Quantum Reports Third Quarter Fiscal 2022 Results

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

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

Third Quarter Fiscal 2022 Financial Summary

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

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

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

Third Quarter Fiscal 2022 vs. Prior Quarter

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

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

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

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

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

Balance Sheet and Liquidity 

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

Outlook

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

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

Conference Call and Webcast

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

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

About Quantum

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

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

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 ("Exchange Act"). These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results; that our newly introduced products will drive a growing contribution of recurring revenue and deliver higher margins, while also increasing the total addressable market of our solutions; our expectations to continue our operational execution and to gain incremental traction across our market verticals, including with our leading hyperscale and global web scale customers, statements about our backlog and the implication that this backlog will translate into future revenue; the trend in our underlying business remaining robust; continued progress in our business transformation; the anticipated impact and benefits of our acquisition of Pivot3's video surveillance portfolio and assets; the anticipated impact and benefits of the refinancing of our outstanding debt; and the Company's position for long-term sustainable growth and profitability.

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

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

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

 

 

QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)

December 31, 2021

March 31, 2021

Assets

Current assets:

Cash and cash equivalents

$                              4,004

$                           27,430

Restricted cash

331

707

Accounts receivable, net of allowance for doubtful accounts of $347 and $406

66,070

73,102

Manufacturing inventories

33,912

24,467

Service parts inventories

22,532

23,421

Other current assets

14,082

6,939

Total current assets

140,931

156,066

Property and equipment, net

13,020

10,051

Intangible assets, net

10,738

5,037

Goodwill

10,262

3,466

Restricted cash

5,000

Right-of-use assets, net

3,483

9,383

Other long-term assets

9,202

5,921

Total assets

$                          187,636

$                          194,924

Liabilities and Stockholders' Deficit

Current liabilities:

Accounts payable

$                            42,041

$                           35,245

Deferred revenue

78,115

84,027

Accrued restructuring charges

597

580

Long-term debt, current portion

3,750

1,850

Accrued compensation

16,193

19,214

Other accrued liabilities

15,451

18,174

Total current liabilities

156,147

159,090

Deferred revenue

41,190

36,126

Long-term debt, net of current portion

97,928

90,890

Operating lease liabilities

2,714

8,005

Other long-term liabilities

12,440

13,058

Total liabilities

310,419

307,169

Stockholders' deficit

Preferred stock, 20,000 shares authorized; no shares issued and outstanding

Common stock, $0.01 par value; 125,000 shares authorized; 59,816 and 56,915 shares issued and outstanding

599

570

Additional paid-in capital

640,839

626,664

Accumulated deficit

(763,089)

(738,623)

Accumulated other comprehensive loss

(1,132)

(856)

Total stockholders' deficit

(122,783)

(112,245)

Total liabilities and stockholders' deficit

$                          187,636

$                          194,924

 

 

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

Three Months Ended December 31,

Nine Months Ended December 31,

2021

2020

2021

2020

Revenue:

   Product

$                58,522

$                63,021

$               165,308

$               153,557

   Service

33,162

31,169

100,352

93,049

   Royalty

3,660

3,833

11,963

10,543

      Total revenue

95,344

98,023

277,623

257,149

Cost of revenue:

   Product

45,118

43,311

124,982

108,691

   Service

15,016

12,433

41,764

36,593

      Total cost of revenue

60,134

55,744

166,746

145,284

Gross profit

35,210

42,279

110,877

111,865

Operating expenses:

   Research and development

14,607

9,589

38,287

29,983

   Sales and marketing

16,714

15,294

46,128

40,019

   General and administrative

10,538

11,103

33,830

32,928

   Restructuring charges

576

200

850

2,837

      Total operating expenses

42,435

36,186

119,095

105,767

Income (loss) from operations

(7,225)

6,093

(8,218)

6,098

Other expense, net

(150)

(698)

(223)

(1,395)

Interest expense

(2,431)

(7,808)

(9,387)

(21,823)

Loss on debt extinguishment, net

(4,960)

Net loss before income taxes

(9,806)

(2,413)

(22,788)

(17,120)

Income tax provision

1,254

256

1,678

877

Net loss

$               (11,060)

$                 (2,669)

$               (24,466)

$               (17,997)

Net loss per share - basic and diluted

$                   (0.19)

$                   (0.07)

$                   (0.42)

$                   (0.45)

Weighted average shares - basic and diluted

59,486

40,927

58,399

40,374

Net loss

$               (11,060)

$                 (2,669)

$               (24,466)

$               (17,997)

Foreign currency translation adjustments, net

(37)

975

(276)

1,984

Total comprehensive loss

$               (11,097)

$                 (1,694)

$               (24,742)

$               (16,013)

 

 

QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)

Nine Months Ended December 31,

2021

2020

Operating activities

Net loss

$                            (24,466)

$                            (17,997)

  Adjustments to reconcile net loss to net cash provided by (used in) operating activities  

Depreciation and amortization

6,795

3,898

Amortization of debt issuance costs

1,981

4,906

Long-term debt related costs

167

Provision for product and service inventories

4,016

4,764

Stock-based compensation

10,580

6,428

Paycheck Protection Program loan forgiveness

(10,000)

Non-cash loss on debt extinguishment

8,471

Other

282

2,113

Changes in assets and liabilities:

Accounts receivable, net

7,008

1,342

Manufacturing inventories

(10,672)

(7,732)

Service parts inventories

(2,281)

(4,559)

Accounts payable

5,369

(7,022)

Accrued restructuring charges

17

210

Accrued compensation

(3,021)

4,268

Deferred revenue

(8,598)

(9,727)

Other current assets

(7,047)

846

Other non-current assets

(1,148)

133

Other current liabilities

(3,350)

(2,432)

Other non-current liabilities

(617)

130

Net cash used in operating activities

(26,681)

(20,264)

Investing activities

Purchases of property and equipment

(3,971)

(4,665)

Business acquisition, net of cash acquired

(7,808)

(2,636)

Net cash used in investing activities

(11,779)

(7,301)

Financing activities

Borrowings of long-term debt, net of debt issuance costs

94,961

19,400

Repayments of long-term debt

(93,677)

Borrowings of credit facility

207,563

232,663

Repayments of credit facility

(200,007)

(229,847)

Borrowings of payment protection program

10,000

Proceeds from issuance of common stock

806

539

Net cash provided by financing activities

9,646

32,755

Effect of exchange rate changes on cash, cash equivalents and restricted cash

12

(62)

Net change in cash, cash equivalents and restricted cash   

(28,802)

5,128

Cash, cash equivalents, and restricted cash at beginning of period

33,137

12,270

Cash, cash equivalents, and restricted cash at end of period

$                               4,335

$                             17,398

Cash, Cash Equivalents and Restricted Cash at end of period

Cash and cash equivalents

$                               4,004

$                             11,632

Restricted cash, current

331

766

Restricted cash, long-term

5,000

Cash, cash equivalents and restricted cash at the end of period

$                               4,335

$                             17,398

NON-U.S. GAAP FINANCIAL MEASURES

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

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

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

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

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

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

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

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

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

Three Months Ended December 31,

Nine Months Ended December 31,

2021

2020

2021

2020

Net loss

$                (11,060)

$                  (2,669)

$                (24,466)

$                (17,997)

Interest expense, net

2,431

7,808

9,387

21,823

Provision for income taxes

1,254

256

1,678

877

Depreciation expense

1,627

1,250

4,658

3,801

Stock-based compensation expense

4,307

1,878

10,580

6,428

Restructuring charges

576

200

850

2,837

Loss on extinguishment of Senior Secured Term Loan

14,960

Gain on PPP loan forgiveness

(10,000)

Amortization of acquisition related intangible assets

1,201

97

2,137

97

Acquisition-related costs

411

393

1,361

393

Long-term debt related costs

11

208

263

1,377

Adjusted EBITDA

$                      758

$                   9,421

$                 11,408

$                 19,636

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

 

Three Months Ended December 31,

Nine Months Ended December 31,

2021

2020

2021

2020

Net loss

$                (11,060)

$                  (2,669)

$                (24,466)

$                (17,997)

Stock-based compensation

4,307

1,878

10,580

6,428

Restructuring charges

576

200

850

2,837

Loss on extinguishment of Senior Secured Term Loan

14,960

Gain on PPP loan forgiveness

(10,000)

Amortization of acquisition related intangible assets

1,201

2,137

Acquisition-related costs

411

393

1,361

393

Long-term debt related costs

11

208

263

1,377

   Adjusted net income (loss)

$                  (4,554)

$                        10

$                  (4,315)

$                  (6,962)

   Adjusted Net Income (Loss) per share:

      Basic

$                    (0.08)

$                        —

$                    (0.07)

$                    (0.17)

      Diluted

$                    (0.07)

$                        —

$                    (0.06)

$                    (0.15)

   Weighted average shares outstanding:

      Basic

59,486

40,927

58,399

40,374

      Diluted

68,288

49,238

68,210

47,931

 

 

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SOURCE Quantum Corp.