Kelly reports on Overland Storage progress

"We are very pleased with the progress we made in the past year to continue the transformation of our business in fiscal 2012. We introduced several significant new products, improved gross margins, lowered our operating expenses and received validation of two key patents in our intellectual property portfolio," said Eric Kelly, President and CEO of Overland Storage. "As we continue to make substantial operational improvements, we remain focused on innovative product introductions, accelerating our revenue growth and achieving profitability. In addition to greater sales from these new products, we expect to see acceleration in revenue growth as we enter the fourth calendar quarter from our recently launched SnapSAN solutions and our Scale-out NAS product, which is scheduled to launch as planned."

Kelly has been among the 50 Most important African-Americans in Technology for the past decade, featured in a 2002 CIO Magazine article about the selectees.   This years group meets for Innovation & Equity 2013: Keeping America First in Technology: Public Innovation & Supplier Diversity on Jan. 15, 2013 in Washington, D.C.

He has served as Overland's CEO since January 2009 and as a Board member since 2007. Previously, he was president of Silicon Valley Management Partners Inc., a management consulting and M&A advisory firm, which he co-founded in 2007. Mr. Kelly spent nearly 30 years in computer technology developing distinct operational, marketing and sales expertise. His most recent corporate position was vice president and general manager of storage systems solutions at Adaptec, Inc. Prior to that, he served as president and CEO of Snap Appliance, which was acquired by Adaptec.

Two years earlier, Kelly engineered the purchase of Snap from Quantum Corp., having recognized the inherent value in Snap, where the main product he drove became the volume market leader in Network Attached Storage (NAS) appliances. His previous corporate affiliations include Maxtor Corp., Dell Computer Corp., Diamond Multimedia, Conner Peripherals and IBM. Mr. Kelly earned an M.B.A. from San Francisco State University and a B.S. in Business from San Jose State University.

In a conference call with analysts, Kelly reported:

• Overland reaffirms its guidance of non-GAAP profitability for the fourth quarter of calendar 2012 (excluding stock compensation and other non-cash items) with revenue in the range of $18 to $20 million and gross margins of 37% to 40%.

Highlights of the fiscal year and quarter were:

• SnapServer DX Series product revenue was up 43.8% sequentially in the fourth quarter.
• SnapServer DX Series won "Hardware Product of the Year" at the 2012 Network Computing Awards and Storage Magazine named "Best Disk Product" for the Small to Medium Enterprise at the 2012 Storage Awards.
• Gross margins for fiscal 2012 improved 190 basis points year-over-year to 32.1% from 30.2%.
• Reduced fiscal 2012 total operating expenses 7.4% year-over-year, excluding stock compensation expense.
• Secured settlements with IBM and Dell in the ITC and U.S. District Court actions.
• Received validation from the ITC on two Overland patents in ongoing BDT infringement case.
• Filed patent infringement lawsuits in U.S. District Court against Quantum Corporation, Spectra Logic Corporation, PivotStor, Inc., Qualstar Corporation, Tandberg Data GmbH, Tandberg Data Corp., and Venture Corporation.

Net revenue for the fourth quarter of fiscal 2012 was $15.3 million, compared to $17.6 million for the fourth quarter of fiscal 2011 and $15.2 million for the third quarter of fiscal 2012. Product revenue for the fourth quarter of fiscal 2012 was $9.4 million, compared to $10.9 million in the fourth quarter of fiscal 2011 and $8.9 million for the third quarter of fiscal 2012.

Gross margin for the fourth quarter of fiscal 2012 was 31.6%, compared to 32.5% for the fourth quarter of fiscal 2011 and 31.1% for the third quarter of fiscal 2012.

Operating expenses for the fourth quarter of fiscal 2012 were $8.5 million, a decrease of 7.6% from $9.2 million for the fourth quarter of fiscal 2011, and slightly higher than $8.4 million in the third quarter of fiscal 2012. Stock compensation expense was approximately $1.1 million in the fourth quarter of fiscal 2012, compared to $0.6 million for the fourth quarter of fiscal 2011 and $1.1 million for the third quarter of fiscal 2012. Depreciation and amortization was approximately $0.5 million in the fourth quarter of fiscal 2012, compared to $0.4 million in the fourth quarter of 2011.

Net loss for the fourth quarter of fiscal 2012 was $2.7 million, or a loss of $0.10 per share, compared to a net loss of $3.7 million, or $0.16 per share, in the fourth quarter of fiscal 2011 and a loss of $3.8 million, or $0.16 per share, in the third quarter of fiscal 2012.

Net revenue for fiscal 2012 was $59.6 million, compared to $70.2 million for fiscal 2011. Product revenue for fiscal 2012 was $35.2 million, compared to $45.7 million for fiscal 2011.

Gross margin for fiscal 2012 was 32.1%, compared to 30.2% for fiscal 2011.

Operating expenses for fiscal 2012 were $36.2 million, compared to $36.8 million for fiscal 2011. Stock compensation expense for fiscal 2012 was approximately $5.0 million, compared to $3.1 million for fiscal 2011. Depreciation and amortization for fiscal 2012 was approximately $1.6 million, compared to $1.5 million for fiscal 2011.

Net loss for fiscal 2012 was $16.2 million, or a loss of $0.66 per share, compared to a net loss of $14.5 million, or a loss of $0.94 per share, for fiscal 2011.

Total cash and cash equivalents at June 30, 2012 was $10.5 million, compared to $10.2 million at June 30, 2011. At June 30, 2012, the Company had $3.5 million outstanding under its credit facility.

In November 2011, the Company entered into a multi-year settlement and cross-license agreement with IBM pursuant to which Overland released all claims it had against IBM and Dell in connection with the patent infringement lawsuits it filed in the United States District Court for the Southern District of California and with the United States International Trade Commission (ITC) against BDT AG and certain of its affiliates, Dell and IBM. However, Overland's infringement case against BDT and its affiliates continues and on June 21, 2012, the Chief Administrative Law Judge of the ITC issued a public notice of an initial determination affirming that both of Overland's asserted patents are valid. Overland Storage has petitioned the full Commission for a review of some of the Initial Determination's findings. The Commission has decided to review in part the Initial Determination on the merits, and the Commission is expected to issue its decision in a Final Determination by October 22, 2012. Upon completion of the ITC case, Overland plans to pursue monetary damages against BDT in District Court.

About Overland Storage
Overland Storage is a trusted global provider of effortless data management and data protection solutions across the data lifecycle. By providing an integrated range of technologies and services for primary, nearline, offline, archival and cloud data storage, Overland makes it easy and cost effective to manage different tiers of information over time. Overland SnapServer®, SnapSAN™, NEO® and REO® solutions are available through a select network of value added resellers and system integrators. For more information, visit http://www.overlandstorage.com.