QMCO - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen and welcome to the Quantum Fiscal Third Quarter 2020 Earnings Conference Call. All lines have been placed on a listen-only mode and the floor will be opened for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host for today, Rob Fink of FNK IR. Sir, the floor is yours.

Rob Fink

Thank you, operator. welcome the to like would everyone call. to I Quantum’s CEO, Jamie the call and and are today Dodson. Hosting Lerner Chairman CFO, Mike

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

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

Form Factors risks Quantum’s but entitled limited section listed quarterly on except risk These statements as Risk XX-K known annual information risks, in SEC and statements including, factors More those risks Commission. may by expressly factors and forward-looking unknown are company’s required in whether from with new by alter result implied that additional business. involve are not including a report the unexpected disclaims uncertainties and other the or on Securities uncertainties forward-looking the Quantum’s differ to with as report materially about based to statements the these those Quantum Exchange forward-looking hereof. actual periodic Quantum in results filings cause factors of otherwise available and changes to All and future on any date set detailed or information obligation statements, Form and on Quantum’s the forth update XX-Q law. its filed in as to information, events

supplement on the will and generally information non-GAAP in call, principles accepted to this information. a prepared United this providing be Also GAAP. States Jamie discussing information accordance in accounting company as that with note Mike are financial the or

call table reconciliation reported remind to a like the results earnings release. I replay will company’s available of would Quantum’s GAAP was which these on link in the company’s provided for find reconciliation that also A in metrics days. be available website can to this was the and the You investors.quantum.com. website today on the this in call of at earnings the for at website release issued least is replay which XX provided everyone to

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

Jamie Lerner

been could proud Thank you, with Rob. earnings starting approved new list of announcement more release Included shares the on our not company was have be that this and team. I today X. February our the NASDAQ our on we to Monday, leadership

innovation settled on profitable launched X the re-listing annual new lawsuits, and removed and the basis, products legacy positive and re-listed X Our SEC, basis, returned became transformation $XX turnaround cost with technology cash Phase to where on added key marks end the new in settled our flow and we on our leadership GAAP national our a in of an shareholder exchange. of a million issues last talent year,

be will enter the re-listing, long-term phase stable a from moving of organization basis. on long-term on growing we our to transformation we now and second where sustainable a With a making basis

and The transformation include brings The margins to growth which additional by of items cloud I autonomous revenue winning into positioned as international and believe transformation set increasing especially challenges, unique surveillance Scaling technology’s initiatives. our introductions, core and new geographies, new market next new value are second new discounting. from by verticals selling media growth of set business, this well a phase expanding of product and entering inorganic entertainment executing versus software, such key for tackle. winning our we hyperscaler action

restatement focused and growth. the and more roadmap a We of for Phase our technology laid our on completed first concludes leaner, call, and for transformation our re-listing NASDAQ. X could as but product conducted with our related a Quantum, earnings vision and profitable not poised be out company When more I relieved growth, only a we not

of mistakes the past. repeat not the will We

are high on value revenue. which customer customers, with focused for starts a creating tangible and then leads margins This our partnership. high-quality We stronger to

fact, Quantum sell short differentiated period a based customers of for hard quantifiable all on In of to us solutions in has time, relatively very to our our worked new We the team just with create our process in which the to both customers. not price. be on and solely of in the partners in pledge we based disciplined expenses transact value, management and enabling

months our this team. progress over discipline be first this demonstrate and the year the I of couldn’t and results fiscal quarter’s of X Last prouder

continue advance repositioned we video-like margin storage around on the poised to innovator as expansion management and biggest our transform efforts Quantum profitability of the challenge to the and solve We business data. an and to video as focusing

a data clear space. As be this and leader projected in data video-like all a reminder, world’s is to and the XXXX by video XX% the is Quantum of

timing the orders than the guidance large revenues factors. based its hyperscaler external primarily Quantum variety fluctuate of for inherent of expectations, result business, a quarter profitability can our a to where of third as generating achieved lower despite volatility on

revenue. to the discipline significant demonstrating the our high-quality a speaks within strategic expected We on and first revenue and selling reported is and our the This were tangible have due and value-based the to our guidance even value returned earlier, range for However, revenues achievement with focus gross we made. less time occurred when in quarter described I earnings and to lower a than we progress X operational has years. that were profitability margin during GAAP

loss have restructuring and net $XX million. compensation a we nearly million year. adjusted of net stock swing $X.X generated just basis, On positive of to nearly a narrowed the our to GAAP charges, a compared year-to-date non-recurring charges, $XX positive income, $XX in prior million we million, excluding Year-to-date, swing

year-to-date of $XX.X prior million Our or million over the year. EBITDA increased XX% adjusted $XX.X

we enter our Phase Our as X has X transformation team and strong to focus performance in our our momentum confidence and great turn Phase growth. created for

data video see portion Our to strong and solutions. offerings in business remains continue we demand our video-like of growing differentiated our for the and

timing margin which profile shouldn’t maintain focus from mitigate contribution revenue Our products better increase time. is the of to over these the hyperscaler the which

Our software-defined quarter strongest F-Series their servers yet. had NVMe

large We server, a new have a drive velocity. storage will just lower-priced even NVMe more F-XXXX the and pipeline introduced we which

to from this we the of extending the some software-defined product are strong area. this and customers We StorNext getting our architecture are signals in months rest line early in demand coming our

as profitable we our products are portfolio is my encouraged adoption It surveillance there. through technology innovation. and this are We of building data. in Quantum momentum products in with have sustainable, and sustainable the clear growing these early am recording are still reestablished for now profitability. stages we reinforces have analytics it that clear the that of the management power for we the confidence and poised and video-like large meet out we differentiated that and I a a video of earnings for of with growth and is And the leader in rebuilt industry solutions Quantum that need,

growth. move in tremendous gives transformation to the Phase we the focus momentum our shift profitability this as coming NASDAQ us days, and As our to enter X we of

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

Mike Dodson

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

million year storage $XXX.X driven fluctuating by fiscal third driven turning in primarily $X.X XXXX, a increase is a to sales. hyperscale of was was ago within Now, service increased product primary and in cycles million for $X.X in increase increase primarily purchasing revenue. in X% partially the $X.X or million by by of quarter financial of increase in million increases level $XX.X and higher result an which to partially million third in quarter compared More $XXX of a This business. our X%. secondary systems, media specifically, systems revenue, revenue quarter government the in increase as offset product represents by These results a which decrease storage by the million were revenue a driven was offset sales our X%

a gross reductions year quarter. driven to revenue million was increase Royalty gross gross attractive ago a to for generation higher The weighted in The primarily the margin to adoption third and XX lagging $X in sales in million from and wide continued LTO-X mix product profit margin margin be compared primarily of the the cost $XX.X due or XX.X% the range profitable product more XX.X% primarily basis quarter which months LTO-X of that XXX expectations lines light. $XX delivery. to due margin by for in next was from gross was pricing XX gross third is LTO-X relatively was towards the away of offerings. to across quarter million Gross profit points product and a

an million was dollars revenue for Total decrease million operating the or year or ago The in quarter. were general in quarter of marketing XX% and $XX.X of administrative million. marketing third in costs was $XX.X of partially of $X.X to the research was and compared decreased expenses of development and restructuring revenue expenses restatement, research an $X.X partially decreases the higher was The primarily by related stock was programs. overall due in driven primarily driven in compensation. decrease in headcount general expense The financial in sales expense and development administrative decrease and decrease in increase which marketing by and in of million XX% million driven expense expense $X.X increase which to by sales expense and headcount. offset by an The offset million, and was by to increase $X.X

the third of was quarter headcount the XXX. Our end at

offset net warrants compared gain to of disposal income was to $X.X August after-tax a resulting included or $X.X the which other change $X in investment per the a partially year million of income term share of of related from to the per and amendment of $X.XX prior term expense the an GAAP $X.X The million loan a resulting by the quarter. extinguishment from loan. net for XXXX million share $X.X in $X.XX for quarter the in or ago million mark-to-market XXXX debt valuation $X.X million year a loss of fiscal third quarter related million on was the

a per $X.X release quarter. reconciliation results in and $X.X EBITDA other $X.XX from our compared including and the million net the released restatement Adjusted the $XX.X is $X.X million Excluded items, share and charges, and Adjusted to full loss to non-recurring comparable million GAAP calculations are million the ago share year of year stock-based million press or $XX.X non-GAAP third compensation the in in to directly net ago $X.XX both income measure the was There quarter net XX-Q quarter. to the extinguishment quarter income Form for costs, adjusted or financial compared costs. debt the in per today. increased most third restructuring

increases current fiscal million X the of gross months year margin driven the ago or systems device year profitable year ago products. first $XXX.X storage in in This was Now, in was period, to turning product margin million the $XXX.X in of a and sales. gross a margin or the million increase X%. results. service primary The an the by months for due were to and $XX.X primarily fiscal of $XXX.X $XXX.X weighted of primarily the XXXX increase offerings X increase Gross increase to our an cost our and range an and million of gross reductions period. Revenue and in in year-to-date profit sales more to a XX.X% first across mix to higher due of was media in compared level XX.X% in wide cost towards government million profit gross compared

ago to X $XX.X and period. first improved XXXX XX% X for revenue fiscal million an the million compared million months or and or about period. compared to months the to million of of XX% fiscal the for declined expenses headcount operating by of This year million fiscal efficiencies. year to in X XX% a first Research decreased $XXX.X fiscal period. operating ago to $X.X current expenses revenue of in development lower increased the driven marketing expenses $XXX.X by $XX.X year to compared a $XX.X was marketing months $XX million XXXX ago the period. million were sales Sales in million $XX.X year for Total the compared or decline the the or Total to and of X% current expenses XX% year

our General fiscal primarily decrease and the X% by million administrative $XX.X to or fiscal million expenses physical we was lower processes costs compared for million XXXX. facility as tools decreases $X.X as and increases of for period were and in software to $XX.X have expenses to lower in expenses decreased X stock-based streamlined consolidated These related same compensation. offset months driven the XXXX by restatement, decreased our This by we financial footprint. partially first

$X.X of Adjusted per months X $XX.X share or the period. year in increased to or current million in for months current year million per million months the of or or was of X $X.XX income million of ago EBITDA loss per was fiscal the million a first to the Adjusted the compared million to the $X.XX per period. $X.XX to million loss compared ago year fiscal first fiscal $XX.X share the for $X.X $XX.X year for The share X net net XXXX $X.XX compared the share year $XX.X $XX.X period. ago in net

I wanted our outstanding our provide as some to information count. tax provision as income regarding share well

NOLs years, the in the XXXX with expects and NOLs. Over end federal fiscal approximately company $XXX the has to accumulated year million

future. to pay company not does for So expect the the for cash foreseeable taxes federal

net taxes complete be outstanding $XXX,XXX. on tax have we statutory count, share typical had that jurisdictions share approximately expect the quarter in brings to exercise run-rate for do basis million to count in X.X resulted during we warrants and foreign the to shares. Related a the quarterly cashless a we million issuing approximately former shares. provision million the certain However, would a X.X exercise XX This lender outstanding

during we that calculation. represented count the the for the equity quarter, method takes into use consideration diluted the treasury With to EPS dilutive quarter to GAAP share return and shares calculate the stock instruments million XX.X fully profitability

end on cash Outstanding quarter. Now, end at the in of $XXX.X million cash These of issuance debt was This million and of at to increased costs to the million and amounts and at end looking the of unamortized line compared of $X $X.X prior million the current of million $X.X debt. of quarter net third quarter $XX.X of third million long-term Borrowing the compared at portion $XX in in $X.X in the that quarter the million and balance million $XX.X long-term issuance restricted prior credit was million at $X.X revolving end prior and the $X.X million Cash million debt in $XXX.X than $X.X of debt. cash. the balance the was exclude million flows. quarter. million $X.X end to long-term at the at the current costs $X portion debt lower decreased prior million quarter sheet $X.X by of million the quarter end to net unamortized equivalents the

improvement months in million the in in fiscal capital $X.X period operating from XXXX of reflecting $X the used net Net million operating was cash the activities primarily working fiscal same for first X an results XXXX, of improved changes of accounts.

year a XXXX, quarterly third indicated our and of the fiscal of earnings were conference. we expected as source For on of million our operating positive quarter cash activities last $X.X

months. of and was results balance end of last that the peaks the fiscal of million at represents year revenue that the inventory of end the a end in in contract $XXX decrease decrease renewal of the related variances, quarter remaining at calendar that are million the always at at the to contract Taking the quarter held that distributors wanted primarily revenue sheet I process a decrease highest at channel million in significant the last The the $X.X million year. quarter. the fourth is total the the look end historical the million high balance the $XX.X The over renewals of quarter seasonally balance to following bookings which Approximately, the address $XXX.X in through X $X.X timing to deferred sold of in of fiscal balance revenue deferred deferred the compared was the fiscal the year. last

inventory quarter, down to at end that this As of the is the is held $XXX,XXX. legacy approximately distributors of

mentioned the to as earlier, Jamie listen first matters, global company’s approval the stock other received common have we on market. to NASDAQ Related

begin QMCO. We expect trading X ticker, to on February Monday, the under

recognition as to civil during fiscal restatement we settlement penalty. to XXXX. company’s with which all between and $X for out revenue fiscal accounting the payment company related investigation arising settled in of related a in quarter, disclosed into that Second, The the new million included of transactions December the a the the SEC's matters practices late historical SEC XXXX resulted

our historically period hyperscaler Now, financial softest turning The to our for been year. of impact revenue fourth quarter, the has business, fiscal excluding the guidance.

million. XXXX, For or plus EBITDA million $X million. Management $X or total fourth or The company $XXX plus of minus plus guidance or fiscal revenues net $XX $X share the million million plus be to Adjusted minus million revenues be $XX plus an and per is income EBITDA adjusted expects outlook. of of plus million fourth for for $X.XX. or million. expected quarter quarter expects to year to or outlook be the expects million net full minus update fiscal million $XX results our adjusted $X minus now minus $X.XX $X minus This company adjusted related XXXX and in income of $X

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

Jamie Lerner

Thanks Mike.

are on sustainable focus and for Phase We would re-list transformation NASDAQ conclude where I excited the open X stabilization phase long-term to our begin the Operator? growth. and like now on to questions. we line of the

Operator

Instructions] to [Operator Eric will go Lake you. at first Street Martinuzzi Capital We Thank Markets.

Eric Martinuzzi

If out, it. would due year? appreciate being would of of being could you you royalty the $XX not that so you to Thanks. and the below are now what revenue that is am puts into I what thought revenue much $XXX I that quarters, I at the variances was how am due year? midpoint reset the the a curious the would what revenue $XXX and curious that of thought is individual I it takes maybe Jamie year if don’t fiscal be take be million is Mike, to and of to know midpoint look How we million, get previously full million just on much hyperscaler variance, this parse it this

Mike Dodson

almost look we would When the hyperscaler, quarter. year, that our it’s revenue. but at current would demand almost any of And be saw don’t the see hyperscaler the of it’s just will don’t entirely annual revenue attributed the the decrease part that decrease to just in quarter softest But see forward revenue. look hyperscaler We timing year, to volatility our the Sure. obviously, fourth the down. in in issues. we quarter, attribute the We going the simply of we when to full We when entirely difference the guidance our in. of to competitive timing hyperscaler come the

Eric Martinuzzi

that’s volatile it it know it ‘XX? be the potentially truly, near-term obviously going also to proactively And FY is and the it’s here, is out or to to that you isn’t Okay. but it volatile be volatile I overly just stripping say to this conservative and being bad, hey, can are good, till

Jamie Lerner

customers we say are not be being position from good I relatively Well, what our the are that a guidance. conservative, have conservative we providing. are to would guidance would but our we we and in that do of basis be But overly in

Eric Martinuzzi

understand Okay, wanted obviously okay. and then are talked I there, you F-Series F-Series with And to about that? that, over, value-add defined the having it slick sure I want I to of the good because I in the of architecture you to software software-defined success shift make I get want on but sure top make a of the the I box, idea of technology understand

Jamie Lerner

allow of cloud. value of even that technically them a allowing software of software the is independent on that part run transform to directly to run bolted hardware to – the into the software, hardware, the are us of more not or software to the our have we combined or commodity the company, get sell transformation on allow let Yes, together making software us full

software architected going license be have over variety but it StorNext F-Series will then of software we with as of hardware completely a as of StorNext for you forward. will just to and you buy it run uncoupled a be and different couple actually choices to that and removing will the on, and next it the have sold actually So is way are months unbundled

Eric Martinuzzi

I about side product, from don’t kind see the current product one-time here a ever better XX% shows from on should product is anomaly a Was it margin we as as margin? What and that? be run-rate on improve? job got look the I’ve gross than model far terrific current gross back there we can that that The Okay. of I that or into thinking which my

Jamie Lerner

pleased had new high our When the look at norm at We you say in Yes. the products say were is you margin our margin the with I which very single-digits we to wouldn’t would media, mix. with se. end quarter. is a that at low gross then per that, our of this now we good XXX%. are I gross the royalty and mid look

of So what range of at we have revenue. goes mix a our margin contribution look wide when and we into the

our So earnings we gross bottom margin to from can driven business. the and are managing we a do really providing everything line. We dollars by

do We at end are to the not of going revenue. get quarter to discounting the

the We are to going not for sake of empty sell calories.

difficult to gross the settles we So It’s because we the Where the margin everything percentage strong strong variability our different margin we and maximize in gross gross to we that that those have actions is within of earnings. products. have very do take will out? ensure just margins, predict to to continue very

Eric Martinuzzi

am can to I those understand too, things Got sure. really swing hyperscalers

Congrats will floor. up-list I Okay. Well, for NASDAQ covers see that it the the on me. and

Jamie Lerner

Thanks, Eric.

Operator

Riley. to at FBR Craig next go Ellis We’ll

Craig Ellis

a of logistics non to trivial of people XXX these and they they this them are as of building need safe put monitoring to Jamie, just move of case them taking even support hyperscalers with need Phase think units want capacity the install I saw company MPU them. pace and Riley scores need they you sense and systems thousands that FBR. to embarking and digest what’s they a power digestion sell square item something wanted is for unit think to integrate of capacity the just hundreds over feet X to receive you it their at harmonize similar of that congratulations said a large lot to digestion you Phase week B. of thanks over a regard these and take with really that assume question it hyperscaler can of things it go square that the on starting and install a calendar to and first is a feet it’s to they the and to all pace as and ability tens them XX with back of just is I happens our and my of to which now maker them artifact when to it is fourth accomplished a there understand X more Yes we team the maybe quarter that’s is thousands support what and it between as often in think much as or these to seasonal install software these a to they quick cool have with were they that and what to of second line to as of last we server said play they of manufacturing more and can from the I thousands they that I put power it cooling to absorption the would so it but of ever them hyperscalers an the that like long when question that put to is in first in place what on something single or that is needed be a feels got the more clarify and so them kind had system administrative in systems that as a feet

Craig Ellis

is has pursuing hyperscaler can provide side? really thanks an progressing helpful color. some and is beyond are might that diversify on then you the you color to current follow-up customer opportunity with to customer And That’s there company diversity it the that. Jamie for been related how customers question said the be when

Jamie Lerner

Right.

equipment followed and there both for to another delivered and We next expect most another testing think is who those be feedback requirements be or it I I months economic are not we now continue think several to continue test in those years feel three negotiation about positive and the would meet for there the another months all solid equipment of by to the six and months orders safe tests months financial from where stated cases I and volume to we but more all the believe the volume negotiations six so, customer. second fiscal have trials are hyperscalers viable physical requirements additional happen would testing within it equipment that hyperscalers technical more by so is think XX orders tuning detailed will I before within bought a

Craig Ellis

may first out how direction? just importantly color Thanks for that. am queue, and could we a And StorNext expect we earlier will in with about company services movement to should that move then the year you it and the be more as provide the something into an mentioned come some response the I Mike have the more and jump back revenue into you and that’s ask how on or sold in even one should we royalty before of question think I to individually I wondering that to fourth something think would see products about potential that’s reported segment over model long to the mechanically and if

Mike Dodson

mean those think them going which of of pillars speed really and you to the movie as storage with other all been our and on some side to the which we we with to XX this can operating X to that efficiently I has are businesses work all things the our of think think unbelievable can combine a but our Phase we company form well would box growth initiatives. a expensively expansion which software think to markets the really those is a markets segments are back to you it I value different stabilize products of software, of are the so imagine of it I are is think stable different it growth things is them what more making going products high services combined do to value and think behind all is and less trying from stabilization this that’s Phase software done storage over products are building like separation X then our doing I and a a to us segments products that’s engineering kind we drive large and body to are focused value deep margins up think I every more our to growth so company making think now as primary software, to than is I achieve appealing expand business it engineering those making I see are really markets, which to easier so enter those to I in could make effort attempting margin video just are drive software business man enter secondary will as as the part we allows expensive we women an more I storage to stay surveillance less is we three applicable focus so on the and as distraction now months same is lot flexible and shaping business right of segments and engineering big we additional child Yes and now and be in start build us other the doing are differently cases measurements last product to cheap pieces by the single easier massive an up of are with this well mean of with margin what software and in building appeal our television work use as we install what and with other have different only company separation MAM our work

Craig Ellis

Thanks, up-listing. the Jamie on and congratulations

Jamie Lerner

Thanks Craig.

Operator

to We will at Craig-Hallum Capital. move Bennett next Chad

Chad Bennett

for thanks my taking questions. Great,

you following December did on comment have volatility just any last So, the up mike quarter? revenue Hyperscaler hyperscaler

Mike Dodson

Yes.

Chad Bennett

to you quantify Are able it?

Mike Dodson

can same the that will year but ball we year I fair bit the fiscal year quite much look park between pretty ‘XX separately know but would when of revenue that out be the quarters distribution never year be between break ‘XX we swing in a level over or fiscal it

Chad Bennett

I storage decline is year be would over representative say fair Okay. decline that it million in secondary year to $XX.X that guess the of?

Mike Dodson

Yes

Chad Bennett

it. got Okay,

Okay perfect. enough. That’s

I early much as of back growth in push year the to do next we believe of product revenue ‘XX? year that into next revenue we in first half And half look so as first as and can company returns specifically the growth overall

Jamie Lerner

done Chad. we out come will will just one thoughts we at with quarter. we Really, to the year this get provide looking view next next on that those working Yes quarter this and quarter are that

Chad Bennett

March about Okay. And the and think Mike the how for into then into run revenue part you if royalty little early may the can be should least at visibility quarter we year? next have rate more of just here say a you

Mike Dodson

five to would Yes, be four the the visibility out that quarter may at we would you range least but say have same a be range. one little to give would range we in that I a or better expect

Chad Bennett

out looking quarters couple or? that’s And a of

Mike Dodson

quarter. next the for Just

Chad Bennett

Okay, whether leadership mean be contribute there about last type got goal we to for our any of on or are year few team any the aggregate could XX% as revenue able how four we I to Jamie. may as mean, believe quarters, three or one a in VS-Series then year. R-Series point could be XX% look quarters. is new of grow to organically side way a where half it. next we the products think of out And product a the look I is at there as to color next autonomous I in me products it’s second be F-Series be significant Jamie may for those

that entering a sales a greater markets, be we products new new products the of combination of So be that will will of today. combination have

new And products. So to think new be. currently think I take And grow what I XX% that would XX% building growing we place way of we selling want the in year engineers is be to us the products able have and accomplish meaning for our we it organically and about this to right as organically. products and

Chad Bennett

revenue? overall For

Mike Dodson

revenue. Overall

Jamie Lerner

revenue. product On

Mike Dodson

growth. revenue Product

Chad Bennett

Product, love the seeing Thanks. on it. Nice job the okay, margins managing EBITDA guys. got and the Alright, performance. business, gross

Jamie Lerner

Chad. Thanks,

Operator

at Oppenheimer. move George [indiscernible] We’ll to

Jamie Lerner

Hi, George.

Unidentified Analyst

Phase congrats of and the transformation. Hi finishing X on

meeting us you then visibility that’s more, exclude give bit can the quarter into digging maybe is if at your cloud maybe you so So what the other X expectations business? a look a little for and reminder markets, normal you at and just your of cloud the seasonality fourth

Jamie Lerner

put of that, I discussed we and just and have I can exclude I seasonality, that range we hyperscaler product revenue. normal It’s lumpy the those on because The would a from be would Yes. the X% to trends. revenue XX% have a experienced just just softness,

of the into was have expected. that demand we of As we experienced it the would understood have surprises far any that is There industry. the haven’t outside as outside the have we hyperscalers, – are we given as seen guidance

Unidentified Analyst

color Jamie, Okay. value is and little you where us on sales could are the going you a how seeing more And the selling gains? based bit maybe give productivity

Jamie Lerner

customers problem sell don’t product. more solve us problem, them and them They us Yes. from I to our solve want a right. they a want us. want to a Increasingly, business mean, just importantly help more

help customers help success. to said you – call But to always everything will answer now a box. transforming sell problem, with television our more support are see focused fix them customers genomes more we have have more broken our we create us on you want that And have are who a rapidly it. we and to historically to produce something to And is we if is customer’s if we new line want them our and look, efficiently. us We shows, drugs

them way. a sales critical going hit whatever helps much hey, and you matter have you are margin and target, you the no the and So lot more integrated the attention solve go the they to less to end that’s and help we together revenue lot just old are things a to year, the solve the behaviors and hit don’t box how of. that of buying ultimately Mike to is customer sell pay multiple a a products it’s just I we to at why more money, our at are a look that were off a then problem, The are business products, dropped someone revenue that’s problem lot here seeing sell have target making team a with discount is more or dock. that multiple transformation them And loading

are look, to And say, our so prices. come we in hold going we and to

some not the incredible buy of discount, to you months you If couple are buy a months from going it’s of going a product now, want from to happen. couple now. it And if

better how where is going a transformation you integrate really network than. years to a do a few the way they a integrated customer’s business problems. organization in solve much build of we early. so critical business problem, a abnormally more can our And much that to of that’s good us products, more to that, I how to problem, and changing to problem. it’s how much be become flexible just right. And installation a sell take technical how every solve is we to at the stickier relationship technology selling the our it focus going the sell to on a you customers buy the when engage need install into way our We to better with really to and how but of a special about talk dropped we Again, them, you that’s and we you customers, we selling that’s how talk we And you a quarter just a are we you going solve you them we services build capacity discounts box, becoming sell it’s giving are you products a that, off not and it’s giving our in we much are are to of hey, transformation to and way solving And are stickier them and help the for going and of this actually Because a and model, problem in to to here dock. the transformation this engagement. such hey, of services not about this quote, not proposal you that in hey, can something instead capacity a a a can give unique organization, our more a are multi-page explain quote different solve you it’s them let’s combination to document is more going and to about loading we

I think the it our it lot work just think and perceive kind make I us. but dynamically is company are a to customers that how we transformation, changes of of

Unidentified Analyst

or side with of the a year see you that that me Alright. can for how give so? progressing just And one you evolution, more us software question the sense on next over

Jamie Lerner

hardware that the is that building commodity there flavor price we layers, that our use of Yes. and use At basic lowest storage basic of commoditize layer, placed equipment, we layered can personality as And it find I equipment on and to goal by we commodity equipment, are given a mean, a use think the cake. differentiation series equipment the it. that the has for customers. is our given most increasingly software and

it and take server, a archive into it technology, into can platform, it turn platform. a deep cheap into it turn technology, So genomic and turn surveillance generic a making of piece server movie turn a into a file video we piece a sequencing of

software subscription. software separately so increasingly and a is the hardware separate sell And what step software on and first sell from the the that that

That’s episodic us. reliable. big less a are for and sales are our they more So transformation

image, administrate priced They our data? into if data help Now, storage above us moving you help more software need to hardware and help that it. that to them? okay, and average. for access files million to you backup software may store above on storage want you video is XXX these that about have a management hardware, I XXX but How with that and it layers, search those we on manage other analytics, cloud? and hardware it. a are, to do video software-defined catalogs stored any those but search allow to whose video, are protected, Very Is different hardware? customer help search what want search photographs me move an want a quantities data, say, I given on and and you right are build us. getting So files, and you tools the the how us they think are us cataloging we us from that is the million to is What set video, data at to now where data, technologies. us want of layers hardware of that us also dialogue catalog? manage that data, mean, They of often help time, access layer, it you data? lowest our software-defined it data, and a average for catalog has protect Is in them, they then of two Is it listen on? to for Where video-like the on customers requires search phase, they are talking and enormous understand do my

StorNext whole be cloud. subscription delivered layers So out see it on from a increasingly software. in much from the again cloud, move year the and sales I us our this Amazon think come more those It and be Azure. to an are the going and software to effort to on to cloud you will will of removing Increasingly, reside sold and run will that our Google, platform

of a movements, which lot backup well. on-premise DXi cloud only of up not hardware, up to the kind but our seeing a platform now backs to product, is are these backs we as So

as and year for all and posture more of based these the around managing, you. accessing general infrastructure we of So and move software this making we are a moving, Thank are a software creating all transformations software-defined set again to video.

Operator

Dooley will Securities. David We move Steelhead at next to

David Dooley

Thanks my questions. for taking

in through just we on sequential margins now a us are product vast series – gross went understand guess kind this is the or products we? perspective, on questioner? just along of of kind came I mentioned, product set far are from the along or you gross majority from Just how you far one on I or – layer you a all macro recap take you think previous it exact products of two improvement Are gentleman how on layers or could a the came have margin just another improvement, this margin improvement, help in the and the total it which with gross of vast this that it from of with all

Mike Dodson

in the a improvement products. margin the perspective, from product mean, gross Yes. I was primary macro

and As taking, right to. been direction the that Jamie the well to is describing, customer offer base are positions move are as and there selling we as north, the moving we to solutions are we has

the and I in margin are prepared As providing them, was the what mentioned are the is predominantly there which increase remarks, business good government them. we we business providing solutions

today, is that’s here right. that So –

Jamie Lerner

a have able are what is what And $X DoD transactions. add And $XXX,XXX to we that of able we that we to $XXX,XXX good company I’d do a Mike, many, doing are a gotten is to has at to really do many with sale. million the north

we we $XXX,XXX I as think value, highly problem selling is a selling we where layering to I quick And are are over kind transactional to a drives these them they a strategic to really complex size sales, that sales sales, sale hit, $XXX,XXX of now, someone of and things sales. are problem want higher quick again solution solving we complicated business So of our a that hit but described margin complex that keep higher have with series box million of a strategic $X solve more are baseline sale, it’s we $X because these then not million or large working more on a problem.

David Dooley

you along, transitioned I as how you hyper, far so software-oriented which mix? more as that have selling that then products guess And would to lead Okay. not, far are

Jamie Lerner

Yes. just we in right. I of the that mean, are beginning

mean, are there software, yet. as is but DXi StorNext not sold is there We it’s today not the yet. no I work, engineering doing

We making are transformation. that just

– hardware but still So is products, you has software F-Series them the separated, even it together. those buy and a

So of this. the this very – we early are at days

with that our will selling on products to I separated sharing roadmaps take provisions solution but So early of that we software, we days in all it of customers as are all more is think the – sell our and actually of architecturally are product the our today. few a

David Dooley

explanation it’s am in last, you how that just you readiness very hyperscale I expect your have it to this lumpy, facility know from wanted And it’s you business, frankly lasted but that so the to mentioned a guess Okay. guys that guys issue, what because you sounds on I long long, would think?

Jamie Lerner

Yes. to amounts of to think X X I to issues, some equipment, them right. months. of who mean, sell I it these are construction, safe about about of some all some of are it’s with usually deal for months takes these actually tied these is to And really, us but things it think X of about large digesting, digestion

provide have you the You construct a have building co-gen the electric facility to construct power. to electrical to

waiting the are power So logistics or be a is waiting power brought additional to on on to to to built equipment some basic depending in you or be if – be cases, building tied facility. on the to

of sense a hyperscalers it. equipment. It’s out They infrastructure. the dealing not just what you gives just that the their So installing with build are

actually cooling Sometimes, need buildings additional to build you capability receive or footage additional them. or additional to square

David Dooley

having So if the customer had their facility ready, we then wouldn’t be this issue?

Jamie Lerner

run as December quarter late are their quite are they to draw was wouldn’t be building and cooling, but demand is power, for it give be personnel, just it significantly had getting set something would their case, direct into, about directly own can a big mean, conclusions, about necessarily They can can slowdown the as from, this is a I these always – it isn’t they whole the I their be lot just it right. mean, it what and of it to we access quiet fairly notification got to in there mean receive we privately received linear of that given like there the to and isn’t and and in would It I it issues can equipment. install complex be operate be that support – how insight a infrastructure And us equipment. late I reasons. ability they

David Dooley

Okay, thank you.

Jamie Lerner

Dave. Thanks,

Operator

will participation. questions, for With We no other that you conclude thank conference. today’s your

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

Quantum (QMCO) 29 Jan 202020 Q3 Earnings call transcript