Overland: Fiscal 3Q12 Financial Results

(in US$ million)	3Q11	3Q12	9 mo. 11	9 mo. 12
Revenues	17.1	15.2	52.6	44.3
*Growth*		-11%		*-27%*
Net income (loss)	(3.4)	(3.8)	(10.8)	(13.5)

Overland Storage, Inc. reported financial results for its fiscal 2012 third quarter ended March 31, 2012.

"We’ve made significant progress towards achieving our strategic objectives and positioning Overland Storage for growth and profitability," said Eric Kelly, president and CEO of Overland Storage. "Our ability to sequentially grow revenue from our fiscal second to third quarter for the first time in five years confirms that the strategy we have established is beginning to take hold. In addition, our SnapServer DX Series revenue more than doubled, which further validates the investments we have made in these products."

Key Third Quarter Financial Results:
Net revenue for the third quarter of fiscal 2012 was $15.2 million, compared to $17.1 million for the third quarter of fiscal 2011 and $15.1 million in the second quarter of fiscal 2012. Product revenue for the third quarter of fiscal 2012 was $8.9 million, compared to $10.7 million in the third quarter of fiscal 2011, and $9.0 million in the second quarter of fiscal 2012.

Gross margin for the third quarter of fiscal 2012 was 31.1%, compared to 33.8% for the third quarter of fiscal 2011 and 33.2% for the second quarter of fiscal 2012. The impact on quarterly margin was primarily related to higher prices for disk drives used in Overland’s disk-based products that were a result of the flooding in Thailand in October 2011, as well as additional costs incurred while the company ramped up its new disk-based products.

Operating expenses for the third quarter of fiscal 2012 decreased to $8.4 million, down from $8.6 million for the third quarter of fiscal 2011, and down 9.4% from $9.3 million for the second quarter of fiscal 2012, as a result of ongoing operating efficiency efforts. Stock compensation expense was approximately $1.1 million in the third quarter of fiscal 2012, compared to $0.4 million for the third quarter of fiscal 2011 and $1.4 million for the second quarter of fiscal 2012. Depreciation and amortization was approximately $0.4 million in the third quarter of both fiscal 2012 and 2011.

Net loss for the third quarter of fiscal 2012 was $3.8 million, or a loss of $0.16 per share, compared to a net loss of $3.4 million, or a loss of $0.22 per share, in the third quarter of fiscal 2011 and a loss of $4.3 million, or a loss of $0.18 per share, in the second quarter of fiscal 2012.

Total cash and cash equivalents at March 31, 2012 was $13.4 million, compared to $10.2 million at June 30, 2011. At March 31, 2012, the company had $3.5 million outstanding under its credit facility.

Third Quarter Business Highlights:

The company achieved 22% sequential revenue growth in its disk-based products, compared to the second quarter of fiscal 2012, driven by stronger customer adoption of its new SnapServer DX Series product offerings.
The company achieved a 9.4% sequential improvement in operating expense compared to the second quarter of fiscal 2012.
The company sold an aggregate of 3,640,000 shares of common stock in March 2012, raising net proceeds of approximately $6.6 million.

Product Developments:

The company’s SnapServer DX Series introduced last October was named Hardware Product of the Year at the 2012 Network Computing Awards, and was runner up in the Data Centre Product of the Year category.
The company’s SnapServer DX2 began shipping in volume in May 2012.
The company announced the integration of IBM technology into its line of NEO tape libraries as part of a multi-year agreement that includes the ability to leverage IBM’s worldwide logistics and supply chain.

Patent Litigation:
In November 2011, the company entered into a multi-year settlement and cross-license agreement with IBM pursuant to which Overland released all claims it had against IBM and Dell in connection with the patent infringement lawsuits it filed in the United States District Court for the Southern District of California and with the United States International Trade Commission, or the ITC, against BDT AG and certain of its affiliates, Dell and IBM. However, Overland’s infringement case against BDT and its affiliates continues and the chief administrative law judge of the ITC stated that the initial determination date will be no later than May 24, 2012.