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Quantum Reports First Quarter Fiscal 2024 Results


SAN JOSE, Calif. — August 8, 2023 — Quantum Corporation (Nasdaq: QMCO) announced today financial results for its fiscal first quarter ended June 30, 2023.

First Quarter Fiscal 2024 Financial Summary
•Revenue was $91.8 million, a decrease of 5% year-over-year
•GAAP gross margin was 38.1%, and non-GAAP gross margin expanded to 38.3%
•Subscription ARR was up 78% year-over-year at $14.6 million
•GAAP net loss was $10.6 million, or ($0.11) per share
•Non-GAAP adjusted net loss was $4.8 million, or ($0.05) per share
•Adjusted EBITDA increased to $0.8 million

Commenting on the results, Jamie Lerner, Quantum’s Chairman and CEO, stated, “First quarter revenue was impacted by booking delays; an unanticipated drop in Device and Media sales late in the quarter; and higher than anticipated weakness in the hyperscale vertical. Our subscription ARR in the quarter increased 78% year-over-year and 9% sequentially as we continue to advance recurring software subscriptions across our customer base.

“Despite the overall decline in quarterly revenue, our global efficiency plan and cost reduction initiatives helped to deliver a 790-basis point sequential improvement in gross margin and a reduction in operating expenses, which together contributed to both sequential and year over year increase in adjusted EBITDA.

“Subsequent to quarter-end, our largest hyperscale customer paused orders due to excess capacity driven by broader macro weakness. This development was unexpected and will have a meaningful impact on our second quarter and full year outlook and further punctuates the importance of transitioning our business to a more stable, subscription-based business model to moderate quarterly volatility.

“Our entire team is fully focused on executing with a high sense of urgency to secure and convert our expanding pipeline of opportunities into customers. This includes aggressively scaling our non-hyperscale businesses and ramping our full portfolio of end-to-end solutions. We are also further tightening spending across the organization, while maintaining our investment in key sales, marketing, and product development initiatives.”

First Quarter Fiscal 2024 vs. Prior Year

Revenue for the first quarter fiscal 2024 was $91.8 million, compared to $97.1 million in the prior year first quarter, primarily reflecting a decrease in Primary Storage Systems, Device and Media as well as lower Services business, partially offset by growth in hyperscale Secondary Storage Systems. GAAP gross profit in the first quarter of fiscal 2024 was $34.9 million, or 38.1% of revenue, compared to $34.0 million, or 35.1% of revenue, in the first quarter of fiscal 2023. Non-GAAP gross profit in the first quarter 2024 was $35.2 million, or 38.3% of revenue, compared to $34.5 million, or 35.5% of revenue, in the first quarter of fiscal 2023.

Total GAAP operating expenses in the first quarter of fiscal 2024 were $40.8 million, or 44% of revenue, compared to $41.1 million, or 42% of revenue, in the prior year. Selling, general and administrative expenses were $28.5 million in the quarter, compared to $28.3 million in the prior year. Research and development expenses were $10.9 million in the first quarter of fiscal 2024, compared to $12.1 million in the prior year. Non-GAAP operating expenses in the first quarter of 2024 decreased to $35.5 million from $36.3 million in the first quarter of fiscal 2023.

GAAP net loss in the first quarter of fiscal 2024 was $10.6 million, or ($0.11) per share, compared to a net loss of $10.6 million, or ($0.13) per share, in the first fiscal quarter 2023. Excluding acquisition-related intangible asset costs and stock-based compensation, non-GAAP adjusted net loss in the first fiscal quarter of 2024 was $4.8 million, or ($0.05) per share, compared to adjusted net loss of $3.6 million, or ($0.04) per share, in the prior year first quarter.



Adjusted EBITDA in the first quarter of fiscal 2024 improved to $0.8 million, compared to $0.3 million in the first quarter of fiscal 2023, reflecting the initial benefits from the Company’s recently implemented global efficiency plan and ongoing cost reduction initiatives.

For a reconciliation of GAAP to non-GAAP financial results, please see the financial reconciliation tables below.

Liquidity and Debt (as of June 30, 2023)

•Cash, cash equivalents and restricted cash were $25.7 million, compared to $26.8 million as of June 30, 2022.
•Total interest expense for the first quarter was $3.2 million compared to $2.1 million for the same period a year ago.
•Outstanding term loan debt was $88.6 million, compared to $78.4 million as of June 30, 2022. Outstanding borrowings on the revolving credit facility was $17.8 million, compared to $17.3 million as of June 30, 2022.

Guidance

For the second fiscal quarter of 2024, the Company now expects the following guidance:
•Revenues of $80.0 million, plus or minus $3.0 million
•Non-GAAP gross margin of approximately 42%
•Non-GAAP adjusted net loss per share of ($0.04), plus or minus $0.02
•Adjusted EBITDA of approximately $2.0 million

For the full fiscal year 2024, the Company expect the following outlook:
•Revenues of $360.0 million, plus or minus $10.0 million
•Non-GAAP gross margin of approximately 42%
•Non-GAAP adjusted net loss per share of ($0.06), plus or minus $0.02
•Adjusted EBITDA of approximately $17.0 million, plus or minus $3 million

Commenting on the guidance, CFO Ken Gianella stated, “Not reflected in our original full year outlook was more pronounced declines in both our hyperscale and media businesses as well as the potential impact of a prolonged entertainment work stoppage. Even with these extraordinary revenue headwinds, our total gross margins are improving with the rotation to a higher revenue contribution from Primary Storage and non-hyperscale Secondary Storage customers. Additionally, we are refining our full year adjusted EBITDA outlook from our prior forecast of at least $20 million, which despite the decline in revenue, reflects the meaningful benefits from our global efficiency plan, including disciplined manufacturing and service operations, as well as strong cost and discretionary spending controls.”

This full year outlook assumes an effective annual tax rate of 25%; Non-GAAP adjusted net loss per share assumes an average basic share count of approximately 93.9 million in the fiscal second quarter of 2024 and 94.6 million for fiscal 2024.

Conference Call and Webcast

Management will host a live conference call today, August 8, 2023, at 9:00 a.m. ET (6:00 a.m. PT) to discuss these results. The conference call will be accessible by dialing 866-424-3436 (U.S. Toll-Free) or +1-201-689-8058 (International) and entering conference ID 13740195. This conference call will be broadcast live over the Internet with a slide presentation and can be accessed by all interested parties on the investor relations section of the Company's website at investors.quantum.com under the events and presentations tab.

A telephone replay of the conference call will be available approximately two hours after the conference call and will be available through August 15, 2023. To access the replay dial 1-877-660-6853 and enter the conference ID 13740195 at the prompt. International callers should dial +1-201-612-7415 and enter the same conference ID. Following the conclusion of the live call, a replay of the webcast will be available on the Company's website at www.quantum.com for at least 90 days.

About Quantum



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

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

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results, including for the second fiscal quarter of
2024 and expected impact of our largest hyperscale customer pausing orders; our focus and our strategy; and our plans to scale and tighten spending.

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

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: risks related to the need to address the many challenges facing our business; the impact of macroeconomic and inflationary conditions on our business, including potential disruptions to our supply chain, employees, operations, sales and overall market conditions; the competitive pressures we face; risks associated with executing our strategy; the distribution of our products and the delivery of our services effectively; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the outcome of any claims and disputes; and other risks that are described herein, including but not limited to the items discussed in “Risk Factors” in our filings with the Securities and Exchange Commission (the “SEC”), including our Form 10-K filed with the Securities and Exchange Committee for the fiscal year ended March 31, 2023, and any subsequent reports filed with the SEC. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law or regulation.

Investor Relations Contacts:
Shelton Group
Leanne K. Sievers | Brett L. Perry
E: sheltonir@sheltongroup.com



QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
June 30, 2023March 31, 2023
Assets
Current assets:
Cash and cash equivalents$25,465 $25,963 
Restricted cash200 212 
Accounts receivable, net of allowance for doubtful accounts of $163 and $201, respectively66,245 72,464 
Manufacturing inventories20,017 19,441 
Service parts inventories25,276 25,304 
Prepaid expenses6,444 4,158 
Other current assets6,004 5,513 
Total current assets149,651 153,055 
Property and equipment, net 15,583 16,555 
Intangible assets, net 3,801 4,941 
Goodwill 12,969 12,969 
Right-of-use assets, net10,017 10,291 
Other long-term assets18,463 15,846 
Total assets$210,484 $213,657 
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable$30,560 $35,716 
Deferred revenue, current portion79,686 82,504 
Long-term debt, current portion5,000 5,000 
Accrued compensation14,894 15,710 
Other accrued liabilities12,715 13,666 
Total current liabilities142,855 152,596 
Deferred revenue, net of current portion43,903 43,306 
Revolving credit facility17,800 16,750 
Long-term debt, net of current portion77,814 66,354 
Operating lease liabilities10,001 10,169 
Other long-term liabilities12,191 11,370 
Total liabilities304,564 300,545 
Stockholders' deficit
Preferred stock, 20,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.01 par value; 225,000 shares authorized; 93,705 and 93,574 shares issued and outstanding
938 936 
Additional paid-in capital725,736 722,603 
Accumulated deficit(819,422)(808,846)
Accumulated other comprehensive loss(1,332)(1,581)
Total stockholders’ deficit(94,080)(86,888)
Total liabilities and stockholders’ deficit$210,484 $213,657 




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

Three Months Ended June 30,
20232022
Revenue:
   Product$57,447 $60,211 
   Service and subscription31,375 33,423 
   Royalty2,965 3,440 
      Total revenue91,787 97,074 
Cost of revenue:
   Product44,451 47,921 
   Service and subscription12,403 15,105 
      Total cost of revenue56,854 63,026 
Gross profit34,933 34,048 
Operating expenses:
   Research and development10,913 12,125 
   Sales and marketing15,839 15,962 
   General and administrative12,699 12,314 
   Restructuring charges1,329 725 
      Total operating expenses40,780 41,126 
Loss from operations(5,847)(7,078)
Other income (expense), net(998)751 
Interest expense(3,201)(2,091)
Loss on debt extinguishment— (1,392)
Net loss before income taxes(10,046)(9,810)
Income tax provision530 410 
Net loss$(10,576)$(10,220)
Deemed dividend on warrants— (389)
Net loss attributable to common stockholders$(10,576)$(10,609)
Net loss per share attributable to common stockholders$(0.11)$(0.13)
Weighted average shares - basic and diluted93,673 83,641 
Net loss$(10,576)$(10,220)
Foreign currency translation adjustments, net249 (1,276)
Total comprehensive loss$(10,327)$(11,496)








QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Three Months Ended June 30,
20232022
Operating activities
Net loss$(10,576)$(10,220)
  Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization2,752 2,586 
Amortization of debt issuance costs520 336 
Loss on debt extinguishment— 992 
Provision for product and service inventories516 1,631 
Stock-based compensation1,901 3,069 
Other734 (1,469)
Changes in assets and liabilities:
Accounts receivable, net6,255 4,677 
Manufacturing inventories(692)(412)
Service parts inventories(516)(1,384)
Prepaid expenses(2,287)(2,745)
Accounts payable (5,421)(175)
Accrued restructuring charges110 39 
Accrued compensation(816)(1,610)
Deferred revenue(2,221)(13,634)
Other current assets(487)6 
Other non-current assets(935)(261)
Other current liabilities(954)64 
Other non-current liabilities1,462 164 
Net cash used in operating activities(10,655)(18,346)
Investing activities
Purchases of property and equipment(2,299)(3,036)
Deferred business acquisition payment— (2,000)
Net cash used in investing activities(2,299)(5,036)
Financing activities
Borrowings of long-term debt, net of debt issuance costs14,100 — 
Repayments of long-term debt and payment of amendment fees(1,997)(20,846)
Borrowings of credit facility108,186 109,740 
Repayments of credit facility and payment of amendment fees(107,834)(110,575)
Proceeds from issuance of common stock, net(9)66,324 
Net cash provided by financing activities12,446 44,643 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2)29 
Net change in cash, cash equivalents and restricted cash (510)21,290 
Cash, cash equivalents, and restricted cash at beginning of period26,175 5,493 
Cash, cash equivalents, and restricted cash at end of period $25,665 $26,783 
Cash, Cash Equivalents and Restricted Cash at end of period
Cash and cash equivalents$25,465 $26,528 
Restricted cash, current200 255 
Cash and cash equivalents at the end of period$25,665 $26,783 




NON-GAAP FINANCIAL MEASURES

To provide investors with additional information regarding our financial results, we have presented certain non-GAAP financial measures in this press release, including adjusted EBITDA, non-GAAP adjusted net loss, non-GAAP adjusted net loss per share, non-GAAP operating expenses, non-GAAP gross profit and non-GAAP gross margin.

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

“GAAP net loss” as referred to in this press release represents “Net loss attributable to common stockholders”. Non-GAAP adjusted net income (loss) is a non-GAAP financial measure defined by us as net loss before restructuring charges, stock-based compensation expense, and other non-recurring (income) expenses. We calculate adjusted net income (Loss) per basic and diluted share using the above-referenced definition of adjusted net income (Loss).

We have provided below reconciliations of adjusted EBITDA, non-GAAP adjusted net loss, non-GAAP adjusted net loss per share, non-GAAP operating expenses, non-GAAP gross profit and non-GAAP gross margin, to the most directly comparable U.S. GAAP financial measures. We have presented adjusted EBITDA because it is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business performance. We believe adjusted net income (loss) and adjusted net income (loss) per basic and diluted share serve as appropriate measures to be used in evaluating the performance of our business and help our investors better compare our operating performance over multiple periods. Accordingly, we believe that the use of non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Our use of non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are as follows:

•Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•Adjusted EBITDA does not reflect: (1) interest and tax payments that may represent a reduction in cash available to us; (2) capital expenditures, future requirements for capital expenditures or contractual commitments; (3) changes in, or cash requirements for, working capital needs; (4) the potentially dilutive impact of stock-based compensation expense; (5) potential future costs related to our long-term debt; (6) potential future restructuring expenses; (7) potential future costs related to business acquisitions; (8) gain (loss) on debt extinguishment, (9) and acquisition-related amortization of intangibles assets from business combinations, (10) deemed dividend related to warrants, or (11) manufacturing inventory provisions.
•Adjusted net income (loss) does not reflect: (1) potential future restructuring activities; (2) the potentially dilutive impact of stock-based compensation expense; (3) potential future costs related to our long-term debt; (4) potential future costs related to business acquisitions; (5) gain (loss) on debt extinguishment; (6) acquisition-related amortization of intangibles assets from business combinations; (7) deemed dividend related to warrants; or (8) manufacturing inventory provisions.

Other companies, including companies in our industry, may calculate non-GAAP financial measures differently, which reduces its usefulness as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA and adjusted net income (loss) along with other U.S. GAAP-based financial performance measures, including various cash flow metrics and our U.S. GAAP financial results.

In addition, this press release includes non-GAAP adjusted net loss per share and adjusted EBITDA, each a non-GAAP measure used to describe our expected performance. We have not presented a reconciliation of these non-GAAP measures to our most comparable GAAP financial measures, because the reconciliation could not be prepared without unreasonable effort. The information necessary to prepare the reconciliations is not


available on a forward-looking basis and cannot be accurately predicted. The unavailable information could have a significant impact on the calculation of the comparable GAAP financial measure.

The tables below reconcile the non-GAAP financial measures of adjusted EBITDA, net income, diluted EPS, operating expenses and gross margin with the most directly comparable GAAP financial measures (in thousands, unaudited).

Adjusted EBITDA
Three Months Ended June 30,
20232022
Net loss attributable to common stockholders$(10,576)$(10,609)
Interest expense, net3,417 2,091 
Provision for income taxes530 410 
Depreciation expense1,625 1,422 
Stock-based compensation expense1,901 3,069 
Restructuring charges1,781 725 
Loss on extinguishment of Senior Secured Term Loan— 1,392 
Amortization of acquisition related intangible assets1,140 1,164 
Acquisition and debt related costs953 293 
Deemed dividend— 389 
Adjusted EBITDA$771 $346 

Non-GAAP adjusted net loss and net loss per share
Three Months Ended June 30,
20232022
Net loss attributable to common stockholders$(10,576)$(10,609)
Stock-based compensation1,901 3,069 
Restructuring charges1,781 725 
Loss on extinguishment of Senior Secured Term Loan— 1,392 
Amortization of acquisition related intangible assets1,140 1,164 
Acquisition and debt related costs953 293 
Deemed dividend— 389 
  Non-GAAP adjusted net loss$(4,801)$(3,577)
Non-GAAP adjusted net loss per share - basic and diluted$(0.05)$(0.04)
Weighted average shares outstanding - basic and diluted93,673 83,641 

Non-GAAP operating expenses
Three Months Ended June 30,
20232022
GAAP operating expenses40,780 41,126 
Stock compensation1,709 2,760 
Restructuring1,525 625 
Amortization of acquisition related intangible assets1,140 1,164 
Acquisition and debt related costs953 293 
Total Non-GAAP operating costs35,453 36,284 



Non-GAAP gross profit and non-GAAP gross margin
Three Months Ended June 30,
20232022
Total GAAP revenue91,787 97,074 
Cost of revenue
Product 44,451 47,921 
Service and subscription12,403 15,105 
Non-GAAP adjustments:  
   Stock compensation192 310 
   Restructuring52 90 
      Total Non-GAAP cost of revenue 56,610 62,626 
Non-GAAP gross profit35,177 34,448 
Non-GAAP gross margin38.3 %35.5 %