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Quantum Corporation Reports Fiscal First Quarter 2018 Results

Fiscal First Quarter 2018 Financial Results
(All comparisons are relative to the fiscal first quarter 2017 unless otherwise stated.)1

  • Total revenue increased to $116.9 million, up from $116.3 million.
  • Branded revenue was $99.6 million, a 3 percent increase.
  • Scale-out tiered storage revenue was $33.7 million, up from $30.8 million.
  • Total data protection revenue was $73.1 million, down from $76.9 million and consisting of:
    • $58.4 million in tape automation, devices and media revenue, up 6 percent overall, with branded revenue growing 14 percent and OEM revenue declining 32 percent.
    • $14.7 million in disk backup systems revenue, down from $21.5 million in the same quarter a year earlier which included a large, multi-million dollar deal.
  • Royalty revenue was $10.0 million, up from $8.6 million.
  • GAAP operating loss was $2.5 million, and non-GAAP operating income was $2.2 million, compared to a loss of $1.8 million and income of $2.4 million, respectively.
  • GAAP net loss was $3.7 million, compared to $3.5 million, a net loss of $0.11 per diluted share2 in both quarters.
  • Non-GAAP net income was $1.4 million, or $0.04 per diluted share, up from $0.8 million, or $0.02 per diluted share.

"We continued to build on our momentum over the past year, growing total revenue year-over-year and generating non-GAAP net profit for the fifth consecutive quarter," said Jon Gacek, president and CEO of Quantum. "Although the total revenue increase was slight, branded revenue grew 3 percent. Other revenue highlights included year-over-year growth in scale-out tiered storage of 10 percent and another strong quarter for branded tape automation, devices and media sales.

"We also announced StorNext 6, a major new release of our industry-leading scale-out file system and data management software, which recently began shipping. StorNext 6 will enable us to deliver greater value to customers and, we believe, help further broaden our market reach, along with several new partnerships we announced during the quarter. They include ecosystem partnerships with Veeam in data protection, Veritone in artificial intelligence and DataFrameworks in data visualization and management, as well as a strategic reseller partnership with Uniview in video surveillance. [See "Fiscal First Quarter Business Highlights" section below for additional information on these partnerships.]

"As we look forward to the rest of fiscal 2018, we continue to be excited about the opportunity to grow total revenue, driven by expected scale-out tiered storage growth of at least 20 percent for the year. At the same time, we remain focused on generating profit and cash and are confident in our ability to manage our debt ― including paying off our November 2017 convert ― with existing resources.

"In addition, our newly constituted board of directors has launched a number of strategic initiatives and is working closely with the management team to implement various work streams, with the goal of improving long-term growth, recurring revenue and profitability. As part of this work, we are in the process of engaging a top-tier consulting firm which we expect will help the company to identify and deliver improvements in the operating characteristics of the business over the next six to 12 months, including accretive contributions to non-GAAP earnings. We plan to update investors on a quarterly basis regarding the progress of this important initiative."

Fiscal Second Quarter and Full Year 2018 Guidance
Quantum provided the following guidance for the fiscal second quarter 2018:

  • Total revenue of $120 million to $125 million.
  • GAAP and non-GAAP gross margin of 41-42 percent.
  • GAAP and non-GAAP operating expenses of approximately $49 million and $47 million, respectively.
  • GAAP and non-GAAP interest expense of $2.4 million and $1.9 million, respectively, and taxes of $400,000.
  • GAAP loss/earnings per share of ($0.06) to breakeven and non-GAAP earnings of $0.01 to $0.05 per diluted share.

The company also provided the following guidance for the full fiscal year:

  • Total revenue of $515 million to $525 million.
  • GAAP and non-GAAP earnings per share above the levels achieved in fiscal 2017.

Fiscal First Quarter Business Highlights

  • Quantum announced new, unique integration with Veeam for DXi® deduplication appliances and Quantum's latest Scalar® tape storage platform to deliver more robust data protection for virtual environments. These integrated solutions make it easier for Veeam customers to deploy "3-2-1 data protection" best practices — storing at least three copies of data on two different types of media with one backup copy off-site — to guard against data loss, localized disaster and ransomware.
  • The company has established a strategic relationship with Veritone Inc., a leader in cognitive analytics. Veritone aiWARE ― a hybrid on-premise and cloud version of Veritone's best-in-class, cloud-based artificial intelligence platform ― will be offered as an integrated solution with StorNext®. This combination will allow users to leverage the power of Veritone's analytics, along with top cognitive engines, to extract new value from their on-premise video and audio content without having to move it to the cloud.
  • Under another new partnership, Quantum has integrated DataFrameworks ClarityNow software with its Xcellis® scale-out storage and Artico™ archive appliances, providing increased visibility into usage and other intelligence regarding large unstructured data. Through deeper insight into their data, users with highly demanding storage environments ― which can include hundreds of storage nodes, dozens of file systems and multiple different vendors ― will now be able to scan, organize, access and migrate their data much more easily and efficiently to meet their business or mission objectives.
  • The company announced that Zhejiang Uniview Technologies Co. Ltd., one of the top three video surveillance system integrators in China, has agreed to become a Quantum value-added reseller and strategic alliance partner. This alliance gives Quantum greater reach into what is expected to be the largest video surveillance market in the world by next year and also reflects the company's focus on expanding its partnerships with global system integrators in video surveillance.
  • Further highlighting Quantum's emergence as a major player in video surveillance, the company won two prestigious awards for video surveillance storage at the ISC West 2017 Conference. The Security Industry Association (SIA) named Quantum's StorNext data management software as a category winner in the New Product Showcase (NPS), one of the top accolades for product innovation in the security industry. In addition, StorNext received the Platinum Govies Government Security award given by Security Today magazine, which honors outstanding government security products in a variety of categories.
  • In the media and entertainment market, Quantum's new StorNext 6 release garnered multiple honors at the 2017 NAB Show. Providing a unique combination of new advanced data management features and industry-leading performance, StorNext 6 won a NewBay Media Best of Show Award and Post Magazine "Post Pick." The NewBay Media award recognizes technologies for innovation, feature set, cost efficiency and performance in serving the industry, while the Post Pick award is given to a standout new product notable for its innovation. In addition, StorNext 6 was an IABM Game Changer Award finalist, selected not only for innovation but also for delivering significant operational and business benefits.

Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, Aug. 9, 2017, 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: 503-343-6063
Participant passcode: 55430824
Replay numbers: 855-859-2056 U.S.; 404-537-3406 International