Crossroads: Fiscal 1Q12 Financial Results

Crossroads Systems, Inc. reported financial results for its fiscal first quarter ended January 31, 2012.

Highlights

• Shipped StrongBox, its online all-the-time, non-proprietary and portable data vault for long-term data retention, on schedule to first customer, Capgemini, provider of IT services.
• Formed strategic alliance with Fujitsu to deliver StrongBox data vault, providing a complete solution for leveraging Linear Tape File System (LTFS) technology in Fujitsu’s NuVola Private Cloud Platform.
• Generated industry buzz around the StrongBox solution as evidenced by dozens of financial and trade press articles.
• Created a growing sales funnel and backlog of StrongBox opportunities despite being just a few weeks post launch.
• Released RVA 5.0, featuring new advanced reporting capabilities and enhanced visibility into tape systems.
• Recorded record quarterly revenue for RVA with a growing backlog.

Fiscal Q1 2012 Financial Results
Revenue for fiscal Q1 2012 decreased 28% to $2.6 million from $3.6 million in the same quarter a year ago. The decrease was primarily due to a 36% decrease in intellectual property (IP) licensing, royalty and other revenue from fiscal Q1 2011. The company’s IP licensing revenue can vary significantly from quarter-to-quarter and should be considered on an annual basis, as Crossroads does not control the timing or pace of negotiations.

Gross profit for fiscal Q1 2012 was $2.3 million or 88% of total revenue, as compared to $3.1 million or 86% of total revenue in the same quarter a year ago. The increase in gross profit as a percent of revenue was due to product mix and decreased costs associated with the company’s IP licensing campaign.

Operating expenses for fiscal Q1 2012 totaled $5.0 million, which included $763,000 of stock-based compensation, as compared to $4.3 million, which included $82,000 of stock-based compensation in the same period a year ago. The increase was primarily due to the timing of stock-based compensation expenses.

Net loss for fiscal Q1 2012 totaled $2.7 million or $(0.25) per share, as compared to a net loss of $1.2 million or $(0.12) per share in the same quarter a year ago.

At January 31, 2012, cash and cash equivalents and short-term investments totaled $9.2 million, as compared to $10.7 million in the previous quarter. The decrease in cash was largely due to the decline in IP revenue in the quarter.

"The overall explosion of data creation is threatening to overwhelm the current budget and pricing constraints of existing, largely disk based solutions," said Rob Sims, president and CEO of Crossroads Systems. "From a market perspective, StrongBox plays in what we define as the archive portion of the data storage market. StrongBox is an on-line, all the time, network attached archive that has come to market with a game changing value proposition. Data in the archive space is expected to grow from 69,000 Petabytes to more than 170,000 Petabytes by 2014, which represents 250% growth over 5 years. This market is also called Tier 3, defined generally as ‘write once, read rarely’ data. This was a $23 billion market last year that is expected to grow to more than $40 billion in the next three years. We believe StrongBox is well positioned to gain a meaningful piece of this market given our disruptive pricing at up to a 90% lower cost versus disk-based solutions, when the storage need is measured at a petabyte or more.

"The quarter has been a buzz of activity as we’ve been working with strategic partners and channel partners to bring StrongBox to market. We have a very specific go-to-market strategy for StrongBox. While StrongBox is a horizontal solution, our initial focus is in three verticals that stand out as early and large opportunities: media entertainment, medical imaging, and video surveillance. These three industries are generating large, rich content media and all are growing well over 50 percent year over year. We already have a large backlog for StrongBox for upcoming quarters. We look forward to closing these opportunities and recording revenue going forward."