Quantum Corporation Reports Fiscal Third Quarter 2017 Results

Quantum Corporation today reported results for the fiscal third quarter 2017 ending December 31, 2016 (all comparisons are relative to the fiscal third quarter 2016 unless otherwise stated).

Fiscal Third Quarter 2017 Results

• Total revenue was $133.5 million, an increase of $5.4 million. For the first three quarters of fiscal 2017 (YTD), total revenue was up 8 per cent over the same period in fiscal 2016.
• Branded revenue grew to $115.2 million, up $11.5 million, or 11 per cent.
• Scale-out tiered storage revenue increased to $39.8 million, up $4.1 million and contributing to a 26 per cent YTD growth rate.
• Total data protection revenue grew 3 per cent to $83.1 million, consisting of $22.9 million in disk backup systems revenue (up 17 per cent), $44.8 million in tape automation revenue (down 13 per cent overall, with OEM revenue down 42 per cent and branded revenue down
  3 per cent) and $15.4 million in devices and media revenue (up 51 per cent).
• Royalty revenue was $10.5 million, a decrease of $750,000.
• GAAP operating income was $7.3 million, and non-GAAP operating income was
  $8.8 million, an improvement of $5.8 million and $2.1 million, respectively.
• GAAP net income was $5.0 million, or $0.02 per diluted share, and non-GAAP net income was $6.6 million, or $0.02 per diluted share. This represented an improvement of
  $5.8 million and $1.8 million, respectively.

Aims For The Fourth Quarter

“Following up on our revenue growth and improved profitability in the first half of the fiscal year, we again delivered solid results in the December quarter,” said Jon Gacek, president and CEO of Quantum. “On a year-over-year basis, we generated our 22^nd consecutive quarter of scale-out tiered storage revenue growth and increased total revenue, data protection sales and overall profitability for the third straight quarter. As a result of our strong execution and the leverage our financial model provides, year-to-date GAAP and non-GAAP net income also improved $29 million and $24 million, respectively, on a total revenue increase of $29 million.

“In the fourth quarter, our focus is to continue building on our momentum by providing customers with the optimal combination of high performance, low-cost capacity and ready access to meet their increasing data management demands and achieve their business or mission objectives. We are well-positioned to capitalize on the opportunities across our target markets, having expanded our product offerings, sales capabilities and ecosystem partnerships over the past nine months. As a result, we are raising our revenue and profitability guidance for fiscal 2017.”

Fiscal Fourth Quarter 2017 Outlook

Quantum provided the following guidance for the fiscal fourth quarter:

• Total revenue of $120 million to $125 million.
• GAAP and non-GAAP gross margin of 41-43 per cent.
• GAAP and non-GAAP operating expenses of $49 million to $50 million and $47 million to $48 million, respectively.
• Interest expense of $2.4 million and taxes of $400,000.
• GAAP loss per share of $0.01 and non-GAAP earnings per share of $0.00.

Quantum also updated its fiscal 2017 guidance. The company now expects:

• Total revenue of $505 million to $510 million, an increase over its initial guidance.
• Royalty revenue of at least $35 million.
• GAAP and non-GAAP gross margin of approximately 42 per cent.
• GAAP and non-GAAP operating expense of approximately $201 million and approximately $192 million, respectively.
• Interest expense of $8.0 million and taxes of approximately $1.5 million.
• GAAP earnings per share of $0.01 to $0.02 and non-GAAP earnings per share of $0.04 to $0.05, respectively — an increase over its initial guidance on both a GAAP and non-GAAP basis.

2017 Business Highlights

Quantum concluded definitive agreements with PNC Bank and TCW Direct Lending on a $170 million financing package. The agreement with PNC includes an $80 million revolving credit facility and an additional $20 million credit line available under an accordion feature. The agreement with TCW provides for a $50 million term loan with TCW that was drawn upon closing and a $20 million delayed draw term loan available through December 31, 2017.

The company announced StorNext 5.4, the latest version of its award-winning StorNext^® file system and data management software. StorNext 5.4 enables customers to integrate their existing public cloud storage accounts and/or third-party, object storage-based private clouds as tiers in a StorNext-managed environment. As a result, users can get all the benefits of StorNext while protecting prior investments and reducing the cost and complexity of cloud administration. Another feature provides the ability to embed asset manager, data management and data sharing applications in StorNext-powered appliances, thereby reducing the time, cost and complexity of deploying and maintaining applications.

Quantum Introduces New Scalar Storage Platform

Quantum introduced a new Scalar^® storage platform optimized for storing and managing the ever-increasing volumes of unstructured data. The first new products based on this platform are the Scalar i6 and Scalar i3 tape libraries and the StorNext AEL6 purpose-built rich media archive appliance. The new Scalar platform offers a range of benefits, including best-in-class storage density — twice that of earlier-generation rack-mounted libraries — which enables organizations of all sizes to reduce their data center footprint and further reduce their storage costs.

Notable scale-out tiered storage customer wins included large deals with several leading broadcasters and postproduction companies, two police departments seeking video surveillance solutions and a broad range of organizations that turned to Quantum for help managing their growing unstructured data archives. These organizations included a major government agency, an automotive electronics supplier that is one of the leaders in self-driving technology, an international weather forecasting agency and a top medical research institute.

In data protection, Quantum had a series of notable DXi6900 product family wins, including million dollar-plus deals at an Asian taxation department, a major European insurance company and two big banks, as well as other large deals at a state-owned energy provider in Asia and a leading U.S. telecom company.