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Sphere 3D: Fiscal 4Q15 Financial Results

Revenue increasing 99% with net loss up 244% Y/Y

(in $ million) 4Q14 4Q15 FY14 FY15
Revenue 9.5 18.9 13.5 76.2
Growth   99%   464%
Net income (loss) (5.4) (18.6) (12.7) (47.2)

Sphere 3D Corp. reported financial results for its fourth quarter and fiscal year ended December 31, 2015.

We are making meaningful progress in realizing our strategy of becoming a significant and trusted provider of virtualization, containerization and hybrid cloud solutions,” said Eric Kelly, CEO. “The key partnerships we have forged over the last year have provided us the framework to build and grow our business as we continue to drive adoption and to increase our sales pipeline. As we grow the roster of enterprise customers and go-to-market partners, we expect to transition to top line growth, as we simultaneously focus on operational improvements to drive shareholder value.”

Fourth Quarter 2015 Financial Results:
The following financial results for the fourth quarter of 2015 include contribution from our 2014 acquisition of Overland Storage for the full three months and reflect contribution for a partial period from December 2, 2014 through December 31, 2014. Contribution from our 2015 purchase of RDX assets from Imation is included for the full three months of the fourth quarter of 2015, and is not reflected in the comparative results for the fourth quarter of 2014.

Net revenue for the fourth quarter of 2015 was $18.9 million, compared to $9.5 million for the fourth quarter of 2014.

Product revenue for the fourth quarter of 2015 was $16.6 million, compared to $8.6 million for the fourth quarter of 2014.

Disk systems revenue was $11.2 million, compared to $4.9 million for the fourth quarter of 2014. Disk systems is defined as RDX, SnapServer family, V3 VDI, and Glassware derived products.

Tape archive revenue was $5.4 million, compared to $3.7 million for the fourth quarter of 2014.

Service revenue was $2.3 million, compared to $0.9 million in the fourth quarter of 2014.

Gross margin for the fourth quarter of 2015 was 28.5%, compared to 37.6% for the fourth quarter of 2014. Non-GAAP gross margin for the fourth quarter of 2015 was 31.9%.

Operating expenses for the fourth quarter of 2015 were $25.0 million, which included $10.7 million of impairment of acquired intangible assets related to the Overland Storage acquisition, compared to $8.4 million for the fourth quarter of 2014.

Share-based compensation expense for the fourth quarter of 2015 was $3.1 million, compared to $0.7 million for the fourth quarter of 2014. Depreciation and amortization was $1.7 million in fourth quarter of 2015, compared to $1.1 million in the fourth quarter of 2014.

Net loss for the fourth quarter of 2015 was $18.6 million, or a net loss of $0.44 per share, compared to a net loss of $5.4 million, or a net loss of $0.20 per share, in the fourth quarter of 2014.

Adjusted EBITDA for the fourth quarter of 2015 was a net loss of $4.4 million, or a net loss of $0.10 per share, based on 42.2 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $2.1 million, or net loss of $0.07 per share based on 27.8 million weighted average shares outstanding for the fourth quarter of 2014. Adjusted EBITDA is a non- GAAP measure presented as net loss before interest expense, income taxes, acquisition costs, depreciation and amortization, share-based compensation, warrant liability revaluation and impairment of acquired intangible assets.

The following financial results for the year ended December 31, 2015 reflect contribution from the Overland Storage acquisition for the full year and the contribution from the Imation RDX acquisition from August 10, 2015. The Overland Storage acquisition is reflected for a partial period from December 2, 2014 through December 31, 2014 in the comparative results for the prior year and the contribution from the Imation RDX acquisition is not reflected in the comparative results for the prior year.

Net revenue for 2015 was $76.2 million, compared to net revenue of $13.5 million for the full year of 2014.

Product revenue for 2015 was $65.5 million, compared to product revenue of $12.2 million for the full year of 2014.

Disk systems revenue was $39.8 million, compared to $8.5 million for the full year of 2014. Disk systems is defined as RDX, SnapServer family, V3 VDI, and Glassware derived products.

Tape archive revenue was $25.7 million, compared to $3.7 million for the full year of 2014.

Service revenue was $10.7 million, compared to $1.3 million for the full year of 2014.

Gross margin for 2015 was 29.7% compared to 39.6% for 2014.

Operating expenses for 2015 were $67.5 million, which included $10.7 million of impairment of acquired intangible assets related to the Overland Storage acquisition, compared to $17.4 million for 2014.

Net loss for 2015 was $47.2 million, or a loss of $1.24 per share, compared to a net loss of $12.7 million, or a loss of $0.53 per share for 2014.

Adjusted EBITDA (a non-GAAP measure presented in the same manner described above) for 2015 was a loss of $20.5 million, or a net loss of $0.54 per share, compared to an adjusted EBITDA of a loss of $3.4 million, or a net loss of $0.14 per share in 2014.

Cash and cash equivalents at December 31, 2015 were $8.7 million. At December 31, 2015, the company had $17.4 million outstanding under its credit facilities ($10.0 million of which is from a related party) and $19.5 million outstanding under its note from a related party.

Comments

in $ million Year Ended
December 31, 2014
Year Ended
December 31, 2015
Y/Y growth
Disk systems 8.5 39.8 368%
Tape automation systems 1.9 12.8 574%
Tape drives and media 1.8 12.9 617%
Service 1.3 10.7 723%
TOTAL 13.5 76.2 464%

Abstracts of the earnings call transcript:

Kurt Kalbfleisch, CFO:
"OEM revenue for this quarter was $3.3 million compared to $3 million in the preceding quarter with branded product revenue of $13.3 million compared to $13.1 million in the third quarter.
"Regionally the branded product revenue was 16% in APAC, 26% in Americas and 58% in the EMEA."

 

 

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