“We are making meaningful progress in realizing our strategy of becoming a significant and trusted provider of virtualization, containerization and hybrid cloud solutions,” said
Fourth Quarter 2015 Financial Results:
The following financial results for the fourth quarter of 2015 include contribution from our 2014 acquisition of Overland Storage for the full three months and reflect contribution for a partial period from
- Net revenue for the fourth quarter of 2015 was
$18.9 million , compared to$9.5 million for the fourth quarter of 2014. - Product revenue for the fourth quarter of 2015 was
$16.6 million , compared to$8.6 million for the fourth quarter of 2014.
- Disk systems revenue was
$11.2 million , compared to$4.9 million for the fourth quarter of 2014. Disk systems is defined as RDX, SnapServer family, V3 virtual desktop infrastructure, and Glassware derived products. - Tape archive revenue was
$5.4 million , compared to$3.7 million for the fourth quarter of 2014. - Service revenue was
$2.3 million , compared to$0.9 million in the fourth quarter of 2014.
- Disk systems revenue was
- Gross margin for the fourth quarter of 2015 was 28.5%, compared to 37.6% for the fourth quarter of 2014. Non-GAAP gross margin for the fourth quarter of 2015 was 31.9%. Our methodology for determining non-GAAP gross margin, which excludes the effect of intangible asset amortization from gross profit, is described in the Use of GAAP and Non-GAAP Financial Measures section of this announcement. See also, “Non-GAAP Reconciliations” below.
- Operating expenses for the fourth quarter of 2015 were
$25.0 million , which included$10.7 million of impairment of acquired intangible assets related to the Overland Storage acquisition, compared to$8.4 million for the fourth quarter of 2014. - Share-based compensation expense for the fourth quarter of 2015 was
$3.1 million , compared to$0.7 million for the fourth quarter of 2014. Depreciation and amortization was$1.7 million in fourth quarter of 2015, compared to$1.1 million in the fourth quarter of 2014. - Net loss for the fourth quarter of 2015 was
$18.6 million , or a net loss of$0.44 per share, compared to a net loss of$5.4 million , or a net loss of$0.20 per share, in the fourth quarter of 2014.
Adjusted EBITDA for the fourth quarter of 2015 was a net loss of
Fiscal Year Financial Results:
The following financial results for the year ended December 31, 2015 reflect contribution from the Overland Storage acquisition for the full year and the contribution from the Imation RDX acquisition from
- Net revenue for 2015 was $76.2 million, compared to net revenue of
$13.5 million for the full year of 2014. - Product revenue for 2015 was $65.5 million, compared to product revenue of
$12.2 million for the full year of 2014.
- Disk systems revenue was
$39.8 million , compared to$8.5 million for the full year of 2014. Disk systems is defined as RDX, SnapServer family, V3 virtual desktop infrastructure, and Glassware derived products. - Tape archive revenue was $25.7 million, compared to
$3.7 million for the full year of 2014. - Service revenue was $10.7 million, compared to
$1.3 million for the full year of 2014.
- Disk systems revenue was
- Gross margin for 2015 was 29.7% compared to 39.6% for 2014.
- Operating expenses for 2015 were
$67.5 million , which included$10.7 million of impairment of acquired intangible assets related to the Overland Storage acquisition, compared to $17.4 million for 2014. - Net loss for 2015 was $47.2 million, or a loss of $1.24 per share, compared to a net loss of
$12.7 million , or a loss of $0.53 per share for 2014. - Adjusted EBITDA (a non-GAAP measure presented in the same manner described above) for 2015 was a loss of $20.5 million, or a net loss of
$0.54 per share, compared to an adjusted EBITDA of a loss of $3.4 million, or a net loss of$0.14 per share in 2014. - Cash and cash equivalents at December 31, 2015 were $8.7 million. At
December 31, 2015 , the Company had$17.4 million outstanding under its credit facilities ($10.0 million of which is from a related party) and$19.5 million outstanding under its note from a related party.
Corporate Financing Update:
We have entered into a non-binding proposal with a commercial bank which sets forth proposed terms upon which such bank would provide us up to
The Company has entered into a warrant exchange agreement (the "Warrant Exchange Agreement") with an existing holder pursuant to which the Company agreed to issue a warrant (the "New Warrant") for the purchase of up to 7,199,216 common shares (the “Warrant Shares”), no par value (the "Common Shares"), in a privately negotiated exchange under Section 3(a)(9) of the Securities Act of 1933, as amended, in exchange for the surrender and cancellation of previously outstanding warrants for the purchase of up to, in aggregate, 3,031,249 Common Shares (the "Previously Outstanding Warrants"). The Previously Outstanding Warrants were issued pursuant to certain purchase and subscription agreements entered into in May, August and
- The terms of the New Warrant are substantially similar to the Previously Outstanding Warrants except (i) in the case of 1,855,469 New Warrants, the exercise price has changed from
$4.00 per Common Share (under 781,250 Previously Outstanding Warrants) to$1.22 per Common Share, (ii) in the case of 5,343,747 New Warrants, the exercise price has changed from$2.33 per Common Share (under 2,249,999 Previously Outstanding Warrants) to$1.22 per Common Share, and (iii) the expiry date has changed from various dates betweenMay 18, 2020 andSeptember 22, 2020 toApril 14, 2016 . However, if the Holder exercises the New Warrant for the purchase of at least 3,031,249 common shares beforeApril 14, 2016 , then the expiry date for the balance of any unexercised portion of the New Warrant shall becomeMarch 25 , 2021. OnMarch 25, 2016 , the Holder exercised 3,031,249 of the Warrant Shares for 3,031,249 common shares pursuant to which the Company received$3.7 million in proceeds. The expiration date for the remaining balance of the New Warrant isMarch 25, 2021 .
- The Holder beneficially owns Common Shares representing approximately 6% of the issued and outstanding Common Shares and, immediately prior to the transaction contemplated by the Warrant Exchange Agreement (the "Warrant Exchange"), beneficially owned Common Shares and Common Shares issuable upon exercise of the Previously Outstanding Warrants representing approximately 12% of the issued and outstanding Common Shares on a partially diluted basis. Following completion of the Warrant Exchange, the Holder beneficially will own Common Shares and Common Shares issuable upon exercise of the New Warrants representing approximately 18% of the issued and outstanding Common Shares on a partially diluted basis.
- The Warrant Exchange Agreement constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company intends to file a material change report in connection therewith with the applicable Canadian securities regulatory authorities. However, such material change report will not be filed at least 21 days before the completion of the Warrant Exchange in order to allow the Company to secure the financing opportunities relating to the Warrant Exchange.
- The Company is relying on the exemptions from the "formal valuation" and "minority approval" requirements under MI 61-101, respectively, based on the fact that the subject matter of, or consideration for, the Warrant Exchange insofar as it involves interested parties, as determined in accordance with MI 61-101, does not exceed 25% of the market capitalization of the Company, as determined in accordance with MI 61-101.
Use of GAAP and Non-GAAP Financial Measures:
To supplement Sphere 3D’s consolidated financial statements presented in accordance with GAAP, the Company uses Adjusted EBITDA, a non-GAAP financial measure that excludes from the statement of operations the effects of interest expense, income taxes, acquisition costs, depreciation and amortization, share-based compensation, warrant liability revaluation and impairment of acquired intangible assets. The Company also uses Non-GAAP gross profit and Non-GAAP gross-margin, non-GAAP financial measures that exclude the effect of intangible asset amortization.
Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the most comparable GAAP measures, which are provided in the attached table after the text of this release.
Investor Conference Call:
About
Safe Harbor Statement
This press release contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties including, without limitation, unforeseen changes in the course of Sphere 3D’s business or the business of its wholly-owned subsidiaries, including, without limitation, Overland Storage and Tandberg Data; our inability to obtain additional debt or equity financing; any increase in our future cash needs; market adoption and performance of our products; the level of success of our collaborations and business partnerships; possible actions by customers, partners, suppliers, competitors or regulatory authorities; and other risks detailed from time to time in Sphere 3D’s periodic reports contained in our Annual Information Form and other filings with Canadian securities regulators (www.sedar.com) and in prior periodic reports filed with the
SPHERE 3D CORP. | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(Unaudited) |
(Unaudited) |
||||||||||||||||
Net revenue | $ | 18,869 | $ | 9,467 | $ | 76,165 | $ | 13,469 | |||||||||
Cost of revenue | 13,493 | 5,906 | 53,546 | 8,133 | |||||||||||||
Gross profit | 5,376 | 3,561 | 22,619 | 5,336 | |||||||||||||
Operating expenses: | |||||||||||||||||
Sales and marketing | 6,314 | 2,851 | 23,569 | 5,153 | |||||||||||||
Research and development | 2,579 | 655 | 9,916 | 655 | |||||||||||||
General and administrative | 5,419 | 4,937 | 23,271 | 11,567 | |||||||||||||
Impairment of acquired intangible assets | 10,702 | - | 10,702 | - | |||||||||||||
25,014 | 8,443 | 67,458 | 17,375 | ||||||||||||||
Loss from operations | (19,638 | ) | (4,882 | ) | (44,839 | ) | (12,039 | ) | |||||||||
Interest expense - related party | (594 | ) | (207 | ) | (2,710 | ) | (207 | ) | |||||||||
Interest expense | (105 | ) | (26 | ) | (355 | ) | (240 | ) | |||||||||
Other income (expense), net | 193 | (281 | ) | (689 | ) | (194 | ) | ||||||||||
Loss before income taxes | (20,144 | ) | (5,396 | ) | (48,593 | ) | (12,680 | ) | |||||||||
(Benefit from) provision for income taxes | (1,545 | ) | 42 | (1,366 | ) | 42 | |||||||||||
Net loss | $ | (18,599 | ) | $ | (5,438 | ) | $ | (47,227 | ) | $ | (12,722 | ) | |||||
Net loss per share: | |||||||||||||||||
Basic and diluted | $ | (0.44 | ) | $ | (0.20 | ) | $ | (1.24 | ) | $ | (0.53 | ) | |||||
Shares used in computing | |||||||||||||||||
net loss per share: | |||||||||||||||||
Basic and diluted | 42,163 | 27,843 | 37,957 | 24,131 | |||||||||||||
SPHERE 3D CORP. | |||||||||
SELECTED BALANCE SHEETS INFORMATION | |||||||||
(In thousands) | |||||||||
December 31, | December 31, | ||||||||
2015 | 2014 | ||||||||
(Unaudited) | (Unaudited) | ||||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 8,661 | $ | 4,258 | |||||
Accounts receivable | 13,401 | 15,488 | |||||||
Inventories | 11,326 | 9,936 | |||||||
Other current assets | 3,155 | 2,457 | |||||||
Total current assets | 36,543 | 32,139 | |||||||
Property and equipment, net | 3,972 | 4,427 | |||||||
Intangible assets, net | 54,019 | 73,271 | |||||||
Goodwill | 44,132 | 38,821 | |||||||
Other assets | 445 | 605 | |||||||
Total assets | $ | 139,111 | $ | 149,263 | |||||
LIABILITIES AND EQUITY | |||||||||
Current liabilities | $ | 46,397 | $ | 37,051 | |||||
Long-term debt — related party | 19,500 | 19,500 | |||||||
Long-term deferred tax liabilities | 2,755 | 4,387 | |||||||
Other long-term liabilities | 2,319 | 3,185 | |||||||
Shareholders' equity | 68,140 | 85,140 | |||||||
Total liabilities and equity | $ | 139,111 | $ | 149,263 | |||||
SPHERE 3D CORP. | ||||||||||||||||
NON-GAAP RECONCILIATIONS | ||||||||||||||||
(In thousands except per share data) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Revenue | $ | 18,869 | $ | 9,467 | $ | 76,165 | $ | 13,469 | ||||||||
Gross Profit - GAAP | $ | 5,376 | $ | 3,561 | $ | 22,619 | $ | 5,336 | ||||||||
Intangible asset amortization | 647 | - | 2,608 | - | ||||||||||||
Gross Profit - Non -GAAP | $ | 6,023 | $ | 3,561 | $ | 25,227 | $ | 5,336 | ||||||||
Gross Margin Percentages | ||||||||||||||||
GAAP | 28.5 | % | 37.6 | % | 29.7 | % | 39.6 | % | ||||||||
Non-GAAP | 31.9 | % | 37.6 | % | 33.1 | % | 39.6 | % | ||||||||
Net loss | $ | (18,599 | ) | $ | (5,438 | ) | $ | (47,227 | ) | $ | (12,722 | ) | ||||
Less: | ||||||||||||||||
Interest | 699 | 233 | 3,065 | 447 | ||||||||||||
Tax | (1,545 | ) | 42 | (1,366 | ) | 42 | ||||||||||
Impairment of acquired intangible assets | 10,702 | - | 10,702 | - | ||||||||||||
Depreciation and amortization | 1,713 | 1,127 | 7,450 | 3,453 | ||||||||||||
Share-based compensation | 3,137 | 658 | 7,154 | 3,253 | ||||||||||||
Acquisition costs | - | 1,308 | 218 | 2,166 | ||||||||||||
Warrant revaluation gain | (478 | ) | - | (478 | ) | - | ||||||||||
Adjusted EBITDA | $ | (4,371 | ) | $ | (2,070 | ) | $ | (20,482 | ) | $ | (3,361 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.44 | ) | $ | (0.20 | ) | $ | (1.24 | ) | $ | (0.53 | ) | ||||
Adjusted Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.10 | ) | $ | (0.07 | ) | $ | (0.54 | ) | $ | (0.14 | ) | ||||
Shares used in computing | ||||||||||||||||
net loss and adjusted net loss per share: | ||||||||||||||||
Basic and diluted | 42,163 | 27,843 | 37,957 | 24,131 | ||||||||||||
Non-GAAP Financial Measures:
To supplement Sphere 3D’s consolidated financial statements presented in accordance with GAAP, the Company uses non-GAAP financial measures that exclude from the statement of operations the effects of interest expense, income taxes, impairment of acquired technology, depreciation and amortization, share-based compensation, acquisition costs, and warrant liability revaluation. These non-GAAP financial measures are non-GAAP gross margin and adjusted EBITDA.
Investor Contact:The Blueshirt Group Mike Bishop Tel: +1 415-217-4968 mike@blueshirtgroup.com