Crossroads: Fiscal 4Q13 Financial Results

(in $ million)	4Q12	4Q13	FY12	FY13
Revenue	4.4	3.6	14.0	12.6
*Growth*		-20%		*-10%*
Net income (loss)	(2.6)	(2.3)	(10.7)	(12.1)

Crossroads Systems, Inc. reported financial results for its fiscal fourth quarter and full year ended October 31, 2013.

Fiscal Q4 and Full Year 2013 Financial Results
Total revenue for fiscal Q4 2013 decreased 20% to $3.6 million from $4.4 million in the same quarter a year ago. The decrease was mainly due to decreases in our legacy OEM business.

Total revenue for the fiscal full year 2013 decreased 10% to $12.6 million from $14.0 million in the prior year. The decrease was due to a decrease in sales to one large customer of our Read Verify Appliance and decreases in our legacy OEM business. The decreases were partially offset by an increase in revenue from our StrongBox product.

Gross profit for fiscal Q4 2013 was $2.8 million or 80% of total revenue, compared to $3.1 million, or 70% of total revenue in the same quarter a year ago. Gross profit for fiscal year 2013 was $9.5 million or 75% of total revenue, compared to $11.1 million or 79% of total revenue in fiscal 2012. The period-to-period decreases in gross profit were mainly due to a decrease in total revenue. The year-over-year decrease in gross profit as a percentage of revenue was primarily due to lower margin service revenue from Iron Mountain.

Operating expenses for fiscal Q4 2013 totaled $4.9 million, compared to $5.7 million in the same period a year ago. Operating expenses for fiscal year 2013 totaled $22.1 million, compared to $21.5 million in the prior year. The year-over-year increase was primarily due to StrongBox product launch expenses and increases in professional fees associated with our preferred stock and Fortress financing activities and other securities law compliance matters. On October 24, 2013 we reduced our workforce by approximately 40%. Corresponding expense reductions will be reflected in future reporting periods.

Net loss available to common stockholders for fiscal Q4 2013 totaled $2.3 million or $(0.19) loss per share, compared to a net loss of $2.6 million or $(0.23) loss per share in the same quarter a year ago. Net loss available to common stockholders for fiscal year 2013 totaled $14.3 million or $(1.20) loss per share, compared to a net loss of $10.7 million or $(0.95) loss per share in fiscal 2012. Approximately $1.5 million of other income is attributable to the change in value of the derivative instrument issued in connection with our March 2013 preferred stock private placement. These derivative instruments will be marked to market each quarter and a change in the value of the derivative instruments may cause fluctuations in our loss per share from quarter to quarter.

At October 31, 2013, cash and cash equivalents totaled $7.8 million compared to $9.9 million in the previous quarter.

Richard K. Coleman, Jr., president and CEO, said: “During the fourth quarter, we saw continued growth and market acceptance for our StrongBox product. StrongBox revenue from unit sales and licenses was up 33% over the prior quarter, and total revenue was up 27% over the prior quarter. The positive momentum in product sales, along with our recent expense reductions, positions us to be cash flow positive from operations in fiscal year 2014.”