Quantum Reports Third Quarter Fiscal 2022 Results
Quantum Corporation (NASDAQ: QMCO) reported a fiscal Q3 2022 revenue of $95.3 million, up 2% sequentially. Backlog hit a record $62 million, driven by a 30% increase in subscription customers. However, the company faced supply chain constraints, impacting revenue growth. Gross profit was $35.2 million, a 37% margin, while total operating expenses rose to $42.4 million. The GAAP net loss was $11.1 million, or ($0.19) per share. Looking ahead, Quantum expects Q4 revenues between $92 million and $97 million.
- Record backlog of $62 million, up from $50 million in the prior quarter.
- Subscription revenue increased by over 190%.
- Subscription customers grew more than 98% year-over-year.
- GAAP net loss increased to $11.1 million, from $9.3 million in the prior quarter.
- Gross profit decreased to $35.2 million, or 37% of revenue, down from 41%.
- Total operating expenses rose to $42.4 million, up from $39.3 million.
SAN JOSE, Calif., Feb. 9, 2022 /PRNewswire/ -- Quantum Corporation (NASDAQ: QMCO) announced today financial results for its fiscal third quarter ended December 31, 2021.
Third Quarter Fiscal 2022 Financial Summary
- Revenue increased
2% sequentially to$95.3 million . - Backlog reached a record
$62 million , compared to$50.0 million in the prior quarter. - Number of subscription customers grew
30% sequentially and more than98% year-over-year.
Jamie Lerner, Chairman and CEO, Quantum commented, "Although the current supply constraints are limiting the magnitude of our near-term revenue growth, demand in the third quarter continued to remain near record levels, with bookings exceeding revenue for the fifth consecutive quarter. We also continued to make notable progress on our transformation with subscription revenue increasing greater than
"Our business and customer order momentum remains at historically high levels, demonstrated by another quarter of record backlog. However, given the continued pressure on revenues due to supply chain constraints, combined with the increasing supply chain cost environment, we are immediately implementing a series of cost reduction measures, along with pricing increases, across our product categories. We continue to work closely with our suppliers to secure the inventory necessary in the coming quarters to meet the growing customer demand."
Third Quarter Fiscal 2022 vs. Prior Quarter
Revenue for the third quarter fiscal 2022 was
Total operating expenses in the third quarter of fiscal 2022 were
GAAP net loss in the third quarter of fiscal 2022 was
Adjusted EBITDA in the third quarter of fiscal 2022 was
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
$4.3 million as of December 31, 2021, compared to$23.2 million as of September 30, 2021. - Outstanding debt as of December 31, 2021, was
$101.7 million . This compares to$104.5 million of outstanding debt as of September 30, 2021. - Total interest expense was
$2.4 million , compared to$3.1 million for the three months ended September 30, 2021.
Outlook
Given the ongoing supply disruptions, and to a lesser extent historical seasonality, the company expects the following guidance range for the fourth fiscal quarter of 2022:
- Revenues of
$92 million , plus or minus$5 million - Non-GAAP adjusted net loss of (
$4 million ), plus or minus$1 million - Non-GAAP adjusted net loss per share of (
$0.07) , plus or minus$0.02 - Adjusted EBITDA of breakeven, plus or minus
$1 million
Conference Call and Webcast
Management will host a live conference call today, February 9, 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 13725679. 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 http://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 February 16, 2022. To access the replay dial 1-877-660-6853 and enter the pass code 13725679 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 acquisition of Pivot3's video surveillance portfolio and assets; 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 Pivot3's video surveillance business; 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 May 26, 2021 and our Form 10-Q filed on February 9, 2022. 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 or regulation.
Investor Relations Contacts:
Shelton Group
Jeffrey Schreiner
P: 512-243-8976
E: sheltonir@sheltongroup.com
QUANTUM CORPORATION | |||
December 31, 2021 | March 31, 2021 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 4,004 | $ 27,430 | |
Restricted cash | 331 | 707 | |
Accounts receivable, net of allowance for doubtful accounts of | 66,070 | 73,102 | |
Manufacturing inventories | 33,912 | 24,467 | |
Service parts inventories | 22,532 | 23,421 | |
Other current assets | 14,082 | 6,939 | |
Total current assets | 140,931 | 156,066 | |
Property and equipment, net | 13,020 | 10,051 | |
Intangible assets, net | 10,738 | 5,037 | |
Goodwill | 10,262 | 3,466 | |
Restricted cash | — | 5,000 | |
Right-of-use assets, net | 3,483 | 9,383 | |
Other long-term assets | 9,202 | 5,921 | |
Total assets | $ 187,636 | $ 194,924 | |
Liabilities and Stockholders' Deficit | |||
Current liabilities: | |||
Accounts payable | $ 42,041 | $ 35,245 | |
Deferred revenue | 78,115 | 84,027 | |
Accrued restructuring charges | 597 | 580 | |
Long-term debt, current portion | 3,750 | 1,850 | |
Accrued compensation | 16,193 | 19,214 | |
Other accrued liabilities | 15,451 | 18,174 | |
Total current liabilities | 156,147 | 159,090 | |
Deferred revenue | 41,190 | 36,126 | |
Long-term debt, net of current portion | 97,928 | 90,890 | |
Operating lease liabilities | 2,714 | 8,005 | |
Other long-term liabilities | 12,440 | 13,058 | |
Total liabilities | 310,419 | 307,169 | |
Stockholders' deficit | |||
Preferred stock, 20,000 shares authorized; no shares issued and outstanding | — | — | |
Common stock, | 599 | 570 | |
Additional paid-in capital | 640,839 | 626,664 | |
Accumulated deficit | (763,089) | (738,623) | |
Accumulated other comprehensive loss | (1,132) | (856) | |
Total stockholders' deficit | (122,783) | (112,245) | |
Total liabilities and stockholders' deficit | $ 187,636 | $ 194,924 | |
QUANTUM CORPORATION | |||||||
Three Months Ended December 31, | Nine Months Ended December 31, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Revenue: | |||||||
Product | $ 58,522 | $ 63,021 | $ 165,308 | $ 153,557 | |||
Service | 33,162 | 31,169 | 100,352 | 93,049 | |||
Royalty | 3,660 | 3,833 | 11,963 | 10,543 | |||
Total revenue | 95,344 | 98,023 | 277,623 | 257,149 | |||
Cost of revenue: | |||||||
Product | 45,118 | 43,311 | 124,982 | 108,691 | |||
Service | 15,016 | 12,433 | 41,764 | 36,593 | |||
Total cost of revenue | 60,134 | 55,744 | 166,746 | 145,284 | |||
Gross profit | 35,210 | 42,279 | 110,877 | 111,865 | |||
Operating expenses: | |||||||
Research and development | 14,607 | 9,589 | 38,287 | 29,983 | |||
Sales and marketing | 16,714 | 15,294 | 46,128 | 40,019 | |||
General and administrative | 10,538 | 11,103 | 33,830 | 32,928 | |||
Restructuring charges | 576 | 200 | 850 | 2,837 | |||
Total operating expenses | 42,435 | 36,186 | 119,095 | 105,767 | |||
Income (loss) from operations | (7,225) | 6,093 | (8,218) | 6,098 | |||
Other expense, net | (150) | (698) | (223) | (1,395) | |||
Interest expense | (2,431) | (7,808) | (9,387) | (21,823) | |||
Loss on debt extinguishment, net | — | — | (4,960) | — | |||
Net loss before income taxes | (9,806) | (2,413) | (22,788) | (17,120) | |||
Income tax provision | 1,254 | 256 | 1,678 | 877 | |||
Net loss | $ (11,060) | $ (2,669) | $ (24,466) | $ (17,997) | |||
Net loss per share - basic and diluted | $ (0.19) | $ (0.07) | $ (0.42) | $ (0.45) | |||
Weighted average shares - basic and diluted | 59,486 | 40,927 | 58,399 | 40,374 | |||
Net loss | $ (11,060) | $ (2,669) | $ (24,466) | $ (17,997) | |||
Foreign currency translation adjustments, net | (37) | 975 | (276) | 1,984 | |||
Total comprehensive loss | $ (11,097) | $ (1,694) | $ (24,742) | $ (16,013) | |||
QUANTUM CORPORATION | |||
Nine Months Ended December 31, | |||
2021 | 2020 | ||
Operating activities | |||
Net loss | $ (24,466) | $ (17,997) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||
Depreciation and amortization | 6,795 | 3,898 | |
Amortization of debt issuance costs | 1,981 | 4,906 | |
Long-term debt related costs | — | 167 | |
Provision for product and service inventories | 4,016 | 4,764 | |
Stock-based compensation | 10,580 | 6,428 | |
Paycheck Protection Program loan forgiveness | (10,000) | — | |
Non-cash loss on debt extinguishment | 8,471 | — | |
Other | 282 | 2,113 | |
Changes in assets and liabilities: | |||
Accounts receivable, net | 7,008 | 1,342 | |
Manufacturing inventories | (10,672) | (7,732) | |
Service parts inventories | (2,281) | (4,559) | |
Accounts payable | 5,369 | (7,022) | |
Accrued restructuring charges | 17 | 210 | |
Accrued compensation | (3,021) | 4,268 | |
Deferred revenue | (8,598) | (9,727) | |
Other current assets | (7,047) | 846 | |
Other non-current assets | (1,148) | 133 | |
Other current liabilities | (3,350) | (2,432) | |
Other non-current liabilities | (617) | 130 | |
Net cash used in operating activities | (26,681) | (20,264) | |
Investing activities | |||
Purchases of property and equipment | (3,971) | (4,665) | |
Business acquisition, net of cash acquired | (7,808) | (2,636) | |
Net cash used in investing activities | (11,779) | (7,301) | |
Financing activities | |||
Borrowings of long-term debt, net of debt issuance costs | 94,961 | 19,400 | |
Repayments of long-term debt | (93,677) | — | |
Borrowings of credit facility | 207,563 | 232,663 | |
Repayments of credit facility | (200,007) | (229,847) | |
Borrowings of payment protection program | — | 10,000 | |
Proceeds from issuance of common stock | 806 | 539 | |
Net cash provided by financing activities | 9,646 | 32,755 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 12 | (62) | |
Net change in cash, cash equivalents and restricted cash | (28,802) | 5,128 | |
Cash, cash equivalents, and restricted cash at beginning of period | 33,137 | 12,270 | |
Cash, cash equivalents, and restricted cash at end of period | $ 4,335 | $ 17,398 | |
Cash, Cash Equivalents and Restricted Cash at end of period | |||
Cash and cash equivalents | $ 4,004 | $ 11,632 | |
Restricted cash, current | 331 | 766 | |
Restricted cash, long-term | — | 5,000 | |
Cash, cash equivalents and restricted cash at the end of period | $ 4,335 | $ 17,398 | |
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 December 31, | Nine Months Ended December 31, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Net loss | $ (11,060) | $ (2,669) | $ (24,466) | $ (17,997) | |||
Interest expense, net | 2,431 | 7,808 | 9,387 | 21,823 | |||
Provision for income taxes | 1,254 | 256 | 1,678 | 877 | |||
Depreciation expense | 1,627 | 1,250 | 4,658 | 3,801 | |||
Stock-based compensation expense | 4,307 | 1,878 | 10,580 | 6,428 | |||
Restructuring charges | 576 | 200 | 850 | 2,837 | |||
Loss on extinguishment of Senior Secured Term Loan | — | — | 14,960 | — | |||
Gain on PPP loan forgiveness | — | — | (10,000) | — | |||
Amortization of acquisition related intangible assets | 1,201 | 97 | 2,137 | 97 | |||
Acquisition-related costs | 411 | 393 | 1,361 | 393 | |||
Long-term debt related costs | 11 | 208 | 263 | 1,377 | |||
Adjusted EBITDA | $ 758 | $ 9,421 | $ 11,408 | $ 19,636 | |||
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 December 31, | Nine Months Ended December 31, | ||||||
2021 | 2020 | 2021 | 2020 | ||||
Net loss | $ (11,060) | $ (2,669) | $ (24,466) | $ (17,997) | |||
Stock-based compensation | 4,307 | 1,878 | 10,580 | 6,428 | |||
Restructuring charges | 576 | 200 | 850 | 2,837 | |||
Loss on extinguishment of Senior Secured Term Loan | — | — | 14,960 | — | |||
Gain on PPP loan forgiveness | — | — | (10,000) | — | |||
Amortization of acquisition related intangible assets | 1,201 | — | 2,137 | — | |||
Acquisition-related costs | 411 | 393 | 1,361 | 393 | |||
Long-term debt related costs | 11 | 208 | 263 | 1,377 | |||
Adjusted net income (loss) | $ (4,554) | $ 10 | $ (4,315) | $ (6,962) | |||
Adjusted Net Income (Loss) per share: | |||||||
Basic | $ (0.08) | $ — | $ (0.07) | $ (0.17) | |||
Diluted | $ (0.07) | $ — | $ (0.06) | $ (0.15) | |||
Weighted average shares outstanding: | |||||||
Basic | 59,486 | 40,927 | 58,399 | 40,374 | |||
Diluted | 68,288 | 49,238 | 68,210 | 47,931 | |||
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SOURCE Quantum Corp.
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