Quantum Reports First Quarter Fiscal 2022 Results

SAN JOSE, Calif., Aug. 9, 2021 /PRNewswire/ — Quantum Corporation (NASDAQ: QMCO) announced today financial results for its fiscal first quarter…

SAN JOSE, Calif., Aug. 9, 2021 /PRNewswire/ — Quantum Corporation (NASDAQ: QMCO) announced today financial results for its fiscal first quarter ended June 30, 2021. 

First Quarter Fiscal 2022 Financial Summary and Recent Highlights

  • Revenue grew 22% year-over-year to $89.1 million
  • GAAP net loss was $4.2 million, or ($0.07) per share; adjusted non-GAAP net income was $0.1 million, or $0.00 per diluted share
  • Adjusted EBITDA increased $4.0 million year-over-year to $5.4 million
  • Software and subscription customers grew more than 20% sequentially, while bookings were up 2x
  • Refinanced outstanding term debt, saving $7 million in annualized interest expense
  • Acquired the video surveillance portfolio and assets from Pivot3, adding over 500 customers

Jamie Lerner, Chairman and CEO, Quantum commented, «Demand in the first fiscal quarter continued to be strong, with a significant sequential increase in customer orders. A large majority of these orders were from hyperscale customers for products that are most affected by the current supply constraints.  This dynamic has caused our backlog to reach unprecedented levels. Historically, our backlog has been 5% or less of our reported quarterly revenue.  As of the first fiscal quarter, our backlog has grown to $30 million, compared to approximately $14 million in the previous quarter and $2 million in the year-ago period.  While not all backlog represents potential revenue in the following quarter, it demonstrates how robust demand is across our business, while also providing us significantly higher levels of visibility.  

«Although the industry supply constraints have created near-term revenue headwinds, we continue to make progress on our long-term business transformation.  Following the quarter close, we announced the acquisition of Pivot3’s video surveillance portfolio and assets, which is key step towards establishing a strong share position in the video surveillance market with a leading portfolio of hardware and software solutions.  This acquisition will add over 500 customers and is projected to be slightly accretive to EBITDA through the remainder of fiscal 2022.  More recently, we successfully refinanced our remaining outstanding term debt, allowing for more favorable borrowing terms and reducing future cash interest expense to help drive improvements to our bottom line.»

Mr. Lerner concluded by saying, «I am very pleased with our team’s continued execution and the increasing demand we are seeing for our products and software solutions.  We are building upon our market share leadership position in the hyperscale market.  Overall, I’m confident we are taking the right steps to position the Company for long-term sustainable growth and profitability. And with the recent refinance of debt now behind us, we have completed an important milestone in our financial and business transformation, providing greater operating flexibility on our path to becoming the leader in video and unstructured data storage solutions.» 

First Quarter Fiscal 2022 vs. Prior Quarter

Revenue for the first quarter fiscal 2022 was $89.1 million representing a decrease of 4% sequentially from $92.4 million last quarter. Gross profit in the first quarter of fiscal 2022 was $37.3 million, or 42% of revenue, compared to $38.9 million, or 42% of revenue, in the prior quarter.

Total operating expenses in the first quarter of fiscal 2022 were $37.3 million, or 42% of revenue, compared to $36.6 million, or 40% of revenue, in the prior quarter. Selling, general and administrative expenses were $25.8 million in the quarter, compared to $24.1 million in the fourth fiscal quarter 2021. Research and development expenses were $11.3 million in the first quarter of fiscal 2022, compared to $11.7 million last quarter.

GAAP net loss in the first quarter of fiscal 2022 was $4.2 million, or ($0.07) per share, compared to a net loss of $17.5 million, or ($0.35) per share, in the fourth fiscal quarter 2021 which included a debt extinguishment charge of $14.8 million related to the early retirement of $92.3 million of a senior secured term loan.  Excluding stock compensation, restructuring charges and other non-recurring costs, non-GAAP adjusted net income in the first fiscal quarter of 2022 was $0.1 million, or $0.00 per basic and diluted share, compared to adjusted net income of $2.1 million, or $0.03 per diluted share, last quarter.

Adjusted EBITDA in the first quarter of fiscal 2022 was $5.4 million, compared to $8.3 million in the prior quarter.

For a full reconciliation of GAAP to non-GAAP financial results and additional cautionary language about the use of non-GAAP financial measures, please see the financial reconciliation tables below.

Balance Sheet and Liquidity 

  • Cash and cash equivalents of $24.6 million as of June 30, 2021, compared to $33.1 million as of March 31, 2021. Both balances include $5.0 million in restricted cash required under the Company’s Credit Agreements, and $0.5 million and $0.7 million of short-term restricted cash as of June 30, 2021, and March 31, 2021, respectively.
  • Outstanding long-term debt as of June 30, 2021, was $81.3 million, net of $8.8 million in unamortized debt issuance costs and $11.9 million in current portion of long-term debt. This compares to $90.9 million of outstanding debt as of March 31, 2021, net of $9.7 million in unamortized debt issuance costs and $1.9 million in current portion of long-term debt.
  • Total interest expense was $3.9 million, compared to $5.7 million for the three ended June 30, 2021, and March 31, 2021, respectively.

Outlook

Given the continued uncertainties in the supply chain for the second fiscal quarter of 2022, the company expects the following guidance range:

  • Revenues of $88 million +/- $4 million (includes $2 million forecasted contribution from Pivot3 acquisition)
  • Non-GAAP adjusted net loss of $2 million, plus or minus $1 million
  • Non-GAAP adjusted net loss per share of $0.04, plus or minus $0.02
  • Adjusted EBITDA of $2 million, plus or minus $1 million

For fiscal year 2022, the company expects the following revenue guidance range:

  • Revenues of $380 to $420 million, determined by the timing of supply chain improvements
  • Guidance excludes Pivot3 revenue for fiscal year 2022

Conference Call and Webcast

Management will host a live conference call today, August 9, 2021, at 5:00 p.m. ET (2:00 p.m. PT) to discuss these results. The conference call will be accessible by dialing 866-424-3436 (U.S. Toll-Free) or +1-201-689-8058 (International) and entering passcode 13721632. This conference call will be broadcast live over the Internet with a slide presentation and can be accessed by all interested parties on the investor relations section of the Company’s website at http://investors.quantum.com under the events and presentations tab.

A telephone replay of the conference call will be available approximately two hours after the conference call and will be available through August 16, 2021. To access the replay dial 1-877-660-6853 and enter the pass code 13721632 at the prompt. International callers should dial +1-201-612-7415 and enter the same passcode. Following the conclusion of the live call, a replay of the webcast will be available on the Company’s website for at least 90 days.

About Quantum

Quantum technology and services help customers capture, create and share digital content – and preserve and protect it for decades.  With solutions built for every stage of the data lifecycle, Quantum’s platforms provide the fastest performance for high-resolution video, images, and industrial IoT. That’s why the world’s leading entertainment companies, sports franchises, researchers, government agencies, enterprises, and cloud providers are making the world happier, safer, and smarter on Quantum. Quantum is listed on Nasdaq (QMCO) and was added to the Russell 2000® Index in 2020 as part of the index’s annual constitution. For more information visit www.quantum.com/.

Quantum and the Quantum logo are registered trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners.

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 («Exchange Act»). These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results; that our newly introduced products will drive a growing contribution of recurring revenue and deliver higher margins, while also increasing the total addressable market of our solutions; our expectations to continue our operational execution and to gain incremental traction across our market verticals, including with our leading hyperscale and global web scale customers, statements about our backlog and the implication that this backlog will translate into future revenue; the trend in our underlying business remaining robust; continued progress in our business transformation; the anticipated impact and benefits of our acquisition of Pivot3’s video surveillance portfolio and assets; the anticipated impact and benefits of the refinancing of our outstanding debt; and the Company’s position for long-term sustainable growth and profitability.

These forward-looking statements may be identified by the use of terms and phrases such as «anticipates», «believes», «can», «could», «estimates», «expects», «forecasts», «intends», «may», «plans», «projects», «targets», «will», and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters and other statements regarding matters that are not historical are forward-looking statements. Investors are cautioned that these forward-looking statements relate to future events or our future performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: risks related to the need to address the many challenges facing our business; the potential impact of the COVID-19 pandemic on our business, including potential disruptions to our supply chain, employees, operations, sales and overall market conditions; the competitive pressures we face; risks associated with executing our strategy; the distribution of our products and the delivery of our services effectively; our ability to integrate the business, products, employees and other aspects of Pivot3’s video surveillance business; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; estimates and assumptions related to the cost (including any possible disruption of our business) and the anticipated benefits of the transformation and restructuring plans; the outcome of any claims and disputes; and other risks that are described herein, including but not limited to the items discussed in «Risk Factors» in our filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Committee on May 26, 2021 and our Form 10-Q filed on August 9, 2021. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law or regulation.

Investor Relations Contacts:

Shelton Group

Leanne K. Sievers | Jeffrey Schreiner

P: 949-224-3874 | 512-243-8976 E: sheltonir@sheltongroup.com

QUANTUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts, unaudited)



June 30, 2021


March 31, 2021

Assets




Current assets:




Cash and cash equivalents

$

19,102



$

27,430


Restricted cash

542



707


Accounts receivable, net of allowance for doubtful accounts of $422 and $406

57,895



73,102


Manufacturing inventories

27,672



24,467


Service parts inventories

23,532



23,421


Other current assets

11,953



6,939


Total current assets

140,696



156,066


Property and equipment, net

9,068



10,051


Intangible assets, net

4,572



5,037


Goodwill

3,466



3,466


Restricted cash

5,000



5,000


Right-of-use assets, net

8,565



9,383


Other long-term assets

6,813



5,921


Total assets

$

178,180



$

194,924


Liabilities and Stockholders’ Deficit




Current liabilities:




Accounts payable

$

31,946



$

35,245


Deferred revenue

78,332



84,027


Accrued restructuring charges

126



580


Long-term debt, current portion

11,850



1,850


Accrued compensation

14,362



19,214


Other accrued liabilities

16,630



18,174


Total current liabilities

153,246



159,090


Deferred revenue

35,514



36,126


Long-term debt, net of current portion

81,305



90,890


Operating lease liabilities

7,282



8,005


Other long-term liabilities

13,763



13,058


Total liabilities

291,110



307,169


Stockholders’ deficit




Preferred stock, 20,000 shares authorized; no shares issued and outstanding




Common stock, $0.01 par value; 125,000 shares authorized; 57,280 and 56,915 shares issued and outstanding

573



570


Additional paid-in capital

629,862



626,664


Accumulated deficit

(742,776)



(738,623)


Accumulated other comprehensive loss

(589)



(856)


Total stockholders’ deficit

(112,930)



(112,245)


Total liabilities and stockholders’ deficit

$

178,180



$

194,924


 

QUANTUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)



Three Months Ended June 30,


2021


2020

Revenue:




   Product

$

52,131



$

39,687


   Service

32,831



30,386


   Royalty

4,137



3,232


      Total revenue

89,099



73,305


Cost of revenue:




   Product

38,741



30,382


   Service

13,080



12,071


      Total cost of revenue

51,821



42,453


Gross profit

37,278



30,852


Operating expenses:




   Research and development

11,291



10,162


   Sales and marketing

13,952



11,570


   General and administrative

11,825



11,563


   Restructuring charges

266



1,052


      Total operating expenses

37,334



34,347


Loss from operations

(56)



(3,495)


Other expense, net

(198)



(385)


Interest expense

(3,886)



(6,437)


Net loss before income taxes

(4,140)



(10,317)


Income tax provision

13



419


Net loss

$

(4,153)



$

(10,736)






Net loss per share – basic and diluted

$

(0.07)



$

(0.27)


Weighted average shares – basic and diluted

57,129



39,905


 

QUANTUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



Three Months Ended June 30,


2021


2020

Operating activities




Net loss

$

(4,153)



$

(10,736)


  Adjustments to reconcile net loss to net cash provided by (used in) operating activities  




Depreciation and amortization

1,809



1,286


Amortization of debt issuance costs

1,004



1,124


Long-term debt related costs



167


Provision for product and service inventories

976



1,629


Stock-based compensation

3,201



1,958


Deferred income taxes

(68)



13


Unrealized foreign exchange loss

394



482


Changes in assets and liabilities:




Accounts receivable, net

15,207



20,993


Manufacturing inventories

(3,769)



(1,745)


Service parts inventories

(588)



(1,399)


Accounts payable

(3,178)



(9,967)


Accrued restructuring charges

(454)



458


Accrued compensation

(4,852)



(864)


Deferred revenue

(6,306)



(8,188)


Other assets and liabilities

(6,089)



(4,198)


Net cash used in operating activities

(6,866)



(8,987)


Investing activities




Purchases of property and equipment

(1,150)



(484)


Net cash used in investing activities

(1,150)



(484)


Financing activities




Borrowings of long-term debt, net of debt issuance costs



19,400


Repayments of long-term debt

(463)




Borrowings of credit facility

56,544



78,582


Repayments of credit facility

(56,544)



(81,653)


Borrowings of payment protection program



10,000


Net cash provided by (used) in financing activities

(463)



26,329


Effect of exchange rate changes on cash, cash equivalents and restricted cash

(14)



(16)


Net change in cash, cash equivalents and restricted cash   

(8,493)



16,842


Cash, cash equivalents, and restricted cash at beginning of period

33,137



12,270


Cash, cash equivalents, and restricted cash at end of period

$

24,644



$

29,112


Cash, Cash Equivalents and Restricted Cash at end of period

Cash and cash equivalents

$

19,102



$

23,307


Restricted cash, current

542



805


Restricted cash, long-term

5,000



5,000


Cash, cash equivalents and restricted cash at the end of period

$

24,644



$

29,112


NON-U.S. GAAP FINANCIAL MEASURES

To provide investors with additional information regarding our financial results, we have presented Adjusted EBITDA and Adjusted Net Income (Loss), non-U.S. GAAP financial measures defined below.

Adjusted EBITDA is a non-U.S. GAAP financial measure defined by us as net loss before interest expense, net, provision for income taxes, depreciation and amortization expense, stock-based compensation expense, restructuring charges, and other non-recurring expenses.

Adjusted Net Income (Loss) is a non-U.S. GAAP financial measure defined by us as net loss before restructuring charges, stock-based compensation expense, and other non-recurring (income) expenses. The Company calculates Adjusted Net Income (Loss) per Basic and Diluted share using the Company’s above-referenced definition of Adjusted Net Income (Loss).

We have provided below a reconciliation of Adjusted EBITDA and Adjusted Net Income (Loss) to Net Income (Loss), the most directly comparable U.S. GAAP financial measure. We have presented Adjusted EBITDA because it is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business performance. We believe Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Basic and Diluted Share serve as appropriate measures to be used in evaluating the performance of our business and help our investors better compare our operating performance over multiple periods. Accordingly, we believe that Adjusted EBITDA and Adjusted Net Income (Loss) provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Our use of Adjusted EBITDA and Adjusted Net Income (Loss) have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are as follows:

  • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.
  • Adjusted EBITDA does not reflect: (1) interest and tax payments that may represent a reduction in cash available to us; (2) capital expenditures, future requirements for capital expenditures or contractual commitments; (3) changes in, or cash requirements for, working capital needs; (4) the potentially dilutive impact of stock-based compensation expense; (5) potential future costs related to our long-term debt; (6) potential future restructuring expenses; (7) potential future costs related to business acquisitions; (8) loss on debt extinguishment, or (9) acquisition-related amortization of intangibles assets from business combinations.
  • Adjusted Net Income (Loss) does not reflect: (1) potential future restructuring activities; (2) the potentially dilutive impact of stock-based compensation expense; (3) potential future costs related to our long-term debt; (4) potential future costs related to business acquisitions; (5) loss on debt extinguishment, or (6) acquisition-related amortization of intangibles assets from business combinations.

Other companies, including companies in our industry, may calculate Adjusted EBITDA, Adjusted Net Income (Loss) or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA and Adjusted Net Income (Loss) along with other U.S. GAAP-based financial performance measures, including various cash flow metrics and our U.S. GAAP financial results.

The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Net Income (Loss) (dollars in thousands):


Three Months Ended June 30,


2021


2020

Net loss

$

(4,153)



$

(10,736)


Interest expense, net

3,886



6,437


Provision (benefit) for income taxes

13



419


Depreciation and amortization expense

1,343



1,286


Stock-based compensation expense

3,201



1,958


Restructuring charges

266



1,052


Acquisition-related amortization

465




Acquisition-related costs

139




Long-term debt related costs

207



965


Adjusted EBITDA

$

5,367



$

1,381






The following is a reconciliation of Adjusted Net Income to the most comparable U.S. GAAP financial measure, Net Income (Loss) (in thousands):

 


Three Months Ended June 30,


2021


2020

Net loss

$

(4,153)



$

(10,736)


Stock-based compensation

3,201



1,958


Restructuring charges

266



1,052


Acquisition-related amortization

465




Acquisition-related costs

139




Long-term debt related costs

207



965


   Adjusted net income (loss)

$

125



$

(6,761)






   Adjusted Net Income per share:




      Basic

$

0.00



$

(0.17)


      Diluted

$

0.00



$

(0.17)


   Weighted average shares outstanding:




      Basic

57,129



39,905


      Diluted

68,565



39,905


 

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SOURCE Quantum Corp.