Exhibit 99.1
Crossroads Systems Reports Second Quarter Results
AUSTIN, Texas--(BUSINESS WIRE)--May 25, 2005--Crossroads Systems,
Inc. (NASDAQ:CRDS), a leading global provider of highly secure storage
and data management solutions, today reported results for its fiscal
second quarter ended April 30, 2005 (Q2'05).
Revenue totaled $4.3M for Q2'05 compared to $4.7M in the fiscal
first quarter ended January 31, 2005 (Q1'05). The primary factor
affecting the decrease in revenue in Q2'05 compared with Q1'05 was due
to a decline in OEM revenue. Gross margin percentage was 69% for
Q2'05, compared to 65% for Q1'05. Net loss for Q2'05 was $3.7M, or
$0.14 per share, compared to $3.0M net loss, or $0.12 per share in
Q1'05.
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
Interpretation No. 46 (FIN 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
Q1'05 and Q2'05 reflect the consolidated operations and cash flows of
NexQL. The consolidation of NexQL had a direct impact on Crossroads'
net loss for Q1'05 and Q2'05. Net operating expenses attributable to
NexQL for Q2'05 was $1.0M, compared with $0.7M in Q1'05.
"Revenue from our OEM partners continued to display softness in
the quarter," said Rob Sims, president and chief executive officer,
Crossroads Systems. "However, we continue to identify both near-term
and long-term opportunities that will help evolve Crossroads products
into solutions. These solutions provide differentiation for our OEM
partners, while helping to maintain and strengthen our strategic
relationships with them."
In addition, Crossroads reduced its current workforce during the
quarter to streamline operations and re-align resources with the
company's current strategy in targeted growth areas. The company also
abandoned approximately 10,000 square feet of office space. The
company recognized a charge in its second fiscal quarter as a result
of this restructuring plan of approximately $600K.
Recent Operational Highlights:
-- Crossroads Demonstrates StrongBox Monitor At The Data
Warehousing Institute (TDWI) World Conference and At The
Federal Office Systems Expo, FOSE 2005: Crossroads
demonstrated StrongBox Monitor, a comprehensive suite of
intuitive, easily customizable reports about database
utilization and performance. StrongBox Monitor can serve as a
data management tool for administrators and developers seeking
to understand, troubleshoot, monitor, and improve the
performance of their application and database infrastructure.
-- Crossroads Expands Management Team: Crossroads appointed
Valerie H. Savage to Chief Financial Officer and David Cerf to
Executive Vice President of Business Development.
-- Crossroads Expands Board of Directors: Crossroads announced
that Ashok K. Chandra, president and chief executive officer
of Contessence Software, joined the Company's Board of
Directors.
Conference Call
The conference call will be held at 3:30pm CDT (4:30pm EDT) May
25th. 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 May 25th for
a limited time by calling 1-866-453-6660 (or 1-678-460-1860 for
international callers) and using passcode 164922. An audio replay 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 highly secure storage
and data management solutions. Crossroads' solutions serve the growing
data storage and data management 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, and Promark. 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
can reduce its cash consumption and achieve 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 and/or to develop new products
based on Teracruz technology that achieve market acceptance; 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 has been declining and is
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; 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 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)
January 31, April 30,
2005 2005
----------- -----------
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $25,540 $21,305
Accounts receivable, net 2,523 1,961
Inventories, net 1,239 1,343
Prepaids and other current
assets 762 533
----------- -----------
Total current assets 30,064 25,142
Property and equipment, net 2,697 2,478
Intangible, net 742 674
Other assets 70 72
----------- -----------
Total assets $33,573 $28,366
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $1,725 $1,111
Accrued expenses 3,193 2,099
Accrued warranty costs 463 398
Deferred revenue 1,300 1,240
----------- -----------
Total current liabilities 6,681 4,848
Stockholders' equity 26,892 23,518
----------- -----------
Total liabilities and
stockholders' equity $33,573 $28,366
=========== ===========
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Three Months Ended Six Months Ended
April 30, April 30,
----------------------- -----------------------
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenue:
Product $4,690 $1,752 $9,631 $4,272
Royalty and other 2,735 2,504 4,919 4,675
----------- ----------- ----------- -----------
Total revenue 7,425 4,256 14,550 8,947
Cost of revenue:
Product 2,150 1,295 4,629 2,907
Royalty and other 81 38 117 73
----------- ----------- ----------- -----------
Total cost of
revenue 2,231 1,333 4,746 2,980
----------- ----------- ----------- -----------
Gross profit 5,194 2,923 9,804 5,967
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 1,244 687 2,384 1,597
Research and
development 3,080 4,093 6,101 8,131
General and
administrative 1,318 1,283 2,700 2,587
NexQL research and
development 451 -- 721 --
Business
restructuring
expense (62) 636 (114) 544
Amortization of
intangibles -- 67 -- 134
----------- ----------- ----------- -----------
Total operating
expenses 6,031 6,766 11,792 12,993
----------- ----------- ----------- -----------
Loss from operations (837) (3,843) (1,988) (7,026)
Interest income 105 140 226 293
----------- ----------- ----------- -----------
Net Loss $(732) $(3,703) $(1,762) $(6,733)
=========== =========== =========== ===========
Basic and diluted net
loss per share (0.03) (0.14) (0.07) (0.26)
Shares used in
computing basic and
diluted net loss
per share 25,169,405 26,082,975 24,931,730 25,892,768
=========== =========== =========== ===========
CONTACT: Crossroads Systems, Inc., Austin
Valerie Savage, 512-928-6897 or 800-643-7148
info@crossroads.com