Overland Storage (OVRL)

Gross Profit. Overall gross profit decreased to $24.3 million during fiscal 2007 from $46.4 million during fiscal 2006, a decrease of approximately $22.1 million, or 47.6%.

 

Gross Profit. Overall gross profit decreased to $24.3 million
during fiscal 2007 from $46.4 million during fiscal 2006, a decrease of
approximately $22.1 million, or 47.6%.

 

Gross profit. Gross profit in the first nine months of fiscal 2008 increased by $3.8 million, or 20.9%, to $22.0 million from $18.2 million in the first nine months of fiscal 2007, despite the 21.8% percent decline in net revenue. The improvement in gross margin (22.2% compared to 14.4%) over the prior year period primarily reflects the elimination of charges and redundant costs associated with our terminated outsourced manufacturing arrangement.

 

Gross profit. Gross profit in the first half of fiscal 2008 of $14.3 million increased by $1.1 million, or 8.3%, from $13.2 million in the first half of fiscal 2007, despite the 24.4% percent decline in net revenue. The improvement in gross margin (21.3% compared to 14.9%) over the prior year primarily reflects the elimination of charges and redundant costs associated with our terminated outsourced manufacturing arrangement.

 

Gross Profit. Gross profit increased to $6.5 million during the first quarter of fiscal 2008 from $5.3 million during the first quarter of fiscal 2007, an increase of approximately $1.2 million, or 22.6%. This increase in gross profit for the first quarter of fiscal 2008 primarily reflects that we are no longer amortizing the cost of the technology we acquired from Zetta, as such technology was impaired in the first quarter of fiscal 2007. Before the impairment, amortization expense related to the Zetta technology was $742,000 per quarter over the estimated useful life of such technology (four years). In addition, during the first quarter of fiscal 2007, we recorded a write-down of $350,000 for specific inventory associated with the ULTAMUS Pro product because it could no longer be used in production.

 

Gross Profit. Gross profit decreased from $60.9 million during fiscal 2005 to $46.4 million during fiscal 2006, a decrease of approximately $14.5 million or 23.8%.

Gross Profit. Overall gross profit decreased to $18.2 million during the first nine months of fiscal 2007 from $37.1 million during the first nine months of fiscal 2006, a decrease of approximately $18.9 million, or 51.0%.

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Gross Profit. Gross profit decreased to $13.2 million during the first half of fiscal 2007 from $26.8 million during the first half of fiscal 2006. The decrease of approximately $13.6 million, or 50.9%, is primarily due to an overall decrease in our net revenue of $30.5 million, as described above. Overall gross margin of 14.9% for the first half of fiscal 2007 decreased from 22.5% for the first half of fiscal 2006 due to (i) an increase of approximately $4.2 million in employee and related costs from an increase in average headcount of 64 employees during the first half of fiscal 2007, due to bringing manufacturing back in house, (ii) an increase of $1.0 million of non-warranty services associated with an increase in out-of-warranty repaired items, and (iii) a $1.3 million increase in inventory reserves for the period related to obsolete inventories and components originally acquired for the Dell contract.

Gross Profit. Gross profit decreased from $13.4 million during the first quarter of fiscal 2006 to $5.3 million during the first quarter of fiscal 2007. The decrease of approximately $8.1 million or 60.5% is primarily due to an overall decrease in our net revenue of $16.7 million, as described above, and related materials and labor costs of $11.9 million. The decrease in materials and labor costs during the first quarter of fiscal 2007,were offset by the following: (i) employee and related costs increased $1.3 million due to an 151% increase in headcount due to bringing manufacturing back in-house, (ii) increased warranty and related costs of $944,000 as a result of the increase in extended warranty revenues associated with NEO Series branded products, an increase in sales of extended warranties and an increase in services related to out-of-warranty product being repaired, (iii) an increase of $645,000 in inventory reserves associated with higher inventory balances due to bringing manufacturing in-house and inventory related to the ULTAMUS product and (iv) an additional $227,000 in amortization costs associated with the amortization of the Zetta technology; fiscal 2007 included three months of amortization compared to two months in fiscal 2006. We expect gross profit and gross margin percentage to improve over the course of fiscal 2007 as we eliminate redundant manufacturing costs due to the outsourcing difficulties and as the percentage of branded revenue grows in comparison to revenue from OEM customers, given that branded sales typically result in higher margins than OEM sales.

Gross Profit. Gross profit decreased from $64.7 million in fiscal 2004 to $60.9 million in fiscal 2005. The decrease of approximately $3.8 million or 5.8% is primarily due to the decrease in net revenue of $2.4 million, and an increase of $2.1 million in cost of revenue associated with the outsourcing of our manufacturing activities. In addition, during fiscal 2005 warranty costs increased by $2.6 million as a result of more products under warranty compared to the prior year. These cost increases were partially offset by favorable product mix within our branded channel and a larger concentration of higher margin sales of branded products versus lower margin OEM products.

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Gross Profit. Gross profit was $37.1 million during the first three quarters of fiscal 2006, a decrease of $11.6 million or 23.8% from $48.7 million during the first three quarters of fiscal 2005. The gross margin percentage decreased from 27.0% for the first three quarters of fiscal 2005 to 22.2% for the first three quarters of fiscal 2006. The decrease in gross profit dollars and in the gross margin percentage is a result of the lower revenue during the period, lower pricing to HP, price erosion resulting from increased competition in our branded sales channel and the addition of $2.1 million of amortization costs associated with the acquisition of Zetta Systems. These increased costs were partially offset by a reduction in outsourcing charges which amounted to $1.6 million in the 2005 period compared to $367,000 in the 2006 period.

 

Gross Profit. Gross profit was $26.8 million during the first half of fiscal 2006, a decrease of $7.0 million or 20.8% from $33.8 million during the first half of fiscal 2005. The gross margin percentage decreased from 27.7% for the first half of fiscal 2005 to 22.5% for the first half of fiscal 2006. The overall decrease is a result of lower pricing to HP, a decrease in our net revenue of $2.9 million and increased warranty costs of $1.6 million as a result of the increase in sales of our NEO Series branded products and an increase in sales of extended warranties compared to the prior year. In addition, amortization costs associated with the purchase of Zetta were approximately $1.2 million. These increased costs were partially offset by favorable product mix within our branded channel and a larger concentration of higher margin sales of branded products versus lower margin OEM products.

 

Gross Profit. Gross profit decreased from $16.0 million during the first quarter of fiscal 2005 to $13.4 million during the first quarter of fiscal 2006. The decrease of approximately $2.6 million or 16.2% is primarily due to an overall decrease in our net revenue of $1.0 million, as described above, lower pricing to HP and an increase of  $515,000 in amortization costs associated with the purchase of Zetta. In addition, during the first quarter of fiscal 2006, warranty costs increased by $1.1 million as a result of the increase in revenues associated with NEO Series branded products and an increase in sales of extended warranties compared to the prior year. These cost increases were partially offset by favorable product mix within our branded channel and a larger concentration of higher margin sales of branded products versus lower margin OEM products.

 

Excluding the impact of outsourcing charges in fiscal 2005 and amortization in fiscal 2006 of acquisition costs associated with the Zetta acquisition, we expect our gross margin percentage in fiscal 2006 to be relatively unchanged from fiscal 2005. Although sales of branded products are expected to represent a higher percentage of total revenue in fiscal 2006 compared to fiscal 2005, we expect that the gross margin percentage on our new products will initially be lower than our existing products, which is consistent with our past experience. In the second half of fiscal 2006 we will focus on cost reductions, which we expect will result in gross margin improvements.

 

Gross Profit. Gross profit amounted to $64.7 million in fiscal 2004, an increase of $10.7 million or 19.7% from $54.0 million in fiscal 2003, resulting from a combination of higher sales volumes somewhat offset by slightly lower gross margins. The gross margin percentage decreased slightly to 27.1% in fiscal 2004, down from 27.6% in fiscal 2003. The decrease in gross margin percentage was due primarily to $1.8 million of amortization related to the Okapi technology asset. We also experienced higher warranty costs during fiscal 2004 as our domestic warranty policy, which includes one year of on-site warranty with the purchase of many of our products, was extended to our European customers. Although product mix and channel mix had little effect on the gross margin percentage when compared to the prior year, the increased costs discussed above were partially offset as material cost reductions outpaced average selling price degradation during fiscal 2004 and our pool of relatively fixed overhead costs was spread across a larger revenue base.

 

Gross Profit.  Gross profit amounted to $48.7 million in the first nine months of fiscal year 2005, a decrease of $695,000 or 1.4% from $49.4 million in the first nine months of fiscal year 2004.  Gross profit for the first nine months of fiscal year 2005 included a $1.6 million expense associated with transition of our manufacturing to an outsourced provider.  Despite the transition expense, the gross margin percentage in the first nine months of fiscal year 2005 remained flat at 27.0% compared to the first nine months of fiscal year 2004.  We saw favorable impacts to the gross margin percentage due to (i) a combination of a higher concentration of higher margin branded products versus lower margin OEM products and (ii) cost reduction efforts outpacing the decline in average selling prices, primarily during the first six months of the fiscal year.  Directly offsetting the favorable channel mix and cost reduction efforts were the transition costs associated with the transition to an outsource manufacturer and an increase in warranty cost as a result of more products under warranty compared to the prior year period.

 

Gross Profit.  Gross profit amounted to $33.8 million in the first six months of fiscal year 2005, an increase of $586,000 or 1.8% from $33.2 million in the first six months of fiscal year 2004.  The gross margin percentage increased to 27.7% in the first six months of fiscal year 2005 from 26.7% in the first six months of fiscal year 2004.  Gross profit for the first six months of fiscal year 2005 included a $538,000 expense associated with transition of our manufacturing to an outsourced provider.  The increase in gross margin percentage was due to the combination of a higher concentration of higher margin branded products versus lower margin OEM products and cost reduction efforts outpacing the decline in average selling prices.  Partially offsetting the favorable channel mix and cost reduction efforts were relatively fixed overhead costs spread over fewer units produced and an increase in warranty cost as a result of more products under warranty compared to the prior year period.