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Quantum Corporation Reports Fiscal 2013 and Fourth Quarter Results(Marketwire Via Acquire Media NewsEdge) SAN JOSE, CA -- (Marketwired) -- 05/08/13 -- Quantum Corp. (NYSE: QTM), a proven global expert in data protection and big data management, today reported results for fiscal 2013 (FY13) and the fourth quarter (FQ4'13), ended March 31, 2013. Revenue for the year totaled $588 million, down 10 percent from fiscal 2012 (FY12), primarily due to decreased market demand for tape products. Quantum reported record revenue of $152 million from disk systems and software sales (including related service), an 11 percent increase over FY12 driven by record revenue from both StorNext® and midrange DXi® sales. For FQ4'13, Quantum reported $140 million in revenue, a 13 percent decline from the same period last year (FQ4'12), also primarily due to lower demand for tape. Disk systems and software revenue (including related service) grew for the seventh consecutive quarter on a year-over-year basis. Quantum reported a GAAP net loss for FY13 of $52 million, or 22 cents per diluted share, compared to $9 million in the prior year. On a non-GAAP basis, Quantum had a net loss of $14 million for the year, or 6 cents per diluted share, down from $30 million of net income in FY12. For FQ4'13, Quantum had a GAAP net loss of $15 million, or 6 cents per diluted share, compared to a net loss of $11 million in the same quarter last year. Non-GAAP net loss for FQ4'13 was $5 million, or 2 cents per diluted share, down from $1 million of net income a year earlier. The year-over-year declines were largely due to the lower tape product and royalty revenue. "Although this was a challenging year for storage generally, and a particularly tough one for tape, we grew our disk systems and software revenue to a new high, maintained our market share leadership in tape, introduced a broad range of innovative new products and further improved our balance sheet," said Jon Gacek, president and CEO of Quantum. "We will build on this progress in the new fiscal year to drive a balance of growth and profit, and we are well-positioned to do so. "Our product portfolio is a key strength, and we will continue to be aggressive about utilizing our technology assets to create products and solutions that are clearly differentiated and deliver superior value to customers in both data protection and big data management. This will include new deduplication, virtualization, cloud, workflow and archive offerings." Quantum generated $16 million in cash from operations in FQ4'13 and ended FY13 with $72 million in total cash and cash equivalents. OutlookFor the full 2014 fiscal year, Quantum expects: Total revenue of $610 million to $630 million. GAAP and non-GAAP gross margin rates in the mid-40 percent range. GAAP and non-GAAP operating expenses of $265 million to $270 million and $245 million to $250 million, respectively. Interest expense of $10 million and taxes of $2 million. GAAP loss per share of 5 cents to breakeven and non-GAAP earnings per share of 5 cents to 10 cents. For the first quarter of fiscal 2014, the company expects: Total revenue of $135 million to $140 million. GAAP gross margin rate of 41 to 42 percent and non-GAAP gross margin rate of 42 to 43 percent. GAAP and non-GAAP operating expenses of $65 million to $67 million and $60 million to $62 million, respectively. Interest expense of $2.5 million and taxes of $500,000. Business HighlightsKey business highlights for the March quarter include the following: Quantum announced the DXi6800 backup and deduplication appliance, which combines industry-leading performance, scalability and efficiency with unique "pay-as-you-grow" extensibility to deliver better overall value than the market leader. The new appliance provides up to 16 TB/hour performance, 13-156 TB of usable capacity in a single system and the smallest footprint per TB available. It can replicate to Quantum Q-Cloud™, enabling cloud-based data protection and disaster recovery, and also integrates with Symantec NetBackup AIR, reducing the time needed to return to business in the event of a disaster. The company introduced its new Scalar i6000 HD enterprise tape library, offering best-in-class slot density and scalability as well as high performance and availability. Designed to address customers' big data and archive needs with slot densities that are twice those offered by competitors, the Scalar i6000 HD makes nearly 5 PB of data available in a single 19" rack and scales to more than 75 PB of capacity. It also incorporates new high-availability and management features, including active-active dual robotics for fast data access times. Contributing to the strong growth in StorNext appliance sales, the StorNext M440 Metadata Appliance began its first full quarter of availability. It enables central control of up to 500 million files for management of large-scale, fast-growing datasets, including petabytes of tiered content archives. Quantum also started early shipments of its StorNext QX Storage, primary disk storage optimized for StorNext collaborative workflow environments. Both appliances are 100 percent compatible with the large installed base of Apple Xsan solutions and ideal for mid-sized creative workflow environments. In the latest global accolades for the company's deduplication products, DXi6800 won the Initiative Mittelstand Innovation IT Award 2013 at the CeBIT trade show, and the DXi6701/02 took top honors as the Network Computing 2013 Product of the Year Award in the Storage Product category. In addition, Turner Studios' Sports Central received a prestigious 2012 Excellence Award from Broadcast Engineering magazine for a solution it created to streamline and centralize the video ingest, management and multi-screen distribution of its sports content. Turner uses Quantum's StorNext File System and StorNext Storage Manager™ software to manage the high-performance sharing, accessing and archiving of content within the system. Conference Call and Audio Webcast NotificationQuantum will hold a conference call today, May 8, 2013, at 2:00 p.m. PDT, to discuss its fiscal fourth quarter and full year results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9835 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, May 8, 2013, at 2:00 p.m. PDT. Site for the webcast and related information: www.quantum.com/investors. About QuantumQuantum 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/BeCertain. Quantum, the Quantum logo, Be Certain, DXi, Scalar, StorNext and Q-Cloud 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 that we will build on our progress to drive a balance of growth and profit in the new year, and that we will continue to be aggressive about utilizing our technology assets in our product development efforts 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 14, 2012 and in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 8, 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, loss on debt extinguishment, restructuring charges and share-based compensation expense for the following reasons: Acquisition Expenses The acquisition expenses were those expenses incurred to acquire Pancetera, Inc. and are not part of Quantum's future core operations. 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. Loss on Debt Extinguishment The loss on debt extinguishment relates to specific debt refinancing actions and is not part of Quantum's future core operations. 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. QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended -------------------- -------------------- March 31, March 31, March 31, March 31, 2013 2012 2013 2012 --------- --------- --------- --------- Revenue: Product $ 92,648 $ 109,865 $ 399,043 $ 451,340 Service 36,899 36,408 144,037 144,364 Royalty 10,411 14,031 44,492 56,666 --------- --------- --------- --------- Total revenue 139,958 160,304 587,572 652,370 Cost of revenue: Product 62,633 72,332 267,274 290,376 Service 19,721 22,727 79,647 88,459 Restructuring benefit related to cost of revenue -- -- -- (300) --------- --------- --------- --------- Total cost of revenue 82,354 95,059 346,921 378,535 --------- --------- --------- --------- Gross margin 57,604 65,245 240,651 273,835 Operating expenses: Research and development 17,321 19,153 73,960 74,365 Sales and marketing 33,734 35,948 137,041 130,938 General and administrative 15,269 15,919 62,179 62,910 Restructuring charges 3,569 1,231 10,171 1,930 --------- --------- --------- --------- Total operating expenses 69,893 72,251 283,351 270,143 Gain on sale of patents -- -- -- 1,500 --------- --------- --------- --------- Income (loss) from operations (12,289) (7,006) (42,700) 5,192 Other income and expense 172 304 (216) (118) Interest expense (2,446) (2,575) (8,342) (10,686) Loss on debt extinguishment -- (2,310) -- (2,310) --------- --------- --------- --------- Loss before income taxes (14,563) (11,587) (51,258) (7,922) Income tax provision (benefit) (56) (529) 1,161 887 --------- --------- --------- --------- Net loss $ (14,507) $ (11,058) $ (52,419) $ (8,809) ========= ========= ========= ========= Basic and diluted net loss per share $ (0.06) $ (0.05) $ (0.22) $ (0.04) Basic and diluted weighted average shares 242,165 235,429 239,855 232,599 Included in the above Statements of Operations: Amortization of intangibles: Cost of revenue $ 368 $ 1,435 $ 3,775 $ 7,583 Sales and marketing 1,856 3,256 9,524 13,128 General and administrative -- -- -- 32 --------- --------- --------- --------- 2,224 4,691 13,299 20,743 Share-based compensation: Cost of revenue 550 685 2,389 2,203 Research and development 893 784 3,665 3,250 Sales and marketing 1,096 989 4,699 4,048 General and administrative 871 1,033 4,386 4,236 --------- --------- --------- --------- 3,410 3,491 15,139 13,737 Acquisition expenses -- -- -- 325 QUANTUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 31, March 31, 2013 2012* --------- --------- Assets Current assets: Cash and cash equivalents $ 68,976 $ 51,261 Restricted cash 3,023 4,230 Accounts receivable 99,093 110,840 Manufacturing inventories 53,075 61,111 Service parts inventories 35,368 39,050 Other current assets 12,192 14,729 --------- --------- Total current assets 271,727 281,221 Long-term assets: Property and equipment 21,456 25,440 Intangible assets and goodwill 68,426 81,725 Other long-term assets 9,531 6,962 --------- --------- Total long-term assets 99,413 114,127 --------- --------- $ 371,140 $ 395,348 ========= ========= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 47,634 $ 56,304 Accrued warranty 7,520 7,586 Deferred revenue, current 91,108 93,441 Accrued restructuring charges 4,756 1,752 Accrued compensation 30,311 31,971 Other accrued liabilities 20,188 18,999 --------- --------- Total current liabilities 201,517 210,053 Long-term liabilities: Deferred revenue, long-term 38,393 36,430 Long-term debt -- 49,495 Convertible subordinated debt 205,000 135,000 Other long-term liabilities 7,812 11,050 --------- --------- Total long-term liabilities 251,205 231,975 Stockholders' deficit (81,582) (46,680) --------- --------- $ 371,140 $ 395,348 ========= ========= * Derived from the March 31, 2012 audited Consolidated Financial Statements. QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Twelve Months Ended -------------------- March 31, March 31, 2013 2012 --------- --------- Cash flows from operating activities: Net loss $ (52,419) $ (8,809) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 12,413 11,774 Amortization 14,646 23,101 Service parts lower of cost or market adjustment 10,081 10,736 Loss on debt extinguishment -- 2,310 Deferred income taxes (142) (1,280) Share-based compensation 15,139 13,737 Changes in assets and liabilities, net of effect of acquisition: Accounts receivable 11,747 4,134 Manufacturing inventories (2,098) (21,373) Service parts inventories 3,735 3,642 Accounts payable (8,630) 4,107 Accrued warranty (66) 552 Deferred revenue (370) 8,073 Accrued restructuring charges 3,009 (2,284) Accrued compensation (1,452) 810 Other assets and liabilities 2,142 (3,570) --------- --------- Net cash provided by operating activities 7,735 45,660 Cash flows from investing activities: Purchases of property and equipment (10,099) (11,414) (Increase) decrease in restricted cash 1,113 (2,505) Purchases of other investments (2,169) -- Return of principal from other investments 247 97 Payment for business acquisition, net of cash acquired -- (8,152) --------- --------- Net cash used in investing activities (10,908) (21,974) Cash flows from financing activities: Borrowings of long-term debt, net -- 48,535 Repayments of long-term debt (49,495) (104,334) Borrowings of convertible subordinated debt, net 67,701 -- Payment of taxes due upon vesting of restricted stock (2,036) (2,944) Proceeds from issuance of common stock 4,805 10,390 --------- --------- Net cash provided by (used in) financing activities 20,975 (48,353) Effect of exchange rate changes on cash and cash equivalents (87) (82) Net increase (decrease) in cash and cash equivalents 17,715 (24,749) Cash and cash equivalents at beginning of period 51,261 76,010 --------- --------- Cash and cash equivalents at end of period $ 68,976 $ 51,261 ========= ========= QUANTUM CORPORATION GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2013 ---------------------------------------------- Per Per Share Share Gross Net Net Gross Margin Loss, Loss, Margin Rate Net Loss Basic Diluted -------- ------ -------- -------- -------- GAAP $ 57,604 41.2% $(14,507) $ (0.06) $ (0.06) Non-GAAP Reconciling Items: Amortization of intangibles 368 2,224 Share-based compensation 550 3,410 Restructuring charges -- 3,569 -------- -------- Non-GAAP $ 58,522 41.8% $ (5,304) $ (0.02) $ (0.02) GAAP Non-GAAP -------- -------- Computation of basic and diluted net loss per share: Net loss $(14,507) $ (5,304) Weighted average shares: Basic 242,165 242,165 Dilutive shares from stock plans -- -- Dilutive shares from convertible notes -- -- -------- -------- Diluted 242,165 242,165 ======== ======== Twelve Months Ended March 31, 2013 ---------------------------------------------- Per Per Share Share Gross Net Net Gross Margin Loss, Loss, Margin Rate Net Loss Basic Diluted -------- ------ -------- -------- -------- GAAP $240,651 41.0% $(52,419) $ (0.22) $ (0.22) Non-GAAP Reconciling Items: Amortization of intangibles 3,775 13,299 Share-based compensation 2,389 15,139 Restructuring charges -- 10,171 -------- -------- Non-GAAP $246,815 42.0% $(13,810) $ (0.06) $ (0.06) GAAP Non-GAAP -------- -------- Computation of basic and diluted net loss per share: Net loss $(52,419) $(13,810) Weighted average shares: Basic 239,855 239,855 Dilutive shares from stock plans -- -- Dilutive shares from convertible notes -- -- -------- -------- Diluted 239,855 239,855 ======== ======== Three Months Ended March 31, 2012 ---------------------------------------------- Per Per Share Share Net Net Gross Net Income Income Gross Margin Income (Loss), (Loss), Margin Rate (Loss) Basic Diluted -------- ------ -------- -------- -------- GAAP $ 65,245 40.7% $(11,058) $ (0.05) $ (0.05) Non-GAAP Reconciling Items: Amortization of intangibles 1,435 4,691 Share-based compensation 685 3,491 Restructuring charges -- 1,231 Loss on debt extinguishment -- 2,310 -------- -------- Non-GAAP $ 67,365 42.0% $ 665 $ 0.00 $ 0.00 GAAP Non-GAAP -------- -------- Computation of basic and diluted net income (loss) per share: Net income (loss) $(11,058) $ 665 Interest on dilutive convertible notes -- -- -------- -------- Income (loss) for purposes of computing income (loss) per diluted share $(11,058) $ 665 ======== ======== Weighted average shares: Basic 235,429 235,429 Dilutive shares from stock plans -- 6,321 Dilutive shares from convertible notes -- -- -------- -------- Diluted 235,429 241,750 ======== ======== Twelve Months Ended March 31, 2012 ---------------------------------------------- Per Per Share Share Net Net Gross Net Income Income Gross Margin Income (Loss), (Loss), Margin Rate (Loss) Basic Diluted -------- ------ -------- -------- -------- GAAP $273,835 42.0% $ (8,809) $ (0.04) $ (0.04) Non-GAAP Reconciling Items: Amortization of intangibles 7,583 20,743 Share-based compensation 2,203 13,737 Restructuring charges (300) 1,630 Loss on debt extinguishment -- 2,310 Acquisition expenses -- 325 -------- -------- Non-GAAP $283,321 43.4% $ 29,936 $ 0.13 $ 0.12 GAAP Non-GAAP -------- -------- Computation of basic and diluted net income (loss) per share: Net income (loss) $ (8,809) $ 29,936 Interest on dilutive convertible notes -- -- -------- -------- Income (loss) for purposes of computing income (loss) per diluted share $ (8,809) $ 29,936 ======== ======== Weighted average shares: Basic 232,599 232,599 Dilutive shares from stock plans -- 7,028 Dilutive shares from convertible notes -- -- -------- -------- Diluted 232,599 239,627 ======== ======== 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. QUANTUM CORPORATION FULL YEAR AND FIRST QUARTER FISCAL 2014 FORECASTS GAAP TO NON-GAAP RECONCILIATION (Dollars in millions, except per share amounts) FULL YEAR FISCAL 2014 ---------------------------------------------------------------------------- For fiscal 2014, we forecast GAAP and non-GAAP gross margin rates in the mid-40 percent range, with non-GAAP gross margin approximately 60 basis points higher than GAAP gross margin, comprised of 0.2% for intangible amortization and 0.4% for share-based compensation. ---------------- Dollar Range ---------------- Forecast fiscal 2014 operating expense on a GAAP basis $264.5 - $269.5 Forecast amortization of intangibles 7.4 Forecast share-based compensation 12.1 ------ ------ Forecast fiscal 2014 operating expense on a non-GAAP basis $245.0 - $250.0 ====== ====== ---------------- Dollar Range ---------------- Forecast fiscal 2014 diluted earnings (loss) per share on a GAAP basis $(0.05) - $ 0.00 Forecast amortization of intangibles 0.04 Forecast share-based compensation 0.06 ------ ------ Forecast fiscal 2014 diluted earnings per share on a non- GAAP basis $ 0.05 - $ 0.10 ====== ====== FIRST QUARTER FISCAL 2014 --------------------------------------------------------------------------- ---------------- Percentage Range ---------------- Forecast first quarter fiscal 2014 gross margin rate on a GAAP basis 41.3% - 42.3% Forecast amortization of intangibles 0.3% Forecast share-based compensation 0.4% ------ ------ Forecast first quarter fiscal 2014 gross margin rate on a non-GAAP basis 42.0% - 43.0% ====== ====== ---------------- Dollar Range ---------------- Forecast first quarter fiscal 2014 operating expense on a GAAP basis $ 64.9 - $ 66.9 Forecast amortization of intangibles 1.9 Forecast share-based compensation 3.0 ------ ------ Forecast first quarter fiscal 2014 operating expense on a non-GAAP basis $ 60.0 - $ 62.0 ====== ====== Estimates based on current (May 8, 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 14, 2012. 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. Contact: Brad Cohen Public Relations Quantum Corp. (408) 944-4044 [email protected] Christi Lee Investor Relations Quantum Corp. (253) 334-9823 [email protected] Source: Quantum Corporation |