Overland: Fiscal 1Q10 Financial Results

Overland Storage, Inc. reported first quarter results for its fiscal quarter ended September 30, 2009.

"While these remain difficult economic times, Overland is focused on what will enable us to succeed in the long term – rightsizing our operations to bring them more in line with expectations and innovating for future growth," said Eric L. Kelly CEO of Overland Storage. "We have completed a successful fundraising effort and launched a new product with our recently announced strategic manufacturing partner Foxconn. With these actions and the capital we have raised, we now have the flexibility to continue to execute on a business strategy that will allow us to succeed in the long term."

Net revenue for the fiscal 2010 first quarter was $19.3 million, compared with $32.3 million for the same period a year ago, a decrease of 40.2 percent. The company reported a net loss of $3.7 million, or $0.29 per share, for the fiscal 2010 first quarter, compared with a net loss of $6.9 million, or $0.54 per share, for the same period a year earlier.

Compared to the prior-year quarter, branded-product sales declined 48.8 percent and service-related sales were constant at $5.7 million, while sales to OEM customers declined 50.5 percent. The declines noted are consistent with the company’s expectations during the realignment of Overland’s sales organization to focus on branded products and a change in product mix.

Gross-profit margin percentage of 27.0 percent remained unchanged compared to the same period a year ago due primarily to cost-saving initiatives and improved operational efficiencies implemented during fiscal 2009.

Operating expenses decreased for the fiscal 2010 first quarter to $8.4 million from $15.6 million in the fiscal 2009 first quarter. The decrease in operating expenses is primarily attributable to Overland’s fiscal 2009 restructuring activities. Operating expenses increased slightly on a sequential basis from $8.2 million in the fiscal 2009 fourth quarter. The increase was primarily attributable to $0.2 million in excess severance expenses associated with fiscal 2009 fourth quarter restructuring activities and $0.2 million in legal expenses associated with the 2010 restructuring activities and strategic planning. As adjusted to exclude these net charges of $0.4 million in the fiscal 2010 first quarter, operating expenses were $8.0 million, showing a decrease of 2.4 percent compared to operating expenses of $8.2 million in the fiscal 2009 fourth quarter. Adjusted operating expense is a non-GAAP measure, which management believes facilitates a better understanding of the impact of our restructuring activities on Overland’s results.

Cash at September 30, 2009 was $4.0 million, a 27.3 percent decrease from $5.5 million as of June 30, 2009. During the fiscal 2010 first quarter, the company made $0.4 million in payments toward the Adaptec note, and as of September 30, 2009, the balance on the Adaptec note was $0.7 million. Current liabilities associated with the company’s non-OEM accounts receivable financing arrangements, including interest, remained constant at $4.2 million as of September 30, 2009 compared to June 30, 2009.