QUANTUM CORP /DE/00007092832022FYFALSEP1YP2YP1Yhttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesCurrentP2YP2YP1Y00007092832021-04-012022-03-3100007092832021-09-30iso4217:USD00007092832022-06-01xbrli:shares00007092832022-03-3100007092832021-03-31iso4217:USDxbrli:shares0000709283us-gaap:ProductMember2021-04-012022-03-310000709283us-gaap:ProductMember2020-04-012021-03-310000709283us-gaap:ProductMember2019-04-012020-03-310000709283us-gaap:ServiceMember2021-04-012022-03-310000709283us-gaap:ServiceMember2020-04-012021-03-310000709283us-gaap:ServiceMember2019-04-012020-03-310000709283us-gaap:RoyaltyMember2021-04-012022-03-310000709283us-gaap:RoyaltyMember2020-04-012021-03-310000709283us-gaap:RoyaltyMember2019-04-012020-03-3100007092832020-04-012021-03-3100007092832019-04-012020-03-3100007092832020-03-3100007092832019-03-310000709283us-gaap:AccountsPayableMember2021-04-012022-03-310000709283us-gaap:AccountsPayableMember2020-04-012021-03-310000709283us-gaap:AccountsPayableMember2019-04-012020-03-310000709283us-gaap:AccruedLiabilitiesMember2021-04-012022-03-310000709283us-gaap:AccruedLiabilitiesMember2020-04-012021-03-310000709283us-gaap:AccruedLiabilitiesMember2019-04-012020-03-310000709283us-gaap:CommonStockMember2019-03-310000709283us-gaap:AdditionalPaidInCapitalMember2019-03-310000709283us-gaap:RetainedEarningsMember2019-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310000709283us-gaap:RetainedEarningsMember2019-04-012020-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012020-03-310000709283us-gaap:CommonStockMember2019-04-012020-03-310000709283us-gaap:AdditionalPaidInCapitalMember2019-04-012020-03-310000709283us-gaap:CommonStockMember2020-03-310000709283us-gaap:AdditionalPaidInCapitalMember2020-03-310000709283us-gaap:RetainedEarningsMember2020-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310000709283us-gaap:RetainedEarningsMember2020-04-012021-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012021-03-310000709283us-gaap:CommonStockMember2020-04-012021-03-310000709283us-gaap:AdditionalPaidInCapitalMember2020-04-012021-03-310000709283us-gaap:CommonStockMember2021-03-310000709283us-gaap:AdditionalPaidInCapitalMember2021-03-310000709283us-gaap:RetainedEarningsMember2021-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000709283us-gaap:RetainedEarningsMember2021-04-012022-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012022-03-310000709283us-gaap:CommonStockMember2021-04-012022-03-310000709283us-gaap:AdditionalPaidInCapitalMember2021-04-012022-03-310000709283us-gaap:CommonStockMember2022-03-310000709283us-gaap:AdditionalPaidInCapitalMember2022-03-310000709283us-gaap:RetainedEarningsMember2022-03-310000709283us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000709283us-gaap:SubsequentEventMemberqtm:RightsOfferingMember2022-04-222022-04-220000709283srt:MinimumMember2021-04-012022-03-310000709283srt:MaximumMember2021-04-012022-03-310000709283us-gaap:MachineryAndEquipmentMembersrt:MinimumMember2021-04-012022-03-310000709283us-gaap:MachineryAndEquipmentMembersrt:MaximumMember2021-04-012022-03-310000709283us-gaap:ComputerEquipmentMembersrt:MinimumMember2021-04-012022-03-310000709283us-gaap:ComputerEquipmentMembersrt:MaximumMember2021-04-012022-03-310000709283us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-04-012022-03-310000709283us-gaap:FurnitureAndFixturesMember2021-04-012022-03-310000709283us-gaap:OfficeEquipmentMember2021-04-012022-03-310000709283us-gaap:SoftwareDevelopmentMember2021-04-012022-03-310000709283us-gaap:CustomerConcentrationRiskMemberqtm:CustomerOneMemberus-gaap:AccountsReceivableMember2022-03-31qtm:customer0000709283us-gaap:CustomerConcentrationRiskMemberqtm:CustomerOneMemberus-gaap:AccountsReceivableMember2021-04-012022-03-31xbrli:pure0000709283us-gaap:CustomerConcentrationRiskMemberqtm:CustomerTwoMemberus-gaap:AccountsReceivableMember2021-03-310000709283us-gaap:CustomerConcentrationRiskMemberqtm:CustomerTwoMemberus-gaap:AccountsReceivableMember2020-04-012021-03-31qtm:segmentqtm:region0000709283country:US2022-03-310000709283country:US2021-03-310000709283us-gaap:NonUsMember2022-03-310000709283us-gaap:NonUsMember2021-03-310000709283us-gaap:ScenarioAdjustmentMember2021-10-310000709283qtm:PrimaryStorageSystemsMembersrt:AmericasMember2021-04-012022-03-310000709283qtm:PrimaryStorageSystemsMembersrt:AmericasMember2020-04-012021-03-310000709283qtm:PrimaryStorageSystemsMembersrt:AmericasMember2019-04-012020-03-310000709283srt:AmericasMemberqtm:SecondaryStorageSystemsMember2021-04-012022-03-310000709283srt:AmericasMemberqtm:SecondaryStorageSystemsMember2020-04-012021-03-310000709283srt:AmericasMemberqtm:SecondaryStorageSystemsMember2019-04-012020-03-310000709283qtm:DeviceandMediaMembersrt:AmericasMember2021-04-012022-03-310000709283qtm:DeviceandMediaMembersrt:AmericasMember2020-04-012021-03-310000709283qtm:DeviceandMediaMembersrt:AmericasMember2019-04-012020-03-310000709283us-gaap:ServiceMembersrt:AmericasMember2021-04-012022-03-310000709283us-gaap:ServiceMembersrt:AmericasMember2020-04-012021-03-310000709283us-gaap:ServiceMembersrt:AmericasMember2019-04-012020-03-310000709283srt:AmericasMember2021-04-012022-03-310000709283srt:AmericasMember2020-04-012021-03-310000709283srt:AmericasMember2019-04-012020-03-310000709283qtm:PrimaryStorageSystemsMemberus-gaap:EMEAMember2021-04-012022-03-310000709283qtm:PrimaryStorageSystemsMemberus-gaap:EMEAMember2020-04-012021-03-310000709283qtm:PrimaryStorageSystemsMemberus-gaap:EMEAMember2019-04-012020-03-310000709283us-gaap:EMEAMemberqtm:SecondaryStorageSystemsMember2021-04-012022-03-310000709283us-gaap:EMEAMemberqtm:SecondaryStorageSystemsMember2020-04-012021-03-310000709283us-gaap:EMEAMemberqtm:SecondaryStorageSystemsMember2019-04-012020-03-310000709283qtm:DeviceandMediaMemberus-gaap:EMEAMember2021-04-012022-03-310000709283qtm:DeviceandMediaMemberus-gaap:EMEAMember2020-04-012021-03-310000709283qtm:DeviceandMediaMemberus-gaap:EMEAMember2019-04-012020-03-310000709283us-gaap:EMEAMemberus-gaap:ServiceMember2021-04-012022-03-310000709283us-gaap:EMEAMemberus-gaap:ServiceMember2020-04-012021-03-310000709283us-gaap:EMEAMemberus-gaap:ServiceMember2019-04-012020-03-310000709283us-gaap:EMEAMember2021-04-012022-03-310000709283us-gaap:EMEAMember2020-04-012021-03-310000709283us-gaap:EMEAMember2019-04-012020-03-310000709283qtm:PrimaryStorageSystemsMembersrt:AsiaPacificMember2021-04-012022-03-310000709283qtm:PrimaryStorageSystemsMembersrt:AsiaPacificMember2020-04-012021-03-310000709283qtm:PrimaryStorageSystemsMembersrt:AsiaPacificMember2019-04-012020-03-310000709283srt:AsiaPacificMemberqtm:SecondaryStorageSystemsMember2021-04-012022-03-310000709283srt:AsiaPacificMemberqtm:SecondaryStorageSystemsMember2020-04-012021-03-310000709283srt:AsiaPacificMemberqtm:SecondaryStorageSystemsMember2019-04-012020-03-310000709283qtm:DeviceandMediaMembersrt:AsiaPacificMember2021-04-012022-03-310000709283qtm:DeviceandMediaMembersrt:AsiaPacificMember2020-04-012021-03-310000709283qtm:DeviceandMediaMembersrt:AsiaPacificMember2019-04-012020-03-310000709283srt:AsiaPacificMemberus-gaap:ServiceMember2021-04-012022-03-310000709283srt:AsiaPacificMemberus-gaap:ServiceMember2020-04-012021-03-310000709283srt:AsiaPacificMemberus-gaap:ServiceMember2019-04-012020-03-310000709283srt:AsiaPacificMember2021-04-012022-03-310000709283srt:AsiaPacificMember2020-04-012021-03-310000709283srt:AsiaPacificMember2019-04-012020-03-310000709283qtm:PrimaryStorageSystemsMember2021-04-012022-03-310000709283qtm:PrimaryStorageSystemsMember2020-04-012021-03-310000709283qtm:PrimaryStorageSystemsMember2019-04-012020-03-310000709283qtm:SecondaryStorageSystemsMember2021-04-012022-03-310000709283qtm:SecondaryStorageSystemsMember2020-04-012021-03-310000709283qtm:SecondaryStorageSystemsMember2019-04-012020-03-310000709283qtm:DeviceandMediaMember2021-04-012022-03-310000709283qtm:DeviceandMediaMember2020-04-012021-03-310000709283qtm:DeviceandMediaMember2019-04-012020-03-310000709283qtm:SquareBoxSystemsLimitedMember2020-12-122020-12-120000709283us-gaap:CommonStockMemberqtm:SquareBoxSystemsLimitedMember2020-12-122020-12-120000709283qtm:SquareBoxSystemsLimitedMember2021-12-122021-12-120000709283qtm:SquareBoxSystemsLimitedMembersrt:ScenarioForecastMember2022-12-122022-12-120000709283qtm:SquareBoxSystemsLimitedMember2020-12-120000709283qtm:Pivot3IncMember2021-07-202021-07-2000007092832021-07-200000709283qtm:Pivot3IncMemberus-gaap:DevelopedTechnologyRightsMember2021-07-200000709283qtm:Pivot3IncMemberus-gaap:DevelopedTechnologyRightsMember2021-07-202021-07-200000709283us-gaap:CustomerListsMemberqtm:Pivot3IncMember2021-07-200000709283us-gaap:CustomerListsMemberqtm:Pivot3IncMember2021-07-202021-07-200000709283qtm:Pivot3IncMember2021-07-200000709283qtm:EnCloudEnMemberus-gaap:DevelopedTechnologyRightsMember2021-10-012021-10-310000709283qtm:EnCloudEnMemberus-gaap:DevelopedTechnologyRightsMember2021-10-310000709283qtm:ManufacturedFinishedGoodsMember2022-03-310000709283qtm:ManufacturedFinishedGoodsMember2021-03-310000709283qtm:DistributorInventoryMember2022-03-310000709283qtm:DistributorInventoryMember2021-03-310000709283us-gaap:MachineryAndEquipmentMember2022-03-310000709283us-gaap:MachineryAndEquipmentMember2021-03-310000709283us-gaap:LeaseholdImprovementsMember2022-03-310000709283us-gaap:LeaseholdImprovementsMember2021-03-310000709283us-gaap:FurnitureAndFixturesMember2022-03-310000709283us-gaap:FurnitureAndFixturesMember2021-03-310000709283us-gaap:DevelopedTechnologyRightsMember2022-03-310000709283us-gaap:DevelopedTechnologyRightsMember2021-03-310000709283us-gaap:CustomerListsMember2022-03-310000709283us-gaap:CustomerListsMember2021-03-310000709283qtm:SeniorSecuredTermLoanMemberus-gaap:SecuredDebtMember2022-03-310000709283qtm:SeniorSecuredTermLoanMemberus-gaap:SecuredDebtMember2021-03-310000709283qtm:TermLoanMemberus-gaap:SecuredDebtMember2022-03-310000709283qtm:TermLoanMemberus-gaap:SecuredDebtMember2021-03-310000709283qtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2022-03-310000709283qtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2021-03-310000709283qtm:PaycheckProtectionProgramLoanCARESActMemberus-gaap:NotesPayableOtherPayablesMember2022-03-310000709283qtm:PaycheckProtectionProgramLoanCARESActMemberus-gaap:NotesPayableOtherPayablesMember2021-03-310000709283qtm:SeniorSecuredTermLoanMemberus-gaap:SecuredDebtMember2021-02-112021-02-110000709283qtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-050000709283qtm:CovenantPeriodOneMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-050000709283qtm:CovenantPeriodTwoMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-050000709283qtm:SeniorSecuredTermLoanMemberus-gaap:SecuredDebtMember2021-08-050000709283qtm:SeniorSecuredTermLoanMember2021-08-052021-08-050000709283qtm:PrepaymentPenaltiesMemberqtm:SeniorSecuredTermLoanMember2021-08-052021-08-050000709283qtm:LegalFeesMemberqtm:SeniorSecuredTermLoanMember2021-08-052021-08-050000709283qtm:SeniorSecuredTermLoanMember2021-08-050000709283qtm:TermLoanMemberus-gaap:BaseRateMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283us-gaap:FederalFundsEffectiveSwapRateMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283qtm:OneMonthLondonInterbankOfferedRateLIBORMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283us-gaap:PrimeRateMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283us-gaap:LondonInterbankOfferedRateLIBORMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283qtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-08-052021-08-050000709283qtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-04-012022-03-310000709283qtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2021-09-300000709283us-gaap:LondonInterbankOfferedRateLIBORMemberqtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2021-12-312021-12-310000709283us-gaap:LondonInterbankOfferedRateLIBORMemberqtm:AmendedRevolvingCreditAgreementWithPNCMembersrt:MinimumMemberus-gaap:LineOfCreditMember2022-03-152022-03-150000709283us-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMemberqtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2022-03-152022-03-150000709283qtm:DomesticRateAndSwingLineLoansMemberqtm:OvernightBankFundingRateMemberus-gaap:LineOfCreditMember2021-12-312021-12-310000709283qtm:DomesticRateAndSwingLineLoansMembersrt:MinimumMemberus-gaap:LineOfCreditMemberqtm:DailyLondonInterbankOfferedRateMember2021-12-312021-12-310000709283us-gaap:LondonInterbankOfferedRateLIBORMemberqtm:DomesticRateAndSwingLineLoansMembersrt:MaximumMemberus-gaap:LineOfCreditMember2021-12-312021-12-310000709283qtm:DomesticRateAndSwingLineLoansMemberqtm:PNCCreditAgreementMembersrt:MinimumMember2022-03-152022-03-150000709283qtm:DomesticRateAndSwingLineLoansMembersrt:MaximumMemberqtm:PNCCreditAgreementMember2022-03-152022-03-150000709283qtm:AmendedRevolvingCreditAgreementWithPNCMembersrt:MinimumMemberus-gaap:LineOfCreditMember2022-03-152022-03-150000709283srt:MaximumMemberqtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2022-03-152022-03-150000709283us-gaap:LondonInterbankOfferedRateLIBORMemberqtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2021-09-300000709283qtm:DomesticRateAndSwingLineLoansMemberus-gaap:LineOfCreditMember2021-09-300000709283qtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-09-300000709283qtm:TermLoanMemberqtm:TermLoanMembersrt:MinimumMember2021-09-300000709283qtm:TermLoanMembersrt:MaximumMemberqtm:TermLoanMember2021-09-300000709283qtm:TermLoanMember2022-03-310000709283qtm:CovenantPeriodTwoMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2022-03-310000709283qtm:CovenantPeriodTwoMemberqtm:TermLoanMemberqtm:TermLoanCreditAgreementMember2021-04-012022-03-310000709283qtm:AmendedPNCCreditFacilityMember2022-03-310000709283qtm:PaycheckProtectionProgramLoanCARESActMemberus-gaap:NotesPayableOtherPayablesMember2020-04-130000709283qtm:PaycheckProtectionProgramLoanCARESActMemberus-gaap:NotesPayableOtherPayablesMember2021-04-012022-03-310000709283qtm:SecondaryOfferingMember2021-02-082021-02-080000709283qtm:LongTermIncentivePlan2012Member2021-04-012022-03-310000709283qtm:LongTermIncentivePlan2012Member2022-03-310000709283qtm:StockOptionsPerformanceShareUnitsRestrictedSharesMemberqtm:LongTermIncentivePlan2012Member2022-03-310000709283qtm:LongTermIncentivePlan2012Memberus-gaap:ShareBasedPaymentArrangementEmployeeMember2021-04-012022-03-310000709283us-gaap:ShareBasedPaymentArrangementNonemployeeMemberqtm:LongTermIncentivePlan2012Member2021-04-012022-03-310000709283qtm:InducementPlan2021Memberus-gaap:EmployeeStockOptionMember2021-02-012021-02-010000709283us-gaap:RestrictedStockUnitsRSUMemberqtm:InducementPlan2021Member2021-02-012021-02-010000709283qtm:InducementPlan2021Memberus-gaap:EmployeeStockOptionMembersrt:MinimumMember2021-02-012021-02-010000709283us-gaap:RestrictedStockUnitsRSUMemberqtm:InducementPlan2021Membersrt:MinimumMember2021-02-012021-02-010000709283srt:MaximumMemberqtm:InducementPlan2021Memberus-gaap:EmployeeStockOptionMember2021-02-012021-02-010000709283us-gaap:RestrictedStockUnitsRSUMembersrt:MaximumMemberqtm:InducementPlan2021Member2021-02-012021-02-010000709283qtm:EmployeeStockPurchasePlanMember2021-04-012022-03-310000709283qtm:EmployeeStockPurchasePlanMember2021-03-310000709283qtm:EmployeeStockPurchasePlanMember2020-03-310000709283qtm:EmployeeStockPurchasePlanMember2020-04-012021-03-310000709283qtm:EmployeeStockPurchasePlanMember2022-03-310000709283qtm:EmployeeStockPurchasePlanMember2019-04-012020-03-310000709283qtm:EmployeeStockPurchasePlanMembersrt:MinimumMember2021-04-012022-03-310000709283qtm:EmployeeStockPurchasePlanMembersrt:MaximumMember2021-04-012022-03-310000709283qtm:EmployeeStockPurchasePlanMembersrt:MinimumMember2020-04-012021-03-310000709283qtm:EmployeeStockPurchasePlanMembersrt:MaximumMember2020-04-012021-03-310000709283qtm:MarketPerformanceSharesPSUsMember2021-04-012022-03-310000709283qtm:MarketPerformanceSharesPSUsMember2020-04-012021-03-310000709283qtm:MarketPerformanceSharesPSUsMember2019-04-012020-03-310000709283qtm:MarketPerformanceSharesPSUsMembersrt:MinimumMember2021-04-012022-03-310000709283qtm:MarketPerformanceSharesPSUsMembersrt:MaximumMember2021-04-012022-03-310000709283qtm:PerformancePSUsMember2021-04-012022-03-310000709283qtm:PerformancePSUsMember2020-04-012021-03-310000709283qtm:PerformancePSUsMember2019-04-012020-03-310000709283us-gaap:PerformanceSharesMember2021-03-310000709283us-gaap:PerformanceSharesMember2021-04-012022-03-310000709283us-gaap:PerformanceSharesMember2022-03-310000709283qtm:MarketPerformanceSharesPSUsMember2022-03-310000709283qtm:PerformancePSUsMember2022-03-310000709283us-gaap:PerformanceSharesMember2020-04-012021-03-310000709283us-gaap:PerformanceSharesMember2019-04-012020-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2021-04-012022-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2020-04-012021-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2019-04-012020-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2021-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2022-03-310000709283us-gaap:CostOfSalesMember2021-04-012022-03-310000709283us-gaap:CostOfSalesMember2020-04-012021-03-310000709283us-gaap:CostOfSalesMember2019-04-012020-03-310000709283us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012022-03-310000709283us-gaap:ResearchAndDevelopmentExpenseMember2020-04-012021-03-310000709283us-gaap:ResearchAndDevelopmentExpenseMember2019-04-012020-03-310000709283us-gaap:SellingAndMarketingExpenseMember2021-04-012022-03-310000709283us-gaap:SellingAndMarketingExpenseMember2020-04-012021-03-310000709283us-gaap:SellingAndMarketingExpenseMember2019-04-012020-03-310000709283us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012022-03-310000709283us-gaap:GeneralAndAdministrativeExpenseMember2020-04-012021-03-310000709283us-gaap:GeneralAndAdministrativeExpenseMember2019-04-012020-03-310000709283qtm:DecemberTwentyTwentyEightAmendmentsOfWarrantsMember2021-03-310000709283qtm:DecemberTwentyTwentyEightAmendmentsOfWarrantsMember2022-03-310000709283qtm:DecemberJuneTwoThousandThirtyAmendmentsOfWarrantsMember2022-03-310000709283qtm:SeniorSecuredTermLoanMember2020-06-160000709283us-gaap:StockCompensationPlanMember2021-04-012022-03-310000709283us-gaap:StockCompensationPlanMember2020-04-012021-03-310000709283us-gaap:StockCompensationPlanMember2019-04-012020-03-310000709283us-gaap:WarrantMember2021-04-012022-03-310000709283us-gaap:WarrantMember2020-04-012021-03-310000709283us-gaap:WarrantMember2019-04-012020-03-310000709283qtm:EmployeeStockPurchasePlanMember2021-04-012022-03-310000709283qtm:EmployeeStockPurchasePlanMember2020-04-012021-03-310000709283qtm:EmployeeStockPurchasePlanMember2019-04-012020-03-310000709283us-gaap:RestrictedStockUnitsRSUMember2021-04-012022-03-310000709283us-gaap:OtherNoncurrentAssetsMember2022-03-310000709283us-gaap:OtherNoncurrentLiabilitiesMember2022-03-310000709283us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberqtm:SeniorSecuredTermLoanMember2021-03-310000709283us-gaap:FairValueInputsLevel2Memberqtm:SeniorSecuredTermLoanMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-03-310000709283us-gaap:CarryingReportedAmountFairValueDisclosureMemberqtm:TermLoanMemberus-gaap:FairValueInputsLevel2Member2022-03-310000709283qtm:TermLoanMemberus-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-03-310000709283us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberqtm:RevolvingCreditAgreementwithPNCMemberus-gaap:LineOfCreditMember2022-03-310000709283us-gaap:FairValueInputsLevel2Memberqtm:RevolvingCreditAgreementwithPNCMemberus-gaap:LineOfCreditMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-03-310000709283us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberqtm:RevolvingCreditAgreementwithPNCMemberus-gaap:LineOfCreditMember2021-03-310000709283us-gaap:FairValueInputsLevel2Memberqtm:RevolvingCreditAgreementwithPNCMemberus-gaap:LineOfCreditMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-03-310000709283us-gaap:SubsequentEventMemberqtm:AmendedRevolvingCreditAgreementWithPNCMemberus-gaap:LineOfCreditMember2022-04-25
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number 001-13449
qtm-20220331_g1.jpg
Quantum Corporation
(Exact name of registrant as specified in its charter)
Delaware94-2665054
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
224 Airport ParkwaySuite 550
San JoseCA95110
(Address of Principal Executive Offices)(Zip Code)

(408)944-4000
Registrant's telephone number, including area code
 
(Former name, former address, and former fiscal year, if changed since last report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par value per shareQMCONasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
¨
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
¨
 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
¨
 No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
Non-accelerated filer  
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o
Yes No
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

As of the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant's common stock held by its non-affiliates, computed by reference to the price at which the common stock was last sold, was $134,585,491.
As of June 1, 2022, there were 101,813,778 shares of Quantum Corporation’s common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
The portions of the registrant's proxy statement to be filed in connection with the Annual Meeting of Stockholders to be held in 2022 have been incorporated by reference into Part III of this Annual Report on Form 10-K.


Table of Contents
QUANTUM CORPORATION

ANNUAL REPORT ON FORM 10-K
For the Year Ended March 31, 2022

Table of Contents
Page
Number
PART I
Item 4.
Mine Safety Disclosures
PART II
Item 9C.
PART III
PART IV
i

Table of Contents
As used in this Annual Report on Form 10-K (this "Annual Report"), the terms "Quantum," "we," "us," and "our" refer to Quantum Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise.

Note Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding COVID-19's anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Item 1A. Moreover, we operate in a competitive and changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations.


3

Table of Contents

PART I
ITEM 1. BUSINESS
Overview
Quantum is a data company with a portfolio of products and services for storing, managing, protecting, archiving, and enriching digital data. We specialize in solutions for video data, images, and other large files because this “unstructured” data represents more than 80% of all data being created, according to leading industry analyst firms. This unstructured data has driven a fundamental shift in the nature of data and the role data plays in every industry. It is exponentially larger than traditional corporate data, contains immense value, and must be captured, protected, and stored for many years, decades, and longer.

We recognized this fundamental shift in the data landscape, and through a series of strategic acquisitions and internal innovation, we have transformed the company to offer end to end solutions for video and unstructured data. Quantum is a leading provider of cold storage infrastructure to the world’s largest hyperscalers. The world’s leading studios, broadcasters, sports teams, and visual effects studios rely on Quantum to create and archive content. The largest airports, hotels, and critical infrastructure rely on Quantum to capture mission-critical video surveillance data. And many of the world’s leading government agencies, research institutions, and well-known brands everywhere rely on Quantum to store, manage, and protect the data that is at the core of digital transformation.

Products and Services

Our portfolio of products and services now includes:

Asset Management and Workflow Orchestration Software to index, analyze, enrich video and image data.
Primary Storage Systems for high-speed data ingest and capture – optimized for video and images with the fastest streaming performance, and highly available and resilient designs.
Secondary Storage Systems for large scale data storage, data and cyber protection, active and deep archives.
A Broad Portfolio of Services including 24x7x365 support services, deployment and consulting services, education services, and Quantum-as-a-Service. Our services are delivered with a combination of expertise and technology, including the MyQuantum Service Delivery Platform, and Cloud-Based Analytics (CBA) AIOps software for proactive remote monitoring.

CatDV Asset Management Platform and Workflow Orchestration Software

CatDV is an agile asset management and workflow orchestration platform that provides powerful asset management, automation, and collaboration tools for any organization that manages large volumes of digital media. The software application indexes and catalogs video files, digital images, audio files, and other types of files. CatDV helps organizations browse their content and streamline their workflows. CatDV can be used with StorNext file storage, with ActiveScale object storage, as well as third party storage.

StorNext High-Performance File System Software

At the core of our high-performance shared storage product line is our StorNext software that enables high-speed ingest, editing, processing and management of digital video and image datasets. Major broadcasters and studios, post-production companies including streaming services, sports franchises, and corporations around the world use StorNext.

StorNext software is both a shared file system and data management platform. StorNext provides fast streaming performance and data access, a shared file storage environment for macOS, Microsoft Windows, and Linux workstations, and intelligent data management to protect data across its lifecycle.

StorNext is sold as software based on a subscription licensing model, runs on standard servers, and is sold with storage arrays that are used within the StorNext environment.
4

Table of Contents

These storage arrays include:

Quantum F-Series: A line of ultra-fast, highly available non-volatile memory express ("NVMe") storage servers for editing, rendering, and processing of video content and other large unstructured datasets.
Quantum H-Series: A line of high-performance storage arrays, offered with either hard disk drives ("HDDs"), solid state drives ("SSDs"), or some combination of the two.
Quantum QXS-Series: A line of high performance storage arrays, offered with either HDD, SSD, or some combination of the two. Customers are now deploying our StorNext file system with a combination of NVMe storage and more traditional SSD and HDD storage to balance cost and performance.

Our StorNext software can also manage data across different types, or pools, of storage, such as public cloud object stores and disk-based object storage systems. StorNext supports a broad range of both private and public object stores to meet customer needs. For customers that archive video and image data for years, StorNext is also integrated with our tape storage, and can assign infrequently used but important data to tape to create a large-scale active archive.

Solutions for Video Surveillance Recording and Retention

We offer a broad portfolio of products designed for the capture and analysis of video surveillance and security. These products include network video recording servers, as well as hyper-converged storage systems for video surveillance management and recording. In addition, we offer appliances designed for video surveillance analytics and to run different types of access control systems.

Quantum ActiveScale™ Object Storage

With the acquisition of the ActiveScale object storage business from Western Digital that was completed in March of 2020, we now offer leading object storage systems for massive-scale, online content repositories such as media archives, genome sequencing data repositories, and big data lakes.

ActiveScale object storage provides high levels of data durability and facilitates the management of many petabytes and billions of objects. ActiveScale object storage software is sold via a subscription licensing model, stores data in object format and uses patented erasure-encoding software to protect data across storage nodes and across multiple geographic sites.

DXi Backup Appliances

DXi backup appliances provide high-performance, scalable storage for backup and multi-site disaster recovery. Advanced deduplication technology maximizes data reduction, replication enables multi-site protection and data recovery, and a high-efficiency design enables customers to maximize backup performance while minimizing data center footprint.

Scalar® Tape Storage

Scalar tape storage systems are low-cost, long-term data storage used by large cloud providers and leading enterprises to archive and preserve digital content for decades. The product line scales from entry-level libraries for small backup environments up to massive petabyte and even exabyte scale archive libraries.

Our tape systems provide storage density, offline secure storage to protect against ransomware and malware, and an intelligent, advanced diagnostics engine designed to reduce downtime and operational expense relative to other tape systems. Our tape systems are used by thousands of enterprises around the world as well as by large cloud service providers.

In addition to our tape systems, we also sell Linear Tape Open ("LTO") tape cartridges as well as standalone LTO tape drives for small business and desktop use.

Global Support and Services, and Warranty

Our global services strategy is an integral component of our total customer solution. Service is typically a significant purchase factor for customers considering long-term storage for archiving and retention or data protection storage
5

Table of Contents
solutions. Consequently, our ability to provide comprehensive installation and integration services as well as maintenance services can be a noteworthy competitive advantage to attract new customers and retain existing customers. In addition, we believe that our ability to retain long-term customer relationships and secure repeat business is frequently tied directly to our comprehensive service capabilities and performance.

Our extensive use of technology and innovative product intelligence allows us to scale our global services operations to meet the needs of our customers. We are currently able to provide service to customers in more than 100 countries, supported by 24-hour, multi-language technical support centers located in North America, Europe, and Asia. We provide our customers with warranty coverage on our products. Customers with high availability requirements may also purchase additional services to obtain faster response times on our high-performance shared storage systems, tape systems, and disk backup systems. We offer this additional support coverage at a variety of response levels up to 24-hours a day, seven-days-a-week, 365-days-a-year, for customers with stringent high-availability needs. We provide support ranging from repair and replacement to 24-hour rapid exchange to on-site service support for our midrange and enterprise-class products. In addition to these traditional installation and maintenance services, we also provide project management, managed services, and other value-added services to enhance our customer’s experience and engagement. These incremental services create a deeper relationship with customers that enables them to maximize the value of our solution and better positions us to retain our customers through technology transitions.

We generally warrant our hardware products against defects for periods ranging from one to three years from the date of sale. We provide warranty and non-warranty repair services through our service team and third-party service providers. In addition, we utilize various other third-party service providers throughout the world to perform repair and warranty services for us to reach additional geographic areas and industries to provide quality services in a cost-effective manner.

Research and Development

We compete in an industry characterized by rapid technological change and evolving customer requirements. Our success depends, in part, on our ability to introduce new products and features to meet end user needs. Our research and development teams are focused on technology and services to make our storage systems and data management software easier to manage at scale; software enhancements to make our storage more searchable and accessible, software-defined hyperconverged storage technology, next generation solid-state and hard-drive storage system software, data deduplication and other data reduction technologies, and making tape even more efficient as a storage medium for long term archival storage.

Sales and Distribution Channels

Product Sales Channels

We utilize distributors, value-added resellers ("VARs") and direct market resellers ("DMRs") in our sales process. Our reseller program provides our channel partners the option of purchasing products directly or through distribution channels and provides them access to a more comprehensive product line. Additionally, we sell directly to multiple large corporate entities and government agencies.

OEM Relationships

We sell our products to several original equipment manufacturer ("OEM") customers that resell our hardware products under their own brand names and typically assume responsibility for product sales, end user service and support. We also license our software to certain OEM customers that include this software in their own brand name products. These OEM relationships enable us to reach end users not served by our branded distribution channels or our direct sales force. They also allow us to sell to select geographic or vertical markets where specific OEMs have exceptional strength.

Customers

Our customers vary across multiple industries worldwide ranging from small businesses to global enterprises. In addition, we sell to OEMs, distributors, VARs and DMRs to reach end user customers. Sales to our top five customers represented 17%, 16%, and 23% of revenue in fiscal 2022, fiscal 2021 and fiscal 2020, respectively, of which no customer represented 10% or more of our total revenue.
6

Table of Contents

Competition

The markets in which we participate are highly competitive, characterized by rapid technological change and changing customer requirements. In some cases, our competitors in one market area are customers or suppliers in another. Our competitors often have greater financial, technical, manufacturing, marketing, or other resources than we do. Additionally, the competitive landscape continues to change due to merger and acquisition activity as well as new entrants into the market.

As our customers look to use more public cloud storage services, these providers offer a competitive alternative, as well as new platforms and new ways to deploy our software. We expect that the data storage infrastructures of the future will be both hybrid-cloud and multi-cloud, meaning our customers will store their data in the various large public cloud environments, and also want to use services from multiple public cloud vendors.

Our primary storage systems and object storage systems primarily face competition from the EMC business unit of Dell Inc., (“Dell”), International Business Machines Corporation, (“IBM”), NetApp, Inc., (“NetApp”), and other enterprise storage vendors in the markets we serve.

Our tape storage systems primarily compete in the midrange and enterprise reseller and end user markets with IBM and other tape library vendors. Competitors for entry-level and OEM tape systems include BDT Products, Inc. and several others that supply or manufacture similar products. In addition, disk backup products and cloud storage are an indirect competitive alternative to tape storage.

Our backup storage systems primarily compete with products sold by Dell, HPE and Veritas Technologies LLC.

Manufacturing and Supply Chain

Quantum has a global supply chain and operations organization, with contract manufacturers located in the U.S. and Mexico along with supporting third-party logistics companies in the Europe, Middle East, and Africa region, or (“EMEA”), and the Asia-Pacific region, or (“APAC”). Our supply chain and manufacturing strategy minimizes geo-political and environmental causal risks and provides flexibility to support demand fluctuations by region, further enhancing our variable cost structure.

Quantum primary storage and secondary storage systems are sold as appliances that combine Quantum software with servers that are procured from various server vendors. Quantum sources these servers from various vendors, then uses contract manufacturers for final integration and shipment to customers. Quantum tape storage systems are designed by Quantum and manufactured by a global contract manufacturer.

Tape media is manufactured in Japan and distributed globally.

The global supply chain environment is constrained, both in terms of server supply and tape drive supply. These shortages are affecting the entire data storage industry, and many industries worldwide, and have resulted in longer lead times, increased costs, and a large backlog. To address these shortages, the supply chain organization is focused on a number of actions including alternate component qualifications, more aggressive management of contract manufacturers, and model changes for better logistics performance and visibility.

Backlog

The global supply constraints have resulted in a historically large backlog, and as of the end of fiscal year 2022, these supply constraints restricted our ability to fulfill all orders. Quantum is carrying a significant backlog of orders heading into fiscal year 2023, and is taking the actions outlined above to draw down this backlog over time while continuing to book new orders.

Intellectual Property and Technology

We generally rely on patent, copyright, trademark and trade secret laws and contract rights to establish and maintain our proprietary rights in our technology and products. As of March 31, 2022, we hold over 170 U.S. patents. In general, these patents have a 20-year term from the first effective filing date for each patent. We also hold multiple foreign patents and patent applications for certain of our products and technologies. Although we
7

Table of Contents
believe that our patents and applications have significant value, rapidly changing technology in our industry means that our future success may also depend heavily on the technical competence and creative skills of our employees.

From time to time, third parties have asserted that the manufacture and sale of our products have infringed on their patents. We are not knowingly infringing any third-party patents. Should it ultimately be determined that licenses for third-party patents are required, we will undertake best efforts to obtain such licenses on commercially reasonable terms. See Note 10: Commitments and Contingencies for additional disclosures regarding lawsuits alleging patent infringement.

On occasion, we have entered into various patent licensing and cross-licensing agreements with other companies. We may enter into patent cross-licensing agreements with other third parties in the future as part of our normal business activities. These agreements, when and if entered into, would enable these third parties to use certain patents we own and enable us to use certain patents owned by these third parties. We have also sold certain patents, retaining a royalty-free license for these patents.

We are a member of the consortium that develops, patents, and licenses Linear Tape-Open, (or “LTO® tape”) technology to media manufacturing companies. We receive royalty payments for LTO media technology sold under licensing agreements. We have also entered into various licensing agreements with respect to our technology, patents and similar intellectual property which provide licensing revenues in certain cases and may expand the market for products and solutions using these technologies.

Segment Information

We operate as a single reporting unit and operating segment for business and operating purposes. Information about revenue attributable to each of our product groups is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and information about revenue and long-lived assets attributable to certain geographic regions is included in Note 2: Revenue and Note 4: Balance Sheet Information, respectively, to the consolidated financial statements and risks attendant to our foreign operations is set forth below in Item 1A. Risk Factors.

Seasonality

As is typical in our industry, we generally have the greatest demand for our products and services in the fourth quarter of each calendar year, or our fiscal third quarter. We usually experience the lowest demand for our products and services in the first and second quarters of each calendar year, or our fiscal fourth quarter and fiscal first quarter, respectively.

Information About Our Executive Officers and Management Team

Following are the names and positions of our management team as of May 18, 2022, including a brief account of the business experience of each.
NamePosition with Quantum
James J. LernerPresident, Chief Executive Officer and Chairman of the Board
J. Michael DodsonChief Financial Officer
Brian E. CabreraChief Legal and Compliance Officer
John HurleyChief Revenue Officer
Lewis Moorehead Chief Accounting Officer

James J. Lerner, 52, was appointed as President and CEO of the Company, effective July 1, 2018, and was appointed Chairman of the Board on August 7, 2018. Mr. Lerner has previously served as Vice President and Chief Operating Officer at Pivot3 Inc., a software development company, from March 2017 to June 2018, and Chief Revenue Officer from November 2016 to March 2017. Prior to Pivot3 Inc., from March 2014 to August 2015, Mr. Lerner served as President of Cloud Systems and Solutions at Seagate Technology Public Limited Company (“Seagate”), a data storage company. Prior to Seagate, Mr. Lerner served in various executive roles at Cisco Systems, Inc. (Nasdaq: CSCO), a networking hardware and software manufacturing company, including most recently as Senior Vice President and General Manager of the Cloud & Systems Management Technology Group.
8

Table of Contents
Before beginning his career as a technology company executive, Mr. Lerner was a Senior Consultant at Andersen Consulting, a financial advisory and consulting firm. Since 2011, Mr. Lerner has served on the Board of Trustees of Astia, a global not-for-profit organization built on a community of men and women dedicated to the success of women-led, high-growth ventures, and is currently serving as the Chair of the Board of Trustees. Mr. Lerner earned a Bachelor of Arts in Quantitative Economics and Decision Sciences from U.C. San Diego.

J. Michael Dodson, 61, was appointed Chief Financial Officer effective May 31, 2018. He was also appointed interim Chief Executive Officer, a position in which he served until James J. Lerner joined the Company on July 1, 2018. From August 2017 to May 2018, Mr. Dodson served as the Chief Financial Officer of Greenwave Systems, a mobile network solutions company. Prior to joining Greenwave Systems, Mr. Dodson served as the Chief Operating Officer and Chief Financial Officer at Mattson Technology, Inc. (“Mattson”), a semiconductor equipment manufacturing company, from 2012 to 2017. He joined Mattson as Executive Vice President, Chief Financial Officer and Secretary in 2011. Prior to joining Mattson, Mr. Dodson served as Chief Financial Officer at four global public technology companies and Chief Accounting Officer for an S&P 500 company. Mr. Dodson started his career with Ernst & Young LLP, a global accounting firm, in San Jose, California. From 2013 through 2020, he served on the Board of Directors of Sigma Designs, Inc., a provider of system-on-chip solutions, including as Lead Independent Director starting in 2014 and Chairman of the Audit Committee starting in 2015. He has also served on Board of Directors of A10 Networks, Inc. (NYSE: ATEN), an application security company, from February 2020 until April 2021 and was named Chairman of their Audit Committee in June 2020. In addition, Mr. Dodson serves as a director of two private entities: a charitable organization and a privately held for-profit company. He holds a B.B.A. degree with dual majors in Accounting and Information Systems Analysis and Design from the University of Wisconsin-Madison.

Brian E. Cabrera, 57, most recently served as the Assistant United States Attorney from October 2018 to April 2020 and as Special Assistant United States Attorney from October 2017 to October 2018 in the Office of the United States Attorney, Northern District of California. From May 2014 to June 2017, Mr. Cabrera served as Senior Vice President & General Counsel of NVIDIA Corporation (“NVIDIA”) (Nasdaq: NVIDIA), a graphics processing units technology company. Prior to NVIDIA, Mr. Cabrera served as General Counsel and Corporate Secretary, Chief Ethics & Compliance Officer of Synopsys, Inc. (Nasdaq: SNPS), an electronic design automation company, from 2006 to 2014. From 1999 to 2006, Mr. Cabrera served as Senior Vice President, Operations, General Counsel and Corporate Secretary of Callidus Software, Inc., an enterprise software company. Prior to Callidus Software, Inc., Mr. Cabrera held various legal positions with PeopleSoft, Inc., a human resource management systems provider, Netscape Communications Corporation, an internet software developing company, Silicon Graphics, Inc., a computer hardware and software manufacturing company, and Bronson, Bronson & McKinnon LLP, a law firm.

John Hurley, 56, has served as Quantum's Chief Revenue Officer since August 2021. Prior to Quantum, Mr. Hurley was at Cisco Systems, Inc. (“Cisco”) (Nasdaq: CSCO), a networking hardware and software manufacturing company, from 2008 to 2021, and most recently served as vice president at Cisco, global commercial segment. Mr. Hurley also spent several years overseeing Cisco's service provider business. Additionally, Mr. Hurley led transformational enterprise relationships with Cisco's largest enterprise customers in aerospace and automotive. From 2005 to 2008, he served as area vice president, Midwest Global / Corporate Business Group at Dell Technologies (NYSE: DELL), a multinational technology company, where he led regional sales directors and their teams to support multiple Fortune 100 customers. Mr. Hurley held leadership roles at transformational early-stage software companies, where he helped drive the businesses to successful acquisitions by industry leaders Microsoft and HP. Mr. Hurley holds a Bachelor of Science in Economics from Pennsylvania State University.

Lewis Moorehead, 50, has served as our Chief Accounting Officer since October 2018. Prior to joining Quantum, Mr. Moorehead was the Director of Finance, Accounting and Tax at Carvana, Co. (NYSE: CVNA), a publicly traded on-line retailer, from November 2016 to October 2018. Beginning in September 2004, he has served as Managing Partner at Quassey, an investment firm. While at Quassey, he also served as Vice President of Finance and Principal Accounting Officer at Limelight Networks, a Nasdaq-listed global content delivery network and SaaS provider, from March 2010 to August 2013. He has also held finance and accounting positions at eTelecare Global Solutions, an outsourcing service company, Rivers and Moorehead PLLC, an accounting advisory firm, Intelligentias, Inc., a data intelligence company, American Express Company (NYSE: AXP), a payment card services company, and PricewaterhouseCoopers LLP, an advisory and tax services firm. He holds a Bachelor of Business Administration (B.B.A.), in Accounting from the University of Wisconsin-Whitewater.

Human Capital

9

Table of Contents
Our Chief Human Resources Officer ("CHRO") leads our human capital initiatives which includes the design and execution of all people strategies. The CHRO partners directly with the Board of Directors, the Leadership and Compensation Committee, and Senior Management on the design, cost, and effectiveness of our people programs to ensure they are competitive and rewards our teams for driving company performance.

This past year we executed our global strategy in becoming the leader in video and unstructured data solutions with the acquisitions of Pivot3 and EncloudEn, strengthening our position in the video surveillance market. From these acquisitions, Quantum added 60 new employees primarily located in the U.S. and India.

Our workforce is distributed in over 16 countries, with 905 employees globally as of March 31, 2022, including 529 in the U.S. and Canada, 175 in APAC, and 201 in EMEA. We will engage with contractors, consultants, or temporary employees as needs for special projects occur.

Work Environment

Competition for talent in the technology industry continues to be aggressive and a candidates’ market. We continue to design, evaluate, and expand our total rewards programs so they remain competitive in attracting, motivating, rewarding, and retaining key talent.

For the last two years, our focus has been about keeping our employees and office locations safe during the pandemic. We offer flexible and hybrid working arrangements that allow our employees to choose where and how they work. We ensure our work environments, whether onsite or remote, are safe, professional, and inclusive so our employees can be successful.

To build high performing products and services, we start with building high performing teams that are inclusive, diverse, and respected regardless of gender, race, color, religion, age, sexual orientation, or disability. We invest in diversity hiring and training initiatives as well as performance development opportunities. We seek out candidates anywhere on the career spectrum from intern to a seasoned professional. We hire for energy first, excellence second, and experience last. This past year, we partnered with an outside firm for our annual anti-harassment and anti-discrimination training. The importance of diversity and inclusion is seen and heard from our executive team on a regular basis that includes celebrating diversity internally, promoting equality on social media, and some of our executive management serves as board members for organizations supporting women in leadership and minorities. We believe that having a work environment that is inclusive is a critical component to our culture of excellence.

Culture of Excellence, Accountability, and Innovation

Our company goals and leadership attributes set the tone for our culture of excellence and accountability. Through our Code of Conduct, Culture of Compliance survey, and monthly compliance newsletter, employees are empowered to ask questions, use their voice and report concerns without fear of retaliation.

Our company culture supports and inspires innovation. Employees are encouraged to seek out new projects or experiences even outside their own working group. The leadership team created regular “no internal meetings” days so employees can have more time to work on innovative projects, plan, take a training course, or use the uninterrupted time for personal development.

Talent Development

Our talent is our greatest asset. We are actively growing our employees from a skills and leadership perspective while also retaining our high potential and most critical talent. We offer a worldwide mentorship program that lasts six months in duration and is available to any interested employee. All of our senior leaders participate in the program and get paired with an employee on key developmental skills or behaviors. In addition, we focus our performance reviews on a semi-annual basis in order to closely monitor and discuss our talent successes, needs, and aspirations. Our managers and employees participate in semi-annual discussions that help facilitate conversations of employee contributions, goals and expectations.

Available Information

10

Table of Contents
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website at https://www.quantum.com generally when such reports are available on the SEC website. The contents of our website are not incorporated into this Annual Report on Form 10-K.

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy, and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
11

Table of Contents
ITEM 1A. RISK FACTORS
Before investing in any of our securities, you should carefully consider the risks and uncertainties described below, together with all other information in this Annual Report. The risks and uncertainties described below could materially and adversely affect our business, operating results, financial condition, liquidity, or competitive position, and consequently, the value of our securities. The material adverse effects include, but are not limited to, our potential inability to grow our revenue or market share at the pace that they have grown historically or at all, our revenue, market share, stock price, and market capitalization fluctuating on a quarterly and annual basis, our history of losses continuing or our failure to become profitable, our inability to achieve the revenue and net income (loss) guidance that we provide, and the risk of harm to our reputation and brand.

Risks Related to Our Supply Chain and Sales Strategy

Cost increases, supply disruptions, or raw material shortages, including single source components, could harm our business.

We have and may continue to experience cost increases or sustained supply interruptions in raw materials and components necessary for our products. We also have and may continue to experience increased freight charges and reduced capacity from our freight forwarders. Any such increases or interruptions could materially negatively impact our business, prospects, financial condition and operating results, including delays in manufacturing and shipments of our products and canceled orders. While we have implemented price increases intended to offset rising costs, we cannot provide assurance that these increases will have the desired effects on our business model in the expected timeframe.

We outsource our component supply, manufacturing, and service repair operations to third parties. Our business, financial condition, and operating results could face material adverse impacts if we cannot obtain parts, products, and services in a cost effective and timely manner that meets our customers’ expectations.

Many aspects of our supply chain and operational results are dependent on the performance of third-party business partners, including contract manufacturers, service providers, and product integrators. We face a number of risks as a result of these relationships, any or all of which could have a material adverse effect on our business and harm our operating results and financial condition.

Sole source of product supply

In many cases, our business partners may be the sole source of supply for the products or parts they manufacture, or the services they provide to us, and we may not have executed long-term purchase agreements with these partners. Our reliance on a limited number of suppliers and the lack of any guaranteed sources of supply exposes us to several risks, including:

the inability to obtain an adequate supply of key components;
price volatility for the components of our products;
failure of a supplier to meet our quality or production requirements;
failure of a supplier of key components to remain in business or adjust to market conditions; and
consolidation among suppliers, resulting in some suppliers exiting the industry, discontinuing the manufacture of components or increasing the price of components.

We cannot assure investors that we will be able to obtain a sufficient supply of these key components or that their costs will not increase. If our component supply is disrupted or delayed, or if we need to replace our existing suppliers or redesign a product to accept different components, we cannot guarantee that additional components will be available when required, on terms that are favorable to us, or at reasonable prices, which could extend our lead times and increase our component costs.

Cost and purchase commitments and processes

We may not be able to control the costs of products or services we obtain from our business partners. We provide a customer demand forecast used to procure inventory to build our products. We could be responsible for the financial impact from any forecast reduction or product mix shift relative to materials already purchased under a prior forecast, including the cost of finished goods in excess of current customer demand or for excess or obsolete inventory.
12

Table of Contents

In some cases we may retain the responsibility to purchase component inventory to support third-party manufacturing activities, which presents a number of risks that could materially and adversely affect our financial condition. For instance, as part of our component planning, we may place orders with or pay certain suppliers for components in advance of receiving customer purchase orders. We may occasionally enter into large orders with vendors to ensure that we have sufficient components for our products to meet anticipated customer demand. It is possible that we could experience a design or manufacturing flaw that could delay or even prevent the production of the components for which we previously committed to pay.

In addition, in order to reduce manufacturing lead times and plan for adequate component supply, from time to time we may issue non-cancelable and non-returnable component or product orders. Our inventory management systems and related supply chain visibility tools may be inadequate to enable us to make accurate forecasts and effectively manage our component and product supply. If we ultimately determine that we have excess supply, we may have to reduce our prices and write down or write off excess or obsolete inventory. Alternatively, insufficient supply levels may lead to shortages resulting in delayed or lost revenue or reduced product margins. We could experience operating losses based on any of these conditions.

We also maintain service parts inventories to satisfy future warranty obligations and to earn service revenue by providing enhanced and extended technical support and product service during and beyond the warranty period. We estimate service parts inventory needs based on historical usage and forecasts of future warranty and service contract requirements, including estimates of failure rates, costs to repair, and out of warranty revenue. Given the significant levels of judgment inherently involved in the process, we cannot provide assurance that we will be able to maintain service parts inventories appropriate to satisfy customer needs or to avoid inventory purchases that later prove to be unnecessary. If we are unable to maintain appropriate levels of service parts inventories, our business, financial condition and results of operations may be materially and adversely impacted.

Although we have contracts for most of our third-party repair service vendors, the contract period may not be the same as the underlying customer service contract. In such cases, we face risks that the third-party service provider may increase the cost of providing services in later periods already under contract to our customers at a fixed price.

Financial condition and stability

Our third-party business partners may suffer adverse financial or operating results or be negatively impacted by economic conditions. We may face interrupted component, product, or service supply as a result of financial or other volatility affecting our supply chain. As a result, we could suffer production downtime or increased costs to procure alternate products or services.

Quality and supplier conduct

We have limited control over the quality of products and components produced and services provided by our third-party business partners and their supply chains. The quality of the products, parts or services may not be acceptable to our customers and could result in customer dissatisfaction, lost revenue, and increased warranty costs. In addition, we have limited control over the manner in which our business partners conduct their business. We may face negative consequences or publicity as a result of a third-party’s failure to comply with applicable compliance, trade, environmental, or employment regulations.

As a result of our global manufacturing and sales operations, we are subject to a variety of risks related to our business outside of the U.S., any of which could, individually or in the aggregate, have a material adverse effect on our business.

A significant portion of our manufacturing, sales, and supply chain operations occur in countries other than the U.S. We utilize third-party business partners to engineer, produce, sell, and fulfill orders for our products, several of which have operations located in foreign countries including China, Hungary, India, Japan, Malaysia, Singapore, Mexico, the Philippines, Thailand, and Ukraine. Because of these operations, we are subject to a number of risks in addition to those already described, including:

increasing import and export duties and value-added taxes, or trade regulation changes that could erode our profit margins or delay or restrict our ability to transport our products;
13

Table of Contents
war, military conflict, and geo-political unrest may affect our engineering and support teams outside the U.S. and their ability to perform as well as our sales and services delivery with sanctioned entities and countries.
reduced or limited protection of our intellectual property;
difficulty complying with multiple and potentially conflicting regulatory requirements and practices, including laws governing corporate conduct outside the U.S., such as the Foreign Corrupt Practices Act, United Kingdom Bribery Act, and similar regulations;
commercial laws that favor local businesses and cultural differences that affect how we conduct business;
differing technology standards or customer requirements;
exposure to economic uncertainty and fluctuations including inflation, adverse movement of foreign currencies against the U.S. dollar (the currency in which we report our results), restrictions on transferring funds between countries, and continuing sovereign debt risks;
fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points for our products and shipments;
inflexible employee contracts and employment laws that may make it difficult to terminate or change the compensation structure for employees in the event of business downturns;
difficulties attracting and recruiting employees and wage inflation in highly competitive markets;
political instability, military, social and infrastructure risks, especially in emerging or developing economies, including the war between Russia and Ukraine;
political or nationalist sentiment impacting global trade, including the willingness of non-U.S. consumers to purchase goods or services from U.S. corporations;
natural disasters, including earthquakes, flooding, typhoons and tsunamis; and
pandemics and epidemics, including the impact of COVID-19, and varying and potentially inconsistent governmental restrictions on the operation of businesses, travel and other restrictions.

Any or all of these risks could have a material adverse effect on our business.

We rely on indirect sales channels to market and sell our branded products. The loss of or deterioration in our relationship with one or more of our resellers or distributors, or our inability to establish new indirect sales channels to drive growth of our branded revenue, could negatively affect our operating results.

We sell most of our branded products to distributors, value added resellers, and direct market resellers, who in turn sell our products to end users. We use different distribution channel partners in different countries and regions in the world. The success of these sales channels is hard to predict, particularly over time, and we have no purchase commitments or long-term orders from them that assure us of any baseline sales. Several of our channel partners carry competing product lines they may promote over ours. A channel partner might discontinue our products or fail to effectively market them, and each partner determines the type and amount of our products that it will purchase and the price at which it sells to end users. Establishing new indirect sales channels is an important part of our strategy to drive growth of our branded revenue. Our results of operations could be adversely affected by any number of factors related to our channel partners, including:

A change in competitive strategy that adversely affects a partner’s willingness or ability to distribute our products;
The reduction, delay, or cancellation of orders or the return of significant products volume;
Our inability to gain traction in developing new indirect sales channels for our branded products, or the loss of one or more existing partners; or
Changes in requirements or programs that allow our products to be sold by third parties to government or other customers.

Because we rely heavily on channel partners to market and sell our products, if one or more of them were to experience a significant deterioration in its financial condition or its relationship with us, this could disrupt our product distribution and reduce our revenue, which could materially and adversely affect our business, financial condition, and operating results.

We heavily utilize channel partners to perform the functions necessary to market and sell our products in certain product and geographic segments. To fulfill this role, partners must maintain an acceptable level of financial stability, creditworthiness, and the ability to successfully manage business relationships with the customers they serve directly. If partners are unable to perform in an acceptable manner, we may be required to reduce sales to the partner or terminate the relationship. We may also incur financial losses for product returns from partners or for the failure or refusal of distributors to pay obligations owed to us. Either scenario could result in fewer of our products
14

Table of Contents
being available to the affected market segments, reduced levels of customer satisfaction and increased expenses, which could in turn have a material and adverse impact on our business, results of operations and financial condition.

A certain percentage of our sales are to a few customers, some of which are also competitors, and these customers generally have no minimum or long-term purchase commitments. The loss of, or a significant reduction in demand from, one or more key customers could materially and adversely affect our business, financial condition and results of operations.

Our product sales have been and continue to be concentrated among a small number of channel partners, direct end-users, and original equipment manufacturers. We sell to many end-user customers and channel partners on purchase orders, not under the terms of a binding long-term procurement agreement. Accordingly, they generally are not obligated to purchase any minimum product volume, and our relationships with them are terminable at will. In addition, recently we have focused our direct-sales business on the largest users of hierarchical storage architectures, the so-called “Hyper-scalers”; there are very few of these extremely large storage customers, but their order activity has a significant impact on our results from quarter to quarter.

Some of our tape and disk products are incorporated into larger storage systems or solutions that are marketed and sold to end users by third parties. Because of this, we may have limited market access to those end users, limiting our ability to influence and forecast their future purchasing decisions. In addition, revenue from OEM customers has decreased in recent years. Certain of our large OEM customers are also our competitors, and could decide to reduce or terminate purchasing our products for competitive reasons.

In addition, our sales efforts may involve long sales cycles during which we incur expenses to educate our customers about product use and benefits and support customer-driven product evaluations. These cycles may make it difficult for us to predict when, or if, future sales will occur.

During the fiscal years ended March 31, 2022 and March 31, 2021, no single customer represented 10% or more of our total revenue. However, a significant reduction in orders from, or a loss of, one or more large customers would have a material adverse effect on our operating results.

The U.S. federal government is an important customer, and our business may be materially and adversely harmed by changes in government purchasing activity.

A portion of our sales are to various agencies and departments of the U.S. federal government, and federal spending funding cuts and temporary government shutdowns have previously impacted and may continue to impact our revenue in the future. Future spending cuts by the U.S. federal government, temporary shutdowns of the U.S. federal government, or changes in its procurement processes or criteria could decrease our sales to the federal government and could materially and adversely affect our operating results. In addition, changes in government certification requirements applicable to our products could impact our ability to see to U.S. federal customers.

Risks Related to Our Operating Results, Financial Condition, or Stock Price

We continue to face risks related to inflation, economic uncertainty, and slow economic growth.

Uncertainty about economic conditions, particularly due to the ongoing COVID-19 pandemic, pose risks as businesses may further reduce or postpone spending in response to reduced budgets, tightening of credit markets, increases in inflation and interest rates, negative financial news, and declines in income or asset values which could adversely affect our business, financial condition and operating results. Recent inflationary increases have driven up the prices at which we are able to purchase necessary components, products, and services, as well as the cost of contract labor. In addition, we continue to face risks related to uncertain tariff levels between countries where our products are manufactured and sold, unstable political and economic conditions in Europe, including the war between Russia and Ukraine, and concerns about sovereign debt, which could negatively impact the U.S. and global economies and adversely affect our financial results. In addition, our ability to access capital markets may be restricted or result in unfavorable financing terms, impacting our ability to react to changing economic and business conditions and could also materially and adversely affect our ability to sustain our operations at their current levels.

Our stock price has experienced significant volatility in the recent past, and continued volatility may cause our common stock trading price to remain volatile or decline.
15

Table of Contents

Our stock price has been extremely volatile in the recent past. For example, the closing price of our common stock between January 3, 2022 and June 3, 2022 ranged from $1.56 to $5.64. The trading price of our common stock may continue to fluctuate in response to a number of events and factors, many of which may be beyond our control, such as:
quarterly variations in our operating results;
failure to meet our financial guidance or the expectations of securities analysts and investors;
new products, services, innovations, strategic developments, or business combinations and investments by our competitors or us;
changes in our capital structure, including incurring new debt, issuing additional debt or equity to the public, and issuing common stock upon exercise of our outstanding warrants or subscribing to our recent rights offering;
large or sudden purchases or sales of stock by existing or new investors;
changes in interest and exchange rates;
a continued widespread decline in the U.S. or global economy as a result of the continued impact of COVID-19, supply chain constraints, or other factors;
fluctuations in the stock market in general and market prices for technology companies in particular;
tariffs imposed by the U.S. government on sales originating in or being shipped to countries with which we have on-going trade or other political conflicts;
investigations or enforcement actions related to a potential or actual failure to comply with applicable regulations;
costs of new or ongoing commercial litigation; and
significant changes in our brand or reputation.

Any of these events and factors may cause our stock price to rise or fall and may adversely affect our business and financing opportunities.

We may be unable to attract and retain key talent necessary to effectively meet our business objectives.

The market for skilled engineering, sales, and administrative talent is very competitive and recently we are seeing delays in recruiting and hiring timeframes. We believe our ability to recruit and hire new talent, and retain existing key personnel, may be negatively impacted by prior and ongoing fluctuations in our operating results, stock price, and ability to offer competitive benefits and total compensation programs. Our business results may be harmed if we are unable to attract and retain key talent in the future.

Our quarterly operating results have fluctuated significantly, and past results should not be used to predict future performance.

Our quarterly operating results have fluctuated significantly in the past and could fluctuate significantly in the future. As a result, our quarterly operating results should not be used to predict future performance. Quarterly results could be materially and adversely affected by a number of factors, including, but not limited to:

IT spending fluctuations resulting from economic conditions or changes in U.S. federal government spending;
supply chain constraints or other failures by our contract manufacturers to complete shipments in a timely manner;
new product announcements by us or our competitors which may cause purchasing delays or cancellations;
customers canceling, reducing, deferring, or rescheduling significant orders as a result of excess inventory levels, weak economic conditions, reduced demand, or other factors;
seasonality, including customer and government fiscal year-ends and budget availability impacting demand for our products;
reduced demand, declines in large orders, royalty, or software revenues, or other changes in product mix;
product development and ramp cycle delays or product performance or quality issues;
poor execution of and performance against expected sales and marketing plans and strategies;
increased competition which may, among other things, increase pricing pressure or reduce sales;
restructuring actions or unexpected costs; and
foreign exchange fluctuations.

16

Table of Contents
Our operating results depend on continuing and increasing market acceptance of our existing products and on new product introductions, which may be unsuccessful, in which case our business, financial condition and results of operations may be materially and adversely affected.

A limited number of products comprise a significant majority of our sales, and due to rapid technological change in our industry, our future operating results depend on our ability to improve existing products and develop and successfully introduce new products. We have devoted and expect to continue to devote considerable management and financial resources to these efforts.

When we introduce new products to the market, they may not achieve market acceptance or significant market share. In addition, the target markets for our new products may not continue or grow as we anticipate. Our new products may not be successfully or timely qualified by new customers, and if they are qualified, we may not achieve high volume production in a timely manner, if at all. In addition, we may experience technical, quality, performance-related, or other difficulties that could prevent or delay the introduction and market acceptance of new products.

If we are not successful in timely completing our new product qualifications and ramping sales to our key customers, our revenue and operating results could be adversely impacted. In addition, if the quality of our products is not acceptable to our customers, customer dissatisfaction, lost revenue, and increased warranty and repair costs could result.

We derive significant revenue from products incorporating tape technology. Our future operating results depend in part on continued market acceptance and use of tape products; in the past, decreases in the market have materially and adversely impacted our business, financial condition and operating results.

We currently derive significant revenue from products that incorporate some form of tape technology, and we expect to continue to do so in the next several years. As a result, our future operating results depend in part on continued market acceptance and use of tape products. Decreased market acceptance or use of products employing tape technology has materially and adversely impacted our business, financial condition, and operating results, and we expect that our revenues from certain types of tape products could continue to decline in the future.

Disk, solid-state, and flash storage products, as well as various software solutions and alternative technologies have eroded the demand for tape products. We expect that, over time, many of our tape customers could migrate toward these other products and solutions and their proportionate contribution to our revenue will increase in the future. While we are making targeted investments in software, disk backup systems, and other alternative technologies, these markets are characterized by rapid innovation, evolving customer demands, and strong competition, including competition with companies who are also significant customers. If we are not successful in our efforts, we may not be able to attract or retain customers, and our business, financial condition and results of operations could be materially and adversely affected.

A significant decline in our media royalty or branded software revenues could materially and adversely affect our business, financial condition and operating results.

Our media royalties and branded software revenues generate relatively greater profit margins than some of our other products and can significantly impact our overall profitability. We receive media royalty revenue based on tape media cartridges sold by various tape media manufacturers and resellers. Under our patent and technology license agreements with these companies, each of the licensees determines the pricing and number of units of tape media cartridges that it sells. Our media royalty revenue varies based on the licensees’ media sales and other factors, including:

Our customers’ continued use of storage tape media, including the size of the installed base of devices and similar products that use tape media cartridges;
The relative growth in units of newer device products, since the associated media cartridges for newer products typically sell at higher prices compared with the media cartridges associated with older products;
The media consumption habits and rates of end users and pattern of device retirements;
The level of channel inventories; and
Agreement on standards for newer generations of the tape media that generates our royalty revenue.

Risks Related to Our Indebtedness
17

Table of Contents
We have significant indebtedness, which imposes upon us debt service obligations, and our term loan and revolving credit facilities contain various operating and financial covenants that limit our discretion in operating our business. If we are unable to generate sufficient cash flows from operations and overall operating results to meet these debt obligations or remain in compliance with the covenants, our business, financial condition and operating results could be materially and adversely affected.

Our level of indebtedness presents significant risks to our business and investors, both in terms of the constraints that it places on our ability to operate our business and because of the possibility that we may not generate sufficient cash and operating results to remain in compliance with our covenants and pay the principal and interest on our indebtedness as it becomes due. As recently as March 2022, we were in danger of failing to meet certain financial covenants in our debt agreements, which could have resulted in a default under these agreements if we had not obtained a waiver of noncompliance from our lenders. For further description of our outstanding debt, see the section captioned “Liquidity and Capital Resources” in Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.

As a result of our indebtedness:

Our ability to invest in growing our business is constrained by the financial covenants contained in our credit facilities, which require us to maintain certain maximum total net leverage ratio levels, a minimum fixed charge coverage ratio, and liquidity levels and restrict our ability to:
Incur debt and liens;
Acquire businesses or entities or sell certain assets;
Make investments, including loans, guarantees, and advances;
Engage in transactions with affiliates;
Pay dividends or repurchase stock; and
Enter into certain restrictive agreements;
We must dedicate a significant portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, research and development, mergers and acquisitions, and other cash-based activities, all of which may place us at a competitive disadvantage;
We are subject to mandatory field audits and control of cash receipts by the lenders if we do not maintain liquidity above certain thresholds;
We may be more vulnerable to adverse economic and industry conditions; and
We may be unable to make payments on other indebtedness or obligations.

Our ability to make scheduled payments of the principal, to pay interest on, or refinance our debt, or to make cash payments in connection with our credit facilities, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Further, as our debt reaches maturity, we will be required to make large cash payments or adopt one or more alternatives, such as restructuring indebtedness or obtaining additional debt or equity financing on terms that may be onerous or highly dilutive. Our ability to restructure or refinance our debt will depend on the capital markets and our financial condition at such time. We may be unable to incur additional debt or refinance our existing debt on acceptable terms, if at all.

Our credit facilities are collateralized by a pledge of all our assets. If we were to default and be unable to cure it within any applicable grace periods or obtain a waiver of such default, the lenders would have a right to foreclose on our assets to satisfy our obligations under these agreements. Any such action on the part of the lenders could have a materially adverse impact on our business, financial condition and results of operations.

In connection with entering into our prior credit facilities and certain amendments to our prior credit facilities, we were required to issue to our lenders thereunder, certain warrants to purchase our common stock. When exercised, these warrants will result in significant dilution to our stockholders. As a result, the issuance of common stock upon the exercise of our outstanding warrants may cause our stock price to decline.

Risks Related to Our Business and Industry

If we do not successfully manage the changes that we have made and may continue to make to our business model, infrastructure, and management, our business could be disrupted, and that could adversely impact our operating results and financial condition.
18

Table of Contents

Managing change is an important focus for us. In recent years, we have implemented several significant initiatives involving our sales and marketing, product engineering, and operations organizations, aimed at transitioning our revenue model from discrete hardware sales to recurring software revenue, increasing our efficiency, and better aligning internal operations with our corporate strategy. In addition, we have reduced headcount to streamline and consolidate our supporting functions as appropriate following recent acquisitions and in response to market or competitive conditions, and have increased our reliance on certain third-party business relationships. If we are unable to successfully manage the changes that we implement and detect and address issues as they arise, our business could be disrupted, and our results of operations and financial condition could be materially and adversely impacted.

In addition, given that we are relatively new to offering products and services on a subscription basis, and those models in the storage industry continue to evolve, we may not be able to effectively compete, drive expected revenue and margin growth, or obtain profitability for the foreseeable future. Demand for subscription-based products could also erode one-time sales of our hardware products that might not be immediately offset by increased recurring revenue.

We have taken considerable steps towards reducing our cost structure. The steps we have taken may not reduce our cost structure to a level appropriate in relation to our future sales and therefore, these cost reductions may be insufficient to achieve profitability.

In the last several years, we have recorded significant restructuring charges and made cash payments to reduce our cost of sales and operating expenses to respond to adverse economic and industry conditions, to execute strategic management decisions, and to rationalize our operations following acquisitions. These restructuring plans may result in decreases to our revenues or adversely affect our ability to grow our business in the future. Workforce reductions may also adversely affect employee morale and our ability to retain our employees. We may take future steps to further reduce our operating costs, including additional restructurings in response to strategic decisions, increased operating and product costs due to inflation, supply chain constraints, and other external factors, adverse changes in our business or industry, or future acquisitions. We may be unable to reduce our cost of sales and operating expenses at a rate and to a level appropriate in relation to our future sales, which may materially and adversely affect our business, financial condition and results of operations.

In addition, our ability to achieve the anticipated cost savings and other benefits from these restructuring plans within the expected time frame is subject to many estimates and assumptions which may be adversely impacted by significant economic, competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our business, financial condition, and operating results could be adversely affected.


From time to time we have made acquisitions. The failure to successfully integrate future acquisitions could harm our business, financial condition, and operating results.

As a part of our business strategy, we have in the past and may make acquisitions in the future. We may also make significant investments in complementary companies, products or technologies. If we fail to successfully integrate such acquisitions or significant investments, it could harm our business, financial condition, and operating results. Risks that we may face in our efforts to integrate any recent or future acquisitions include, among others:
failure to realize anticipated synergies or return on investment from the acquisition;
difficulties assimilating and retaining employees, business culture incompatibility, or resistance to change;
diverting management’s attention from ongoing business concerns;
coordinating geographically separate organizations and infrastructure operations in a rapid and efficient manner;
the potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;
failure of acquired technology or products to provide anticipated revenue or margin contribution;
insufficient revenues to offset increased expenses associated with the acquisition;
costs and delays in implementing or integrating common systems and procedures;
reduction or loss of customer orders due to the potential for market confusion, hesitation and delay;
impairment of existing customer, supplier and strategic relationships of either company;
insufficient cash flows from operations to fund the working capital and investment requirements;
19

Table of Contents
difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;
dissatisfaction or performance problems with the acquired company;
the assumption of risks, unknown liabilities, or other unanticipated adverse circumstances of the acquired company that are difficult to quantify; and
the cost associated with the acquisition, including restructuring actions, which may require cash payments that, if large enough, could materially and adversely affect our liquidity.

A cybersecurity breach of our internal infrastructure or our products could adversely affect our ability to conduct our business, harm our reputation, expose us to significant liability, or otherwise damage our financial results.

We maintain sensitive data related to our employees, strategic partners, and customers, including personally identifiable information, intellectual property, and proprietary business information on our own systems. In addition, many of our customers and partners store sensitive data on our products.

It is critical to our business that our employees’, strategic partners’ and customers’ sensitive information remains and is perceived as secure. While we employ sophisticated security measures in our own environment and our product features, we may face internal and external threats including unauthorized access, ransomware attacks, security breaches, and other system disruptions. A cybersecurity breach of our own IT infrastructure or products sold to our customers could result in unauthorized access to, loss of, or unauthorized disclosure of such information and expose us to litigation, indemnity obligations, government investigations, and other possible liabilities. Additionally, a cyber-attack, whether actual or perceived, could result in negative publicity which could harm our reputation and reduce our customers’ confidence in the effectiveness of our solutions, which could materially and adversely affect our business and operating results. A breach could also expose us to increased costs from remediation, disruption of operations, or increased cybersecurity protection costs that may have a material adverse effect on our business. Although we maintain cybersecurity liability insurance, our insurance may not cover potential claims of these types or may not be adequate to indemnify us for inability that may be imposed. Any imposition or liability or litigation costs that are not covered by insurance could harm our business.

If our products fail to meet our or our customers’ specifications for quality and reliability, we may face liability and reputational or financial harm which may adversely impact our operating results and our competitive position may suffer.

We may from time to time experience problems with the performance of our products, which could result in one or more of the following:
Increased costs related to fulfilling our warranty obligations;
Reduced, delayed, or cancelled orders or the return of a significant amount of products; or
The loss of reputation in the market and customer goodwill.
These factors could cause our business, financial condition and results of operations to be materially and adversely affected.

In addition, we face potential liability for product performance problems because our end users employ our technologies to store and backup important data and to satisfy regulatory requirements. Loss of this data could cost our customers significant amounts of money, directly and indirectly as a result of lost revenues, intellectual property, proprietary business information, or other harm to their business. In some cases, the failure of our products may be caused by third-party technology that we incorporate into them. Even if failures are caused by third-party technology, we may be required to expend resources to address the failure and preserve customer relationships. We could also potentially face claims for product liability from our customers if our products cause property damage or bodily injury. Although there are limitations of liability in our commercial agreements and we maintain technology errors and omissions liability and general liability insurance, our insurance may not cover potential claims of these types or may not be adequate to indemnify us for all liability that may be imposed. Any imposition of liability or litigation costs that are not covered by insurance or could harm our business.

Competition is intensifying in the data storage and protection market as a result of competitors introducing products based on new technology standards and merger and acquisition activity, which could materially and adversely affect our business, financial condition, and operating results.

20

Table of Contents
Our competitors in the data storage and protection market are aggressively trying to advance and develop new technologies and products to compete against us. Consequently, we face the risk that customers could choose competitor products over ours. As a result of competition and new technology standards, our sales or gross margins could decline, which could materially and adversely affect our business, financial condition, and operating results. Some of those competitors, are much larger, financially stronger, and have more diverse product offerings, and aggressively compete based on their reputations and greater size.

Technological developments, industry consolidation, and storage market competition over the years have resulted in decreased prices and increased commoditization for tape device and automation products and our other product offerings. Pricing pressure is more pronounced for entry-level products and less pronounced for enterprise products. Over time, the prices of our and competitor products have decreased, but such products often incorporate new or different features and technologies from what we offered in prior years. We face risks that customers could choose competitors’ products over ours due to these features and technologies or pricing differences. If competition further intensifies, our product sales and gross margins could decline, which could materially and adversely affect our business, financial condition and results of operations.

Additional industry consolidation may further result in:

competitors consolidating, having greater resources and becoming more competitive with us;
new entrants into one or more of our primary markets increasing competition;
customers that are also competitors becoming more competitive with us and/or reducing their purchase of our products;
competitors acquiring our current suppliers or business partners and negatively impacting our business model; and
market uncertainty and disruption due to the impact and timing of announced and completed transactions.

Risks Related to Intellectual Property

Some of our products contain licensed, third-party technology that provides important product functionality and features. The loss or inability to obtain any such license could have a material adverse effect on our business.

Certain of our products contain technology licensed from third parties that provides important product functionality and features. We cannot provide assurance that we will have continued access to this technology in the future. In some cases, we may seek to enforce our technology access via litigation against the licensing company itself, which may cause us to incur significant legal or other costs and may not be resolved in our favor. Other legal actions against the licensing company, such as for intellectual property infringement, could also impact our future access to the technology. We also have limited visibility or control of the technology roadmap at the licensing company and cannot ensure that the licensing company will advance the roadmap of the licensed technology in the manner best for us. We also face the risk of not being able to quickly implement a replacement technology or otherwise mitigate the risks associated with not having access to this licensed technology. Any of these actions could negatively impact our available technology portfolio, thereby reducing the functionality or features of our products, and could materially and adversely affect our business, financial condition, and operating results.

Third-party intellectual property infringement claims could result in substantial liability and significant costs, and, as a result, our business, financial condition and results of operations may be materially and adversely affected.

From time to time, third parties allege that our products infringe their patented or proprietary technology and demand that we purchase a license from them. The ultimate outcome of any license discussion or litigation, is uncertain. Adverse resolution of any third-party infringement claim could subject us to substantial liabilities and require us to refrain from manufacturing and selling certain products. In addition, the costs incurred in intellectual property litigation can be substantial, regardless of the outcome. As a result, our business, financial condition, and operating result could be materially and adversely affected.

If we fail to protect our intellectual property or if others use our proprietary technology without authorization, our competitive position may suffer.

21

Table of Contents
Our future success and ability to compete depends in part on our proprietary technology. We rely on a combination of copyright, patent, trademark, and trade secrets laws and nondisclosure agreements to establish and protect our proprietary technology. However, we cannot provide assurance that patents will be issued with respect to pending or future patent applications that we have filed or plan to file, that our patents will be upheld as valid, or that our patents will prevent the development of competitive products, or that any actions we have taken will adequately protect our intellectual property rights.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain or use our products or technology. Enforcing our intellectual property rights can sometimes only be accomplished through litigation, which is expensive and can divert management’s attention away from our business. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S.

We license certain of our software under “open source” licenses. Because of the characteristics of opensource software licenses, it may be relatively easy for competitors, some of whom have greater resources than we have, to enter our markets and compete with us. In addition, our failure to comply with the terms of open source licenses could have a material adverse effect on our competitive position and financial results.

One of the characteristics of open source software is that the source code is typically publicly available at no charge, and anyone who obtains copies has a license under certain of our intellectual property rights. Depending on the license, that may include access to certain of our patents, to modify and redistribute the software, and use it to compete in the marketplace. Certain open source software licenses require users to license to other any software that is based on, incorporates, or interacts with the open source software. Although we endeavor to comply fully with those requirements, third parties could claim we are required to license larger portions of our software than we intended. If such claims were successful, they could adversely impact our competitive position and financial results by providing our competitors with access to sensitive information that may help them develop competitive products without the degree of overhead and lead time required by traditional proprietary software development.

It is possible for competitors to use our open source project software to develop their own software, potentially reducing the demand for our solution and putting price pressure on our subscription offerings. We cannot guarantee that competitive pressure or the availability of new open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could harm our business, financial condition, operating results, and cash flows.

In addition, we use our own open source project software in our proprietary products. As a result, there is a risk that we may inadvertently release as open source certain code that was intended to be kept as proprietary, that reveals confidential information regarding the inner workings of our proprietary products, or that could enable competitors to more readily reverse engineer or replicate aspects of our proprietary technology that we would otherwise protect as trade secrets. We may also accept contributions from third parties to our open source projects, and it may be difficult for us to accurately determine the origin of the contributions and whether their use, including in our proprietary products, infringes, misappropriates, or violates third-party intellectual property or other rights. The availability of certain of our own software in source code form may also enable others to detect and exploit security vulnerabilities in our products. In addition, our use of open source software may harm our business and subject us to intellectual property claims, litigation, or proceedings in the future.

Risks Related to Regulatory Matters

We are subject to many laws and regulations, and violation of or changes in those requirements could materially and adversely affect our business.

We are subject to numerous U.S. and international laws and requirements regarding corporate conduct, fair competition, corruption prevention, import and export practices, and hazardous or restricted material use, storage, discharge, and disposal, including laws applicable to U.S. government contractors. We have incurred, and will continue to incur, costs and business process changes to comply with such regulations. While we maintain a rigorous corporate ethics and compliance program, we may be subject to increased regulatory scrutiny, significant monetary fines or penalties, suspension of business opportunities, loss of jurisdictional operating rights, and increased litigation and investigation costs as a result of any failure to comply with those requirements. If we identify that we have fallen out of compliance, we may proactively take corrective actions, including the filing of voluntary self-disclosure statements with applicable agencies, which could cause us to incur additional expenses and subject
22

Table of Contents
us to penalties and other consequences that could adversely affect our business, financial condition, and operating results. Our supply and distribution models may be reliant upon the actions of our third-party business partners and we may also be exposed to potential liability resulting from their violation of these or other compliance requirements. Further, our U.S. and international business models are based on currently applicable regulatory requirements and exceptions. Changes in those requirements or exceptions could necessitate changes to our business model. Any of these consequences could materially and adversely impact our business and results of operations.

Our actual or perceived failure to adequately protect personally identifiable information could adversely affect our business, financial condition, and operating results.

A variety of state, national, foreign, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, deletion, and other processing of personally identifiable information. These privacy- and data protection-related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations. Compliance with these laws and regulations can be costly and can delay or impede the development or implementation of new products or internal systems. Failure to comply could result in enforcement actions and significant penalties against us, which could result in negative publicity, increase our operating costs, and have a material adverse effect on our business, financial condition, and operating results.

General Risk Factors

We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

We face various risks related to public health issues, including epidemics, pandemics, and other outbreaks, including the COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have impacted and may continue to impact our workforce and operations, and those of our strategic partners, customers, suppliers, and logistics providers. These impacts have included and may include increased component, product, transportation, and overhead costs, increased logistics capacity and flexibility needs, decreased workforce availability, component supply, and product output, increased cybersecurity threats from remote work, and general economic downturns. We or our third-party business partners have been and may continue to be subject to government restrictions that impact our ability to continue efficient business operations. While we have taken many actions to mitigate the ongoing effects of the COVID-19 pandemic, we cannot guarantee that they will be sufficient to mitigate all related risks.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in more detail in this “Risk Factors” section, such as those relating to adverse global or regional conditions, our highly competitive industry, supply chain disruption, customer demand conditions and our ability to forecast demand, cost saving initiatives, our indebtedness and liquidity, and cyber-attacks.

If we fail to maintain proper and effective internal controls, material misstatements in our financial statements could occur, impairing our ability to produce accurate and timely financial statements and adversely affecting investor confidence in our financial reports, which could negatively affect our business.

If we fail to maintain proper and effective internal controls, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results in the future. Moreover, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all. If we are unable to provide reliable and timely financial reports in the future, our business and reputation may be further harmed. Restated financial statements and failures in internal control may also cause us to fail to meet reporting obligations or debt covenants, negatively affect investor confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity, any of which could have a negative effect on the price of our common stock, subject us to further regulatory investigations and penalties or stockholder litigation, and materially and adversely impact our business and financial condition.

We are exposed to fluctuations in foreign currency exchange rates, and an adverse change in foreign currency exchange rates relative to our position in such currencies could have a material adverse impact on our business, financial condition and results of operations.

23

Table of Contents
We do not currently use derivative financial instruments for speculative purposes. To the extent that we have assets or liabilities denominated in a foreign currency that are inadequately hedged or not hedged at all, we may be subject to foreign currency losses, which could be significant. Our international operations can act as a natural hedge when both operating expenses and sales are denominated in local currencies. In these instances, although an unfavorable change in the exchange rate of a foreign currency against the U.S. dollar would result in lower sales when translated to U.S. dollars, operating expenses would also be lower in these circumstances. The competitive price of our products relative to others could also be negatively impacted by changes in the rate at which a foreign currency is exchanged for U.S. dollars. Such fluctuations in currency exchange rates could materially and adversely affect our business, financial condition and results of operations.

If the future outcomes related to the estimates used in recording tax liabilities to various taxing authorities result in higher tax liabilities than estimated, then we would have to record tax charges, which could be material.

We have provided amounts and recorded liabilities for probable and estimable tax adjustments required by various taxing authorities in the U.S. and foreign jurisdictions. If events occur that indicate payments of these amounts will be less than estimated, then reversals of these liabilities would create tax benefits recognized in the periods when we determine the liabilities have reduced. Conversely, if events occur which indicate that payments of these amounts will be greater than estimated, then tax charges and additional liabilities would be recorded. In particular, various foreign jurisdictions could challenge the characterization or transfer pricing of certain intercompany transactions. In the event of an unfavorable outcome of such challenge, material tax charges and adverse impacts on operating results could occur in the period in which the matter is resolved or an unfavorable outcome becomes probable and estimable.

Certain changes in stock ownership could result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. Should we undergo such a change in stock ownership, it would severely limit the usage of these carryover tax attributes against future income, resulting in additional tax charges, which could be material.

24

Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our headquarters are located in San Jose, California. We lease facilities in North America, Europe, and Asia Pacific. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations.



ITEM 3. LEGAL PROCEEDINGS
See Item 8 of Part II, “Financial Statements and Supplementary Data—Note 10: Commitments and Contingencies.”


ITEM 4. MINE SAFETY DISCLOSURE

None.

25

Table of Contents

PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is traded on the Nasdaq Global Market under the symbol "QMCO".


Holders of Record, and Dividends

As of June 1, 2022, we had 229 holders of record of our common stock.

Dividends

We have no intention of paying cash dividends in the foreseeable future. Our ability to pay dividends is restricted by the covenants in our senior secured term loan and amended credit facility agreements. See the section captioned “Liquidity and Capital Resources” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5: Debt to the consolidated financial statements.

Recent Sales of Unregistered Securities
During the period covered by this annual report, we did not sell any equity securities that were not registered under the Securities Act of 1933.

Issuer Purchases of Equity Securities
During the quarter ended March 31, 2022, there were no purchases of our common stock by or on behalf of us or any of our affiliated purchasers, as such term is defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended ("the "Exchange Act").
26

Table of Contents
Stock Performance Graph
The graph below compares the cumulative total return of a $100 investment in our common stock with the cumulative total return of the same investment in the Nasdaq and the S&P 500 Index from March 31, 2017 through March 31, 2022.

qtm-20220331_g2.jpg
27

Table of Contents
ITEM 6. [RESERVED]


28

Table of Contents
ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements, the accompanying notes, and other information included in this Annual Report. In particular, the risk factors contained in Item 1A may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources.

The following discussion contains forward-looking statements, such as statements regarding COVID-19's anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations. Please see "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements.

Overview and Fiscal Year 2022 Highlights

We are a technology company whose mission is to deliver innovative solutions to forward-thinking organizations across the world. We design, manufacture and sell technology and services that help customers capture, create and share digital content, and protect it for decades. We emphasize innovative technology in the design and manufacture of our products to help our customers unlock the value in their video and unstructured data in new ways to solve their most pressing business challenges.

We generate revenue by designing, manufacturing, and selling technology and services. Our most significant expenses are related to compensating employees; designing, manufacturing, marketing, and selling our products and services; data center costs in support of our cloud-based services; and income taxes.

Highlights from fiscal year 2022 included:

We announced a new partnership with Supermicro and our ActiveScale 6.0 software and storage platform, as we expand our Object Storage line of business.

We completed the Pivot3 business acquisition, which adds a portfolio of industry leading hyperconverged infrastructure (HCI) and intelligent software solutions for the security and surveillance markets.

We completed the EnClouden assets acquisition which will enable us to expand the addressable market for our video surveillance portfolio, offering customers a solution using their server hardware of choice with a flexible subscription-based software model.

We completed the refinancing of our term loan, significantly reducing our annual debt service and greatly increasing our financial flexibility related to covenants and restrictions.

We brought on industry veteran John Hurley as Chief Revenue Officer. John brings extensive experience working with the largest global enterprise, commercial, and service provider customers.

We announced a new collaboration and Remote Editing Solution for Adobe Premiere Pro Users.

We announced a partnership with IBM on the next generation of LTO technology in which we will collaborate with IBM in its development of LTO-10 tape drives and media in order to accelerate time-to-market, capacity, and performance.

We were awarded one Platinum and one Gold 'ASTORS' Homeland Security Award from American Security Today. The Annual 'ASTORS' Awards Program, is specifically designed to honor distinguished government and vendor solutions that deliver enhanced value, benefit, and intelligence to end-users in a variety of government, homeland security, enterprise, and public safety vertical markets.


COVID-19 IMPACT AND ASSOCIATED ACTIONS

Since the beginning of March 2020, COVID-19 has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread,
29

Table of Contents
including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders. These measures may remain in place for a significant period of time.

In light of these events, we have taken actions to protect the health and safety of our employees while continuing to serve our global customers as an essential business. We have implemented more thorough sanitation practices as outlined by health organizations and instituted mitigation practices at our locations around the world, including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and decreasing employee travel.

We have seen a gradual stabilization in our business during the second half of fiscal 2021 and into fiscal 2022 as customers increasingly adapted to the COVID-19 environment. However, COVID-19 has caused a significant disruption to the global supply chain, which continues to have a negative impact on our business. Before the current disruptions in the global supply chain our historical backlog was very limited and typically represented less than 5% of quarterly revenues. During our fourth fiscal quarter our backlog remained above $60 million for the second consecutive quarter, up from $50 million as of September 30, 2021, and $30 million as of June 30, 2021. Approximately 80% of the ending backlog represented tape products a majority of which is for orders from our hyperscale customers. We anticipate that supply chain constraints will remain challenging, limiting our ability to ship against all customer demand and recognize a meaningful portion of the current backlog.

We will continue to actively monitor the impact of COVID-19 and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. See “The recent COVID-19 pandemic could adversely affect our business, results of operations and financial condition” in Item 1A for more information regarding the risks we face as a result of the COVID-19 pandemic.


RESULTS OF OPERATIONS
Year Ended March 31,
(in thousands)202220212020
Total revenue$372,827 $349,576 $402,949 
Total cost of revenue (1)
225,792 198,823 230,441 
Gross profit147,035 150,753 172,508 
Operating expenses
Research and development (1)
51,812 41,703 36,301 
Sales and marketing (1)
62,957 54,945 59,524 
General and administrative (1)
45,256 42,001 54,457 
Restructuring charges850 3,701 1,022 
Total operating expenses160,875 142,350 151,304 
Income (loss) from operations(13,840)8,403 21,204 
Other expense, net(251)(1,312)(261)
Interest expense(11,888)(27,522)(25,350)
Loss on debt extinguishment, net(4,960)(14,789)— 
Loss before income taxes(30,939)(35,220)(4,407)
Income tax provision1,341 239 803 
Net loss$(32,280)$(35,459)$(5,210)
(1) Includes stock-based compensation as follows:
30

Table of Contents
Year Ended March 31,
(in thousands)202220212020
Cost of revenue$1,112 $672 $452 
Research and development5,843 2,881 984 
Sales and marketing2,516 1,757 1,165 
General and administrative4,358 4,314 4,147 
   Total$13,829 $9,624 $6,748 

Comparison of the Years Ended March 31, 2022 and 2021

Revenue
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Product revenue
   Secondary storage systems$117,688 32 %$89,000 25 %$28,688 32 %
   Primary storage systems56,043 15 %69,644 20 %$(13,601)(20)%
   Devices and media50,030 13 %51,164 15 %(1,134)(2)%
      Total product revenue$223,761 60 %$209,808 60 %$13,953 %
Service and subscription revenue133,689 36 %124,904 36 %8,785 %
Royalty revenue15,377 %14,864 %513 %
Total revenue$372,827 100 %$349,576 100 %$23,251 %

Product Revenue
In fiscal 2022, product revenue increased $14.0 million, or 7%, as compared to fiscal 2021. Secondary storage systems increased by 32%, driven by increased demand from our large hyperscale customers, as well as continued strong demand globally for data protection and archive solutions. Primary storage systems decreased 20%, driven by large end-of-life purchases in the prior year. Devices and media decreased $1.1 million driven partially by decreased supply of LTO tape drives.
Service and Subscription Revenue
Service and subscription revenue increased $8.8 million, or 7%, in fiscal 2022 compared to fiscal 2021. This increase was due in part to acquisitions made during fiscal 2022. The increase also reflects a shift to subscription-based software licensing.
Royalty Revenue
We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium. Royalty revenue increased $0.5 million, or 3%, in fiscal 2022, as compared to fiscal 2021, related to shifts in market unit volumes towards more recent technologies such as LTO9 and LTO8.

31

Table of Contents
Gross Profit and Margin
Year Ended March 31,
(in thousands)2022Gross
margin %
2021Gross
margin %
$ ChangeBasis point change
Product gross profit$53,981 24.1 %$59,551 28.4 %$(5,570)(430)
Service and subscription gross profit77,677 58.1 %76,338 61.1 %1,339 (300)
Royalty gross profit15,377 100.0 %14,864 100.0 %513 — 
Gross profit$147,035 39.4 %$150,753 43.1 %$(3,718)(370)

Product Gross Margin
Product gross margin decreased 430 basis points for fiscal 2022, as compared with the same period in 2021. This decrease was due primarily to an increase in materials cost and freight, as global supply chain constraints disrupted normal procurement channels. Our product mix was also more heavily weighted to lower margin solutions.
Service and subscription gross margin decreased 300 basis points for fiscal 2022, as compared with the same period in 2021. This decrease was due primarily to increased costs for freight and repair on replacement parts.
Royalty Gross Margin
Royalties do not have significant related cost of sales.

Operating expenses
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Research and development$51,812 14 %$41,703 12 %$10,109 24 %
Sales and marketing62,957 17 %54,945 16 %8,012 15 %
General and administrative45,256 12 %42,001 12 %3,255 %
Restructuring charges850 — %3,701 %(2,851)(77)%
   Total operating expenses$160,875 43 %$142,350 41 %$18,525 13 %

In fiscal 2022, research and development expense increased $10.1 million, or 24%, as compared with fiscal 2021. This increase was partially attributable to acquisitions made during fiscal 2022 which broaden our portfolio in the video surveillance and media and entertainment markets. We have also invested in a partnership with IBM to develop the next generation LTO technology.
In fiscal 2022, sales and marketing expenses increased $8.0 million, or 15%, as compared with fiscal 2021. This increase was partially driven by acquisitions made during fiscal 2022, expanding us into new markets. Marketing program spend also increased as in-person events started to occur again after a halt in the previous year.
In fiscal 2022, general and administrative expenses increased $3.3 million, or 8%, as compared with fiscal 2021. This increase was driven primarily by one-time legal and financial expenses related to acquisitions.
In fiscal 2022, restructuring expenses decreased $2.9 million, or 77%, as compared with fiscal 2021. This decrease is driven by corporate restructuring activities in the prior year as we consolidated our physical footprint and operations in certain markets.

Other expense, net
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Other expense, net$(251)%$(1,312)%$(1,061)(81)%
32

Table of Contents

In fiscal 2022, other expense, net decreased $1.1 million or 81%, compared to fiscal 2021. The decrease was primarily related to differences in foreign currency gains and losses during each period.

Interest expense
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Interest expense(11,888)(3)%(27,522)(8)%(15,634)(57)%

In fiscal 2022, interest expense decreased $15.6 million, or 57%, as compared to fiscal 2021. This decrease was primarily due to a lower principal balance and a lower effective interest rate on our Term Loan.

Loss on debt extinguishment, net
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Loss on debt extinguishment, net(4,960)(1)%(14,789)(4)%(9,829)(66)%

In fiscal 2022, loss on debt extinguishment, net was related to prepayment of our Senior Secured Term Loan that occurred during the period offset by the $10.0 million gain on the forgiveness of the Paycheck Protection Program loan. In fiscal 2021, we incurred a loss on debt extinguishment related to our Senior Secured Term Loan.

Income tax provision
Year Ended March 31,
(in thousands)2022% of
revenue
2021% of
revenue
$ Change% Change
Income tax provision$1,341 — %$239 — %$1,102 461 %

Our income tax provision is primarily influenced by foreign and state income taxes. In fiscal 2022, the income tax provision increased $1.1 million or 461%, compared to fiscal 2021, related primarily to higher current foreign taxes as a result of an increase in foreign taxable income.
Due to our history of net losses in the U.S., the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgement is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.

33

Table of Contents
Comparison of the Years Ended March 31, 2021 and 2020

Revenue
Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Product revenue
   Secondary storage systems$89,000 25 %$111,672 28 %$(22,672)(20)%
   Primary storage systems69,644 20 %77,152 19 %$(7,508)(10)%
   Devices and media51,164 15 %62,344 15 %(11,180)(18)%
      Total product revenue$209,808 60 %$251,168 62 %$(41,360)(16)%
Service and subscription revenue124,904 36 %131,050 33 %(6,146)(5)%
Royalty revenue14,864 %20,731 %(5,867)(28)%
Total revenue$349,576 100 %$402,949 100 %$(53,373)(13)%

Product Revenue
In fiscal 2021, product revenue decreased $41.4 million, or 16%, as compared to fiscal 2020. Secondary storage systems decreased by 20%, driven by fluctuating purchase cycles with our hyperscale customers. Primary storage systems decreased 10%, driven by early disruption in the media and entertainment market as COVID-19 significantly decreased major television and film production. Devices and media decreased $11.2 million driven partially by unusually high demand in fiscal 2020 following the resolution of a legal dispute, which had caused a constraint on LTO tape supply between the two principal suppliers in the market.
Service and Subscription Revenue
Service revenue decreased $6.1 million, or 5%, in fiscal 2021 compared to fiscal 2020. This decrease was due to reduced support renewals from our legacy backup customers, partially offset by new customer support agreements and installations.
Royalty Revenue
We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium. Royalty revenue decreased $5.9 million, or 28%, in fiscal 2021, as compared to fiscal 2020, related to overall declines in market unit volumes as the primary use of tape transitions from backup to archive workflows.

Gross Profit and Margin
Year Ended March 31,
(in thousands)2021Gross
margin %
2020Gross
margin %
$ ChangeBasis point change
Product gross profit$59,551 28.4 %$71,408 28.4 %$(11,857)— 
Service and subscription gross profit76,338 61.1 %80,369 61.3 %(4,031)(20)
Royalty gross profit14,864 100.0 %20,731 100.0 %(5,867)— 
Gross profit$150,753 43.1 %$172,508 42.8 %$(21,755)30 

Product Gross Margin
Product gross margin was flat comparing fiscal 2021 to fiscal 2020.
Service and Subscription Gross Margin
Service and subscription gross margin decreased 20 basis points for fiscal 2021, as compared with the same period in 2020. This decrease was due primarily to reduced service and subscription revenues from some of our legacy backup customers, partially offset by a reduction in service and subscription costs.
34

Table of Contents
Royalty Gross Margin
Royalties do not have significant related cost of sales.

Operating expenses
Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Research and development$41,703 12 %$36,301 %$5,402 15 %
Sales and marketing54,945 16 %59,524 15 %(4,579)(8)%
General and administrative42,001 12 %54,457 14 %(12,456)(23)%
Restructuring charges3,701 %1,022 — %2,679 262 %
   Total operating expenses$142,350 41 %$151,304 38 %$(8,954)(6)%

In fiscal 2021, research and development expense increased $5.4 million, or 15%, as compared with fiscal 2020. This increase was partially attributable to an increase in research and development headcount and professional services cost related to new product development. Most notably this includes headcount related to business acquisitions and integration of the associated development teams.
In fiscal 2021, sales and marketing expenses decreased $4.6 million, or 8%, as compared with fiscal 2020. This decrease was driven by a decrease in compensation as the result of lower sales performance and a decrease in marketing programs and professional services costs. Travel expenses were also significantly reduced during the fiscal year due to restrictions from the COVID-19 pandemic.
In fiscal 2021, general and administrative expenses decreased $12.5 million, or 23%, as compared with fiscal 2020. This decrease was driven primarily by lower costs related to our prior financial restatement and related activities, which we primarily incurred during fiscal 2019 and fiscal 2020 and decreased facilities expenses as we consolidate our physical footprint. These decreases were partially offset by increases to software expense as we modernize our existing IT infrastructure.
In fiscal 2021, restructuring expenses increased $2.7 million, or 262%, as compared with fiscal 2020. This increase was primarily due to footprint and associated headcount reductions that occurred in fiscal 2021, as well as changes in key leadership positions.

Other expense, net
Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Other expense$(1,312)%$(261)%$1,051 403 %
Interest expense(27,522)(8)%(25,350)(6)%2,172 %
Loss on debt extinguishment, net(14,789)(4)%— — %14,789 100 %

In fiscal 2021, other expense, net increased $1.1 million or 403%, compared to fiscal 2020. The increase was primarily related to differences in foreign currency gains and losses during each period.

Interest expense
Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Interest expense(27,522)(8)%(25,350)(6)%2,172 %

In fiscal 2021, interest expense increased $2.2 million, or 9%, as compared to fiscal 2020. This increase was primarily due to a higher average principal balance of our outstanding debt.
35

Table of Contents

Loss on debt extinguishment, net
Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Loss on debt extinguishment, net(14,789)(4)%— — %14,789 100 %

In fiscal 2021, we incurred a loss on debt extinguishment related to our Senior Secured Term Loan.

Income tax provision

Year Ended March 31,
(in thousands)2021% of
revenue
2020% of
revenue
$ Change% Change
Income tax provision$239 — %$803 — %$(564)(70)%

Our income tax provision is primarily influenced by foreign and state income taxes. In fiscal 2021, the income tax provision decreased $0.6 million or 70%, compared to fiscal 2020, related primarily to a valuation allowance recorded in fiscal 2020 for certain foreign deferred tax assets. 
Due to our history of net losses in the U.S., the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgement is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.



Liquidity and Capital Resources

We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities. Our principal sources of liquidity include cash from operating activities, cash and cash equivalents on our balance sheet and amounts available under our Amended PNC Credit Facility (as defined below). We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures. Our future liquidity requirements will depend on multiple factors, including our research and development plans and capital asset needs. We are subject to the risks arising from COVID-19 which have caused substantial financial market volatility and have adversely affected both the U.S. and the global economy. We believe that these social and economic impacts have had a negative effect on sales due to the decline in certain of our customers' ability or willingness to purchase our products and services. We have also experienced negative impacts on sales due to global supply chain constraints which has resulted in a significant increase in our sales backlog compared to our historical levels. The extent of the impacts will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue. We expect the impact of COVID-19 to continue to have a significant impact on our liquidity and capital resources.

We had cash and cash equivalents of $5.2 million as of March 31, 2022, compared to $27.4 million as of March 31, 2021. These amounts exclude $0.0 and $5.0 million in long-term restricted cash that we were required to maintain under our PNC Credit Facility, and $0.3 million and $0.7 million of short-term restricted cash as of March 31, 2022 and March 31, 2021, respectively. As of March 31, 2022 we had $5.0 million available to borrow under the PNC Credit Agreement.

We generated negative cash flows from operations of approximately $33.7 million, $0.8 million and $1.2 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively, and generated net losses of approximately
36

Table of Contents
$32.3 million, $35.5 million, and $5.2 million for the fiscal years ended March 31, 2022, 2021 and 2020, respectively. We have funded operations through the sale of common stock, term debt borrowings, revolving credit facility borrowings and proceeds from the Paycheck Protection Program Loan described in Note 5: Debt. Management believes that it has the ability to obtain additional debt or equity financing, if required, and has historically been able to do so. Management also believes that current working capital, borrowings available under the revolving credit facility and future equity financing (including the April 22, 2022 sale of 30 million shares of our common stock for gross proceeds of $67.5 million) or debt financing will provide the Company with sufficient capital to fund operations for at least one year from the financial statement issuance date. There is no assurance that we would be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to us.

Our outstanding long-term debt amounted to $107.2 million as of March 31, 2022, net of $4.9 million in unamortized debt issuance costs and $4.4 million in current portion of long-term debt, and $90.9 million as of March 31, 2021 net of $9.7 million in unamortized debt issuance costs and $1.9 million in current portion of long-term debt.

We are subject to various debt covenants under our debt agreements. Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations. On March 15, 2022, we received waivers of our financial covenants under our term debt and PNC Credit Facility. We believe we were in compliance with all covenants under our debt agreements as of the date of filing of this Annual Report on Form 10-K. See "Risks Related to our Indebtedness" section of Item 1A. Risk Factors.

Cash Flows

The following table summarizes our consolidated cash flows for the periods indicated.
 Year Ended March 31,
( in thousands)202220212020
Cash provided by (used in):
   Operating activities(33,728)(767)$(1,181)
   Investing activities(14,124)(9,586)(4,599)
   Financing activities20,157 31,328 1,211 
   Effect of exchange rate changes(108)(108)(16)
Net change in cash, cash equivalents, and restricted cash$(27,803)$20,867 $(4,585)

Net Cash Used in Operating Activities

Net cash used in operating activities was $33.7 million for the year ended March 31, 2022, primarily attributable to $30.5 million of changes in assets and liabilities due primarily to working capital requirements due to higher inventories and prepaid expenses.

Net cash used in operating activities was $0.8 million for the year ended March 31, 2021, primarily attributable to cash provided by operating activities excluding changes in assets and liabilities of $3.6 million offset by working capital changes.

Net cash used in operating activities was $1.2 million for the year ended March 31, 2020, primarily attributable $20.9 million of changes in assets and liabilities due primarily to lower deferred revenue and an increase in manufacturing inventories offset by cash provided by operating activities excluding changes in assets and liabilities.

Net Cash Used in Investing Activities

Net cash used in investing activities was $14.1 million for the year ended March 31, 2022, primarily attributable to $7.8 million of business acquisitions and $6.3 million of capital expenditures.

Net cash used in investing activities was $9.6 million for the year ended March 31, 2021, primarily attributable to $6.9 million of capital expenditures and $2.7 million for a business acquisition.
37

Table of Contents

Net cash used in investing activities was $4.6 million for the year ended March 31, 2020, primarily attributable to $2.6 million of capital expenditures and $2.0 million for a business acquisition.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $20.2 million for the year ended March 31, 2022 due primarily to $17.7 million of borrowings under PNC Credit Facility.

Net cash provided by financing activities was $31.3 million for the year ended March 31, 2021 due primarily to a secondary equity offering which generated net proceeds of $96.8 million, term loan borrowings of $19.4 million (net of lender fees of $0.6 million), $10.0 million in borrowings under the Paycheck Protection Program, offset in part by the prepayment of $92.3 million of our term debt.

Net cash provided by financing activities was $1.2 million for the year ended March 31, 2020 related primarily to net borrowings under the Amended PNC Credit Facility offset by principal repayments on our term debt.

Commitments and Contingencies
Our contingent liabilities consist primarily of certain financial guarantees, both express and implied, related to product liability and potential infringement of intellectual property. We have little history of costs associated with such indemnification requirements and contingent liabilities associated with product liability may be mitigated by our insurance coverage. In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties with respect to certain matters, such as intellectual property infringement or other claims. We also have indemnification agreements with our current and former officers and directors. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims, and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.

We are also subject to ordinary course of business litigation, See Note 10: Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Contractual Obligations

Contractual obligations are cash amounts that we are obligated to pay as part of certain contracts that we have entered into during the normal course of business. Below is a table that shows our contractual obligations as of March 31, 2022 (in thousands):
Payments Due by Period
(in thousands)Total1 year or less1 – 3 Years3 –5 YearsMore than
5 years
Debt obligations (1)
$149,186 $12,355 $24,972 $111,859 $— 
Future lease commitments (2)
24,137 2,638 4,141 2,902 14,456 
Purchase obligations (3)
64,601 64,601 — — — 
     Total$237,924 $79,594 $29,113 $114,761 $14,456 

(1) Consists of (i) principal and interest payments on our term loan based on the amount outstanding and interest rates in effect at March 31, 2022, and (ii) principal, interest, and unused commitment fees on our PNC Credit Facility based on the amount outstanding and rates in effect at March 31, 2022.

(2) Represents aggregate future minimum lease payments under non-cancelable operating leases.

(3) Includes primarily non-cancelable inventory purchase commitments.


38

Table of Contents
Off-Balance Sheet Arrangements

We do not currently have any other off-balance sheet arrangements and do not have any holdings in variable interest entities.


CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We consider the following accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change. The following accounting policies include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain. For information on our significant accounting policies, including the policies discussed below, see Note 1: Description of Business and Significant Accounting Policies, to our consolidated financial statements.

Revenue Recognition

Our revenue is derived from three main sources: (a) products, (b) service and subscription, and (c) royalties. Our performance obligations are satisfied at a point in time or over time as stand ready obligations. Product revenue is recognized at the point in time when the customer takes control of the product, which typically occurs at the point of shipment. Service and subscription revenue consists of customer support agreements, software subscriptions, installation, and consulting & training. Our software subscriptions include term licenses which are recognized as revenue when the license has been delivered to the customer and related customer support which is recognized ratably over the service period. Revenue from customer support agreements is recognized ratably over the contractual term of the agreement. Installation services are typically completed within a short period of time and revenue from these services are recognized at the point when installation is complete. A majority of the Company's consulting and training revenue does not take significant time to complete therefore these obligations are satisfied upon completion of such services at a point in time. We license certain products under royalty arrangements, pursuant to which our licensees periodically provide us with reports containing units sold to end users subject to the royalties. The reports substantiate that our performance obligation has been satisfied and we recognize royalty revenue based on the reports or when amounts can be reasonably estimated.

There are significant judgements used when applying ASC Topic 606 to contracts with customers. Most of our contracts contain multiple goods and services designed to meet each customers’ unique storage needs. For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price of the good or service underlying each performance obligation. Where standalone selling price may not be directly observable (e.g., the performance obligation is not sold separately), we maximize the use of observable inputs by using information including reviewing discounting practices, performance obligations with similar customers and product groupings. We determined that invoice price is the best representation of what we expect to receive from the delivery of each performance obligation. This judgment is based on the fact that each storage solution is customizable to meet an individual customer’s needs and every product’s transaction price can vary depending on the mix of other products included in the same purchase order and there are no identifiable trends that provide a good representation of expected margin for each product.
Product revenue may be impacted by a variety of price adjustments or other factors, including rebates, returns and stock rotation. We use the expected value method to estimate the net consideration expected to be returned by the customer. We use historical data and current trends to drive our estimates. We record a reduction to revenue to account for these items that may result in variable consideration. We initially measure a returned asset at the carrying amount of the inventory, less any expected costs to recover the goods including potential decreases in value of the returned goods.

Income Taxes

39

Table of Contents
Deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities, measured at the enacted tax rates expected to apply to taxable income in the years in which those tax assets or liabilities are expected to be realized or settled. Based on the evaluation of available evidence, both positive and negative, we recognize future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not.

A valuation allowance is provided if we believe it is more likely than not that all or some portion of the deferred tax asset will not be realized. An increase or decrease in the valuation allowance, if any, that results from a change in circumstances, and which causes a change in our judgment about the realizability of the related deferred tax asset, is included in the tax provision.

We recognize the financial statement effects of an uncertain income tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances and changes in tax law. We recognize penalties and tax-related interest expense as a component of income tax expense in our consolidated statements of operations. See Note 9: Income Taxes, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Inventories

Manufacturing Inventories

Our manufacturing inventory is recorded at the lower of cost or net realizable value, with cost being determined on a first-in, first-out (“FIFO”) basis. Costs include material, direct labor, and an allocation of overhead. Adjustments to reduce the cost of manufacturing inventory to its net realizable value, if required, are made for estimated excess, obsolete or impaired balances. Factors influencing these adjustments include declines in demand, rapid technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. Revisions to these adjustments would be required if these factors differ from our estimates.

Service Parts Inventories

Our service parts inventories are recorded at the lower of cost or net realizable value, with cost being determined on a FIFO basis. Service parts inventories consist of both component parts, which are primarily used to repair defective units, and finished units, which are provided for customer use permanently or on a temporary basis while the defective unit is being repaired. We record adjustments to reduce the carrying value of service parts inventory to its net realizable value and dispose of parts with no use and a net realizable value of zero. Factors influencing these adjustments include product life cycles, end of service life plans and the volume of enhanced or extended warranty service contracts. Estimates of net realizable value involve significant estimates and judgments about the future, and revisions would be required if these factors differ from our estimates.

Business Acquisitions, Goodwill and Acquisition-Related Intangible Assets

We allocate the purchase price to the intangible and tangible assets acquired and liabilities assumed in a business combination at their estimated fair values on the date of acquisition, with the excess recorded to goodwill. We use our best estimates and assumptions to assign fair value to the assets acquired and liabilities assumed as well as the useful lives of the acquired intangible assets. Examples of critical estimates in valuing certain intangible assets we have acquired include, but are not limited to, future expected cash flows, expected technology life cycle, attrition rates of customers, and discount rates. We estimate the useful lives of each intangible asset based on the expected period over which we anticipate generating economic benefit from the asset. The amounts and useful lives assigned to acquired intangible assets impact the amount and timing of future amortization expense.

While we use our best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the estimated fair value of the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the consolidated statements of operations.
40

Table of Contents

Recently Issued and Adopted Accounting Pronouncements

For recently issued and adopted accounting pronouncements, see Note 1: Description of Business and Significant Accounting Policies, to our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Interest Rate Risk

We are subject to interest rate risk on borrowings under our variable interest rate term debt and PNC Credit Facility. See Note 5: Debt to our consolidated financial statements for a description of our long term debt. Changes in the market interest rate will increase or decrease our interest expense. Assuming no change in the outstanding borrowings under the term debt and the PNC Credit Facility during fiscal 2023, a hypothetical 100-basis point increase or decrease in market interest rates sustained throughout the year would not result in a material change to our annual interest expense. Our other long-term debt related to lease obligations have fixed interest rates and terms, and as such, we consider the associated risk to our results of operations from changes in market rates of interest applied to our lease obligations to be minimal.

Foreign Exchange Risk

We conduct business in certain international markets. Because we operate in international markets, we have exposure to different economic climates, political arenas, tax systems and regulations that could affect foreign exchange rates. Our primary exposure to foreign currency risk relates to transacting in foreign currency and recording the activity in U.S. dollars. Changes in exchange rates between the U.S. dollar and these other currencies will result in transaction gains or losses, which we recognize in our consolidated statements of operations.

To the extent practicable, we minimize our foreign currency exposures by maintaining natural hedges between our assets and liabilities and revenues and expenses denominated in foreign currencies. We may enter into foreign exchange derivative contracts or other economic hedges in the future. Our goal in managing our foreign exchange risk is to reduce to the extent practicable our potential exposure to the changes that exchange rates might have on our earnings.




41

Table of Contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page

42

Table of Contents
Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders
Quantum Corporation
San Jose, California


Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Quantum Corporation and its subsidiaries (the Company) as of March 31, 2022 and 2021 and the related consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for each of the years in the three year period ended March 31, 2022, and the related notes (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2022, based on the criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
43

Table of Contents
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.


Revenue Recognition — Refer to Note 1 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company recognizes revenue from sales of products as control is transferred to customers, which generally occurs at the point of shipment or upon delivery, unless customer acceptance is uncertain. Revenue from distributors is recognized when the customer obtains control of the product, which generally occurs at the point of shipment or upon delivery, unless customer acceptance is uncertain. Net sales for the fiscal year ended March 31, 2022 was $372.8 million, which principally consist of product sales.

We identified the timing of revenue recognition for product sales (i.e., whether the Company recorded product sales in the appropriate fiscal year) as a critical audit matter because of the significant judgment used when applying Accounting Standards Codification Topic 606 – Revenue from Contracts with Customers – to contracts with customers. The Company utilizes a broad network of distributors, value-added resellers ("VARs"), direct marketing resellers ("DMRs"), original equipment manufacturers ("OEMs") and other suppliers ship products and fulfill performance obligations. This made auditing the timing of revenue recognition for product sales challenging and required significant audit effort to validate the timing of revenue recognition.


44

Table of Contents
How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the timing of revenue recognition for product sales included the following, among others:

We tested the effectiveness of internal controls over the timing of revenue recognition.

We selected a sample of product sales obtained the invoice, purchase order, customer contract or agreement, packing list, bill of lading, proof of delivery, and evidence of cash collection, to validate revenue was recognized in the appropriate fiscal year.

We selected a sample of product sales for the year and examined the related contract to validate no customer acceptance clauses existed that would preclude revenue recognition.

We selected a sample of credit memos from the period immediately subsequent to the Company’s fiscal year end and the related invoice, return merchandise authorization form, and shipping documents, to and validated revenue was recognized in the fiscal year ended March 31, 2022 only when control was transferred to the customer and if applicable, customer acceptance had occurred.

We obtained and evaluated internal certifications provided by the Company’s sales employees to validate no side agreements existed that could impact the timing of revenue recognition.
45

Table of Contents

Inventories – Excess and Obsolescence Reserve — Refer to Note 1 to the Consolidated Financial Statements

Critical Audit Matter Description

The Company's manufacturing and service parts inventories are recorded on a first-in, first-out ("FIFO") basis, subject to the lower of cost or net realizable value, and as necessary, the Company writes down the valuation of inventories for excess and obsolescence. Provision for manufacturing and service inventories for the fiscal year ended March 31, 2022 was $20.8 million.

We identified the excess and obsolescence write-down as a critical audit matter because of the judgment's management makes to estimate the excess and obsolescence write-downs. This required a high degree of auditor judgment and significant effort to validate the methodology and the reasonableness of the excess and obsolescence write-downs.



How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s excess and obsolescence write-down included the following procedures, among others:

We tested the effectiveness of internal controls over inventory valuation.

We gained an understanding and evaluated the Company’s methodology for determining inventory that is excess or obsolete and the key assumptions and judgments made as part of the process.

We evaluated the assumptions used by the Company to define what is considered aged inventory by assessing historical trends in the Company’s product life cycle as well as evaluating the underlying calculations applied to the aged inventory.

We evaluated the inventory valuation utilizing the methodology above to assess the inventory write-down rate applied to different products.



/s/ ArmaninoLLP

San Ramon, California

June 8, 2022


We have served as the Company's auditor since 2019.



46

Table of Contents

QUANTUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31,
20222021
Assets
Current assets:
Cash and cash equivalents$5,210 $27,430 
Restricted cash283 707 
Accounts receivable, net of allowance for doubtful accounts of $422 and $406, respectively
69,354 73,102 
Manufacturing inventories33,546 24,467 
Service parts inventories24,254 23,421 
Prepaid expenses7,853 3,893 
Other current assets4,697 3,046 
Total current assets145,197 156,066 
Property and equipment, net12,853 10,051 
Intangible assets, net9,584 5,037 
Goodwill12,969 3,466 
Restricted cash 5,000 
Right-of-use assets, net11,107 9,383 
Other long-term assets9,925 5,921 
Total assets$201,635 $194,924 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$34,220 $35,245 
Deferred revenue86,517 84,027 
Long-term debt, current portion4,375 1,850 
Accrued compensation16,141 19,214 
Other accrued liabilities16,562 18,754 
Total current liabilities157,815 159,090 
Deferred revenue41,580 36,126 
Revolving credit facility17,735  
Long-term debt, net of current portion89,448 90,890 
Operating lease liabilities9,891 8,005 
Other long-term liabilities11,849 13,058 
Total liabilities328,318 307,169 
Commitments and Contingencies (Note 10)
Stockholders’ deficit
Preferred stock:
Preferred stock, 20,000 shares authorized; no shares issued as of March 31, 2022 and 2021
  
Common stock:
Common stock, $0.01 par value; 125,000 shares authorized; 60,433 and 56,915 shares issued and outstanding at March 31, 2022 and 2021, respectively
605 570 
Additional paid-in capital645,038 626,664 
Accumulated deficit(770,903)(738,623)
Accumulated other comprehensive loss(1,423)(856)
Total stockholders' deficit(126,683)(112,245)
Total liabilities and stockholders' deficit$201,635 $194,924 
The accompanying notes are an integral part of these consolidated financial statements.
47

Table of Contents

QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share amounts)
Year Ended March 31,
202220212020
Revenue
Product$223,761 $209,808 $251,168 
Service and subscription133,689 124,904 131,050 
Royalty15,377 14,864 20,731 
Total revenue372,827 349,576 402,949 
Cost of revenue
Product 169,780 150,257 179,760 
Service and subscription56,012 48,566 50,681 
Total cost of revenue225,792 198,823 230,441 
Gross profit147,035 150,753 172,508 
Operating expenses
Research and development51,812 41,703 36,301 
Sales and marketing62,957 54,945 59,524 
General and administrative45,256 42,001 54,457 
Restructuring charges850 3,701 1,022 
Total operating expenses160,875 142,350 151,304 
Income (loss) from operations
(13,840)8,403 21,204 
Other expense, net(251)(1,312)(261)
Interest expense(11,888)(27,522)(25,350)
Loss on debt extinguishment, net(4,960)(14,789) 
Net loss before income taxes
(30,939)(35,220)(4,407)
Income tax provision1,341 239 803 
Net loss$(32,280)$(35,459)$(5,210)
 
Net loss per share - basic and diluted$(0.55)$(0.83)$(0.14)
Weighted average shares - basic and diluted58,871 42,852 37,593 
Net loss$(32,280)$(35,459)$(5,210)
Foreign currency translation adjustments, net(567)666 (112)
Total comprehensive loss$(32,847)$(34,793)$(5,322)

The accompanying notes are an integral part of these consolidated financial statements.


48

Table of Contents
QUANTUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended March 31,
202220212020
Operating activities
Net loss
$(32,280)$(35,459)$(5,210)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization9,418 5,697 4,287 
Amortization of debt issuance costs2,414 6,301 4,017 
Long-term debt related costs8,471 167  
Paid-in-kind interest  1,858 
Provision for manufacturing and service inventories5,740 6,334 6,255 
Gain on PPP loan extinguishment(10,000)  
Stock-based compensation13,829 9,624 6,748 
Non-cash income tax benefit (577) 
Non-cash loss on debt extinguishment 10,087  
Other non-cash(832)704 1,807 
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable3,651 (1,625)15,237 
Manufacturing inventories(12,069)924 (11,092)
Service parts inventories(4,400)(5,879)(3,817)
Accounts payable(1,939)(1,994)(768)
Deferred revenue(2,514)418 (11,334)