Overland: Fiscal 1Q12 Financial Results

Overland Storage, Inc. reported financial results for its fiscal 2012 first quarter ended September 30, 2011.

"We are very excited about the tremendous customer response to our new SnapServer DX storage solution, which we introduced worldwide – the week of October 10th," said Eric Kelly, President and CEO of Overland Storage. "SnapServer DX was built on the premise that the next generation of storage provisioning is no storage provisioning at all. Customers are quickly recognizing that with our DX series they no longer need to worry about provisioning storage by department or user in advance because DX dynamically allocates storage to whoever needs it most, seamlessly and without interruption or downtime.

"With our latest new product launch, we continue to further Overland as a leader in the mid-tier data storage market. The DX gives us a significant advantage over the competition, and will also support our Scale-Out NAS software that we plan to introduce in 2012. As we continue our product innovation and to expand upon some of the most recognized brands in the industry, SnapServer and NEO, we believe we are well positioned to gain further traction in the growing global storage market."

Key First Quarter Financial Results

• Net revenue for the first quarter of fiscal 2012 was $14.1 million, compared to $17.6 million for the first quarter of fiscal 2011. OEM product revenues were down $2.4 million from the first quarter of fiscal 2011 to the first quarter of fiscal 2012 as the shipments of tape libraries to HP ceased in the fourth quarter of fiscal 2011
• Gross margin for the first quarter of fiscal 2012 was 32.6%, compared 23.6% for the first quarter of fiscal 2011. This improvement is a result of the reduced level of OEM product sales, the overall product mix and continued improvements in operational efficiencies.
• Operating expenses for the first quarter of fiscal 2012 were $10.0 million, compared to $9.9 million for the first quarter of fiscal 2011. Stock compensation expense was approximately $1.4 million in the first quarter of fiscal 2012 versus $1.0 million in the first quarter of fiscal 2011. Depreciation and amortization was approximately $0.4 million in each quarter of fiscal 2012 and 2011.
• Net loss for the first quarter of fiscal 2012 was $5.4 million, or a loss of $0.23 per share, compared to a net loss of $6.5 million, or a loss of $0.59 per share, in the first quarter of fiscal 2011.
• Total cash and cash equivalents at September 30, 2011 was $9.5 million, compared to $10.2 million at June 30, 2011. At September 30, 2011, we had $1.4 million outstanding under our credit facility.

First Quarter Business Highlights

Operational Efficiencies:
New strategic manufacturing partnerships and material sourcing agreements will further increase operational efficiencies and positively impact our gross margins.

Product Developments:

• Overland launched its newest product innovation, SnapServer DX, on October 11, 2011, expanding upon one of the most recognized brands in the industry.
• SnapServer DX is a new unified NAS and ISCSI SAN device that eliminates the need to provision storage capacity, enabling businesses to effortlessly grow data storage capacity from 2TB to 288TB without interruption or downtime for end users. The SnapServer DX offers enterprise quality features and functionality that enable any size business to manage its data storage like an enterprise, but at one-tenth the cost.
• SnapServer DX is available through Overland’s worldwide network of over 1,500 channel partners.
• Overland’s 2012 product roadmap includes its Scale-Out NAS and private cloud offering, which are based on the MaxiScale technology and Guardian operating system. These new product offerings will enable Overland to enter additional fast growing markets in 2012.

Patent Litigation:
Overland filed patent infringement lawsuits against BDT, IBM and Dell claiming infringement of two of our patents in the International Trade Commission (ITC) and the federal district court in San Diego. The ITC trial was completed on September 7, 2011, with a ruling from the ITC expected by November 23, 2011. The ITC action and district court action against IBM and Dell have been resolved by settlement. Overland plans to continue the infringement case against BDT and we remain optimistic about the outcome. The company is represented by DLA Piper LLP, the largest law firm in the world.