Qualstar: Fiscal 2Q09 Financial Results

Qualstar Corporation reported financial results for the second quarter of fiscal 2009 ended December 31, 2008.

Revenues for the second quarter of fiscal 2009 were $4.6 million, compared to $6.0 million for the same quarter of fiscal 2008, a decrease of $1.4 million or 23.6 percent. Loss from operations was $846,000 compared to $483,000 in fiscal 2008. Net loss was $555,000, or $(0.05) per basic and diluted share, compared to a net loss of $59,000, or $(0.00) per basic and diluted share for the second quarter of fiscal 2008.

Tape library segment revenues were $3.1 million for the quarter, compared to $5.0 million for the same quarter of the prior year, a decrease of $1.9 million, or 37.2%. Power supply segment revenues increased 41.3 percent, or $432,000, to $1.5 million for the quarter from $1.0 million for the same quarter of the prior year.

Gross margin percentage in the fiscal 2009 second quarter was 31.9 percent, compared to 33.8 percent in the year-ago quarter. The decrease in gross margin percentage was primarily attributable to a change in product mix, partially offset by efficiencies achieved in labor and overhead.

Research and development expenses for the second quarter of fiscal 2009 were $765,000, or 16.5 percent of revenues, compared to $770,000 or 12.7 percent of revenues, for the second quarter of fiscal 2008. Sales and marketing expenses were $753,000, or 16.3 percent of revenues, compared to $840,000 or 13.9 percent of revenues, in the corresponding period last year. General and administrative expenses in the second quarter of fiscal 2009 were $802,000 or 17.3 percent of revenues, compared to $918,000, or 15.2 percent of revenues, for the same period last year.

Fiscal 2009 Six-Month Financial Results
Qualstar reported revenues of $10.0 million for the first six months of fiscal 2009, compared with $11.4 million for the first six months of fiscal 2008. The Company’s net loss for the first six months of fiscal 2009 was $0.6 million or $(0.05) per basic and diluted share, compared with a net loss of $0.3 million, or $(0.02) per basic and diluted share, in the first six months of fiscal 2008.

Cash, cash equivalents and marketable securities were $30.2 million at December 31, 2008, down from $32.5 million at June 30, 2008. Inventory at December 31, 2008 was $6.4 million, compared to $6.1 million at June 30, 2008.

Commenting on the second quarter results, Bill Gervais, president and chief executive officer of Qualstar said: “While second quarter revenues of $4.6 million were within our guidance range, our results suggest that we are beginning to be affected by the current recessionary economic climate, which has resulted in several potential customers delaying purchase decisions for our libraries. That said, I continue to be pleased with the performance of our N2Power business. During the second quarter, N2Power generated revenues of $1.5 million, a 41 percent improvement compared to the same period last year, largely due to power supply shipments to an OEM customer for use in gaming applications. N2Power is growing in importance as part of Qualstar’s overall business and we believe N2Power products will continue to generate strong demand due to worldwide requirements for smaller and more energy efficient power supplies.”

Mr. Gervais concluded: “Although we are in uncertain times, we have a solid balance sheet and excellent liquidity and we are comfortable with the future earnings and cash flow potential of the Company. Our financial strength puts us in an enviable position and gives us the flexibility to weather the current uncertainty as well as capitalize on opportunities once conditions stabilize.”