SOURCE: Quantum Corporation
May 13, 2010 16:05 ET
Quantum Corporation Reports Strong Fiscal 2010 Year-End Financial Results, With Improved Fourth Quarter Performance
Major New Disk, Tape and Software Product Introductions Provide Foundation for Growth in Fiscal Year 2011
SAN JOSE, CA--(Marketwire - May 13, 2010) - Quantum Corp. (NYSE: QTM), the leading global
specialist in backup, recovery and archive, today announced that revenue
for its fiscal year 2010 (FY10), ended March 31, 2010, was $681 million,
with $164 million in fiscal fourth quarter (FQ4'10) revenue. The company's
FY10 GAAP gross margin rate of 41.1 percent was the highest in nine years,
and the FQ4'10 GAAP gross margin rate of 40.8 percent was above 40 percent
for the third consecutive quarter. Quantum generated GAAP net income of $17
million for the full year, or eight cents per basic share, with the $17
million profit representing the company's best fiscal year performance in
eight years. Although Quantum reported a GAAP net loss of $4 million, or
two cents per share, for the March quarter, this was a significant
improvement over the comparable quarter in fiscal year 2009 (FY09).
The strength of Quantum's financial performance in FY10 is further
demonstrated by the fact that the $17 million in GAAP net income included
$36 million in amortization of intangibles costs, $10 million in
stock-based compensation charges and $5 million in restructuring expenses,
offset by only a $13 million net gain related to the retirement of
convertible debt. The net impact of these four items reduced FY10 basic
earnings per share by 18 cents to the company's reported 8-cent earnings
per basic share. Similarly, the $4 million GAAP net loss in the March
quarter included $9 million in amortization of intangibles costs and $3
million in stock-based compensation charges, reducing basic earnings per
share by six cents to the reported 2-cent loss per share for the quarter.
Quantum generated $100 million in cash for the full fiscal year, with $19
million in cash from operations for FQ4'10. This strong cash generation
enabled the company to pay down
$62 million of its senior debt in FY10 and end the year with $117 million
in total cash and cash equivalents, the highest year-end level since March
2006.
Quantum's financial results reflect a successful multi-year strategy of
moving away from a more device-centric orientation to becoming a storage
systems company. A key element of this strategy has been a shift from
reliance on low-margin OEM revenue to driving a greater percentage of
higher-margin branded business. For FY10, the company's branded business
represented 74 percent of total non-royalty revenue, up from 67 percent in
FY09, with an FQ4'10 branded share of 78 percent compared to 70 percent in
the same period the previous year. This mix shift was one of the major
factors behind the strong financial results Quantum reported today and also
is the basis for the respective 16 percent and 2 percent year-over-year
revenue declines for FY10 and FQ4'10, as these declines were largely due to
lower OEM revenue.
"Fiscal year 2010 was a critical year in Quantum's transformation to
becoming a storage systems company and providing a strong foundation for
growth in the new fiscal year," said Rick Belluzzo, chairman and CEO of
Quantum. "We overcame some very difficult challenges and succeeded in
delivering our best financial performance in many years, introducing major
new products across our portfolio, and shifting our go-to-market focus. As
a result, Quantum is well-positioned to capitalize on the improved storage
spending environment, on our central role in key market segments such as
deduplication and high performance data management, and on channel and
other partner opportunities created by changes in the competitive
landscape. All of this will enable us to drive revenue growth moving
forward, our top priority for fiscal year 2011."
In addition to Quantum's success in executing on its financial model, the
company also continued to make progress in driving disk systems and
software momentum. Inclusive of related service revenue, revenue in this
product category was $95 million for FY10, and $23 million for FQ4'10. This
included record branded disk systems and software revenue for the full
fiscal year, with a 19 percent increase over FY09. For the March quarter,
branded revenue in this product category grew 29 percent over the same
period in FY09, driven by a significant increase in branded DXi™ sales.
New DXi6500 midrange customers in FQ4'10 included a leading U.S. medical
technology supplier, a global oil company's European division and a major
American hydroelectric power provider. Notable DXi7500 enterprise account
wins during the quarter included new business with one of the world's
largest greeting card companies, a major automobile manufacturer in Asia
and a top telecommunications supplier in Europe and Latin America, as well
as repeat orders from leading U.S. insurance and wireless providers.
In the March quarter, Quantum also continued building on StorNext®'s
leadership in the Media and Entertainment industry with major deals at
several broadcasting companies around the world. Quantum also strengthened
StorNext's foothold in other key vertical markets such as Government and
Life Sciences, where some of the largest revenue contributions came from
existing customers, including a national intelligence organization, a
governmental geosciences agency, and a genome sequencing center.
Quantum stated that it expects its DXi and StorNext products to be a
significant growth driver in fiscal year 2011. Since last October, the
company has introduced two new DXi backup, deduplication and replication
platforms -- the DXi6500 for midrange, NAS environments and the DXi4500 for
small- and medium-size businesses and remote offices, both of which are
optimized for sales through channel partners -- as well as version 4.0 of
its StorNext data management software.
Complementing its disk systems and software products, Quantum also said it
intends to build on its position as the worldwide leader in open systems
tape automation, again leveraging products launched since last fall. These
include the Scalar® i40 and i80 entry-level libraries and the Scalar
i6000 enterprise library, as well as new LTO-5 tape drives that the company
is adding to its tape automation systems.
Both the DXi4500 and Scalar i6000 were just introduced in the last six
weeks, and many of the other new products only started shipping in the last
three months. Although these new products have been well-received by end
users and channel partners, their contribution to Quantum's revenue base is
therefore still limited. As they begin to ramp in the coming months, the
company expects these products to generate increasing revenue momentum and
play a key role in meeting its growth objectives for fiscal year 2011.
Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, May 13, 2010, at 2:00 p.m. PDT,
to discuss its fiscal fourth quarter and year-end results. Press and
industry analysts are invited to attend in listen-only mode. Dial-in
number: (480) 629-9771 (U.S. & International). Quantum will provide a live
audio webcast of the conference call beginning today, May 13, 2010, 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(tm)-Series, the first disk backup solutions to extend the power of
data deduplication 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, the Quantum logo, StorNext and Scalar are registered trademarks of
Quantum Corporation and its affiliates. 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 major new disk,
tape and software product introductions providing a foundation for growth
in fiscal year 2011, Quantum being well-positioned to capitalize on its
opportunities and drive revenue growth, that Quantum expects its DXi and
StorNext products to be a significant growth driver in fiscal year 2011,
that Quantum intends to build on its position as the worldwide leader in
open systems tape automation and that the company expects recent product
introductions to generate increasing revenue momentum and play a key role
in meeting its growth objectives for fiscal year 2011. 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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors," in Quantum's
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on February 5, 2010 and in Quantum's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on June 30, 2009. 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)
(Unaudited)
Three Months Ended Twelve Months Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2010 2009 2010 2009
--------- --------- --------- ---------
Revenue:
Product $ 107,970 $ 111,826 $ 456,101 $ 556,484
Service 38,827 40,071 156,477 164,664
Royalty 17,654 16,226 68,849 87,824
--------- --------- --------- ---------
Total revenue 164,451 168,123 681,427 808,972
Cost of Revenue:
Product 72,896 76,012 300,568 379,595
Service 24,506 31,297 100,822 125,063
--------- --------- --------- ---------
Total cost of revenue 97,402 107,309 401,390 504,658
--------- --------- --------- ---------
Gross margin 67,049 60,814 280,037 304,314
Operating expenses:
Research and development 18,355 16,728 69,949 70,537
Sales and marketing 30,410 30,244 114,612 141,250
General and administrative 15,360 17,785 61,372 76,645
Restructuring charges 11 2,338 4,795 6,807
Goodwill impairment -- -- -- 339,000
--------- --------- --------- ---------
64,136 67,095 250,728 634,239
--------- --------- --------- ---------
Income (loss) from
operations 2,913 (6,281) 29,309 (329,925)
Interest income and other, net (540) (462) 1,255 41
Interest expense (6,116) (5,700) (25,515) (29,261)
Gain on debt extinguishment,
net of costs -- -- 12,859 --
--------- --------- --------- ---------
Income (loss) before
income taxes (3,743) (12,443) 17,908 (359,145)
Income tax provision (benefit) 622 (557) 1,274 (881)
--------- --------- --------- ---------
Net income (loss) $ (4,365) $ (11,886) $ 16,634 $(358,264)
========= ========= ========= =========
Net income (loss) per share:
Basic $ (0.02) $ (0.05) $ 0.08 $ (1.71)
Diluted (0.02) (0.05) 0.02 (1.71)
Income (loss) for purposes of
computing net income
(loss) per share:
Basic $ (4,365) $ (11,886) $ 16,634 $(358,264)
Diluted (4,365) (11,886) 5,024 (358,264)
Weighted average common and
common equivalent shares:
Basic 214,442 210,189 212,672 209,041
Diluted 214,442 210,189 223,761 209,041
--------- --------- --------- ---------
Included in the above
Statements of Operations:
Amortization of intangibles:
Cost of revenue 5,547 5,510 22,069 24,668
Research and development 100 100 400 400
Sales and marketing 3,394 3,393 13,575 15,035
General and administrative 25 25 100 100
--------- --------- --------- ---------
9,066 9,028 36,144 40,203
Share-based compensation:
Cost of revenue 414 320 1,366 1,419
Research and development 640 549 2,373 2,722
Sales and marketing 744 706 2,581 2,695
General and administrative 836 925 3,469 3,756
--------- --------- --------- ---------
2,634 2,500 9,789 10,592
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31, March 31,
2010 2009*
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 114,947 $ 85,532
Restricted cash 1,896 1,773
Accounts receivable, net 103,397 107,851
Manufacturing inventories, net 54,080 61,237
Service parts inventories, net 53,217 63,029
Deferred income taxes 7,907 9,935
Other current assets 14,500 24,745
---------- ----------
Total current assets 349,944 354,102
Long-term assets:
Property and equipment, less accumulated
depreciation 24,528 28,553
Intangible assets, less accumulated
amortization 73,092 109,236
Goodwill 46,770 46,770
Other long-term assets 9,809 10,708
---------- ----------
Total long-term assets 154,199 195,267
---------- ----------
$ 504,143 $ 549,369
========== ==========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 56,688 $ 45,182
Accrued warranty 5,884 11,152
Deferred revenue, current 94,921 84,079
Current portion of long-term debt 1,884 4,000
Current portion of convertible subordinated
debt 22,099 --
Accrued restructuring charges 3,795 4,681
Accrued compensation 31,237 27,334
Income taxes payable 2,594 4,752
Other accrued liabilities 23,555 34,550
---------- ----------
Total current liabilities 242,657 215,730
Long-term liabilities:
Deferred revenue, long-term 30,724 32,082
Deferred income taxes 8,676 11,190
Long-term debt 305,899 244,000
Convertible subordinated debt -- 160,000
Other long-term liabilities 7,444 6,326
---------- ----------
Total long-term liabilities 352,743 453,598
Stockholders' deficit (91,257) (119,959)
---------- ----------
$ 504,143 $ 549,369
========== ==========
* Derived from the March 31, 2009 audited Consolidated Financial
Statements.
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Twelve Months Ended
------------------------------
March 31, 2010 March 31, 2009
-------------- --------------
Cash flows from operating activities:
Net income (loss) $ 16,634 $ (358,264)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 12,098 15,452
Amortization 38,461 42,291
Service parts lower of cost or market
adjustment 11,424 20,691
Gain on debt extinguishment (15,613) --
Goodwill impairment -- 339,000
Deferred income taxes (466) (352)
Share-based compensation 9,789 10,592
Changes in assets and liabilities:
Accounts receivable 4,454 75,132
Manufacturing inventories, net 2,328 6,591
Service parts inventories, net 3,217 1,658
Accounts payable 11,495 (52,692)
Accrued warranty (5,268) (8,710)
Deferred revenue 9,484 11,515
Accrued restructuring charges (917) 968
Accrued compensation 3,824 (4,335)
Income taxes payable (2,239) 1,794
Other assets and liabilities 1,459 (12,231)
-------------- --------------
Net cash provided by operating activities 100,164 89,100
Cash flows from investing activities:
Purchases of property and equipment (8,595) (5,423)
Increase in restricted cash (112) (295)
Return of principal from other investments 166 1,038
-------------- --------------
Net cash used in investing activities (8,541) (4,680)
Cash flows from financing activities:
Borrowings of long-term debt, net 120,042 --
Repayments of long-term debt (61,934) (92,000)
Repayments of convertible subordinated
debt (122,288) --
Payment of taxes due upon vesting of
restricted stock (1,069) (779)
Proceeds from issuance of common stock 2,851 2,738
-------------- --------------
Net cash used in financing activities (62,398) (90,041)
Effect of exchange rate changes on cash and
cash equivalents 190 (997)
Net increase (decrease) in cash and cash
equivalents 29,415 (6,618)
Cash and cash equivalents at beginning of
period 85,532 92,150
-------------- --------------
Cash and cash equivalents at end of period $ 114,947 $ 85,532
============== ==============