Overland: Fiscal 2Q14 Financial Results

(in $ million)	2Q13	2Q14	6 mo. 13	6 mo. 14
Revenues	12.6	10.6	24.3	21.2
*Growth*		-16%		*-13%*
Net income (loss)	(4.3)	(4.3)	(9.1)	(8.9)

Overland Storage, Inc. reported financial results for its fiscal 2014 second quarter ended December 31, 2013.

Eric Kelly, president and CEO, Overland, said: “We feel very good about our recent acquisition of Tandberg Data and are moving forward with the integration of the two companies. We are focused on leveraging key areas where we believe we can drive growth in the business, and believe the combination of the two companies provides the scale and resources required for Overland to become a profitable and growing company. In addition, as we continue to work to expand our set of innovative products, our overall vision is to securely store data and provide access to the applications and information from any device. We believe the integration of our storage technology, virtualization engines and the mobility platform will address the needs of our customers and one of the fastest growing segments of the storage market in a way that no other company has been able to do in the past.”

Recent Highlights:

Completed acquisition of Tandberg Data Holdings S.à r.l., a privately held global leader of storage and data protection solutions in January 2014.
Expanded relationship with Sphere 3D Corporation through Sphere’s announced agreement to acquire the product portfolio of V3 Systems, creating a new purpose built VDI appliance and software defined storage solution which would include Overland’s NAS platform and be delivered through Overland’s channel partners.

Second Quarter Fiscal 2014 Financial Results
Net revenue for the second quarter of fiscal 2014 was $10.6 million, compared to $12.6 million for the second quarter of fiscal 2013 and $10.6 million in the first quarter of fiscal 2014. Product revenue for the second quarter of fiscal 2014 was $6.6 million, compared to $7.8 million for the second quarter of fiscal 2013 and $6.1 million in the first quarter of fiscal 2014.

Gross margin for the second quarter of fiscal 2014 was 34.5%, compared to 36.5% for the second quarter of fiscal 2013 and 33.7% in the first quarter of fiscal 2014.

Operating expenses for the second quarter of fiscal 2014 were $8.2 million, compared to $8.7 million in the second quarter of fiscal 2013 and $7.7 million for the first quarter of fiscal 2014. Stock compensation expense was $0.8 million in the second quarter of fiscal 2014, compared to $1.3 million in the second quarter of fiscal 2013 and $0.9 million in the first quarter of fiscal 2014. Depreciation and amortization was $0.3 million in both the second quarters of fiscal 2014 and 2013, and in the first quarter of fiscal 2014.

Net loss for the second quarter of fiscal 2014 was $4.3 million, or a loss of $0.12 per share, compared to a net loss of $4.3 million, or a loss of $0.15 per share, in the second quarter of fiscal 2013 and a net loss of $4.6 million, or a loss of $0.15 per share, in the first quarter of fiscal 2014.

Cash and short-term investments at December 31, 2013 were $9.6 million, compared to cash of $8.8 million at June 30, 2013. At December 31, 2013, the company had $3.5 million outstanding under its credit facility and $7.5 million outstanding under its convertible notes. In January 2014, additional convertible notes having a principal amount of $2.0 million were issued.

Comments

Eric Kelly, president and CEO:
"If we look back at calendar year 2013 for both Overland and Tandberg, the combination company revenue mix would look like this: disk-based solutions comprising approximately 34% of total revenue; service and royalty representing 23%; tape automation, 22% of total revenue; and tape accessories, drives and media making up the remaining 21%. Approximately 79% of the companies' combined revenue came from our channel partners and the remaining 21% from OEM partners.
"In fact, with our partnership with Sphere 3D and V3 Systems, we began building the V3 Systems virtual desktop appliance in December. We currently have beta customers using this enterprise mobility product on both the appliance and on the cloud. We plan to introduce a suite of workforce mobility products into the market over the course of this calendar year beginning with a phased rollout of our appliance product within the first half of this calendar year. As we noted before, we will offer this innovative products in 2 different delivery models: one, as an appliance to be installed at the customer location; and the other, as a cloud solution."

Kurt Kalbfleisch, CFO:
"Total product revenue for the second quarter of fiscal 2014 was $6.6 million, compared to $7.8 million in the same quarter of fiscal 2013, and up from $6.1 million in the immediately preceding quarter.
"Warranty and service revenue in the second quarter of fiscal 2014 totaled $4 million or 38% of total Q2 revenue, compared to $4.8 million or 38% of revenue in the same quarter last year, and $4.5 million or 42% of revenue in the immediately preceding quarter.
Tape revenue in the second quarter increased 10% sequentially or approximately $280,000, compared to immediately preceding quarter, but decreased 28%, or approximately $1.2 million year-over-year, compared to the second quarter fiscal 2013. The majority of the year-over-year decrease was due to a reduction in add-on drives and decreased volume in our lower-end tape library product in both EMEA and the Americas channel.
"EMEA tape revenue increased 29% or $357,000 sequentially, but decreased 33% or $774,000 from the same quarter in the prior year. Americas tape revenue was down only $41,000 sequentially, but 25% of $415,000 from the second quarter of fiscal 2013. And APAC tape revenue decreased 10% sequentially, but was up 18% year-over-year, although off a small base. Disk revenue worldwide in the second quarter decreased approximately 5% sequentially from the immediately preceding quarter and was up 3% or approximately $71,000 over the same quarter in the prior year.
"Revenue in the second quarter of fiscal 2014 for the SnapServer DX Series was $1.6 million. Although this was a decrease from the immediately preceding quarter revenue of $1.9 million, the difference was related to a single large order which shipped at the end of the second quarter fiscal 2013. For the first 2 quarters of fiscal 2014, SnapServer DX Series revenue was up 14% when compared to the same period in the prior year."