Quantum: Fiscal 4Q12 Financial Results

Quantum Corp. reported results for fiscal 2012 (FY12) and the fourth quarter (FQ4’12), ended March 31, 2012.

Revenue for the year totaled $652 million, down 3 percent from fiscal 2011 (FY11), primarily due to expected decreases in OEM deduplication software revenue and royalty revenue.

For FQ4’12, Quantum reported $160 million in revenue, a 3 percent decrease from the same period last year (FQ4’11). Branded revenue, which represented 81 percent of total non-royalty revenue for the year, grew 2 percent over FY11. Branded disk systems and software sales, including related service revenue, were a key contributor to this year-over-year growth, increasing 18 percent for FY12 and 28 percent for the fourth quarter.

Quantum reported a GAAP net loss for FY12 of $9 million (4 cents per diluted share), compared to net income of $5 million in the prior year. On a non-GAAP basis, Quantum generated $30 million in net income for the year (12 cents per diluted share), down from $49 million in FY11. For FQ4’12, Quantum had a GAAP net loss of $11 million (5 cents per diluted share), compared to a net loss of $2 million in FQ4’11. Non-GAAP net income for the quarter was $1 million (less than 1 cent per diluted share), down from $10 million in the same quarter of FY11.

The year-over-year declines were largely due to expected reductions in OEM deduplication software revenue and royalty revenue for FY12 and decreased tape automation systems revenue for FQ4’12. Quantum’s results also reflected a decision to increase sales and marketing spending in the fourth quarter to provide a stronger foundation for driving overall growth from the start of the new fiscal year. Finally, GAAP results included a $2.3 million loss in FQ4’12 related to the refinancing of its senior debt, which is expected to save the company approximately $2 million in annual interest expense and bank fees, beginning with the current fiscal year.

"The March quarter capped off a year of strong performance in key growth areas," said Jon Gacek, president and CEO of Quantum. "In fiscal 2012, we increased overall branded revenue for the second consecutive year, with record revenues from both branded DXi and branded StorNext sales. It was also a year of continued technology and product innovation, as we enhanced our entire DXi product line, introduced a series of new StorNext appliances and added new features to our Scalar tape libraries. Shortly after acquiring Pancetera Software last June, we also launched Quantum vmPRO virtual server protection solutions and laid the groundwork for our recently announced cloud-based data protection platform.

"As we enter the new fiscal year, we are well-positioned to drive overall revenue growth, with industry-leading technology and products in some of the hottest segments of the storage market, including deduplication, virtualization and cloud services. We also are continuing to build on this leadership, as demonstrated by today’s announcement regarding a new category of solutions that uniquely address the physical storage challenges in big data management and cloud environments. All of this reflects Quantum’s transformation over the last few years and our ability to address a much broader range of customer needs in data protection and big data management with highly differentiated solutions optimized to deliver greater business value."

Quantum ended FY12 with $55 million in total cash and cash equivalents and $184 million in total debt. For the full year, the company generated $46 million in cash from operations and reduced its total debt by $55 million.

For the full 2013 fiscal year, Quantum expects:

• Total revenue growth over FY12.
• GAAP and non-GAAP gross margin rates in the mid-40 percent range.
• GAAP and non-GAAP operating expenses of $280 million to $285 million and $255 million to $260 million, respectively.
• Interest expense of $8 million and taxes of $4 million.

For the first quarter of fiscal 2013, the company expects:

• Year-over-year revenue growth to approximately $155 million.
• GAAP gross margin rate of approximately 41 percent and non-GAAP gross margin rate of 42 percent.
• GAAP and non-GAAP operating expenses of $70 million to $72 million and $63 million to $65 million, respectively.
• Interest expense of $2 million and taxes of $1 million.

Business highlights for the March quarter include:

• Quantum launched a new, all-virtual software platform to help customers take advantage of cloud-based data protection through a highly optimized, flexible approach that overcomes the limitations of other cloud offerings. Centered on vmPRO technology and a new virtual deduplication appliance, DXi V1000, this platform is a key component of Xerox’s cloud backup and DR services announced earlier this year. It also serves as the foundation of a multi-faceted plan to make the benefits of Quantum’s cloud-optimized technology available through other public and private cloud services, including new branded offerings.
• Storage magazine and SearchStorage.com named vmPRO 4000 virtual server protection appliance as 2011 Backup Hardware Product of the Year in their annual awards, reflecting the company’s success in extending its data protection beyond physical environments. The vmPRO 4000 was recognized for innovation, performance, ease of integration and use, manageability, functionality and value.
• The DXi6700 family of midrange disk backup and deduplication appliances was named Storage Product of the Year at the 2012 Network Computing Awards in London. The awards recognize the hardware, software and services which have most impressed the readers of Network Computing, the UK’s longest established computer networking publication. In addition, the DXi6700 was a finalist in the Storage magazine/SearchStorage.com Product of the Year awards.
• The company began shipping its StorNext G300 Gateway appliances which simplify and leverage high-speed networking technologies to provide virtual, highly available access over an IP connection to large data sets managed by the high-performance StorNext file system. In addition, it added the new StorNext QS2400 Storage System to its primary disk product line, further building out its StorNext appliance offerings.
• Quantum also prepared for launch of its Scalar LTFS (Linear Tape File System) appliance, announced shortly after the quarter ended. Scalar LTFS, which is based on the LTFS open-standard for content formatting, offers new modes of portability and user accessibility for archived content on LTO tape. Because it works with existing application and file system tools, LTFS-based content can be easily managed, transported and accessed for long-term data protection and archival storage.