Qualstar: Fiscal 1Q13 Financial Results

Qualstar Corporation reported financial results for its first fiscal quarter ended September 30, 2012.

Fiscal 2013 First Quarter Financial Results
Revenues for the first quarter of fiscal 2013 were $3.5 million, compared to $4.6 million for the same quarter of fiscal 2012, a decrease of $1.2 million or 25.3%. Loss from operations was $1.9 million compared to income from operations of $13,000 in the first quarter of fiscal 2012. GAAP net loss was $1.9 million or $0.16 per basic and diluted share. Excluding charges of $325,000 in inventory reserves, $94,000 in legal settlement fees and $882,000 in facility restructuring expenses, non-GAAP net loss was $645,000 or $0.05 per share. This compares to GAAP net income of $57,000, or $0.00 per basic and diluted share for the first quarter of fiscal 2012.

Storage revenues were $1.9 million for the first quarter compared to $2.4 million in the first quarter of fiscal 2012, a decrease of $500,000, or 21.1%. This year-over-year decrease in revenues was a result of legacy products that were discontinued in the fourth quarter of fiscal 2012, as well as lower sales of XLS tape libraries, media and service. This decline was partially offset by strong sales of our RLS library products, which increased 15.5% from the same quarter last year.

N2Power revenues were $1.5 million for the quarter, compared to $2.2 million in the prior year quarter, a decrease of $700,000, or 29.9%. The decrease in revenues was due to an inventory tightening by our OEM customers in two of our stronger markets, servers and telecom.

Gross profit decreased to $944,000 or 27.3% of revenues, for the three months ended September 30, 2012, from $1.7 million, or 37.1% of net revenues, for the three months ended September 30, 2011. The decrease was due to higher inventory reserves and lower absorption of manufacturing overhead.

Engineering expenses for the first quarter of fiscal 2013 were $666,000, or 19.3% of revenues, comparable to $648,000 or 14.0% of revenues, for the first quarter of fiscal 2012. Sales and marketing expenses were $531,000, or 15.4% of revenues, compared to $461,000 or 10.0% of revenues, in the corresponding period last year. The increase was due to compensation, advertising and promotional expenses. General and administrative expenses were $740,000 or 21.4% of revenues, compared to $592,000, or 12.8% of revenues, for the same period last year. The increase in G&A expenses was attributed to an increase in compensation expenses.

Cash, cash equivalents and marketable securities were $19.6 million at September 30, 2012, down $1.3 million from $20.9 million at June 30, 2012. Inventory, net of reserves, at September 30, 2012 was $4.1 million, compared to $4.5 million at June 30, 2012.

"While the lingering effects of the proxy contest impacted our fiscal first quarter performance, we are encouraged by our growing bookings and long-term trends in our markets," said Larry Firestone, president and CEO. "With the recently initiated strategic plan and new management in place we have taken significant steps to restructure the company and lower our breakeven with much more to come. We are expanding Qualstar’s portfolio of products across its power conversion and storage markets and are targeting a variety of new market opportunities to drive long-term growth and profitability."