Qualstar: Fiscal 1Q10 Financial Results

Qualstar Corporation reported financial results for the first quarter of fiscal 2010 ended September 30, 2009.

Revenues for the first quarter of fiscal 2010 were $3.7 million, compared to $5.4 million for the same quarter of fiscal 2009, a decrease of $1.7 million or 31.9 percent. Loss from operations was $1.1 million compared to $321,000 in fiscal 2009. Net loss was $1.0 million or $(0.08) per basic and diluted share, compared to a net loss of $39,000, or $(0.00) per basic and diluted share for the first quarter of fiscal 2009.

Tape library segment revenues were $2.5 million for the quarter, compared to $3.8 million for the same quarter of the prior year, a decrease of $1.3 million, or 34.3 percent. Power supply segment revenues of $1.2 million for the quarter decreased by $0.4 million, or 26.2 percent, compared to $1.6 million in the same quarter of the prior year.

Gross profit decreased to $1.0 million, or 26.2 percent of net revenues, for the three months ended September 30, 2009, from $1.9 million, or 34.9 percent of net revenues, for the three months ended September 30, 2008.

The decrease in gross profit is due to a decrease in revenues, a change in product mix, an increase in inventory reserves, and lower absorption of labor and overhead.

Research and development expenses for the first quarter of fiscal 2010 were $802,000, or 21.8 percent of revenues, compared to $743,000 or 13.8 percent of revenues, for the first quarter of fiscal 2009. The increase is due primarily to an increase in compensation related to additions in personnel and prototype material expenses. Sales and marketing expenses were $544,000, or 14.8 percent of revenues, compared to $695,000 or 12.9 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expense was due to a decrease in compensation related to reductions in personnel and commission expenses. General and administrative expenses in the first quarter of fiscal 2010 were $671,000 or 18.2 percent of revenues, compared to $766,000, or 14.2 percent of revenues, for the same period last year. The decrease in general and administrative expense was primarily due to a decrease in compensation related to reductions in personnel and bad debt expenses.

Cash, cash equivalents and marketable securities were $26.5 million at September 30, 2009, down from $31.1 million at September 30, 2008.

Inventory at September 30, 2009 was $5.6 million, compared to $6.2 million at September 30, 2008.

Commenting on the first quarter results, Bill Gervais, president and chief executive officer of Qualstar, said: "While first quarter revenues of $3.7 million were within our expect guidance range, sales were impacted by the timing of several orders for XLS libraries that were shipped subsequent to the end of the first quarter. Despite the ongoing macroeconomic conditions that continue to result in customers delaying purchase decisions, we are taking the necessary actions to strengthen our business during these challenging times."