Sphere 3D Reports Second Quarter Fiscal Year 2017 Financial Results
August 14 2017 - 4:05PM
Sphere 3D Corp. (NASDAQ:ANY), a containerization,
virtualization, and data management solutions provider, today
reported financial results for its second quarter ended June 30,
2017.
“The HVE/UCX acquisition revenue in its first 5 months currently
puts us on an annualized run-rate to exceed 50% growth for HVE/UCX,
and its integration with the Sphere 3D core technology portfolio
will allow us to continue to be a technology leader in several of
the fastest growing sectors in the industry," said Eric Kelly,
chairman and chief executive officer of Sphere 3D. "As our
virtualization business gains momentum, we are leveraging our
existing Sphere 3D partnerships as well as building new ones both
domestically and internationally and have a renewed focus on
driving growth in the second half of the year. Meanwhile, we have
continued to work toward the goal of improving our operational
efficiencies, achieving greater than a 52% improvement in adjusted
EBITDA in the first half of the year.”
Financial Highlights |
Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended |
(in millions) |
June 30, 2017 |
June 30, 2016 |
June 30, 2017 |
June 30, 2016 |
|
|
|
|
|
Net revenue |
$ |
19.4 |
|
$ |
19.6 |
|
$ |
41.2 |
|
$ |
39.2 |
|
Gross profit |
$ |
5.4 |
|
$ |
5.8 |
|
$ |
12.2 |
|
$ |
11.8 |
|
Non-GAAP Gross profit (1) |
$ |
5.9 |
|
$ |
6.4 |
|
$ |
13.3 |
|
$ |
12.9 |
|
Gross margin (%) |
|
27.7 |
% |
|
29.6 |
% |
|
29.7 |
% |
|
30.0 |
% |
Non-GAAP Gross margin (%) (1) |
|
30.6 |
% |
|
32.6 |
% |
|
32.4 |
% |
|
33.0 |
% |
Adjusted EBITDA (1) |
$ |
(2.6 |
) |
$ |
(4.6 |
) |
$ |
(3.6 |
) |
$ |
(7.6 |
) |
Net loss |
$ |
(7.5 |
) |
$ |
(9.6 |
) |
$ |
(15.3 |
) |
$ |
(17.7 |
) |
(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.
Six Months Ended June 30, 2017 Financial
Results:
- Net revenue for the first six months of 2017 was $41.2 million,
compared to $39.2 million for the first six months of
2016.
- Product revenue for the first six months of 2017 was $36.5
million, compared to $34.8 million for the first six months of
2016.
- Disk systems revenue was $26.5 million, compared to $24.0
million for the first six months of 2016. Disk systems is defined
as RDX, SnapServer family, V3 virtual desktop infrastructure, and
Glassware derived products.
- Tape archive product revenue was $10.0 million compared to
$10.8 million for the first six months of 2016.
- Service revenue for the first six months was $4.6 million,
compared to $4.4 million in the first six months of
2016.
- Gross margin for the first six months of 2017 was 29.7%,
compared to 30.0% for the first six months of 2016. Non-GAAP
gross margin for the first six months of 2017 was 32.4%, compared
to 33.0% for the first six months of 2016.
- Operating expenses for the first six months of 2017 were $23.1
million, compared to $27.6 million for the first six months of
2016.
- Share-based compensation expense for the first six months of
2017 was $3.7 million, compared to $4.7 million for the first six
months of 2016. Depreciation and amortization was $3.1 million in
the first six months of 2017, compared to $3.2 million in the first
six months of 2016.
- Net loss for the first six months of 2017 was $15.3 million, or
a net loss of $4.22 per share, compared to a net loss of $17.7
million, or a net loss of $9.29 per share, in the first six months
of 2016.
- Adjusted EBITDA for the first six months of 2017 was a net loss
of $3.6 million, or a net loss of $0.99 per share, based on 3.6
million weighted average shares outstanding, compared to adjusted
EBITDA net loss of $7.6 million, or net loss of $4.01 per share
based on 1.9 million weighted average shares outstanding for the
first six months of 2016.
Second Quarter 2017 Financial Results:
- Net revenue for the second quarter of 2017 was $19.4 million,
compared to $19.6 million for the second quarter of
2016.
- Product revenue for the second quarter of 2017 was $17.1
million, compared to $17.5 million for the second quarter of 2016.
- Disk systems revenue was $11.5 million, compared to $11.8
million for the second quarter of 2016. Disk systems is defined as
RDX, SnapServer family, V3 virtual desktop infrastructure, and
Glassware derived products.
- Tape archive product revenue was $5.6 million compared to $5.7
million for the second quarter of 2016.
- Service revenue was $2.3 million, compared to $2.1 million in
the second quarter of 2016.
- Gross margin for the second quarter of 2017 was 27.7%, compared
to 29.6% for the second quarter of 2016. Non-GAAP gross
margin for the second quarter of 2017 was 30.6%, compared to 32.6%
for the second 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 second quarter of 2017 were $11.5
million, compared to $13.8 million for the second quarter of
2016.
- Share-based compensation expense for the second quarter of 2017
was $1.5 million, compared to $2.1 million for the second quarter
of 2016. Depreciation and amortization was $1.5 million in second
quarter of 2017, compared to $1.6 million in the second quarter of
2016.
- Net loss for the second quarter of 2017 was $7.5 million, or a
net loss of $1.81 per share, compared to a net loss of $9.6
million, or a net loss of $4.86 per share, in the second quarter of
2016. All share and per share numbers in this press
release reflect the 1-for-25 share consolidation that was
effective on July 11, 2017.
- Adjusted EBITDA for the second quarter of 2017 was a net loss
of $2.6 million, or a net loss of $0.64 per share, based on 4.1
million weighted average shares outstanding, compared to adjusted
EBITDA net loss of $4.6 million, or net loss of $2.30 per share
based on 2.0 million weighted average shares outstanding for the
second quarter of 2016. Adjusted EBITDA is a non-GAAP measure
presented as net loss before interest expense, income taxes,
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.
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, 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 2017 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 58101396. 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 58101396. 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 comply with the covenants in
our credit facilities or to obtain additional debt or equity
financing; our ability to maintain compliance with NASDAQ Capital
Market listing requirements; any increase in our future cash needs;
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 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 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 |
|
Six Months
Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
(Unaudited) |
|
(Unaudited) |
Net
revenue |
|
$ |
19,438 |
|
|
$ |
19,592 |
|
|
$ |
41,176 |
|
|
$ |
39,211 |
|
Cost
of revenue |
|
|
14,051 |
|
|
|
13,794 |
|
|
|
28,958 |
|
|
|
27,457 |
|
Gross
profit |
|
|
5,387 |
|
|
|
5,798 |
|
|
|
12,218 |
|
|
|
11,754 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Sales and
marketing |
|
|
4,707 |
|
|
|
6,270 |
|
|
|
9,504 |
|
|
|
12,323 |
|
|
Research and
development |
|
|
1,896 |
|
|
|
2,266 |
|
|
|
3,667 |
|
|
|
4,708 |
|
|
General and
administrative |
|
|
4,914 |
|
|
|
5,289 |
|
|
|
9,903 |
|
|
|
10,600 |
|
|
|
|
|
11,517 |
|
|
|
13,825 |
|
|
|
23,074 |
|
|
|
27,631 |
|
Loss
from operations |
|
|
(6,130 |
) |
|
|
(8,027 |
) |
|
|
(10,856 |
) |
|
|
(15,877 |
) |
|
Interest
expense |
|
|
(1,061 |
) |
|
|
(336 |
) |
|
|
(2,251 |
) |
|
|
(448 |
) |
|
Interest expense
- related party |
|
|
(638 |
) |
|
|
(925 |
) |
|
|
(1,298 |
) |
|
|
(1,853 |
) |
|
Other income
(expense), net |
|
|
508 |
|
|
|
(229 |
) |
|
|
(419 |
) |
|
|
730 |
|
Loss
before income taxes |
|
|
(7,321 |
) |
|
|
(9,517 |
) |
|
|
(14,824 |
) |
|
|
(17,448 |
) |
Provision for taxes |
|
|
192 |
|
|
|
98 |
|
|
|
498 |
|
|
|
236 |
|
Net
loss |
|
$ |
(7,513 |
) |
|
$ |
(9,615 |
) |
|
$ |
(15,322 |
) |
|
$ |
(17,684 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(1.81 |
) |
|
$ |
(4.86 |
) |
|
$ |
(4.22 |
) |
|
$ |
(9.29 |
) |
|
|
|
|
|
|
|
|
|
|
Shares used in computing |
|
|
|
|
|
|
|
|
net
loss per share: |
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
4,140 |
|
|
|
1,978 |
|
|
|
3,631 |
|
|
|
1,904 |
|
|
|
|
|
|
|
|
|
|
|
SPHERE 3D
CORP. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
2017 |
|
|
2016 |
|
|
|
(Unaudited) |
|
(Unaudited) |
ASSETS |
|
|
|
|
Cash
and cash equivalents |
|
$ |
3,272 |
|
$ |
5,056 |
Accounts receivable |
|
|
11,161 |
|
|
11,591 |
Inventories |
|
|
9,673 |
|
|
10,002 |
Other
current assets |
|
|
1,810 |
|
|
3,621 |
|
Total current
assets |
|
|
25,916 |
|
|
30,270 |
Property and equipment, net |
|
|
2,898 |
|
|
3,058 |
Intangible assets, net |
|
|
46,541 |
|
|
47,728 |
Goodwill |
|
|
11,590 |
|
|
11,068 |
Other
assets |
|
|
813 |
|
|
432 |
|
Total assets |
|
$ |
87,758 |
|
$ |
92,556 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current liabilities |
|
$ |
65,313 |
|
$ |
42,854 |
Long-term debt — related party, net |
|
|
- |
|
|
24,401 |
Long-term deferred tax liabilities |
|
|
3,160 |
|
|
3,100 |
Other
long-term liabilities |
|
|
4,798 |
|
|
1,755 |
Shareholders' equity |
|
|
14,487 |
|
|
20,446 |
|
Total liabilities
and equity |
|
$ |
87,758 |
|
$ |
92,556 |
|
|
|
|
|
|
SPHERE 3D
CORP. |
NON-GAAP
RECONCILIATIONS |
(In thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Six Months
Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
19,438 |
|
|
$ |
19,592 |
|
|
$ |
41,176 |
|
|
$ |
39,211 |
|
|
|
|
|
|
|
|
|
|
Gross Profit -
GAAP |
|
$ |
5,387 |
|
|
$ |
5,798 |
|
|
$ |
12,218 |
|
|
$ |
11,754 |
|
Intangible asset
amortization |
|
|
564 |
|
|
|
592 |
|
|
|
1,130 |
|
|
|
1,176 |
|
Gross Profit -
Non -GAAP |
|
$ |
5,951 |
|
|
$ |
6,390 |
|
|
$ |
13,348 |
|
|
$ |
12,930 |
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentages |
|
|
|
|
|
|
|
|
GAAP |
|
|
27.7 |
% |
|
|
29.6 |
% |
|
|
29.7 |
% |
|
|
30.0 |
% |
Non-GAAP |
|
|
30.6 |
% |
|
|
32.6 |
% |
|
|
32.4 |
% |
|
|
33.0 |
% |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,513 |
) |
|
$ |
(9,615 |
) |
|
$ |
(15,322 |
) |
|
$ |
(17,684 |
) |
Less: |
|
|
|
|
|
|
|
|
Interest |
|
|
1,699 |
|
|
|
1,261 |
|
|
|
3,549 |
|
|
|
2,301 |
|
Provision for taxes |
|
|
192 |
|
|
|
98 |
|
|
|
498 |
|
|
|
236 |
|
Acquisition costs |
|
|
- |
|
|
|
- |
|
|
|
34 |
|
|
|
- |
|
Depreciation and amortization |
|
|
1,531 |
|
|
|
1,578 |
|
|
|
3,057 |
|
|
|
3,154 |
|
Share-based compensation |
|
|
1,497 |
|
|
|
2,141 |
|
|
|
3,666 |
|
|
|
4,703 |
|
Loss on revaluation of investment |
|
|
- |
|
|
|
- |
|
|
|
1,145 |
|
|
|
- |
|
Warrant revaluation gain |
|
|
(48 |
) |
|
|
(22 |
) |
|
|
(235 |
) |
|
|
(348 |
) |
Adjusted
EBITDA |
|
$ |
(2,642 |
) |
|
$ |
(4,559 |
) |
|
$ |
(3,608 |
) |
|
$ |
(7,638 |
) |
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(1.81 |
) |
|
$ |
(4.86 |
) |
|
$ |
(4.22 |
) |
|
$ |
(9.29 |
) |
|
|
|
|
|
|
|
|
|
Adjusted net loss
per share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.64 |
) |
|
$ |
(2.30 |
) |
|
$ |
(0.99 |
) |
|
$ |
(4.01 |
) |
|
|
|
|
|
|
|
|
|
Shares used in
computing |
|
|
|
|
|
|
|
|
net loss and
adjusted EBITDA per share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
4,140 |
|
|
|
1,978 |
|
|
|
3,631 |
|
|
|
1,904 |
|
|
|
|
|
|
|
|
|
|
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
Lauren Sloane
Tel: +1 415-217-2632
Lauren@blueshirtgroup.com
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