Having just gone over the latest financial report, following quick key observations:
Revenue:
- Revenue increased > 70% quarter-on-quarter, even better than indicated by the Corporate Update at the end of July.
- Revenue growth was primarily driven by the increase in hardware and software sales which more than doubled quarter-on-quarter (huge V3 acquisition positive)
- Management provided three times evidence that the company is on track to not only continue and sustain very high revenue growth, but also to influence the shape of the entire sector! :
1) Market demand: “The market for the Company’s products and services has experienced strong demand and management anticipates that such demand will continue for the foreseeable future.”
2) Uniqueness: “Management believes that the Sphere 3D’s Glassware 2.0 TM proprietary virtualization platform design and architecture is unique and innovative…While some of our competitors appear to have similar product offerings, management believes that Sphere 3D’s products represent a significant advance in terms of functionality and usability.”
3) Continued innovation: “Sphere 3D continues on its quest to redefine the boundaries of hardware through its “software defined everything” approach to computing. DLA Piper, on behalf of the Company, filed a provisional patent for the first microvisor runtime environment available on a chip. The latest IP creation is a culmination of years of miniaturization work with the intent of making Glassware 2.0 completely portable and available offline.”
Gross Margins:
- Sphere isn’t selling “gear”, it is evidently selling unique and eagerly awaited solutions with high margins! Despite a substantially higher proportion of hardware and software sales, the gross margin remained > 50%!
- The above bodes incredibly well for the company’s future growth in profitability as sales continue to increase.
- Contrary to so many other young technology companies Sphere 3D does not need to sacrifice its very impressive hardware and software margins to achieve its initial staggering ramp up in sales.
Expenses:
- Expenses increased as a result of two main factors, the ramp up in sales and marketing professionals as well as the recent and upcoming M&A activity in regards to V3 and Overland respectively.
- In regards to the former management nicely and transparently states that it “intends to focus the majority of sales efforts through an indirect sales channel in order to achieve the greatest possible impact with the least possible start-up costs. This indirect channel includes licensees, resellers, ISVs, OEMs and systems integrators…During fiscal 2013, Sphere 3D shifted its focus to deliver any consumer centric solutions through a Business-to-Business-to-Consumer (B2B2C) approach. This strategic shift is primarily in response to demand from software publishers for application virtualization, the operational and financial efficiencies gained through this approach, and the requirement to focus resources on the considerable Business and Enterprise market opportunities currently available to the Company.”
- This revised strategic B2B2C approach is immensely positive in that staff expenses can be expected to rise significantly less than revenue growth, leading to continuously improving net margins as the company continues to grow.
- The company very intelligently adapted its sales strategy to the strong demand it sees, thereby making its future growth as little as possible restricted by the size of the company’s own sales and support staff.
Needless to say, the above is just an excerpt of thoughts related to the filing. I would highly recommend to read and digest - apart from the financials - also at least the sections pertaining to the General Development Of The Business and the Description Of The Business as these contain extraordinarily valuable and encouraging information about our company.
AI
