Crossroads: Fiscal 2Q12 Financial Results

Crossroads Systems, Inc. reported financial results for its fiscal second quarter ended April 30, 2012.

StrongBox Highlights

• Formally launched StrongBox, a LTFS NAS solution, into the media and entertainment vertical at the 2012 NAB Show, presenting and demonstrating to hundreds of prospective customers.
• Publicly introduced research supporting an 80 percent cost savings by using StrongBox against disk-based NAS solutions.
• Fujifilm introduced the first tape-based cloud storage product built entirely on StrongBox.
• First quarter revenue was recognized from multiple StrongBox shipments.

Fiscal Q2 2012 Financial Results
Revenue for fiscal Q2 2012 increased 34% to $3.5 million from $2.6 million in the same quarter a year ago. The increase was primarily due to a 74% increase in product revenue from fiscal Q2 2011 mainly due to a one-time corporate RVA software license to a customer, not including the roll-out of systems across the corporation.

Gross profit for fiscal Q2 2012 was $3.1 million or 89% of total revenue, as compared to $2.2 million or 86% of total revenue in the same quarter a year ago. The increase in gross profit as a percent of revenue was due to the product mix.

Operating expenses for fiscal Q2 2012 remained consistent with the same period a year ago at $5.1 million, which included $416,000 of stock-based compensation in Q2’12 and $83,000 of stock-based compensation in Q2’11. Not including stock-based compensation, operating expenses decreased due to non-recurring engineering (NRE) reimbursements from strategic partners.

Net loss for fiscal Q2 2012 totaled $2.1 million or $(0.19) per share, as compared to a net loss of $2.9 million or $(0.26) per share in the same quarter a year ago.

At April 30, 2012, cash and cash equivalents and short-term investments totaled $9.9 million, as compared to $9.2 million in the previous quarter. Cash burn from operations was $300,000, a substantial improvement year over year and from Q1 2012 reported cash flow from operations. The improvement in cash flow from operations was driven by increased product revenues, NRE from strategic partners, which is presented on the income statement as a reduction in research and development expenses, as well as additional NRE payments from a strategic partner, presented on the balance sheet as a cash asset and accrued liability.

Management Commentary
Rob Sims, president and CEO of Crossroads Systems, commented: "I’m pleased to report that our financial performance for fiscal Q2 2012 improved meaningfully as compared to the same period a year ago. I mentioned in my comments from our Q1 2012 results that we had a strong backlog of orders for our StrongBox storage product that would become evident in the coming quarters. We were able to recognize revenue in Q2 as a result of multiple shipments of StrongBox to several customers. The pace of our activity continued from Q1 as we built upon the momentum of our go-to-market strategy for StrongBox and we’re on target for continued revenue recognition of StrongBox sales to three target vertical markets: media entertainment, medical imaging, and video surveillance. We also hope to build on the favorable press received in Q2 around the StrongBox solution by attracting additional strategic alliances and partnerships."