Quantum: Fiscal 3Q16 Financial Results

 Quantum Corp. reported results for the fiscal third quarter 2016 ended Deceùber 31, 2015.

Fiscal Third Quarter 2016 Results:

(All comparisons relative to the fiscal third quarter 2015.)

• Revenue was $128.0 million, driven by continued strength in scale-out storage offset by overall weakness in the general storage market and pricing environment of commodity tape media products.
• Scale-out storage and related service revenue grew approximately $8.5 million to an all-time high of $35.7 million, a 31% increase, marking the 18th consecutive quarter of year-over-year growth.
• Royalty revenue increased $0.6 million to $11.3 million.
• Disk backup systems and related service revenue decreased to $19.6 million.
• Branded tape automation and related service revenue decreased to $38.5 million, while OEM tape automation and related service revenue decreased to $12.7 million.
• Devices and media revenue decreased to $10.2 million as a result of a $3.5 million decline in tape media revenue.
• GAAP and non-GAAP operating income of $2.0 million and $7.2 million, respectively.
• GAAP net loss was $0.3 million, or $0.00 per diluted share.
• Non-GAAP net income was $5.3 million, or $0.02 per diluted share.

“We are pleased with our overall results and the continued scale-out revenue growth this quarter, to a new record high, especially given the overall weakness in the broad storage market environment,” said Jon Gacek, president and CEO. “In response to the market conditions, we also successfully implemented significant operational changes during the quarter that improved our profitability. For the quarter, our data protection revenue increased sequentially – with higher sales of both disk and tape automation products. In our scale-out storage solutions line, targeted at specialized workflows, we grew revenue 31% over the comparable quarter a year ago, even with no ‘mega deals’ above $1 million in the just-completed quarter. Excluding mega deals, scale-out storage revenue grew 48% and 49%, respectively, over the comparable three- and nine-month periods in the prior year.
“For the fourth quarter, we will continue to focus on growing our run-rate scale-out revenue driven by expanding our media and entertainment, surveillance and technical workflow opportunities, and we will continue to work to close the mega deals in our sales funnel. In addition, similar to the third quarter, we will actively manage tape media revenue based on the pricing environment and optimize our activity for profit. We will also continue to manage our spending and our investments to achieve the right balance across our financial objectives.”

The company also announced that Linda Breard has resigned as SVP and CFO of Quantum to pursue another opportunity. Chris Willis, VP, financial planning and analysis, Quantum, will serve as interim CFO while the company completes its search process for a permanent position.

Based on current market conditions, including tape media pricing dynamics and the difficulty in forecasting large and mega deals given their long sales cycles, Quantum provided the following guidance for the fiscal fourth quarter:

• Revenue of $118 million to $122 million.
• GAAP and non-GAAP gross margin of approximately 43-44%.
• GAAP and non-GAAP operating expenses of approximately $50 million to $51 million and $48 million to $49 million, respectively.
• Interest expense of $1.5 million and taxes of $400,000.
• GAAP and non-GAAP earnings per share of ($0.01) to $0.00 and $0.00 to $0.01, respectively.

Fiscal Third Quarter 2016 Business Highlights

• Purchased the remaining $83.7 million of aggregate principal amount of its convertible subordinated notes due November 2015, plus accrued interest, using $16.3 million in restricted cash and $68.9 million of its revolving credit facility with Wells Fargo Capital Finance.
• Unveiled Xcellis workflow storage, Quantum’s next-generation, high-performance storage solution engineered to optimize demanding workflows, accelerate time to insight and empower organizations to drive greater success. The new solution addresses the growth of unstructured data and the opportunity to capitalize on its strategic value by enabling users to share and leverage this data more quickly, easily and cost-effectively. Powered by StorNext and its streaming performance, Xcellis can be deployed as a standalone system or as the primary storage component within a multi-tier storage environment incorporating object storage, tape and cloud technologies.
• Extended its StorNext scale-out platform with the release of StorNext 5.3, providing a range of advanced data management capabilities for multi-tier storage and hybrid cloud environments. In addition to powering the company’s new Xcellis workflow storage solution, it also serves as the data management engine in Artico, Quantum’s intelligent NAS archive appliance.
• Expanded its Q-Cloud offerings with the launch of Q-Cloud Vault, a new service that enables users to take advantage of secure, low-cost public cloud storage for long-term retention of digital assets. Q-Cloud Vault is available for StorNext 5.3 users.
• Released StorNext Connect 1.1, a enhanced version of its easy-to-use management tool that simplifies the installation, discovery, administration and monitoring of StorNext environments. It integrates management and reporting of a multi-tier storage environment, including disk, tape, object storage and cloud resources.
• Added LTO-7 technology to its tiered storage portfolio, more than doubling the capacity over previous generations and enabling low-cost, energy-efficient and secure storage for protecting and retaining data.

To read the earnings call transcript