EX-99.1 2 exhibit99-1.htm PRESS RELEASE, DATED JULY 27, 2011 exhibit99-1.htm
     Exhibit 99.1
 
     
   
     

Contact: For Release:
Brad Cohen July 27, 2011
Public Relations 1:05 p.m. PDT
Quantum Corp.  
(408) 944-4044  
brad.cohen@quantum.com  
   
Christi Lee  
Investor Relations  
Quantum Corp.  
(408) 944-4450  
ir@quantum.com  

QUANTUM CORPORATION REPORTS FISCAL FIRST QUARTER RESULTS
 
Highlights:
  • Total revenue of $154 million, with branded growth up 3% over prior year period
  • Branded disk systems and related maintenance revenue up 15% year-over-year
  • Branded tape automation revenue up 8% year-over-year
  • Expanded future market reach with StorNext appliance launch, StorNext reseller agreement with NetApp, Pancetera acquisition and other new products/partnerships
SAN JOSE, Calif., July 27, 2011 – Quantum Corp. (NYSE:QTM), the leading global specialist in backup, recovery and archive, today reported results for the first quarter of fiscal 2012 (FQ1’12), ended June 30, 2011. Revenue for the quarter totaled $154 million, down 6 percent from the first quarter of fiscal 2011 (FQ1’11) primarily due to the recognition of $9.5 million in OEM deduplication software license revenue in FQ1’11 that was not repeated. Branded revenue, which represented 80 percent of total non-royalty revenue for the quarter, grew 3 percent year-over-year.
 
For FQ1’12, GAAP net loss was $5 million, or 2 cents per diluted share, compared to a GAAP net loss of $3 million, or 1 cent per diluted share, in FQ1’11. Non-GAAP net income for the quarter was $3 million, or 1 cent per diluted share, down from $9 million, or 4 cents per diluted share, in the comparable quarter last year.
 
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“We are not pleased with our overall revenue result for the quarter and specifically the fact that disk systems and software sales did not meet our growth expectations; however, our branded business grew 3 percent and we delivered another strong quarter for tape automation,” said Jon Gacek, president and CEO of Quantum. “We also took a number of actions that we believe will expand our market reach and drive growth in the coming quarters, including introducing our first StorNext® appliance, acquiring Pancetera Software and preparing for today’s launch of our new DXi6701 and DXi6702 appliances. We believe these actions, along with our continued focus on improving sales and go-to-market execution, will enable us to get back on track and deliver on our fiscal 2012 goals.”
 
Outlook
For the second quarter of fiscal 2012, the company expects:
  • Revenue of approximately $160 million.
  • A GAAP gross margin rate slightly higher and non-GAAP gross margin rate slightly lower than those in FQ1’12.
  • GAAP operating expenses of $66 million and non-GAAP operating expenses of $60 million.
  • Interest expense of approximately $3 million and taxes of $1 million.
Business Highlights
Key business highlights for the June quarter include the following:
  • Quantum announced and began shipping the StorNext M330, the first in a new family of StorNext appliances. It combines the high-performance, heterogeneous software file sharing and tiered, vendor-agnostic archiving benefits found in Quantum’s StorNext data management software with the simplicity of purpose-built hardware. Targeting organizations with sustained large data throughput challenges, the StorNext M330 addresses complex “big data” management needs yet is designed for ease of deployment with minimal configuration requirements.
  • Also extending the market reach for StorNext, the company announced that NetApp would begin reselling StorNext software in combination with its disk-based products, giving customers a powerful unified storage solution for simultaneous sharing, managing, on-demand distribution and archiving of rich media files.
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  • With its acquisition of Pancetera Software Inc., Quantum gained key assets for dramatically reducing the complexity and cost of managing and protecting data in virtual server environments. Pancetera technology is already compatible with Quantum’s DXi® disk backup and deduplication products, and the company plans to further integrate the technology into its DXi and StorNext roadmaps.
  • The company finalized its new DXi6701 and DXi6702 deduplication appliances being announced today. Incorporating Quantum’s latest generation DXi 2.0 software, the new appliances provide industry-leading performance (twice that of leading competitors) and scalability, as well as a unique approach to distributing deduplication across a network. The DXi6701 and DXi6702 also deliver unparalleled value, starting at a price point as low as half that of leading competitors and with all the necessary software licenses included in the base price.
  • Quantum’s DXi6000 disk backup and deduplication appliances were named “Storage Product of the Year” at the 2011 Storage Awards: The Storries VIII. The awards were based on votes cast by the readers of Storage Magazine, the UK’s leading IT and storage publication.
  • The company announced a new OEM agreement with HP under which HP will brand and sell a new enterprise tape library based on Quantum’s Scalar i6000 platform. The agreement builds on the strong partnership the two companies have established in tape-based storage, including a previous OEM relationship in enterprise tape automation.
  • Enhancing its tape archiving capabilities, Quantum introduced a new Extended Data Life Management (EDLM) feature that is part of the Scalar i6000 tape library’s iLayer™ management software. EDLM automates the integrity checking of tapes, improving resiliency and helping to protect valuable archived content that can be stored for years on tape. EDLM also integrates with StorNext Storage Manager™ archiving software to migrate content automatically from a suspect tape based on the results of an EDLM scan.
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Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, July 27, 2011, 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: (480) 629-9692 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, July 27, 2011, 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 specialist in backup, recovery, and archive. From small businesses to multinational enterprises, more than 50,000 customers trust Quantum to solve their data protection, retention and management challenges. Quantum’s best-of-breed, open systems solutions provide significant storage efficiencies and cost savings while minimizing risk and protecting prior investments. They include three market-leading, highly scalable platforms: DXi®-Series disk-based deduplication and replication systems for fast backup and restore, Scalar® tape automation products for disaster recovery and long-term data retention, and StorNext® data management software and appliances for high-performance file sharing and archiving. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, (408) 944-4000, www.quantum.com.
 
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Quantum, the Quantum logo, DXi, iLayer, Scalar, StorNext and StorNext Storage Manager 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, the statements regarding actions we believe will expand our market reach and drive growth in the coming quarters; that we believe these actions, along with our continued focus on improving sales and go-to-market execution, will enable us to get back on track and deliver on our fiscal 2012 goals; that we plan to further integrate the Pancetera technology into our DXi and StorNext roadmaps; and that HP will brand and sell a new enterprise tape library based on our Scalar i6000 platform, as well as 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 “Item 1A. Risk Factors,” in Quantum’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 14, 2011. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
 
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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 amortization of intangibles, share-based compensation expense, restructuring charges and acquisition expenses for the following reasons:
 
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.
 
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.
 
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.
 
Acquisition Expenses
The acquisition expenses are those expenses incurred to acquire Pancetera and are not part of Quantum’s future core operations.
 
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.
 
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
        Three Months Ended
    June 30, 2011       June 30, 2010
Revenue:                
       Product   $        102,268     $        108,454  
       Service     36,696       38,637  
       Royalty     14,571       16,134  
              Total revenue     153,535       163,225  
Cost of revenue:                
       Product     68,507       70,635  
       Service     22,066       25,136  
       Restructuring benefit related to cost of revenue     (300 )     —  
              Total cost of revenue     90,273       95,771  
                     Gross margin     63,262       67,454  
                 
Operating expenses:                
       Research and development     18,580       18,122  
       Sales and marketing     30,525       30,078  
       General and administrative     16,002       15,483  
       Restructuring benefit     (164 )     (83 )
      64,943       63,600  
                     Income (loss) from operations     (1,681 )     3,854  
                 
Interest income and other, net     (98 )     (32 )
Interest expense     (2,809 )     (6,115 )
                     Loss before income taxes     (4,588 )     (2,293 )
Income tax provision     638       403  
                     Net loss   $ (5,226 )   $ (2,696 )
                 
Basic and diluted net loss per share   $ (0.02 )   $ (0.01 )
                 
Basic and diluted weighted average common and common equivalent shares     228,423       215,448  
                 
Included in the above Statements of Operations:                
       Amortization of intangibles:                
              Cost of revenue   $ 2,575     $ 5,547  
              Research and development     —       100  
              Sales and marketing     3,331       3,394  
              General and administrative     25       25  
      5,931       9,066  
       Share-based compensation:                
              Cost of revenue     455       460  
              Research and development     640       749  
              Sales and marketing     719       885  
              General and administrative     1,203       948  
      3,017       3,042  
       Acquisition expenses     232       —  

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QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
    June 30, 2011   March 31, 2011*
Assets                        
Current assets:                
       Cash and cash equivalents   $         73,829     $              76,010  
       Restricted cash     1,586       1,863  
       Accounts receivable, net     96,825       114,969  
       Manufacturing inventories     49,085       48,131  
       Service parts inventories     43,583       45,036  
       Deferred income taxes     6,219       6,271  
       Other current assets     11,540       11,274  
              Total current assets     282,667       303,554  
Long-term assets:                
       Property and equipment, net     25,365       24,980  
       Intangible assets and goodwill     96,537       91,481  
       Other long-term assets     10,321       10,950  
              Total long-term assets     132,223       127,411  
    $ 414,890     $ 430,965  
Liabilities and Stockholders’ Deficit                
Current liabilities:                
       Accounts payable   $ 50,846     $ 52,203  
       Accrued warranty     7,157       7,034  
       Deferred revenue, current     81,249       87,488  
       Current portion of long-term debt     1,016       1,067  
       Accrued restructuring charges     1,565       4,028  
       Accrued compensation     30,335       31,249  
       Income taxes payable     1,483       1,172  
       Other accrued liabilities     18,714       21,418  
              Total current liabilities     192,365       205,659  
Long-term liabilities:                
       Deferred revenue, long-term     33,493       34,281  
       Deferred income taxes     6,271       6,820  
       Long-term debt     98,051       103,267  
       Convertible subordinated debt     135,000       135,000  
       Other long-term liabilities     7,165       7,049  
              Total long-term liabilities     279,980       286,417  
Stockholders’ deficit     (57,455 )     (61,111 )
    $ 414,890     $ 430,965  
                 
*       Derived from the March 31, 2011 audited Consolidated Financial Statements.
 
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    Three Months Ended
    June 30, 2011   June 30, 2010
Cash flows from operating activities:                        
        Net loss   $         (5,226 )   $         (2,696 )
        Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
                Depreciation     2,982       2,974  
                Amortization     6,482       9,477  
                Service parts lower of cost or market adjustment     1,735       4,458  
                Deferred income taxes     (493 )     156  
                Share-based compensation     3,017       3,042  
                Changes in assets and liabilities, net of effect of acquisition:                
                        Accounts receivable     18,150       (2,152 )
                        Manufacturing inventories     (2,564 )     (3,204 )
                        Service parts inventories     1,328       (321 )
                        Accounts payable     (1,364 )     (4,559 )
                        Accrued warranty     123       (69 )
                        Deferred revenue     (7,055 )     (15,185 )
                        Accrued restructuring charges     (2,486 )     (1,351 )
                        Accrued compensation     (1,019 )     (4,136 )
                        Income taxes payable     303       (623 )
                        Other assets and liabilities     (2,545 )     (1,520 )
Net cash provided by (used in) operating activities     11,368       (15,709 )
                 
Cash flows from investing activities:                
        Purchases of property and equipment     (3,413 )     (2,193 )
        Decrease in restricted cash     300       72  
        Return of principal from other investments     —       95  
        Payments for business acquisition, net of cash acquired     (8,152 )     —  
Net cash used in investing activities     (11,265 )     (2,026 )
                 
Cash flows from financing activities:                
        Repayments of long-term debt     (5,267 )     (471 )
        Payment of taxes due upon vesting of restricted stock     (424 )     (429 )
        Proceeds from issuance of common stock     3,433       1,037  
Net cash provided by (used in) financing activities     (2,258 )     137  
                 
Effect of exchange rate changes on cash and cash equivalents     (26 )     (61 )
                 
Net decrease in cash and cash equivalents     (2,181 )     (17,659 )
Cash and cash equivalents at beginning of period     76,010       114,947  
Cash and cash equivalents at end of period   $ 73,829     $ 97,288  
                 
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QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
 
    Three Months Ended June 30, 2011
                                              Per Share       Per Share
            Gross           Net Income   Net Income
    Gross   Margin   Net Income   (Loss),   (Loss),
    Margin   Rate   (Loss)   Basic   Diluted
GAAP   $       63,262        41.2 %      $       (5,226 )   $       (0.02 )   $       (0.02 )
Non-GAAP Reconciling Items:                                          
       Amortization of intangibles     2,575                 5,931                  
       Share-based compensation     455                 3,017                  
       Restructuring benefit     (300 )               (464 )                
       Acquisition expenses     —                 232                  
Non-GAAP   $ 65,992       43.0 %     $ 3,490     $ 0.02     $ 0.01  
           
              Computation of basic and diluted net income (loss) per share:     GAAP   Non-GAAP
                     Net income (loss)     $ (5,226 )   $ 3,490  
                   
              Weighted average shares:                  
                     Basic     228,423       228,423  
                            Dilutive shares from restricted stock       —       6  
                            Dilutive shares from stock plans       —       9,683  
                            Dilutive shares from convertible notes       —       —  
                     Diluted     228,423       238,112  
 
    Three Months Ended June 30, 2010
                              Per Share   Per Share
            Gross           Net Income   Net Income
    Gross   Margin   Net Income   (Loss),   (Loss),
    Margin   Rate   (Loss)   Basic   Diluted
GAAP   $ 67,454       41.3 %     $ (2,696 )   $ (0.01 )   $ (0.01 )
Non-GAAP Reconciling Items:                                          
       Amortization of intangibles     5,547                 9,066                  
       Share-based compensation     460                 3,042                  
       Restructuring benefit     —                 (83 )                
Non-GAAP   $ 73,461       45.0 %     $ 9,329     $ 0.04     $ 0.04  
           
              Computation of basic and diluted net income (loss) per share:     GAAP   Non-GAAP
                     Net income (loss)     $ (2,696 )   $ 9,329  
                   
              Weighted average shares:                  
                     Basic     215,448       215,448  
                            Dilutive shares from stock plans       —       9,846  
                            Dilutive shares from convertible notes       —       —  
                     Diluted     215,448       225,294  
                 
The non-GAAP 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.
 
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QUANTUM CORPORATION
FORECAST SECOND QUARTER FISCAL 2012
GAAP TO NON-GAAP RECONCILIATION
(In millions)
 
Forecast operating expense on a GAAP basis       $       66.0
Forecast amortization of intangibles     3.3
Forecast share-based compensation     2.7
Forecast operating expense on a non-GAAP basis   $ 60.0
       
Estimates based on current (July 27, 2011) 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, 2011. 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.
 
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