Sphere 3D: Fiscal 3Q15 Financial Results

Sphere 3D Corp. reported financial results for its third quarter ended September 30, 2015.

“In the third quarter, we have made significant steps in the market toward scaling and driving broad adoption of our Enterprise cloud infrastructure offerings,” said Eric Kelly, CEO. “We sequentially grew revenue despite some partner headwinds. We believe we have positioned the company to drive revenue growth as enterprises shift to using any device, on any network, on any cloud, anywhere through our unique cloud-ready technologies like the Glassware 2.0 platform and SnapServer / SnapCloud products.”

Third Quarter 2015 Financial Results:

The following financial results for the third quarter of 2015 include contribution from the Overland Storage acquisition for the full three months, and the contribution from the Imation RDX acquisition since August 10th, 2015, which contribution is not reflected in the comparative results for the third quarter of 2014.

• Net revenue for the third quarter of 2015 was $18.8 million, compared to $1.5 million for the third quarter of 2014.
• Product revenue for the third quarter of 2015 was $16.1 million, compared to $1.3 million for the third quarter of 2014.
• Disk systems revenue was $10.1 million, compared to $1.3 million for the third quarter of 2014.
• Tape archive product revenue was $6.0 million compared to none for the third quarter of 2014.
• Service revenue was $2.7 million, compared to $0.2 million in the third quarter of 2014.
   

Gross margin for the third quarter of 2015 was 29.2%, compared to 37.1% for the third quarter of 2014. Non-GAAP gross margin for the third quarter of 2015 was 33%.

Operating expenses for the third quarter of 2015 were $14.5 million, compared to $4.0 million for the third quarter of 2014.
 
Share-based compensation expense for the third quarter of 2015 was $2.7 million, compared to $0.8 million for the third quarter of 2014. Depreciation and amortization was $1.8 million in third quarter of 2015, compared to $1.1 million in the third quarter of 2014.
 
Net loss for the third quarter of 2015 was $10.2 million, or a net loss of $0.26 per share, compared to a net loss of $3.5 million, or a net loss of $0.15 per share, in the third quarter of 2014.
 
Adjusted EBITDA for the third quarter of 2015 was a net loss of $4.6 million, or a net loss of $0.12 per share, based on 38.7 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $0.9 million, or net loss of $0.04 per share based on 23.6 million weighted average shares outstanding for the third quarter of 2014.
 
Cash and cash equivalents at September 30, 2015 were $5.1 million, compared to $4.3 million at December 31, 2014. The company had $10.3 million outstanding under its credit facilities ($5.0 million of which is from related parties) and $19.5 million outstanding under its notes from related parties as of September 30, 2015.

Recent Corporate and Business Highlights:

• As was announced on October 15, 2015, Sphere 3D’s Glassware 2.0 powered Exosphere on Microsoft Azure, which is its scalable and secure cloud application delivery solution targeted for 10,000 users and above, is now available through direct solutions sales engagement. Also, G-Series cloud on Azure (powered by Glassware 2.0) is on track for availability in the Azure Marketplace by the end of November 2015.
• On October 15, 2015, Sphere 3D co-hosted with Microsoft a Worldwide Infopedia webinar where Exosphere, G-Series, and SnapCloud offerings on Azure were presented. Webinar attendees included Microsoft partners, Microsoft salespeople, and end-user customers.
• In October 2015, two planned product deployments over the next three years were announced: 1) Sphere 3D signed a master agreement with iPro to deploy virtualization solutions to over 200 healthcare locations, representing an estimated $13 million over three years if fully implemented, and 2) Sphere 3D partnered with the Region 6 Education Services Center in Texas to offer technology modernization capabilities to over 8,000 public schools, representing an estimated $20 million in revenue from the deployment over the next three years.
• In October 2015, Sphere 3D launched a leasing program to give partners an additional purchasing alternative to offer to its customer base. The program applies to the entire portfolio of Sphere 3D’s on-premise products and is available to Sphere 3D channel partners in North America.
• In November, 2015, Sphere 3D reported that its board of directors granted inducement restricted stock units to a total of 11 individuals, for an aggregate 458,000 shares of its common stock. These grants vest over a multi-year vesting period, subject to the grantee’s continued employment with the company through the applicable vesting date. The RSUs were granted as an inducement material to employment in accordance with NASDAQ Listing Rule 5635 (c)(4).