Tuesday, November 18, 2014

Overland: Fiscal 1Q15 Financial Results More than doubling revenue with Tandberg

Overland Storage, Inc. reported financial results for its fiscal 2015 first quarter ended September 30, 2014.

Eric Kelly, president and CEO, said: "As we announced this week, the SEC has declared the Registration Statement on Form F-4/A filed by Sphere 3D Corporation regarding the proposed merger between Overland and Sphere 3D to be effective. We are asking shareholders to approve the merger, and to date, shareholders holding approximately 65% of our outstanding stock have agreed to vote their shares in favor of the merger, which is expected to close during the first week of December. Through our long-term partnership with Sphere 3D, we have been laying the groundwork to build a solid foundation for the combined company. We are excited to offer our customers a highly optimized and a comprehensive set of app and desktop virtualization solutions coupled with scalable, enterprise storage offerings to address these growing markets in the software-defined IT era."

He further noted: "We are pleased to report that we exceeded internal revenue projections in the past quarter, and we have completed the third phase of our integration plan with Tandberg Data. The significant operational changes at Overland will result in cost-savings of 10% to 15% (or $2 million to $3 million) greater than our previously-announced target of $20 million. The final phase of the integration plan, which includes recent organizational reductions and changes to our manufacturing and supply chain operations, is expected to positively impact gross margins going forward. The Tandberg integration plan will be completed prior to the closing of the merger agreement with Sphere 3D and is expected to allow for a profitable run-rate exiting calendar year 2014, excluding one-time charges and stock compensation expense."

Recent Corporate Highlights:
  • Completed the third phase of the company's integration plan with Tandberg Data.
  • The Registration Statement on Form F-4/A filed by Sphere 3D Corporation has been declared effective by the SEC. Shareholders will be asked to approve the merger at a meeting of shareholders on November 28, 2014. Certain Overland Storage shareholders holding approximately 65% of the outstanding Overland shares have agreed, pursuant to voting agreements, to vote their shares in favor of the merger, and as a result Overland expects the merger to be approved at the shareholder meeting, and completed during the first week in December.
  • Secured $5.0 million of additional working capital in the form of debt financing from Cyrus Capital to support our transition plans.
  • Entered into a Memorandum of Understanding with the plaintiffs in the consolidated class action cases that would, subject to court approval and other standard conditions, provide for the settlement of all outstanding claims in regard to our proposed merger transaction with Sphere3D.
  • Litigation update: November 7, 2014, the United States Patent and Trademark Office issued a Final Written Decision finding claims 1-11 of U.S. Patent No. 6,328,766 to be unpatentable. Overland has the option to appeal the decision to the United States Court of Appeals for the Federal Circuit. Overland Storage has successfully settled its infringement litigation related to this patent with all other parties.
First Quarter Fiscal 2015 Financial Results:
The following financial highlights for the first fiscal quarter of 2015 reflect contribution from the Tandberg Data acquisition, which contribution is not reflected in the comparative results for the first fiscal quarter of 2014.

  • Net revenue was $22.9 million, compared to $10.6 million for the first quarter of fiscal 2014 and $24.2 million in the fourth quarter of fiscal 2014. Product revenue for the first quarter of fiscal 2015 was $19.3 million, compared to $6.1 million for the first quarter of fiscal 2014 and $19.8 million in the fourth quarter of fiscal 2014.
  • Gross margin was 27.8%, compared to 33.7% in the first quarter of fiscal 2014, and 26.9% in the fourth quarter of fiscal 2014.
  • Operating expenses were $13.3 million, compared to $7.7 million in the first quarter of fiscal 2014 and $15.0 million for the fourth quarter of fiscal 2014. One-time costs for the first quarter of fiscal 2015 were approximately $1.9 million.
  • Stock compensation expense was $0.8 million, compared to $0.9 million in the first quarter of fiscal 2014 and $1.2 million in the fourth quarter of fiscal 2014. Depreciation and amortization was $0.9 million in the first quarter of fiscal 2015, compared to $0.3 million in the first quarter of fiscal 2014 and $1.0 million in the fourth quarter of fiscal 2014.
  • Net loss was $7.3 million, or a loss of $0.42 per share, compared to a net loss of $4.6 million, or a loss of $0.75 per share, in the first quarter of fiscal 2014, and a net loss of $7.4 million, or a loss of $0.42 per share, in the fourth quarter of fiscal 2014.
  • Adjusted EBITDA was a loss of $3.8 million, compared to adjusted EBITDA of a loss of $3.0 million in the first quarter of fiscal 2014, and a loss of $6.3 million in the fourth quarter of fiscal 2014.
  • Cash and short-term investments at September 30, 2014 were $6.9 million, compared to cash and short-term investments of $12.1 million at June 30, 2014. As of September 30, 2014, the company had $5.1 million outstanding under its credit facilities and $17.3 million outstanding under its notes from related parties.
Recent Product Highlights:
  • V3 hyper-converged appliances designed to address the rapidly growing virtualization and cloud markets.
  • SnapServer XSD 40, powered by the new GuardianOS 7.6 software, is the simplest and most versatile NAS and iSCSI SAN storage system available for today's business needs--from virtualized server and Exchange environments, to backup and storage consolidation.
  • VMware-certified SnapScale clustered storage featuring RAINcloud OS 4.1, the next major software release with software-defined storage services for virtual infrastructures.
  • RDX integration with SnapServer provides SMBs customers with an affordable, integrated solution for backup and data exchange.
  • NEO XL-Series automated tape libraries, combining flexibility, density, performance and best value for backup, archive and DR.

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