Exhibit 99.1

 
Quantum®       News Release
 

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

For Release:
August 1, 2013
1:05 p.m. PDT

 

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



QUANTUM CORPORATION REPORTS FISCAL FIRST QUARTER RESULTS

Highlights include:

SAN JOSE, Calif., Aug. 1, 2013 – Quantum Corp. (NYSE:QTM), a proven global expert in data protection and big data management, today reported results for the first quarter of fiscal 2014 (FQ1’14), ended June 30, 2013. Revenue for the quarter totaled $148 million, up 5 percent from the first quarter of fiscal 2013 (FQ1’13), primarily due to a $15 million one-time royalty payment associated with an intellectual property agreement. Quantum generated revenue of $31 million from disk system and software sales (including related service), a 2 percent increase over FQ1’13 driven mostly by growth of 23 percent in midrange DXi® revenue and 13 percent in big data sales.

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Quantum reported GAAP net income of $3 million, or 1 cent per diluted share, for FQ1’14, compared to a GAAP net loss of $17 million in the same quarter of last year. On a non-GAAP basis, the company had net income of $12 million, or 4 cents per diluted share, up from a net loss of $8 million a year earlier. The year-over-year increases were largely driven by the higher overall revenue.

“Our June quarter results clearly reflect the benefits of our strong intellectual property portfolio and the actions we’ve taken to drive growth and profit,” said Jon Gacek, president and CEO of Quantum. “With a few exceptions, our revenue performance was generally good and in line with our expectations, and we were particularly pleased by the double-digit growth we generated in midrange DXi and overall StorNext® revenue. We also significantly improved our gross margin rates and operating income, even without the additional royalty revenue resulting from the intellectual property agreement we concluded during the quarter.

“Moving forward we will maintain our balanced approach of driving revenue growth and spending wisely to generate cash and profit. This will include the continued expansion of our data protection and big data management offerings for physical, virtual and cloud environments, leveraging our technology leadership to help customers store, manage and quickly access their increasingly valuable digital content throughout its lifecycle.”

Quantum generated $9 million in cash from operations in FQ1’14, ending the quarter with $80 million in total cash and cash equivalents.

Outlook
For the second quarter of fiscal 2014, Quantum expects:

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Business Highlights
Key business highlights for the June quarter include the following:

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Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, Aug. 1, 2013, at 2:00 p.m. PDT, to discuss its fiscal first quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9867 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Aug. 1, 2013, at 2:00 p.m. PDT. Site for the webcast and related information: www.quantum.com/investors.

About Quantum
Quantum is a proven global expert in data protection and big data management, providing specialized storage solutions for physical, virtual and cloud environments. From small businesses to major enterprises, more than 100,000 customers have trusted Quantum to help maximize the value of their data by protecting and preserving it over its entire lifecycle. With Quantum, customers can Be Certain™ they’re able to adapt in a changing world – keeping more data longer, bridging from today to tomorrow, and reducing costs. See how at www.quantum.com.

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Quantum, the Quantum logo, Be Certain, DXi, Lattus, Scalar, StorNext, vmPRO and BlackBridge Stratus – Powered by Quantum are either registered trademarks or 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.

“Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, our statements regarding our go-forward business approaches and priorities, our product and technology expansion plans, expected product features and performance and all of our statements under the “Outlook” section are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum’s actual results to differ materially from those implied by the forward-looking statement. More detailed information about these risk factors, and additional risk factors, are set forth in Quantum’s periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled “Risk Factors” in Quantum’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 7, 2013. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

Quantum believes that the non-GAAP financial measures disclosed above provide useful and supplemental information to investors regarding its quarterly financial performance. Quantum management uses these non-GAAP financial measures internally to understand, manage and evaluate the company’s business results and make operating decisions. For instance, Quantum management often makes decisions regarding staffing, future management priorities and how the company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, compensation of our employees is based in part on the performance of our business based on non-GAAP operating income.

The non-GAAP financial measures used in this press release exclude the impact of acquisition expenses, amortization of intangibles, restructuring charges and share-based compensation expense for the following reasons:

Amortization of Intangible Assets
This includes acquired intangibles such as purchased technology and customer relationships in connection with prior acquisitions. These expenses are not factored into management’s evaluation of potential acquisitions or Quantum’s performance after completion of the acquisitions because they are not related to Quantum’s core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related charges from non-GAAP measures provides investors with a basis to compare Quantum against the performance of other companies without the variability caused by purchase accounting.

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Restructuring Charges
Restructuring charges primarily relate to expenses associated with changes to Quantum’s operating structure. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Quantum has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. Management believes that it is appropriate to exclude restructuring charges from Quantum’s non-GAAP financial measures, as it enhances the ability of investors to compare Quantum’s period-over-period operating results from continuing operations.

Share-Based Compensation Expense
Share-based compensation expense relates primarily to equity awards such as stock options and restricted stock units. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Quantum’s control. As a result, management excludes this item from Quantum’s internal operating forecasts and models. Management believes that non-GAAP measures adjusted for share-based compensation provide investors with a basis to measure Quantum’s core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used.

Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material impact on the company’s reported financial results and, therefore, should not be relied upon as the sole financial measures to evaluate the company. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

Note 1

In the first quarter of fiscal year 2014, Quantum identified an error related to the accounting for certain allowances for estimated future price adjustments to customers which impacted prior reporting periods. In addition, the company had previously identified errors related to the accrual for sales commissions that also impacted prior reporting periods. While these errors were not material to any previously issued annual or quarterly consolidated financial statements, management concluded that correcting the errors in the current quarter would be material to the current quarter’s consolidated financial statements. Quantum will revise its prior period annual and quarterly consolidated financial statements to correct the errors when next presented in future SEC filings.

In this earnings release, the company has revised the March 31, 2013 Condensed Consolidated Balance Sheet and the Condensed Consolidated Statements of Operations and Cash Flows for the quarter ended June 30, 2012 to record additional accounts receivable allowance for future price adjustments and revised sales commission expense. The net impact of the revision was to reduce the previously reported net loss for the quarter ended June 30, 2012 by $800,000 and increase the previously reported accumulated deficit and stockholders’ deficit at March 31, 2013 by $2.2 million.

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended June 30,
2013        2012
(Revised) Note 1
Revenue:
       Product $                  85,969 $            93,785
       Service 36,492 36,087
       Royalty 25,508 10,981
              Total revenue 147,969 140,853
Cost of revenue:
       Product 58,783 64,750
       Service 19,231 20,304
                     Total cost of revenue 78,014 85,054
                            Gross margin 69,955 55,799
Operating expenses:
              Research and development 16,694 18,549
              Sales and marketing 30,158 34,444
              General and administrative 14,697 16,780
              Restructuring charges 2,559
64,108 69,773
                            Income (loss) from operations 5,847 (13,974 )
Other income and expense 375 (338 )
Interest expense (2,439 ) (1,849 )
                            Income (loss) before income taxes 3,783 (16,161 )
Income tax provision 390 499
                            Net income (loss) $ 3,393 $ (16,660 )
Basic and diluted net income (loss) per share $ 0.01 $ (0.07 )
Weighted average common and common equivalent shares:
       Basic 243,309 236,628
       Diluted 245,844 236,628
 
Included in the above Statements of Operations:
       Amortization of intangibles:
              Cost of revenue $     368        $     1,362
              Sales and marketing 1,856 3,256
       2,224 4,618
Share-based compensation:
              Cost of revenue 528 571
              Research and development 868 900
              Sales and marketing 1,074 1,084
              General and administrative 886 1,732
3,356 4,287

Note 1 is presented above, before the Condensed Consolidated Statements of Operations.

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

       June 30, 2013        March 31, 2013*
(Revised) Note 1
Assets
Current assets:
       Cash and cash equivalents $        76,731 $              68,976
       Restricted cash 3,104 3,023
       Accounts receivable 86,967 97,546
       Manufacturing inventories 51,290 53,075
       Service parts inventories 31,876 35,368
       Other current assets 12,760 12,192
              Total current assets 262,728 270,180
Long-term assets:
       Property and equipment 20,216 21,456
       Intangible assets 10,589 12,813
       Goodwill 55,613 55,613
       Other long-term assets 9,264 9,531
              Total long-term assets 95,682 99,413
$ 358,410 $ 369,593
Liabilities and Stockholders’ Deficit
Current liabilities:
       Accounts payable $ 35,274 $ 47,634
       Accrued warranty 7,015 7,520
       Deferred revenue, current 88,321 91,108
       Accrued restructuring charges, current 4,117 3,021
       Accrued compensation 28,599 30,964
       Other accrued liabilities 18,842 20,188
              Total current liabilities 182,168 200,435
Long-term liabilities:
       Deferred revenue, long-term 39,011 38,393
       Convertible subordinated debt 205,000 205,000
       Other long-term liabilities 9,540 9,547
              Total long-term liabilities 253,551 252,940
Stockholders’ deficit (77,309 ) (83,782 )
$ 358,410 $ 369,593

*       Derived from the March 31, 2013 audited Consolidated Financial Statements.

Note 1 is presented above, before the Condensed Consolidated Statements of Operations.

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

       Three Months Ended June 30,
2013        2012
(Revised) Note 1
Cash flows from operating activities:
       Net income (loss) $              3,393 $             (16,660 )
       Adjustments to reconcile net income (loss) to net cash provided by (used in)  
       operating activities:
              Depreciation 2,872 3,021
              Amortization 2,633 4,912
              Service parts lower of cost or market adjustment 4,028 2,029
              Deferred income taxes 128 382
              Share-based compensation 3,356 4,287
              Changes in assets and liabilities:
                     Accounts receivable 10,579 24,009
                     Manufacturing inventories 337 (4,603 )
                     Service parts inventories 913 722
                     Accounts payable (12,372 ) (8,891 )
                     Accrued warranty (505 ) 211
                     Deferred revenue (2,169 ) (7,351 )
                     Accrued restructuring charges 1,026 (484 )
                     Accrued compensation (2,370 ) (1,138 )
                     Other assets and liabilities (2,676 ) (1,555 )
Net cash provided by (used in) operating activities 9,173 (1,109 )
Cash flows from investing activities:
       Purchases of property and equipment (1,230 ) (3,984 )
       (Increase) decrease in restricted cash (37 ) 109
       Return of principal from other investments 208
Net cash used in investing activities (1,267 ) (3,667 )
Cash flows from financing activities:
       Payment of taxes due upon vesting of restricted stock (203 ) (321 )
       Proceeds from issuance of common stock 60 176
Net cash used in financing activities (143 ) (145 )
Effect of exchange rate changes on cash and cash equivalents (8 ) (70 )
Net increase (decrease) in cash and cash equivalents 7,755 (4,991 )
Cash and cash equivalents at beginning of period 68,976 51,261
Cash and cash equivalents at end of period $ 76,731 $ 46,270

Note 1 is presented above, before the Condensed Consolidated Statements of Operations.

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QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)

       Three Months Ended June 30, 2013
  Gross
Margin
       Gross
Margin
Rate
       Net Income        Per Share
Net Income
Basic
       Per Share
Net Income
Diluted
GAAP $     69,955 47.3 % $     3,393 $     0.01 $     0.01
Non-GAAP Reconciling Items:    
       Amortization of intangibles 368 2,224    
       Share-based compensation 528 3,356  
       Restructuring charges 2,559
Non-GAAP $ 70,851 47.9 % $ 11,532 $ 0.05 $ 0.04

Computation of basic and diluted net income per share:        GAAP        Non-GAAP
       Net income $ 3,393 $ 11,532
              Interest on dilutive convertible notes 1,969
       Income for purposes of computing income per diluted share $      3,393 $ 13,501
 
Weighted average shares:
       Basic 243,309 243,309
              Dilutive shares from stock plans 2,535 2,535
              Dilutive shares from convertible notes 73,660
       Diluted 245,844 319,504

       Three Months Ended June 30, 2012 (Revised) Note 1
Gross
Margin
       Gross
Margin
Rate
       Net Loss        Per Share
Net Loss,
Basic
       Per Share
Net Loss,
Diluted
GAAP $      55,799 39.6 % $      (16,660 ) $       (0.07 ) $       (0.07 )
Non-GAAP Reconciling Items:  
       Amortization of intangibles 1,362 4,618  
       Share-based compensation 571 4,287
Non-GAAP $ 57,732 41.0 % $ (7,755 ) $ (0.03 ) $ (0.03 )

Computation of basic and diluted net loss per share: GAAP        Non-GAAP
       Net loss $      (16,660 ) $      (7,755 )
              Interest on dilutive convertible notes
       Loss for purposes of computing loss per diluted share $ (16,660 ) $ (7,755 )
      
Weighted average shares:
       Basic 236,628 236,628
              Dilutive shares from stock plans
              Dilutive shares from convertible notes
       Diluted 236,628 236,628

Note 1 is presented above, before the Condensed Consolidated Statements of Operations.

The non-GAAP information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.

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QUANTUM CORPORATION
FORECAST SECOND QUARTER FISCAL 2014
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions)

Percentage range
Forecast second quarter gross margin rate on a GAAP basis 41.2 % 42.3 %
Forecast amortization of intangibles     0.3 %  
Forecast share-based compensation 0.4 % 0.5 %
Forecast second quarter gross margin rate on a non-GAAP basis 42.0 % 43.0 %

Dollar range
Forecast second quarter operating expense on a GAAP basis $      63.0 $      65.0
Forecast amortization of intangibles 1.9
Forecast share-based compensation   3.1  
Forecast second quarter operating expense on a non-GAAP basis $ 58.0 $ 60.0

Estimates based on current (August 1, 2013) projections.

The projected GAAP and non-GAAP financial information set forth in this table represent forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For risk factors that could impact these projections, see our Annual Report on Form 10-K as filed with the SEC on June 7, 2013. We disclaim any obligation to update information in any forward-looking statement.

The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies.

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