SAN JOSE, CA -- (MARKETWIRE) -- 01/30/13 -- Quantum Corp. (NYSE: QTM)

Highlights:

  • Total revenue of $159 million, up 8% sequentially
  • Disk systems and software revenue of $41 million, up 13% year-over-year
  • Record DXi revenue, up 19% year-over-year
  • Strong rebound in tape automation revenue over prior quarter, up 25%

Quantum Corp. (NYSE: QTM), a proven global expert in data protection and big data management, today reported results for the third quarter of fiscal 2013 (FQ3'13), ended Dec. 31, 2012. Revenue for the quarter totaled $159 million, down 8 percent from the third quarter of fiscal 2012 (FQ3'12), primarily due to expected declines in OEM and branded tape automation revenue. However, total revenue was up $12 million, or 8 percent, over the prior quarter (FQ2'13). Quantum reported revenue of $41 million from disk system and software sales (including related service), a 13 percent increase over FQ3'12 due to record revenue from DXi® disk system sales. The company also grew tape automation revenue by 25 percent over the prior quarter, as both midrange and enterprise sales rebounded strongly.

Quantum reported a GAAP net loss of $8 million, or 4 cents per share, for FQ3'13, compared to GAAP net income of $4 million in the same quarter of last year. On a non-GAAP basis, the company had net income of $5 million, or 2 cents per share, down from net income of $12 million a year earlier. The year-over-year declines were largely driven by the lower overall revenue. Compared to the prior quarter's results, the GAAP net loss in FQ3'13 was $4 million smaller, and the non-GAAP net income was $10 million higher.

"We improved our financial performance in the December quarter, growing revenue sequentially, driving better-than-expected non-GAAP profits and generating cash," said Jon Gacek, president and CEO of Quantum. "We also had another quarter of record DXi deduplication sales, which contributed to the 14 percent year-over-year increase in combined DXi and StorNext® revenue we've achieved over the first three quarters of the fiscal year.

"In addition, even as we scaled back spending, we continued to invest in new, industry-leading products and solutions for protecting and managing digital content in physical, virtual, cloud and big data environments. These include our Lattus™ wide area storage systems, vmPRO 3.0 virtual backup software, DXi6800 deduplication appliances and Scalar i6000 HD enterprise tape libraries."

Quantum generated $6 million in cash from operating activities in FQ3'13 and ended the quarter with $55 million in cash and cash equivalents.

Outlook
 For the fourth quarter of fiscal 2013, Quantum expects:

  • Revenue of approximately $145 million to $150 million, reflecting typical seasonality, with higher sequential disk systems and software revenue.
  • GAAP gross margin rate of approximately 41 percent and non-GAAP gross margin rate of 42 percent.
  • GAAP operating expenses of $66 million to $68 million and non-GAAP operating expenses of $61 million to $63 million.
  • Interest expense of $2.5 million and taxes of $500,000.

Business Highlights
 Key business highlights for the December quarter include the following:

  • Quantum introduced a new family of wide area storage solutions, named Lattus, which provides globally distributed disk-based archives that are extremely scalable and cost-effective and allows storage of data forever on disk without interruption or migration. Integrating dispersed next-generation object storage and Quantum file system technologies, the Lattus family offers a new approach to archiving that overcomes the limitations and inefficiencies posed by traditional disk architectures in multi-petabyte storage environments. The first Lattus product, Lattus-X, began shipping in December.
  • The company integrated its Q-Cloud™ backup and disaster recovery services with Symantec OpenStorage (OST) technology, providing NetBackup and Backup Exec customers with multiple options for leveraging Q-Cloud's services. Q-Cloud now directly supports NetBackup and Backup Exec software, enabling both backup applications to stay completely aware of all copies of data backed up to a Q-Cloud DXi appliance.
  • Quantum began offering full-featured, free downloads of its vmPRO virtual machine backup software and DXi V1000 virtual deduplication appliance, providing a risk-free way to explore their superior features and value. The vmPRO Standard Edition software protects up to 1 TB of virtual data and can be upgraded to vmPRO Enterprise Edition for additional capacity, making it easy for customers to adopt Quantum vmPRO™ and scale it to meet their growth requirements. The DXi V1000 stores up to 15 TB of deduplicated data and works with vmPRO software to offer a 100 percent virtual data protection solution as well as a path to the cloud.
  • LTO-6 technology started shipping in Quantum's Scalar i6000 and i500 tape libraries, as well as in its autoloaders, drives and media. LTO-6 nearly doubles capacity and increases transfer rates by up to 43 percent over LTO-5 technology, further enhancing the role of tape as an integral component of a broader tiered storage strategy.
  • Quantum products continued to garner industry honors, as the DXi V1000 was named "Virtualisation Product of the Year" at the 2012 Storage, Virtualisation and Cloud Computing (SVC) Awards, and Quantum's StorNext data management software was recognized as runner-up in the Storage Software Appliance category. In addition, earlier this month, Storage magazine announced that the DXi V1000 is a finalist for its 2012 Product of the Year awards, and Network Computing selected the DXi6701/02 midrange deduplication appliance as a Product of the Year finalist for its upcoming awards.

Conference Call and Audio Webcast Notification
 Quantum will hold a conference call today, Jan. 30, 2013, at 2:00 p.m. PST, to discuss its fiscal third quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9645 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Jan. 30, 2013, at 2:00 p.m. PST. Site for the webcast and related information: http://www.quantum.com/investors.

About Quantum
 Quantum 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, StorNext, Lattus, Scalar, Q-Cloud and Quantum vmPRO 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, 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 November 9, 2012. 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, 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.

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 Nine Months Ended
December 31, 2012 December 31, 2011 December 31, 2012 December 31, 2011
Revenue:
Product $ 112,517 $ 124,081 $ 306,395 $ 341,475
Service 35,340 35,362 107,138 107,956
Royalty 11,538 14,049 34,081 42,635
Total revenue 159,395 173,492 447,614 492,066
Cost of revenue:
Product 72,007 77,238 204,641 218,044
Service 19,360 22,537 59,926 65,732
Restructuring benefit related to cost of revenue -- -- -- (300 )
Total cost of revenue 91,367 99,775 264,567 283,476
Gross margin 68,028 73,717 183,047 208,590
Operating expenses:
Research and development 18,615 17,629 56,639 55,212
Sales and marketing 33,588 33,350 103,307 94,990
General and administrative 14,851 15,759 46,910 46,991
Restructuring charges 6,602 -- 6,602 699
73,656 66,738 213,458 197,892
Gain on sale of patents -- -- -- 1,500
Income (loss) from operations (5,628 ) 6,979 (30,411 ) 12,198
Other income and expense 60 (142 ) (388 ) (422 )
Interest expense (2,230 ) (2,450 ) (5,896 ) (8,111 )
Income (loss) before income taxes (7,798 ) 4,387 (36,695 ) 3,665
Income tax provision 348 473 1,217 1,416
Net income (loss) $ (8,146 ) $ 3,914 $ (37,912 ) $ 2,249
Basic and diluted net income (loss) per share: $ (0.04 ) $ 0.02 $ (0.16 ) $ 0.01
Weighted average common and common equivalent shares:
Basic 240,786 233,812 239,099 231,661
Diluted 240,786 239,912 239,099 239,261
Included in the above Statements of Operations:
Amortization of intangibles:
Cost of revenue $ 911 $ 1,472 $ 3,407 $ 6,148
Sales and marketing 1,856 3,256 7,668 9,872
General and administrative -- -- -- 32
2,767 4,728 11,075 16,052
Share-based compensation:
Cost of revenue 626 495 1,839 1,518
Research and development 925 795 2,772 2,466
Sales and marketing 1,273 1,127 3,603 3,059
General and administrative 892 1,007 3,515 3,203
3,716 3,424 11,729 10,246
Acquisition expenses -- -- -- 325
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, 2012 March 31, 2012*
Assets
Current assets:
Cash and cash equivalents $ 51,340 $ 51,261
Restricted cash 3,515 4,230
Accounts receivable 115,993 110,840
Manufacturing inventories 53,845 61,111
Service parts inventories 34,931 39,050
Deferred income taxes 4,927 5,295
Other current assets 8,638 9,434
Total current assets 273,189 281,221
Long-term assets:
Property and equipment 24,055 25,440
Intangible assets and goodwill 70,650 81,725
Other long-term assets 10,055 6,962
Total long-term assets 104,760 114,127
$ 377,949 $ 395,348
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 46,539 $ 56,304
Accrued warranty 7,746 7,586
Deferred revenue, current 86,030 93,441
Accrued restructuring charges 4,935 1,752
Accrued compensation 32,289 31,971
Income taxes payable 227 1,133
Other accrued liabilities 17,477 17,866
Total current liabilities 195,243 210,053
Long-term liabilities:
Deferred revenue, long-term 39,191 36,430
Deferred income taxes 4,432 4,564
Long-term debt -- 49,495
Convertible subordinated debt 205,000 135,000
Other long-term liabilities 6,163 6,486
Total long-term liabilities 254,786 231,975
Stockholders' deficit (72,080 ) (46,680 )
$ 377,949 $ 395,348
* Derived from the March 31, 2012 audited Consolidated Financial Statements.
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
December 31, 2012 December 31, 2011
Cash flows from operating activities:
Net income (loss) $ (37,912 ) $ 2,249
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation 9,283 8,776
Amortization 12,013 17,785
Service parts lower of cost or market adjustment 7,026 7,564
Deferred income taxes 231 (785 )
Share-based compensation 11,729 10,246
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable (5,153 ) (131 )
Manufacturing inventories 1,502 (17,463 )
Service parts inventories 2,857 3,150
Accounts payable (9,748 ) 7,052
Accrued warranty 160 46
Deferred revenue (4,650 ) (2,727 )
Accrued restructuring charges 3,184 (3,347 )
Accrued compensation 326 1,975
Income taxes payable (901 ) 438
Other assets and liabilities 1,921 (1,735 )
Net cash provided by (used in) operating activities (8,132 ) 33,093
Cash flows from investing activities:
Purchases of property and equipment (9,389 ) (8,538 )
(Increase) decrease in restricted cash 691 (2,317 )
Purchases of other investments (2,169 ) --
Return of principal from other investments 208 97
Payment for business acquisition, net of cash acquired -- (8,152 )
Net cash used in investing activities (10,659 ) (18,910 )
Cash flows from financing activities:
Repayments of long-term debt (49,495 ) (35,698 )
Borrowings of convertible subordinated debt, net 67,701 --
Payment of taxes due upon vesting of restricted stock (1,926 ) (2,638 )
Proceeds from issuance of common stock 2,604 7,506
Net cash provided by (used in) financing activities 18,884 (30,830 )
Effect of exchange rate changes on cash and cash equivalents (14 ) (113 )
Net increase (decrease) in cash and cash equivalents 79 (16,760 )
Cash and cash equivalents at beginning of period 51,261 76,010
Cash and cash equivalents at end of period $ 51,340 $ 59,250
QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended December 31, 2012
Gross Margin Gross Margin Rate Net Income (Loss) Per Share Net Income (Loss), Basic Per Share Net Income (Loss), Diluted
GAAP $ 68,028 42.7 % $ (8,146 ) $ (0.04 ) $ (0.04 )
Non-GAAP Reconciling Items:
Amortization of intangibles 911 2,767
Share-based compensation 626 3,716
Restructuring charges -- 6,602
Non-GAAP $ 69,565 43.6 % $ 4,939 $ 0.02 $ 0.02
Computation of basic and diluted net income (loss) per share: GAAP Non-GAAP
Net income (loss) $ (8,146 ) $ 4,939
Interest on dilutive convertible notes -- 533
Income (loss) for purposes of computing income (loss) per diluted share $ (8,146 ) $ 5,472
Weighted average shares:
Basic 240,786 240,786
Dilutive shares from stock plans -- 1,892
Dilutive shares from convertible notes -- 28,490
Diluted 240,786 271,168
Nine Months Ended December 31, 2012
Gross Margin Gross Margin Rate Net Loss Per Share Net Loss, Basic Per Share Net Loss, Diluted
GAAP $ 183,047 40.9 % $ (37,912 ) $ (0.16 ) $ (0.16 )
Non-GAAP Reconciling Items:
Amortization of intangibles 3,407 11,075
Share-based compensation 1,839 11,729
Restructuring charges -- 6,602
Non-GAAP $ 188,293 42.1 % $ (8,506 ) $ (0.04 ) $ (0.04 )
Computation of basic and diluted net loss per share: GAAP Non-GAAP
Net loss $ (37,912 ) $ (8,506 )
Weighted average shares:
Basic and diluted 239,099 239,099
Three Months Ended December 31, 2011
Gross Margin Gross Margin Rate Net Income Per Share Net Income, Basic Per Share Net Income, Diluted
GAAP $ 73,717 42.5 % $ 3,914 $ 0.02 $ 0.02
Non-GAAP Reconciling Items:
Amortization of intangibles 1,472 4,728
Share-based compensation 495 3,424
Non-GAAP $ 75,684 43.6 % $ 12,066 $ 0.05 $ 0.05
Computation of basic and diluted net income per share: GAAP Non-GAAP
Net income $ 3,914 $ 12,066
Interest on dilutive convertible notes -- 1,191
Income for purposes of computing income per diluted share $ 3,914 $ 13,257
Weighted average shares:
Basic 233,812 233,812
Dilutive shares from stock plans 6,100 6,100
Dilutive shares from convertible notes -- 31,158
Diluted 239,912 271,070
Nine Months Ended December 31, 2011
Gross Margin Gross Margin Rate Net Income Per Share Net Income, Basic Per Share Net Income, Diluted
GAAP $ 208,590 42.4 % $ 2,249 $ 0.01 $ 0.01
Non-GAAP Reconciling Items:
Amortization of intangibles 6,148 16,052
Share-based compensation 1,518 10,246
Restructuring charges (300 ) 399
Acquisition expenses -- 325
Non-GAAP $ 215,956 43.9 % $ 29,271 $ 0.13 $ 0.12
Computation of basic and diluted net income per share: GAAP Non-GAAP
Net income $ 2,249 $ 29,271
Interest on dilutive convertible notes -- 3,560
Income for purposes of computing income per diluted share $ 2,249 $ 32,831
Weighted average shares:
Basic 231,661 231,661
Dilutive shares from stock plans 7,600 7,600
Dilutive shares from convertible notes -- 31,158
Diluted 239,261 270,419
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
FORECAST FOURTH QUARTER FISCAL 2013
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions)
Percentage
Forecast fourth quarter gross margin rate on a GAAP basis 41.3%
Forecast amortization of intangibles 0.3%
Forecast share-based compensation 0.4%
Forecast fourth quarter gross margin rate on a non-GAAP basis 42.0%
Dollar Range
Forecast fourth quarter operating expense on a GAAP basis $65.9 - $67.9
Forecast amortization of intangibles 1.8
Forecast share-based compensation 3.1
Forecast fourth quarter operating expense on a non-GAAP basis $61.0 - $63.0
Estimates based on current (January 30, 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
brad.cohen@quantum.com

Christi Lee
Investor Relations
Quantum Corp.
(408) 944-4450
ir@quantum.com


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