Preliminary Revenue of Sphere 3D for 3FQ17 Expected at $21.5 Million

Sphere 3D Corp. is providing the following corporate update.

The company continues to make progress on multiple fronts as it works through its assessment of strategic alternatives. Concurrent with such review, the company continues to focus on driving its overall business towards profitability.

It reports that its preliminary net revenue for the third quarter of fiscal year 2017 is expected to exceed $21.5 million, representing a 16% increase compared to $18.5 million for the third quarter of 2016, and an 11% increase compared to $19.4 million from the previous quarter.

In addition, the company was able to make improvements to its adjusted EBITDA loss for the third quarter of fiscal 2017. Although still preliminary, the company anticipates that the adjusted EBITDA loss will be at the lowest level since it began reporting this non-GAAP metric in the fourth quarter of 2014.   

The company maintained reductions in operating expenses with a slight improvement in the third fiscal quarter of 2017 compared to the second quarter of 2017; the company continues to evaluate its operating expenses to seek opportunities for additional improvements.

As reported earlier this year, the company refined its go-to-market approach through the creation of a storage group that is branded as the Overland-Tandberg storage business group and the virtualization group marketed under the HVE brand.

Subsequent to this, and a byproduct of the strategic review being undertaken, the company has completed an analysis of its data protection and archive products (which includes RDX, tape, media and related services) and associated costs as a pro-forma business unit within the Overland-Tandberg storage business group. This analysis shows that as a standalone business unit, it would have seen positive adjusted EBITDA for each of the last eight quarters. It believes this product group could see additional growth and profitability with a number of recent product launches, such as its RDX Ransom Block solution and the NEO Agility LTFS product line with its new features that enable integration with Microsoft Azure Cloud. The company continues to review the overall business with an eye towards unlocking potential value for stakeholders.

Recent Corporate Developments

• Favorable ruling and dismissal of the Special Situations Funds complaint in its entirety with prejudice by the Commercial Division of the Supreme Court of the State of New York; Special Situation Funds had sought $6.0 million in contractual damages, plus costs and fees
• Extended the Opus Credit Agreement maturity date to March 31, 2018
• Engagement with EYCA as its exclusive financial advisor to review a broad range of strategic options 
   

Business HVA Key Milestones

• has won Huawei Americas Partner of the Year for the 2nd year in the row
  recently announced another customer contract win with a value that exceeds $1 million
• announced during VMworld, in August of this year, multiple product offerings that leverage a range of Sphere technologies
• Overland-Tandberg announced earlier in October the Overland-Tandberg rdxLOCK and RansomBlock functionality to defend against enterprise software security threats like Ransomware

“We are excited to see the positive momentum from our business restructuring earlier this year to move to a distinct focus on the Virtualization market through our HVE brand, and the storage market through our Overland-Tandberg brand,” said Eric Kelly, chairman and CEO for Sphere 3D. “Our total top line results continue to improve because we are better equipped to support the unique market dynamics for each of these product groups.  Also, we have seen a significant improvement in our bottom line, based on the preliminary adjusted EBITDA numbers in the third quarter. Maintaining these demonstrated improvements in operational efficiencies will help keep us on our path to profitability.”