QMCO - Earnings call transcript Q1 2021

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Operator

Good day, ladies and gentlemen, and welcome to your Quantum Fiscal First Quarter 2021 Earnings Call and Webcast. All lines have been placed on a listen-only mode, and the floor will be open 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, Rob Fink. Sir, the floor is yours.

Rob Fink

Thank you, operator. everyone call. welcome to like to the I'd Hosting and Mike CEO, call today Dodson. Quantum's Chairman remotely are Jamie on the Lerner; and CFO, our Please comments statements. some that call during be forward-looking may of include aware made the statements could deemed that All are be than historical forward statements facts other statements looking. of advises forward-looking caution on reliance Quantum in statements.

be new financial a required of disclaims the Also to as Risk listed quarterly forth will discussing or on update Quantum's income, statements limitation, as other and the risk timing. expected financial detailed statements, and Form to, factors the law. the that as well without any included margin, result forward-looking performance, or cause those information company's set Quantum's future These with include, flows factors statements those hereof. of statements are statements forward-looking information otherwise filed not obligation with Quantum's on and market revenue, whether involve Quantum information. report Any any adjusted to competitive cash differ including, periodic the business. expenses, implied impact additional financial report this COVID-XX More expected filings Securities risks development, actual on performance uncertainties known risk note and anticipated Form and by Forward-looking Exchange and these factors results the concerning entitled that available limited Quantum's products may projection as to risks, expressly non-GAAP EBITDA, results. based materially other adjusted to and All net call, and applicable share section from Commission. the service or SEC, about unexpected Factors items annual on in and in date alter but its forward-looking events company Quantum in in the unknown changes are by statements, uncertainties on relating XX-Q except information, XX-K or as

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

reconciliation Chairman reported everyone can Quantum's earnings be provided the to the XX a would investors.quantum.com. Quantum, in website was to the release, replay provided available I'd issued days. is a turn remind in call replay Jamie on link this of afternoon. that least results to to find the to said, You affiliation for of it's also will the Jamie, website for And at and CEO metrics of table the which like the company's Lerner. that is With call like release. reference these this and I the company's earnings call all GAAP over call at website A on yours.

Jamie Lerner

you thank all and Rob, on call. for today's joining you, Thank us

us. proud is clear our strategy. a While behind this it's worst of the continued challenging was our couldn't way that be more deliver team on transformation has the quarter, I to

would represent expected, we As led to in just first believe fiscal decline weeks a said call, COVID-XX our revenues. our trough quarter we that impacted quarter few a conference and In a profitability. in revenues the ago, fourth the disruption our of

second as case nearly is this improve. we're that seeing on our business we halfway quarter. increasingly the confident visibility, as we're Now current through the And our are based

recovery gradual seeing are and We entertainment media and cloud, and sectors. steady other across enterprise, government,

spend encouraging procurement purchasing new and signs starting our seeing on initiatives. are projects and up as activity again ramp new to We customers as business of well

a very federal are business. We government our for expecting quarter strong

and and production, expenses we our stresses TV to steps movie, F-Series, operations. pick pandemic and continue taken archive. business, on distributed We see R-Series, of the are reduce in back response seeing the sports up traction to to from we services our it growth have and activity short-term initiatives and In created streamline cloud

X our These plus period fiscal the has in higher benefited cuts breakeven than historically typical the Combined reduced significantly the lower our meaningfully revenue, burn cash in losses which XX% were quarter. year second second point. expected seasonality, expenses should ago. quarter, operating total and with narrow us Our help

demonstrate initiatives releases with innovation on to execution most our in strategic crisp innovation history. transformation continue and We and product our the

We have our from pulling are trials is that four archived cloud in next-generation of competition. technology. getting that feedback we we're lab And the hyperscalers away deep are the

business volume we We And signals, are this driver continue view a Quantum. when begin. while it is getting purchasing growth to positive for will as unclear

against policy We featuring to converged next-generation transition a architecture, are virtualized, software-defined data our executing driven and placement.

allowing both multi-cloud cloud, our We run on-premise customers and enabling in are on to hybrid operate our to the a and also technology architecture.

customer We are software-defined well StorNext storage as platform. our of currently next-gen release X limited as in H-Series

XXX% version deployed key the cloud initiative. of StorNext as using They're their We have cloud customers. for of our studio basis one at our also this

DXi to the We will Later entirely release basis. entering ability software to in archive can by software limited we a this and also followed the be quarter rolling on DXi customers enhanced limited customer this out on-premise additional cloud. that the to cloud, software run this data are virtualized for quarter,

technology are ransomware active as software available making enhancements map active scale only. scale near-term and driving road with protection We our and for compliance

recent Our show expanded Ready momentum this continued object recent certification and a partnership Alliance the solution the in active acquisition. Veeam as Quantum's from Archive

and months customers management manage our worldwide. The us. we have and increased our and a to services, by after usage represents new X,XXX recognizing over encouraged business XXX% XX within scores increase, depend wins operate We're it with connected from in NVMe Promoter key We've June, our introduced line. Quantum our and remotely cloud well established and over of by has monitoring progress, year-on-year history like assisted who Rumia the driving of Eve by for Score to achieved services based also progress in cloud-based to score product Quantum analytics, We're video and significant similar devices, a on newly competitors. the business. support vertical. also our satisfaction solutions. their edge organization, have early a year-over-year congratulate highest above XX key who distributed making systems some are I'd customer now our which services led surveillance expanded our introducing have company's over our in which this is collection We application autonomous X market is [ph], to Net

behind growth, rates. generated remain forms, driven the we data and focused of ahead, other the at devices its unprecedented machines We're Looking growth worst images exponential on video, being and all by large large unstructured files confident is us. in by

making to transformation, we business August Dodson, we see seeing are Mike continuing go we progress the over more CFO, steady to Investor can With our future. discuss the where I'd virtual like opportunity and demonstrate are we looking forward and into the and on on and our that, innovation to the We're XX, Mike? depth on execution initiatives. call turn our the our on recovery, our to long-term We and crisp strategic technology to transformation financials. strategy gradual are Day for

Mike Dodson

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

reduced provided ago downward for our of XX% key a storage his a of compared as opening our pandemic in quarter million quarter decrease product COVID-XX installations. to reflected same in a fewer in revenue demand additional verticals. last revenue certainly to the mentioned hyperscale was system quarter was compared we our driven was first on pressure due due purchase lower the decline XXXX primarily a from driven by the in significant of and and in quarter, resulting Jamie of secondary customers year million previous the with first fiscal The first guidance in fiscal our the in year, and quarter disruption impact and many renewal cycles systems down $XXX.X challenging $XX.X call. comments, business. Service X% the in which by fluctuating line fiscal to COVID-XX, quarter the COVID-XX to As related rates was Revenue in result of few

and to revenue an be historical due revenue decline modestly is customer volumes. later reduced The development. decrease an expected offset in due development last more XX.X% revenue, increase Related and increase debt year to and year. fiscal of to Gross $X.X This expenses a wanted and research period margin lagged costs was was in on million driven LTO-X, by same driven was to market primarily first this period and quarter in revenues. infrastructure This compared the compared for and year. The primarily decline Research LTO-X reduced was a and fixed fiscal and share decrease restatement, bad quarter expenses ago entertainment overhead quarter for our to spreading of in total, financial were marketing to decreased last expectations, in quarter, year in million product in be expenses. XX% quarter $X.X the due a fiscal development. pricing overall operating marketing, expense in quarter was XX% primarily experienced a $X.X royalty share over general programs, an as the a offset fiscal research XX% to operating COVID-XX-related up calculations, contracted $X lower head in primarily same in first count compared decrease the fiscal and a attributable XX.X% in to in which decrease to to to stock XX% attractive higher travel the focused expenses and to overall compared related calendar of I unit royalty sales first revenue the Gross relatively first of were compared by to million services first of adoption costs of The or In overall compared in $XX.X the also expenses IT of administrative and costs provide the count $XX.X compensation. anticipation high-margin LTO-X and the a head count Royalty XX% to lower to used expenses current in quarter. million the $XX.X in for general count, year. expense combined launched million partially or an marketing by light ago, million increase The compensation increase in with period decrease margins XX% next-generation was the in restrictions. first head decrease in professional the periods. in has function We the revenue the due million to development on lower administrative and new partially by per decrease revenue, continued primarily to XX% a sales same ago color. XXXX year in expenses

to differences period the a calculation. straightforward per a in amendment, calculate At between further warrants in an and impact XX.X our QX in loss credit a was recent loss end used is conjunction with million. the the period calculations for not position, issued agreement the our our the count earnings and Given share shares loss of share

number $XX.X GAAP period, was warrants share per XX.X vested would exercised of For the Ultimately, is profit first count the net XX.X share million assuming share in for quarter, have million shares awards in to when the the year quarter were The and per million. a employee or net a been total a same share of loss entire $X.XX million. warrants diluted are quarter. outstanding calculations the $X.X outstanding or all fiscal loss $X.XX the and compared ago diluted per

Form quarter. in in quarter. compensation, $X.XX income share today. most share first fiscal the was the stock of There measure million non-GAAP loss year charges, the the million in in is or nonrecurring year adjusted net restructuring of both Excluding was $X.X press or compared to adjusted to the EBITDA compared our $X.X comparable million in charges per full million XX-Q ago net and ago results diluted $X.XX the reconciliation a diluted Adjusted recently per GAAP and quarter $XX.X first released release to $X.X quarter

equivalents as $X.X at sheet, to as of XXXX. million balances agreement million liquidity restricted cash June compared XXXX, short-term cash of credit of required cash include and under Cash looking and XX, Now and our Both restricted XX, March balance $XX.X $X flows. million million cash. the $XX.X were in

improved strengthened that our fiscal liquidity. the sheet completed and quarter, first balance we transactions During several

December securing million $XX incremental on additional terms loan First, and and credit and liquidity XX, we amended flexible term our expire an loan, XXXX. These revolving conditions. line credit negotiated in more facilities

agreement of and term of terms the existing our the loan including XXXX to in credit term term security terms pricing. similar loan, XXXX to credit maturity, substantially and terms relation our In agreement, the loan the of are agreement,

customary a the X.X we to addition strike with issued In term loan amendment of fees, closing warrants price to $X lenders. and our million

of X% bears Program terms This XX Second, year interest per may at loan is rate unsecured. due term apply the up we of the X of $XX to the loan, million months, initial and liquidity PPP. a secured fixed an in of amount loan. years for Under maximum forgiveness from Paycheck deferred with a additional has Protection this an or we of the on interest

We in the or accordance the for loan have the from PPP the and with forgiven loan terms partially of proceeds intend qualifying At this be of apply loan loan we agreement. for this that PPP time, in to utilized be assured expenses full. forgiveness will cannot the

net was debt fiscal provided of first the primarily of net operating comparable greater This the With $X.X first these of transactions, to quarter year cash as of aligned covenants net capital prior $X.X to sales the XXXX, million basis, is our as million, unamortized quarter. to $XXX.X June debt higher-margin continue opportunities $XX.X XXXX, million in in $X by a first flexibility same as quarter million we outstanding rationalize loss year. million unamortized was the last our used costs. million on higher million period compared Outstanding a on value, with after in net our fiscal and in basis. $XXX.X focus plus used in approximate XX, the net March XX, operating same And net compares to basis, needs. on activities million basis, customers' have $XXX.X the The Net with our issuance after gross almost the period the period million a a $X in structure on compared activities $XXX.X million loss more to and ago, debt $XX.X of million debt for attributed costs. we cost in $XX gross was financial million difference of fiscal was cash to higher a netting compares year. to issuance This shift $XX.X a as in netting working

The economy year result our guidance full outlook. financial limits our continuing this uncertainty COVID overall of to in will therefore, the pandemic we, provide and turning Finally, the as at a visibility, time. not

However, confident of the as we are in increasingly quarter and our we to that a first a represent a this increase. second fiscal quarter on opening trough double-digit line the remarks revenues that we represents in revenues, sight discussed call, sequential have clear

million, $X million. loss be or plus million, of net back per Our plus $XX million, $X share, outlook or plus comments. for adjusted the $X or that, includes per quarter $X.XX for loss Jamie? $X.XX net closing I'll plus to Jamie share per adjusted the of revenues second call adjusted and minus EBITDA million, minus of share minus million or With to minus turn $X $X.X

Jamie Lerner

proud first dynamic I'm and a in Quantum environment. the challenging how executed Mike. the amidst Thanks, quarter, team of fiscal

unstructured this increasingly the plan, data. We and through and crisis of are and in transformation according managing navigate advancing our long-term to video and that power our confident will expand I'm rebuilt Quantum become strategy retaining as earnings leadership we apparent

and we Analyst us opportunity leader business event customers. comprehensive Investor and markets, as our deeper virtual key on event unstructured our an more hear mentioned, Day This unique data will are overviewing strategy goals. solutions, experts a share transform as into executives will I As to into vision technology, financial serve as provide well and will video industry opportunity our and the driving of a be and This August XX. to long-term a look some to transformation from addressable that a hosting

questions may us quantum. hope will opportunity our you meaningful we take With Additional consider now for you to be on that, will learn what website more I IR information will made have. available will any about event Operator? this be we and hope on joining a

Operator

take B. from Instructions] Ellis question first FBR. Craig our [Operator We'll Riley with

Craig Ellis

Congratulations next a Government was you elaborate are Yes. look little I was to them. not bit transformation areas do for and prepared coming there on of execute of but continuing going? on in seeing of number through Jamie, the you're one that a quarters, over current government that you period remarks, end just your of vertical, the in strength. your the that quarter, you signs trajectory few difficult what markets back of that how you guides. out are showing more see as a mentioned hoping could

Jamie Lerner

strong end Yes. the government is it's clearly, quarter year, I sweeps. government this it's because mean, of

incredible video strength, involving in So we're increasingly we're being used StorNext data data just seeing DoD applications, this think And across the larger. being the just a not and our execution quarters, just just archived, of And more lot not and quarter, of subsequent focus our for data, unstructured being in not unstructured intense for seeing more putting seeing machine out investment. but ecosystem seeing our but building analytics activities. seeing into of globally. but I We're where data and being pervasive out, our we're richer civilian more and solutions. We're -- speed storage we're sales more more team area we're think wider I but it's and government more we're building just our expanding and an partner photography, business government, generated U.S. around but just data, and also applicability putting

Craig Ellis

helpful. on vertical in the the past, well. And commented think health care you I That's as in strength

vertical if could look we of of outside a at bit, wondering these the got So media new some verticals the good discussion little you've activity I'm expand into traditional the as where some the and scope entertainment growth. of just you

Jamie Lerner

X-Ray, data, increasingly, records, lot in never that's the also generation data of bioinformatics, knows storage data. in we're technology is is unstructured speed. genomics, of Yes. very a just machine-generated creating medical we're What in everyone turn that to forms complex seeing that its health Clearly, drug And drug then just explosion activity data MRI testing patient for imagery, but of care of seeing seeing data. people an development, thrown just primary this away. data, And all we're correlations trial our are clinical between and

various our need tightly also high-speed XXX-year care. health our compliance has with we're really all that fact We've that And that very at have partner relevancy ecosystem. health the our is in starting then into to to in for we're sellers long-term the better archives, beginning beginning our the becoming at to get the but played and that. vertical, the increased pieces with we work and health So of expert phases years, area. care I'd to care many sharpen capabilities coupled just we're certifications data really say in

that's think got a to that. I come long and we're years But we over hospitals still world-class today. at a -- few we've XXX go to I become way, think serving

Craig Ellis

hyperscale helpful. the then, And I wanted follow-up on comments. That's to

I X advanced think you hyperscalers you evaluations. in said had product

I months, I maybe would think a couple. X if I months, rebound X the clock, expected have

like X revenue So have view base-case a in When to And maybe a expect couple it come we more from seems or material a hyperscalers potentially of view, for growth? case would more be what see in. revenues more? could more better meaningful

Jamie Lerner

either of Yes. that new And available racks a now being meaning have cloud archive I or that -- I There have is more that are volume XX the physically think that Several technology equipment occurred customers. their in paid next-generation shipping world's laboratories hardware. for the mean hyperscalers several are largest we technology, the using have or in X advancements our are deep of tested. in that are laboratories. trials,

along. further much we're So

the signals we also phase are selected now have to be I going is what equipment, gotten been demand we've it are to volumes, going that think into go-forward the is at entering planning. technology strong When supported. we the very they how need and as

manufacturing be into to demand with from phase. and phase particularly, we're we trial phase But we're beginning planning. There's trial the -- the clarified So exiting one there. really in much moving the still are delivery

Craig Ellis

few seasonality before remarks, one not the prepared the should current And for to seasonal the repeatedly current was but beyond for ensuing give quarters? others. that in Mike, of about the of we how looking as helpful. current then, quarter, quarter I as think we the guidance, look the one the That's floor quarter Mike for beyond business strength the characterized

Mike Dodson

Yes. Sure.

with As is the a next we've quarter the year-end. federal quarter the seasonally discussed, government, strong

I would what strength as Beyond our the recovery be, a from behind COVID to when think that. revenues we think and strength have that, pandemic of we expect we the

the I half So seasonal X year. last overweigh type think look of will back quarters when you at activity of that the or any this

next be and think quarter, give I So we beyond to more we quarter. we'll quarter. next But report it's guidance feel good more as about this recovery going driven

Operator

next We'll take question our Craig-Hallum. from with Chad Bennett

Chad Bennett

brief. be to try I'll

So about this just on remember, rebound shipment the see I you strong last quarter. correctly, this your quarter. -- existing a great coming your And hyperscaler call, I back Jamie, of think potentially to kind talked if sequential it's standpoint, from

the strength question So is, of And that to how that seasonal business? sequential is just getting the Fed much I happening? hyperscaler back then is strong the and guess from from the existing versus

Jamie Lerner

a worked we're now allows federal Yes. They're like steady our increasing much customer and would And the state enterprise. They've state. to highs up quarter-over-quarter of in And a at The is with U.S. I run high we've our lumpy current mostly schedule, schedule installed rebound say, more delivery factory back at much a at not strength to a and of regarding in with which what general about us. instead a less way. where the we're we're or would more shipments. low attributed to say, us steady a base But military, obviously we're in -- right in rate. is efficient seeing delivery a steady a strength steady to got -- little is -- been they've or start-and-stop achieve them I I that now

Chad Bennett

how view but margin segment of only a there, royalty. Mike, margin. not see there. scale the over of terms fixed Obviously, layer How No, here kind quarter, and on that's you a we current being little about on Should should for we're costs we a to gross the what a color. expect then good lower in sequential based more -- revenue, somewhat increase that in is great we of of getting then And maybe the here? in pretty year now? follow-up of throughout Mike. think gross just revs rebound right improvement And bit from question a second

Mike Dodson

Yes. Yes.

So first, going of LTO-X. adoption I the revenues. be there the to think key royalty Really, is the

get we QX. you're the levels the going once at we in by get until that bit business that introduce little end that point, So saw level, to expecting to of there's So a And they're see the much year. think of they delay, I the to a right? to this pretty always

not may beyond actually in of the see we it But be So our from results that. should by the it's healthy year. back as a adopted, bounce end that,

As would far for little margin we a be government the typically QX in our expect as margins, to our better us. is business margins a with better

So that higher a it allows base. those fixed costs having with And despite revenue of expectation revenue there. to royalty us over forecast, lower will a a larger help us course, spread

So I of front. think we should see a improvement little the bit margin on

Chad Bennett

And hear. rebounding. the to good see to business Good it's

Mike Dodson

Chad. Thanks, Okay.

Operator

Market. from question Capital Meyers Lake our Ryan with take next Street We'll

Ryan Meyers

what one Just seeing you now on Can for if any are of sort and there's you guys me. in right question some constraints? us give color chain supply the

Jamie Lerner

filming It's issue had now, biggest as We're you is because some delays. us not time chain start shipping we achieve for television L.A. want traffic been air where and they restricted. mean XX if healthy. want figure People are historic Australia. in up worried we we're really, if television mean, stop-and-go filming lanes or we what again. in L.A. out back issue, Jamie. to to up, levels, standstill I begin again. the and just filming could -- flights I seeing so now, -- People surprisingly chain. movies sports, in in issue thing COVID it's to or had it's mean availability an single-biggest But you that's sports just levels we were was been those think lanes, We're far restraining showing them what flight and seasons precautions Iceland. at Europe. supply were at because get state, to seeing are a delays New opening for or to right if it's be movies There this vertical, any from just we I and a Ryan, are the a true York shipping shortened we're how the Right and for need and back still up not right music do York long begin movies on television seeing you that and reasons. a in pinpoint to and new think, now, is were But supply recording is from while whether taking historic time. I about This taking put not would

Operator

That will conclude Mr. now our We'll question-and-answer session the ahead, to over back turn floor go sir. for today. Please Lerner.

Jamie Lerner

in for a time. session We August All dive our us a everyone, today. X-hour on hope us go thanks, you joining at that our right. strategy Well, meet for we'll on XX for investor deep and conference,

So thanks, everyone.

Operator

We today's gentlemen, for and conclude thank your Ladies does this participation. teleconference. you

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

Quantum (QMCO) 9 Aug 202021 Q1 Earnings call transcript