Quantum: Fiscal 4Q09 Financial Results

Quantum Corp. announced that revenue for its fiscal fourth quarter (FQ4’09), ended March 31, 2009, was $168 million and that revenue for the full fiscal year 2009 (FY09) was $809 million. GAAP gross margin rates were 37.5 percent for the quarter and 37.9 percent for the year, the highest yearly rate in eight years. The company had a GAAP net loss of $10 million for FQ4’09, or four cents per share. This loss included $9 million in amortization of intangibles, $3 million in stock-based compensation charges and $2 million in restructuring costs, and the net impact of these items reduced earnings per share on a diluted basis by approximately six cents. For the full year, the GAAP net loss was $356 million, or $1.70 per share, and included a non-cash charge of $339 million in the third fiscal quarter for goodwill impairment as well as $40 million in amortization of intangibles, $11 million in stock-based compensation charges and $7 million in restructuring costs. The net impact of these items reduced FY09 earnings per share on a diluted basis by $1.89 per share.

Relative to the comparable periods for fiscal year 2008 (FQ4’08 and FY08), Quantum’s total revenue declined 27 percent for the quarter and 17 percent for the year. Although these declines were partly due to the impact of the global economic crisis in the second half of FY09, they also resulted from the company’s strategy of shifting its sales mix toward higher margin opportunities. The success of this strategy is reflected in the year-over-year improvement in gross margin rates: from 33.0 percent in FQ4’08 to 37.5 percent in FQ4’09 and from 32.7 percent in FY08 to 37.9 percent in FY09. On a GAAP basis, operating expenses were $67 million for the quarter, which was down from $82 million in FQ4’08, and $634 million for the year, which was up from $327 million in FY08 due largely to the $339 million goodwill impairment charge in the third quarter.

Quantum generated $38 million in cash from operations for the quarter and $88 million for the full year. This strong cash generation enabled the company to pay down $92 million of its senior debt in FY09, a 27 percent reduction from the balance outstanding at the end of FY08.

"Our March quarter results clearly reflect not only the significant challenges of the current economic environment but also the continued progress we made this past year toward transitioning the company to a storage systems business model," said Rick Belluzzo, chairman and CEO of Quantum. "This progress can be seen in our substantial gross margin improvement, our continued year-over-year growth in disk systems and software revenue, and our strong cash generation. In addition, we took several important actions that will better position us to capitalize on our opportunities in the coming year. These include shifting more R&D investment into disk systems and software, further refining our product roadmaps to support our edge-to-core vision for data protection and management, and adjusting our go-to-market model to extend our market reach."

Quantum’s product revenue, which includes sales of the company’s hardware and software products, totaled $112 million in FQ4’09. This represented a net decrease of $51 million over FQ4’08, reflecting expected reductions in OEM revenue as well as additional shortfalls in both OEM and branded tape revenue due principally to customers reducing their spending in response to the difficult economic environment.

Disk systems and software revenue, inclusive of related service revenue, was $24 million in the March quarter. This was up 93 percent over the comparable period in FY08, reflecting the addition of deduplication software license revenue from EMC, the addition of DXi7500 revenue, and an increase in StorNext software sales. For the full year, Quantum’s disk systems and software revenue grew by 79 percent, inclusive of related service revenue.

During the March quarter, Quantum continued to enhance its DXi7500 platform, increasing usable disk capacity by 22 percent and incorporating new software features for multi-site, multi-tier operations, including more replication options and additional choices for direct tape creation from disk. The company also continued to see strong validation from customers regarding the benefits of its DXi solutions, as indicated by the results of a third-party survey. Seventy percent of respondents had reduced their disk backup requirements by at least 85 percent with the DXi7500, and 45 percent of all DXi users responding had reduced their backup window by at least half. Equally important in these times of tight budgets, nearly 60 percent had cut their backup costs by more than 10 percent, with 25 percent experiencing cost savings of more than 40 percent.

Quantum also finished FY09 with continued momentum in the core markets where its StorNext data management software is sold, most notably Media and Entertainment. Leveraging new partnerships, the company increased StorNext’s footprint at studios, broadcasters and post-production houses as well as in High Performance Computing, Life Sciences and Genomics environments.