Qualstar: Fiscal 3Q10 Financial Results

Qualstar Corporation reported financial results for the third quarter of fiscal 2010 ended March 31, 2010.

Fiscal 2010 Third Quarter Financial Results
Revenues for the third quarter of fiscal 2010 were $4.0 million, compared to $4.1 million for the same quarter of fiscal 2009, a decrease of $0.1 million or 2.3 percent. Loss from operations remained comparable at $0.9 million for the third quarters of fiscal 2010 and fiscal 2009. Net loss was $0.8 million or $(0.07) per basic and diluted share, compared to a net loss of $0.7 million or $(0.06) per basic and diluted share for the third quarter of fiscal 2009.

Tape library segment revenues were $2.1 million for the quarter, compared to $3.1 million for the same quarter of the prior year, a decrease of $1.0 million, or 31.2 percent. Power supply segment revenues of $1.9 million for the quarter increased by $0.9 million, or 83.7 percent, compared to $1.0 million in the same quarter of the prior year.

Gross profit decreased to $1.2 million, or 30.1 percent of net revenues, for the three months ended March 31, 2010, from $1.4 million, or 34.3 percent of net revenues, for the three months ended March 31, 2009. The decrease in gross profit percentage is attributed to a change in product mix, an increase in inventory reserves, and lower absorption of labor and overhead.

Research and development expenses for the third quarter of fiscal 2010 were comparable at $0.8 million to the third quarter of fiscal 2009. Sales and marketing expenses were $0.6 million, or 14.9 percent of revenues, compared to $0.7 million, or 16.6 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expense was due to a decrease in advertising and promotion and miscellaneous expenses. General and administrative expenses in the third quarter of fiscal 2010 were $0.7 million, or 17.1 percent of revenues, compared to $0.8 million, or 20.5 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 expense, partially offset by an increase in legal expense.

Commenting on the third quarter results, Bill Gervais, president and chief executive of Qualstar said: "Third quarter revenues of $4.0 million were within our expected guidance range and increased more than 11 percent on a sequential quarter basis. During the quarter, we continued to experience solid demand for our XLS enterprise class libraries with a total of 14 XLS units shipped to a broad array of end users. Through the first nine months of fiscal 2010, revenues from our XLS family have increased more than 70 percent compared to the same period last year and have helped to offset lower demand for our legacy library products. In addition, I am also pleased with our N2Power business, which generated $1.9 million in third quarter revenues, an all-time record for a single quarter. Looking ahead, we expect that N2Power will continue to benefit from increasing worldwide interest in small, high efficiency power supplies."

Fiscal 2010 Nine-Month Financial Results
Qualstar reported revenues of $11.3 million for the first nine months of fiscal 2010, compared with $14.1 million for the first nine months of fiscal 2009. The Company’s net loss for the first nine months of fiscal 2010 was $2.5 million or $(0.21) per basic and diluted share, compared with a net loss of $1.3 million, or $(0.11) per basic and diluted share, in the first nine months of fiscal 2009.

Cash, cash equivalents and marketable securities were $24.8 million at March 31, 2010, down from $27.7 million at June 30, 2009. Inventory at March 31, 2010 was $5.0 million, compared to $5.8 million at June 30, 2009.

Common Stock Dividend
Qualstar’s Board of Directors did not declare a dividend in May. Ongoing dividends are evaluated on a quarter-by-quarter basis. Given the state of the economy, the Board conservatively elected in favor of preserving capital this quarter.