SOURCE: Crossroads Systems

Crossroads Systems

August 29, 2012 16:00 ET

Crossroads Systems Reports Fiscal Third Quarter 2012 Financial Results

AUSTIN, TX--(Marketwire - Aug 29, 2012) -  Crossroads Systems, Inc. (NASDAQ: CRDS), a global provider of data protection solutions and services, reported financial results for its fiscal third quarter ended July 31, 2012.

StrongBox Highlights

  • Entered into a strategic alliance with Iron Mountain, a partnership that creates both an OEM channel as well as an ongoing SaaS service.
  • Major League Baseball Network chooses StrongBox to solve long-term, on-line archive needs.
  • Increased StrongBox revenue quarter over quarter from approximately $150,000 to more than $900,000.

Fiscal Q3 2012 Financial Results
Revenue for fiscal Q3 2012 increased 37% to $3.5 million from $2.6 million in the same quarter a year ago. The increase was due to a 58% increase in product revenue from fiscal Q3 2011 mainly due to the roll-out of a large Read Verify Appliance (RVA) customer as well as a few large StrongBox customers, offset by decreases in SPHiNX sales. The increase was also due to a 22% increase in IP license, royalty and other revenue primarily due to the recognition of revenue relating to the Iron Mountain contract.

Gross profit for fiscal Q3 2012 was $2.6 million or 75% of total revenue, as compared to $2.3 million or 88% of total revenue in the same quarter a year ago. The decrease in gross profit as a percent of revenue was due to the product mix and lower margin associated with the Iron Mountain research and development arrangement.

Operating expenses for fiscal Q3 2012 increased $0.8 million from the same period a year ago to $5.8 million, which included $507,000 of stock-based compensation in Q3 2012 and $137,000 of stock-based compensation in Q3 2011. Operating expenses increased due to headcount increases including approximately $0.3 million from non-recurring expenses relating to hiring personnel and professional fees.

Net loss for fiscal Q3 2012 totaled $3.2 million or $(0.29) per share, as compared to a net loss of $2.7 million or $(0.25) per share in the same quarter a year ago.

At July 31, 2012, cash and cash equivalents totaled $10.3 million, as compared to $9.9 million in the previous quarter, an increase of $0.4 million.

Management Commentary
Rob Sims, President and CEO of Crossroads Systems, commented, "The third quarter was an important quarter for Crossroads. The Major League Baseball Network (MLB) and Iron Mountain announcements this quarter both validate the StrongBox product as well as the long-term opportunities for growth. MLB Network serves as a great illustration of how StrongBox provides data protection and security at the price point needed for long-term archive - with a built-in annuity model since as their data grows, added capacity grows, and Crossroads' revenue grows. The investment by Iron Mountain as well as their financial commitment to the development of a world-class service based on StrongBox shows their belief in this annuity model and their belief in Crossroads. I'm very excited about this partnership and see great potential for both companies going forward."

Conference Call
Crossroads will hold a conference call later today (Wednesday, August 29, 2012) to discuss financial results. Sims and CFO Jennifer Crane will host the call starting at 4:30 p.m. Eastern Time. A question and answer session will follow management's presentation.

To participate in the call, dial the number 5-10 minutes prior to the start time and ask for the Crossroads Systems conference call:

Date: Wednesday, August 29, 2012
Time: 4:30 p.m. Eastern Time (3:30 p.m. Central Time)
Dial-In Number: 1-877-221-8809
International: 1-706-679-8667

The conference call will be broadcasted and available for replay at http://us.meeting-stream.com/crossroadssystemsinc_082912 and via the company's Web site in the Investor Relations Events & Presentations section.

For the webcast, please visit the Web site at least 15 minutes early to register, download, and install any necessary audio software.

About Crossroads Systems
 
Crossroads Systems, Inc. (NASDAQ: CRDS) is a global provider of data protection solutions and services. Crossroads offers organizations proactive data security, intelligent storage connectivity, high performance, and significant cost savings. Founded in 1996 and headquartered in Austin, Texas, Crossroads holds more than 100 patents granted and pending and has been honored with numerous industry awards for innovation in data protection and storage. Visit www.crossroads.com.

Important Cautions Regarding Forward-Looking Statements
This press release includes forward-looking statements that relate to the business and future events or future performance of Crossroads Systems, Inc. and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," and similar expressions or phrases identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about Crossroads Systems' ability to implement its business strategy, including the transition from a hardware storage company to a software solutions and services provider, its ability to expand its distribution channels, its ability to maintain or broaden relationships with existing distribution channels and strategic alliances and develop new industry relationships, the performance of third parties in its distribution channels and of its strategic alliances, uncertainties relating to product development and commercialization, the ability to obtain, maintain or protect patent and other proprietary intellectual property rights, technological change in its industry, market acceptance of its products and services, future capital requirements, regulatory actions or delays, competition in general and other factors that may cause actual results to be materially different from those described herein. Forward-looking statements in this press release are based on management's beliefs and opinions at the time the statements are made. Crossroads Systems does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.

©2012 Crossroads Systems, Inc. Crossroads and Crossroads Systems are registered trademarks of Crossroads Systems, Inc. All trademarks are the property of their respective owners. All specifications are subject to change without notice.

   
   
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, except share data)  
             
    October 31,     July 31,  
ASSETS   2011     2012  
          (Unaudited)  
Current assets:                
  Cash and cash equivalents   $ 7,336     $ 10,290  
  Short-term investments     3,385       -  
    Total cash, cash equivalents and short-term investments     10,721       10,290  
                 
  Accounts receivable, net of allowance for doubtful accounts of $71 and $99, respectively     2,659       2,035  
  Inventory     188       316  
  Prepaid expenses and other current assets     297       296  
    Total current assets     13,865       12,937  
                 
Property and equipment, net     1,320       1,471  
Intangible assets, net     110       -  
Other assets     56       55  
    Total assets   $ 15,351     $ 14,463  
                 
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 2,228     $ 1,047  
  Accrued expenses     2,156       2,336  
  Deferred revenue     1,009       1,908  
  Current portion of long term debt     1,973       2,943  
    Total current liabilities     7,366       8,234  
                 
                 
Long term liabilities     126       1,917  
                 
Commitments and contingencies (See Note 8)     -       -  
                 
Stockholders' equity:                
  Common stock, $0.001 par value, 75,000,000 shares authorized, 10,923,543 and 11,657,842 shares issued and outstanding, respectively     11       12  
  Additional paid-in capital     199,750       204,259  
  Accumulated other comprehensive loss     (40 )     (45 )
  Accumulated deficit     (191,862 )     (199,914 )
    Total stockholders' equity     7,859       4,312  
    Total liabilities and stockholders' equity   $ 15,351     $ 14,463  
                 
                 
                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(In Thousands, Except Share and Per Share Data)  
                         
                         
                         
    Three Months Ended     Nine Months Ended  
    July 31,     July 31,  
    2011     2012     2011     2012  
Revenue:                                
  Product   $ 1,016     $ 1,608     $ 3,410     $ 4,611  
  IP license, royalty and other     1,561       1,912       5,345       4,941  
    Total revenue     2,577       3,520       8,755       9,552  
                                 
Cost of revenue:                                
  Product     56       235       286       471  
  IP license, royalty and other     241       658       881       1,131  
    Total cost of revenue     297       893       1,167       1,602  
                                 
Gross profit     2,280       2,627       7,588       7,950  
                                 
Operating expenses:                                
  Sales and marketing     1,295       1,573       3,685       4,516  
  Research and development     2,917       3,234       7,855       8,653  
  General and administrative     665       935       2,147       2,530  
  Amortization of intangible assets     47       16       582       110  
                                 
    Total operating expenses     4,924       5,758       14,269       15,809  
                                 
Loss from operations     (2,644 )     (3,131 )     (6,681 )     (7,859 )
                                 
Interest expense     (29 )     (75 )     (90 )     (178 )
Other expense     -       (31 )     -       (16 )
                                 
Net loss   $ (2,673 )   $ (3,237 )   $ (6,771 )   $ (8,053 )
                                 
Basic and diluted net loss per share     (0.25 )     (0.29 )     (0.63 )     (0.73 )
                                 
Basic and diluted average common shares outstanding     10,868,382       11,194,755       10,789,317       11,072,574  
                                 
                                 
                                 
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(In thousands)  
             
    Nine Months Ended  
    July 31,  
    2011     2012  
                 
Cash flows from operating activities:                
  Net loss   $ (6,771 )   $ (8,053 )
  Adjustments to reconcile net loss to net cash used in operating activities:                
    Depreciation     376       505  
    Amortization of intangible assets     582       110  
    Loss on disposal of property and equipment     6       17  
    Stock-based compensation     302       1,280  
    Provision for doubtful accounts receivable     1       28  
  Changes in assets and liabilities:                
    Accounts receivable     3,007       586  
    Inventory     (194 )     (128 )
    Prepaid expenses and other current assets     (578 )     (2 )
    Accounts payable     4       (1,177 )
    Accrued expenses     (297 )     270  
    Deferred revenue     64       1,094  
      Net cash used in operating activities     (3,498 )     (5,470 )
Cash flows from investing activities:                
  Purchase of property and equipment     (1,067 )     (700 )
  Proceeds from sale of property and equipment     -       15  
  Purchase of held-to-maturity investments     (6,670 )     (185 )
  Maturity of held-to-maturity investments     1,806       3,570  
      Net cash (used in) provided by investing activities     (5,931 )     2,700  
Cash flows from financing activities:                
  Proceeds from issuance of common stock, net of expenses     62       3,160  
  Proceeds from borrowing on debt     -       3,000  
  Paydown of debt     -       (422 )
      Net cash provided by financing activities     62       5,738  
                 
Effect of foreign exchange rate on cash and cash equivalents     147       (14 )
Net (decrease) increase in cash and cash equivalents     (9,220 )     2,954  
Cash and cash equivalents, beginning of period     13,811       7,336  
Cash and cash equivalents, end of period   $ 4,591     $ 10,290  
                 

Contact Information

  • Company Contact:
    Jennifer Crane
    Crossroads Systems
    Email Contact
    512.928.6897 or 800.643.7148

    Investor Contact:
    John Baldissera
    BPC Financial Marketing
    800.368.1217

    Press Contact:
    Matthew Zintel
    Zintel Public Relations
    Email Contact
    281.444.1590