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Revenue Sequentially Increased to $95.3 Million;
Strong Demand Offset by Continued Supply Chain Constraints

SAN JOSE, Calif. — February 9, 2022 — Quantum Corporation (NASDAQ: QMCO) announced today financial results for its fiscal third quarter ended December 31, 2021.

Third Quarter Fiscal 2022 Financial Summary

•Revenue increased 2% sequentially to $95.3 million.
•Backlog reached a record $62 million, compared to $50.0 million in the prior quarter.
•Number of subscription customers grew 30% sequentially and more than 98% year-over-year.

Jamie Lerner, Chairman and CEO, Quantum commented, "Although the current supply constraints are limiting the magnitude of our near-term revenue growth, demand in the third quarter continued to remain near record levels, with bookings exceeding revenue for the fifth consecutive quarter. We also continued to make notable progress on our transformation with subscription revenue increasing greater than 190% and the number of subscription customers growing more than 98% year-over-year. Our integration of Pivot3 and EnCloudEn continues to see positive momentum with both product integration and cross-selling opportunities with other Quantum storage-based solutions driving expanding opportunities in the video surveillance market.

“Our business and customer order momentum remains at historically high levels, demonstrated by another quarter of record backlog. However, given the continued pressure on revenues due to supply chain constraints, combined with the increasing supply chain cost environment, we are immediately implementing a series of cost reduction measures, along with pricing increases, across our product categories. We continue to work closely with our suppliers to secure the inventory necessary in the coming quarters to meet the growing customer demand.”

Third Quarter Fiscal 2022 vs. Prior Quarter

Revenue for the third quarter fiscal 2022 was $95.3 million, representing an increase of 2.3% sequentially from $93.2 million last quarter. Gross profit in the third quarter of fiscal 2022 was $35.2 million, or 37% of revenue, compared to $38.4 million, or 41% of revenue, in the prior quarter.

Total operating expenses in the third quarter of fiscal 2022 were $42.4 million, or 45% of revenue, compared to $39.3 million, or 42% of revenue, in the prior quarter. Selling, general and administrative expenses were $27.3 million in the quarter, compared to $26.9 million in the second fiscal quarter 2022. Research and development expenses were $14.6 million in the third quarter of fiscal 2022, compared to $12.4 million last quarter.

GAAP net loss in the third quarter of fiscal 2022 was $11.1 million, or ($0.19) per share, compared to a net loss of $9.3 million, or ($0.16) per share, in the second fiscal quarter 2022, which included a debt extinguishment charge of $15 million, partially offset by a gain of $10 million for the forgiveness on the PPP loan. Excluding stock compensation, restructuring charges and other non-recurring costs, non-GAAP adjusted loss in the third fiscal quarter of 2022 was $4.6 million, or $0.07 per diluted share, compared to adjusted net income of $0.1 million, or $0.00 per diluted share, last quarter.

Adjusted EBITDA in the third quarter of fiscal 2022 was $0.8 million, compared to $5.3 million in the prior quarter.

For a full reconciliation of GAAP to non-GAAP financial results and additional cautionary language about the use of non-GAAP financial measures, please see the financial reconciliation tables below.

Balance Sheet and Liquidity



•Cash and cash equivalents including restricted cash was $4.3 million as of December 31, 2021, compared to $23.2 million as of September 30, 2021.
•Outstanding debt as of December 31, 2021, was $101.7 million. This compares to $104.5 million of outstanding debt as of September 30, 2021.
•Total interest expense was $2.4 million, compared to $3.1 million for the three months ended September 30, 2021.

Outlook

Given the ongoing supply disruptions, and to a lesser extent historical seasonality, the company expects the following guidance range for the fourth fiscal quarter of 2022:

•Revenues of $92 million, plus or minus $5 million
•Non-GAAP adjusted net loss of ($4 million), plus or minus $1 million
•Non-GAAP adjusted net loss per share of ($0.07), plus or minus $0.02
•Adjusted EBITDA of breakeven, plus or minus $1 million

Conference Call and Webcast

Management will host a live conference call today, February 9, 2022, at 5:00 p.m. ET (2:00 p.m. PT) to discuss these results. The conference call will be accessible by dialing 866-424-3436 (U.S. Toll-Free) or +1-201-689-8058 (International) and entering pass code 13725679. This conference call will be broadcast live over the Internet with a slide presentation and can be accessed by all interested parties on the investor relations section of the Company's website at http://investors.quantum.com under the events and presentations tab.

A telephone replay of the conference call will be available approximately two hours after the conference call and will be available through February 16, 2022. To access the replay dial 1-877-660-6853 and enter the pass code 13725679 at the prompt. International callers should dial +1-201-612-7415 and enter the same passcode. Following the conclusion of the live call, a replay of the webcast will be available on the Company's website for at least 90 days.

About Quantum

Quantum technology, software, and services provide the solutions that today's organizations need to make video and other unstructured data smarter – so their data works for them and not the other way around. With over 40 years of innovation, Quantum's end-to-end platform is uniquely equipped to orchestrate, protect, and enrich data across its lifecycle, providing enhanced intelligence and actionable insights. Leading organizations in cloud services, entertainment, government, research, education, transportation, and enterprise IT trust Quantum to bring their data to life, because data makes life better, safer, and smarter. Quantum is listed on Nasdaq (QMCO) and the Russell 2000® Index. For more information visit www.quantum.com.

Quantum and the Quantum logo are registered trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners.

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results; that our newly introduced products will drive a growing contribution of recurring revenue and deliver higher margins, while also increasing the total addressable market of our solutions; our expectations to continue our operational execution and to gain incremental traction across our market verticals, including with our leading hyperscale and global web scale customers, statements about our backlog and the implication that this backlog will translate into future revenue; the trend in our


underlying business remaining robust; continued progress in our business transformation; the anticipated impact and benefits of our acquisition of Pivot3’s video surveillance portfolio and assets; the anticipated impact and benefits of the refinancing of our outstanding debt; and the Company’s position for long-term sustainable growth and profitability.

These forward-looking statements may be identified by the use of terms and phrases such as “anticipates”, “believes”, “can”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “plans”, “projects”, “targets”, “will”, and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters and other statements regarding matters that are not historical are forward-looking statements. Investors are cautioned that these forward-looking statements relate to future events or our future performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: risks related to the need to address the many challenges facing our business; the potential impact of the COVID-19 pandemic on our business, including potential disruptions to our supply chain, employees, operations, sales and overall market conditions; the competitive pressures we face; risks associated with executing our strategy; the distribution of our products and the delivery of our services effectively; our ability to integrate the business, products, employees and other aspects of Pivot3’s video surveillance business; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; estimates and assumptions related to the cost (including any possible disruption of our business) and the anticipated benefits of the transformation and restructuring plans; the outcome of any claims and disputes; and other risks that are described herein, including but not limited to the items discussed in “Risk Factors” in our filings with the Securities and Exchange Commission, including our Form 10-K filed with the Securities and Exchange Committee on May 26, 2021 and our Form 10-Q filed on February 9, 2022. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law or regulation.

Investor Relations Contacts:
Shelton Group
Jeffrey Schreiner
P: 512-243-8976
E: sheltonir@sheltongroup.com




QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
December 31, 2021March 31, 2021
Assets
Current assets:
Cash and cash equivalents$4,004 $27,430 
Restricted cash331 707 
Accounts receivable, net of allowance for doubtful accounts of $347 and $406
66,070 73,102 
Manufacturing inventories33,912 24,467 
Service parts inventories22,532 23,421 
Other current assets14,082 6,939 
Total current assets140,931 156,066 
Property and equipment, net 13,020 10,051 
Intangible assets, net 10,738 5,037 
Goodwill 10,262 3,466 
Restricted cash— 5,000 
Right-of-use assets, net3,483 9,383 
Other long-term assets9,202 5,921 
Total assets$187,636 $194,924 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$42,041 $35,245 
Deferred revenue78,115 84,027 
Accrued restructuring charges597 580 
Long-term debt, current portion3,750 1,850 
Accrued compensation16,193 19,214 
Other accrued liabilities15,451 18,174 
Total current liabilities156,147 159,090 
Deferred revenue41,190 36,126 
Long-term debt, net of current portion97,928 90,890 
Operating lease liabilities2,714 8,005 
Other long-term liabilities12,440 13,058 
Total liabilities310,419 307,169 
Stockholders' deficit
Preferred stock, 20,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.01 par value; 125,000 shares authorized; 59,816 and 56,915 shares issued and outstanding
599 570 
Additional paid-in capital640,839 626,664 
Accumulated deficit(763,089)(738,623)
Accumulated other comprehensive loss(1,132)(856)
Total stockholders’ deficit(122,783)(112,245)
Total liabilities and stockholders’ deficit$187,636 $194,924 




QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts, unaudited)

Three Months Ended December 31,Nine Months Ended December 31,
2021202020212020
Revenue:
   Product$58,522 $63,021 $165,308 $153,557 
   Service33,162 31,169 100,352 93,049 
   Royalty3,660 3,833 11,963 10,543 
      Total revenue95,344 98,023 277,623 257,149 
Cost of revenue:
   Product45,118 43,311 124,982 108,691 
   Service15,016 12,433 41,764 36,593 
      Total cost of revenue60,134 55,744 166,746 145,284 
Gross profit35,210 42,279 110,877 111,865 
Operating expenses:
   Research and development14,607 9,589 38,287 29,983 
   Sales and marketing16,714 15,294 46,128 40,019 
   General and administrative10,538 11,103 33,830 32,928 
   Restructuring charges576 200 850 2,837 
      Total operating expenses42,435 36,186 119,095 105,767 
Income (loss) from operations(7,225)6,093 (8,218)6,098 
Other expense, net(150)(698)(223)(1,395)
Interest expense(2,431)(7,808)(9,387)(21,823)
Loss on debt extinguishment, net— — (4,960)— 
Net loss before income taxes(9,806)(2,413)(22,788)(17,120)
Income tax provision1,254 256 1,678 877 
Net loss$(11,060)$(2,669)$(24,466)$(17,997)
Net loss per share - basic and diluted$(0.19)$(0.07)$(0.42)$(0.45)
Weighted average shares - basic and diluted59,486 40,927 58,399 40,374 
Net loss$(11,060)$(2,669)$(24,466)$(17,997)
Foreign currency translation adjustments, net(37)975 (276)1,984 
Total comprehensive loss$(11,097)$(1,694)$(24,742)$(16,013)








QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Nine Months Ended December 31,
20212020
Operating activities
Net loss$(24,466)$(17,997)
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization6,795 3,898 
Amortization of debt issuance costs1,981 4,906 
Long-term debt related costs— 167 
Provision for product and service inventories4,016 4,764 
Stock-based compensation10,580 6,428 
Paycheck Protection Program loan forgiveness(10,000)— 
Non-cash loss on debt extinguishment8,471 — 
Other282 2,113 
Changes in assets and liabilities:
Accounts receivable, net7,008 1,342 
Manufacturing inventories(10,672)(7,732)
Service parts inventories(2,281)(4,559)
Accounts payable 5,369 (7,022)
Accrued restructuring charges17 210 
Accrued compensation(3,021)4,268 
Deferred revenue(8,598)(9,727)
Other current assets(7,047)846 
Other non-current assets(1,148)133 
Other current liabilities(3,350)(2,432)
Other non-current liabilities(617)130 
Net cash used in operating activities(26,681)(20,264)
Investing activities
Purchases of property and equipment(3,971)(4,665)
Business acquisition, net of cash acquired(7,808)(2,636)
Net cash used in investing activities(11,779)(7,301)
Financing activities
Borrowings of long-term debt, net of debt issuance costs94,961 19,400 
Repayments of long-term debt(93,677)— 
Borrowings of credit facility207,563 232,663 
Repayments of credit facility(200,007)(229,847)
Borrowings of payment protection program— 10,000 
Proceeds from issuance of common stock806 539 
Net cash provided by financing activities9,646 32,755 
Effect of exchange rate changes on cash, cash equivalents and restricted cash12 (62)
Net change in cash, cash equivalents and restricted cash (28,802)5,128 
Cash, cash equivalents, and restricted cash at beginning of period33,137 12,270 
Cash, cash equivalents, and restricted cash at end of period $4,335 $17,398 
Cash, Cash Equivalents and Restricted Cash at end of period
Cash and cash equivalents$4,004 $11,632 
Restricted cash, current331 766 
Restricted cash, long-term— 5,000 
Cash, cash equivalents and restricted cash at the end of period$4,335 $17,398 







NON-U.S. GAAP FINANCIAL MEASURES

To provide investors with additional information regarding our financial results, we have presented Adjusted EBITDA and Adjusted Net Income (Loss), non-U.S. GAAP financial measures defined below.

Adjusted EBITDA is a non-U.S. GAAP financial measure defined by us as net loss before interest expense, net, provision for income taxes, depreciation and amortization expense, stock-based compensation expense, restructuring charges, and other non-recurring expenses.

Adjusted Net Income (Loss) is a non-U.S. GAAP financial measure defined by us as net loss before restructuring charges, stock-based compensation expense, and other non-recurring (income) expenses. The Company calculates Adjusted Net Income (Loss) per Basic and Diluted share using the Company’s above-referenced definition of Adjusted Net Income (Loss).

We have provided below a reconciliation of Adjusted EBITDA and Adjusted Net Income (Loss) to Net Income (Loss), the most directly comparable U.S. GAAP financial measure. We have presented Adjusted EBITDA because it is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business performance. We believe Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Basic and Diluted Share serve as appropriate measures to be used in evaluating the performance of our business and help our investors better compare our operating performance over multiple periods. Accordingly, we believe that Adjusted EBITDA and Adjusted Net Income (Loss) provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Our use of Adjusted EBITDA and Adjusted Net Income (Loss) have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are as follows:

•Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•Adjusted EBITDA does not reflect: (1) interest and tax payments that may represent a reduction in cash available to us; (2) capital expenditures, future requirements for capital expenditures or contractual commitments; (3) changes in, or cash requirements for, working capital needs; (4) the potentially dilutive impact of stock-based compensation expense; (5) potential future costs related to our long-term debt; (6) potential future restructuring expenses; (7) potential future costs related to business acquisitions; (8) gain (loss) on debt extinguishment, or (9) and acquisition-related amortization of intangibles assets from business combinations.
•Adjusted Net Income (Loss) does not reflect: (1) potential future restructuring activities; (2) the potentially dilutive impact of stock-based compensation expense; (3) potential future costs related to our long-term debt; (4) potential future costs related to business acquisitions; (5) gain (loss) on debt extinguishment, or (6) acquisition-related amortization of intangibles assets from business combinations.

Other companies, including companies in our industry, may calculate Adjusted EBITDA, Adjusted Net Income (Loss) or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA and Adjusted Net Income (Loss) along with other U.S. GAAP-based financial performance measures, including various cash flow metrics and our U.S. GAAP financial results.

The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Net Income (Loss) (dollars in thousands):



Three Months Ended December 31,Nine Months Ended December 31,
2021202020212020
Net loss$(11,060)$(2,669)$(24,466)$(17,997)
Interest expense, net2,431 7,808 9,387 21,823 
Provision for income taxes1,254 256 1,678 877 
Depreciation expense1,627 1,250 4,658 3,801 
Stock-based compensation expense4,307 1,878 10,580 6,428 
Restructuring charges576 200 850 2,837 
Loss on extinguishment of Senior Secured Term Loan— — 14,960 — 
Gain on PPP loan forgiveness— — (10,000)— 
Amortization of acquisition related intangible assets1,201 97 2,137 97 
Acquisition-related costs411 393 1,361 393 
Long-term debt related costs11 208 263 1,377 
Adjusted EBITDA$758 $9,421 $11,408 $19,636 
 
The following is a reconciliation of Adjusted Net Income to the most comparable U.S. GAAP financial measure, Net Income (Loss) (in thousands):
Three Months Ended December 31,Nine Months Ended December 31,
2021202020212020
Net loss$(11,060)$(2,669)$(24,466)$(17,997)
Stock-based compensation4,307 1,878 10,580 6,428 
Restructuring charges576 200 850 2,837 
Loss on extinguishment of Senior Secured Term Loan— — 14,960 — 
Gain on PPP loan forgiveness— — (10,000)— 
Amortization of acquisition related intangible assets1,201 — 2,137 — 
Acquisition-related costs411 393 1,361 393 
Long-term debt related costs11 208 263 1,377 
   Adjusted net income (loss)$(4,554)$10 $(4,315)$(6,962)
   Adjusted Net Income (Loss) per share:
      Basic$(0.08)$— $(0.07)$(0.17)
      Diluted$(0.07)$— $(0.06)$(0.15)
   Weighted average shares outstanding:
      Basic59,486 40,927 58,399 40,374 
      Diluted68,288 49,238 68,210 47,931