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Quantum Corporation Reports Fiscal First Quarter Results

Grows Branded Disk Systems and Software Revenue 86 Percent Year-Over-Year to Record Level, With 125 Percent Year-Over-Year Increase in Branded DXi Sales

SAN JOSE, CA, Jul 28, 2010 (MARKETWIRE via COMTEX) --

Quantum Corp. (NYSE: QTM), the leading global specialist in backup, recovery and archive, today announced that revenue for its fiscal first quarter (FQ1'11), ended June 30, 2010, was $163 million, an increase of $3 million from the same period last year (FQ1'10). This increase was primarily due to record branded disk systems and software revenue, which grew 86 percent from FQ1'10, and higher OEM DXi(TM) software revenue recognized in accordance with contractual requirements. Quantum's branded business grew to 73 percent of total non-royalty revenue, up from 71 percent in FQ1'10.

Reflecting the strength of the company's business model, Quantum increased both its gross margin rate and operating income from the same quarter last year. Its GAAP gross margin rate was 41.3 percent, up from 38.4 percent, and GAAP operating income rose to $4 million, up from $200,000.

Quantum reported a GAAP net loss of $3 million, or 1 cent per share, compared to GAAP net income of $5 million in FQ1'10, which included an $11 million net gain related to the retirement of convertible debt. The $3 million loss in FQ1'11 included $9 million in amortization of intangibles and $3 million in stock-based compensation charges which reduced per share earnings by approximately 5 cents.

"We continued to make significant progress in several key areas during the June quarter, most notably setting a new record for branded DXi revenue, which more than doubled on a year-over-year basis," said Rick Belluzzo, chairman and CEO of Quantum. "We also continued to deliver strong gross margin and operating income performance. However, although our revenue increased over the prior year, we clearly did not deliver the growth we had expected. While this was partly due to economic challenges in Europe, we continue to believe there is significant opportunity in the market and that Quantum is well-positioned to capitalize on it, particularly given the new products we've launched over the past year.

"The key to generating greater revenue growth is building a stronger channel business -- especially in the midrange with our DXi solutions -- better leveraging our large installed base and further improving our sales execution," continued Belluzzo. "While we believe our go-to-market strategy is still fundamentally sound, we are making targeted changes and investments in all these areas that will help us build a stronger, more diverse revenue base moving forward."

Quantum's product revenue, which includes sales of the company's hardware and software products, totaled $108 million in FQ1'11. This represented a net increase of $3 million from FQ1'10. Disk systems and software revenue, inclusive of related service revenue, was $35 million in the June quarter, an increase of 80 percent from the same period last year. The growing strength of Quantum's branded disk systems and software offerings was reflected in year-over-year revenue increases of 125 percent for branded DXi systems and 36 percent for branded StorNext(R) software. Contributing to this momentum were a variety of large deals, including a multi-site, follow-on DXi7500 sale to one of the top insurance companies in the United States, a significant DXi7500 purchase by a new DXi customer that is one of the leaders in the American music recording industry, and multi-unit DXi6500 deals with a government agency and state university. On the StorNext side, notable customer wins included new business with a major manufacturer of supercomputers, several Chinese television stations, and a top university in the Middle East, as well as a follow-on sale to a large government-owned broadcast network in Asia.

Quantum ended FQ1'11 with $99 million in total cash and cash equivalents and $329 million in total debt. The quarter-over-quarter decline in cash was expected, generally driven by balance sheet fluctuations and, specifically, the final utilization of a customer prepayment. Quantum stated that it expects to generate cash from operations in the current quarter and that it will pay off the remaining $22 million of its convertible debt.

Conference Call and Audio Webcast Notification

Quantum will hold a conference call today, July 28, 2010, at 2:00 p.m. PDT, to discuss its fiscal first quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9867 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, July 28, 2010, at 2:00 p.m. PDT. Site for the webcast and related information: http://www.quantum.com/investors.

About Quantum

Quantum Corp. (NYSE: QTM) is the leading global storage company specializing in backup, recovery and archive. Combining focused expertise, customer-driven innovation, and platform independence, Quantum provides a comprehensive, integrated range of disk, tape, and software solutions supported by a world-class sales and service organization. This includes the DXi(TM)-Series, the first disk backup solutions to extend the power of data deduplication and replication across the distributed enterprise. As a long-standing and trusted partner, the company works closely with a broad network of resellers, OEMs and other suppliers to meet customers' evolving data protection needs. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, (408) 944-4000, www.quantum.com.

Quantum, the Quantum logo and StorNext are registered trademarks of Quantum Corporation and its affiliates. DXi is a trademark of Quantum Corporation. All other trademarks are the property of their respective owners.

"Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, statements relating to generating greater revenue growth, that we are making targeted changes and investments to help us build a stronger, more diverse revenue base moving forward, and that we continue to believe there is significant opportunity in the market and that we are well-positioned to capitalize on it, that we expect to generate cash from operations in the current quarter and that we will pay off the remaining $22 million of our convertible debt are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum's actual results to differ materially from those implied by the forward-looking statement. More detailed information about these risk factors, and additional risk factors, are set forth in Quantum's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors," in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 11, 2010. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

                            QUANTUM CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In thousands, except per-share amounts)
                                (Unaudited)
                                                   Three Months Ended
                                              ----------------------------
                                              June 30, 2010  June 30, 2009
                                              -------------  -------------
Revenue:
  Product                                     $     108,454  $     105,224
  Service                                            38,637         38,902
  Royalty                                            16,134         16,214
                                              -------------  -------------
    Total revenue                                   163,225        160,340
Cost of revenue:
  Product                                            70,635         72,086
  Service                                            25,136         26,611
                                              -------------  -------------
    Total cost of revenue                            95,771         98,697
                                              -------------  -------------
      Gross margin                                   67,454         61,643
  Operating expenses:
    Research and development                         18,122         16,532
    Sales and marketing                              30,078         27,293
    General and administrative                       15,483         14,505
    Restructuring charges (benefit)                     (83)         3,110
                                              -------------  -------------
                                                     63,600         61,440
                                              -------------  -------------
      Income from operations                          3,854            203
  Interest income and other, net                        (32)             4
  Interest expense                                   (6,115)        (5,651)
  Gain on debt extinguishment, net of costs              --         11,290
                                              -------------  -------------
      Income (loss) before income taxes              (2,293)         5,846
  Income tax provision                                  403            838
                                              -------------  -------------
      Net income (loss)                       $      (2,696) $       5,008
                                              =============  =============
  Net income (loss) per share:
      Basic                                   $       (0.01) $        0.02
      Diluted                                         (0.01)         (0.02)
  Income (loss) for purposes of computing net
   income (loss) per share:
      Basic                                   $      (2,696) $       5,008
      Diluted                                        (2,696)        (5,592)
  Weighted average common and common
   equivalent shares:
      Basic                                         215,448        210,257
      Diluted                                       215,448        226,046
  Included in the above Statements of
   Operations:
  Amortization of intangibles:
      Cost of revenue                         $       5,547  $       5,475
      Research and development                          100            100
      Sales and marketing                             3,394          3,394
      General and administrative                         25             25
                                              -------------  -------------
                                                      9,066          8,994
  Share-based compensation:
      Cost of revenue                                   460            300
      Research and development                          749            638
      Sales and marketing                               885            458
      General and administrative                        948            742
                                              -------------  -------------
                                                      3,042          2,138
                            QUANTUM CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                                (Unaudited)
                                                      June 30,   March 31,
                                                        2010       2010*
                                                      ---------  ---------
Assets
  Current assets:
    Cash and cash equivalents                         $  97,288  $ 114,947
    Restricted cash                                       1,813      1,896
    Accounts receivable, net                            105,549    103,397
    Manufacturing inventories, net                       56,043     54,080
    Service parts inventories, net                       50,321     53,217
    Deferred income taxes                                 7,746      7,907
    Other current assets                                 14,399     14,500
                                                      ---------  ---------
      Total current assets                              333,159    349,944
  Long-term assets:
    Property and equipment, less accumulated
     depreciation                                        23,652     24,528
    Intangible assets, less accumulated amortization     64,026     73,092
    Goodwill                                             46,770     46,770
    Other long-term assets                                9,654      9,809
                                                      ---------  ---------
      Total long-term assets                            144,102    154,199
                                                      ---------  ---------
                                                      $ 477,261  $ 504,143
                                                      =========  =========
Liabilities and Stockholders' Deficit
  Current liabilities:
    Accounts payable                                  $  52,099  $  56,688
    Accrued warranty                                      5,815      5,884
    Deferred revenue, current                            80,864     94,921
    Current portion of long-term debt                     1,884      1,884
    Current portion of convertible subordinated debt     22,099     22,099
    Accrued restructuring charges                         2,446      3,795
    Accrued compensation                                 26,921     31,237
    Income taxes payable                                  1,874      2,594
    Other accrued liabilities                            22,872     23,555
                                                      ---------  ---------
      Total current liabilities                         216,874    242,657
  Long-term liabilities:
    Deferred revenue, long-term                          29,595     30,724
    Deferred income taxes                                 8,660      8,676
    Long-term debt                                      305,428    305,899
    Other long-term liabilities                           7,409      7,444
                                                      ---------  ---------
      Total long-term liabilities                       351,092    352,743
  Stockholders' deficit                                 (90,705)   (91,257)
                                                      ---------  ---------
                                                      $ 477,261  $ 504,143
                                                      =========  =========
------------------------------------------------------
* Derived from the March 31, 2010 audited Consolidated Financial Statements
                            QUANTUM CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                (Unaudited)
                                                   Three Months Ended
                                              ----------------------------
                                              June 30, 2010  June 30, 2009
                                              -------------  -------------
Cash flows from operating activities:
  Net income (loss)                           $      (2,696) $       5,008
  Adjustments to reconcile net income (loss)
   to net cash provided by (used in)
   operating activities:
    Depreciation                                      2,974          3,288
    Amortization                                      9,477          9,840
    Service parts lower of cost or market
     adjustment                                       4,458          3,026
    Gain on debt extinguishment                          --        (13,077)
    Deferred income taxes                               156           (146)
    Share-based compensation                          3,042          2,138
    Changes in assets and liabilities:
      Accounts receivable, net                       (2,152)        19,342
      Manufacturing inventories, net                 (3,204)         4,183
      Service parts inventories, net                   (321)         1,845
      Accounts payable                               (4,559)         5,690
      Accrued warranty                                  (69)          (544)
      Deferred revenue                              (15,185)         5,078
      Accrued restructuring charges                  (1,351)           (32)
      Accrued compensation                           (4,136)        (3,712)
      Income taxes payable                             (623)        (1,714)
      Other assets and liabilities                   (1,520)        (7,047)
                                              -------------  -------------
Net cash provided by (used in) operating
 activities                                         (15,709)        33,166
Cash flows from investing activities:
  Purchases of property and equipment                (2,193)        (1,916)
  Decrease in restricted cash                            72             16
  Return of principal from other investments             95             --
                                              -------------  -------------
Net cash used in investing activities                (2,026)        (1,900)
Cash flows from financing activities:
  Borrowings of long-term debt, net                      --         73,872
  Repayments of long-term debt                         (471)       (40,521)
  Repayments of convertible subordinated debt            --        (74,104)
  Payment of taxes due upon vesting of
   restricted stock                                    (429)           (57)
  Proceeds from issuance of common stock              1,037             --
                                              -------------  -------------
Net cash provided by (used in) financing
 activities                                             137        (40,810)
Effect of exchange rate changes on cash and
 cash equivalents                                       (61)           163
Net decrease in cash and cash equivalents           (17,659)        (9,381)
Cash and cash equivalents at beginning of
 period                                             114,947         85,532
                                              -------------  -------------
Cash and cash equivalents at end of period    $      97,288  $      76,151
                                              =============  =============

Contact:
Brad Cohen
Public Relations
Quantum Corp.
(408) 944-4044
brad.cohen@quantum.com

Christi Lee
Investor Relations
Quantum Corp.
(408) 944-4450
IR@quantum.com

SOURCE: Quantum Corporation