Quantum: Fiscal 3Q13 Financial Results

Revenue up Q/Q and down Y/Y by 8%, rebound in tape automation

Quantum Corp. reported results for the third quarter of fiscal 2013 (FQ3'13), ended Dec. 31, 2012.
Revenue for the quarter totaled $159 million, down 8% from the third quarter of fiscal 2012 (FQ3'12), primarily due to expected declines in OEM and branded tape automation revenue. However, total revenue was up $12 million, or 8%, over the prior quarter.
 
Quantum reported revenue of $41 million from disk system and software sales (including related service), a 13% increase over FQ3'12 due to record revenue from DXi disk system sales. The company also grew tape automation revenue by 25% over the prior quarter, as both midrange and enterprise sales rebounded strongly.

Quantum reported a GAAP net loss of $8 million, or 4 cents per share, for FQ3'13, compared to GAAP net income of $4 million in the same quarter of last year. On a non-GAAP basis, the company had net income of $5 million, or 2 cents per share, down from net income of $12 million a year earlier. The year-over-year declines were largely driven by the lower overall revenue. Compared to the prior quarter's results, the GAAP net loss in FQ3'13 was $4 million smaller, and the non-GAAP net income was $10 million higher.

"We improved our financial performance in the December quarter, growing revenue sequentially, driving better-than-expected non-GAAP profits and generating cash," said Jon Gacek, president and CEO of Quantum. "We also had another quarter of record DXi deduplication sales, which contributed to the 14% year-over-year increase in combined DXi and StorNext revenue we've achieved over the first three quarters of the fiscal year.

"In addition, even as we scaled back spending, we continued to invest in new, industry-leading products and solutions for protecting and managing digital content in physical, virtual, cloud and big data environments. These include our Lattus wide area storage systems, vmPRO 3.0 virtual backup software, DXi6800 deduplication appliances and Scalar i6000 HD enterprise tape libraries."
Quantum generated $6 million in cash from operating activities in FQ3'13 and ended the quarter with $55 million in cash and cash equivalents.

For 4Q2013, Quantum expects:

• Revenue of approximately $145 million to $150 million, reflecting typical seasonality, with higher sequential disk systems and software revenue.
• GAAP gross margin rate of approximately 41% and non-GAAP gross margin rate of 42%.
• GAAP operating expenses of $66 million to $68 million and non-GAAP operating expenses of $61 million to $63 million.
• Interest expense of $2.5 million and taxes of $500,000.

Business highlights for the December quarter
include the following:

• Quantum introduced a new family of wide area storage solutions, named Lattus, which provides globally distributed disk-based archives that are extremely scalable and cost-effective and allows storage of data forever on disk without interruption or migration. Integrating dispersed next-generation object storage and Quantum file system technologies, the Lattus family offers a new approach to archiving that overcomes the limitations and inefficiencies posed by traditional disk architectures in multi-petabyte storage environments. The first Lattus product, Lattus-X, began shipping in December.
• The company integrated its Q-Cloud backup and disaster recovery services with Symantec OpenStorage (OST) technology, providing NetBackup and Backup Exec customers with multiple options for leveraging Q-Cloud's services. Q-Cloud now directly supports NetBackup and Backup Exec software, enabling both backup applications to stay completely aware of all copies of data backed up to a Q-Cloud DXi appliance.
• Quantum began offering full-featured, free downloads of its vmPRO virtual machine backup software and DXi V1000 virtual deduplication appliance, providing a risk-free way to explore their superior features and value. The vmPRO Standard Edition software protects up to 1TB of virtual data and can be upgraded to vmPRO Enterprise Edition for additional capacity, making it easy for customers to adopt Quantum vmPRO and scale it to meet their growth requirements. The DXi V1000 stores up to 15TB of deduplicated data and works with vmPRO software to offer a 100% virtual data protection solution as well as a path to the cloud.
• LTO-6 technology started shipping in Quantum's Scalar i6000 and i500 tape libraries, as well as in its autoloaders, drives and media. LTO-6 nearly doubles capacity and increases transfer rates by up to 43% over LTO-5 technology, further enhancing the role of tape as an integral component of a broader tiered storage strategy.
• Quantum products continued to garner industry honors, as the DXi V1000 was named Virtualisation Product of the Year at the 2012 Storage, Virtualisation and Cloud Computing (SVC) Awards, and Quantum's StorNext data management software was recognized as runner-up in the Storage Software Appliance category. In addition, earlier this month, Storage magazine announced that the DXi V1000 is a finalist for its 2012 Product of the Year awards, and Network Computing selected the DXi6701/02 midrange deduplication appliance as a Product of the Year finalist for its upcoming awards.