Quantum: Fiscal 4Q15 Financial Results

Quantum Corp. reported results for the fiscal fourth quarter and full year 2015 ended March 31, 2015.

Fiscal Fourth Quarter 2015 Results
All comparisons are relative to the fiscal fourth quarter of 2014.)

• Revenue was $147.8 million, up 15%, primarily driven by sales of scale-out storage and DXi deduplication solutions.
• Total branded revenue grew to $122.1 million, a 20% increase.
• Scale-out storage and related service revenue increased 116%, to a record $31.7 million.
• DXi deduplication appliance and related service revenue was $25.2 million, an increase of 30%.
• GAAP operating income was $2.5 million, up from an operating loss of $12.5 million.
• GAAP net income was $12.9 million, or $0.04 per diluted share. This included $13.6 million from the gain on sale of Quantum’s investment in a privately held company. In the fiscal fourth quarter 2014, the company had a net loss of $14.4 million, or $0.06 per diluted share.
• Non-GAAP operating income was $6.3 million, up from an operating loss of $159,000.
• Non-GAAP net income was $18.0 million, or $0.06 per diluted share, again including $13.6 million from the gain on sale of
• Quantum’s investment in a privately held company. In the fiscal fourth quarter 2014, Quantum had a net loss of $2.1 million, or $0.01 per diluted share.

Fiscal 2015 Results

(All comparisons are relative to fiscal 2014, which included a one-time $15 million royalty payment to Quantum.)

• Revenue was $553.1 million, compared to $553.2 million, as Quantum’s $29.8 million in branded revenue growth offset the combination of a $14.0 million decline in OEM revenue and a $15.8 million reduction in royalty revenue.
• Total branded revenue grew to $448.0 million, a 7% increase.
• Scale-out storage revenue reached a record level of $102.4 million, growing 74%.
• DXi revenue was $88.2 million, a 10% increase.
• GAAP operating income was $14.4 million, up from an operating loss of $11.8 million.
• GAAP net income was $16.8 million, or $0.06 per diluted share, compared to a net loss of $21.5 million, or $0.09 per diluted share.
• Non-GAAP operating income was $34.4 million, up from $23.3 million.
• Non-GAAP net income was $38.1 million, or $0.14 per diluted share, up from $13.7 million, or $0.05 per diluted share.
• Quantum ended the fiscal year with $70.6 million in total cash and cash equivalents, which reflected the early repurchase of $50 million of convertible notes due November 2015 in an all-cash transaction completed during the fourth quarter.

“Our fourth quarter capped off a year that was a key turning point for Quantum, as we generated strong revenue and profit results that reflect the strategic actions we’ve taken over the last several years to improve our financial and operational performance, deliver even greater value to customers and position the company for the future,” said Linda Breard, CFO. “Branded revenue grew year-over-year in all four quarters, driven by growth rates in scale-out storage increasing each quarter – ultimately to 116% in Q4. We also returned to generating annual growth in DXi revenue, and our full year GAAP net income was the highest it’s been in more than five years.”

“We are well-positioned to build on this momentum and drive increased growth and profit in fiscal 2016,” said Jon Gacek, president and CEO. “Our scale-out storage solutions offer a unique combination of industry-leading performance and low-cost retention through multi-tier storage – across sites and the cloud – all managed by our StorNext platform. This makes them ideal for addressing increased demands for re-monetizing and analyzing digital content. As a result, we plan to expand our leadership in media and entertainment and also extend our expertise to other markets such as video surveillance, corporate video and HPC applications.

“At the same time, we will leverage our long-standing leadership in data protection technology, recently expanded archive offerings and incorporation of Dot Hill disk arrays into our product line to provide our large install base of users and future customers with an even broader range of data center solutions.

“Finally, we will continue to invest in delivering further differentiated solutions, capitalizing on new opportunities through sales and marketing initiatives and driving long-term growth.“

For 1FQ16, Quantum expects:

• Revenue of approximately $125 million to $130 million, reflecting typical seasonality and the strength of the prior quarter, including the large number of significant deals that closed toward the end of the quarter.
• Scale-out storage revenue growth of 50% over the fiscal first quarter of 2015.
• GAAP and non-GAAP gross margin of approximately 45-46%.
• GAAP and non-GAAP operating expenses of approximately $57 million and $54 million, respectively.
• GAAP operating loss of $100,000 to operating income of $1.9 million and non-GAAP operating income of $3 million to $5 million.
• Interest expense of $1.9 million and taxes of $400,000.
• GAAP net loss of $2.1 million to $100,000, or a loss of $0.01 to $0.00 per diluted share, and non-GAAP net income of $1 million to $3 million, or $0.00 to $0.01 per diluted share.

For FY16 year, Quantum is targeting year-over-year growth of:

• 4-5% in total revenue.
• 50% in scale-out storage revenue.
• 8-10% in non-GAAP operating income.

Changes in board of directors
Quantum announced the resignation of Jeffrey Smith from its board of directors and appointment of Robert Andersen.

Fiscal Fourth Quarter 2015 Business Highlights

• Quantum announced three new solutions that integrate the cloud into multi-tier, hybrid storage architectures for demanding data workloads. Q-Cloud Archive and Q-Cloud Vault incorporate the power of the public cloud as an off-site tier within a StorNext 5 workflow environment, while Q-Cloud Protect for AWS enables customers using Quantum’s DXi deduplication appliances to replicate data to the Amazon Web Services (AWS) cloud. With all three offerings, customers can realize the full benefits of the cloud without having to make changes to existing applications or processes.
• The company introduced StorNext QXS-5600, a high-capacity, high-density disk array that provides cost-effective storage for customers managing an increasing number of large files containing high-resolution video, images or other rich content. The new offering, which has been well-received by customers, provides work-in-process storage for a variety of applications, including 4K and 8K video production and post-production, geospatial imaging, seismic research and analysis, and video surveillance.
• Further reflecting its expansion into video surveillance, Quantum announced the certification of StorNext with XProtect VMS from Milestone Systems, provider of open platform IP video management software (VMS). The combined solution stores large amounts of video files while optimizing the performance of the system.
• Fujitsu America and Quantum began offering North American customers a joint solution for large enterprise and mainframe backup and archive storage that encompasses best-in-class disk and tape technologies from Fujitsu and Quantum, respectively.
• The company announced the Quantum Advantage Program, a platform for partners to test and qualify their technology with its offerings, ensuring tightly integrated solutions for the most demanding customer environments.
• Quantum continued to garner awards and honors. StorNext Pro Solutions received a Visionary Product Award for Enabling Collaborative Storage Technology at the 14th annual Storage Visions Conference. In addition, Storage magazine named DXi6900 and StorNext 5 as finalists in two categories of its 2014 Product of the Year Awards, with DXi6900 later receiving a Silver Award. StorNext 5 was also named a finalist in the Storage Product of the Year category of the UK’s Network Computing Awards 2015 and the post-production category of the StudioDaily Prime Awards.