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Quantum Corp. Reports Operating Results (10-Q)

August 09, 2012 | About:

10qk

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Quantum Corp. (QTM) filed Quarterly Report for the period ended 2012-06-30.

Quantum Corp has a market cap of $334.9 million; its shares were traded at around $1.495 with a P/E ratio of 70.7 and P/S ratio of 0.5.

Highlight of Business Operations:

In the first quarter of fiscal 2013, revenue was negatively impacted by lower than expected revenue in Europe across all of our product lines and by a decrease in large orders, or orders greater than $200,000. We believe economic weakness in Europe was the primary reason we had lower than expected revenue in Europe. In addition, we believe large orders also decreased due to companies responding to the economic climate and budget uncertainty, choosing to cancel, reduce or delay these larger purchases. We had total revenue of $140.9 million in the first quarter of fiscal 2013, an 8% decrease from the first quarter of fiscal 2012. Our product revenue from OEM customers decreased 13% largely due to expected decreases and revenue from branded products decreased 7% primarily due to decreased enterprise tape automation and disk systems sales. Our continued efforts to increase revenue from disk systems and software solutions resulted in a 5% increase in this revenue category. Service revenue decreased $0.6 million, or 2%, primarily due to a decreased volume of OEM product repair services. Our continued focus on growing our branded business is reflected in the greater proportion of non-royalty revenue from branded business, at 82% in the first quarter of fiscal 2013, compared to 80% in the first quarter of fiscal 2012. Royalty revenue decreased 25% primarily due to lower LTO royalties and to a lesser extent from royalties from sales of older DLT media.

Our gross margin percentage decreased 160 basis points from the first quarter of fiscal 2012 to 39.6% primarily due to decreased royalty revenue. Operating expenses increased $5.7 million, or 9%, primarily from increased sales and marketing expenses, largely due to growing our sales force and marketing team. We also expanded marketing programs in the first quarter of fiscal 2013 to generate greater awareness and future demand for Quantum products and services. We had a $14.8 million loss from operations in the first quarter of fiscal 2013 compared to a $1.7 million loss from operations in the first quarter of fiscal 2012.

The $4.8 million increase in sales and marketing expense in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 was primarily due to a $2.5 million increase in salaries and benefits, including commissions, largely from growing our branded sales force and marketing team. In addition, we had a $1.8 million increase in marketing expenses from expanded marketing programs to generate greater awareness of Quantum and increase future demand for our products and solutions. Travel expenses also increased $0.4 million from the first quarter of fiscal 2012.

The $16.4 million difference between reported net loss and cash used in operating activities during the three months ended June 30, 2012 was primarily due to a $24.0 million decrease in accounts receivable and $14.6 million in non-cash expenses, partially offset by an $8.9 million decrease in accounts payable and a $7.4 million decrease in deferred revenue. The decrease in accounts receivable was primarily due to decreased sales in the first quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012. Non-cash expenses included $4.9 million in amortization, $4.3 million in share-based compensation and $3.0 million in depreciation. Accounts payable decreased due to the timing of payments in addition to decreased purchases compared to the fourth quarter of fiscal 2012. The decrease in deferred revenue was primarily due to a typical seasonal decline in service contract volumes. The majority of our service contracts renew in our third and fourth fiscal quarters.

The $16.6 million difference between reported net loss and cash provided by operating activities during the three months ended June 30, 2011 was primarily due to an $18.2 million decrease in accounts receivable and $13.7 million in non-cash expenses, partially offset by a $7.1 million decrease in deferred revenue. The decrease in accounts receivable was primarily due to decreased sales in the first quarter of fiscal 2012 compared to the fourth quarter of fiscal 2011. Non-cash expenses included $6.5 million in amortization, $3.0 million in depreciation and $3.0 million in share-based compensation. The decrease in deferred revenue was primarily due to a typical seasonal decline in service contract volumes.

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