Delivers 31 Percent Year-Over-Year Growth in Disk Systems and Software Revenue, Continued Gross Margin Improvement and Further Debt Reduction
SAN JOSE, CA -- (Marketwire) -- 10/22/08 -- Quantum Corp. (NYSE: QTM), the leading global
specialist in backup, recovery and archive, today announced that revenue
for its fiscal second quarter (FQ2'09), ended Sept. 30, 2008, was $215
million. Compared to the same quarter last year (FQ2'08), Quantum's total
revenue was down 13 percent, due primarily to the company's strategy of
shifting its sales mix toward higher margin opportunities and a
year-over-year decline in branded tape sales. Despite the revenue decline,
the company's GAAP gross margin rate was 38 percent, up from 31 percent in
the same quarter last year. GAAP operating expenses totaled $77 million, an
increase of $2 million over FQ2'08.
Quantum reported a GAAP net loss of $3 million, or 1 cent per share, a
9-cent improvement over the same period last year. The $3 million net loss
for the quarter included $11 million in amortization of intangibles, $3
million in stock-based compensation charges and $450 thousand in
restructuring expenses. The net impact of these items reduced earnings per
share on a diluted basis by approximately 6 cents.
"Our results were clearly impacted by the global financial crisis, but we
were still able to deliver solid improvements in many areas of our
business," said Rick Belluzzo, chairman and CEO of Quantum. "We continued
to grow our disk systems and software revenue and reversed the decline in
midrange and enterprise tape sales that we had experienced in the first
quarter, even though a number of customers held off on closing large deals
at the end of September. In addition, we further improved our gross margin
performance and paid down another $40 million of debt.
"Despite the macroeconomic challenges, we still see opportunities for
growth over the next several quarters, and we remain focused on leveraging
our unique combination of disk, tape, software and service offerings to
deliver integrated, edge-to-core solutions for protecting and managing
data," continued Belluzzo.
Quantum's product revenue, which includes sales of the company's hardware
and software products, totaled $143 million in the September quarter. This
represented a net decrease of $42 million from FQ2'08, due to an expected
decline in overall OEM revenue as well as lower sales of branded devices,
non-royalty media and tape automation systems.
Disk systems and software product revenue was $19 million in FQ2'09, up
from $15 million in the same period last year. With related service revenue
included, the total for the quarter was $21 million, an increase of 31
percent over FQ2'08. Contributing to the revenue growth was the addition of
new Quantum DXi(TM)-Series and EMC disk customers who purchased systems
incorporating Quantum's de-duplication and replication software. Quantum
alone increased its DXi-Series customer base to more than 400 in the
September quarter, driven in part by sales of its DXi7500 enterprise
solution. Reflecting its strong value proposition, two-thirds of DXi7500
customers to date have purchased replication licenses and nearly a third
have taken advantage of the direct tape creation option which provides
seamless disk-tape integration.
September quarter revenue for Quantum's other two product categories was as
follows:
-- $86 million in tape automation sales, a decrease of $25 million from
the comparable period last year. Approximately two-thirds of the decline
related to OEM products, with the other third due mainly to lower branded
sales in North America.
-- $39 million in devices and non-royalty media revenue, down $21 million
from FQ2'08. This was largely the result of an anticipated decline in OEM
device revenue, although branded device sales were also lower. In addition,
Quantum chose not to pursue some lower margin media revenue opportunities.
Service revenue, which includes hardware service contracts as well as
repair, installation and professional services, was $42 million in FQ2'09.
This was an increase of $3 million over FQ2'08.
Quantum had $31 million in royalty revenue for the September quarter, which
included an $11 million payment from Riverbed Technology as part of a
previously announced settlement of patent infringement litigation. The $31
million in royalty revenue was up $6 million from the comparable quarter
last year.
Excluding royalties, the company's branded share of revenue increased to 66
percent in FQ2'09, from 63 percent in FQ2'08.
Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, Oct. 22, 2008, at 2:00 p.m. PDT,
to discuss its fiscal second quarter results. Press and industry analysts
are invited to attend in listen-only mode. Dial-in number: (303) 262-2161
(U.S. & International). Quantum will provide a live audio webcast of the
conference call beginning today, Oct. 22, 2008, at 2:00 p.m. PDT. Site for
the webcast and related information: http://www.quantum.com/investors.
About Quantum
Quantum Corp. (NYSE: QTM) is the leading global storage company
specializing in backup, recovery and archive. Combining focused expertise,
customer-driven innovation, and platform independence, Quantum provides a
comprehensive, integrated range of disk, tape, and software solutions
supported by a world-class sales and service organization. This includes
the DXi-Series, the first disk backup solutions to extend the power of data
de-duplication and replication across the distributed enterprise. As a
long-standing and trusted partner, the company works closely with a broad
network of resellers, OEMs and other suppliers to meet customers' evolving
data protection needs. Quantum Corp., 1650 Technology Drive, Suite 800, San
Jose, CA 95110, (408) 944-4000, www.quantum.com.
Quantum and the Quantum logo are trademarks of Quantum Corporation
registered in the United States and other countries.
DXi is a trademark of Quantum Corporation. 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, statements relating to our opportunities
for growth over the next several quarters, and our focus on leveraging our
unique combination of disk, tape, software and service offerings to deliver
integrated, edge-to-core solutions for protecting and managing data, are
forward-looking statements within the meaning of the Safe Harbor. These
statements are based on management's current expectations and are subject
to certain risks and uncertainties. As a result, actual results may differ
materially from the forward-looking statements contained herein. Factors
that could cause actual results to differ materially from those described
herein include, but are not limited to: (a) the failure to compete
successfully in the highly competitive and rapidly changing marketplace for
backup, recovery, archive and other storage products and services; (b) our
ability to successfully execute to our product roadmaps and timely ship our
products; (c) the risk that lower volumes and continuing price and cost
pressures could lead to lower gross margin rate; (d) media royalties from
media manufacturers coming in at lower levels than expected; (e) risks
related to our debt obligations; (f) acceptance of, or demand for, our
products being lower than anticipated; and (g) difficulties in retaining
key employees. 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," on pages 12 to 22 of Quantum's Annual Report on Form 10-K for
fiscal year 2008, filed with the Securities and Exchange Commission on June
13, 2008 and on pages 28 to 38 of Quantum's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2008, filed with the Securities and
Exchange Commission on August 8, 2008. In particular, you should review the
risk factors on pages 28 through 30 of our Form 10-Q under the headings: "A
large percentage of our sales come from a few customers, and these
customers generally have no minimum or long-term purchase commitments. The
loss of, or a significant reduction in demand from, one or more key
customers could materially and adversely affect our business, financial
condition and operating results," "We derive almost all of our revenue from
products incorporating tape technology. If competition from alternative
storage technologies continues or increases, our business, financial
condition and operating results would be materially and adversely harmed,"
"In connection with the acquisition of ADIC, we drew on our credit facility
substantially increasing our debt service obligations and constraining our
ability to operate our business. Unless we are able to generate sufficient
cash flows from operations to meet these debt obligations, our business
financial condition and operating results will be materially and adversely
affected," "Competition has increased, and may increasingly intensify, in
the tape drive and tape automation markets as a result of competitors
introducing products based on new technology standards, which could
materially and adversely affect our business, financial condition and
results of operations" and "Our credit agreement contains various covenants
that limit our discretion in the operation of our business, which could
have an adverse effect on our business, financial condition and results of
operations." Quantum expressly disclaims any obligation to update or alter
its forward-looking statements, whether as a result of new information,
future events or otherwise.
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share amounts)
Three Months Ended Six Months Ended
------------------------ ------------------------
September September September September
30, 30, 30, 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Product $ 143,192 $ 184,973 $ 300,776 $ 366,604
Service 41,579 39,008 83,836 79,112
Royalty 30,619 24,526 52,569 48,559
----------- ----------- ----------- -----------
Total revenue 215,390 248,507 437,181 494,275
Cost of Revenue
Product 99,631 141,595 214,634 278,738
Service 32,884 28,637 64,833 58,968
Restructuring charges
related to cost of
revenue -- -- -- 237
----------- ----------- ----------- -----------
Total cost of
revenue 132,515 170,232 279,467 337,943
----------- ----------- ----------- -----------
Gross margin 82,875 78,275 157,714 156,332
Operating expenses
Research and
development 18,766 22,500 37,756 48,858
Sales and marketing 38,148 34,253 78,185 69,609
General and
administrative 19,820 17,986 41,845 39,503
Restructuring
charges 457 217 407 9,331
----------- ----------- ----------- -----------
77,191 74,956 158,193 167,301
----------- ----------- ----------- -----------
Income (loss) from
operations 5,684 3,319 (479) (10,969)
Interest income and
other, net (385) 1,512 1,097 5,869
Interest expense (7,510) (24,199) (16,285) (37,833)
----------- ----------- ----------- -----------
Loss before income
taxes (2,211) (19,368) (15,667) (42,933)
Income tax provision 1,053 1,099 1,935 119
----------- ----------- ----------- -----------
Net loss $ (3,264) $ (20,467) $ (17,602) $ (43,052)
=========== =========== =========== ===========
Basic and diluted net
loss per share $ (0.01) $ (0.10) $ (0.08) $ (0.21)
Basic and diluted
weighted average
common and common
equivalent shares 208,960 201,142 207,943 199,700
Included in the
above Statements
of Operations:
Expense related to
retiring prior debt
facility $ -- $ 12,602 $ -- $ 12,602
Accelerated
depreciation on
legacy IT system -- -- -- 2,179
Accelerated
depreciation related
to facility closures -- 66 -- 66
Retention expense
Cost of revenue -- 53 -- 219
General and
administrative -- 73 -- 73
----------- ----------- ----------- -----------
-- 126 -- 292
Amortization of
intangibles
Cost of revenue 6,730 8,047 13,648 16,556
Research and
development 100 206 200 411
Sales and marketing 4,117 4,223 8,248 8,446
General and
administrative 25 25 50 50
----------- ----------- ----------- -----------
10,972 12,501 22,146 25,463
Share-based
compensation
Cost of revenue 603 572 958 938
Research and
development 807 1,058 1,572 1,917
Sales and marketing 972 1,000 1,713 1,583
General and
administrative 684 1,039 1,517 2,081
----------- ----------- ----------- -----------
3,066 3,669 5,760 6,519
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, March 31,
2008 2008
------------- -------------
(Unaudited) *
Assets
Current assets:
Cash and cash equivalents $ 33,177 $ 93,643
Accounts receivable, net 148,022 182,998
Inventories 77,318 75,995
Deferred income taxes 12,138 12,060
Other current assets 29,761 30,601
------------- -------------
Total current assets 300,416 395,297
Long-term assets:
Property and equipment, less
accumulated depreciation 33,505 39,271
Service parts for maintenance, less
accumulated amortization 75,409 77,211
Purchased technology, less accumulated
amortization 60,819 74,667
Other intangible assets, less
accumulated amortization 66,925 75,223
Goodwill 390,776 390,776
Other long-term assets 12,496 13,280
------------- -------------
Total long-term assets 639,930 670,428
------------- -------------
$ 940,346 $ 1,065,725
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 77,992 $ 97,965
Accrued warranty 15,240 19,862
Deferred revenue, current 74,137 73,525
Current portion of long-term debt 4,000 4,000
Accrued restructuring charges 3,514 3,834
Other accrued liabilities 79,915 82,997
------------- -------------
Total current liabilities 254,798 282,183
Long-term liabilities:
Deferred revenue, long-term 33,896 31,152
Deferred income taxes 13,892 13,640
Long-term debt 246,000 336,000
Convertible subordinated debt 160,000 160,000
Other long-term liabilities 14,176 14,746
------------- -------------
Total long-term liabilities 467,964 555,538
Stockholders' equity 217,584 228,004
------------- -------------
$ 940,346 $ 1,065,725
============= =============
* Derived from the March 31, 2008 audited Consolidated Financial Statements
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
----------------------------
September 30, September 30,
2008 2007
------------- -------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net loss (17,602) (43,052)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 8,524 15,245
Amortization** 32,401 42,763
Realized gain on sale of investment -- (2,122)
Deferred income taxes 174 (14)
Share-based compensation 5,760 6,519
Fixed assets written off in
restructuring -- 568
Changes in assets and liabilities:
Accounts receivable 34,976 (48,828)
Inventories (7,490) 9,650
Service parts for maintenance (1,099) 62
Accounts payable (19,973) 512
Income taxes payable (154) (621)
Accrued warranty (4,622) (6,587)
Deferred revenue 3,356 4,709
Accrued restructuring charges (320) (3,647)
Other assets and liabilities (3,352) 1,294
------------- -------------
Net cash provided by (used in) operating
activities 30,579 (23,549)
Cash flows from investing activities:
Purchases of marketable securities -- (65,000)
Proceeds from sale of marketable
securities -- 100,000
Purchases of property and equipment (3,025) (13,831)
Proceeds from sale of investment -- 5,441
Proceeds from sale of subsidiary, net
of cash sold -- 2,176
------------- -------------
Net cash provided by (used in) investing
activities (3,025) 28,786
Cash flows from financing activities:
Borrowings of long-term debt, net -- 441,953
Repayments of long-term debt (90,000) (432,500)
Proceeds from issuance of common stock,
net 1,980 9,018
------------- -------------
Net cash provided by (used in) financing
activities (88,020) 18,471
Net increase (decrease) in cash and cash
equivalents (60,466) 23,708
Cash and cash equivalents at beginning of
period 93,643 59,926
------------- -------------
Cash and cash equivalents at end of period $ 33,177 $ 83,634
============= =============
** Amortization for the six months ended September 30, 2007 includes
$8.1 million of the prior debt facility's capitalized debt costs.
Contact:
Brad Cohen
Public Relations
Quantum Corp.
(408) 944-4044
Email Contact
Marilyn Keys
Investor Relations
Quantum Corp.
(408) 944-4450
Email Contact
