Sphere 3D: Fiscal 4Q17 Financial Results

Sphere 3D Corp. reported financial results for its fourth quarter and fiscal year ended December 31, 2017.

“With a year over year revenue increase of over $5 million, I am pleased to report we closed 2017 with momentum and have laid the foundation for growth. Moreover, we demonstrated our continued commitment to improving operational efficiencies through a reduction of nearly $6 million in operating expense for the year which helped reduce our adjusted EBIDTA losses by over 50%,” said Eric Kelly, chairman and CEO. “We have executed on our goal to promote both the virtualization business through our HVE brand, and the storage business through our Overland-Tandberg brand. As market awareness for our products increases, we believe we are well positioned to continue to grow our business.”

Fiscal Year Financial Results:
• Net revenue for 2017 was $81.5 million, compared to net revenue of $76.4 million for 2016. 
• Product revenue for 2017 was $72.8 million, compared to product revenue of $68.1 million for 2016.
• Disk systems revenue was $52.5 million, compared to $46.8 million for 2016. Disk systems is defined as RDX, SnapServer family, VDI, and Glassware derived products.
• Tape archive revenue was $20.3 million, compared to $21.3 million for 2016.
• Service revenue was $8.7 million, compared to $8.3 million for 2016.
• Gross margin for 2017 was 30.3%, compared to 29.2% for 2016. Non-GAAP gross margin for the  2017 was 33.1%, compared to 32.3% for 2016.
• Operating expenses for 2017 were $48.6 million, compared to $86.2 million for 2016. Operating expenses included $2.5 million of impairment of acquired intangible assets for 2017, and $34.4 million of impairment of goodwill and acquired intangible assets for 2016.
• Share-based compensation expense for 2017 was $7.8 million, compared to $9.1 million for 2016. Depreciation and amortization was $6.1 million in 2017, compared to $6.2 million in 2016.
• Net loss for 2017 was $26.2 million, or a loss of $5.26 per share, compared to a net loss of $68.5 million, or a loss of $34.42 per share, for 2016.
• Adjusted EBITDA for 2017 was a loss of $6.6 million, or a net loss of $1.32 per share, based on 5.0 million shares outstanding, compared to an adjusted EBITDA of a loss of $14.1 million in 2016, or a net loss of $7.08 per share, based on 2.0 million shares outstanding.
• The preceding financial results for the full year of 2017 include contribution from acquisitions of Unified ConneXions, Inc and HVE ConneXions, LLC in January 2017.

Fourth Quarter 2017 Financial Results:
• Net revenue for the fourth quarter of 2017 and 2016 was $18.7 million. 
• Product revenue for the fourth quarter of 2017 was $16.7 million, compared to $16.8 million for the fourth quarter of 2016.
• Disk systems revenue was $11.9 million, compared to $11.6 million for the fourth quarter of 2016. Disk systems is defined as RDX, SnapServer family, VDI, and Glassware derived products.
• Tape archive product revenue was $4.8 million compared to $5.2 million for the fourth quarter of 2016.
• Service revenue for the fourth quarter of 2017 was $2.0 million, compared to $1.9 million in the fourth quarter of 2016.
• Gross margin for the fourth quarter of 2017 was 30.7%, compared to 28.9% for the fourth quarter of 2016.  Non-GAAP gross margin for the fourth quarter of 2017 was 33.8%, compared to 31.9% for the fourth quarter of 2016.
• Operating expenses for the fourth quarter of 2017 were $14.3 million, compared to $10.8 million for the fourth quarter of 2016. Included in the operating expenses for the fourth quarter of 2017 were $2.5 million of impairment of acquired intangible assets.
• Share-based compensation expense for the fourth quarter of 2017 was $2.1 million, compared to $1.7 million for the fourth quarter of 2016. Depreciation and amortization was $1.5 million in fourth quarter of 2017 and 2016.
• Net loss for the fourth quarter of 2017 was $7.4 million, or a net loss of $1.10 per share, compared to a net loss of $7.5 million, or a net loss of $3.57 per share, in the fourth quarter of 2016.
• Adjusted EBITDA (a non-GAAP financial measure) presented in the same manner described above) for the fourth quarter of 2017 was a net loss of $2.3 million, or a net loss of $0.35 per share, based on 6.7 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $2.4 million, or net loss of $1.16 per share, based on 2.1 million weighted average shares outstanding for the fourth quarter of 2016.
• Cash and cash equivalents at December 31, 2017 were $4.6 million, compared to $5.1 million at December 31, 2016.  
• The preceding financial results for the fourth quarter of 2017 include contribution from acquisition in January 2017.