Cash Flow Turns Positive SAN DIEGO, Aug. 9 /PRNewswire-FirstCall/
-- Overland Storage, Inc. (NASDAQ:OVRL) today reported fourth
quarter and full-year results for its fiscal year ended June 30,
2007. Net revenue for the fiscal 2007 fourth quarter was $34.1
million, compared with $41.7 million for the same period a year
ago. The company reported a net loss of $6.0 million, or $0.47 per
share, for the fiscal 2007 fourth quarter compared with a net loss
of $6.8 million, or $0.52 per share, for the same period a year
earlier. For the fiscal year ended June 30, 2007, the company
reported net revenue of $160.4 million compared with $209.0 million
for the prior fiscal year. The net loss for the year was $44.1
million, or $3.45 per share, compared with a net loss of $19.5
million, or $1.42 per share, a year earlier. Included in the fiscal
2007 loss is an $8.4 million charge, or $0.65 per share, related to
the impairment of acquired technology. The company noted that
revenue for its fiscal 2007 fourth quarter decreased 18 percent
from the prior year quarter, due primarily to a 22 percent decline
in sales to the company's largest OEM customer. Although product
sales in the company's branded channel declined 17 percent from the
prior year quarter, sales of spares and service posted a 30 percent
gain. Softness in the company's branded channel, also noted by
other industry participants, was experienced in both the company's
tape and disk-based appliances. The company noted that due to a
June launch of REO(R) 4500, REO 9100 and ULTAMUS(TM) RAID 4800,
these products did not materially contribute to revenue in the
fourth quarter. The company posted sequential improvement in gross
margin from 13.3 percent in the fiscal 2007 third quarter to 18.1
percent in the fiscal 2007 fourth quarter. On a year-to-year basis,
the 18.1 percent in the fiscal 2007 fourth quarter compared to 22.3
percent in the fiscal 2006 fourth quarter. Gross margin in both the
fiscal 2007 third and fourth quarters was negatively impacted by
under-absorbed manufacturing costs, although to a significantly
less extent in the fourth quarter. Operating expenses of $12.0
million in the fiscal 2007 fourth quarter declined by approximately
$6.4 million or 35 percent compared to the fiscal 2006 fourth
quarter. R&D spending declined 52 percent, or $2.8 million,
reflecting the completion of many of the company's product
development programs as well as staff reductions. Sales and
marketing expenses declined 29 percent, or $2.7 million, reflecting
lower spending on marketing programs and staff reductions. G&A
expenses declined 25 percent, or $0.9 million, primarily as a
result of decreased spending on IT projects and reduced legal and
accounting fees. "I am extremely pleased to announce that Vern
LoForti, who has been Overland's CFO for nearly 12 years, is now
our new president and CEO and a member of our board of directors,"
said Scott McClendon, chairman of the board, and former interim
president and CEO. "Vern and I worked closely together during the
years when I was CEO, and again since last November when I returned
to the company in a full-time capacity. No one knows the company
better, and no one is better qualified to execute the strategy and
lead the company in its return to profitability. The board
recognizes that Vern's strengths and knowledge go well beyond the
functions of finance. He is a leader and a confidence builder."
"When I returned to Overland in November 2006, we faced challenges
in the major functional areas of the company. We needed to address
issues in manufacturing, product development and delivery, and
sales and marketing. We have addressed each of these issues, and I
believe have either corrected them, or made significant progress
towards doing so. Although the turnaround is not complete, I am
confident that Vern is up to the challenge and will continue the
transition with the required discipline and eye to execution. As
chairman of the board, I will continue to be available to Vern to
assure a smooth transition," stated McClendon. Commenting on the
results, LoForti noted: "Despite missing our revenue forecast for
the quarter, we achieved a number of financial and operational
objectives. For the first time in two years, we posted positive
cash flow, increasing our cash balance by 7 percent to $22.8
million. Last quarter, we projected reduced inventory levels in the
fourth quarter. We exceeded our goal and reduced net inventories by
over $5 million. Through a combination of cost reduction efforts
and the completion of R&D cycles, operating expenses reached
the lowest level in over three and a half years. Combined with four
new product launches during the quarter, these accomplishments are
significant and gratifying. "I've had a long history at Overland,
and am grateful to the board for their confidence. The last two
years have been disappointing. After the extreme efforts of the
past several months, I am now optimistic, more so than at any time
during the recent past. The current core group of Overland
employees exudes a level of pride, commitment and competence
necessary to drive the company forward. And, our current products,
combined with four products scheduled for launch within the next
two quarters, strengthen our ability to capture a larger share of
our now expanded addressable market," said LoForti. "When Scott
returned last November we faced a number of issues that required
immediate correction. At this point, manufacturing has stabilized
and we believe we have regained our reputation for timely delivery
of quality products. The causes of the delays we previously
experienced in new product delivery have been resolved, and we now
have a refreshed set of products in market. And, our product
roadmap is active with further enhancements and upgrades that we
believe will enable us to stay ahead of customer demand. I am
grateful to Scott for his leadership in especially difficult times.
We will count on his participation as we continue his initiatives
to execute a sound recovery for Overland." "Also today, we are
announcing that Kurt Kalbfleisch has been named interim chief
financial officer. Kurt, who will continue as our vice president of
finance, is a highly valued member of Overland's management; he's
been here for over 13 years, rising through the ranks of the
finance department. I am confident that Kurt will continue
Overland's traditions of fiscal conservatism, integrity and
transparency. "Our challenge now is to leverage our new product
portfolio and drive our branded sales channel. In April 2007, Bob
Farkaly, a storage industry veteran, became vice president of
worldwide sales. Already, Bob is well along in reshaping the
dynamics of the sales team, instilling new focus and discipline to
enable them to competitively sell our new products. Bob is working
closely with Michael Kerman, our vice president of worldwide
marketing and chief strategy officer, to design and implement
programs that optimize our resources and leverage our channel
partners. With expenses stabilized, we will gradually begin to
expand sales and marketing to spur the ramp of our new products.
Increased revenue, combined with focus on asset utilization and
cash preservation, will enable us to accelerate our recovery,"
concluded LoForti. About Overland Storage Now in its 26th year,
Overland Storage is a market leader and innovative provider of
smart, affordable data protection appliances that help midrange and
distributed enterprises ensure business-critical data is constantly
protected, readily available and always there. Overland's
award-winning products include NEO SERIES(R) and ARCvault(TM) tape
libraries, REO SERIES(R) disk-based appliances with Virtual Tape
Library (VTL) capabilities and ULTAMUS RAID high-performance,
high-density storage. Overland sells its products through leading
OEMs, commercial distributors, storage integrators and value- added
resellers. For more information, visit Overland's web site at
http://www.overlandstorage.com/ Except for the factual statements
made herein, the information contained in this news release
consists of forward-looking statements that involve risks,
uncertainties and assumptions that are difficult to predict. Words
and expressions reflecting optimism and satisfaction with current
prospects, as well as words such as "believe," "hopes," "intends,"
"estimates," "expects," "projects," "plans," "anticipates" and
variations thereof, identify forward- looking statements, but their
absence does not mean that a statement is not forward looking. Such
forward-looking statements are not guarantees of performance and
the company's actual results could differ materially from those
contained in such statements. Factors that could cause or
contribute to such differences include possible delays in new
product introductions and shipments by the company including the
new ULTAMUS and ARCvault product lines; possible delays in
enhancements and new offerings in the company's REO line; market
acceptance of the company's other new product offerings; the
performance of the company's newly restructured management team;
the timing and market acceptance of new product introductions by
competitors; unexpected charges resulting from the termination of
the relationship with the company's former outsourced manufacturing
partner; inefficiencies and excessive manufacturing costs in the
company's San Diego facility; worldwide information technology
spending levels; unexpected shortages of critical components;
rescheduling or cancellation of customer orders; loss of a major
customer; the timing and amount of licensing royalties; general
competition and price pressures in the marketplace; the company's
ability to control costs and expenses; and general economic
conditions. Reference is also made to other factors set forth in
the company's filings with the Securities and Exchange Commission,
including the "Risk Factors," "Management's Discussion and
Analysis" and other sections of the company's periodic reports
currently on file with the SEC. These forward-looking statements
speak only as of the date of this release and the company
undertakes no obligation to update publicly any forward-looking
statements to reflect new information, events or circumstances
after the date of this release. Overland, Overland Storage, REO
Series, REO, NEO Series, NEO, ARCvault Series, ARCvault and ULTAMUS
are trademarks of Overland Storage, Inc. Webcast: A live audio
Webcast of Overland's management conference call discussing third
fiscal quarter results will be held beginning at 9:30 a.m. EDT,
August 9, 2007, and will be posted at
http://www.overlandstorage.com/. Please provide adequate time to
log on. Following the broadcast, the conference call will be
archived for future access on Overland's website. - Financial
Tables Follow - OVERLAND STORAGE, INC. CONSOLIDATED STATEMENT OF
OPERATIONS (In thousands, except per share data) Three Months Ended
Twelve Months Ended June 30, June 30, 2007 2006 2007 2006
(Unaudited) (Unaudited) Net revenue $34,058 $41,745 $160,443
$209,038 Cost of revenue 27,904 32,441 136,100 162,592 Gross profit
6,154 9,304 24,343 46,446 Operating expenses: Sales and marketing
6,758 9,477 32,391 37,940 Research and development 2,599 5,376
14,999 18,752 General and administrative 2,637 3,520 13,387 14,564
Impairment of acquired technology - - 8,411 - Acquired in-process
research and development - - - 1,121 Total expenses 11,994 18,373
69,188 72,377 Operating loss (5,840) (9,069) (44,845) (25,931)
Interest income, net 220 760 1,707 2,759 Other income, net (205)
(61) (698) (139) Loss before income taxes (5,825) (8,370) (43,836)
(23,311) Income taxes 197 (1,535) 275 (3,825) Net loss $(6,022)
$(6,835) $(44,111) $(19,486) Net loss per share: Basic and Diluted
$(0.47) $(0.52) $(3.45) $(1.42) Shares used in computing net loss
per share: Basic and Diluted 12,748 13,271 12,799 13,716 OVERLAND
STORAGE, INC. SELECTED BALANCE SHEET INFORMATION (In thousands)
June 30, June 30, 2007 2006 (unaudited) ASSETS Cash and equivalents
$17,503 $20,315 Short-term investments 5,322 42,197 Accounts
receivable, net 22,572 30,321 Inventories 20,556 14,978 Other
current assets 7,138 11,261 Total current assets 73,091 119,072
Property, plant and equipment, net 11,052 11,026 Other assets 3,910
14,671 Total assets $88,053 $144,769 LIABILITIES & EQUITY
Current liabilities $33,525 $42,691 Long-term debt - - Other
long-term liabilities 5,418 6,640 Shareholders' equity 49,110
95,438 Total liabilities and equity $88,053 $144,769 DATASOURCE:
Overland Storage, Inc. CONTACT: Vernon A. LoForti, ,
+1-858-571-5555, or Lisa Grau, HetzelMeade Communications, ,
+1-760-635-8640 Web site: http://www.overlandstorage.com/
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