Overland Storage Reports Fiscal 2009 First Quarter Results

Gross Profits and Margins Improve SAN DIEGO , Oct. 23 /PRNewswire-FirstCall/ -- Overland Storage, Inc. (Nasdaq: OVRL) today reported results for its fiscal 2009 first quarter ended September 30, 2008 . Net revenue for the fiscal 2009...


Gross Profits and Margins Improve

SAN DIEGO , Oct. 23 /PRNewswire-FirstCall/ -- Overland Storage, Inc. (Nasdaq: OVRL) 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(R) 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.

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