Sphere 3D Corp.

Total revenue for Q3 2017 was $21.7 million, up 17.3% from $18.5 million in Q3 2016 and up 11.9% from $19.4 million in Q2 2017. Gross margin was 31.1%, versus 28.0% a year ago and 27.7% last quarter; excluding intangible amortization, gross margin was 33.7%. Net loss was $3.5 million, or $0.59 per share, versus a $43.3 million loss, or $21.10 per share, in Q3 2016 and a $7.5 million loss, or $1.81 per share, in Q2 2017. Adjusted EBITDA was a loss of $629,000, improving from a $4.0 million loss a year ago and a $2.6 million loss in Q2 2017. Cash and cash equivalents were $3.9 million at September 30, 2017, and cash used in operations was $1.6 million in the quarter. Management did not provide specific next-quarter or full-year revenue/EPS guidance, but said it expects the company to be positioned for an even better 2018 and to improve financial performance through the balance of the year and into 2018.

Eric Kelly framed the quarter as validation that Sphere 3D's strategy is working, citing revenue growth in both business segments and significant adjusted EBITDA improvement. He said the company is focusing on profitability and revenue growth, and that the team has built a solid foundation for continued execution and long-term shareholder value. His tone was upbeat and confident, while acknowledging that success is not linear.

Kurt Kalbfleisch walked through the quarter's financial improvement in detail: revenue of $21.7 million, gross margin of 31.1% (33.7% excluding intangible amortization), and adjusted EBITDA of negative $629,000. He also noted operating expenses excluding share-based compensation of $9.3 million, cash and cash equivalents of $3.9 million, and cash used in operations of $1.6 million for the quarter and $8.6 million for the first nine months, down 44.9% from $15.6 million in the prior-year period. Debt remained a focus, with $18.2 million of third-party debt, $24.5 million of related-party convertible notes, and $769,000 of related-party term loan outstanding at quarter-end.

There was no Q&A on the call. Management said the Q&A portion would be skipped because of strategic options being explored with Ernst & Young. As a result, no analyst concerns or follow-up questions were addressed live.