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| Quantum Corporation Reports Fiscal Second Quarter Results |
-- Total revenue of $175 million - up 9 percent sequentially -- GAAP gross margin rate of 43.8 percent - highest in more than eight years -- GAAP net income of $11 million - highest in nearly five years -- Disk systems and software revenue of $28 million - up 36 percent year-over-year and 47 percent sequentially Quantum also reported its second consecutive quarter of GAAP profits, with $11 million in net income, or basic earnings per share of six cents. This compared to a GAAP net loss of $3 million in FQ2'09 and represented the company's best performance in nearly five years. The $11 million profit included a $2 million net gain related to the retirement of convertible debt, offset by $9 million in amortization of intangibles, $3 million in stock-based compensation charges and $2 million in restructuring costs. The net impact of these four items reduced basic earnings per share by five cents. Quantum generated $31 million in cash from operations for the quarter, paid down $20 million of its senior debt, and ended the quarter with $85 million in cash and cash equivalents. "Despite the continuing impact of the economic downturn and changes in the deduplication landscape, we delivered some of our best results in many years," said Rick Belluzzo, chairman and CEO of Quantum. "This included significantly higher gross margin rates, operating income and margins, and net income, compared to both last year and the prior quarter. We also generated strong growth in disk systems and software revenue, with our branded DXi backup/deduplication sales up significantly, both year-over-year and sequentially. "Our September quarter results reflect a number of initiatives we have implemented over the past year, as well as an aggressive shift we made in our go-to-market focus during the quarter in response to changed industry dynamics," continued Belluzzo. "While we have more work to do in completing our transformation to a storage systems company, our performance clearly shows the substantial progress we've made." Quantum's product revenue, which includes sales of the company's hardware and software products, totaled $118 million in FQ2'10. This represented a decrease of $25 million from FQ2'09, primarily reflecting expected declines in both OEM tape automation sales and OEM devices and media revenue. Disk systems and software revenue, inclusive of related software maintenance and service revenue, was $28 million in the September quarter. This was up approximately $7 million from the same quarter last year, primarily due to record sales of Quantum's DXi7500 enterprise disk backup and deduplication system. Contributing to these record sales were several deals of more than a million dollars, including new DXi account wins at one of the top utility companies in the world and another national utility provider in Europe. Other notable DXi7500 wins included a large deal with one of the biggest U.S. insurance companies -- a new DXi customer -- and repeat business with one of the largest wireless providers in America, a U.S. Federal Reserve Bank and Aeroports de Paris. The increase in disk systems and software revenue also included modest growth in StorNext(R) sales on both a year-over-year and sequential basis. In addition to a strong contribution from federal government business, Quantum closed several major StorNext deals, including a new win at one of the leading U.S. cable TV networks and repeat purchases by a large multimedia retailer and one of the biggest system integrators in China. Looking beyond FQ2'10, Quantum said it expects to build on its branded revenue momentum in disk systems and software with last week's announcement of the company's new DXi6500 family, a set of preconfigured disk backup and deduplication appliances targeted at the midrange NAS market and optimized for sale through independent channel partners (see press release titled, "New Quantum DXi6500 Family Delivers Unparalleled Combination of Simplicity and Value in Midrange Deduplication," Oct. 21, 2009). Conference Call and Audio Webcast Notification Quantum will hold a conference call today, Oct. 27, 2009, at 2:00 p.m. PDT, to discuss its fiscal second quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9643 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Oct. 27, 2009, at 2:00 p.m. PDT. Site for the webcast and related information: http://www.quantum.com/investors. About Quantum Quantum Corp. (NYSE: QTM) is the leading global storage company specializing in backup, recovery and archive. Combining focused expertise, customer-driven innovation, and platform independence, Quantum provides a comprehensive, integrated range of disk, tape, and software solutions supported by a world-class sales and service organization. This includes the DXi(TM)-Series, the first disk backup solutions to extend the power of data deduplication and replication across the distributed enterprise. As a long-standing and trusted partner, the company works closely with a broad network of resellers, OEMs and other suppliers to meet customers' evolving data protection needs. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, (408) 944-4000, www.quantum.com. Quantum, the Quantum logo and StorNext are registered trademarks of Quantum Corporation and its affiliates. DXi is a trademark of Quantum Corporation. All other trademarks are the property of their respective owners. "Safe Harbor" Statement: This press release contains "forward-looking" statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Specifically, but without limitation, the statement that Quantum expects to build on its branded revenue momentum in disk systems and software with last week's announcement of the company's new DXi6500 family, is a forward-looking statement within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum's actual results to differ materially from those implied by the forward-looking statements. These risks include operational difficulties, unforeseen technical limitations, unexpected material deviation in product operation, the ability of competitors to introduce new solutions that compete more successfully with our solutions, unexpected changes in market conditions and unanticipated changes in customers' needs or requirements, as well as the risks set forth in Quantum's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors," in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 7, 2009 and in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 30, 2009. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
(Unaudited)
Three Months Ended Six Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
------------ ------------ ------------ ------------
Revenue:
Product $ 118,327 $ 143,192 $ 223,551 $ 300,776
Service 39,757 41,579 78,659 83,836
Royalty 16,842 30,619 33,056 52,569
------------ ------------ ------------ ------------
Total revenue 174,926 215,390 335,266 437,181
Cost of Revenue:
Product 73,077 99,631 145,163 214,634
Service 25,220 32,884 51,831 64,833
------------ ------------ ------------ ------------
Total cost of
revenue 98,297 132,515 196,994 279,467
------------ ------------ ------------ ------------
Gross margin 76,629 82,875 138,272 157,714
Operating expenses:
Research and
development 16,907 18,766 33,439 37,756
Sales and
marketing 27,880 38,148 55,173 78,185
General and
administrative 15,218 19,820 29,723 41,845
Restructuring
charges 1,696 457 4,806 407
------------ ------------ ------------ ------------
61,701 77,191 123,141 158,193
------------ ------------ ------------ ------------
Income (loss) from
operations 14,928 5,684 15,131 (479)
Interest income and
other, net 1,265 (385) 1,269 1,097
Interest expense (6,935) (7,510) (12,586) (16,285)
Gain on debt
extinguishment,
net of costs 1,569 -- 12,859 --
------------ ------------ ------------ ------------
Income (loss)
before income
taxes 10,827 (2,211) 16,673 (15,667)
Income tax provision
(benefit) (528) 1,053 310 1,935
------------ ------------ ------------ ------------
Net income
(loss) $ 11,355 $ (3,264) $ 16,363 $ (17,602)
============ ============ ============ ============
Net income (loss)
per share:
Basic $ 0.06 $ (0.01) $ 0.08 $ (0.08)
Diluted 0.04 (0.01) 0.02 (0.08)
Income (loss) for
purposes of
computing net
income(loss)
per share:
Basic $ 11,355 $ (3,264) $ 16,363 $ (17,602)
Diluted 9,792 (3,264) 4,753 (17,602)
Weighted average
common and common
equivalent shares:
Basic 212,475 208,960 211,372 207,943
Diluted 213,794 208,960 225,752 207,943
Included in the
above Statements
of Operations:
Amortization of
intangibles:
Cost of revenue 5,499 6,730 10,974 13,648
Research and
development 100 100 200 200
Sales and
marketing 3,394 4,117 6,788 8,248
General and
administrative 25 25 50 50
------------ ------------ ------------ ------------
9,018 10,972 18,012 22,146
Share-based
compensation:
Cost of revenue 319 603 619 958
Research and
development 582 807 1,220 1,572
Sales and
marketing 760 972 1,218 1,713
General and
administrative 1,014 684 1,756 1,517
------------ ------------ ------------ ------------
2,675 3,066 4,813 5,760
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, March 31,
2009 2009*
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 84,772 $ 87,305
Accounts receivable, net 106,007 107,851
Manufacturing inventories 51,069 61,237
Service parts inventories 57,140 63,029
Deferred income taxes 9,917 9,935
Other current assets 18,353 24,745
------------ ------------
Total current assets 327,258 354,102
Long-term assets:
Property and equipment, less accumulated
depreciation 25,495 28,553
Purchased technology, less accumulated
amortization 37,974 49,148
Other intangible assets, less accumulated
amortization 53,250 60,088
Goodwill 46,770 46,770
Other long-term assets 10,859 10,708
------------ ------------
Total long-term assets 174,348 195,267
------------ ------------
$ 501,606 $ 549,369
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 50,362 $ 45,182
Accrued warranty 7,100 11,152
Deferred revenue, current 103,538 84,079
Current portion of long-term debt 1,884 4,000
Current portion of convertible subordinated
debt 22,099 --
Accrued restructuring charges 5,392 4,681
Accrued compensation 28,648 27,334
Income taxes payable 2,569 4,752
Other accrued liabilities 25,599 34,550
------------ ------------
Total current liabilities 247,191 215,730
Long-term liabilities:
Deferred revenue, long-term 28,096 32,082
Deferred income taxes 10,906 11,190
Long-term debt 306,841 244,000
Convertible subordinated debt -- 160,000
Other long-term liabilities 7,122 6,326
------------ ------------
Total long-term liabilities 352,965 453,598
Stockholders' deficit (98,550) (119,959)
------------ ------------
$ 501,606 $ 549,369
============ ============
* Derived from the March 31, 2009 audited Consolidated Financial Statements
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
--------------------------
September 30, September 30,
2009 2008
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 16,363 $ (17,602)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 6,257 8,524
Amortization 19,513 23,333
Service parts lower of cost or market
adjustment 4,391 9,068
Gain on debt extinguishment (15,613) --
Deferred income taxes (266) 174
Share-based compensation 4,813 5,760
Changes in assets and liabilities:
Accounts receivable 1,844 34,976
Manufacturing inventories 7,937 (7,490)
Service parts inventories 3,729 (1,099)
Accounts payable 5,180 (19,973)
Accrued warranty (4,052) (4,622)
Deferred revenue 15,473 3,356
Accrued restructuring charges 711 (320)
Accrued compensation 1,314 960
Income taxes payable (2,183) (154)
Other assets and liabilities (690) (4,312)
------------ ------------
Net cash provided by operating activities 64,721 30,579
Cash flows from investing activities:
Purchases of property and equipment (3,096) (3,025)
------------ ------------
Net cash used in investing activities (3,096) (3,025)
Cash flows from financing activities:
Borrowings of long-term debt, net 120,042 --
Repayments of long-term debt (60,992) (90,000)
Repayments of convertible subordinated debt (122,288) --
Payment of taxes due upon vesting of
restricted stock (928) (759)
Proceeds from issuance of common stock, net 8 2,739
------------ ------------
Net cash used in financing activities (64,158) (88,020)
Net decrease in cash and cash equivalents (2,533) (60,466)
Cash and cash equivalents at beginning of
period 87,305 93,643
------------ ------------
Cash and cash equivalents at end of period $ 84,772 $ 33,177
============ ============
Contact: SOURCE: Quantum Corporation |
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