Quantum: Fiscal 3Q12 Financial Results

Quantum Corp.www.quantum.com reported results for the third quarter of fiscal 2012 (FQ3’12), ended Dec. 31, 2011.

Highlights:

• Total revenue of $173 million, with ninth consecutive quarter of year-over-year growth in Quantum branded sales
• Record disk systems and software revenue of $36 million, up 18% year-over-year
• Strong traction from new midrange and SMB DXi deduplication appliances, vmPRO virtual data protection solutions and StorNext big data management appliances

Revenue for the quarter totaled $173 million, down 2 percent from the third quarter of fiscal 2011 (FQ3’11) primarily due to expected reductions in OEM and royalty revenue. On a sequential basis, third quarter revenue was up $8 million. In addition, FQ3’12 was the ninth consecutive quarter of year-over-year growth in branded revenue, which increased 3 percent and represented 81 percent of total non-royalty revenue. Quantum also generated record revenue of $36 million from disk system and software sales (including related maintenance), which increased 18 percent from the same quarter last year.

GAAP net income for FQ3’12 was $4 million, or 2 cents per diluted share, compared to GAAP net income of $6 million, or 3 cents per diluted share, in FQ3’11. Non-GAAP net income for the quarter was $12 million, or 5 cents per diluted share, down from $16 million, or 7 cents per diluted share, in the comparable quarter last year. The year-over-year decline in GAAP and non-GAAP net income was primarily due to lower tape-related service and media royalty revenue.

"We are pleased with the continued momentum we saw across key areas in the December quarter," said Jon Gacek, president and CEO of Quantum. "Quantum branded revenue, which now makes up more than 80 percent of total product and service revenue, grew year-over-year for the ninth consecutive quarter. We also achieved a new high for disk and software revenue, with a strong contribution from new product sales, and generated our highest level of branded tape automation revenue in eight quarters.

"Sales of our DXi6701/02 and DXi4601 disk backup and deduplication products were particularly strong, and customers also responded very positively to our new vmPRO virtual data protection solutions, all of which speaks to the unique value we offer customers in protecting both physical and virtual machine data. We also saw significant traction with our new StorNext appliances, as more customers are turning to Quantum for big data management solutions that enable them to maximize revenue and accelerate time-to-market by fully leveraging their digital assets."

The company generated $16 million in cash from operating activities and ended the quarter with $69 million of senior debt, $135 million of convertible debt and $63 million in cash and cash equivalents.

Outlook

• For the fourth quarter of fiscal 2012, Quantum expects:
• Revenue of $160 million to $170 million.
• GAAP gross margin and non-GAAP gross margin rates slightly below those in FQ3’12.
• GAAP operating expenses of $68 million to $70 million and non-GAAP operating expenses of $62 million to $64 million.
• Interest expense of approximately $3 million and taxes of $1 million.

Business Highlights
Key business highlights for the December quarter include the following:

• Further enhancing its portfolio of DXi backup and deduplication appliances, Quantum began shipping the DXi4601for small data center or remote office environments and the DXi8500 with DXi 2.1 software for enterprise customers. The DXi4601 provides the industry’s first capacity-on-demand capability in a deduplication appliance and achieves twice the performance of competitors in its class at half the price. The new DXi8500 offers 60 percent greater capacity, nearly a 40 percent increase in performance, industry-leading price-performance and unique hybrid deduplication.
• Quantum introduced two new vmPRO virtual data protection offerings. The vmPRO 4601 appliance is a turnkey VM backup solution for small and medium-sized businesses and remote offices that includes capacity-on-demand scalability. Quantum’s vmPRO software incorporates advanced utilities designed to dramatically improve and simplify VM data protection in midrange and larger data centers. In conjunction with the company’s DXi deduplication appliances, it delivers the most effective deduplication rates and the fastest VM recovery in the industry. Demonstrating Quantum’s growing leadership in VM data protection, its vmPRO 4000 was named Storage Virtualization Product of the Year
• The company announced it had sold more than 60,000 StorNext licenses to date, a significant milestone and testament to its leadership in helping customers manage big data and extract the full value from their digital assets. Quantum also began shipping new StorNext disk and archive offerings as part of its expanded StorNext appliance family. These appliances leverage high-performance StorNext software and market-leading hardware in purpose-built configurations that are highly scalable, cost-effective and easy to deploy.
• Quantum began shipping its Scalar i6000 enterprise tape libraries with dual robotics for high availability. The enhanced libraries also feature Active Vault, which expands managed capacity within the library while reducing application licensing costs. Further reinforcing Quantum’s position as the worldwide leader in open systems tape automation, Storage magazine announced that the company had captured the top spot overall and in all five rating categories for both enterprise and midrange libraries in its annual tape library quality awards.
• The company announced two new low-cost data deduplication and disaster recovery solutions for small businesses. The NDX-8 NAS appliance includes built-in backup software and deduplication technology, enabling customers to reduce storage requirements and network traffic by up to 90 percent. The RDX 8000 removable disk library combines the advantages of disk with the removability of tape and is available with Quantum Datastor Shield deduplication software, which can cut cartridge use by nearly two-thirds.