Quantum Reports Fourth Quarter and Fiscal 2022 Results
Quantum Corporation (NASDAQ: QMCO) reported a fourth quarter revenue of $95.2 million, a 3.0% increase year-over-year. The fiscal year 2022 revenue totaled $372.8 million, up 6.7%, primarily driven by subscription software growth. Although the GAAP net loss for Q4 was $7.8 million ($0.13 per share), this marked an improvement compared to the previous quarter. The company strengthened its balance sheet with a $67.5 million rights offering. Future guidance expects revenues around $94 million for Q1 2023, indicating continued momentum.
- Fourth quarter revenue of $95.2 million exceeded preliminary results.
- Annual recurring revenue (ARR) from subscription software reached $7.4 million.
- Backlog remained near record levels over $60 million.
- 356 active subscription customers, up 39% sequentially and 190% year-over-year.
- Gross margin increased to 38.0%, up 110 basis points sequentially.
- Rights offering generated gross proceeds of $67.5 million to reduce debt.
- GAAP net loss for fiscal 2022 was $32.3 million, or ($0.55) per share.
- Adjusted EBITDA decreased significantly from $28.0 million in fiscal 2021 to $11.8 million in fiscal 2022.
- Total operating expenses increased to $160.9 million, or 43.1% of revenue.
Fourth Quarter Revenue of
SAN JOSE, Calif., June 8, 2022 /PRNewswire/ -- Quantum Corporation (NASDAQ: QMCO) announced today financial results for its fiscal fourth quarter and fiscal year 2022 ended March 31, 2022.
Fourth Quarter Fiscal 2022 Financial Summary and Recent Highlights
- Revenue increased
3.0% year-over-year to$95.2 million - Backlog remained near record level of over
$60 million - Number of active subscription customers grew
39% sequentially and190% year-over-year to 356 - Gross margin increased 110 basis points sequentially to
38.0% - GAAP net loss was
$7.8 million , or ($0.13) per share, improving sequentially and year-over-year - Adjusted non-GAAP net loss was
$2.8 million , or ($0.05) per share, achieving the high-end of guidance - Adjusted EBITDA of
$0.4 million , which was above the midpoint of guidance - Strengthened balance sheet with oversubscribed Rights Offering, generating gross proceeds of
$67.5 million , reducing outstanding debt and resetting all debt covenants to more favorable levels
"We made progressive improvements throughout the year to strengthen our business, highlighted by revenue for the fourth quarter exceeding our preliminary results," stated Jamie Lerner, Chairman and CEO of Quantum. "Additionally, we continue to gain increasing momentum transitioning new and existing customers to our software subscription model as demonstrated by
"We have strengthened our balance sheet with the recent completion of an oversubscribed rights offering that enabled us to reduce debt, increase our cash position and reset all debt covenants to more favorable levels. With backlog at near record levels, we have aggressively implemented supply chain strategies that will help us increase our revenues and margins. We are also implementing a series of cost reduction programs that are focused on reduced spending and continued integration efforts related to the recent acquisitions, which we expect will decrease our current operating expense run-rate by
"Our focus going forward is to drive improvement in adjusted EBITDA and expand earnings over the next four quarters through a combination of operational expense reductions, sales growth and margin expansion, and continued supply chain execution and cost management."
Fourth Quarter Fiscal 2022 vs. Prior Quarter
Revenue for the fourth quarter fiscal 2022 was
Total GAAP operating expenses in the fourth quarter of fiscal 2022 were
GAAP net loss in the fourth quarter of fiscal 2022 was
Adjusted EBITDA in the fourth quarter of fiscal 2022 was
Fiscal 2022 vs. Prior Year
Revenue of
Total GAAP operating expenses in fiscal 2022 were
GAAP net loss in fiscal 2022 was
Adjusted EBITDA in fiscal 2022 decreased to
For a full reconciliation of GAAP to non-GAAP financial results and additional cautionary language about the use of non-GAAP financial measures, please see the financial reconciliation tables below.
Balance Sheet and Liquidity
- Cash and cash equivalents including restricted cash was
$5.5 million as of March 31, 2022, compared to$33.1 million as of March 31, 2021. - Subsequent to the quarter end, the Company closed a Rights Offering with gross proceeds of
$67.5 million , a significant portion of which was allocated to increasing the Company's current cash balance. - Outstanding long-term debt as of March 31, 2022 was
$111.6 million , net of$4.9 million in unamortized debt issuance costs. This compares to$92.7 million of outstanding debt as of March 31, 2021, net of$9.7 million in unamortized debt issuance costs. - Subsequent to the quarter end, the Company used proceeds from the Rights Offering to pay down
$20.0 million of outstanding long-term debt. - Total interest expense was
$2.5 million and$11.9 million for the three and twelve months ended March 31, 2022, respectively.
Outlook
Based on currently committed supply, the Company expects the following guidance range for the first fiscal quarter of 2023:
- Revenues of
$94 million , plus or minus$3 million - Non-GAAP adjusted net loss of (
$3 million ), plus or minus$1 million - Non-GAAP adjusted net loss per share of (
$0.04) , plus or minus$0.01 - Adjusted EBITDA of breakeven, plus or minus
$1 million
Conference Call and Webcast
Management will host a live conference call today, June 8, 2022, at 5:00 p.m. ET (2:00 p.m. PT) to discuss these results. The conference call will be accessible by dialing 866-424-3436 (U.S. Toll-Free) or +1-201-689-8058 (International) and entering pass code 13729809. This conference call will be broadcast live over the Internet with a slide presentation and can be accessed by all interested parties on the investor relations section of the Company's website at https://investors.quantum.com under the events and presentations tab.
A telephone replay of the conference call will be available approximately two hours after the conference call and will be available through June 15, 2022. To access the replay dial 1-877-660-6853 and enter the pass code 13729809 at the prompt. International callers should dial +1-201-612-7415 and enter the same passcode. Following the conclusion of the live call, a replay of the webcast will be available on the Company's website for at least 90 days.
About Quantum
Quantum technology, software, and services provide the solutions that today's organizations need to make video and other unstructured data smarter – so their data works for them and not the other way around. With over 40 years of innovation, Quantum's end-to-end platform is uniquely equipped to orchestrate, protect, and enrich data across its lifecycle, providing enhanced intelligence and actionable insights. Leading organizations in cloud services, entertainment, government, research, education, transportation, and enterprise IT trust Quantum to bring their data to life, because data makes life better, safer, and smarter. Quantum is listed on Nasdaq (QMCO) and the Russell 2000® Index. For more information visit www.quantum.com.
Quantum and the Quantum logo are registered 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.
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 and projections about future events and financial trends affecting our business. Such forward-looking statements include, in particular, statements related to future projections of our financial results; that our newly introduced products will drive a growing contribution of recurring revenue and deliver higher margins, while also increasing the total addressable market of our solutions; our expectations to continue our operational execution and to gain incremental traction across our market verticals, including with our leading hyperscale and global web scale customers, statements about our backlog and the implication that this backlog will translate into future revenue; the trend in our underlying business remaining robust; continued progress in our business transformation; the anticipated impact and benefits of our Pivot3 and EnCloudEn acquisitions; the anticipated impact and benefits of the refinancing of our outstanding debt; and the Company's position for long-term sustainable growth and profitability.
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 potential impact of the COVID-19 pandemic 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; our ability to integrate the business, products, employees and other aspects of our Pivot3 and EnCloudEn acquisitions; 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 the transformation and restructuring plans; the outcome of any claims and disputes; 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, including our Form 10-K filed with the Securities and Exchange Committee on June 8, 2022. The Company does 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 or regulation.
Investor Relations Contacts:
Shelton Group
Leanne K. Sievers | Brett L. Perry
P: 949-224-3874 | 214-272-0070
E: sheltonir@sheltongroup.com
QUANTUM CORPORATION | |||
March 31, | |||
2022 | 2021 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 5,210 | $ 27,430 | |
Restricted cash | 283 | 707 | |
Accounts receivable, net of allowance for doubtful accounts of | 69,354 | 73,102 | |
Manufacturing inventories | 33,546 | 24,467 | |
Service parts inventories | 24,254 | 23,421 | |
Prepaid expenses | 7,853 | 3,893 | |
Other current assets | 4,697 | 3,046 | |
Total current assets | 145,197 | 156,066 | |
Property and equipment, net | 12,853 | 10,051 | |
Intangible assets, net | 9,584 | 5,037 | |
Goodwill | 12,969 | 3,466 | |
Restricted cash | — | 5,000 | |
Right-of-use assets, net | 11,107 | 9,383 | |
Other long-term assets | 9,925 | 5,921 | |
Total assets | $ 201,635 | $ 194,924 | |
Liabilities and Stockholders' Deficit | |||
Current liabilities: | |||
Accounts payable | $ 34,220 | $ 35,245 | |
Deferred revenue | 86,517 | 84,027 | |
Long-term debt, current portion | 4,375 | 1,850 | |
Accrued compensation | 16,141 | 19,214 | |
Other accrued liabilities | 16,562 | 18,754 | |
Total current liabilities | 157,815 | 159,090 | |
Deferred revenue | 41,580 | 36,126 | |
Revolving credit facility | 17,735 | — | |
Long-term debt, net of current portion | 89,448 | 90,890 | |
Operating lease liabilities | 9,891 | 8,005 | |
Other long-term liabilities | 11,849 | 13,058 | |
Total liabilities | 328,318 | 307,169 | |
Stockholders' deficit | |||
Preferred stock: | |||
Preferred stock, 20,000 shares authorized; no shares issued as of March 31, 2022 and 2021 | — | — | |
Common stock: | |||
Common stock, | 605 | 570 | |
Additional paid-in capital | 645,038 | 626,664 | |
Accumulated deficit | (770,903) | (738,623) | |
Accumulated other comprehensive loss | (1,423) | (856) | |
Total stockholders' deficit | (126,683) | (112,245) | |
Total liabilities and stockholders' deficit | $ 201,635 | $ 194,924 | |
QUANTUM CORPORATION | |||||||
Three months ended March 31, | Twelve months ended March 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | |||||||
Product | $ 58,454 | $ 56,250 | $ 223,761 | $ 209,808 | |||
Service and subscription | 33,337 | 31,855 | 133,689 | 124,904 | |||
Royalty | 3,414 | 4,321 | 15,377 | 14,864 | |||
Total revenue | 95,205 | 92,426 | 372,827 | 349,576 | |||
Cost of revenue | |||||||
Product | 44,798 | 41,567 | 169,780 | 150,257 | |||
Service and subscription | 14,248 | 11,940 | 56,012 | 48,566 | |||
Total cost of revenue | 59,046 | 53,507 | 225,792 | 198,823 | |||
Gross profit | 36,159 | 38,919 | 147,035 | 150,753 | |||
Operating expenses | |||||||
Research and development | 13,525 | 11,694 | 51,812 | 41,703 | |||
Sales and marketing | 16,828 | 14,915 | 62,957 | 54,945 | |||
General and administrative | 11,425 | 9,140 | 45,256 | 42,001 | |||
Restructuring charges | — | 865 | 850 | 3,701 | |||
Total operating expenses | 41,778 | 36,614 | 160,875 | 142,350 | |||
Income (loss) from operations | (5,619) | 2,305 | (13,840) | 8,403 | |||
Other expense, net | (28) | 84 | (251) | (1,312) | |||
Interest expense | (2,502) | (5,699) | (11,888) | (27,522) | |||
Loss on debt extinguishment, net | — | (14,789) | (4,960) | (14,789) | |||
Net loss before income taxes | (8,149) | (18,099) | (30,939) | (35,220) | |||
Income tax provision | (336) | (638) | 1,341 | 239 | |||
Net loss | $ (7,813) | $ (17,461) | $ (32,280) | $ (35,459) | |||
Net loss per share - basic and diluted | $ (0.13) | $ (0.35) | $ (0.55) | $ (0.83) | |||
QUANTUM CORPORATION | |||
Year Ended March 31, | |||
2022 | 2021 | ||
Operating activities | |||
Net loss | $ (32,280) | $ (35,459) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 9,418 | 5,697 | |
Amortization of debt issuance costs | 2,414 | 6,301 | |
Long-term debt related costs | 8,471 | 167 | |
Provision for manufacturing and service inventories | 5,740 | 6,334 | |
Gain on PPP loan extinguishment | (10,000) | — | |
Stock-based compensation | 13,829 | 9,624 | |
Non-cash income tax benefit | — | (577) | |
Non-cash loss on debt extinguishment | — | 10,087 | |
Other non-cash | (832) | 704 | |
Changes in assets and liabilities, net of effect of acquisition: | |||
Accounts receivable | 3,651 | (1,625) | |
Manufacturing inventories | (12,069) | 924 | |
Service parts inventories | (4,400) | (5,879) | |
Accounts payable | (1,939) | (1,994) | |
Deferred revenue | (2,514) | 418 | |
Accrued restructuring charges | (580) | 580 | |
Accrued compensation | (3,073) | 4,257 | |
Prepaid expenses and other assets | (6,561) | 2,215 | |
Other liabilities | (3,003) | (2,541) | |
Net cash used in operating activities | (33,728) | (767) | |
Investing activities | |||
Purchases of property and equipment | (6,316) | (6,931) | |
Business acquisitions | (7,808) | (2,655) | |
Net cash provided by (used in) investing activities | (14,124) | (9,586) | |
Financing activities | |||
Borrowings of long-term debt | 94,961 | 19,400 | |
Repayments of long-term debt | (94,301) | (92,782) | |
Borrowings of credit facility | 309,000 | 309,920 | |
Repayments of credit facility | (291,265) | (313,065) | |
Borrowings of paycheck protection program | — | 10,000 | |
Proceeds from secondary offering, net | — | 96,756 | |
Payment of taxes due upon vesting of restricted stock | — | (236) | |
Proceeds from issuance of common stock | 1,762 | 1,335 | |
Net cash provided by financing activities | 20,157 | 31,328 | |
Effect of exchange rate changes on cash and cash equivalents | 51 | (108) | |
Net change in cash, cash equivalents, and restricted cash | (27,644) | 20,867 | |
Cash, cash equivalents, and restricted cash at beginning of period | 33,137 | 12,270 | |
Cash, cash equivalents, and restricted cash at end of period | $ 5,493 | $ 33,137 | |
NON-U.S. GAAP FINANCIAL MEASURES
To provide investors with additional information regarding our financial results, we have presented Adjusted EBITDA and Adjusted Net Income (Loss), non-U.S. GAAP financial measures defined below.
Adjusted EBITDA is a non-U.S. GAAP financial measure defined by us as net loss before interest expense, net, provision for income taxes, depreciation and amortization expense, stock-based compensation expense, restructuring charges, and other non-recurring expenses.
Adjusted Net Income (Loss) is a non-U.S. GAAP financial measure defined by us as net loss before restructuring charges, stock-based compensation expense, and other non-recurring (income) expenses. The Company calculates Adjusted Net Income (Loss) per Basic and Diluted share using the Company's above-referenced definition of Adjusted Net Income (Loss).
We have provided below a reconciliation of Adjusted EBITDA and Adjusted Net Income (Loss) to Net Income (Loss), the most directly comparable U.S. GAAP financial measure. We have presented Adjusted EBITDA because it is a key measure used by our management and the board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operating plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business performance. We believe Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Basic and Diluted Share serve as appropriate measures to be used in evaluating the performance of our business and help our investors better compare our operating performance over multiple periods. Accordingly, we believe that Adjusted EBITDA and Adjusted Net Income (Loss) provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and our board of directors.
Our use of Adjusted EBITDA and Adjusted Net Income (Loss) have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are as follows:
- Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- Adjusted EBITDA does not reflect: (1) interest and tax payments that may represent a reduction in cash available to us; (2) capital expenditures, future requirements for capital expenditures or contractual commitments; (3) changes in, or cash requirements for, working capital needs; (4) the potentially dilutive impact of stock-based compensation expense; (5) potential future costs related to our long-term debt; (6) potential future restructuring expenses; (7) potential future costs related to business acquisitions; (8) gain (loss) on debt extinguishment, or (9) and acquisition-related amortization of intangibles assets from business combinations.
- Adjusted Net Income (Loss) does not reflect: (1) potential future restructuring activities; (2) the potentially dilutive impact of stock-based compensation expense; (3) potential future costs related to our long-term debt; (4) potential future costs related to business acquisitions; (5) gain (loss) on debt extinguishment, or (6) acquisition-related amortization of intangibles assets from business combinations.
Other companies, including companies in our industry, may calculate Adjusted EBITDA, Adjusted Net Income (Loss) or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Because of these and other limitations, you should consider Adjusted EBITDA and Adjusted Net Income (Loss) along with other U.S. GAAP-based financial performance measures, including various cash flow metrics and our U.S. GAAP financial results.
The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, Net Income (Loss) (dollars in thousands):
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net loss | $ (7,814) | $ (17,461) | $ (32,280) | $ (35,458) | |||
Interest expense, net | 2,502 | 5,699 | 11,889 | 27,522 | |||
Provision for income taxes | (336) | (638) | 1,342 | 239 | |||
Depreciation expense | 1,099 | 1,193 | 5,757 | 5,091 | |||
Stock-based compensation expense | 3,249 | 3,197 | 13,829 | 9,624 | |||
Restructuring charges | — | 865 | 850 | 3,701 | |||
Loss on extinguishment of Senior Secured Term Loan | — | 14,789 | 14,960 | 14,789 | |||
Gain on PPP loan forgiveness | — | — | (10,000) | — | |||
Amortization of acquisition related intangible assets | 1,524 | 563 | 3,661 | 563 | |||
Acquisition-related costs | 201 | 59 | 1,562 | 452 | |||
Long-term debt related costs | — | 38 | 263 | 1,416 | |||
Adjusted EBITDA | $ 425 | $ 8,304 | $ 11,833 | $ 27,939 | |||
The following is a reconciliation of Adjusted Net Income to the most comparable U.S. GAAP financial measure, Net Income (Loss) (in thousands):
| |||||||
Three Months Ended March 31, | Twelve Months Ended March 31, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net loss | $ (7,814) | $ (17,461) | $ (32,280) | $ (35,458) | |||
Stock-based compensation | 3,249 | 3,197 | 13,829 | 9,624 | |||
Restructuring charges | — | 865 | 850 | 3,701 | |||
Loss on extinguishment of Senior Secured Term Loan | — | 14,789 | 14,960 | 14,789 | |||
Gain on PPP loan forgiveness | — | — | (10,000) | — | |||
Amortization of acquisition related intangible assets | 1,524 | 563 | 3,661 | 563 | |||
Acquisition-related costs | 201 | 59 | 1,562 | 452 | |||
Long-term debt related costs | — | 38 | 263 | 1,416 | |||
Adjusted net income (loss) | $ (2,840) | $ 2,050 | $ (7,155) | $ (4,913) | |||
Adjusted Net Income (Loss) per share: | |||||||
Basic | $ (0.05) | $ 0.04 | $ (0.12) | $ (0.11) | |||
Diluted | $ (0.04) | $ 0.03 | $ (0.11) | $ (0.11) | |||
Weighted average shares outstanding: | |||||||
Basic | 60,313 | 50,424 | 58,871 | 42,852 | |||
Diluted | 66,452 | 61,359 | 67,783 | 42,852 | |||
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SOURCE Quantum Corp.
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