Qualstar: Fiscal 2Q10 Financial Results

Qualstar Corporation reported financial results for the second quarter of fiscal 2010 ended December 31, 2009.

Fiscal 2010 Second Quarter Financial Results
Revenues for the second quarter of fiscal 2010 were $3.6 million, compared to $4.6 million for the same quarter of fiscal 2009, a decrease of $1.0 million or 22.2 percent. Loss from operations was $0.9 million compared to $0.8 in fiscal 2009. Net loss was $0.8 million or $(0.07) per basic and diluted share, compared to a net loss of $0.6 million or $(0.05) per basic and diluted share for the second quarter of fiscal 2009.

Tape library segment revenues were $2.6 million for the quarter, compared to $3.1 million for the same quarter of the prior year, a decrease of $0.5 million, or 16.5 percent. Power supply segment revenues of $1.0 million for the quarter decreased by $0.5 million, or 34.3 percent, compared to $1.5 million in the same quarter of the prior year.

Gross profit decreased to $1.2 million, or 33.2 percent of net revenues, for the three months ended December 31, 2009, from $1.5 million, or 31.9 percent of net revenues, for the three months ended December 31, 2008. The increase in gross profit percentage was due to a change in product mix, partially offset by lower absorption of labor and overhead and an increase in inventory reserves.

Research and development expenses for the second quarter of fiscal 2010 were comparable at $0.8 million to the second quarter of fiscal 2009. Sales and marketing expenses were $0.6 million, or 17.3 percent of revenues, compared to $0.8 million, or 16.3 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expense was due to a decrease in compensation related to reductions in personnel and a decrease in sales consulting expenses. General and administrative expenses in the second quarter of fiscal 2010 were $0.6 million, or 17.9 percent of revenues, compared to $0.8 million, or 17.3 percent of revenues, for the same period last year. The decrease in general and administrative expense was primarily due to a decrease in compensation related to reductions in personnel and bad debt expenses.

Commenting on the second quarter results, Bill Gervais, president and chief executive of Qualstar said: "Although second quarter revenues of $3.6 million were within our guidance, our XLS sales jumped to $0.8 million or 17 units versus $0.2 million or 3 units in the year ago quarter. This was the highest quarter of XLS unit shipments since the product was launched in July 2006. Despite the strong XLS sales, we continue to face declines in our legacy library products as well as in tape media. Looking ahead to the second half of fiscal 2010, we expect that the actions we have taken over the past two years to strengthen our business model, including cost reductions and continuing with new product developments, will have a positive impact on our results as the broader economic conditions turn the corner. Power supply revenues should also benefit from the worldwide focus on higher efficiency and the general movement toward ‘green’ products."

Fiscal 2010 Six-Month Financial Results
Qualstar reported revenues of $7.3 million for the first six months of fiscal 2010, compared with $10.0 million for the first six months of fiscal 2009. The Company’s net loss for the first six months of fiscal 2010 was $1.7 million or $(0.14) 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 six months of fiscal 2009.

Cash, cash equivalents and marketable securities were $25.0 million at December 31, 2009, down from $27.7 million at June 30, 2009. Inventory at December 31, 2009 was $5.2 million, compared to $5.8 million at June 30, 2009.

Common Stock Dividend
Qualstar’s Board of Directors did not declare a dividend in January as has been done in prior quarters. Ongoing dividends are evaluated on a quarter-by-quarter basis. Given the state of the economy, the Board conservatively elected in favor of preserving capital this quarter.