Crossroads Systems Reports First Quarter Results; Company Re-Aligns Work Force To Allocate Resources To Current Strategy.AUSTIN, Texas -- Crossroads Systems, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CRDS CRDS Contribution pour Le Remboursement de la Dette Sociale (French: Social Debt Repayment Contribution) CRDS Cavity Ring-Down Spectroscopy CRDS Community Rehabilitation and Disability Studies ), a leading provider of connectivity for storage networking solutions, today reported results for its fiscal first quarter ended January 31, 2005 (Q1'05). Revenue totaled $4.7M for Q1'05 compared to $6.6M in the fiscal fourth quarter ended October 31, 2004 (Q4'04) and $7.1M in the fiscal first quarter ended January 31, 2004 (Q1'04). The primary factor affecting the decrease in revenue in Q1'05 compared with Q4'04 was a lack of IP license revenue. The decline in revenue in Q1'05 compared with Q1'04 was due primarily to an overall decline in OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and revenue. Gross margin percentage was 65% for Q1'05, compared to 73% for Q4'04, and 65% for Q1'04. The consistency in gross margin percentages for Q1'05 and Q1'04 reflects the impact of the royalty model, as well a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix in Q1'04. Gross margin for Q4'04 was positively impacted by IP licensing and HP royalty business. Net loss for Q1'05 was $3.0M, or $0.12 per share, compared to $2.5M net loss, or $0.10 per share in Q4'04, and net loss of $1.0M, or $.04 per share, in Q1'04. In December 2003, Crossroads entered into a strategic relationship with NexQL Corporation, a development stage company, for the joint development of hardware accelerated data management solutions. FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). Interpretation No. 46 (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46), "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51," and the revised interpretations, require consolidation by business enterprises of Variable Interest Entities, as defined by FIN 46. As a result, the operating results of NexQL were accounted for under the equity method in Q1'04, and the company began consolidating the statements of operations and cash flows of NexQL beginning May 1, 2004, such that Q4'04 and Q1'05 reflect the consolidated operations and cash flows of NexQL. The consolidation of NexQL had a direct impact on Crossroads' net loss for Q4'04 and Q1'05. Net operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. attributable to NexQL for Q1'05 was $0.7M, compared with $1.0M in Q4'04, and $0.3M in Q1'04. "Despite significant progress in executing our long-term strategy, our first quarter results were below expectations, primarily due to continued weakness in our distribution channel, as well as weakness in a portion of our OEM business," said Rob Sims Rob Sims (b. December 6, 1983) is an American football offensive guard, who currently plays for the National Football League's Seattle Seahawks. He was drafted in round four, pick 128 of the 2006 NFL Draft. , president and chief executive officer, Crossroads Systems. In addition, Crossroads announced that it will reduce its current workforce to streamline operations and re-align resources with the company's current strategy in targeted growth areas. The workforce reduction will result in an elimination of approximately 23 jobs out of a current workforce of approximately 115 employees. The company will recognize a charge in its second fiscal quarter as a result of this restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan. Crossroads management will announce details of the restructuring plan during its fiscal first quarter financial results call on March 10. "We greatly appreciate the contribution of our colleagues affected by this action," said Sims. "As we move forward, we believe that the re-alignment will allow us to better focus our resources on several promising opportunities relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our core business and new products while reducing our cash consumption." Recent Operational Highlights: --Crossroads Announces Data Mover Also called a "storage router," it is a device in a backup system that manages the transfer of data to the backup storage. See LAN free backup. Appliance for SAN Backup Solutions: Crossroads announced the DataMover 240f Appliance that will complement Information Lifecycle Management Information Lifecycle Management refers to a wide-ranging set of strategies for administering storage systems on computing devices. Specifically, four categories of storage strategies may be considered under the auspices of ILM. (ILM) storage strategies through a range of advanced features supporting automation of policy-based storage management, enterprise class performance, and system monitoring A System Monitor (SM) is a process within a distributed system for collecting and storing state data. There are many issues involved with designing and implementing a system monitor. of hosts, drives, and media for improved utilization and management of storage resources. The DataMover 240f will work with leading data protection applications for Fibre Channel Storage Area Network (SAN) backup solutions. --Crossroads Announces Strongbox(TM) Family of Network Solutions Appliances: Crossroads announced its StrongBox(TM) family of network-based appliances to help IT organizations address requirements for secure, compliant, managed solutions for their database and application resources. --Crossroads Appoints Chief Technology Officer: Crossroads appointed David Boles as its chief technology officer (CTO (Chief Technical Officer) The executive responsible for the technical direction of an organization. See CIO and salary survey. ) in January 2005. Mr. Boles will be directly responsible for driving Crossroads vision for its Intelligence At the Edge strategy to deliver versatile, high performance, low latency Low latency allows human-unnoticeable delays between an input being processed and the corresponding output providing real time characteristics. This can be especially important for internet connections utilizing services such as online gaming and VOIP - VOIP is not as important as solutions for improved utilization and management of storage and database resources. Conference Call The conference call will be held at 3:30pm CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. (4:30pm EST EST electroshock therapy. EST abbr. electroshock therapy ) March 10th. Interested parties can listen to the call by dialing 1-866-459-7779 (or 1-678-460-1867 for international callers). An audio-only replay of the call will be available by March 10th for a limited time by calling 1-866-453-6660 (or 1-678-460-1860 for international callers) and using playback Playback could mean:
About Crossroads Systems, Inc. With headquarters in Austin, Texas, Crossroads Systems (Nasdaq:CRDS) is a leading global provider of data routing solutions for Storage Area Networks (SANs). Crossroads' solutions serve the growing storage connectivity and data storage markets, and are designed to help companies store, manage and ensure the integrity and availability of their data. Crossroads' products are in solutions from companies such as EMC (1) (EMC Corporation, Hopkinton, MA, www.emc.com) The leading supplier of storage products for midrange computers and mainframes. Founded in 1979 by Richard J. Egan and Roger Marino, EMC has developed advanced storage and retrieval technologies for the world's largest companies. , HP and StorageTek, and are distributed through partners such as Bell Micro, DLT (Digital Linear Tape) A magnetic tape technology originally developed by Digital for its VAX line. The technology was later sold to Quantum, which makes it available to other manufacturers. DLT uses half-inch, single-hub cartridges similar to IBM's 3480/3490/3590 line. Solutions, Info-X, and Promark. Crossroads is a voting member of the Storage Networking Industry Association An association of producers and consumers of storage networking products, whose goal is to further storage networking technology and applications. The Storage Networking Industry Association, or SNIA (SNIA (Storage Networking Industry Association, San Francisco, CA, www.snia.org) An organization devoted to the advancement of mission critical storage systems. Founded in 1997, its goal is to determine the standards that must be developed to allow hosts and storage systems to interact via ) in both the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Europe. For more information about Crossroads Systems, please visit www.crossroads.com or call 800/643-7148. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "expect," "intend," "plan," "project," "will" and similar phrases as they relate to Crossroads are intended to identify such forward-looking statements. These statements reflect the current views and assumptions of Crossroads, and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: the quarterly fluctuations of Crossroads' operating results and Crossroads' inability to accurately predict revenue and budget for expenses for future periods; the extent to which Crossroads can reduce its cash consumption and achieve positive cash flow; the company's ability to maintain its operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ; the acceptance by our existing customers of any new family of products; the performance of NexQL with whom we are required to consolidate our financial statements; our ability to incorporate the assets of Teracruz that we recently acquired into our products and/or to develop new products based on Teracruz technology that achieve market acceptance; any general economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. , including, in particular, related expense reductions by organizations affecting their IT spending and budget which could impact sales; the dependence of Crossroads' business on the storage area network market which has been declining and is unpredictable; the possibility that the pending stockholder class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax could result in an adverse outcome to the company; unforeseen changes in anticipated expenses or revenues; the continuation of Crossroads' successful relationships with its limited number of OEM customers; Crossroads' inability to protect its intellectual property rights; our ability to retain the services of key employees; as well as, other factors detailed in Crossroads' filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Reports on 10-Q. Crossroads expressly disclaims any obligation to release publicly any updates or revisions to the information contained in this press release or with respect to any future distribution of its stock by investors, or to update or revise any forward-looking statements to reflect any changes in expectations, or any change in events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or on which those statements are based, unless otherwise required by law.
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
October 31, January 31,
2004 2005
------------ ------------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $28,537 $25,540
Accounts receivable, net 2,581 2,523
Inventories, net 1,160 1,239
Prepaids and other current assets 669 762
------------ ------------
Total current assets 32,947 30,064
Property and equipment, net 2,909 2,697
Intangible 809 742
Other assets 104 70
------------ ------------
Total assets $36,769 $33,573
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,901 $1,725
Accrued expenses 3,432 3,193
Accrued warranty costs 508 463
Deferred revenue 1,262 1,300
------------ ------------
Total current liabilities 7,103 6,681
Stockholders' equity 29,666 26,892
------------ ------------
Total liabilities and stockholders'
equity $36,769 $33,573
============ ============
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Three Months Ended
----------------------- -----------------------
January 31, January 31, October 31, January 31,
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenue:
Product $4,941 $2,520 $2,485 $2,520
Royalty and other 2,184 2,171 4,117 2,171
----------- ----------- ----------- -----------
Total revenue 7,125 4,691 6,602 4,691
Cost of revenue:
Product 2,479 1,612 1,366 1,612
Royalty and other 36 35 436 35
----------- ----------- ----------- -----------
Total cost of
revenue 2,515 1,647 1,802 1,647
----------- ----------- ----------- -----------
Gross profit 4,610 3,044 4,800 3,044
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 1,140 910 1,058 910
Research and
development 3,021 4,038 3,893 4,038
General and
administrative 1,382 1,304 1,584 1,304
NexQL research and
development 270 - - -
Litigation
settlement - - 1,000 -
Business
restructuring
expense (52) (92) (119) (92)
Amortization of
intangibles - 67 - 67
----------- ----------- ----------- -----------
Total operating
expenses 5,761 6,227 7,416 6,227
----------- ----------- ----------- -----------
Loss from operations (1,151) (3,183) (2,616) (3,183)
Other income, net 121 153 148 153
----------- ----------- ----------- -----------
Net loss $(1,030) $(3,030) $(2,468) $(3,030)
=========== =========== =========== ===========
Basic and diluted net
loss per share (0.04) (0.12) (0.10) (0.12)
Shares used in
computing basic and
diluted net loss per
share 24,699,222 25,708,764 25,437,968 25,708,764
=========== =========== =========== ===========
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