Quantum: Fiscal 2Q13 Financial Results

Quantum Corp. reported results for the second quarter of fiscal 2013 (FQ2’13), ended Sept. 30, 2012.

Highlights:

• Total revenue of $147 million, up 5% sequentially
• Record disk systems and software revenue of $42 million, up 18% year-over-year
• Record DXi revenue driven by 30% year-over-year increase in enterprise sales
• Record StorNext revenue, up 27% year-over-year and reflecting continued StorNext appliances momentum

Revenue for the quarter totaled $147 million, down 11% from the second quarter of fiscal 2012 primarily due to lower-than-expected OEM and branded tape automation revenue. However, total revenue was up $6 million, or 5%, sequentially.

In addition, Quantum reported record revenue of $42 million from disk system and software sales (including related service), which increased 18% from FQ2’12 and 38% sequentially. Both DXi and StorNext revenues were also the highest they have ever been for a quarter, growing 14% and 27%, respectively, over FQ2’12.

Quantum reported a GAAP net loss of $12 million, or 5 cents per share, for FQ2’13, compared to GAAP net income of $4 million in FQ2’12. On a non-GAAP basis, the company had a net loss of $5 million, or 2 cents per share, down from net income of $14 million in the same quarter last year. The year-over-year declines were largely driven by the lower overall revenue.

"We are very pleased with our record results in disk systems and software, as these products are key to driving higher revenue growth and profit," said Jon Gacek, president and CEO of Quantum. "In the September quarter, we also continued to expand and enhance our product portfolio to build on this momentum moving forward, launching our Q-Cloud backup and disaster recovery subscription service, shipping the next generation of our vmPRO virtual data protection software, adding 3TB drives to our DXi8500 enterprise deduplication line and releasing a new version of our StorNext big data management software.

"We believe the shortfall in tape revenue and impact on profits was largely due to the industry transitioning to the latest LTO generation technology. Nevertheless, as we begin the second half of the fiscal year, we are taking actions to reduce spending in certain areas so that we can continue to make the investments that best support our growth strategy."

For the third quarter of fiscal 2013, Quantum expects:

• Revenue of approximately $160 million.
• GAAP gross margin rate of approximately 41% and non-GAAP gross margin rate of 42%.
• GAAP operating expenses of $67 million to $69 million and non-GAAP operating expenses of $62 million to $64 million.
• Interest expense of $2 million and taxes of $500,000.

For the full fiscal year, the company now expects:

• Revenue of approximately $600 million.
• GAAP gross margin rate of approximately 41% and non-GAAP gross margin rate of 42%.
• GAAP operating expenses of approximately $273 million and non-GAAP operating expenses of approximately $250 million.

Business highlights for the  quarter include the following:

• Quantum introduced Q-Cloud, a new cloud-based backup and disaster recovery subscription service incorporating Quantum’s DXi and vmPRO technology and delivering business-class data protection for as little as 1 cent/GB/month. Q-Cloud provides backup of both physical and virtual infrastructures for capacities ranging from 1TB up to 1PB of protected data. With an on-premise DXi appliance, Q-Cloud customers can benefit from the speed and convenience of local recovery with the security of cloud-based backup.
• The company increased the storage density and power savings in its DXi8500 appliances, creating an efficient disk backup and deduplication solution for enterprise customers. The DXi8500 now incorporates 3TB disk drives to deliver 50% greater storage density, 42% more power savings and 25% higher performance, offering a small footprint and a high value enterprise disk backup solution.
• Shipments of the DXi6700 appliance family surpassed 1,000 units, reflecting the broad adoption of the DXi6701 and DXi6702 during its first year in the market. Designed to eliminate the trade-offs customers have to make with other deduplication solutions, the DXi6701/02 has received several product of the year honors and other industry recognition.
• Quantum released StorNext 4.3 software, which brings new intelligence features, greater performance and increased scale to managing big data, including support for up to one billion files and dozens of petabytes of tiered storage. This latest generation StorNext software also includes capabilities for emerging needs, such as archive on ingest, active vaulting and project-based capacity management – all designed to help customers extract value from their data.
• StorNext File System shipments surpassed 70,000, representing an increase of nearly 20% in less than nine months. In addition, the value StorNext provides in helping customers manage big data was reflected in two other announcements made during the quarter. First, a NASCAR video project in which StorNext played a central role won an Innovation Award at IBC 2012, an international conference for the media and entertainment industry. Second, in research sponsored by Quantum and conducted by IDC, the industry analyst firm found that StorNext customers experienced a return of nearly $6.50 for every $1 invested over three years, with payback in just over four months.
• Teradata, an analytic data solutions company, selected Quantum’s Scalar tape libraries and Scalar Key Manager encryption software as standard elements in its enterprise data protection solution offerings for customers. This partnership speaks to Quantum’s worldwide market share leadership in open systems tape automation and enables the company to extend its customer reach further.