Quantum: Fiscal 4Q17 Financial Results

Quantum Corp. reported results for the fiscal fourth quarter and full year 2017 ended March 31, 2017.

Full Year 2017 Highlights:

• Total revenue of $505 million, up 6% over fiscal 2016
• Scale-out tiered storage revenue of $148 million, up 17% year-over-year
• Data protection revenue of $318 million, up 3% year-over-year
• GAAP net income of $4 million, an $80 million improvement over fiscal 2016
• Non-GAAP net income of $16 million, a $19 million improvement over the prior year
• GAAP earnings per share of $0.11, compared to a loss per share of $2.33 in fiscal 2016
• Non-GAAP earnings of $0.46 per diluted share, compared to a loss per share of $0.10 the prior year

Fiscal Fourth Quarter 2017 Financial Results
(All comparisons relative to the 4FQ16 unless otherwise stated.)

• Total revenue was $120.8 million, up from $120.0 million.
• Branded revenue was $103.5 million, a 7% increase.
• Scale-out tiered storage revenue was $31.0 million, compared to $33.1 million, primarily reflecting fewer large deals than the same quarter a year earlier.
• Total data protection revenue grew 5% to $79.7 million, consisting of $21.5 million in disk backup systems revenue (up 19%), $40.2 million in tape automation revenue (down 10% overall, with OEM revenue down 45% and branded revenue flat) and $18.1 million in devices and media revenue (up 38%).
• Royalty revenue was $10.1 million, compared to $11.0 million.
• GAAP operating income was $1.1 million, and non-GAAP operating income was $4.2 million, compared to a loss of $50.1 million and income of $8.2 million, respectively. (Fiscal fourth quarter 2016 results included a non-cash goodwill impairment charge of $55.6 million.)
• GAAP net loss was $1.9 million, or $0.06 per diluted share,[2] compared to GAAP net loss of $52.9 million, and non-GAAP net income was $1.6 million, or $0.05 per diluted share, compared to non-GAAP net income of $6.2 million.

Fiscal 2017 Full Year Financial Results
(All comparisons relative to FY16 year results unless otherwise stated.)

• Total revenue grew 6% to $505.3 million, up from $476.0 million.
• Branded revenue grew 11% to $432.1 million, up from $388.3 million.
• Scale-out tiered storage revenue grew 17% to $148.4 million, up from $126.5 million.
• Total data protection revenue grew 3% to $318.2 million, consisting of $84.6 million in disk backup systems revenue (up 16%), $172.7 million in tape automation revenue (down 9% overall, with OEM revenue down 27% and branded revenue down 3%) and $60.9 million in devices and media revenue (up 33%).
• Royalty revenue was $38.8 million, compared to $41.2 million.
• GAAP operating income was $12.1 million, and non-GAAP operating income was $23.0 million, compared to a loss of $67.8 million and income of $3.9 million, respectively.
• GAAP net income was $3.6 million, or $0.11 per diluted share, and non-GAAP net income was $15.8 million, or $0.46 per diluted share, compared to a loss of $76.4 million and $3.3 million, respectively.

“Our solid fourth quarter results closed out a year of strong overall performance and execution,” said Jon Gacek, president and CEO. “We generated year-over-year growth and improved profitability in a year of ongoing industry disruption. One of the keys to this success was the fact that we grew scale-out tiered storage revenue for the ninth consecutive year, building on our leadership in traditional rich media markets and expanding our footprint in new verticals and use cases. In addition, despite continuing challenges in the data protection market, we turned around this part of our business in fiscal 2017, driving significant growth in disk backup systems and extending our position as the market leader in tape automation. From a product standpoint, we delivered innovative new solutions and features for scale-out tiered storage, disk backup and tape archive, including new ways to leverage flash technology and the cloud. Finally, we secured a large financing package that addresses our November 2017 convertible debt and provides a stable, more flexible capital structure over the next five years. All of this makes us well-positioned for further success in fiscal 2018 and beyond.

“We are also excited about the addition of Adalio Sanchez and Marc Rothman to our board of directors and expect to add the final director in our reconstituted board this month. As soon as the new board is fully in place, we will go through a comprehensive strategic review taking a detailed look at the market and its trends, our product and solution capabilities, our sales model, R&D roadmaps, expenses and areas of investment, and capital structure  and then make decisions on how to take Quantum to the next level and drive increased shareholder value.

“When that process is complete, we will provide guidance for fiscal 2018 and update our strategic direction for the year and beyond. In the meantime, our current expectation is that we will grow total revenue year-over-year in the fiscal first quarter, driven by growth in scale-out tiered storage revenue.”

4FQ2017 and Other Recent Business Highlights

• Building on its momentum in video surveillance, the company closed the highest number of surveillance deals in a quarter to date, which included its first surveillance sales wins in life sciences use cases. Four additional video management software (VMS) partners were also certified to support the company’s range of scale-out storage tiers, bringing the total number of VMS partners certified for full tiering to 20 and covering 80% of the market. Adding to Quantum’s industry accolades, Milestone Systems, one of the top VMS providers, named Quantum Technology Partner of the Year for 2016 in the Americas and, for the second consecutive year, Best Solution Partner in the AsiaPac region.
• The firm announced purpose-built 4K video reference architectures that leverage the company’s StorNext-powered, disk- and flash-based workflow storage systems to maximize 4K stream counts and optimize performance levels in accordance with users’ specific needs. Based on testing with real-world metrics, the new reference architectures empower media facilities to make better-informed investments in 4K storage infrastructure.
• The company introduced StorNext 6, a new release of the StorNext platform that provides a combination of performance and data management features. It is designed to help users overcome the challenges of working with growing volumes of higher-resolution content and enable them to capitalize on the opportunities to re-monetize or re-purpose that content. Features include more efficient and cost-effective ways to meet project performance demands, share and access content across geographically distributed teams, and manage and protect archived content.
• Quantum announced a strategic relationship with Veritone Inc., in cognitive analytics. Veritone aiWARE, a hybrid on-premise and cloud version of Veritone’s cloud-based artificial intelligence platform, will be offered as an integrated solution with StorNext. This combination will allow users to leverage the power of Veritone’s cognitive analytics along with top cognitive engines in areas such as face detection, object recognition and transcription to extract new value from their on-premise video and audio content without having to move it to the cloud.
• Board of directors approved a 1-for-8 reverse stock split of its common stock, which began trading on a split-adjusted basis on April 19, 2017.
• The company appointed Adalio Sanchez and Marc Rothman to its board of directors. Sanchez is a 35-year information technology industry veteran who spent most of his career at IBM Corp., including 16 years in senior executive and global general management roles. He is currently president of S Group Advisory LLC, a firm providing expertise and management consulting services. Rothman is EVP and CFO at VeriFone Inc., responsible for leading the company’s finance, information technology, and real estate organizations, and has more than 30 years of global finance and merger and acquisition experience.