Overland Storage, Inc. today
reported results for its fiscal 2009 first quarter ended September 30, 2008.
Net revenue for the fiscal 2009 first quarter was $32.3 million, compared with
$32.9 million for the same period a year ago. The company reported a net loss of
$6.9 million, or $0.54 per share, for the fiscal 2009 first quarter, compared
with a net loss of $4.5 million, or $0.35 per share, for the same period a year
earlier.
The company noted that increased sales through its branded sales channel nearly
offset the expected sales decline to OEM customers during the fiscal 2009 first
quarter in comparison to the fiscal 2008 first quarter. Specifically, in the
fiscal 2009 first quarter, sales to the company's largest OEM customer were down
25.2 percent compared to the fiscal 2008 first quarter, reflecting the
continuing transition by the customer to a different product. Conversely, the
company's branded revenue increased 12.3 percent compared to the prior year
quarter, reflecting the addition of revenue from the Snap Server® line of
products that the company acquired on June 27, 2008.
The company further noted that net
revenue for the fiscal 2009 first quarter grew 11.6 percent on a sequential
basis, compared to net revenue of $28.9 million in the fiscal 2008 fourth
quarter. Sales to OEM customers, representing 28.1 percent of net revenue in the
fiscal 2009 first quarter, actually increased 2.2 percent compared to the
preceding quarter. Non-OEM revenue grew by 16.5 percent sequentially.
Gross profit increased 34.8
percent from $6.5 million in the fiscal 2008 first quarter to $8.7 million in
the fiscal 2009 first quarter; and the gross margin percentage improved from
19.7 percent in the fiscal 2008 first quarter to 27.0 percent in the fiscal 2009
first quarter. The company noted that these improvements reflect the continuing
shift toward a higher concentration of branded revenue vs. OEM revenue, an
improved product mix, as well as reduced inventory charges and warranty costs.
Operating expenses in the fiscal
2009 first quarter were $15.6 million, a 40.5 percent increase from $11.1
million in the previous year first quarter. The significant increase in spending
compared to the prior year resulted from an expansion of the sales force, the
addition of the Snap Server business at the beginning of the quarter, and costs
associated with the restructuring announced by the company on August 29, 2008.
At that time, the company stated that it had reduced anticipated spending for
its fiscal year 2009 by approximately $10 million.
“It was a challenging quarter, but
there are two very positive elements included in our reported results that I
want to highlight,” stated Vern LoForti, president and chief executive officer
of Overland Storage. “First is the 16.5 percent sequential growth in branded
revenue from the 2008 fourth quarter. This increase reflects an improved revenue
stream from the Snap acquisition. Second is the significant improvement in our
gross profit margin to 27.0 percent. Revenue growth and higher gross profit
margins are key elements to our recovery.
“In our first quarter, we
accomplished two significant tasks: the integration of the Snap business that we
bought at the end of June and the restructuring that we triggered at the end of
August. In both instances, I am extremely pleased with the timeliness and
efficiency of these transitions. By the end of September, we had substantially
completed the integration of both the Snap personnel and its business systems
into Overland, as originally planned. At this point, we have completed training
our worldwide sales force about Snap products and continue training our channel
partners. We are now introducing the products to our entire channel, a critical
step toward maximizing our Snap investment.
“In September, we announced a new
version of the Snap software base, called GuardianOS™ 5.0, and a new version of
the Snap replication engine, called Snap Enterprise Data Replicator™ 7.2. We are
now shipping these new software elements with all of our Snap products. In
addition, we announced an expansion to the Snap product line, the Snap Server
620, which delivers 63 percent faster performance than its predecessor. A
further development is a new strategic relationship with Mobotix Vision Systems,
the leader in high-resolution IP network cameras. We formed this partnership to
deliver a bundled solution that includes Snap Servers and Mobotix's line of
digital, network-based video security solutions. We believe this combination
provides a simple and compelling solution to the rapidly growing video
surveillance market.
“Following the Snap acquisition,
we restructured in order to adjust our operating expense structure. Though we
cut approximately $10 million in planned fiscal 2009 spending, we believe that
we have preserved the ability to execute our strategy and to grow revenue
throughout fiscal 2009. The restructuring was too late in the quarter to
positively affect the first quarter's results, and the quarter did have to
absorb the costs associated with the restructuring. As a result of the
restructuring, we expect to see an operating expense reduction of approximately
15 percent from first-quarter levels in the remaining three quarters of the
fiscal year. On a related note, I am extremely pleased with the reformulated
sales and marketing team, led by Ravi Pendekanti, which already produced a
significant sales ramp in September after the seasonal lull in August and the
uncertainty surrounding our then pending restructuring.
“We ended the September quarter
with $5.4 million in cash. In order to continue to execute our strategy, we are
seeking $10 million in funding and have retained a financial advisor to assist
us in this effort. Although the current worldwide financial environment is
extremely challenging, we are in discussion with a number of institutions that
are still actively lending. In fact, we are now in the process of evaluating
letters of intent for funding arrangements, and hope to be able to put a
facility in place soon.
“The addition of the Snap NAS
product line enables us to offer a portfolio of end-to-end data protection
solutions not offered by the majority of our competitors. We are extremely
encouraged by the high level of interest expressed by many of our channel
partners in Snap and in the new video surveillance solutions,” concluded LoForti.
“Our expanded product set and newly energized sales team is a potent combination
that we hope will be the catalyst to improved results in the future.”