ |
(0.14 |
) |
$ |
(0.44 |
) |
$ |
(1.38 |
) |
$ |
(1.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
52,406 |
|
|
42,163 |
|
|
49,736 |
|
|
37,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPHERE 3D CORP.SELECTED BALANCE SHEETS
INFORMATION(In thousands) |
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2016 |
|
|
2015 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
5,056 |
|
$ |
8,661 |
|
Accounts
receivable |
|
11,591 |
|
|
13,401 |
|
Inventories |
|
10,002 |
|
|
11,326 |
|
Other current
assets |
|
3,621 |
|
|
3,155 |
|
Total
current assets |
|
30,270 |
|
|
36,543 |
|
Property and equipment,
net |
|
3,058 |
|
|
3,972 |
|
Intangible assets,
net |
|
47,728 |
|
|
54,019 |
|
Goodwill |
|
11,068 |
|
|
44,132 |
|
Other assets |
|
432 |
|
|
445 |
|
Total
assets |
$ |
92,556 |
|
$ |
139,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Current
liabilities |
$ |
42,854 |
|
$ |
46,397 |
|
Long-term debt —
related party, net |
|
24,401 |
|
|
19,500 |
|
Long-term deferred tax
liabilities |
|
3,100 |
|
|
2,755 |
|
Other long-term
liabilities |
|
1,755 |
|
|
2,319 |
|
Shareholders'
equity |
|
20,446 |
|
|
68,140 |
|
Total
liabilities and equity |
$ |
92,556 |
|
$ |
139,111 |
|
|
|
|
|
|
|
|
SPHERE 3D CORP. NON-GAAP RECONCILIATIONS(In
thousands except per share data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
18,723 |
|
$ |
18,869 |
|
$ |
76,393 |
|
$ |
76,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit -
GAAP |
$ |
5,415 |
|
$ |
5,376 |
|
$ |
22,339 |
|
$ |
22,619 |
|
Intangible asset
amortization |
|
565 |
|
|
647 |
|
|
2,318 |
|
|
2,608 |
|
Gross Profit - Non
-GAAP |
$ |
5,980 |
|
$ |
6,023 |
|
$ |
24,657 |
|
$ |
25,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentages |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
28.9 |
% |
|
|
28.5 |
% |
|
|
29.2 |
% |
|
|
29.7 |
% |
|
Non-GAAP |
|
31.9 |
% |
|
|
31.9 |
% |
|
|
32.3 |
% |
|
|
33.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(7,484 |
) |
$ |
(18,599 |
) |
$ |
(68,460 |
) |
$ |
(47,227 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
1,892 |
|
|
699 |
|
|
5,087 |
|
|
3,065 |
|
Provision
for (benefit from) taxes |
|
878 |
|
|
(1,545 |
) |
|
825 |
|
|
(1,366 |
) |
Impairment of goodwill and acquired intangible assets |
|
- |
|
|
10,702 |
|
|
34,398 |
|
|
10,702 |
|
Acquisition costs |
|
- |
|
|
- |
|
|
- |
|
|
218 |
|
Depreciation and amortization |
|
1,493 |
|
|
1,713 |
|
|
6,187 |
|
|
7,450 |
|
Share-based compensation |
|
1,695 |
|
|
3,137 |
|
|
9,131 |
|
|
7,154 |
|
Warrant
revaluation gain |
|
(900 |
) |
|
(478 |
) |
|
(1,248 |
) |
|
(478 |
) |
Adjusted EBITDA |
$ |
(2,426 |
) |
$ |
(4,371 |
) |
$ |
(14,080 |
) |
$ |
(20,482 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.14 |
) |
$ |
(0.44 |
) |
$ |
(1.38 |
) |
$ |
(1.24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
$ |
(0.05 |
) |
$ |
(0.10 |
) |
$ |
(0.28 |
) |
$ |
(0.54 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
|
|
|
|
|
|
net loss
and adjusted EBITDA per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
52,406 |
|
|
42,163 |
|
|
49,736 |
|
|
37,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 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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