Quantum announced results for its first fiscal quarter of 2017, representing the three month period ending June 30, 2016. Total revenue for the quarter was $116.3 million, an increase of 4.9%
versus the year earlier period (FY Q1 2016), and a 3.1% decrease versus the preceding quarter (FY Q4 2016). The first fiscal quarter of the year is generally Quantum’s weakest.
The quarter’s revenue of $116.3 million exceeded the high end of management’s guidance of $115 million (issued during the previous quarter). The Company’s gross margins were in-line with guidance for the quarter, and its earnings result were slightly above earlier guidance.
Gross margins (GAAP) were 43.3% for the quarter, a slight improvement over the 42.4% gross margins from the year earlier period, and a slight decline compared to the 45.6% gross margins in the preceding quarter.
Net loss (GAAP) for the quarter was $3.8 million, equating to $0.01 loss per diluted share. Quantum recorded a net loss of $10.7 million (or a loss of $0.04 per diluted share) during the year-earlier period and a net loss of $52.4 million in the preceding quarter. The preceding quarter, fiscal fourth quarter of 2016, included a non-cash goodwill impairment charge of $55.6 million.
As of June 30, 2016 cash and cash equivalents were $34.5 million, a slight increase over the $33.8 million balance as of March 31, 2016.
Most relevant to Quantum’s activities in the media and entertainment segment, the Company’s scale-out storage business, which includes Quantum’s StorNext storage offerings, registered its 20th consecutive quarter of year-over-year growth. Scale-out storage revenue was $30.8 million in the quarter, an 11% increase versus last year’s first quarter.
Management disclosed a win rate for scale-out storage in the quarter in the 70% range. Over 120 new scale-out storage customers were added during the quarter, which compares favorably to the more than 90 new customers added in the first quarter of fiscal 2016. During the call with equity analysts, management also highlighted several recent scale-out storage projects in the media and entertainment sector including a $200,000 plus deal “with one of the emerging leaders in virtual reality.”
The earnings release noted Quantum’s NAB Show announcement of integration between Avid’s Interplay MAM system and Quantum’s StorNext. The integration enables media customers to control StorNext archive and restore functions through Interplay. Commenting on the Avid Integration at the NAB Show, Geoff Stedman, SVP of Marketing at Quantum, said, “Through initiatives ranging from solution development to closer alignment of sales and support activities, Quantum is working closely with Avid to help Avid customers better manage their content over the long term. Together our technologies empower users to optimize their media storage and access to content on a broad range of archive platforms, providing significant time and cost savings that make it easier to achieve their creative and business goals.”
Update on Convertible Notes due November 2017
Quantum’s CFO Fuad Ahmad provided an update on Quantum’s efforts to address its convertible note balance, in the amount of $69.3 million, due in November 2017. On the earnings call with analysts, Mr. Ahman said, “we want to be proactive, but sensible about our financing options. To that end, we’re in discussions with a number of financial institutions regarding expanding our credit lines to provide sufficient near and long-term liquidity and to create a clear and executable roadmap to address the convertible notes, which I may add will mature in another 15 months.”
Quantum had repurchased approximately $83 million dollars of prior convertible notes during November 2015.
Guidance for Fiscal Second Quarter, Full Year 2017
Quantum’s management issued guidance for the second fiscal quarter of revenue between $188 million to $122 million with GAAP gross margins of between 41% and 42% and a GAAP loss per share of $0.01 to $0.00.
Management also reaffirmed the full year guidance of at least $500 million in total revenue, equating to year-over-year growth of at least 5%. Driving this growth is an expectation of a continued increase in scale-out storage revenue across Quantum’s vertical focus areas – Media and entertainment, surveillance and intelligence, and unstructured data archives for technical workflows.
Scale-out storage is expected to account for 35% to 40% of Quantum’s total revenue, which would represent a year-over-year growth of 40% to 60%, if achieved.
Quantum’s CEO Jon Gacek offered the following commentary on the outlook for scale-out storage, “Looking more closely at scale-out storage, Q1 was our 20thth consecutive year-over-year growth quarter, and given our increasing market traction and opportunity, we feel very good about our ability to achieve our scale-out growth objectives for the year.”
Press Release: Fiscal first quarter 2017 earnings release
© Devoncroft Partners 2009 – 2016. All Rights Reserved.