Overland Storage Posts Record Fiscal 2004 Results Annual Revenue
Climbs 22 Percent; Net Income Grows 59 Percent SAN DIEGO, Aug. 13
/PRNewswire-FirstCall/ -- Overland Storage Inc. (NASDAQ:OVRL) today
announced results for its fourth quarter and fiscal year ended June
30, 2004. Record levels were achieved for annual revenue, net
income and earnings per share. Revenue for the fiscal 2004 fourth
quarter was $55.0 million compared with $56.5 million for the same
period last year. Net income for the fourth quarter was $2.1
million, or $0.14 per diluted share, compared with $3.3 million, or
$0.25 per diluted share, for the fiscal 2003 fourth quarter. Pro
forma net income for the fourth quarter of fiscal 2004, excluding
the non-cash amortization resulting from the June 2003 acquisition
of Okapi Software Inc. that is charged to cost of goods sold, was
$2.4 million, or $0.16 per diluted share. Pro forma results are
presented to provide a more complete view of the company's
financial results in light of the launch of new products during
fiscal 2004 resulting from the acquisition of Okapi. See "Non-GAAP
Financial Measures" below. Revenue for fiscal year 2004 increased
22 percent to $238.1 million from $195.9 million last year. Net
income for the year jumped 59 percent to $10.6 million, or $0.74
per diluted share, from $6.7 million, or $0.54 per diluted share,
in the prior year. Pro forma net income for fiscal 2004 was $11.8
million, or $0.82 per diluted share. The per share calculation
reflects an increase of 2.1 million shares resulting from new
shares issued in conjunction with the company's May 2003 private
stock placement, additional shares issued as partial consideration
for the Okapi acquisition, and the exercise of employee stock
options. "Our solid performance for fiscal 2004 reflects the
ongoing demand for Overland's back-up technology and the leadership
position the company has established among OEM and branded channel
customers. This represents our twenty-fourth consecutive year of
record revenue and our third consecutive year of record earnings
per share. In fiscal 2004, our OEM business grew 22 percent
compared to the prior year and our branded channel business climbed
21 percent," said Christopher Calisi, president and chief executive
officer. He emphasized the continuing benefit and contribution
Overland has realized through its acquisition of Okapi in June
2003, with three new disk-based backup appliance products launched
in fiscal 2004, and increasing traction in this emerging market.
"Overland has established itself as the leader in the iSCSI-based
backup appliance sector. In fact, earlier this week the company was
recognized by Enterprise Strategy Group (ESG) as having shipped
more units and terabytes of iSCSI-based disk-to-disk backup
appliances in 2004 than any other vendor in the industry. We intend
to leverage this leadership position and deliver a steady stream of
increasingly sophisticated appliances that our customers can
seamlessly integrate to protect their digital assets," Calisi said.
"Fourth quarter performance did not meet our expectations due
primarily to a reduced level of sales to our largest OEM customer.
We did benefit from strong sales to our second largest OEM customer
and better than expected royalty revenue. These strengths helped
offset seasonal softness in our Asia Pacific OEM business, as well
as some end-of-quarter softness in our branded channel. Despite the
macro economic issues that affected this quarter, we are optimistic
that we will be able to generate another year of record revenue and
earnings in fiscal 2005," Calisi added. He noted that the
technology shift relating to disk-based backup is beginning to gain
momentum, with the advent of low-cost serial ATA disk and iSCSI
interconnect technology fueling the shift. Additionally, IT
departments are facing the need to accelerate both backups and
restores. "Customers are looking for near-line appliances with
software intelligence that store and protect critical data on disk
and can quickly move that data to tape for more permanent and
removable storage," Calisi said. He highlighted Overland's REO
family of products as designed to address this need. "REO is a
mid-range solution that can be incorporated into any network
computing environment and can complement any tape automation
system. Overland sold more than three and one half times as many
REO units in our fourth fiscal quarter than in the immediately
preceding third quarter, and we believe this demonstrates the
industry's strong acceptance of our products and this new
technology," Calisi emphasized. "Overland's corporate strategy is
to further establish our leadership position in the mid-range tape
automation market, while expanding our new disk-based backup
business supported by a wide array of new solutions. In the current
data protection market, disk is complementary to tape automation
and presents a great opportunity for us. The higher software
content in disk-based appliances as compared to tape libraries
should enable us to capture higher margins. Additionally, the disk
business will enable Overland to diversify its customer base, an
important strategic goal for future growth," Calisi said. He added
that to develop this business, Overland is increasing its
investment in research and development, including expansion of its
software development team. Additionally, the new products will be
supported by higher levels of sales and marketing. "Though these
initiatives will impact our profitability in the near term," stated
Calisi, "we believe they will help Overland become a stronger, more
diversified and larger company." Forward Guidance The company noted
that its guidance considers the current economic conditions and
constrained IT spending environment. Management expects rapid
growth in its disk-based appliance business that should contribute
8 percent of fiscal 2005 total revenue. This will improve gross
margins, which are expected to reach 30 percent by the fourth
fiscal quarter. The focus and increased investment on R&D will
result in a 38 percent rise in R&D expense for the year, and
total operating expenses are expected to grow 19 percent over
fiscal 2004. Total revenue for the year is expected to grow
approximately 10 percent and GAAP earnings per share are expected
to increase approximately 12 percent. The company also noted that,
consistent with its stated plan, it would discontinue the
presentation of pro forma earnings beginning with the first quarter
of fiscal 2005. Revenue in the fiscal year 2005 first quarter is
expected to be approximately $56 million. Operating expenses are
planned to grow sequentially in the first quarter by approximately
$2.1 million, reflecting increased R&D, sales and marketing
expenses. Net income for the first quarter is estimated to be $0.06
per diluted share. Non-GAAP Financial Measures To supplement the
Consolidated Statement of Operations presented in accordance with
GAAP, the company has included a Pro Forma Consolidated Statement
of Operations that excludes the non-cash amortization of the $9.0
million intangible asset (including the gross-up effect related to
deferred taxes) that arose from the June 2003 acquisition of Okapi.
The intangible is being amortized to cost of goods sold over five
years, the estimated life of the acquired products. Overland did
not begin shipping the products gained from the acquisition until
August 2003, but sales of these products grew sequentially during
the four quarters of fiscal year 2004. Because GAAP requires that
the intangible asset be amortized at a minimum on a straight-line
basis commencing immediately upon acquisition, the combined
amortization and product cost in each of the four quarters of
fiscal year 2004 exceeded the revenue generated by the product,
thereby resulting in a negative gross profit for the product line
and a depression of the company's overall gross margin. During the
product introduction ramp-up that occurred throughout fiscal year
2004, management evaluated the performance of this new product line
excluding the amortization charge, and allocated resources based on
such evaluation. The company believes that the pro forma results
provide useful information to investors concerning Overland's
operating results, and permit a more meaningful comparison to
historical financial results, which did not include amortization
charges. The company considered the capital costs of the
acquisition when it modeled the expected benefits, and noted that
revenues from the product increased by the end of fiscal year 2004
to a level sufficient to generate a more normalized product gross
margin on a GAAP basis in fiscal 2005. Accordingly, the company
intends to discontinue reporting pro forma results beginning in
fiscal 2005. Reconciliations of GAAP net income to pro forma net
income and GAAP to pro forma per share results are provided in a
table immediately following the Pro Forma Consolidated Statements
of Operations. Although management believes the above non-GAAP
financial measures enhance investors' understanding of the
company's business and performance, these non-GAAP financial
measures are inherently limited in that they exclude certain costs
which are required to be included in a GAAP presentation, and do
not therefore present the full measure of the company's recorded
costs against its revenues. Accordingly, these pro forma results
should be considered together with GAAP results, rather than as an
alternative to GAAP basis financial measures. About Overland
Storage For more than 20 years, Overland Storage has delivered
world-class data protection solutions designed to ensure business
continuity. Focused on backup and recovery, Overland's data
protection solutions are designed for entry-level and midrange
computing environments. These include the REO family of disk-based
backup and recovery appliances and the award-winning NEO Series of
tape libraries. Overland sells its products worldwide through
leading OEMs, commercial distributors, storage integrators and
value-added resellers. For more information, visit Overland's
website 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," "intends,"
"expects," "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
difficulty of predicting sales to the company's major OEM customer,
technology spending levels, unexpected shortages of critical
components, rescheduling or cancellation of customer orders, loss
of a major customer, the timing and market acceptance of new
product introductions by the company, including the launch of the
company's new REO products, its competitors or its licensees, 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 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 Form 10-K for the most recently completed fiscal
year. These forward-looking statements speak only as of the date of
this release and the company undertakes no obligation to publicly
update any forward-looking statements to reflect new information,
events or circumstances after the date of this release. All
trademarks, trade names, service marks, and logos referenced herein
belong to their respective companies. Webcast: A live audio Webcast
of Overland's management conference call discussing fourth quarter
2004 results and the outlook for fiscal 2005 will be held beginning
at 10:30 a.m. EDT, Aug. 13, 2004, 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 Web site. OVERLAND
STORAGE, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands,
except per share data) Three Months Ended Twelve Months Ended June
30, June 30, 2004 2003 2004 2003 (Unaudited) (Unaudited) Net
revenues $55,031 $56,532 $238,139 $195,881 Cost of revenues 39,793
40,379 173,485 141,863 Gross profit 15,238 16,153 64,654 54,018
Operating expenses: Sales and marketing 7,858 6,981 30,848 26,700
Research and development 1,817 1,737 7,259 7,376 General and
administrative 2,590 2,427 10,949 9,632 Total expenses 12,265
11,145 49,056 43,708 Operating income 2,973 5,008 15,598 10,310
Interest income, net 165 107 533 215 Other income (loss), net 4
(123) 68 (332) Income before income taxes 3,142 4,992 16,199 10,193
Income taxes 1,069 1,717 5,574 3,511 Net income $2,073 $3,275
$10,625 $6,682 Earnings per share: Basic $0.15 $0.27 $0.79 $0.59
Diluted $0.14 $0.25 $0.74 $0.54 Shares used in computing earnings
per share: Basic 13,673 12,042 13,384 11,318 Diluted 14,427 13,261
14,404 12,314 OVERLAND STORAGE, INC. PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS (In thousands, except per share data) Three
Months Ended Twelve Months Ended June 30, June 30, 2004 2003 2004
2003 (Unaudited) (Unaudited) Net revenues $55,031 $56,532 $238,139
$195,881 Cost of revenues 39,344 40,379 171,689 141,863 Gross
profit 15,687 16,153 66,450 54,018 Operating expenses: Sales and
marketing 7,858 6,981 30,848 26,700 Research and development 1,817
1,737 7,259 7,376 General and administrative 2,590 2,427 10,949
9,632 Total expenses 12,265 11,145 49,056 43,708 Operating income
3,422 5,008 17,394 10,310 Interest income, net 165 107 533 215
Other income (loss), net 4 (123) 68 (332) Income before income
taxes 3,591 4,992 17,995 10,193 Income taxes 1,224 1,717 6,194
3,511 Net income $2,367 $3,275 $11,801 $6,682 Earnings per share:
Basic $0.17 $0.27 $0.88 $0.59 Diluted $0.16 $0.25 $0.82 $0.54
Shares used in computing earnings per share: Basic 13,673 12,042
13,384 11,318 Diluted 14,427 13,261 14,404 12,314 A reconciliation
between net income on a GAAP basis and pro forma net income is as
follows: GAAP net income $2,073 $3,275 $10,625 $6,682 Amortization
of purchased intangible assets 449 -- 1,796 -- Income tax effect
(155) -- (620) -- Pro forma net income $2,367 $3,275 $11,801 $6,682
A reconciliation between diluted earnings per share on a GAAP basis
and pro forma diluted earnings per share is as follows: GAAP net
income $0.14 $0.25 $0.74 $0.54 Amortization of purchased intangible
assets 0.03 -- 0.12 -- Income tax effect (0.01) -- (0.04) -- Pro
forma net income $0.16 $0.25 $0.82 $0.54 OVERLAND STORAGE, INC.
SELECTED BALANCE SHEET INFORMATION (In thousands) June 30, June 30,
2004 2003 (Unaudited) ASSETS Cash and equivalents $58,422 $55,020
Short term investments 11,235 -- Accounts receivable, net 31,424
31,850 Inventories 16,163 19,262 Other current assets 11,323 6,812
Total current assets 128,567 112,944 Property, plant and equipment,
net 7,945 8,171 Other assets 7,514 9,807 Total assets $144,026
$130,922 LIABILITIES & EQUITY Current liabilities $25,460
$28,618 Long-term debt -- 3,026 Other long-term liabilities 5,052
6,014 Shareholders' equity 113,514 93,264 Total liabilities and
equity $144,026 $130,922 DATASOURCE: Overland Storage Inc. CONTACT:
Vernon A. LoForti, CFO, , or Cynthia A. Bond, Director of Corporate
Communications, , both of Overland Storage Inc., +1-858-571-5555
Web site: http://www.overlandstorage.com/
Copyright
Overland Storage (NASDAQ:OVRL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Overland Storage (NASDAQ:OVRL)
Historical Stock Chart
From Jul 2023 to Jul 2024