QMCO - Earnings call transcript Q2 2020

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Operator

Good day everyone and thank you for participating in today's conference call to discuss Quantum's financial results for the second fiscal quarter ended September 30, 2019. At this time, all participants are in a listen-only mode. A question-and-answer session will follow with the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Rob Fink of FNK IR. sir. ahead go Please

Rob Fink

operator. you, Thank

the call Lerner, and Jamie Quantum's today CFO, Mike are and Chairman Dodson. CEO, Hosting

Please be on other aware this that advises that some of the forward-looking. deemed may historical are Quantum forward-looking. could of be call and comments be All statements. statements statements reliance than caution fact statements forward-looking today made during

development, or the statements performance, or concerning adjusted net EBITDA, include, expenses, margins, adjusted statements competitive or without Forward-looking share of exchange. services Any cash market limitation, on other flows performance revenue, the products items. any national the expected expected projections of to relisting financial income, relating timing and

and based business. These forward-looking may cause other All are on Company's forward-looking differ hereof. available Quantum's actual the statements results to statements from the and Quantum by in to those known implied changes the date uncertainties factors on involve materially statements, that information risks, unexpected including unknown

law. annual factors detailed the are risks Quantum future update events More including, risk and in Form section on risks XX-Q Exchange limited result and the but about In filed forth information, and new periodic forward-looking otherwise a Commission Exchange of not any factors Factors. in or quarterly expressly to, Quantum's set information statements obligation or on as filings its entitled with Form as alter the listed Securities XX-K disclaims report Securities by report required Commission. and to those with these and uncertainties whether additional Risk Quantum's except as

non-GAAP the be financial on that call this discussing note will Also information. company

with United principles information this GAAP. providing States, generally prepared information accepted CFO in and supplement CEO the Our to as or in are accounting accordance a

a the earnings the reconciliation these You in the in GAAP reported reconciliation can release. company's table provided to results metrics find of

of on company's Quantum's this the replay XX would like replay available will provided at also in Web link days. call press A to everyone for release on to that the remind least call Web site is site the Web earnings available site for this be I is at and investors.quantum.com.

would said, Jamie. I yours. that Jamie, is turn all the With over like now the to call call to

Jamie Lerner

you, Thank Rob.

This was combined dividends. for right itself and evidence The focused deliver with strategy, aggressive profitable renewed the solidified vision our and competitors we markets further strong can that have quarter position differentiate the operations past providing expenses the our Quantum where is streamlining Quantum, years two to another paying on growing growth. over from of

million period GAAP grew a $XXX of On fourth the nearly to we quarter-over-quarter consecutive basis, growth. XX% representing revenue by

in on quarter a restatement We operations. second also our compensation, adjusted row adjusted excluding in our expanded We expenses. million. income for stock costs generated more than from million restructuring than more exceeded $X gross EBITDA generated in $XX million margins and When the and net year-over-year and income basis $X a

Year-to-date, we earnings demonstrating new EBITDA in the have generated more Quantum. the adjusted power than $XXX million of

million to We the $XX on are outlook previously by our $XX year our raised EBITDA way million. of and have issued full $X million range our delivering on bottom to adjusted end well to

tenants. based two is transformation around Our new on formed strategy core a

hybrid processing data the video-like of leader and storage in video, both data, cost projection will long-term First, of by data low Quantum is an the positioned environments. a that multi-cloud as XXXX be video on-premise second, in XX% world's and high-speed video-like the or unstructured video a and of

tape challenge the represents research for and for today We're infrastructure opportunity institution the and backup the and franchises, Quantum. companies studios, to a Today world's sports airports, video The many massive world's houses, Quantum longer data just provides no storage of largest is new hyperscalers. company. and it largest a brands, corporate video a of post video-like networks some major market

our to us technology enterprise need. relevant along deeply traditional oppressing confident trusted for Today, providing such video the video a We're media and medical video, and vehicles, and more. growing largest increasingly and strategy and for autonomous requirements similar quality partner as with assurance, as this into critical hyperscalers markets customers and tactical video entertainment surgical also we enable to search, technology surveillance, imagery, with rapidly accelerating expand world's satellite are applications, analytics, and geospatial and will military manufacturing adjacent

expenses revamping call, conference million and additional $X made last technological product investments our progress to that $X in the further while our In have the I year-over-year, million our than have sequentially lead. R&D discussed extend more operating we declined note line. we increased I an

tape and anywhere cost one-sixth to of technologies. This storage tape because different market is a for tape requires we archive significant as one-third of long-term hyperscalers tape the a a As in archive offering opportunity repositioned this, part traditional alternative architecture for tape as compared with is and both to enterprise hyperscaler backup. are from new using cloud basis the for our of These the key technology customers. very

Quantum this emerging has been new this tape historic decline the for to this tape of expects a and backup established in market secular enterprise market. as reverse leader opportunity

In storage large line have rendering on including, our of processing and content platform. for a addition, defined datasets line arrays we video new flash NVMe completely Quantum unstructured and F-Series, new cloud editing, entirely other software first, refreshed the storage product our based

one customers F-Series available production platforms storage of The and it's processing is video fastest and the with today. in

the Second, storage resold building growth we platform the on surveillance also also for ongoing is in capitalize recording hyperconverged world's production the announced This systems product surveillance customers and largest of this to video is VS-Series, with of market. being integrators. management surveillance, by a and

in-vehicle system, vehicles are management Quantum a can trains capture, storage file FlexTier platform edge planes, R-Series StorNext software non-data military This data the in significant we technology case Fourth, line launched surveillance our in FlexSync multi-cloud in and are and use installed and largest investments Autonomous applications. our center test storage our and for products. we environments. ruggedized today. making cars, of data automotive ruggedized hybrid of grade, systems R-Series, mobile be remote removable Third, buses, the

enabling protection hybrid data are advantages cost, to multiple advantage cloud storage customers a model. move seamlessly take locations video We performance providers of to and our between of and multi-cloud

all the enabling we're as an driving selling margins Essentially and experience, and We enhancements the Quantum high products cloud. customers. designing hybrid and to our a cloud. this with also shift all connecting video-like part recurring clear focus property. of product multi-cloud offer of revenue and and infrastructure not becoming technology but deployments with analytics, Quantum with products of for Fifth, of video distributed on will monitoring our on configuration significantly enables strategy are customer many and feel to service through the and product of cloud-based both a based to enabling, Quantum on better model only intellectual renewed These mission leader a focused unique all our model defendable our

partner like operational focus board his attention the With Eric Capital on in thank new highlighting governance and sales would determination a and successful key by his led to Eric activist management as the spending a Quantum Board for energy, is efforts. our Directors Singer from investments, I clear Partners Viex discipline, the tremendous our is product improving campaign turnaround. vision, Eric team, now vision execution, and and close. turnaround retired of in and personally strategy, Singer to his and to confidence drawing company's

industry from new board robust a storage a for member search candidates active are IT interviewing an independent and and pipeline of veterans. have We

new over we recruited all our that and Today's noted a addition, Director Corporate is Officer, the of VP In highly of In team, best Internal from XX headcount and Executive Financial Chief I to Chief both overall Chief senior comprise Supply Chain, eliminating Chief organizations call, Audit. our revamped our worldwide including middle-management. have Officer, we and executives executive leadership streamlining Officer, Information Chief Officer, new last Officer, experienced. Accounting team layers Controller, streamlined leadership Revenue while our of new

a hire second and quarter, Chief During our Regan Officer. of new this Compliance we Legal to MacPherson, added the with

Our focused resonating our customers. is video-based division with

is our revenue substantial and metrics and work by they're The is hybrid strategy product validating key there's execution moving working. We across product to portfolio. cloud growth sales continuously are encouraging a believe Our software architecture opportunity performance that to improving margin efforts. our defined our drive further signs showing and

to Mike Mike? CFO call to to the I'd our over now turn financials. like the Dodson, discuss

Mike Dodson

Welcome Jamie. has that our joined today. everyone call you, to Thank

prior to the relate quick on front. our First, financial up a I today August The in statements SEC filings published clarification that results will comments to we period X, comparisons just financial in my discussing the XXXX. with be

secondary in and and increase represents of Now turning second near year primary was by end by to storage an suppliers driven results an business financial revenue XX%. sales. was system business. more a XXXX. two secondary The higher in driven ongoing second of in or that the driven was between the million the million the increase the $XXX.X beginning compared The in quarter $XX.X fiscal systems, media was an media storage with systems of environment market. revenue the principal's higher quarter the of the $XX.X This higher ago storage legal resolution dispute to increase quarter million Revenue hyperscaler typical of the by quarter for

offerings million Gross primarily reductions This increase profit in wide gross the XX.X% across an in by cost was gross was to of driven margin margin. gross in margin and mix lines. product the a increase or year more quarter. by million in towards a increase and the weighted profitable second gross revenue ago sales profit driven in XX.X% increase while range quarter gross margin primarily The compared product due higher was $XX.X was to product $XX.X

the revenue lower was in contributor product lower XX.X% lower improvement as are mix gross unfavorable that weighted product prior encouraged the a second mix is in quarter the the we margins, we year-over-year Sequentially, lines. margin with margin in gross of to revenue an well royalty our While towards note the gross margin as largest quarter.

$X.X related expense increase expense largely of headcount. for compared $XX.X restructuring final was were increase was of primarily the quarter and the million. research The due driven year to million restructuring dollars million The quarter. by development XX% revenue in expense and in $X.X revenue negotiation increase expense lower the XX% Total of marketing of operating a closure expense which or $X.X The increase second million and ago and research sales million were in in development in in to and offset expenses facility. by $XX.X represented increases by or an of the in to

related The $XX.X in partially decrease sequential audit expenses million services $X.X lower costs. and fees significant programs a operating primarily due to was million decrease lower total restructuring professional the in and to and by professional quarter from was higher driven costs. stock-based compensation marketing headcount financial decrease offset the and in and restatement prior in and marketing The sales by of expense

million $X.X at the headcount in the compared Our of the in the company quarter principal balance. was quarter to XXX, interest second incurred of ago million higher $X.X year primarily end second the due quarter a expense to

quarter share extinguishment $XX.X ago to The expense quarter debt was or $X.XX in net for second million million net amendment. the $XX.X the The the loss included of per August for pretax XXXX $X.X a loss to compared or year $X.XX million term per share prior a the related quarter. of loan

second The debt and the loss the adjusted increased to compared diluted quarter calculations loss $XX.X compensation net and restatement ago restructuring charges, or to $X.X adjusted including per million items the quarter million million $X.X $X.X for other and was financial EBITDA $X.XX million stock-based from ago. net in costs, Adjusted income compared share in to Excluded $X.XX are income the of adjusted million $XX.X per costs. net quarter. year share the non-recurring net year in or the extinguishment second

both Form to and full in press results There's non-GAAP a most measure our XX-Q release the the comparable of directly release reconciliation today. GAAP

color like would I outstanding related to count. provide our share also some to

equity when will employee loss, weighted warrants equity we include excluding First, shares like only outstanding awards. instruments dilutive a record we average and

example, in weighted fiscal and million quarters year shares two first million XXXX, were of average the respectively. the XX.X used XX shares For

to stock When that share we the fully calculate the method count instruments. consideration use diluted dilutive treasury into equity the takes share, calculate net we income per

current of quarters equity respectively. shares in million lenders diluted fiscal and were are and example, X.X XX formal plans. XXXX, XX.X share the held warrants in fully XX.X approximately million outstanding million For incentive and our in diluted share year million two first our the counts by shares calculation our Included

quarter. diluted fully our is average increase quarter driven the during in recent the to in the increase count compared price sequential most prior stock the share The by primarily

increase primarily million year turning entries a growth an system secondary for and offset first Now partially or results. XXX.X and the storage the fiscal primary XX XXX.X business to growth our were to and This was These Revenue lower X%. revenue. revenues. by system period revenues ago an million was in a in by degree in due increases million year of storage quarter year-to-date hyperscaler to compared of service -- revenue lesser to ago year increase in half royalty media, driven

in of gross and profit million in XX.X% of services. products million Gross the increase year reductions by margin driven gross a an driven was primarily in the gross The was XX.X% margin first fiscal the margin increase cost profit period. or gross and half to primarily in was in revenue, across $XX.X $XX.X wide range year the increase while compared by ago

revenue period. compared compared total expenses ago of the million revenue for or operating the operating Total ago or were by XX.X the million million of the fiscal in half decreased expenses XX.X X.X or X% XX% to The first period. year of year to XX% year

due administrative programs, to marketing to restatement million million Selling, fiscal primarily general and lower compared first activities. the related professional system was half compensation fees for year headcount, by the operational increases declined stock-based the professional period. partially X% financial the in This year million costs expenses decrease XX.X to and or related information of expense and XX.X offset costs and X.X service ago to for

compared million loss million half year first X.X $X.XX net million or million and X.X of or of the XX% fiscal year primarily to in for headcount. X.X million the the year compared for were up the XX.X share or of fiscal net in per compared first in of to ago year first is period. The loss decreased million the or period. This $X.XX to $X.X X.X the per ago was expenses Research the ago XX.X increase period. development due share year to to expenses higher $XX.X in year fiscal Restructuring a million half XX% the the million half

diluted The in the of million XX.X the the adjusted ago half compared loss $XX.X compared or income to to XX.X to for net share half year was year Adjusted for million adjusted net $X.XX the share year ago period. EBITDA an in the of million per fiscal million $X.X per first fiscal X.X or of the year increased first $X.XX period. million

of Now cash the prior amounts taking XX.X required the company's the flows, end at cash million quarter X and compared to look the balance $X second at was cash million credit under sheet These a exclude at restricted the the of million end in quarter. agreements.

XXX.X end debt revolving portion million of quarter sequential facility prior $XXX.X short-term portion working credit Outstanding unamortized debt requirements. of borrowings million net X at debt X.X unamortized capital the of of and of million outstanding in the to to and the debt the current end compares meet from long-term the and current million The at long-term X.X costs current debt. the at of long-term costs the long-term XX.X increase of This from prior million the quarter primarily second a in debt in issuance end due was was to million net debt. million quarter in period XX.X of

restructuring The remaining second the cash professional restatement. quarter business the and related and flow paying experienced plans last costs to of pressures the completing fees transformation significant financial

living quarter the up as after annual customers contracts renew significant calendar service and revenue just This receipts the of to in a number seasonal their end the annual also related decline deferred our and of enterprise endeared cash year.

a borrowing by cash revolving our decrease from million. these of results, cash credit pressures a on in a facility flow resulted X X.X increased Despite million positive and business operating in sequential

our of represent million the $XX quarter, of quarter third the to million. a flow Looking implications EBITDA range next for to adjusted $XX guidance forecasted of cash the

largely restatement quarter. trends and we we in approximately generate well capital will expense quarter the taxes, the and restructuring expenditures behind of during $X million With experienced forecast the of us interest second paying flow cash after costs the expect as cash that flow free the as to third reverse foreign and

remaining Related XX-month comparable calculations. we performance covenant on million on and bank to the covenants, financing EBITDA trailing to had our cushion $X our covenant current cushions the financial key compared

discuss the the relist an quarter process the National on Quantum guidance like we financial SEC fiscal related update to provide would to before Exchange. the and to and year, I the for Now, next investigation

the SEC cooperate and First, to to continue the as provide we investigation, ongoing staff related requested. with documentation

we additional will status a no provide related practice, As details regarding comments and or the the investigation settlement of discussions.

but initially related we our the anticipated. is taking process on longer progressing, to the Exchange, Second, efforts to than relist National

qualifications regarding has that investigation. this, with we to National again that of representatives they from SEC difficult progress listed the will Based Stock confident remain once provide both the be but timing. the it we are for the During York advanced it the clear time discussions Exchange, NASDAQ closely listing and become is definitive Exchange, on monitoring at New this on

turning to guidance. financial Now, our

quarter stock-based is of fiscal fiscal XXX the December year and expect revenues compensation million approximately charges. of traditionally million to third excluding The million, X of range we that XXX the ends in in our strongest

be the to adjusted forecasting income are related per share X We adjusted in income of X and of $X.XX net to to million million net range $X.XX.

is EBITDA range of be to to XX million. in Adjusted million XX expected the

range million expects For the $XXX of $XXX of million range EBITDA million in the in total to year, and $XX million. full $XX revenues adjusted Quantum to fiscal the

a the years. for by per Quantum senior further the GAAP the earnings revamped improved growth. for first time three of XXX net to the return financial In summary, guidance evidenced income performance financial Through fifth we representing third quarter of consecutive the revenue of the second million, revenue quarter leadership to management is $XXX guidance the success financial expecting in quarter. of reported quarter share With transformation million of results in team, continued last provided the are the

for Jamie? turn comments. over to the back Jamie me that, With closing call let

Jamie Lerner

Mike. Thanks,

progress tremendous this made selling results products half year the video-like committed over innovative I'm to driving We're margins encouraged designing high by and by reporting biggest world's technical are data. the We've and around today. and of video fiscal challenges the we first to solve

our further and financial and a We additional to base improve earnings have opportunities stable solid see power.

We are more to more of value improve making searchable, our engineering value accessible, reducing more increasing software our and costs intelligent. while by and it products performance, the

our Operator? for forward. excited now look would to open for future as and We're I move line sharing we forward like to the the progress questions.

Operator

this At Craig Instructions] Thank you. first FBR. to we'll go B. [Operator time Riley Ellis,

Craig Ellis

for see. performance. the and question to Thanks financial Gentlemen, taking congratulations Yes. nice on the

to question wanted perhaps customer the I the synthesizing Jamie, F-Series, up you start-off VS-Series. mentioned a a and product with the question, R-Series

just think with has give on the of out the the any move update company was And an discussion I how of It like would sounded that different you one probably F-Series had along of that wondering, hyperscalers. and months but in the the ago, that products specific of can with numerous hyperscalers. But discussions three help if products those engaged that. issues legal LTO I'm the is indicated stand going resolution us you requirements, with each forward? would the some

Jamie Lerner

think With I have hyperscalers, main care abouts. they to two Yes. regard

first the they to want that is, them The on per work get terabyte. with us price lowest architectures

how amount very that put density, of And density? about work with the the really best in they're highest physical space and most they're tape you do concerned So, a the for economics. looking for tape storage do you how

you is, about, service They're how do literally large colossal they're price is, deployments. in second that deploying feedback acres leading just of scale leading performance largest at is serviceability in service in care the getting ability. for both we're volumes. such exabyte looking they're we're and thing we're second The equipment at buying And these their

not the the deployments in to We expect our believe and hoping XX own selections so their in now are we been And their anywhere them test solution that and deployment, to from are final yet. test we hyperscalers have we're made now software be the software it their right selection. several build are XX in phase. in right months But for of and a take with of platforms. leading in test the at-scale own we where selected the Many hyperscalers but storage can those to we months testing three phase middle prevail of lot to

Craig Ellis

as clarity you quarter. your Mike I we Thanks that financials. reduction the we ahead, getting quarter for may expense and the drivers beyond excellent the adjustments, December helpful. FICA, things I all in look can need we job about fringe good we primary remarks, it operating but anything a X potentially in typically the to my doing in quarter, just would beyond the as expect operating recap be very That's to will have think prepared you're cost like million as is you. expense to the the And of around ask missed mindful we the there? look there controls December follow-up

Mike Dodson

to quarter, the it next would expense. that Sure. sales revenues When nature our relates to there we look up, a go to we expect out as variable is as our

expect to fourth amount we our products to very definitely going weighted -- quarter monitor that towards that Besides increase. quarter. -- more So, impact probably and it's would closely. on expenses we third be the will that, an calendar And also we be

really we don't we see the quarter. going in up next other in any that -- the from last expenses So, -- standpoint

Craig Ellis

guys. I'll in. hop Thanks back

Mike Dodson

Okay.

Operator

Eric We'll Lake go next Street. to Martinuzzi,

Eric Martinuzzi

to amount the growth. model. as That's see. just the And well Congratulations a double-digit only tremendous terrific of offers growth, on Hi. in the obviously not but leverage

about product part the for lesser that of growth only expect also the That's reverse the to decline. You the really extent service stream I we When to seeing on talked focus given can secondary the moment itself we're in side. you revenue. a highlighted a primary storage. strength the wanted that revenue storage and that to the

Mike Dodson

and also, revenue. do next timing go tape tape of as revenue of shown to line backup service And the renewals quarters. and had as as the as just forward a Well, the contract the at deferred in the relates I as in an has mentioned, Jamie well. to at call We as the a happen see we related outlined, as to there that the tape the the this versus down we decline. as glide hyperscalers in we secular is tape growth expect period area a general service driver will strengths We it would be look archive we in it two move that golden service our as as look

Eric Martinuzzi

it'll no I timeframe March, But that me is that sense like, math this asking know, Okay. what don't got reverse, June do is on and of revenue I'm now just we've actually deferred contraction the here? for the

Mike Dodson

then year. the beginning okay. collect and much down people deferred at will we the the Oh, Well, contracts amortize revenue end and following We deferred sign you signed you you near revenue, record collect year cash, year, don't that it during your when the more everyone's -- but evenly of of or contracts. cash the the

So, does the you're if make the cash, but balance I'm will know just that that amortize the what because gets deferred I at not we're recorded, sense? the clearly, then if down time, that collecting explaining right? collecting and the deferred very revenue cash down. But revenue comes don't

Eric Martinuzzi

a EMEA to had in APAC also a question, decline you what's small but in was -- there relatively the decline, behind focus and me up, on Let strength a was Americas it's geographic revenue. total good the

Jamie Lerner

mean can sway APAC I you in sales pretty deal large Yes. so around. one are small, our

close we in had So, to $X Asia. last deal million quarter

And smaller it's because becomes business. a so lumpy it just much

of have to I think Asia, do. lot we a work in

small pretty a have need in-country move we think think there. I also pricing to today. that team probably to we I model an

how and given China, think those specialized pricing just Rim, competitive a in I markets worldwide geographic need are. Pacific probably markets pricing We India, you have like of kind

And more revenue market frankly. And the of So a it I into that to focus today, our to see wasn't that just just we lot the put Asia mode growth. market, its us revenue more of move during is focus a as think think is. how and year, But, survival on quite I represents out smallest we're market. last going need for largest potentials but attention small one to put on you're mode, it of going because growth

Eric Martinuzzi

came with million for the litigation given But so LTO-X, we the or revenue in or Fujitsu was year-over-year. progress that the What, for seeing a lastly Okay. think settlement sequentially. the X.X for And next then, September to and way of that for were on the at quarter good that down I what's royalty year? Sony adoption full up versus about you're think

Jamie Lerner

Yes.

available. things While that became generation marks, latest is legally, I and LTO-X, generation regarding which resolved three are think question there the still the just

is, first capability. there isn't of a lot production factory The

you has look at almost that somewhat it not I product are it producing limited on Sony would available, the today, factories are the Fuji So, quantities. quantities if say, even no Their and producing at, just market. is

the staying aggressive than people Secondly, because but half two pricing the of it's that an is in so I LTO-X you format, some it's is think MA it only are with less when almost it price. use LTO-X, terabytes

And so, about then next and the thirdly, LTO-X, generation only is XX months away.

It and going get to down and right but LTO-X quarters. waiting what's do, major at going to to we volume don't from and were I of of purchases happen picture haven't -- I factories this quarter. of now, which full the to and capacity hyperscalers I a better It next So, happen. I it's switches when to switched LTO-X from muted we'll may two happen. them think that think yet, some least just the we're seeing it the for could at LTO-X happen uptake just are think happen put make if expect is happen seen in I

the recovering. it's view it as still that's glad would market legal I'm I battles are a over, -- So, but

Eric Martinuzzi

between it it September for of the to we saw for kind QX a those Okay. though, split on of and is QX of point To in or what December model safer finer kind put us… difference do we

Mike Dodson

And of range you look as a it if right in split yes, to the I middle, think at that we a X.X range. X.X. the are you

Eric Martinuzzi

again my for Okay. thanks and questions. on All the right. Congrats quarter taking

Mike Dodson

Yes. Thanks Eric.

Operator

at Bennett next are Craig-Hallum. to We Chad

Chad Bennett

gate quarter. execution on kudos here guys. wise Again, the the out Great Great. of job

So, Mike, more What the quarter? the little a margin progression from maybe on refinement guide. in just a December quarter standpoint December we gross expect should

Mike Dodson

EBITDA. under and talk talk give don't the typically second we was you and guidance quarter we we royalty. guidance bottom-line But about the from Well, revenue about pressure guidance, would expect the

gross think able levels, you benefit. standpoint higher a just that that make think and… QX trends margin would that stronger revenue general are more a I would So should little to usually just But, scaled get sequentially bit you you model from wise, be and those

Chad Bennett

then, here of if can VS, then year. is in should terms year-over-year, it what mean that of products one a you into of really what's maybe next look we the about doubled the I maybe, F-Series, primary for And Thanks. a for expectations at of go highlight little driving the And ramp with those what is, growth guess, Jamie, in this R-Series products storage in profile you've kind you type nearly I And of traction growth? year-over-year. I and your seen bit scale. in Americas Okay. as margin Mike question then, talk say, on gross your as maybe can are maybe September quarter. And in initial terms the they there new integrated

Jamie Lerner

Sure.

we've made simplified. even it's known systems, drastically stable been television system so, it what jobs made we've also speed known to an more. high it speed as product primary And product storage, medical or last making, is movie file is the use, like that. sports, scale done It's and hard predominantly used it It's being in for easier our making, somewhat that of video, extremely stabilized to the use. imagery most We've as the So and StorNext. complex. somewhat highest over flagship one manipulating but and file made surgical We've year

for But larger complicated happening use, making jobs. what's time a so, used simplified, is, by it's it's to it making a easier viewed worth as, really now And much using and being set most the it only jobs. of now was it for world's by pressing for long

need use as don't continue You to you need by going to It's much services don't now as of that. expertise people. it; much it. much wider usable we're audience a And to install

major where it called kind. its X, probably release next We we're have going than coming in a any several of up new system make file to easier StorNext months to the use

doing just is, to we're performance it audience to making And management by seamless We're bringing of easy. of data make product system incredible easier, a to the and wider going movement ability the we're deploy the easier, simpler. just what people data this

that's I lot. a So, think helping

F-Series by to bolt-on an who's our today StorNext bolt-in few and in a in boost performance. Anyone they can doing easy base. product Secondly is get that, the F-Series a to is, a huge using just very hours install literally

seen some one F-Series cases, adding We've box customers, XXx to their Xx, Xx, in system performance it. by the existing just of

has The base to and the a install that product is the new for very it's easiest us. go. bolt but So compelling, market new naturally VS-Series into been

tied of is new a construction surveillance bus new So, very often a a casino a airport, stadium. to the new new terminal, video

an very because I'm So, to new seeing of get often a we're that because But that's encouraged all a we're new going we're in market by entering that's just and what new space. slower business all customers whole to going space. construction, literally part

take like little a So new feedback I But going. getting. we're product's like that's I we when entering market longer. the how expect you're a the

but what but gets product, us priced you on up devices lower to and -- it vehicles a to particularly it's of into storage vehicle the data hundreds expensive, when getting ends doing tape. Again, are small an in well. not have is, actually do when our do StorNext the road it's really backhauled all the to project, autonomous you continues vehicles R-Series that

usually reason in the core those after the what really we're is projects. want is So, to edge the we get

often most XXX And very are over at extremely data to what the the StorNext how with autonomous they money. well. also data like vehicle that's And I having with tiering hundred us about And does because start petabyte save projects petabyte. to of projects, vehicle need the discussions that's amount things autonomous is now where and the going in

Mike Dodson

at to the device you the secondary. far better then, media. just qualitatively, you question margin gives general if a than as when out. just it when products, slightly of your be the would the first, margins, margin. product primary; in product and qualitatively our portfolio, at just and then our you will look Chad, And secondary you service; when highest at But be as sense look it falls at And our margin you will how So in look look be service primary lowest

Jamie Lerner

holidays and that profile build change coming next product engineering much new March. that six of be going the half to over deploy margin technical getting And, and be -- devices a out said, revamping use hardware. that we will as StorNext almost the expect the the to trials into is be get project a the It's efficiently, is, And customer of new months, into around more entirely hardware allow us also value we're product. and to set effectively start the a year it architecture to much how we'll should we're essentially that hands, in customers' with long more efficiently we much going buying performance more something around by

developments So the very on for lot the been year. encouraged new last working a of we've about

Chad Bennett

Nice job Great. again. guys. Good to hear

Jamie Lerner

you. Thank Yes.

Mike Dodson

Thanks, Chad.

Operator

go We'll Duley, David Steelhead Securities. to next

David Duley

Congratulations to adjustments is nice any that GAAP couple mentions of this $X get results. X on questions. non-GAAP in release the difference comp? Is I think between stock had there million the GAAP from housekeeping million on non-GAAP? I it in and Mike, of earnings other press a to top

Mike Dodson

in No, not our guidance.

David Duley

Okay.

just it's difference? So $X a million

Mike Dodson

Yes.

David Duley

you customers Okay. the any during And have quarter? did XX%

Mike Dodson

No.

David Duley

-- as the product. think far video DS-Series, the As it's surveillance I

you looking not mentioned you that we sell that sign the bunch just that that penetrate should some value-added big to of with familiar Who that You product. that of going to help resellers market? you be help up bars space. have will forward you I'm a are that

customers in could help just who some And wondering targeted understand are so I'm us space. you that if

Jamie Lerner

public right? wide local K is rail, I of projects, be resellers XX. There through Yes. to facilities, cities, airports, stadiums universities transportation, resellers, bus, spectrum customers police you safe stadiums. bunch in of certain do do well. of those surveillance There then K regional campuses. and And that through work players. building resellers of small There XX, a have JCI likes do large a operations that you is specialized that as be the large large and departments, they're prisons, lot Siemens and tend players that have a of the lot going a critical companies, So are to large different building mean, large

value in resellers added is There as well. that space some

again, people the that companies. makers, make the So looking we're with with at the some world VMS video both, presence. partnering also We're We're to building of large international and out the milestones the of the management local strong genetechs software. operations reaching

A selling an when engineering blueprints firms process it's of architecture where work the the video that designing with and E of surveillance, are really buildings. So, and firms, these ecosystem permitting the the you doing buildings and

You for software to a video used work time a to you've got these management for integrators, a access national sometimes that with work with And period large over ecosystem integrator, work whole win sometimes local security control, and that's then, you integrators. of projects.

it it, what we did when so the and high-speed small scale designed technology down to so And wanted very we is, could projects. we do design

a it So, stadiums. run up then a can we bit scale rate also we do of and can have large or business

large Those large airports, long sometimes are large sales two, four year stadiums, prisons, those pursuits. one,

So, of can more a years. being what or we're smaller several month stadium a do seeing right sales, months like is Whereas where lot of new that's three constructed take now you sales kind a of the could six cycle.

still early across that, days for us. it's working we're So,

video We're that there, a we're strategy convinced you've a being got got years handful as simply in you to about investments but of have well. several our we've somewhat surveillance think if video have the that I next a strategy, over salespeople area. conservative

David Duley

products help more total or how Okay. from think Final for of software now them, that, we frame to will expect this me conference capturing question of by means or basis points And kind they I macro increase is what from did gross in initiative? perspective, the you've XXX successful on on talked now, us software the or impact value margins couple how I that a orientation should bundle. content to product of whatever on you're that you last are calls about, will think gross sort me there goal, more want some a XXX if from and is, products value more margins, engineering your just or

Jamie Lerner

I'm I StorNext, VS-Series. mean, what, They're think tape, what targets reticent we'll to you going be in different. see we'll to see I really just and because Yes. in what we see the give in numbers

we've entirely not you can product. what tell for manufacturing lower one of pay to doing. But moved of what a the to build do engineering example I we're it is, some our And countries, cost known. lower we is Series of that so cost efforts, is

like they less are We're are PCBAs integrating pricing of that there. can so negotiating using the lower some that of we down. or We less products redesigning so costs motors less have expensive expensive chips the We're material use materials. products vertically the materials expensive

can a less stores, it on run it less needs equipment. needs memory, We're needs less also so we software, smaller so our hardware, it tuning CPU, less expensive

many efforts the doing our largest is with of what different are we're there we're them. hyper happening. are So converging But, lot that is a products

a So the instead one task, three, five box tasks. of may or box doing do four,

do it the or a of one size. appliances instead or effectively that four So, five in boxes five task, needing do to can of we servers server same

usage products. in build our we're much how getting we our more hardware efficient and So,

it. a So, to other you pay so for you line when the And product today, doing, don't hardware we're software, given again, item, buy you deployment. less a get product, buying the buy support we're the teasing from one onto apart thing us, you don't you cases, the appliance. multiple you some place place software us We're you can from else. the those it. And appliance And that software or now from of in pay then someone so an on for pieces our buy actually

breaking those apart. So, we're

And the easiest our so, nine and item. the it -- these of and as for for efforts months things. at or with more we've go can capture been line at a charge software on for will -- we And value it actually least starting

we be through know have there'll give nine comfortable I there'll we're we'll on to three months, obvious not getting where any to six core months, somewhat go Mike out architecture schedule think there be we months. share in nor actually about, it, achieve improvements much it we're we'll It's to changing And you projections of we and things and be sharing. we're as product. just the quarters, of putting harder think but project, the Now we'll too the it'll improvements, where projections I go but we hard as set that we're neither a or a on updates

David Duley

you. Thank

Jamie Lerner

welcome. You're

Mike Dodson

Dave. Thanks

Operator

back Riley to from follow-up Ellis, go a Craig FBR. B. We

Craig Ellis

I for taking the ago, the for of A tied portfolio last the as quarter and was one up. if portfolio. was part that testing some follow could unique that F-Series company from of I that wanted the had I would commentary more Jamie, or to meant over the call really other around interest of up was points product if on were thought was some that that sure appetite the offerings follow there Thanks the than to into XX think terabytes, that takeaway be thought provide. what time R-Series solutions wasn't a dynamic into that one that points of might and I this and I of And an F-Series market VS. the a fairly the solutions company the and come spend the three making XXX you is for that and I there now

product you're maybe give looking the portfolio. of bit and us at So, sense about you could talk a that little the how better for a breadth

Jamie Lerner

highly as very we relates things the Yes. the box. is I mean, things one to of specifically F-Series one the of is a it available F-Series, we realized -- the

of redundancy. level of customers of we've be highest that to willing a much data level But, high-level protection, seen redundancy we'd more forego price. it say, So, aggressive for has highest the

cost an cost maybe So, product the of for lot lower be year. probably that'll a early a going that a you're demand we're of as product, and product, to not a lower much new but much where F-XXXX out be is seeing introducing and durable coming which in

similarly of that on platform. we're particularly different different spending lot qualifying software incarnations, finding many a so, we video VS-Series, are The VMSs management support for for for demand different time demand

And all vehicles. speed products a where higher they I think do disc drive. the data with you for in can just flash we're seeing and can achieve demand products, the a in ruggedized NVMe-based collection

methodology, changes will very products our to we than development So, can we're a we getting of example, a agile so development feedback F-XXXX make up And phase. the an for probably lot end quickly. and less is XX-week, all being run

time I pivot into don't developing we're So, we I to in speeds at -- that competitors, feedback market, able and larger customer see, to more meetings really is, the like get spend just able think then I put and than spend just product I our what we're products. iterate they'll our

really getting. so that the liking] engineering we're of And speed I [I'm [ph]

really And can us we weeks, to they so market, can our that customers we literally them produce feedback. on a get have very give -- that customers technology, feedback with been us few within We ability and the for long, it tune really, hammer do. our think detailed I tight-knit get going new our a out. is that and market ramp StorNext and what really be I introductions. products, across StorNext-X like the for across lights is products, it tape I going going. I'm across sales like have iterate the seeing how our I really the product innovation to in

lot in of and think the industry. new data data management management and I standards a management it'll I policy for movement with think tiering the the StorNext-X set hierarchical data, of

we've balance here the So we've Mike we we're I'm I about feeling launch to a We're cost we expenses. and done, think we more Mike create, a new in are, done, efficiently. that getting new doing. expenses do can't geographies, We've goes we're of of and think though, can't don't products job to there. quarter managing I down, don't taking good more innovate, but do by And got think product. a build we're starve in engineering, it thought starve we've technology that managing a where to low I I, got pretty And right? And I really to either. And realized, to here engineering and while here good expenses is good has how

good feels it now. So right pretty

Craig Ellis

Thank helpful. you. That's

Jamie Lerner

Yes.

Operator

time all additional to today. Mr. That's for conference remarks. questions back have for Lerner we any or turn the I'll the closing

Jamie Lerner

everyone All forward look updated right. in today. and be everyone for us XX like again Well, I thank updating everyone Mike I'd keeping to joining we'll to and days.

time your support. for everyone your thanks for thanks So and

Operator

conclude for Ladies thank we and will your That today's participation. you conference. gentlemen,

great at day. have and a You this may disconnect time

Quantum (QMCO) 10 Nov 192020 Q2 Earnings call transcript