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Revenue of $99.1 Million at High-End of Guidance Amid Improving Supply Chain; Guides to Continued Revenue Growth
SAN JOSE, Calif., Nov. 2, 2022 /PRNewswire/ -- Quantum Corporation (QMCO" href="/company/QMCO" onmouseover="handlePagePreview('company','QMCO')" style="color:#4007a2 !important; text-decoration:underline !important; font-weight:bold;">NASDAQ: QMCOQMCO-pp">) announced today financial results for its fiscal second quarter ended September 30, 2022.
Second Quarter Fiscal 2023 Financial Summary
"Our supply chain continued to improve in the quarter, underscored by greater availability of materials at more standard pricing and lead times," said Jamie Lerner, Chairman and CEO of Quantum. "These business conditions contributed to revenue being at the high-end of guidance as well as sequential improvements in our overall operating performance for the quarter. Notably, our record backlog consists almost entirely of forward orders from our hyperscale customers and no new unfulfilled orders associated with supply chain constraints. We anticipate these overall favorable trends to extend into the next fiscal quarter, resulting in our expectation for revenue to exceed $100 million."
"Further, our continued execution and cost containment measures lowered our non-GAAP operating expenses to slightly below $35 million, contributing to increased operating leverage as we continue to scale our business."
Second Quarter Fiscal 2023 vs. Prior Quarter
Revenue for the second quarter fiscal 2023 was $99.1 million compared to $97.1 million in the prior quarter. Gross profit in the second quarter of fiscal 2023 was $27.8 million, or 28% of revenue, compared to $34.0 million, or 35% of revenue, in the first quarter of fiscal 2023. Second quarter GAAP gross profit included an extraordinary inventory reserve provision primarily caused by global supply chain disruptions since the start of the pandemic and the longer associated lead times that resulted in older generation products being displaced by next-generation solutions. Non-GAAP gross margin was 35% in the second quarter, which was comparable sequentially.
Total GAAP operating expenses in the second quarter of fiscal 2023 decreased to $39.0 million, or 39% of revenue, compared to $41.1 million, or 42% of revenue, in the prior quarter. Selling, general and administrative expenses were $27.5 million in the quarter, compared to $28.3 million in the prior quarter. Research and development expenses were $10.5 million in the second quarter of fiscal 2023, compared to $12.1 million in the prior quarter. Non-GAAP operating expenses in the second quarter of 2023 decreased to $34.8 million from $36.3 million in the prior quarter.
GAAP net loss in the second quarter of fiscal 2023 was $11.9 million, or ($0.13) per share, compared to a net loss of $10.6 million, or ($0.13) per share, in the first fiscal quarter 2023. Excluding stock compensation, restructuring charges and other non-recurring costs, non-GAAP adjusted loss in the second fiscal quarter of 2023 was $0.5 million, or ($0.01) per share, compared to adjusted net loss of $3.6 million, or ($0.04) per share, in the prior quarter.
Adjusted EBITDA in the second quarter of fiscal 2023 was $4.1 million, compared to $0.3 million in the prior quarter.
Balance Sheet and Liquidity
Outlook
The Company expects the following guidance for the third fiscal quarter of 2023:
Conference Call and Webcast
Management will host a live conference call today, November 2, 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 conference ID 13732851. 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 November 9, 2022. To access the replay dial 1-877-660-6853 and enter the conference ID 13732851 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 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; our expectations to continue our operational execution; our anticipation that overall favorable trends in our business, including in our supply chain, extend into our next fiscal quarter; statements about our backlog and the implication that this backlog will translate into future revenue; the trend in our underlying business remaining robust; 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 and 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; our ability to integrate the business, products, employees and other aspects of our recent acquisitions; 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 June 8, 2022. The Company does 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
P: 949-224-3874 | 214-272-0070
E: sheltonir@sheltongroup.com
QUANTUM CORPORATION | |||
September 30, 2022 | March 31, 2022 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 25,698 | $ 5,210 | |
Restricted cash | 223 | 283 | |
Accounts receivable, net of allowance for doubtful accounts of $195 and $422 | 61,309 | 69,354 | |
Manufacturing inventories | 23,671 | 33,546 | |
Service parts inventories | 25,458 | 24,254 | |
Prepaid expenses | 9,241 | 7,853 | |
Other current assets | 4,839 | 4,697 | |
Total current assets | 150,439 | 145,197 | |
Property and equipment, net | 15,973 | 12,853 | |
Intangible assets, net | 7,245 | 9,584 | |
Goodwill | 12,969 | 12,969 | |
Right-of-use assets, net | 10,579 | 11,107 | |
Other long-term assets | 12,477 | 9,925 | |
Total assets | $ 209,682 | $ 201,635 | |
Liabilities and Stockholders' Deficit | |||
Current liabilities: | |||
Accounts payable | $ 34,263 | $ 34,220 | |
Deferred revenue | 70,184 | 86,517 | |
Long-term debt, current portion | 5,000 | 4,375 | |
Accrued compensation | 13,192 | 16,141 | |
Other accrued liabilities | 14,502 | 16,562 | |
Total current liabilities | 137,141 | 157,815 | |
Deferred revenue | 40,165 | 41,580 | |
Revolving credit facility | 21,500 | 17,735 | |
Long-term debt, net of current portion | 68,250 | 89,448 | |
Operating lease liabilities | 10,315 | 9,891 | |
Other long-term liabilities | 11,653 | 11,849 | |
Total liabilities | 289,024 | 328,318 | |
Stockholders' deficit | |||
Preferred stock, 20,000 shares authorized; no shares issued and outstanding | — | — | |
Common stock, $0.01 par value; 225,000 shares authorized; 92,158 and 60,433 | 922 | 605 | |
Additional paid-in capital | 716,800 | 645,038 | |
Accumulated deficit | (793,067) | (770,903) | |
Accumulated other comprehensive loss | (3,997) | (1,423) | |
Total stockholders' deficit | (79,342) | (126,683) | |
Total liabilities and stockholders' deficit | $ 209,682 | $ 201,635 |
QUANTUM CORPORATION | |||||||
Three Months Ended September 30, | Six Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue: | |||||||
Product | $ 62,967 | $ 54,655 | $ 123,178 | $ 106,786 | |||
Service and subscription | 32,692 | 34,359 | 66,116 | 67,189 | |||
Royalty | 3,478 | 4,166 | 6,918 | 8,303 | |||
Total revenue | 99,137 | 93,180 | 196,212 | 182,278 | |||
Cost of revenue: | |||||||
Product | 56,561 | 41,124 | 104,482 | 79,864 | |||
Service and subscription | 14,745 | 13,669 | 29,850 | 26,748 | |||
Total cost of revenue | 71,306 | 54,793 | 134,332 | 106,612 | |||
Gross profit | 27,831 | 38,387 | 61,880 | 75,666 | |||
Operating expenses: | |||||||
Research and development | 10,546 | 12,389 | 22,671 | 23,680 | |||
Sales and marketing | 15,593 | 15,462 | 31,555 | 29,414 | |||
General and administrative | 11,940 | 11,466 | 24,254 | 23,293 | |||
Restructuring charges | 921 | 8 | 1,646 | 274 | |||
Total operating expenses | 39,000 | 39,325 | 80,126 | 76,661 | |||
Loss from operations | (11,169) | (938) | (18,246) | (995) | |||
Other income (expense), net | 2,431 | 126 | 3,182 | (71) | |||
Interest expense | (2,745) | (3,070) | (4,836) | (6,956) | |||
Loss on debt extinguishment | — | (4,960) | (1,392) | (4,960) | |||
Net loss before income taxes | (11,483) | (8,842) | (21,292) | (12,982) | |||
Income tax provision | 461 | 411 | 872 | 424 | |||
Net loss | $ (11,944) | $ (9,253) | $ (22,164) | $ (13,406) | |||
Deemed dividend on warrants | — | — | (389) | — | |||
Net loss attributable to common stockholders | $ (11,944) | $ (9,253) | $ (22,553) | $ (13,406) | |||
Net loss per share attributable to common stockholders | $ (0.13) | $ (0.16) | $ (0.26) | $ (0.23) | |||
Weighted average shares - basic and diluted | 91,550 | 58,567 | 87,617 | 57,852 | |||
Net loss | $ (11,944) | $ (9,253) | $ (22,164) | $ (13,406) | |||
Foreign currency translation adjustments, net | (1,298) | (506) | (2,574) | (239) | |||
Total comprehensive loss | $ (13,242) | $ (9,759) | $ (24,738) | $ (13,645) |
QUANTUM CORPORATION | |||
Six Months Ended September 30, | |||
2022 | 2021 | ||
Operating activities | |||
Net loss | $ (22,164) | $ (13,406) | |
Adjustments to reconcile net loss to net cash used in operating activities | |||
Depreciation and amortization | 5,133 | 3,967 | |
Amortization of debt issuance costs | 768 | 1,629 | |
Loss on debt extinguishment | 992 | — | |
Provision for product and service inventories | 9,946 | 2,418 | |
Stock-based compensation | 5,357 | 6,273 | |
Paycheck Protection Program loan forgiveness | — | (10,000) | |
Non-cash loss on debt extinguishment | — | 8,471 | |
Other | (152) | 41 | |
Unrealized foreign exchange loss | (2,766) | (61) | |
Changes in assets and liabilities: | |||
Accounts receivable, net | 8,264 | 10,024 | |
Manufacturing inventories | 416 | (5,199) | |
Service parts inventories | (1,971) | (1,818) | |
Prepaid expenses | (1,208) | (3,224) | |
Accounts payable | 293 | 1,559 | |
Accrued restructuring charges | 115 | (560) | |
Accrued compensation | (2,949) | (3,779) | |
Deferred revenue | (17,747) | (9,032) | |
Other current assets | (486) | (962) | |
Other non-current assets | (349) | (1,266) | |
Other current liabilities | 769 | (353) | |
Other non-current liabilities | (196) | 16 | |
Net cash used in operating activities | (17,935) | (15,262) | |
Investing activities | |||
Purchases of property and equipment | (7,795) | (2,396) | |
Business acquisition payments | (2,000) | (5,000) | |
Net cash used in investing activities | (9,795) | (7,396) | |
Financing activities | |||
Repayments of long-term debt and payment of amendment fees | (22,096) | (93,051) | |
Borrowings of credit facility | 229,605 | 126,084 | |
Repayments of credit facility and payment of amendment fees | (226,240) | (116,084) | |
Proceeds from issuance of common stock, net | 66,723 | 806 | |
Net cash provided by financing activities | 47,992 | 12,716 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 166 | 12 | |
Net change in cash, cash equivalents and restricted cash | 20,428 | (9,930) | |
Cash, cash equivalents, and restricted cash at beginning of period | 5,493 | 33,137 | |
Cash, cash equivalents, and restricted cash at end of period | $ 25,921 | $ 23,207 | |
Cash, Cash Equivalents and Restricted Cash at end of period | |||
Cash and cash equivalents | $ 25,698 | $ 22,757 | |
Restricted cash, current | 223 | 450 | |
Cash and cash equivalents at the end of period | $ 25,921 | $ 23,207 | |
Supplemental disclosure of cash flow information | |||
Cash paid for interest | $ 4,114 | $ 5,198 | |
Cash paid for income taxes, net | $ 465 | $ 480 | |
Non-cash transactions | |||
Purchases of property and equipment included in accounts payable | $ 548 | $ 309 | |
Transfer of manufacturing inventory to services inventory | $ 1,905 | $ — | |
Transfer of manufacturing inventory to property and equipment | $ 279 | $ 76 | |
Paid-in-kind interest | $ 319 | $ — | |
Deemed dividend on warrants | $ 389 | $ — |
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.
"GAAP net loss" as referred to in this press release represents "Net loss attributable to common stockholders". 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. For example, in the quarter ended September 30, 2022, we have excluded a large inventory reserve provision caused by global supply chain disruptions since the start of the pandemic and the longer associated lead times that resulted in older generation products being displaced by next-generation solutions. We do not believe an inventory adjustment of this magnitude is reasonably likely to reoccur in the foreseeable future and do not believe it is indicative of our ongoing operations; accordingly, we have excluded its impact from our non-GAAP results. 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:
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 September 30, | Six Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net loss attributable to common stockholders | $ (11,944) | $ (9,253) | $ (22,553) | $ (13,406) | |||
Interest expense, net | 2,745 | 3,070 | 4,836 | 6,956 | |||
Provision for income taxes | 461 | 411 | 871 | 424 | |||
Depreciation expense | 1,372 | 1,688 | 2,794 | 3,031 | |||
Stock-based compensation expense | 2,288 | 3,072 | 5,357 | 6,273 | |||
Restructuring charges | 921 | 8 | 1,646 | 274 | |||
Loss on extinguishment of Senior Secured Term Loan | — | 14,960 | 1,392 | 14,960 | |||
Gain on PPP loan forgiveness | — | (10,000) | — | (10,000) | |||
Amortization of acquisition related intangible assets | 1,175 | 471 | 2,339 | 936 | |||
Acquisition-related costs | 65 | 811 | 192 | 950 | |||
Long-term debt related costs | 108 | 45 | 274 | 252 | |||
Deemed dividend related to warrants | — | — | 389 | — | |||
Manufacturing inventory provision | 6,926 | — | 6,926 | — | |||
Adjusted EBITDA | $ 4,117 | $ 5,283 | $ 4,463 | $ 10,650 | |||
The following is a reconciliation of Adjusted Net Income to the most comparable U.S. GAAP financial measure, | |||||||
Three Months Ended September 30, | Six Months Ended September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net loss attributable to common stockholders | $ (11,944) | $ (9,253) | $ (22,553) | $ (13,406) | |||
Stock-based compensation | 2,288 | 3,072 | 5,357 | 6,273 | |||
Restructuring charges | 921 | 8 | 1,646 | 274 | |||
Loss on extinguishment of Senior Secured Term Loan | — | 14,960 | 1,392 | 14,960 | |||
Gain on PPP loan forgiveness | — | (10,000) | — | (10,000) | |||
Amortization of acquisition related intangible assets | 1,175 | 471 | 2,339 | 936 | |||
Acquisition-related costs | 65 | 811 | 192 | 950 | |||
Long-term debt related costs | 108 | 45 | 274 | 252 | |||
Deemed dividend related to warrants | — | — | 389 | — | |||
Manufacturing inventory provision | 6,926 | — | 6,926 | — | |||
Adjusted net income (loss) | $ (461) | $ 114 | $ (4,038) | $ 239 | |||
Adjusted Net Income (Loss) per share: | |||||||
Basic | $ (0.01) | $ 0.00 | $ (0.05) | $ 0.00 | |||
Diluted | $ (0.01) | $ 0.00 | $ (0.05) | $ 0.00 | |||
Weighted average shares outstanding: | |||||||
Basic | 91,550 | 50,129 | 87,617 | 57,852 | |||
Diluted | 91,550 | 68,565 | 87,617 | 68,167 |
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SOURCE Quantum Corp.