Qualstar: Fiscal 3Q09 Financial Results

Qualstar Corporation reported financial results for the third quarter of fiscal 2009 ended March 31, 2009.

Revenues for the third quarter of fiscal 2009 were $4.1 million, compared to $5.2 million for the same quarter of fiscal 2008, a decrease of $1.1 million or 20.8 percent. Loss from operations was $924,000 compared to $700,000 in fiscal 2008. Net loss was $720,000, or $(0.06) per basic and diluted share, compared to a net loss of $322,000, or $(0.03) per basic and diluted share for the third quarter of fiscal 2008.

Tape library segment revenues were $3.1 million for the quarter, compared to $4.1 million for the same quarter of the prior year, a decrease of $1.0 million, or 25.2 percent. Power supply segment revenues of $1.0 million for the quarter were lower by $42,000, or 3.9 percent compared to the same quarter of the prior year.

Gross profit decreased to $1.4 million, or 34.3% of net revenues, for the three months ended March 31, 2009, from $1.8 million, or 34.5% of net revenues, for the three months ended March 31, 2008. The decrease in gross profit correlates to the decrease in revenues, partially offset by a change in product mix.

Research and development expenses for the third quarter of fiscal 2009 were $807,000, or 19.7 percent of revenues, compared to $772,000 or 14.9 percent of revenues, for the third quarter of fiscal 2008. Sales and marketing expenses were $679,000, or 16.6 percent of revenues, compared to $810,000 or 15.7 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expense was due to a decrease in commission expense correlated to lower revenues and lower advertising and promotion expenses. General and administrative expenses in the third quarter of fiscal 2009 were $842,000 or 20.5 percent of revenues, compared to $904,000, or 17.5 percent of revenues, for the same period last year. The decrease is primarily due to a decrease in accounting and audit related expenses including fees associated with the Sarbanes Oxley compliance efforts that were completed in fiscal 2008, partially offset by an increase in compensation related expenses, bad debt and legal expenses.

Fiscal 2009 Nine-Month Financial Results
Qualstar reported revenues of $14.1 million for the first nine months of fiscal 2009, compared with $16.6 million for the first nine months of fiscal 2008. The Company’s net loss for the first nine months of fiscal 2009 was $1.3 million or $(0.11) per basic and diluted share, compared with a net loss of $0.6 million, or $(0.05) per basic and diluted share, in the first nine months of fiscal 2008.

Cash, cash equivalents and marketable securities were $28.8 million at March 31, 2009, down from $32.5 million at June 30, 2008. Inventory at March 31, 2008 was $6.9 million, compared to $6.1 million at June 30, 2008.

Commenting on the third quarter results, Bill Gervais, president and chief executive officer of Qualstar said: “While revenues of $4.1 million were within our guidance range, sales of our tape libraries continue to be impacted by the recessionary economic climate and during the third quarter, several potential customers delayed purchase decisions. This was especially evident with our enterprise class XLS product line, where the average sales cycles are longer than they are for our smaller libraries. However, despite the economic uncertainty, we continue to see the XLS appealing to a broad array of end users and we are pleased with the excellent pipeline of potential customers. In addition, I continue to be encouraged by our ability to carefully manage operating expenses and improve manufacturing efficiencies during these challenging times.”

Mr. Gervais concluded: “Our N2Power division enjoyed another solid quarter with revenues of $1.0 million as we completed a large initial order of power supplies to an OEM customer for use in gaming applications. N2Power is an important 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.”