Exhibit 99.1
Qualstar Reports Fiscal 2006 Second Quarter Results
SIMI VALLEY, Calif.--(BUSINESS WIRE)--Feb. 2, 2006--Qualstar(R)
Corporation (Nasdaq:QBAK), a manufacturer of automated tape storage
solutions, today reported financial results for the second quarter of
fiscal 2006 ended December 31, 2005.
Fiscal 2006 Second Quarter Financial Results
Revenues for the second quarter of fiscal 2006 were $5.7 million,
compared to $6.4 million for the same quarter of the prior year. The
decrease in revenues was due primarily to an approximate $1.0 million
decline in sales of tape libraries and tape drives in the current
quarter compared to last year. This resulted from lower sales of tape
libraries and drives incorporating AIT, SAIT and SDLT tape technology,
partially offset by higher sales of tape libraries and drives
incorporating LTO tape technology. Partially offsetting the decline in
sales of tape libraries and drives were increased sales of power
supplies and tape media. Gross margin in the fiscal 2006 second
quarter was 33.8 percent, compared to 36.2 percent in the year-ago
quarter. The decline in gross margin was primarily related to a change
in product mix, increased competitive pricing pressures and lower
overhead absorption.
Research and development expenses for the second quarter of fiscal
2006 were $762,000, or 13.4 percent of revenues, compared to $865,000,
or 13.5 percent of revenues, for the year-ago quarter. The decrease in
research and development expenses was due primarily to lower
compensation expenses, prototype costs and consulting fees. Sales and
marketing expenses in the 2006 fiscal second quarter were $715,000, or
12.6 percent of revenues, compared to $868,000, or 13.6 percent of
revenues, in the same quarter last year. The decrease in sales and
marketing expenses resulted primarily from lower compensation expenses
due to fewer employees (a temporary condition), and reduced
advertising and promotion expenses. General and administrative
expenses in the second quarter of fiscal 2006 were $900,000, or 15.8
percent of revenues, compared to $1.1 million, or 17.8 percent of
revenues, for the second quarter of fiscal 2005. The decrease in
general and administrative expenses was due primarily to lower legal
and accounting expenses and reduced bad debt expenses.
Qualstar reported a loss from operations of $455,000 in the second
quarter of fiscal 2006, compared to a loss from operations of $558,000
for the second quarter of fiscal 2005. The Company reported a net loss
of $189,000, or $(0.02) per basic and diluted share, for the second
quarter of fiscal 2006, compared with a net loss of $347,000, or
$(0.03) per basic and diluted share, for last year's second quarter.
In accordance with the Share-Based Payment rules (SFAS 123(R))
issued by the Financial Accounting Standards Board, which became
applicable to Qualstar beginning July 1, 2005, Qualstar reported
stock-based compensation expense of $37,000 in the second quarter of
fiscal 2006, compared to $0 in the comparable quarter in fiscal 2005.
Cash, cash equivalents and marketable securities were $33.8
million at December 31, 2005, compared with $34.1 million at June 30,
2005. Days sales outstanding (DSOs) were approximately 49 days at
December 31, 2005, compared to approximately 48 days at June 30, 2005.
Inventory turns were 2.1 times on an annualized basis for the period
ended December 31, 2005, compared to 2.5 times on an annualized basis
for the period ended June 30, 2005.
"Our business remained relatively stable this quarter compared to
the first fiscal quarter of this year," said William J. Gervais,
president and chief executive officer of Qualstar. "LTO-based library
sales grew once again as the result of increasing customer demand for
this technology, and our power supply business showed continued
strength both sequentially and compared to last year's second quarter.
"We are performing continuous qualification testing of our new XLS
enterprise-class library and anticipate shipping our first production
units in the fourth quarter of fiscal 2006. At the same time, we've
released a second, smaller XLS model to pilot production in response
to feedback from some of our key resellers. We believe the large
market for this next generation product line is significant and that
our high-efficiency, low-cost offering will be a welcome addition in
the storage arena," said Mr. Gervais.
Fiscal 2006 Six-Month Financial Results
Qualstar reported revenues of $11.8 million for the first six
months of fiscal 2006, compared with $12.7 million for the first six
months of fiscal 2005. The Company's net loss for the first six months
of fiscal 2006 was $400,000, or $(0.03) per basic and diluted share,
compared with a net loss of $583,000, or $(0.05) per basic and diluted
share, in the first six months of fiscal 2005.
Qualstar Corporation Conference Call
Company management will hold a conference call to discuss its
fiscal 2006 second quarter results today at 2:00 p.m. Pacific (5:00
p.m. Eastern). Investors are invited to listen to the call live via
the Internet using the link under the "Investors" section at
www.qualstar.com. Please go to the Website at least 15 minutes early
to register, download and install any necessary audio software. A
replay of the webcast will be available for 30 days. Additionally,
participants can dial into the live conference call by calling
800-240-4186 or 303-262-2190. An audio replay will be available
through February 9, 2006, by calling 800-405-2236 or 303-590-3000, and
entering passcode 11051626.
About Qualstar Corporation
Qualstar is a manufacturer of automated tape libraries used for
backup, archival storage, data protection and disaster recovery. Its
products are known throughout the world for their rugged, Simply
Reliable design yielding years of trouble-free operation. Qualstar
tape libraries are sold, installed and supported worldwide by selected
Value Added Resellers, Systems Integrators, Distributors and Original
Equipment Manufacturers. Qualstar also designs, manufactures and sells
ultra small, high efficiency open-frame switching power supplies under
the "N2Power" brand name to OEMs. Qualstar Corporation is publicly
traded on the NASDAQ National Market under the symbol QBAK. More
information is available at www.qualstar.com or by phone at
805-583-7744.
Forward-Looking Statements
Statements in this press release concerning the future business,
operating results and financial condition of the Company are
"forward-looking" statements as defined in the Private Securities
Litigation Reform Act of 1995. Such statements are based upon
management's current expectations and are subject to a number of
uncertainties that could cause actual performance and results to
differ materially from the results discussed in the forward-looking
statements. Factors that could affect the Company's actual results
include the Company's ability to increase sales of its tape libraries
which incorporate LTO and SAIT tape drives, whether the Company's
initiatives to maintain and increase sales of its tape libraries based
on AIT tape technology will be successful, whether development of the
Company's new enterprise-class tape libraries will be completed on
time and achieve customer acceptance, rescheduling or cancellation of
customer orders, unexpected shortages of critical components,
unexpected product design or quality problems, and adverse changes in
market demand for tape libraries or Qualstar's products. The Company
undertakes no obligation to publicly update any forward-looking
statements whether as a result of new information, future events or
otherwise. Further information on these and other potential factors
that could affect the Company's financial results or condition are
included in Qualstar's filings with the Securities and Exchange
Commission. In particular, reference is made to the "Risk Factors"
section of the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2005, and to the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections of
its Form 10-K and its most recent Quarterly Report on Form 10-Q.
QUALSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(UNAUDITED)
Three Months Six Months
Ended Dec. 31, Ended Dec. 31,
2005 2004 2005 2004
------- ------- -------- --------
Net revenues $5,689 $6,392 $11,791 $12,697
Cost of goods sold 3,767 4,081 7,965 8,053
------- ------- -------- --------
Gross profit 1,922 2,311 3,826 4,644
------- ------- -------- --------
Operating expenses:
Research and development 762 865 1,481 1,819
Sales and marketing 715 868 1,472 1,715
General and administrative 900 1,136 1,810 2,068
------- ------- -------- --------
Total operating expenses 2,377 2,869 4,763 5,602
------- ------- -------- --------
Loss from operations (455) (558) (937) (958)
Investment Income 266 211 537 375
------- ------- -------- --------
Loss before income taxes (189) (347) (400) (583)
Provision for income taxes - - - -
------- ------- -------- --------
Net Loss $(189) $(347) $(400) $(583)
======= ======= ======== ========
Loss per share:
Basic $(0.02) $(0.03) $(0.03) $(0.05)
======= ======= ======== ========
Diluted $(0.02) $(0.03) $(0.03) $(0.05)
======= ======= ======== ========
Shares used to compute loss per share:
Basic 12,253 12,477 12,253 12,541
======= ======= ======== ========
Diluted 12,253 12,477 12,253 12,541
======= ======= ======== ========
QUALSTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Dec. 31, June 30,
2005 2005
ASSETS (Unaudited)(Audited)
--------- ---------
Current assets:
Cash and cash equivalents $8,352 $12,210
Marketable securities 25,424 21,854
Receivables, net of allowances of $193
as of December 31, 2005 and $248
as of June 30, 2005 3,047 3,532
Inventories 7,309 7,157
Prepaid expenses and other current assets 674 452
Prepaid income taxes 642 640
--------- ---------
Total current assets 45,448 45,845
--------- ---------
Property and equipment, net 1,083 1,188
Other assets 300 190
--------- ---------
Total assets $46,831 $47,223
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $867 $763
Accrued payroll and related liabilities 458 496
Other accrued liabilities 1,363 1,311
--------- ---------
Total current liabilities 2,688 2,570
--------- ---------
Shareholders' equity:
Common stock, no par value; 50,000 shares authorized,
12,253 shares issued and outstanding as of
December 31, 2005 and June 30, 2005 18,442 18,370
Accumulated other comprehensive loss (341) (159)
Retained earnings 26,042 26,442
--------- ---------
Total shareholders' equity 44,143 44,653
--------- ---------
Total liabilities and shareholders'
equity $46,831 $47,223
========= =========
CONTACT: Qualstar Corporation
Frederic T. Boyer, 805-583-7744
Vice President & CFO
fboyer@qualstar.com
or
Financial Relations Board
Laurie Berman, 310-854-8315
General Information
lberman@financialrelationsboard.com