Revenue Increases 23 Percent Year-over-Year Due Largely to ADIC
Contribution SAN JOSE, Calif., Nov. 8 /PRNewswire-FirstCall/ --
Quantum Corp. (NYSE:DSS), the leading global specialist in backup,
recovery and archive, today announced that revenue for its fiscal
second quarter (FQ2'07), ended Sept. 30, 2006, was $250 million.
This was a 23 percent increase over the same quarter last year
(FQ2'06), largely due to the inclusion of sales resulting from the
acquisition of Advanced Digital Information Corp. (ADIC), which
closed on Aug. 22. Quantum reported a GAAP net loss of $30.7
million, or 16 cents per diluted share, compared to a 7-cent loss
per diluted share in the comparable quarter last year. The $30.7
million net loss included a number of major items totaling $35.2
million: $14.7 million of in-process research and development
expenses resulting from the ADIC acquisition, $9.6 million in
amortization of acquisition-related intangibles, $6.7 million in
restructuring charges, $2.2 million in stock-based compensation
charges and $2 million related to a one-time, purchase accounting
adjustment in inventory. "With just five-and-a-half weeks as a
combined company in the September quarter, we are already beginning
to see the benefits of the ADIC acquisition," said Rick Belluzzo,
chairman and CEO of Quantum. "We increased revenues without the
'leakage' that often follows an acquisition and moved quickly to
begin realizing the cost synergies we'd identified. We feel very
good about the progress we're making on integration, the response
we've received from customers and partners and our ability to drive
toward our target business model." Quantum's gross margin rate for
the September quarter was 28 percent, compared to 26 percent in
FQ2'06. Operating expenses were $92.3 million, up from $67.3
million in the same quarter last year due mainly to the ADIC
acquisition. Quantum began executing on its plan to achieve $20
million in quarterly cost synergies, completing the majority of its
headcount reduction actions and non-headcount decisions. Because
the acquisition was completed with less than six weeks remaining in
the September quarter, the synergy savings in FQ2'07 was relatively
small. However, the company said it expects to achieve roughly half
of its $20 million quarterly synergy target in the current quarter
(FQ3'07) and three-fourths of the target in the March quarter.
Quantum's product revenue, which includes sales of the company's
hardware and software products and services, totaled $222.5 million
in the September quarter. This represented an increase of $51.0
million over FQ2'06, again largely due to the addition of ADIC
sales after Aug. 22. To provide greater insight into its results,
Quantum broke down product revenue into three categories:
"systems," "devices and non-royalty media" and "services and
other." Systems revenue, which includes sales of tape automation,
disk-based backup systems and software, totaled $102.9 million in
FQ2'07, compared to $48.9 million in the same quarter last year.
Most of the increase resulted from the ADIC acquisition, with a
strong contribution from sales of the i500 midrange tape library,
one of the flagship products in Quantum's newly expanded portfolio.
While still a relatively small percentage of Quantum's overall
business, sales of ADIC software continued to achieve record
levels, expanding a customer base that includes television
networks, movie studios, law enforcement organizations and a number
of U.S. and foreign governmental agencies. Beyond the ADIC
contribution to systems revenue in the September quarter, Quantum
also benefited from sales of several new products it introduced
over the previous year, including the DX3000 and DX5000 disk-based
backup appliances, PX502 entry-level tape library and
SuperLoader(TM) 3 tape autoloader. Revenue from devices (tape
drives and removable hard drives) and non-royalty media sales
totaled $92.3 million in FQ2'07, down $9.8 million from FQ'06.
Despite year-over-year increases in sales of LTO-2 HH and LTO-3
tape drives and the ramping of new DLT-S4 and DLT-V4 drives over
the last few quarters, this was insufficient to offset the
retirement of older device products. Revenue in the "services and
other" category -- which includes hardware service contracts as
well as repair, installation and professional services -- was $27.3
million in the September quarter. This represented an increase of
$6.8 million from FQ2'06, reflecting the contribution of ADIC.
Revenue from tape media royalties totaled $27.8 million in FQ2'07,
down about $4.2 million from FQ2'06. This reflected the impact of
the net decline in the installed base of DLT(R) tape drives over
the past year. Commenting on the remaining two quarters of its
fiscal year, Quantum said it expected revenues of approximately
$300 million per quarter, gross margin rates in the range of 29
percent to 30 percent, and operating expenses of approximately $90
million and $81 million in the December and March quarters,
respectively. The gross margin rate includes the impact of
approximately $8 million in amortization of acquisition-related
intangibles and stock-based compensation charges, while the
operating expense figures include approximately $8 million to $9
million related to these two items. Change in Stock Ticker Symbol
In addition to reporting its September quarter results, Quantum
also announced today that it is changing its stock ticker symbol
from DSS to QTM to align more closely with the company's name now
that the ADIC acquisition has been completed. Quantum stock will
continue to trade on the New York Stock Exchange, and the ticker
symbol change will take effect at the start of trading on
Wednesday, Nov. 15, 2006. Conference Call and Audio Webcast
Notification Quantum will hold a conference call today, Nov. 8,
2006, at 2:00 p.m. PST, to discuss its fiscal second quarter
results. Press and industry analysts are invited to attend in
listen-only mode. Dial-in number: (303) 262-2191 (U.S. &
International). Quantum will provide a live audio webcast of the
conference call beginning today, Nov. 8, 2006, at 2 p.m. PST. Site
for the webcast and related information:
http://investors.quantum.com/. About Quantum Quantum Corp. is the
leading global storage company specializing in backup, recovery and
archive. Combining focused expertise, customer-driven innovation,
and platform independence, Quantum provides a comprehensive,
integrated range of disk, tape, and software solutions supported by
a world- class sales and service organization. As a long-standing
and trusted partner, the company works closely with a broad network
of resellers, OEMs and other suppliers to meet customers' evolving
data protection needs. Quantum Corp., 1650 Technology Drive, Suite
700, San Jose, CA 95110, (408) 944-4000, http://www.quantum.com/.
NOTE: Quantum, the Quantum logo, DLT and DLTtape are trademarks of
Quantum Corporation registered in the United States and other
countries. SuperLoader and DX are trademarks of Quantum
Corporation. All other trademarks are the property of their
respective owners. "Safe Harbor" Statement under the U.S. Private
Securities Litigation Reform Act of 1995: This press release
contains "forward-looking" statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Specifically,
without limitation, statements relating to: (1) our ability to
drive toward our business model; (2) our expectations regarding
FQ3'07 and FQ4'07 revenues, gross margins, operating expenses,
amortization of intangibles and stock based compensation charges;
and (3) our expectation regarding synergies and cost savings
resulting from the ADIC acquisition and the timing of the
realization of such cost savings. More detailed information about
these risk factors, and additional risk factors, are set forth in
Quantum's periodic filings with the Securities and Exchange
Commission, including, but not limited to, those risks and
uncertainties listed in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors," on pages 32 to 42 in Quantum's
Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on August 7, 2006 and pages 14 to 25 in
Quantum's Annual Report on Form 10-K for fiscal year 2006, filed
with the Securities and Exchange Commission on June 12, 2006. In
particular, you should review the risk factors on pages 32 through
35 of our Form 10-Q under the headings "A large percentage of our
sales come from a few customers, and these customers have no
minimum or long-term purchase commitments. The loss of, or a
significant reduction in demand from, one or more key customers
could materially and adversely affect our business, financial
condition, and operating results", "From time to time we make
acquisitions, such as the contemplated acquisition of ADIC. The
failure to successfully integrate recent or future acquisitions
could harm our business, financial condition, and operating
results", "Our operating results depend on new product
introductions, which may not be successful, in which case our
business, financial condition, and operating results may be
materially and adversely affected", "Competition has increased, and
may increasingly intensify, in the tape drive and tape automation
markets as a result of competitors introducing products based on
new technology standards, which could materially and adversely
affect our business, financial condition, and results of
operations", "We derive almost all of our revenue from products
incorporating tape technology. If competition from alternative
storage technologies continues or increases, our business,
financial condition, and operating results would be materially and
adversely harmed", and "Our tape media business generates a
relatively high gross margin rate, which significantly impacts the
total company gross margin rate. If we were to experience a
significant decline in the tape media or tape royalty gross margin
rate, our business, financial condition, and operating results
would be materially and adversely affected." Quantum expressly
disclaims any obligation to update or alter its forward-looking
statements, whether as a result of new information, future events
or otherwise. QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (In thousands, except per-share amounts) Three Months
Ended Six Months Ended Sept. 30, Sept. 26, Sept. 30, Sept. 26, 2006
2005 2006 2005 Product revenue $222,537 $171,530 $381,581 $347,624
Royalty revenue 27,833 32,077 55,384 62,620 Total revenue 250,370
203,607 436,965 410,244 Cost of revenue 179,757 150,948 314,327
300,143 Gross margin 70,613 52,659 122,638 110,101 Operating
expenses: Research and development 27,864 27,488 51,947 56,670
Sales and marketing 30,577 21,168 51,537 42,976 General and
administrative 12,487 9,039 22,748 19,828 Restructuring charges
6,660 9,585 6,743 9,507 In-process research and development 14,700
-- 14,700 -- 92,288 67,280 147,675 128,981 Loss from operations
(21,675) (14,621) (25,037) (18,880) Interest income and other, net
2,067 3,866 4,030 6,040 Interest expense (8,546) (2,582) (10,708)
(5,373) Loss before income taxes (28,154) (13,337) (31,715)
(18,213) Income tax provision 2,522 451 2,537 1,052 Net loss
$(30,676) $(13,788) $(34,252) $(19,265) Net loss per share Basic
$(0.16) $(0.07) $(0.18) $(0.11) Diluted $(0.16) $(0.07) $(0.18)
$(0.11) Weighted average common and common equivalent shares Basic
190,158 183,905 189,178 183,387 Diluted 190,158 183,905 189,178
183,387 Included in the above Statements of Operations: Inventory
valuation adjustment to fair value $1,960 $-- $1,960 $--
Amortization of intangibles: Cost of revenue 5,586 4,059 9,717
8,042 Research and development 344 96 539 191 Sales and marketing
3,625 1,074 4,690 2,133 General and administrative 18 147 164 293
9,573 5,376 15,110 10,659 Share-based compensation: Cost of revenue
270 -- 521 -- Research and development 563 -- 1,040 -- Sales and
marketing 501 -- 841 -- General and administrative 895 -- 1,605 --
2,229 -- 4,007 -- QUANTUM CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands) September 30, March 31, 2006 2006
Assets Current assets: Cash and cash equivalents $128,987 $123,298
Short-term investments 21,901 99,975 Accounts receivable, net of
allowance for doubtful accounts of $8,961 and $7,843, respectively
208,039 114,020 Inventories 117,476 88,963 Deferred income taxes
27,620 7,422 Other current assets 35,578 30,869 Total current
assets 539,601 464,547 Long-term assets: Property and equipment,
net 67,910 38,748 Service parts for maintenance, net 82,051 57,316
Purchased technology, net 123,398 41,237 Other intangible assets,
net 101,662 8,572 Goodwill 385,415 47,178 Other assets 15,947 5,746
Total long-term assets 776,383 198,797 $1,315,984 $663,344
Liabilities and Stockholders' Equity Current liabilities: Accounts
payable $101,374 $67,306 Accrued warranty 35,341 32,422 Current
deferred revenue 59,416 22,107 Short-term debt 25,000 -- Accrued
restructuring 20,171 13,019 Other accrued liabilities 125,168
80,355 Total current liabilities 366,470 215,209 Deferred income
taxes 27,223 6,995 Convertible subordinated debt 160,000 160,000
Long-term debt 471,500 -- Deferred revenue, long-term 19,212 --
Other long-term liabilities 53 69 Stockholders' equity 271,526
281,071 $1,315,984 $663,344 QUANTUM CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended September
30, September 26, 2006 2005 Cash flows from operating activities:
Net loss $(34,252) $(19,265) Adjustments to reconcile net loss to
net cash provided by (used in) operating activities: Depreciation
& amortization 31,182 22,346 In-process research and
development 14,700 -- Gain on Ireland facility closure (476) --
Deferred income taxes (36) 22 Share-based compensation 4,007 424
Changes in assets and liabilities: Accounts receivable (10,937)
6,888 Inventories 107 (2,037) Service parts for maintenance
(11,848) 2,950 Accounts payable (2,297) (14,430) Income taxes
payable 1,056 (769) Accrued warranty (4,026) (2,646) Deferred
revenue 1,801 (463) Accrued restructuring (8,348) 3,831 Other
assets and liabilities 4,222 9,791 Net cash provided by (used in)
operating activities (15,145) 6,642 Cash flows from investing
activities: Purchases of short-term investments (464,758)
(1,036,100) Proceeds from sale of short-term investments 544,733
933,400 Purchases of property and equipment (9,651) (11,428)
Proceeds from sale of Ireland facility 6,000 -- Payments made in
connection with business acquisitions, net of cash acquired
(545,385) (20,228) Net cash used in investing activities (469,061)
(134,356) Cash flows from financing activities: Borrowings of
long-term debt, net 486,808 -- Proceeds from issuance of common
stock, net 3,087 3,383 Net cash provided by financing activities
489,895 3,383 Net increase (decrease) in cash and cash equivalents
5,689 (124,331) Cash and cash equivalents at beginning of period
123,298 225,136 Cash and cash equivalents at end of period $128,987
$100,805 DATASOURCE: Quantum Corp. CONTACT: Brad Cohen, Public
Relations, +1-408-944-4044, or , or Mary Springer, Investor
Relations, +1-408-944-4450, or , both of Quantum Corp. Web site:
http://www.quantum.com/
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