Sphere 3D/Overland/Tandberg: Fiscal 1Q15 Financial Results

Sphere 3D Corp. reported financial results for its first quarter ended March 31, 2015.

“Our core data management business continues to deliver a solid revenue foundation that has enabled us to remain focused on our expansion into the fast growing virtualization markets,” said Eric Kelly, CEO. “We see positive channel partner and customer feedback on our strategy to position the company for growth. In the near future, we plan to roll out our new hybrid cloud architecture for the virtual workspace environment. This will allow organizations to deploy their applications and data into a combination of public, private or hybrid cloud solutions.”

First Quarter 2015 Financial Results:

The following financial results include contribution from the acquisition for the full three months, which contribution is not reflected in the comparative results for the first quarter of 2014.

• Net revenue was $20.1 million, compared to $0.9 million for the first quarter of 2014.
• Product revenue was $17.2 million, compared to $0.8 million for the first quarter of 2014. Disk systems and virtualization revenue was $10.0 million, compared to $0.8 million for the first quarter of 2014. Archive product revenue was $7.2 million compared to none for the first quarter of 2014. Service revenue was $2.9 million, compared to $0.1 million in the first quarter of 2014.
• Gross margin was 29.6%, compared to 56.9% for the first quarter of 2014. Non-GAAP gross margin for the first quarter of 2015 was 32.7%.
• Operating expenses were $13.6 million, compared to $1.3 million for the first quarter of 2014.
• Share-based compensation expense was $0.7 million in the first quarter of both 2015 and 2014. Depreciation and amortization was $2.0 million in first quarter of 2015, compared to $0.1 million in the first quarter of 2014.
• Net loss was $9.5 million, or a loss of $0.27 per share, compared to a net loss of $0.8 million, or a loss of $0.04 per share, in the first quarter of 2014.
• Adjusted EBITDA was a net loss of $6.1 million, or a net loss of $0.18 per share, based on 35.0 million weighted average shares outstanding, compared to adjusted EBITDA of $41,000, or $0.00 per share based on 21.7 million weighted average shares outstanding for the first quarter of 2014. Adjusted EBITDA is a non-GAAP measure presented as net loss before interest expense, income taxes, depreciation and amortization and share-based compensation.
• Cash and cash equivalents at March 31, 2015 were $4.4 million, compared to $4.3 million at December 31, 2014. The company had $9.9 million outstanding under its credit facilities and $19.5 million outstanding under its notes from related parties at March 31, 2015.

Corporate Highlights:

• As announced earlier, Sphere 3D has entered into definitive agreements for a non-brokered private placement of shares of its common stock and warrants for a gross purchase price of approximately$4.1 million.
• In addition to the equity agreement, FBC Holdings S.A.R.L. has agreed in principal to increase the existing revolving credit facility by an additional $5 million. The terms of the increase are expected to be the same as the current agreement.

Business Highlights:

• As previously announced, Sphere 3D, in collaboration with Microsoft, is leveraging its virtualization and storage technologies with Microsoft Azure to simplify and accelerate customers’ transitions to cloud-integrated solutions.
  Sphere 3D has announced a series of events titled “Technologies to Power the Next Cloud” with venues at Microsoft Technology Centers in Silicon Valley, New York, Toronto and London. During these events, Sphere 3D will present its hybrid cloud-enabling technologies, including Glassware 2.0 Windows container technology for application delivery, and the latest in its virtualized storage technologies for enterprise hybrid cloud infrastructure, to a combined audience of Microsoft and Sphere 3D channel partners.
• Sphere 3D announced a strategic alliance with a regional service center in the southern United States to support the digital learning needs of over a million public school students. Under the terms of this alliance, the education service center will provide technology integration to regional schools, and is certified to resell, promote, service and support Sphere 3D’s virtualization and data management product portfolio. This partnership aligns with Sphere 3D’s strategy to securely deliver Windows applications and specialized educational and digital learning software on a number of end user client devices certified for use in the education sector.
• Sphere 3D’s SnapScale technology is gaining traction with a number of wins, including the recently-announced deployment with the LISA scientific research institution in France to protect its primary scientific research data. The renewed interest in SnapScale is attributable in large part to its patented Peer Set protection technology which ensures the HA of its storage infrastructure, simplicity of deployment and scalability to accommodate increasing data capacity needs.
• The V3 platform was added to the GSA listing in Q1 2015. This will position our hyper-converged platform to take advantage of government sales opportunities.