Exhibit 99.1
Crossroads Systems Reports Third Quarter Results
AUSTIN, Texas--(BUSINESS WIRE)--Sept. 2, 2004--Crossroads Systems, Inc.
(NASDAQ:CRDS), a leading provider of connectivity for storage networking
solutions, today reported results for its fiscal third quarter ended July 31,
2004 (Q3'04).
Revenue totaled $4.9M for Q3'04 compared to $7.4M in the fiscal second
quarter ended April 30, 2004 (Q2'04). The factors affecting the decrease in
revenue included seasonality and weakness in sales across the OEM business.
Gross margin percentage was 72% for Q3'04, compared to 70% for Q2'04. Net loss
for Q3'04 was $2.1M or $0.08 per share compared to $732,000 net loss, or $0.03
per share in Q2'04.
In December 2003, Crossroads entered into a strategic relationship with
NexQL Corporation, a development stage company, for the joint development of
advanced data management solutions. The consolidation of NexQL had a direct
impact on the Company's current net loss. Net operating expenses attributable to
NexQL for the three and nine month periods ended July 31, 2004 were
approximately $0.6 million and $1.4 million, respectively.
"Our visibility going into the third quarter indicated seasonal weakness;
however, it was disappointing that actual sales were unable to meet even these
lowered expectations," said Rob Sims, president and chief executive officer,
Crossroads Systems. "Nevertheless, we remain confident in the long-term,
strategic direction of the Company and we continue to be focused on implementing
our new product roadmap which will deliver new solutions into emerging markets."
Conference Call
Crossroads will hold a conference call (866-459-7778, international callers
dial 678-460-1867) and simultaneous webcast (www.crossroads.com) at 3:30 P.M.
(CDT) today. An audio replay of the call will be available by September 2nd for
a limited time by calling 866-453-6660 (passcode: 150690) or by visiting the
Crossroads Web site.
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, HP and StorageTek, and are distributed through
partners such as Bell Micro, DLT Solutions, Info-X, Promark, and TidalWire.
Crossroads is a voting member of the Storage Networking Industry Association
(SNIA) in both the United States and Europe. For more information about
Crossroads Systems, please visit www.crossroads.com or call 800-643-7148.
Forward-Looking Statements
This release may include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, 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 will maintain positive cash flow;
the company's ability to maintain its operating margins; the acceptance by our
existing customers of any new family of products; any general economic slowdown,
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 is evolving and
unpredictable; the possibility that the pending shareholder class action
lawsuits 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, as well as, other factors detailed in
Crossroads' filings with the Securities and Exchange Commission, including its
Annual Report on Form 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 on which those statements are based, unless otherwise
required by law.
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
April 30, July 31,
2004 2004
------------ -----------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $31,545 $29,482
Accounts receivable, net 2,980 1,980
Inventories, net 1,631 1,611
Prepaids and other current assets 610 636
------------ -----------
Total current assets 36,766 33,709
Property and equipment, net 2,621 2,715
Other assets 291 282
------------ -----------
Total assets $39,678 $36,706
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,144 $2,193
Accrued expenses 2,179 1,632
Accrued warranty costs 779 588
Deferred revenue 358 384
------------ -----------
Total current liabilities 5,460 4,797
Non-controlling interest 215 -
Stockholders' equity 34,003 31,909
------------ -----------
Total liabilities and stockholders'
equity $39,678 $36,706
============ ===========
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,
----------------------- -----------------------
2003 2004 2003 2004
----------- ----------- ----------- -----------
Revenue:
Product $3,741 $2,920 $21,444 $12,551
Royalty and other 1,876 1,957 2,424 6,876
----------- ----------- ----------- -----------
Total revenue 5,617 4,877 23,868 19,427
Cost of revenue:
Product 2,547 1,305 14,018 5,934
Royalty and other 91 41 237 158
----------- ----------- ----------- -----------
Total cost of
revenue 2,638 1,346 14,255 6,092
----------- ----------- ----------- -----------
Gross profit 2,979 3,531 9,613 13,335
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 1,018 1,019 3,033 3,403
Research and
development 2,925 3,892 9,063 9,993
General and
administrative 1,136 1,158 4,283 3,858
NexQL research and
development - - - 721
Business
restructuring
expense (201) (73) (341) (187)
Non-controlling
interest - (215) - (215)
Amortization of
intangibles - - 173 -
----------- ----------- ----------- -----------
Total operating
expenses 4,878 5,781 16,211 17,573
----------- ----------- ----------- -----------
Loss from operations (1,899) (2,250) (6,598) (4,238)
Interest income 164 120 468 346
----------- ----------- ----------- -----------
Net Loss $(1,735) $(2,130) $(6,130) $(3,892)
=========== =========== =========== ===========
Basic and diluted net
loss per share (0.07) (0.08) (0.25) (0.16)
Shares used in
computing basic and
diluted net loss per
share 24,190,122 25,318,050 24,478,962 25,061,443
=========== =========== =========== ===========
CONTACT: Crossroads Systems, Inc., Austin
Jennifer Ray, 512-928-6897 or 800-643-7148
info@crossroads.com