Sphere 3D New Product and Financial Review

Company Overview

Sphere 3D Corp. (NASDAQ: ANY) provides virtualization technologies and data management solutions. It enables organizations to deploy a combination of public, private, or hybrid cloud strategies through containerized applications, virtual desktops, virtual storage, and physical hyper-converged platforms. The company sells its products through its distributor and re-seller network to small and medium enterprises, small and medium businesses, and distributed enterprises. Sphere 3D Corp. was incorporated in 2007 and is headquartered in Mississauga, Canada.

Products and Services

The company offers G-Series Appliance and G-Series Cloud applications; virtual desktop management software for managing virtual desktop pools on its V3 hyper-converged appliances for virtualized desktop infrastructures; virtual desktop infrastructure appliances; RDX removable disk solutions, which use public cloud providers comprising Microsoft and Amazon for data protection; and SnapServer network attached storage solution, a platform for primary or nearline storage for integration with Windows, UNIX/Linux, and Macintosh environments.

It also provides SnapScale clustered network attached storage solutions, which are clustered network attached storage (NAS) solutions that enable organizations with rapid or unpredictable data growth to scale capacity and performance; NEO tape-based backup and long-term archive solutions, including tape libraries, autoloaders, and drives, as well as LTFS solutions; and LTO tape drives and media products. The company markets its products under the Glassware 2.0, NEO, RDX, SnapCLOUD, SnapServer, SnapSync, and V3 brand names.

Earlier this month the company announce the release of its new HVE Appliances supporting Non-Volatile Memory express (NVMe) technology.  These NVMe enabled appliances will allow for over 3 times the drive read / write performance when compared to SSD only platforms, and are available as either converged and hyper converged appliances or “Datrium Ready” open converged nodes. Per G2M research, the NVMe market is growing fast, with a 95% CAGR rate and a forecast of 60% of enterprise storage appliances adopting the NVMe technology by 2020.


Q1 Financial Review

Financial Highlights                          Three Months Ended

(in millions)                         March 31, 2017                 March 31, 2016

Net revenue                      $21.7                                                     $19.6

Gross profit                        $6.8                                                       $6.0

Gross margin (%)              31.4%                                                   30.4%

Adjusted EBITDA (1)        $(1.0)                                                    $(3.1)

Net loss                                 $(7.8)                                                    $(8.1)

Net revenue for the first quarter of 2017 was $21.7 million, compared to $19.6 million for the first quarter of 2016.

Product revenue for the first quarter of 2017 was $19.4 million, compared to $17.3 million for the first quarter of 2016.

Disk systems revenue was $15.0 million, compared to $12.2 million for the first quarter of 2016. Disk systems is defined as RDX, SnapServer family, virtual desktop infrastructure, and Glassware derived products.

Tape archive product revenue was $4.4 million compared to $5.1 million for the first quarter of 2016.

Service revenue was $2.3 million in the first quarter of 2017 and the first quarter of 2016.

Operating expenses for the first quarter of 2017 were $11.6 million, compared to $13.8 million for the first quarter of 2016.

Share-based compensation expense for the first quarter of 2017 was $2.2 million, compared to $2.6 million for the first quarter of 2016. Depreciation and amortization was $1.5 million in the first quarter of 2017, compared to $1.6 million in the first quarter of 2016.

Adjusted EBITDA for the first quarter of 2017 was a net loss of $966,000, or a net loss of $0.01 per share, based on 77.9 million weighted average shares outstanding, compared to adjusted EBITDA net loss of $3.1 million, or net loss of $0.07 per share based on 45.7 million weighted average shares outstanding for the first quarter of 2016. 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 quarter of 2017 was $7.8 million, or a net loss of $0.10 per share, compared to a net loss of $8.1 million, or a net loss of $0.18 per share, in the first quarter of 2016.


Stock Influences

  • Results from new product release;
  • The company is still burning cash, and may require additional financing in the future.


Risk Factors

  • Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk.
  • The Company is subject to risk of non-payment of accounts receivable.
  • The share price is under the NASDAQ minimum and there is a risk of share reorganization.
  • The Company may not be able to meet its obligations as they fall due.


Stock Performance


ANY shares closed at $.16 on Wednesday, June 21, 2017. Trading volume was at 9.4 million shares, much higher than the daily average of 2.9 million. The current RSI (14 day) is 57.07. ANY shares closed below their 50-day moving average of $.166 and below their 200-day moving average of $.359.



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