Quantum Announces the Next Steps of its Debt Reduction Initiative

Rhea-AI Summary

Quantum (QMCO) has entered into a Standby Equity Purchase Agreement (SEPA) with Yorkville Advisors Global, LP, providing access to up to $200 million in equity capital over three years. The agreement is initially to 1.15 million shares (19.99% of outstanding shares) until shareholder approval is obtained.

The SEPA features discount fees of 3% and 4%, with Quantum maintaining 100% discretion over timing and volume. The company plans to use the proceeds for working capital, general corporate purposes, and debt repayment. This strategic financial partnership aims to strengthen Quantum's balance sheet and support its AI data management solutions vision.

The company has been implementing revenue and margin improvement plans, restructuring, and cost reduction initiatives over the past year to enhance operational and financial health. The agreement includes covenant relief during the debt reduction process.

Positive

• Access to up to $200 million in flexible equity capital over 3 years
• Full control over timing and volume of capital raises
• Relatively low discount fees of 3-4%
• Covenant relief during debt reduction process

Negative

• Potential shareholder dilution through equity issuance
• Initial limitation to 1.15M shares requires additional shareholder approval for full access
• Current debt burden requiring refinancing efforts

Insights

Financial Analyst

Quantum's strategic SEPA arrangement with Yorkville represents a significant financial restructuring move that warrants careful analysis. The $200 million potential equity facility provides important financial flexibility while maintaining operational control. The relatively modest discount rates of 3-4% are notably favorable compared to typical market rates for similar arrangements, which often range from 5-15%.

The structure reveals sophisticated financial engineering: the initial cap at 19.99% of outstanding shares (1.15 million shares) strategically avoids immediate shareholder approval requirements, while preserving access to the full facility post-approval. This demonstrates management's balanced approach to immediate capital needs versus long-term flexibility.

Several key implications emerge: First, the discretionary nature of the facility provides a valuable safety net without immediate dilution, effectively functioning as a financial insurance policy. Second, the three-year term aligns with typical enterprise transformation timelines, suggesting management anticipates a gradual evolution rather than an immediate turnaround. Third, the focus on debt reduction indicates a strategic pivot toward a healthier capital structure, particularly important given rising interest rates.

The arrangement's potential impact on the AI strategy is particularly noteworthy. The flexible capital access could accelerate Quantum's positioning in the high-growth AI data management sector, where rapid deployment capabilities often determine market share. However, investors should monitor the execution carefully, as the success will depend on management's ability to balance growth investments with prudent capital deployment and dilution management.

SAN JOSE, Calif.--(BUSINESS WIRE)-- Quantum® Corporation (Nasdaq: QMCO) ("Quantum" or the "Company"), a leader in solutions for AI and unstructured data, today announced of its entry into a Standby Equity Purchase Agreement (the “SEPA”) an investment fund managed by Yorkville Advisors Global, LP (“Yorkville”).

Transaction Summary:

• Access to additional equity capital and liquidity with discount fees of 3% and 4%
• Limited initially to 1.15 million shares, remainder requires shareholder approval
• Three years to access full amount with 100% at Company’s discretion
• Covenant relief during the process to reduce its debt

“This strategic financial partnership provides Quantum with the flexibility to support our ongoing operations and accelerate our growth initiatives,” said Jamie Lerner, CEO of Quantum. “We have solidified access to significant capital, which, over time, will be used to strengthen our balance sheet and enable us to focus on executing our vision of revolutionizing data management solutions for the AI industry.”

Mr. Lerner continues, “Quantum has made substantial efforts over the last year to improve our operational and financial health through a combination of revenue and margin improvement plans, financial and organizational restructuring, and cost reduction initiatives. In addition, we have been exploring several strategic alternatives to pay down our currently outstanding debt, which would also help to lower our cost structure, including lowering the interest expense and other fees the Company has incurred. These actions combined with improving our operating free cash flow, strengthen Quantum for its future success.”

The Company’s agreement with Yorkville is initially limited to 19.99% of outstanding shares, or no more than 1,157,139 shares of common stock of the Company under the Purchase Agreement until shareholder approval is obtained. The Company intends to strategically use the SEPA to raise capital as desired, drawing on the available amount based on market conditions and business opportunities. Pursuant to the terms of the SEPA, the Company has the right, but not the obligation, to issue up to $200 million of shares of the Company’s common stock at any time during the three-year period following the execution date of the SEPA, subject to certain customary conditions. There is no obligation to utilize any portion available under the SEPA, and the Company retains control over both timing and volume. The SEPA does not impose any material restrictions on the Company’s operational activities. The per share price Yorkville will pay for the shares will be dependent on the one- or three-day pricing period elected by the Company at a discount of either 3% or 4%, as provided for in the SEPA. The Company expects that any proceeds received from such sales to Yorkville will be used for working capital and general corporate purposes, including the repayment of debt.

The securities described herein have not been registered under the Securities Act of 1933, as amended, and may not be sold in the United States absent registration or an applicable exemption from the registration requirements. A registration statement relating to the resale of the securities to be issued under the SEPA will be filed with the Securities and Exchange Commission and these securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.

About Quantum

Quantum delivers end-to-end data management solutions designed for the AI era. With over four decades of experience, our data platform has allowed customers to extract the maximum value from their unique, unstructured data. From high-performance ingest that powers AI applications and demanding data-intensive workloads, to massive, durable data lakes to fuel AI models, Quantum delivers the most comprehensive and cost-efficient solutions. Leading organizations in life sciences, government, media and entertainment, research, and industrial technology trust Quantum with their most valuable asset – their data. Quantum is listed on Nasdaq (QMCO).

Quantum and the Quantum logo are registered trademarks of Quantum Corporation and its affiliates in the United States and/or other countries.

Forward-Looking Information

The information provided in this press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). These forward-looking statements are largely based on our current expectations about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to: expected usage under the Purchase Agreement, including amount and use of proceeds; the anticipated benefits of the Purchase Agreement, including helping lower our cost structure, lowering interest expense and other fees; and our focus and strategy.

These forward-looking statements may be identified by the use of terms and phrases such as “anticipates”, “believes”, “can”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “plans”, “projects”, “targets”, “will”, and similar expressions or variations of these terms and similar phrases. Additionally, statements concerning future matters and other statements regarding matters that are not historical are forward-looking statements. Investors are cautioned that these forward-looking statements relate to future events or our future performance and are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, including without limitation, the following: risks related to the need to address the many challenges facing our business; the impact macroeconomic and inflationary conditions on our business, including potential disruptions to our supply chain, employees, operations, sales and overall market conditions; the competitive pressures we face; risks associated with executing our strategy; the distribution of our products and the delivery of our services effectively; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; estimates and assumptions related to the cost (including any possible disruption of our business) and the anticipated benefits of restructuring plans and utilization of the Purchase Agreement; the outcome of any claims and disputes; the ability to meet stock exchange continued listing standards; risks related to our ability to implement and maintain effective internal control over financial reporting in the future; and other risks that are described herein, including but not limited to the items discussed in “Risk Factors” in our filings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K filed with the Securities and Exchange Committee on June 28, 2024, and any subsequent reports filed with the SEC. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250127722849/en/

Investor Relations Contact:

Shelton Group

Leanne K. Sievers | Brett Perry

E: sheltonir@sheltongroup.com

Source: Quantum

FAQ

What is the size and duration of Quantum's (QMCO) new equity purchase agreement?

Quantum's SEPA with Yorkville provides access to up to $200 million in equity capital over a three-year period.

What are the discount rates in QMCO's Standby Equity Purchase Agreement?

The SEPA includes discount fees of 3% or 4%, depending on the one- or three-day pricing period elected by the company.

How many shares can QMCO initially issue under the Yorkville agreement?

Initially, Quantum can issue up to 1,157,139 shares (19.99% of outstanding shares) until shareholder approval is obtained for additional issuance.

What will Quantum (QMCO) use the SEPA proceeds for?

Quantum plans to use the proceeds for working capital, general corporate purposes, and debt repayment.

Does QMCO have any obligations to use the full $200M SEPA facility?

No, Quantum has no obligation to utilize any portion of the SEPA and maintains full control over both timing and volume of capital raises.