Overland: Fiscal 2Q13 Financial Results

Overland Storage, Inc. reported financial results for its fiscal 2013 second quarter ended December 31, 2012.

"During the second fiscal quarter, we experienced strong demand, compared to the preceding quarter, which was reflected in our unit sales across all product lines including a 34% increase in SnapServer, a 30% increase in NEO Tape Libraries, and a 21% increase in SnapSAN," said Eric Kelly, president and CEO of Overland Storage. "In addition, we achieved 42% sequential revenue growth in Europe. With the release of our new clustered NAS product, SnapScale X2, last October, we have significantly expanded our total addressable market, and we continue to see a growing pipeline of new primary storage opportunities generated by our SnapSAN and SnapScale X2 clustered NAS solutions. In addition, we were pleased to announce today a $14.25 million financing comprised of convertible notes and equity. We plan to use this additional capital to fund further growth and capitalize on the substantial opportunities we see ahead."

Second Quarter Fiscal 2013 Financial Results
Net revenue for the second quarter of fiscal 2013 was $12.6 million, up 8% sequentially from $11.7 million for the first quarter of fiscal 2013, and down 17% from $15.1 million in the second quarter of fiscal 2012.

Product revenue for the second quarter of fiscal 2013 was $7.8 million, up 18% sequentially from $6.6 million for the first quarter of fiscal 2013, and down 14% from $9.1 million in the second quarter of fiscal 2012.

Gross margins of 36.5% for the second quarter of fiscal 2013 were up 280 basis points sequentially from 33.7% in the first quarter of fiscal 2013, and up over 300 basis points from 33.2% in the second fiscal quarter of 2012.

Operating expenses for the second quarter of fiscal 2013 were $8.7 million, compared to $8.6 million in the first quarter of fiscal 2013 and $9.3 million for the second quarter of fiscal 2012.

Depreciation and amortization was $0.3 million in the second quarter of fiscal 2013 compared to $0.3 million in the first fiscal quarter of 2013 and $0.4 million in the second quarter of fiscal 2012.

Stock compensation expense was $1.3 million in the second quarter of fiscal 2013, compared to $1.3 million for the first quarter of fiscal 2013 and $1.4 million for the second quarter of fiscal 2012.

Net loss for the second fiscal quarter of 2013 was $4.3 million, or a loss of $0.15 per share, compared to a net loss of $4.9 million, or a loss of $0.17 per share, in the first quarter of fiscal 2013 and a net 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 December 31, 2012 was $3.2 million, compared to $10.5 million at June 30, 2012. At December 31, 2012, the company had $3.5 million outstanding under its credit facility.

Product Developments

• Released new clustered NAS product SnapScale X2 in October 2012, expanding the company’s addressable market opportunity to include the $14 billion scale-out NAS market.
• Released 10GbE for SnapScale X2 clustered NAS solutions.
• First to market and first to ship LTO6 drives in NEO Series tape product portfolio.
• Granted U.S patent covering clustered file system technology for large-scale computer file storage.

Patent Litigation
Based on the United States International Trade Commission’s (ITC) evaluation of its ‘581 mail slot patent, Overland filed a petition on November 8, 2012 arguing that claims 10, 12 and 16 meet the new definition of ‘linear array’ put forward by the Commission, and thus the ITC now should decide for the first time whether the BDT products include all the other elements of these claims. If the ITC remands the ‘581 infringement issue on this basis, the Administrative Law Judge could find BDT’s products infringe claims 10, 12 and 16, which Overland believes would result in BDT no longer being allowed to ship products with mail slots into the United States.

Overland reported on October 26, 2012 that the ITC released a Notice of Commission Decision in the infringement action filed by Overland Storage against IBM, Dell and BDT. Overland has previously reported that its ITC and District Court actions against IBM and Dell have been resolved by settlement. The Notice of Commission Decision makes several key findings regarding Overland Storage’s U.S. Patent No. 6,328,766, which relates to partitioning media elements in automated media devices, and its U.S. Patent No. 6,353,581, which relates to the ‘mail slot’ feature in automated media devices. Overland views this decision by the full Commission as beneficial to pursuing patent suits in civil court and another step in the process of proving that BDT and others in the data storage industry have been using Overland’s intellectual property without permission. The company’s infringement case against BDT and its affiliates continues and Overland plans to pursue monetary damages against BDT in District Court.

To read the earnings call transcript