Quantum: Fiscal 4Q11 Financial Results

Quantum Corp. reported results for fiscal 2011 and the fourth quarter ended March 31, 2011.

Revenue for the year totaled $672 million, down about one percent from fiscal 2010, primarily due to expected reductions in OEM revenue. For FQ4’11, Quantum reported $165 million in revenue, slightly higher than the same period last year. Branded revenue, which represented 79 percent of total non-royalty revenue for the year, grew 5 percent for the year and 9 percent for FQ4’11 over the comparable FY10 periods. Branded disk systems and software sales, including related service revenue, were a key contributor to this year-over-year growth, increasing 38 percent for FY11 and 31 percent for the fourth quarter.

For the fiscal year, Quantum’s GAAP and non-GAAP gross margin rates were 42.1 percent and 44.6 percent, respectively. These rates were the highest in 10 years, up from 41.1 percent in FY10 on a GAAP basis and from 44.5 percent on a non-GAAP basis. The company’s GAAP gross margin rate for FQ4’11 was 41.5 percent, up from 40.8 percent a year earlier, while the non-GAAP gross margin rate decreased to 43.7 percent from 44.4 percent.

GAAP net income for FY11 was $5 million, or 2 cents per basic share, compared to net income of $17 million, or 8 cents per share, in the prior year. Non-GAAP net income for the year was $49 million, or 22 cents per basic share, down from $55 million, or 26 cents per share, in FY10. For FQ4’11, Quantum reported a GAAP net loss of $2 million, or one cent per basic share, an improvement over the net loss of $4 million, or 2 cents per share, in FQ4’10. Non-GAAP net income for the quarter was $10 million, or 4 cents per basic share, compared to $7 million, or 4 cents per share, in the same quarter of FY10.

"In fiscal 2011, we delivered growth in a number of key areas," said Jon Gacek, CEO of Quantum. "Branded sales increased 5 percent over the prior year, and we had record revenue for both branded disk systems and branded software, which were up 43 percent and 28 percent, respectively. In addition, midrange DXi product revenue nearly tripled over the prior year. We also added approximately 550 new midrange and enterprise tape automation customers and grew our entry-level tape automation revenue 30 percent year-over-year.

"We plan to build on this momentum in fiscal 2012, with new products and enhanced features across our portfolio, as well as deeper engagement with channel partners," Gacek added. "We have also realigned our sales resources so that we can more comprehensively meet the evolving needs of our installed customer base while growing this base through new partnerships and solutions that enable us to broaden our market reach."

Quantum ended FQ4’11 with $78 million in total cash and cash equivalents and $239 million in total debt. For the full year, the company generated $52 million in cash from operations, reduced total debt by $91 million and refinanced its subordinated term debt with subordinated convertible debt at a significantly lower interest rate. The refinancing saved Quantum nearly $4 million in interest expense for FY11 and is expected to save approximately $10 million annually going forward. Reflecting the continued improvement in the company’s business model and balance sheet, both Moody’s Investor Service and Standard and Poor’s upgraded Quantum’s credit rating during the March quarter.

For the full 2012 fiscal year, Quantum expects:

• Increased revenue driven by growth in the company’s branded business, including branded disk systems and software sales.
• Improved GAAP and non-GAAP gross margin rates.
• A modest increase in GAAP and non-GAAP operating expenses driven by higher R&D investment.
• Interest expense similar to the exit rate for FQ4’11.

For the first quarter of fiscal 2012, the company expects:

• Revenue of approximately $160 million.
• GAAP gross margin rate of 41-42 percent and non-GAAP gross margin rate of 43-44 percent.
• GAAP operating expenses of $64 million to $66 million and non-GAAP operating expenses of $58 million to $60 million.
• Interest expense of $3 million and taxes of $1 million.

To read the earnings call transcript