Sphere 3D: Fiscal 2Q17 Financial Results

Sphere 3D Corp. reported financial results for its second quarter ended June 30, 2017.

“The HVE/UCX acquisition revenue in its first 5 months currently puts us on an annualized run-rate to exceed 50% growth for HVE/UCX, and its integration with the Sphere 3D core technology portfolio will allow us to continue to be a technology leader in several of the fastest growing sectors in the industry,” said Eric Kelly, chairman and CEO. “As our virtualization business gains momentum, we are leveraging our existing Sphere 3D partnerships as well as building new ones both domestically and internationally and have a renewed focus on driving growth in the second half of the year. Meanwhile, we have continued to work toward the goal of improving our operational efficiencies, achieving greater than a 52% improvement in adjusted EBITDA in the first half of the year.“

Six Months Ended June 30, 2017 Financial Results:

• Net revenue was $41.2 million, compared to $39.2 million for the first six months of 2016.
• Product revenue was $36.5 million, compared to $34.8 million for the first six months of 2016.
• Disk systems revenue was $26.5 million, compared to $24.0 million for the first six months of 2016. Disk systems is defined as RDX, SnapServer family, V3 VDI, and Glassware derived products.
• Tape archive product revenue was $10.0 million compared to $10.8 million for the first six months of 2016.
• Service revenue was $4.6 million, compared to $4.4 million in the first six months of 2016.
• Gross margin was 29.7%, compared to 30.0% for the first six months of 2016. Non-GAAP gross margin for the first six months of 2017 was 32.4%, compared to 33.0% for the first six months of 2016.
• Operating expenses were $23.1 million, compared to $27.6 million for the first six months of 2016.
• Share-based compensation expense was $3.7 million, compared to $4.7 million for the first six months of 2016. Depreciation and amortization was $3.1 million, compared to $3.2 million in the first six months of 2016.
• Net loss was $15.3 million, or a net loss of $4.22 per share, compared to a net loss of $17.7 million, or a net loss of $9.29 per share, in the first six months of 2016.
• Adjusted EBITDA was a net loss of $3.6 million, or a net loss of $0.99 per share, based on 3.6 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $7.6 million, or net loss of $4.01 per share based on 1.9 million weighted average shares outstanding for the first six months of 2016.
   

Second Quarter 2017 Financial Results:

• Net revenue was $19.4 million, compared to $19.6 million for the second quarter of 2016.
• Product revenue was $17.1 million, compared to $17.5 million for the second quarter of 2016.
• Disk systems revenue was $11.5 million, compared to $11.8 million for the second quarter of 2016. Disk systems is defined as RDX, SnapServer family, V3 VDI, and Glassware derived products.
• Tape archive product revenue was $5.6 million compared to $5.7 million for the second quarter of 2016.
• Service revenue was $2.3 million, compared to $2.1 million in the second quarter of 2016.
• Gross margin was 27.7%, compared to 29.6% for the second quarter of 2016. Non-GAAP gross margin for the second quarter of 2017 was 30.6%, compared to 32.6% for the second quarter of 2016.
• Operating expenses were $11.5 million, compared to $13.8 million for the second quarter of 2016.
• Share-based compensation expense was $1.5 million, compared to $2.1 million for the second quarter of 2016. Depreciation and amortization was $1.5 million, compared to $1.6 million in the second quarter of 2016.
• Net loss was $7.5 million, or a net loss of $1.81 per share, compared to a net loss of $9.6 million, or a net loss of $4.86 per share, in the second quarter of 2016. All share and per share numbers in this press release reflect the 1-for-25 share consolidation that was effective on July 11, 2017.
• Adjusted EBITDA was a net loss of $2.6 million, or a net loss of $0.64 per share, based on 4.1 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $4.6 million, or net loss of $2.30 per share based on 2.0 million weighted average shares outstanding for the second quarter of 2016. Adjusted EBITDA is a non-GAAP measure presented as net loss before interest expense, income taxes, depreciation and amortization, share-based compensation, and warrant revaluation gain.

To read the earnings call transcript