News Column

Quantum Corporation Reports Fiscal Third Quarter Results

January 29, 2014

SAN JOSE, CA -- (Marketwired) -- 01/29/14 -- Quantum Corp. (NYSE: QTM) Highlights: Total revenue of $146 million , up 11% sequentially Sequential increase in branded tape automation and DXi revenue of 37% and 32%, respectively 20% year-over-year growth in StorNext and related service revenue, driven by near doubling of North America sales Year-over-year improvement in GAAP and non-GAAP net income of 70% and 27%, respectively, on 8% revenue decline Quantum Corp. (NYSE: QTM) today reported results for the third quarter of fiscal 2014, ended Dec. 31, 2013 . Revenue for the quarter was $145.9 million , down 8 percent from the third quarter of fiscal 2013, primarily due to lower tape automation revenue and a decline in DXi® sales from the record DXi quarter a year earlier. On a sequential basis, total revenue was up 11 percent and, as previously announced, above the high end of the guidance range provided in the company's Oct. 23, 2013 earnings announcement. Product highlights included growth in StorNext® and related service revenue of 20 percent year-over-year and 5 percent over the prior quarter, as well as sequential increases in branded Scalar® tape automation and DXi sales of 37 percent and 32 percent, respectively. On a GAAP basis, Quantum reported breakeven operating income for the quarter, better than the $5.7 million operating loss a year earlier, and had a net loss of $2.4 million , or $0.01 per diluted share, compared to a net loss of $8.2 million in the prior year, a 70 percent improvement. On a non-GAAP basis, the company generated $8.6 million of operating income, up $1.2 million year-over-year. Finally, Quantum reported non-GAAP net income of $6.2 million , or $0.02 per diluted share, approximately $1.3 million , or 27 percent, higher than a year earlier. The operating and net income results were better than the high end of the third quarter guidance given in October. "Our December quarter results reflect our focus on driving increased profitability and cash flow while capitalizing on revenue opportunities," said Jon Gacek , president and CEO of Quantum. "We reduced our GAAP operating expenses by 17 percent year-over-year -- and 12 percent on a non-GAAP basis -- improving our bottom-line results and helping us end the quarter with our highest cash balance in three years. At the same time we continued to increase our StorNext revenue, with particularly strong year-over-year growth driven by a near doubling of sales in North America , and significantly improved our DXi and tape automation revenue performance over the prior quarter. Moving forward, we will maintain a balanced approach between growth and profit, building on our expanding product portfolio and market reach and the actions we've taken to reduce our cost structure." Quantum generated $7.3 million in cash from operations in the quarter, ending the quarter with $82.8 million in total cash and cash equivalents. Outlook For the fourth quarter of fiscal 2014, Quantum expects: Revenue of approximately $125 million to $130 million . GAAP gross margin of 42 to 43 percent and non-GAAP gross margin of 43 to 44 percent. GAAP operating expenses of $60 million to $61 million and non-GAAP operating expenses of $55 million to $56 million . Interest expense of $2.5 million and taxes of $500,000 . The company noted that its fourth quarter operating expense guidance is $10 million to $11 million lower than actual operating expenses on a GAAP basis in the comparable quarter a year ago and $7 million to $8 million lower on a non-GAAP basis. Quantum also reiterated that it expects approximately $16 million to $18 million of additional annual expense savings from the outsourcing of manufacturing operations and staffing reductions announced earlier this month to be reflected in the company's results beginning in the fiscal first quarter of 2015 ( June 2014 quarter). The company will provide guidance for fiscal 2015 when it reports its fourth quarter results. Business Highlights Key business highlights for the December quarter include the following: Based on the integration of the company's Lattus™ Object Storage with Rocket Arkivio data archiving software, Quantum announced a new solution to reduce primary storage and backup costs by archiving static, unstructured data. Customers using the combined solution can save 30 percent or more in annual storage expenses and, in many cases, pay back their investment within a year. The company introduced a new program enabling managed service providers (MSPs) and value added resellers (VARs) to expand their businesses with a cloud backup service powered by Quantum's DXi virtual deduplication appliances and vmPRO™ backup software. Through unique capacity-based subscription pricing, the program allows MSPs and VARs to brand, market and sell cloud backup-as-a-service offerings that scale as their revenues grow, thereby reducing the need for large up-front capital expenditures on hardware. Quantum continued to receive industry accolades, reinforcing the compelling benefits and overall value it provides to customers and partners. The company and its Lattus Object Storage solution were named as finalists for 2014 Storage Visions Awards, which honor excellence and innovation in media and entertainment technology. The Lattus solution also received honorable mention in the Tiered Storage Product of the Year category at the 2013 Storage Virtualization Cloud Awards. At these same awards, the Quantum Alliance reseller program was also selected as "Vendor's Reseller Channel Program of the Year." Conference Call and Audio Webcast Notification Quantum will hold a conference call today, Jan. 29, 2014 , at 2:00 p.m. PST , to discuss its fiscal third quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9819 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Jan. 29, 2014 , at 2:00 p.m. PST . Site for the webcast and related information: www.quantum.com/investors . About Quantum Quantum is a leading expert in end-to-end scale-out storage and data protection, providing solutions for sharing, archiving and accessing digital assets over the entire data lifecycle. From small businesses to major enterprises, more than 100,000 customers have trusted Quantum to address their most demanding content workflow challenges. With Quantum, customers can Be Certain™ they have a comprehensive storage foundation to maximize the value of their data, making it accessible whenever and wherever needed, offering indefinite retention and reducing total cost and complexity. See how at www.quantum.com/customerstories . Quantum, the Quantum logo, Be Certain, DXi, StorNext, Scalar, Lattus and vmPRO are either registered trademarks or trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners. "Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, our statements regarding our priorities and focuses for the fourth quarter of our fiscal year, that we will maintain our balanced approach to driving increased profit and cash flow while pursuing revenue growth and all of our statements under the "Outlook" section are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum's actual results to differ materially from those implied by the forward-looking statement. More detailed information about these risk factors, and additional risk factors are set forth in Quantum's periodic filings with the Securities and Exchange Commission , including, but not limited to, those risks and uncertainties listed in the section entitled "Risk Factors" in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 7, 2013 and in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 12, 2013 . Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Use of Non-GAAP Financial Measures Quantum believes that the non-GAAP financial measures disclosed above provide useful and supplemental information to investors regarding its quarterly financial performance. Quantum management uses these non-GAAP financial measures internally to understand, manage and evaluate the company's business results and make operating decisions. For instance, Quantum management often makes decisions regarding staffing, future management priorities and how the company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, compensation of our employees is based in part on the performance of our business based on non-GAAP operating income. The non-GAAP financial measures used in this press release exclude the impact of amortization of intangibles, share-based compensation, restructuring charges and outsourcing transition costs for the following reasons: Amortization of Intangible Assets This includes acquired intangibles such as purchased technology and customer relationships in connection with prior acquisitions. These expenses are not factored into management's evaluation of potential acquisitions or Quantum's performance after completion of the acquisitions because they are not related to Quantum's core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related charges from non-GAAP measures provides investors with a basis to compare Quantum against the performance of other companies without the variability caused by purchase accounting. Share-Based Compensation Expense Share-based compensation expense relates primarily to equity awards such as stock options and restricted stock units. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Quantum's control. As a result, management excludes this item from Quantum's internal operating forecasts and models. Management believes that non-GAAP measures adjusted for share-based compensation provide investors with a basis to measure Quantum's core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying valuation methodologies and assumptions used. Restructuring Charges Restructuring charges primarily relate to expenses associated with changes to Quantum's operating structure. Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities. Although Quantum has engaged in various restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. Management believes that it is appropriate to exclude restructuring charges from Quantum's non-GAAP financial measures, as it enhances the ability of investors to compare Quantum's period-over-period operating results from continuing operations. Outsourcing Transition Costs Outsourcing transition costs are expenses attributable to transitioning our manufacturing to an outsourced model. These costs are excluded from non-GAAP financial measures because they are not considered core operating activities and management believes that it is appropriate to exclude these costs in order to provide investors the ability to compare Quantum's period-over-period operating results from continuing operations. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material impact on the company's reported financial results and, therefore, should not be relied upon as the sole financial measures to evaluate the company. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release. Note 1 In the first quarter of fiscal year 2014, Quantum identified an error related to the accounting for certain allowances for estimated future price adjustments to customers which impacted prior reporting periods. As a result, the company's financial statements for the third quarter and first nine months of fiscal 2013 have been revised. For additional information, refer to our Form 10-Q filed with the Securities and Exchange Commission on November 12, 2013 . QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended -------------------------- -------------------------- December 31, December 31, December 31, December 31, 2013 2012 2013 2012 ------------ ------------ ------------ ------------ (Revised) (Revised) Note 1 Note 1 Revenue: Product $ 98,348 $ 112,490 $ 269,024 $ 306,316 Service 36,926 35,340 109,612 107,138 Royalty 10,656 11,538 46,693 34,081 ------------ ------------ ------------ ------------ Total revenue 145,930 159,368 425,329 447,535 Cost of revenue: Product 64,502 72,007 181,167 204,641 Service 19,706 19,360 56,053 59,896 Restructuring charges 288 -- 377 -- ------------ ------------ ------------ ------------ Total cost of revenue 84,496 91,367 237,597 264,537 ------------ ------------ ------------ ------------ Gross margin 61,434 68,001 187,732 182,998 Operating expenses: Research and development 16,010 18,615 49,063 56,639 Sales and marketing 29,424 33,588 89,577 102,473 General and administrative 14,279 14,851 43,789 46,910 Restructuring charges 1,758 6,602 4,525 6,602 ------------ ------------ ------------ ------------ Total operating expenses 61,471 73,656 186,954 212,624 ------------ ------------ ------------ ------------ Income (loss) from operations (37) (5,655) 778 (29,626) Other income and expense 370 60 791 (388) Interest expense (2,440) (2,230) (7,319) (5,896) ------------ ------------ ------------ ------------ Loss before income taxes (2,107) (7,825) (5,750) (35,910) Income tax provision 308 348 1,232 1,217 ------------ ------------ ------------ ------------ Net loss $ (2,415) $ (8,173) $ (6,982) $ (37,127) ============ ============ ============ ============ Basic and diluted net loss per share: $ (0.01) $ (0.04) $ (0.03) $ (0.16) Weighted average basic and diluted shares: 248,135 240,786 246,183 239,099 ---------------------------------------------------------------------------- Included in the above Statements of Operations: Restructuring charges related to cost of revenue $ 288 $ -- $ 377 $ -- Restructuring charges related to operating expense 1,758 6,602 4,525 6,602 ------------ ------------ ------------ ------------ 2,046 6,602 4,902 6,602 Amortization of intangibles: Cost of revenue 368 911 1,104 3,407 Sales and marketing 1,856 1,856 5,569 7,668 ------------ ------------ ------------ ------------ 2,224 2,767 6,673 11,075 Share-based compensation: Cost of revenue 509 626 1,560 1,839 Research and development 862 925 2,638 2,772 Sales and marketing 994 1,273 3,148 3,603 General and administrative 1,056 892 2,922 3,515 ------------ ------------ ------------ ------------ 3,421 3,716 10,268 11,729 Outsourcing Transition Costs: Cost of revenue 952 -- 952 -- ------------ ------------ ------------ ------------ 952 -- 952 -- ---------------------------------------------------------------------------- Note 1 is presented above, before the Condensed Consolidated Statements of Operations. QUANTUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 31, March 31, 2013 2013* ------------- ------------- (Revised) Note 1 Assets Current assets: Cash and cash equivalents $ 80,115 $ 68,976 Restricted cash 2,652 3,023 Accounts receivable 105,121 97,546 Manufacturing inventories 43,621 53,075 Service parts inventories 27,743 35,368 Other current assets 11,063 11,831 ------------- ------------- Total current assets 270,315 269,819 Long-term assets: Property and equipment 18,457 21,456 Intangible assets 6,140 12,813 Goodwill 55,613 55,613 Other long-term assets 9,749 9,892 ------------- ------------- Total long-term assets 89,959 99,774 ------------- ------------- $ 360,274 $ 369,593 ============= ============= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 38,994 $ 47,634 Accrued warranty 6,127 7,520 Deferred revenue, current 88,968 91,108 Accrued restructuring charges, current 3,554 3,021 Accrued compensation 29,338 30,964 Other accrued liabilities 13,580 14,503 ------------- ------------- Total current liabilities 180,561 194,750 Long-term liabilities: Deferred revenue, long-term 39,350 38,393 Convertible subordinated debt 205,000 205,000 Other long-term liabilities 14,992 15,232 ------------- ------------- Total long-term liabilities 259,342 258,625 Stockholders' deficit (79,629) (83,782) ------------- ------------- $ 360,274 $ 369,593 ============= ============= * Derived from the March 31, 2013 audited Consolidated Financial Statements. Note 1 is presented above, before the Condensed Consolidated Statements of Operations. QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended -------------------------- December 31, December 31, 2013 2012 ------------ ------------ (Revised) Note 1 Cash flows from operating activities: Net loss $ (6,982) $ (37,127) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 8,217 9,283 Amortization 7,898 12,013 Service parts lower of cost or market adjustment 8,715 7,026 Deferred income taxes 86 231 Share-based compensation 10,268 11,729 Changes in assets and liabilities: Accounts receivable (7,575) (5,074) Manufacturing inventories 5,372 1,502 Service parts inventories 2,993 2,857 Accounts payable (8,672) (9,748) Accrued warranty (1,393) 160 Deferred revenue (1,182) (4,650) Accrued restructuring charges 309 3,184 Accrued compensation (1,786) (538) Other assets and liabilities (732) 1,020 ------------ ------------ Net cash provided by (used in) operating activities 15,536 (8,132) Cash flows from investing activities: Purchases of property and equipment (5,026) (9,389) Decrease in restricted cash 517 691 Purchases of other investments (534) (2,169) Return of principal from other investments - 208 ------------ ------------ Net cash used in investing activities (5,043) (10,659) Cash flows from financing activities: Repayments of long-term debt -- (49,495) Borrowings of convertible subordinated debt, net -- 67,701 Payment of taxes due upon vesting of restricted stock (1,807) (1,926) Proceeds from issuance of common stock 2,431 2,604 ------------ ------------ Net cash provided by financing activities 624 18,884 Effect of exchange rate changes on cash and cash equivalents 22 (14) Net increase in cash and cash equivalents 11,139 79 Cash and cash equivalents at beginning of period 68,976 51,261 ------------ ------------ Cash and cash equivalents at end of period $ 80,115 $ 51,340 ============ ============ Note 1 is presented above, before the Condensed Consolidated Statements of Operations. QUANTUM CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 31, March 31, 2013 2013* ------------- ------------- (Revised) Note 1 Assets Current assets: Cash and cash equivalents $ 80,115 $ 68,976 Restricted cash 2,652 3,023 Accounts receivable 105,121 97,546 Manufacturing inventories 43,621 53,075 Service parts inventories 27,743 35,368 Other current assets 11,063 11,831 ------------- ------------- Total current assets 270,315 269,819 Long-term assets: Property and equipment 18,457 21,456 Intangible assets 6,140 12,813 Goodwill 55,613 55,613 Other long-term assets 9,749 9,892 ------------- ------------- Total long-term assets 89,959 99,774 ------------- ------------- $ 360,274 $ 369,593 ============= ============= Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 38,994 $ 47,634 Accrued warranty 6,127 7,520 Deferred revenue, current 88,968 91,108 Accrued restructuring charges, current 3,554 3,021 Accrued compensation 29,338 30,964 Other accrued liabilities 13,580 14,503 ------------- ------------- Total current liabilities 180,561 194,750 Long-term liabilities: Deferred revenue, long-term 39,350 38,393 Convertible subordinated debt 205,000 205,000 Other long-term liabilities 14,992 15,232 ------------- ------------- Total long-term liabilities 259,342 258,625 Stockholders' deficit (79,629) (83,782) ------------- ------------- $ 360,274 $ 369,593 ============= ============= * Derived from the March 31, 2013 audited Consolidated Financial Statements. Note 1 is presented above, before the Condensed Consolidated Statements of Operations. QUANTUM CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended -------------------------- December 31, December 31, 2013 2012 ------------ ------------ (Revised) Note 1 Cash flows from operating activities: Net loss $ (6,982) $ (37,127) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 8,217 9,283 Amortization 7,898 12,013 Service parts lower of cost or market adjustment 8,715 7,026 Deferred income taxes 86 231 Share-based compensation 10,268 11,729 Changes in assets and liabilities: Accounts receivable (7,575) (5,074) Manufacturing inventories 5,372 1,502 Service parts inventories 2,993 2,857 Accounts payable (8,672) (9,748) Accrued warranty (1,393) 160 Deferred revenue (1,182) (4,650) Accrued restructuring charges 309 3,184 Accrued compensation (1,786) (538) Other assets and liabilities (732) 1,020 ------------ ------------ Net cash provided by (used in) operating activities 15,536 (8,132) Cash flows from investing activities: Purchases of property and equipment (5,026) (9,389) Decrease in restricted cash 517 691 Purchases of other investments (534) (2,169) Return of principal from other investments - 208 ------------ ------------ Net cash used in investing activities (5,043) (10,659) Cash flows from financing activities: Repayments of long-term debt -- (49,495) Borrowings of convertible subordinated debt, net -- 67,701 Payment of taxes due upon vesting of restricted stock (1,807) (1,926) Proceeds from issuance of common stock 2,431 2,604 ------------ ------------ Net cash provided by financing activities 624 18,884 Effect of exchange rate changes on cash and cash equivalents 22 (14) Net increase in cash and cash equivalents 11,139 79 Cash and cash equivalents at beginning of period 68,976 51,261 ------------ ------------ Cash and cash equivalents at end of period $ 80,115 $ 51,340 ============ ============ Note 1 is presented above, before the Condensed Consolidated Statements of Operations. QUANTUM CORPORATION GAAP TO NON-GAAP RECONCILIATION (In thousands, except per share amounts) (Unaudited) Three Months Ended December 31, 2013 ------------------------------------------ Income Gross (Loss) Gross Margin Operating From Margin Rate Expenses Operations --------- -------- --------- ---------- GAAP $ 61,434 42.1% $ 61,471 $ (37) Non-GAAP Reconciling Items: Amortization of intangibles 368 (1,856) 2,224 Share-based compensation 509 (2,912) 3,421 Restructuring charges 288 (1,758) 2,046 Outsouring transition costs 952 - 952 --------- --------- ---------- Non-GAAP $ 63,551 43.5% $ 54,945 $ 8,606 Three Months Ended December 31, 2013 -------------------------------- Per Share Per Share Net Net Net Income Income Income (Loss), (Loss), (Loss) Basic Diluted --------- --------- --------- GAAP $ (2,415) $ (0.01) $ (0.01) Non-GAAP Reconciling Items: Amortization of intangibles 2,224 Share-based compensation 3,421 Restructuring charges 2,046 Outsouring transition costs 952 --------- Non-GAAP $ 6,228 $ 0.02 $ 0.02 ** Computation of basic and diluted net income (loss) per share: GAAP Non-GAAP --------- --------- Net income (loss) $ (2,415) $ 6,228 Interest on dilutive convertible notes - 788 --------- --------- Income (loss) for purposes of computing income (loss) per diluted share $ (2,415) $ 7,016 ========= ========= Weighted average shares: Basic 248,135 248,135 Dilutive shares from stock plans - 1,952 Dilutive shares from convertible notes - 42,502 --------- --------- Diluted 248,135 292,589 Nine Months Ended December 31, 2013 ----------------------------------------- Gross Income Gross Margin Operating From Margin Rate Expenses Operations --------- -------- --------- ---------- GAAP $ 187,732 44.1% 186,954 778 Non-GAAP Reconciling Items: Amortization of intangibles 1,104 (5,569) 6,673 Share-based compensation 1,560 (8,708) 10,268 Restructuring charges 377 (4,525) 4,902 Outsourcing transition costs 952 - 952 --------- --------- ---------- Non-GAAP $ 191,725 45.1% $ 168,152 $ 23,573 Nine Months Ended December 31, 2013 -------------------------------- Per Share Per Share Net Net Net Income Income Income (Loss), (Loss), (Loss) Basic Diluted --------- --------- --------- GAAP $ (6,982) $ (0.03) $ (0.03) Non-GAAP Reconciling Items: Amortization of intangibles 6,673 Share-based compensation 10,268 Restructuring charges 4,902 Outsourcing transition costs 952 --------- Non-GAAP $ 15,813 $ 0.06 $ 0.06 ** Computation of basic and diluted net income (loss) per share: GAAP Non-GAAP --------- --------- Net income (loss) $ (6,982) $ 15,813 Interest on dilutive convertible notes - 2,363 --------- --------- Income (loss) for purposes of computing income (loss) per diluted share $ (6,982) $ 18,176 ========= ========= Weighted average shares: Basic 246,183 246,183 Dilutive shares from stock plans - 2,925 Dilutive shares from convertible notes - 42,502 --------- --------- Diluted 246,183 291,610 ========= ========= ** Non-GAAP per share net income (loss): Each fiscal period is calculated independently, thus the sum of each of the quarter's non-GAAP per diluted share net income (loss) does not necessarily equal the year-to-date non-GAAP per diluted share net income (loss). For example, certain convertible subordinated notes were anti-dilutive in the second quarter of fiscal 2014 but were dilutive for the year-to-date period. The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies. Three Months Ended December 31, 2012 ------------------------------------------ (Revised) Note 1 Income Gross (Loss) Gross Margin Operating From Margin Rate Expenses Operations --------- -------- --------- ---------- GAAP $ 68,001 42.7% $ 73,656 $ (5,655) Non-GAAP Reconciling Items: Amortization of intangibles 911 (1,856) 2,767 Share-based compensation 626 (3,090) 3,716 Restructuring charges - (6,602) 6,602 --------- --------- ---------- Non-GAAP $ 69,538 43.6% $ 62,108 $ 7,430 Three Months Ended December 31, 2012 -------------------------------- (Revised) Note 1 Per Share Per Share Net Net Net Income Income Income (Loss), (Loss), (Loss) Basic Diluted --------- --------- --------- GAAP $ (8,173) $ (0.04) $ (0.04) Non-GAAP Reconciling Items: Amortization of intangibles 2,767 Share-based compensation 3,716 Restructuring charges 6,602 --------- Non-GAAP $ 4,912 $ 0.02 $ 0.02 Computation of basic and diluted net loss per share: GAAP Non-GAAP --------- --------- Net income (loss) $ (8,173) $ 4,912 Interest on dilutive convertible notes - 533 --------- --------- Net income (loss) for purposes of computing income (loss) per diluted share (8,173) 5,445 ========= ========= Weighted average shares: Basic 240,786 240,786 Dilutive shares from stock plans - 1,892 Dilutive shares from convertible notes - 28,490 --------- --------- Diluted 240,786 271,168 ========= ========= Nine Months Ended December 31, 2012 ------------------------------------------ (Revised) Note 1 Gross Gross Margin Operating Loss From Margin Rate Expenses Operations --------- -------- --------- ---------- GAAP $ 182,998 40.9% $ 212,624 $ (29,626) Non-GAAP Reconciling Items: Amortization of intangibles 3,407 (7,668) 11,075 Share-based compensation 1,839 (9,890) 11,729 Restructuring charges - (6,602) 6,602 --------- --------- ---------- Non-GAAP $ 188,244 42.1% $ 188,464 $ (220) Nine Months Ended December 31, 2012 -------------------------------- (Revised) Note 1 Per Share Per Share Net Loss, Net Loss, Net Loss Basic Diluted --------- --------- --------- GAAP $ (37,127) $ (0.16) $ (0.16) Non-GAAP Reconciling Items: Amortization of intangibles 11,075 Share-based compensation 11,729 Restructuring charges 6,602 --------- Non-GAAP $ (7,721) $ (0.03) $ (0.03) Computation of basic and diluted net loss per share: GAAP Non-GAAP --------- --------- Net loss $ (37,127) $ (7,721) Weighted average shares: Basic and diluted 239,099 239,099 Note 1 is presented above, before the Condensed Consolidated Statements of Operations. The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies. QUANTUM CORPORATION FORECAST FOURTH QUARTER FISCAL 2014 GAAP TO NON-GAAP RECONCILIATION (Dollars in millions) ----------------- Percentage Range ----------------- Forecast fourth quarter gross margin rate on a GAAP basis 42.3% - 43.3% Forecast amortization of intangibles 0.3% Forecast share-based compensation 0.4% ----------------- Forecast fourth quarter gross margin rate on a non-GAAP basis 43.0% - 44.0% ================= ----------------- Dollar Range ----------------- Forecast fourth quarter operating expense on a GAAP basis* $59.7 - $60.7 Forecast amortization of intangibles 1.9 Forecast share-based compensation 2.8 ----------------- Forecast fourth quarter operating expense on a non-GAAP basis $55.0 - $56.0 ================= * Forecast fourth quarter GAAP operating expense does not reflect facility restructuring charges for remaining lease payments as a result of the outsourcing decision as described in our Form 8-K as filed with the SEC on July 3, 2013 . These charges will be recognized when we fully vacate the various locations and may occur in the fourth quarter of fiscal 2014, the first quarter of fiscal 2015 or a portion in each period. Estimates based on current ( January 29, 2014 ) projections. The projected GAAP and non-GAAP financial information set forth in this table represent forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For risk factors that could impact these projections, see our Annual Report on Form 10- K as filed with the SEC on June 7, 2013 . We disclaim any obligation to update information in any forward-looking statement. The non-GAAP financial information set forth in this table is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial information used by other companies. Contact: Brad Cohen Public Relations Quantum Corp. (408) 944-4044 brad.cohen@quantum.com Christi Lee Investor Relations Quantum Corp. (253) 334-9823 ir@quantum.com Source: Quantum Corporation


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