Quantum: Fiscal 1Q16 Financial Results

(in $ million)	1Q15	1Q16	Growth
Revenue	128.1	110.9	*-13%*
Net income (loss)	(4.3	(10.8)

Quantum Corp. reported results for the fiscal first quarter 2016 ended June 30, 2015.

Fiscal First Quarter 2016 Results
(All comparisons are relative to the fiscal first quarter 2015.)

Revenue was $110.9 million, a decrease of approximately $17 million, primarily driven by overall weakness in the general storage market.
Scale-out storage and related service revenue grew approximately $10 million to $27.8 million, a 54% increase, marking the fourth consecutive quarter of 50-plus percentage growth and 16th consecutive quarter of year-over-year growth.
Royalty revenue increased $1 million to $10.2 million.
Disk backup systems and related service revenue was relatively flat at $17.3 million.
Branded tape automation and related service revenue decreased approximately $15 million to $35.1 million, while OEM tape automation and related service revenue was down approximately $6 million to $9.5 million.
Devices and media revenue was $10.9 million, a decline of approximately $7 million.
The GAAP net loss was $10.8 million, or $0.04 per diluted share, compared to a net loss of $4.3 million, or $0.02 per diluted share.
The non-GAAP net loss was $7.0 million, or $0.03 per diluted share, compared to net income of $2.4 million, or $0.01 per diluted share.

“Like other companies, we were impacted by overall weakness in the general storage market, which was most notable for Quantum in tape-based data protection but impacted all product lines, including scale-out storage,” said Jon Gacek, president and CEO. “Nevertheless, we continued to generate strong revenue growth in scale-out storage – 54% year-over-year – with higher sales across our StorNext workflow storage solutions and Lattus extended online storage. Our scale-out storage results reflect our success in expanding our leadership in media and entertainment while growing our footprint in other vertical markets and use cases such as video surveillance.

“Moving forward, we plan to build on this scale-out storage strategy, capitalizing on our unique ability to deliver integrated solutions that provide both unmatched performance and low TCO through a tiered storage approach encompassing flash, spinning disk, object storage, tape and the cloud. In doing so, we will continue to use dedicated resources in select verticals as well as our broader sales force for greater market coverage.

“For our data protection products, we will continue leveraging our technology leadership, extensive customer base, and strong channel and technology partnerships to generate profit and cash. In addition, we will closely monitor how the general storage market evolves and take this into account in our spending and investment decisions.”

Fiscal Second Quarter 2016 Outlook
Given both the challenging environment in the prior quarter and the growth opportunities in scale-out storage going forward, Quantum said it is taking a balanced approach to operating the company in the fiscal second quarter, which is reflected in its guidance for the quarter:

Revenue of $120 million to $130 million.
GAAP and non-GAAP gross margin of approximately 42-43%.
GAAP and non-GAAP operating expenses of approximately $55 million to $57 million and $52 million to $54 million, respectively.
Interest expense of $1.9 million and taxes of $400,000.

Quantum also stated that it has the resources to pay off its convertible notes due November 2015 and that it expects to utilize a combination of cash on hand, cash generated from operations and its $75 million bank revolver to do so.

Fiscal 2016 Outlook
For fiscal 2016, the company reiterated its year-over-year revenue growth target of 50% in scale-out storage and said that it will continue to make investments to capitalize on the market opportunities in this part of its business. In addition, considering both the challenging general storage environment and the potential for scale-out storage opportunities to exceed current expectations, the company stated that it is not providing annual guidance.

Fiscal First Quarter 2016 Business Highlights

Scale-out storage product revenue from the media and entertainment market grew 32% year-over-year. In addition to extending its leadership in broadcast and post-production, Quantum expanded its customer base in corporate and sports video, where the company’s long-standing expertise in enabling highly demanding video workflows is a key differentiator.
Outside of media and entertainment, scale-out storage product revenue increased more than 250% year-over-year. Quantum saw increasing market traction in video surveillance, where the combination of its expertise in managing video, its industry-leading streaming performance, and its workflow-optimized tiered storage approach are a key differentiator.
The company also had several large deals in genomics and geospatial applications, as customers purchased Lattus systems to provide a massively scalable active archive.
Quantum announced three new archive solutions that empower customers to address the challenge of unstructured data growth with cost-effective tiered storage strategies: 1) the Artico intelligent NAS archive appliance, which offers customers using scale-out NAS systems a flexible, low-cost entry point for establishing archives outside of StorNext environments and can scale to hold petabytes of data across object storage, tape and cloud storage tiers; 2) a certified solution combining Quantum DXi appliances and Rocket Arkivio Autostor software that provides not only backup but also archive; and 3) a Lattus extended online storage offering with object storage nodes that integrate new 6TB disk drives for increased density and lower cost per terabyte.
The company and Dot Hill announced a new, global go-to-market partnership in which Quantum is integrating Dot Hill’s full line of enterprise disk storage systems into its tiered storage offerings. The new partnership expands Quantum’s range of solutions for managing and protecting data across primary storage, backup and archive.
In conjunction with the 2015 NAB Show, Quantum earned four prestigious awards for its workflow storage and management solutions. Broadcast Beat recognized the company’s Q-Cloud Archive storage service for creativity, and TV Technology magazine named the public cloud service as a Best of Show Award recipient. In addition, Quantum’s StorNext Pro Solutions won a StudioDaily Prime Award, and IABM honored the company itself with a Game Changer Award.
To read the earnings call transcript