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Sphere 3D Reports Second Quarter Fiscal Year 2018 Financial ResultsSAN JOSE, Calif., Aug. 14, 2018 (GLOBE NEWSWIRE) -- Sphere 3D Corp. (NASDAQ: ANY), a company delivering containerization, virtualization, and data management solutions via hybrid cloud, cloud and on-premise implementations through its global reseller network and professional services organization, today reported financial results for its second quarter ended June 30, 2018.
Second Quarter 2018 Financial Results: • Net revenue for the second quarter of 2018 was $18.5 million, compared to $19.4 million for the second quarter of 2017. • Product revenue for the second quarter of 2018 was $16.3 million, compared to $17.1 million for the second quarter of 2017.
• Service revenue was $2.2 million in the second quarter of 2018 compared to $2.3 million for the second quarter of 2017. • Gross margin for the second quarter of 2018 was 31.0%, compared to 27.7% for the second quarter of 2017. Non-GAAP gross margin for the second quarter of 2018 was 34.0%, compared to 30.6% for the second quarter of 2017. 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 second quarter of 2018 were $9.1 million, compared to $11.5 million for the second quarter of 2017. • Share-based compensation expense for the second quarter of 2018 was $0.4 million, compared to $1.5 million for the second quarter of 2017. Depreciation and amortization was $0.9 million in the second quarter of 2018, compared to $1.5 million for the second quarter of 2017. • Adjusted EBITDA for the second quarter of 2018 was a net loss of $1.9 million, or a net loss of $0.14 per share, based on 13.7 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $2.6 million, or a net loss of $0.64 per share, based on 4.1 million weighted average shares outstanding for the second quarter of 2017. Adjusted EBITDA is a non-GAAP measure presented as net loss before interest expense, income taxes, acquisition costs, depreciation and amortization, share-based compensation, loss on revaluation of investment, and warrant revaluation gain. For additional information regarding the non-GAAP financial measures discussed in this release, please see “Use of GAAP and Non-GAAP Financial Measures” and "Non-GAAP Reconciliations " below. • Net loss for the second quarter of 2018 was $6.0 million, or a net loss of $0.44 per share, compared to a net loss of $7.5 million, or a net loss of $1.81 per share, in the second quarter of 2017. Six Months Ended June 30, 2018 Financial Results: • Net revenue for the first six months of 2018 was $37.9 million, compared to $41.2 million for the first six months of 2017. • Product revenue for the first six months of 2018 was $33.7 million, compared to $36.5 million for the first six months of 2017.
• Service revenue was $4.2 million in the first six months of 2018 compared to $4.6 million for the first six months of 2017. • Gross margin for the first six months of 2018 was 30.9%, compared to 29.7% for the first six months of 2017. Non-GAAP gross margin for the first six months of 2018 was 33.9%, compared to 32.4% for the first six months of 2017. 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 first six months of 2018 were $20.2 million, compared to $23.1 million for the first six months of 2017. • Share-based compensation expense for the first six months of 2018 was $1.3 million, compared to $3.7 million for the first six months of 2017. Depreciation and amortization was $2.4 million in the first six months of 2018, compared to $3.1 million for the first six months of 2017. • Adjusted EBITDA for the first six months of 2018 was a net loss of $5.2 million, or a net loss of $0.49 per share, based on 10.7 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $3.6 million, or a net loss of $0.99 per share, based on 3.6 million weighted average shares outstanding for the first six months of 2017. Adjusted EBITDA is a non-GAAP measure presented as net loss before interest expense, income taxes, acquisition costs, depreciation and amortization, share-based compensation, loss on revaluation of investment, and warrant revaluation gain. For additional information regarding the non-GAAP financial measures discussed in this release, please see “Use of GAAP and Non-GAAP Financial Measures” and "Non-GAAP Reconciliations " below. • Net loss for the first six months of 2018 was $12.8 million, or a net loss of $1.20 per share, compared to a net loss of $15.3 million, or a net loss of $4.22 per share, in the first six months of 2017. Investor Conference Call: Sphere 3D will not be hosting a second quarter 2018 earnings conference call. 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 consolidated statement of operations the effects of interest expense, income taxes, acquisition costs, depreciation and amortization, share-based compensation, loss on revaluation of investment, and warrant revaluation gain. 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. Sphere 3D uses the above non-GAAP financial measures internally to understand, manage and evaluate the business. Management believes it is useful for itself and investors to review, as applicable, both GAAP information and the non-GAAP measures in order to assess the performance of continuing operations and for planning and forecasting in future periods. The presentation of these non-GAAP measures is intended to provide investors with an understanding of the Company’s operational results and trends that enables them to analyze the base financial and operating performance and facilitate period-to-period comparisons and analysis of operational trends. Sphere 3D believes the presentation of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered substitutes for or superior to GAAP results. In addition, the Company’s non-GAAP financial measures may not be comparable to similarly titled measures utilized by other companies since such other companies may not calculate such measures in the same manner as does the Company. 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. Additional Information As previously disclosed, on August 1, 2018, Overland Storage, Inc., a wholly-owned subsidiary of the Company (“Overland”), together with its subsidiary, Tandberg Data GmbH, as co-borrowers under that certain Credit Agreement dated as of April 6, 2016 (as amended from time to time, the “Credit Agreement”), with CB CA SPV, LLC (“Colbeck”), as lender, failed to make a required payment of interest due on such date. Such failure constituted an event of default as of August 6, 2018 under the Credit Agreement after expiration of a five day cure period. On August 7, 2018, Overland received a notice from Colbeck stating that, as a result of such failure, all amounts under the Credit Agreement are immediately due and payable. The foregoing also constitutes an event of default under that certain 8% Senior Secured Convertible Debenture in favor of FBC Holdings, S.à r.l (“FBC” and together with Colbeck, the “Lenders”). The Company, Overland and their subsidiaries are in continuing discussions for a potential resolution with the Lenders. Despite these efforts, there can be no assurance that the Lenders will ultimately agree to any such resolution. About Sphere 3D Safe Harbor Statement Non-GAAP Financial Measures: Investor Contact:
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