Crossroads: Fiscal 3Q15 Financial Results

(in $ million)	3Q14	3Q15	9 mo. 14	9 mo. 15
Revenues	2.1	2.1	8.5	6.0
*Growth*		3%		*-29%*
Net income (loss)	(2.2)	(3.3)	(7.3)	(9.1)

Crossroads Systems, Inc. reported financial results for its fiscal third quarter ended July 31, 2015.

Revenue for fiscal Q3 2015 was $2.1 million, consistent with the same quarter a year ago.

Gross profit for fiscal Q3 2015 was $1.6 million, or 74% of total revenue, compared to $1.7 million, or 79% of total revenue in the same quarter a year ago. The decrease is due to a change in the mix of hardware and software products sold during the quarter.

Operating expenses for fiscal Q3 2015 increased thirty seven% to $4.6 million, compared to $3.4 million in the same period a year ago. The increase is attributable to litigation expenses related to the company’s ongoing patent infringement lawsuits.

Net loss available to common stockholders was $(3.3) million, or $(0.17) loss per share, compared to a net loss available to common stockholders of $(2.4) million, or $(0.16) loss per share, in the same quarter a year ago.

On July 31, 2015, cash, cash equivalents, and restricted cash totaled $7.3 million compared to $5.1 million in the previous quarter.

Richard K. Coleman, Jr., president and CEO, said: “Our expectations for the success of our business strategy remain optimistic. Following our positive Markman ruling and the filing of our IPR responses, we were able to settle the litigation with Huawei, by far our smallest defendant, and remain confident in our legal position with the remaining defendants. We expect to deliver significant returns to investors as we continue to pursue companies using our proprietary technology without a license. Our product business improved in the quarter and is off to a strong start in the fourth quarter. The addition of our ability to deliver StrongBox in new VM configurations will strengthen our product offering and should contribute to this momentum in future quarters.”

Comments

Rick Coleman, president and CEO:
"(...) we entered into settlement discussions with Huawei, by far our smallest defendant, based on US sales of infringing products. By agreement between the parties, we settled the case on July 17. Terms of the settlement are confidential, so I can’t provide any details (...")

Jennifer Crane, CFO:
"Our legacy HP OEM SPHiNX revenue declined by $143,000 however this was offset by a $236,000 increase from StrongBox product sales. StrongBox product and maintenance revenue was $640,000, a 71% increase from $374,000 during the same quarter last year.
"The decreases in gross profit and in the gross margin percentage are due to the mix of lower margin hardware products including tape libraries."

Mark Hood, EVP of corporate development:
"I am pleased to announce that beginning in October, we will have a virtual machine VM version of StrongBox that runs on VMware’s ESX Servers.
"In the third quarter, we recognized $640,000 in StrongBox revenue from impressive customers such as Wheaton College, Northeastern University and the University of Notre Dame an account driven by Fujifilm and their Dternity solution. We also delivered a $200,000 plus StrongBox solution to Metro, one of Europe’s leading retailers. Thanks in part to carryover from last quarter, we’re seeing a strong start to Q4 with current orders almost equal to orders during the entire third quarter.
"For example, we received a $140,000 StrongBox order for Major League Baseball.
"Our European sales team also delivered a meaningful order after the third quarter. Last month, Mercedes-Benz placed a $150,000 SPHiNX order, our largest ever."