Overland: Fiscal 4Q12 Financial Results

Overland Storage Inc. reported financial results for its fiscal 2012 fourth quarter and full year ended June 30, 2012.

"We are very pleased with the progress we made in the past year to continue the transformation of our business in fiscal 2012. We introduced several significant new products, improved gross margins, lowered our operating expenses and received validation of two key patents in our intellectual property portfolio," said Eric Kelly, president and CEO of Overland Storage. "As we continue to make substantial operational improvements, we remain focused on innovative product introductions, accelerating our revenue growth and achieving profitability. In addition to greater sales from these new products, we expect to see acceleration in revenue growth as we enter the fourth calendar quarter from our recently launched SnapSAN solutions and our Scale-out NAS product, which is scheduled to launch as planned."

Financial Guidance
Overland reaffirms its guidance of non-GAAP profitability for the fourth quarter of calendar 2012 (excluding stock compensation and other non-cash items) with revenue in the range of $18 to $20 million and gross margins of 37% to 40%.

Fiscal 2012 Fourth Quarter and Full Year Highlights

• SnapServer DX Series product revenue was up 43.8% sequentially in the fourth quarter.
• SnapServer DX Series won Hardware Product of the Year at the 2012 Network Computing Awards and Storage Magazine named Best Disk Product for the Small to Medium Enterprise at the 2012 Storage Awards.
• Gross margins for fiscal 2012 improved 190 basis points year-over-year to 32.1% from 30.2%.
• Reduced fiscal 2012 total operating expenses 7.4% year-over-year, excluding stock compensation expense.
• Secured settlements with IBM and Dell in the ITC and U.S. District Court actions.
• Received validation from the ITC on two Overland patents in ongoing BDT infringement case.
• Filed patent infringement lawsuits in U.S. District Court against Quantum Corporation, Spectra Logic Corporation, PivotStor, Inc., Qualstar Corporation, Tandberg Data GmbH, Tandberg Data Corp., and Venture Corporation.

Fiscal Fourth Quarter Financial Results

Net revenue for the fourth quarter of fiscal 2012 was $15.3 million, compared to $17.6 million for the fourth quarter of fiscal 2011 and $15.2 million for the third quarter of fiscal 2012. Product revenue for the fourth quarter of fiscal 2012 was $9.4 million, compared to $10.9 million in the fourth quarter of fiscal 2011 and $8.9 million for the third quarter of fiscal 2012.

Gross margin for the fourth quarter of fiscal 2012 was 31.6%, compared to 32.5% for the fourth quarter of fiscal 2011 and 31.1% for the third quarter of fiscal 2012.

Operating expenses for the fourth quarter of fiscal 2012 were $8.5 million, a decrease of 7.6% from $9.2 million for the fourth quarter of fiscal 2011, and slightly higher than $8.4 million in the third quarter of fiscal 2012. Stock compensation expense was approximately $1.1 million in the fourth quarter of fiscal 2012, compared to $0.6 million for the fourth quarter of fiscal 2011 and $1.1 million for the third quarter of fiscal 2012. Depreciation and amortization was approximately $0.5 million in the fourth quarter of fiscal 2012, compared to $0.4 million in the fourth quarter of 2011.

Net loss for the fourth quarter of fiscal 2012 was $2.7 million, or a loss of $0.10 per share, compared to a net loss of $3.7 million, or $0.16 per share, in the fourth quarter of fiscal 2011 and a loss of $3.8 million, or $0.16 per share, in the third quarter of fiscal 2012.

Fiscal 2012 Financial Results

Net revenue for fiscal 2012 was $59.6 million, compared to $70.2 million for fiscal 2011. Product revenue for fiscal 2012 was $35.2 million, compared to $45.7 million for fiscal 2011.

Gross margin for fiscal 2012 was 32.1%, compared to 30.2% for fiscal 2011.

Operating expenses for fiscal 2012 were $36.2 million, compared to $36.8 million for fiscal 2011. Stock compensation expense for fiscal 2012 was approximately $5.0 million, compared to $3.1 million for fiscal 2011. Depreciation and amortization for fiscal 2012 was approximately $1.6 million, compared to $1.5 million for fiscal 2011.

Net loss for fiscal 2012 was $16.2 million, or a loss of $0.66 per share, compared to a net loss of $14.5 million, or a loss of $0.94 per share, for fiscal 2011.

Total cash and cash equivalents at June 30, 2012 was $10.5 million, compared to $10.2 million at June 30, 2011. At June 30, 2012, the company had $3.5 million outstanding under its credit facility.

Patent Litigation
In November 2011, the company entered into a multi-year settlement and cross-license agreement with IBM pursuant to which Overland released all claims it had against IBM and Dell in connection with the patent infringement lawsuits it filed in the United States District Court for the Southern District of California and with the United States International Trade Commission (ITC) against BDT AG and certain of its affiliates, Dell and IBM. However, Overland’s infringement case against BDT and its affiliates continues and on June 21, 2012, the chief administrative Law Judge of the ITC issued a public notice of an initial determination affirming that both of Overland’s asserted patents are valid. Overland Storage has petitioned the full Commission for a review of some of the Initial Determination’s findings. The Commission has decided to review in part the Initial Determination on the merits, and the Commission is expected to issue its decision in a Final Determination by October 22, 2012. Upon completion of the ITC case, Overland plans to pursue monetary damages against BDT in District Court.