Exhibit 99.1
Crossroads Systems Reports Fourth Quarter, Fiscal 2004 Full Year Results
AUSTIN, Texas--(BUSINESS WIRE)--Dec. 20, 2004--Crossroads Systems, Inc.
(Nasdaq:CRDS), a leading provider of connectivity for storage networking
solutions, today reported results for its fiscal fourth quarter (Q4'04) and
fiscal year that ended Oct. 31, 2004.
Fiscal Fourth Quarter 2004
Total revenue for the fourth quarter 2004 (Q4'04) was $6.6 million. This
represents an increase of 35% over total revenue for fiscal third quarter 2004
(Q3'04) of $4.9 million and relates primarily to additional IP licensing
revenue. Comparatively, total revenue for the fiscal fourth quarter 2003 (Q4'03)
was $9.3 million. The decrease of revenue from the prior year is primarily due
to a decline in IP license revenue as well as a decrease in revenue to
StorageTek.
In Q4'04, Crossroads improved its gross margin percentage to 73% from 72%
in Q3'04, resulting primarily from IP license revenue. Comparatively, gross
margin for Q4'04 of 73% was higher than the Q4'03 gross margin percentage of
66%, which relates largely to the growth of HP's royalty business and the
addition of HP's software royalties. The net loss for Q4'04 was $2.5 million, or
$0.10 per share, compared with $2.1 million net loss, or $0.08 per share, for
Q3'04, and $317,000 net loss, or $0.01 per share, for Q4'03.
In December 2004, Crossroads reached an agreement in principle to settle
the consolidated securities class action litigation. The shareholder class will
receive a total payment of $4.35 million. Of that amount, the Company's
directors-and-officers insurance carriers agreed to pay $3.35 million and the
Company will pay $1.0 million. As a result, Crossroads took a charge to earnings
in Q4'04 of $1.0 million for the settlement.
In October 2004, Crossroads purchased the assets of Teracruz, Inc., a
privately held company, located in Huntsville, Alabama. The cost of acquisition
will be recognized over subsequent years and amounts expensed in Q4'04 were not
material. The acquisition of Teracruz's technology, including application
acceleration and monitoring technology, represents a component of Crossroads
continued approach to bring focused, purpose driven solutions for intelligent
management of IT resources.
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. The consolidation of NexQL had a
direct impact on Crossroads' net loss. Net operating expenses attributable to
NexQL for Q4'04 included $1.0 million compared with $650,000 in Q3'04.
Fiscal Year 2004
Total revenue for fiscal year 2004 (FY'04) was $26.0 million, compared with
$33.1 million for fiscal year 2003 (FY'03). Gross profit for FY'04 was $18.1
million compared with $15.7 million for FY'03, resulting primarily from margin
increases associated with the royalty model. Net loss for FY'04 was $6.4
million, or $0.25 per share, compared with $6.4 million net loss, or $0.26 per
share, for FY'03.
Recent Operational Highlights:
-- Crossroads Purchases Teracruz, Inc. Assets: Crossroads acquires
application acceleration and monitoring technology with the purchase
of Teracruz, Inc. assets to complement Crossroads Product Strategy.
-- Crossroads and FalconStor Reach Agreement to Settle Patent Suit: The
companies reached a patent cross-licensing arrangement that grants
FalconStor a perpetual worldwide license to Crossroads' access control
technology and grants Crossroads a perpetual worldwide license to
select FalconStor technology. In addition, Crossroads received $1.3
million in license fee revenue.
-- Crossroads and iVivity Collaborate on Development of Advanced iSCSI
Products: Crossroads and iVivity announced the two companies are
collaborating on the development of new gateway and intelligent
storage system products targeting the market for iSCSI storage
solutions. The new products will provide intelligent Crossroads
storage routing software in a hardware platform based on
high-performance iVivity iDiSX (R) silicon technology.
-- Crossroads Announces Network Storage Controller (NSC) Product Family:
Crossroads NSC product family will provide versatile, high
performance, low latency solutions across IT networks for improvement
in the utilization and management of storage resources. Crossroads
demonstrated two planned offerings for the NSC product family at
Storage Networking World (SNW).
Conference Call
The conference call will be held in conjunction with a webcast presentation
at 3:30pm CST (4:30pm EST) December 20th. Interested parties can listen to the
call by dialing 1-866-459-7779 (or 1-678-460-1867 for international callers) and
using passcode Crossroads, and can view the webcast presentation by visiting the
Crossroads web site at www.crossroads.com where the conference call webcast will
be broadcast live along with an online presentation.
An audio-only replay of the call will be available by December 20th for a
limited time by calling 1-866-453-6660 (or 1-678-460-1860 for international
callers) and using playback reference number 153761. A replay of both the audio
and online presentation will be available for a limited time 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 ACAL, Bell Micro, DLT Solutions, Info-X, Promark, and
Scientific Digital. 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; 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;
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
stockholder 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)
July 31, October 31,
2004 2004
---------- ------------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $ 29,482 $ 28,537
Accounts receivable, net 1,980 2,581
Inventories, net 1,611 1,160
Prepaids and other current assets 636 669
---------- ------------
Total current assets 33,709 32,947
Property and equipment, net 2,715 2,909
Intangible - 809
Other assets 282 104
---------- ------------
Total assets $ 36,706 $ 36,769
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,193 $ 1,901
Accrued expenses 1,632 3,432
Accrued warranty costs 588 508
Deferred revenue 384 1,262
---------- ------------
Total current liabilities 4,797 7,103
Stockholders' equity 31,909 29,666
---------- ------------
Total liabilities and stockholders'
equity $ 36,706 $ 36,769
========== ============
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Fiscal Year Ended
October 31, October 31,
------------------------- -------------------------
2003 2004 2003 2004
----------- ----------- ----------- -----------
Revenue:
Product $ 4,511 $ 2,485 $ 25,955 $ 15,036
Royalty and other 4,764 4,117 7,188 10,993
----------- ----------- ----------- -----------
Total revenue 9,275 6,602 33,143 26,029
Cost of revenue(1):
Product 2,580 1,366 16,598 7,300
Royalty and other 598 436 835 594
----------- ----------- ----------- -----------
Total cost of
revenue 3,178 1,802 17,433 7,894
----------- ----------- ----------- -----------
Gross profit 6,097 4,800 15,710 18,135
----------- ----------- ----------- -----------
Operating expenses(1):
Sales and
marketing 1,475 1,058 4,508 4,461
Research and
development 2,866 3,893 11,929 13,671
General and
administrative 1,926 1,584 6,209 5,442
Litigation
settlement - 1,000 - 1,000
NexQL research
and development - - - 721
Business
restructuring
expense (91) (119) (432) (306)
Amortization of
intangibles - - 173 -
----------- ----------- ----------- -----------
Total operating
expenses 6,176 7,416 22,387 24,989
----------- ----------- ----------- -----------
Loss from
operations (79) (2,616) (6,677) (6,854)
Interest income 72 148 540 494
----------- ----------- ----------- -----------
Loss before income
taxes (7) (2,468) (6,137) (6,360)
Income tax expense (310) - (310) -
----------- ----------- ----------- -----------
Net loss $ (317) $ (2,468) $ (6,447) $ (6,360)
=========== =========== =========== ===========
Basic and diluted
net loss per
share (0.01) (0.10) (0.26) (0.25)
Shares used in
computing basic
and diluted net
loss per share 24,336,846 25,437,968 24,443,141 25,225,009
=========== =========== =========== ===========
(1) The Company allocates stock-based compensation to specific line
items within the statement of operations based on the
classification of the employees who received the benefit.
Stock-based compensation for the periods indicated was allocated
as follows:
Three Months Ended Fiscal Year Ended
October 31, October 31,
------------------ -----------------
2003 2004 2003 2004
------- ------- ------ -------
Cost of revenue $ 13 $ 1 $ 36 $ 4
Sales and marketing 1 - 116 -
Research and development 57 3 294 46
General and administrative 437 50 1,017 118
------- ------- ------ -------
Total stock-based compensation $ 508 $ 54 $1,463 $ 168
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CONTACT: Crossroads Systems, Inc., Austin
Richard Sorenson, 512-928-6897 or 800-643-7148
info@crossroads.com