Quantum Corporation (QMCO) on Q1 2023 Results - Earnings Call Transcript

Operator: Good afternoon, everyone. And thank you for participating in today’s Conference Call to discuss Quantum’s Financial Results for the First Quarter Fiscal Year 2023. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Brian Cabrera from Quantum. Brian Cabrera: Good afternoon. And thank you for joining today’s conference call to discuss Quantum’s first quarter fiscal 2023 financial results. I am Brian Cabrera, Quantum’s Chief Legal and Compliance Officer. Joining me today are Jamie Lerner, our Chairman and CEO; and Mike Dodson, our CFO. This afternoon, we issued a press release, which you can access under the Investor Relations section of our website at www.quantum.com. We are using a slide presentation in conjunction with today’s call and this is also accessible under the same section of our website. During today’s call, our comments may include forward-looking statements. All statements other than statements of historical facts should be viewed as forward-looking. These statements include any projections of revenue, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, backlog or other financial items. These statements may also concern the expected development, performance and market share or competitive performance of our products or services. All forward-looking statements are based on information available to Quantum as of today’s date. We advise caution in relying on these statements as they may involve -- as they involve known and unknown risks, and uncertainties we refer to as risk factors. Risk factors may cause our actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in our business. We include detailed information about these and additional risk factors under the section labeled the Risk Factors in our quarterly report on Form 10-Q and our annual report on Form 10-K, which we file with the Securities and Exchange Commission. We do not intend to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except of course, as we are required by applicable law. Please note that our press release and the management statements we make during today’s call will include certain financial information in GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release. If you are unable to listen to the entire call at this time, we will make a recording available for at least 90 days in the Investor Relations section of our website. Now, I would like to turn the call to our Chairman and CEO, Jamie Lerner. Jamie? Jamie Lerner: Thank you, Brian, and thank you all for joining us today. Earlier this afternoon, we announced results for our first quarter of the fiscal year 2023, with revenue results that exceeded the high end of guidance. Our revenue growth was driven by continued strong hyperscale sales, as well as sequential growth in our video surveillance business. In addition to the strong revenue results, our backlog, as of July 31st, was $67 million, a near record level. So demand continues to be strong, and we are confident in the prospects for growth. We also delivered our fifth consecutive quarter of growth in the number of subscription customers, now at over 450, which is an increase of 200% year-over-year and 29% sequentially. We are pleased with the progress we have made thus far, but this only represents a fraction of the total opportunity that still lies ahead. Currently, we have over 10,000 active customers and 23,000 systems under support contract, which represents huge potential toward growing recurring revenue over the next few years. As these customers come up for renewal or have a need to refresh their Quantum products, they have been very receptive to moving to subscription licensing, most on multiyear contracts. As one example, in May, we closed the large StorNext 7 subscription deal with a well-known shoe and apparel company, who has been a customer for many years, using Quantum storage solutions to create all of their advertising and marketing content. As they have expanded their brand, the amount of video and image data they are creating has increased, and their legacy infrastructure was constraining their creative teams. To address this need, they upgraded their old StorNext infrastructure to StorNext 7, moving to subscription software on a five-year contract and added F-Series NVMe storage to their infrastructure to provide increased performance and better efficiency. StorNext software licensing was the largest component of this deal and this is a great example of how large brands and enterprises are creating more video and image data, as well as a very repeatable sale we can make to our installed base of customers around the world. We are also continuing to expand our software offerings and customer adoption of our services technology. StorNext software is now available for purchase on the Amazon Web Services marketplace, giving customers a new way to purchase StorNext and run it on the public cloud. We will be showcasing this new offering later this quarter at the International Broadcasting Conference in Amsterdam. We have close to 1,000 customers that are now using the MyQuantum Service Delivery Platform that we announced in April. And we now have over 2,500 customers and close to 4,000 products connected to our cloud-based analytics software, where we are collecting hundreds of thousands of data points to help our customers improve their operations every day. This service delivery platform enables Quantum to become more connected with our customers, increase the value we are providing, and ultimately, monetize these services as we continue to drive growth in recurring revenue. Also, during the quarter, some of our largest wins were at international government agencies, for national film and sound archives, and digital preservation of valuable cultural artifacts. In addition to the size of these opportunities, these wins are also notable, because they combine Quantum file or object storage software with disk and tape, and in some cases, CatDV, which is used to index catalog and browse the archive. These wins provide a good example of a unique end-to-end architecture for data archiving and digital preservation that only Quantum can provide. I am also pleased to report that we had a very strong quarter in our video surveillance business, where we had big wins at one of the world’s largest transportation companies, as well as wins with transportation authorities, for surveillance and public transit systems, universities, hospitals and casinos. These wins provide further evidence of our success with the Pivot3 acquisition, while also serving as an example of the large opportunities available to significantly grow this business. As demonstrated this quarter, the business is characterized by large wins, and although, it may fluctuate from quarter to quarter, we are excited about this initial momentum as we continue to ramp the business. All of these organizations, cloud providers, Fortune 500 enterprises, household brands, hospitals and research institutions, and government agencies around the world trust Quantum to store, manage and protect their most valuable assets, their digital data. The products and solutions we provide are more relevant than ever with the exponential growth in video and unstructured data that is mission-critical to these organizations. With the strong position we have in these accounts, combined with our large installed base of customers, we are poised to significant -- significantly grow recurring revenue over the next few years, while driving improved margins and more predictable revenue streams. In summary, I believe we have taken the necessary steps to position Quantum for continued improvements in our future operating performance. These -- the programs we have put in place to control PPV, manage discounting and adjust pricing will begin to show more meaningful results in fiscal Q2 in which we expect to deliver sequential improvements in both gross margin and EBITDA, as Mike will discuss. Demand remains strong with backlog currently at record levels. We are continuing to increase the conversion rate of customers to a subscription model and build our recurring revenue. We are committed to disciplined execution on our initiatives, delivering improvements in gross margin and reducing operating expenses that are collectively expected to result in substantial year-on-year improvements to adjusted EBITDA over the coming quarters. Now, I’d like to turn the call over to Mike to provide more detail on the results, then we can take questions. Mike? Mike Dodson: Thank you, Jamie. Welcome, everyone, and thank you for joining the call today. Now, turning to the results for the first quarter. Revenue came in just above the high end of guidance at $97.1 million, representing an increase of 9% year-over-year and 2%, compared to $95.2 million in the prior quarter. Backlog at the end of the first quarter was approximately $47 million, primarily reflecting the timing of large orders, and subsequently, increased to a new record of approximately $67 million at July 31, 2022. Approximately 75% of the first quarter ending backlog was related to hyperscaler customers and approximately $25 million of the ending backlog was shippable to customers if we were not supply constrained. Although, we are seeing some signs of improved supply, we continue to be constrained primarily on tape drives, as well as broad-based shortages of components. During the first quarter, secondary storage revenues were up 1% sequentially, primarily driven by ongoing strong demand from hyperscaler customers, largely offset by a decrease in backup and data protection products. Primary storage systems had another solid quarter and was up 9% sequentially, primarily driven by a significant increase in shipments of video surveillance solutions. In conjunction with our focus on driving the transition to a recurring software subscription model, last quarter we introduced a series of supplemental metrics to track our quarterly progress. The first of these metrics was annual recurring revenue, or ARR, which increased 11% sequentially to $8.2 million. This figure includes recurring software subscription revenue across all of our transaction product offerings, including StorNext, ActiveScale, DXi, and CatDV. Additionally, at quarter end, the cumulative number of customers under a subscription contract increased to over 450 active customers, which represents 200% year-over-year growth and sequential growth of 29%. Another key metric we introduced was total contract value or TCV, which sequentially increased by 16% to $16 million at the end of the first quarter, up from $15.8 million in the prior quarter. Gross margin in the first quarter was 35%, compared to 38% in the prior quarter. The sequential decrease reflected several factors, including our projected peak and purchase price variance driven from constraints in the supply chain, continued inflationary cost pressures and logistics costs, and a product revenue mix that was more heavily weighted toward our hyperscaler customers. Roughly 1% of the sequential decline in gross margin is attributed to the less favorable product mix and 2% of the sequential decline in gross margin is due to the higher PPV and other logistics supply chain costs. Assuming no meaningful deterioration in the overall market environment or supply chain dynamics, the company believes the gross margin in the first quarter represents a low point. As last -- as stated last quarter, it will take additional time to realize meaningful improvements in terms of both product mix and our higher pricing targeted to offset the inflationary cost environment. GAAP operating expenses in the first quarter were $41.1 million, compared to $41.8 million in the prior quarter. Non-GAAP operating expenses during the first quarter decreased $0.9 million to $36.3 million, as compared to $37.2 million in the prior quarter. I want to emphasize that operating expense in the first quarter does not reflect the full anticipated benefit of cost reductions that were implemented in early June. We continue to expect to reduce the quarterly operating expense run rate, targeting approximately $35 million by the end of fiscal 2023. Excluding stock compensation, restructuring charges and nonrecurring charges, non-GAAP adjusted net loss in the first quarter was $3.7 million or $0.04 per share, compared to adjusted net loss of $2.8 million or $0.05 per share in the prior quarter. Adjusted EBITDA for the first quarter was just above the midpoint of guidance at $0.3 million, compared to $0.4 million in the prior quarter. As we have discussed previously, driving continued improvements in our adjusted EBITDA remains one of our highest priorities. We expect to achieve this through a combination of growing revenue, expanding gross margins and reducing operating expenses. We expect the cost reduction actions, together with product price increases and supply chain initiatives, will increasingly contribute to positive EBITDA results during the second half of fiscal 2023. There is a full reconciliation of our non-GAAP results to the most directly comparable GAAP measure in both the press release and Form 10-Q released today. Now turning to the balance sheet, liquidity and cash flows, all of which now reflect the company’s successful rights offering that was closed in April. Cash and cash equivalents at the end of the quarter were $26.8 million, compared to $5.5 million in the prior quarter. Outstanding term debt at the end of the first quarter decreased to $78.4 million from $98.7 million at the end of the prior quarter. This decrease of approximately $20 million reflects the pay down of term debt after completing the rights offering. At the end of the first quarter, the outstanding balance on the company’s revolving line of credit was $17.3 million, compared to $17.7 million in the prior quarter. In the first quarter, interest expense decreased to $2.1 million, compared to $2.5 million in the prior quarter and $3.9 million during the same quarter a year ago. Our cash and cash equivalents increased by $21.3 million during the quarter. Net cash used in operating activities was $18.3 million. Excluding changes in assets and liabilities, net cash used by operating activities for the quarter was $3.1 million, of which approximately two-thirds represented interest expense. The net cash used related to changes in assets and liabilities was $15.2 million, driven primarily by season -- seasonality related declines in deferred revenue. Historically, the heaviest cash collections for service contract renewals have been the December and March quarters, with decreases in cash collections in the June and September quarters. In addition to the normal seasonality, one other factor contributing the current quarter sequential decline of $13.6 million in deferred revenue was the lengthy contract renewal negotiation with one of our largest customers that was not completed by the end of the quarter and represented an annual contract value of just over $4 million. Also, a use of cash during the quarter was an increase in other current assets of approximately $2.7 million, represented by the prepayment for key inventory, as well as annual subscription for group insurance. Net cash used in investing activities was $5 million, which included CapEx of $3 million and a $2 million deferred business acquisition payment. The net cash provided by financing activities during the quarter was $44.6 million and primarily represented the net proceeds of the rights offering, less approximately $20.6 million used to pay down outstanding term debt. Now moving to our financial outlook, as we have outlined, our fiscal 2023 plan is to continue to grow our revenues, while implementing cost reduction programs. We anticipate the most challenging area will be to address the pressure on gross margins. We do expect in the back half of fiscal 2023 to see measurable improvements in adjusted EBITDA. We expect revenue for the second quarter to be in the range of $95 million, plus or minus $4 million, non-GAAP adjusted net loss is expected to be $1.5 million, plus or minus $1 million, and adjusted net loss per share of $0.02, plus or minus $0.02 per share, using an anticipated basic share count of 94.5 million shares. We expect adjusted EBITDA in the second quarter to be $2.5 million, plus or minus $1 million. With that, I will turn the call back to Jamie for closing remarks. Jamie? Jamie Lerner: Thanks, Mike. In closing, demand continues to be strong with strong revenue results and a large backlog. We are very pleased with the growth in subscription customers and we see huge potential to continue to grow recurring revenue over the next few years. We have taken the steps to improve supply chain and deliver improvements in gross margin and adjusted EBITDA in the coming quarters. With that, we will open it up for questions. Operator? Operator: Our first question is from Craig Ellis with B. Riley Securities. Please proceed with your question. Craig Ellis: Thanks for taking the question and I will start with a clarification on the gross margin outlook. So, Mike, if I step three months, I think, or looking at gives and takes in gross margin that at the time we -- going to sustain at 38% gross margin until we got some benefit from some of the initiatives that had underway and now we are at 35% and I think the view is that this will be the bottom and we hope for leverage against that bottom in the back half of the year. So given the significant change versus our recent gross margins could potentially bottom. What gives you the confidence that 35% is the bottom and maybe certainly, what are the specific things that are going to drive materially higher gross margin from here? Mike Dodson: Yeah. Sure, Craig. What we experienced in Q1, we really expected and we understood our PPV, in a lot of the broker buys that we did were two or three quarters ago, but the inventory didn’t move out until this quarter. So we knew that this was going to be the toughest quarter for gross margin, and in our prepared remarks last quarter, we really we expected to see meaningful improvement in the back half of the year. So we knew it was going to be tough, especially the PPV, because that was -- we knew that was being amortized, right? The inflationary cost pressures continued, but we do feel confident we can see PPV getting a lot better. We are no longer putting things on airplanes or on boats. We have done a lot that we can to control those costs. So we feel confident, unless there are some other macro events that impact the supply chain, that this should be the low point. Craig Ellis: Okay. Then let me just ask a follow-up, because I think when we talked about the potential for gross margin in the current quarter, it was relatively late in the quarter. So I think the inputs would have been known and yet we were still basis points below. So how do you feel about the business’ ability to really drive the kind of inputs for forecasting knew the inputs that you need so that we have got the outlook for a line item like that and the ability to execute on that line item? Mike Dodson: Yeah. I think we are very clear visibility into PPV and we know that’s improving. We also are more traction on the price increases that we put into place, as well as efforts to reduce our discounts. We are seeing more and more traction there. So we have a number of programs in place that we are seeing improvements in. It still will be -- it will be a gradual improvement we would expect next quarter and then more improvement further in Q3 and Q4. Craig Ellis: And finally, just to clarify, Mike, are you intimate that gross margin should be flattish fiscal 2Q and then you get those initiative benefits in the back half or are you looking for something up or down… Mike Dodson: No. We are definitely … Craig Ellis: …in Q3 I guess? Mike Dodson: We are definitely expecting an improvement in Q2. Craig Ellis: Okay. I will just ask one more to Jamie, and then I will hop back in the queue. So, Jamie, nice to see I think customers go up by almost 100 progress in the quarter. But when I look at the incremental value for ARR customer, it looks like sequentially it went from $13,000 to $8,000. So that’s down pretty significantly from where we started and I know that we have gone for store centric mix with subscription to some of the other but talk about what a reasonable set of expectations would be from this level of incremental ARR per customer and where should normalize long-term really coming? Thank you. Jamie Lerner: Yeah. I mean you got to understand the mix of products available under subscription has changed significantly. We started predominantly with StorNext, which is probably our -- tends to have a large deal size and now we have added DXi to that, which is a high runner product, but it has an ASP of below $25,000. So what you are seeing is, we are building momentum and customers, the ASP’s coming down, because again, we have added more products, more products that are high runners. And so, I think, we are still kind of characterizing the business, as we have just begun adding these new products. So in terms of fully understanding the ASP three-year value, I still think we have got some work to do there. But I mean, really, what we are looking for at this point is, do customers want to go to subscription, do they have pushback, are there problems with the model and right now, we are not seeing a lot of problems and push back and so we are just trying to pick up the velocity. And again, as we stated in our last earnings call, our goal is to double ARR this year and I think we are on a -- we are on a path to achieve that. And so, I feel pretty good about that part of the business. Obviously, all of our -- huge amount of our effort is all around EBITDA and that’s where I feel really good for the first time in several quarters where that EBITDA is jumping from $300,000 to $2.5 million. I mean that’s -- that really shows you the work that we are doing on pricing, discounting, controlling our spend in OpEx and managing our suppliers and managing the unexpected price increases and that’s all coming more in the control. And again, we are seeing that EBITDA return, which really for us as business operators, is the best thing we have seen in a few quarters and we are just excited about that and we are going to grow that every quarter. We are just going to bring our revenue up every quarter. We see line of sight to that. And we see that we are just going to keep expanding EBITDA over the next several quarters and get returned to the levels we used to be at. But to follow-up on Mike’s comments, we really view that 35% as our low point. This quarter looks much more in the 100 basis points to 200 basis points above that. We see that pretty clearly right now and I think be able to build on that every quarter as we get the business back to historic levels. Craig Ellis: Got it. Thanks, Jamie. Thanks, Mike. Jamie Lerner: Thanks Craig. Operator: Our next question is from Eric Martinuzzi with Lake Street. Please proceed with your question. Eric Martinuzzi: Yeah. My question is on the revenue guidance for Q2. I am not expecting a lot of volatility in the service of the royalty revenue, but based on the midpoint of the guidance, we would be down sequentially. So I am assuming that’s in the product area, is that assumption correct and why would that be given normal seasonality? Jamie Lerner: Yeah. I don’t think those assumptions are correct. So what I have done is, I guided to $92 million two quarters ago, then to $94 million and this quarter, we are now current quarter guiding to $95 million. So I am guiding up every quarter. Now we all know that we have had late in quarter supply fluctuation. Predominantly, we have had the rug pulled out from us a few times where our suppliers committed to delivering certain quantities to us and told us with days and weeks left in the quarter, they couldn’t do it. So my guide incorporates that, right? The $95 million incorporates that I have got to reserve several million dollars for those surprises occurring. If those surprises don’t occur, I expect we are going to be at the top end of the range. So right now, I am expecting quarter-on-quarter growth, but I am taking several million dollars away from that until the supply chain and the late-breaking surprises are a thing of the past. If we don’t get surprised, I don’t think you are going to see -- I think you will see it at the high end of the range. If we do get surprised, it won’t be related to any business performance, it would be related to what product did we get shorted by a supplier. It won’t be related to the sale of a part of the business being lower than we expected. Our sales are pretty much -- we are hitting our expectations, and the shipments and revenue are really tied to availability of materials. And as we said, right now about 93% of our constrained materials are entirely related to tape drives. Eric Martinuzzi: Got you. So just conservatism on the product side, I understand. Shifting over to the services side, historically, we would see -- given the healthy product sales, we would see a step-up in service and yet that kind of stalled out here in the 33%, 34% range. Should we expect that to grow over time as we move back to a positive comp in the product? Jamie Lerner: Mike, do you want to address the kind of service projections? Mike Dodson: Yeah. I think when we look at service, I mean, we address the cash implications, it’s just the seasonality. I think on a longer term basis, the struggle that we have there, the challenge that we have there is the golden glide. So it’s -- underneath that, we are growing the service, but we are also dealing with the golden glide, older established products as they come off and they are not renewed. So I think that’s why you see a bit of a stall, Eric, is that struggle. Eric Martinuzzi: Okay. And then just macro commentary, you guys do have a global view, given thousands of customers worldwide. Curious to know what you are seeing in Europe, is your guidance being impacted and this is both an FX question and a macro demand question, but just curious to hear what are your larger customers in Europe, are they on track, are they getting more tentative, have we seen any sales cycle extended and then is there an FX impact in your outlook? Mike Dodson: I mean I can… Jamie Lerner: Yeah, Mike. Why don’t I cover the macro and you talk FX. Mike Dodson: Okay. Okay. Jamie Lerner: Right now in Europe, we are not seeing anything that I would call widespread, broad based slowing down on technology spending. I think people are being judicious. So I am seeing more process steps, where people are seeking greater approval. There are process steps to justify and make sure that people are making justified orders. But at this stage, we are not seeing a broad-based slowdown. Mike Dodson: Okay. And on the FX side, to-date we haven’t seen a significant impact on our business due to FX. First, when you think of our revenue streams after you back out the service business, because that’s basically amortizing deferred revenue down. The level of business that we have outside the U.S. denominated in the foreign currency is about 20% of our total revenues, and when you look at that level and the mix of currency movements, we just haven’t seen a significant impact. Eric Martinuzzi: Okay. That’s encouraging. Then a couple of housekeeping items, if I may. The weighted average share count upon, which you are basing your guidance for non-GAAP adjusted net loss per share for Q2 is 94.5 million shares and I saw in the Q that you filed as of August 1st, we have got 102.7 million shares. So help me understand the delta there? Mike Dodson: Yeah. The -- yeah, I am not familiar with the 102 million, Eric. But when we look at what our share counts, how they have moved the last few quarters, because it’s the impact of the rights offering, right? And on just the… Eric Martinuzzi: Yeah. Mike Dodson: … basic level, because as long as we have a loss, we don’t have the dilutive effect of all the other equity instruments. But for Q4, we were at 60.3 million. Then Q1, we are at 83.6 million. And really, I -- what we expect looking at the schedule now, Eric, is I would expect 91.6 million for Q2. It looks like the 94.5 million really includes a dilutive effect. But that’s only if we were profitable. Eric Martinuzzi: Okay. Sorry, 91.6 versus 94.5. Mike Dodson: Yeah. Eric Martinuzzi: Got it. Mike Dodson: Yeah. Eric Martinuzzi: Right. And then last housekeeping on the, what should we use for interest expense in Q2, I know you had $2.1 million in Q1, but that had some puts and takes in it. Mike Dodson: Yeah. I think that, I mean, the $2 million is a -- it’s a good number for right now. Eric Martinuzzi: Got it. Mike Dodson: Yeah. Eric Martinuzzi: Great. Mike Dodson: Yeah. Eric Martinuzzi: Thanks for taking my questions. Mike Dodson: Sure. Operator: Our next question is from Nehal Chokshi with Northland Capital. Please proceed with your question. Nehal Chokshi: Yeah. Thank you. It seems like solid results. Congratulations on that. Your slide nine shows your shippable backlog and an order schedule for future quarters. Within those orders schedule for future quarters, that is what happened within the June quarter, so does that mean that there are orders that are shippable within this September quarter? Jamie Lerner: Yeah. Let me turn to that slide and see. Are you are looking -- you are looking at the light blue shippable or the order... Nehal Chokshi: The one -- yeah. I am just wondering if, because that’s orders that were scheduled for future quarters within June quarter. It does not mean that it’s shippable in the September quarter, some portion of that shippable in the September quarter? Jamie Lerner: Not necessarily, because I am -- took a lot beyond the quarter. Nehal Chokshi: But, I guess, the question is some of that still shippable within the September quarter? Jamie Lerner: Yes. Nehal Chokshi: Got it. Jamie Lerner: The… Nehal Chokshi: Okay. Yeah. Because otherwise what it looks like is that, you have very little visibility into your September quarter guidance relative to your June quarter guidance. And so that’s essentially what my question is, is that what gives you this confidence to guide the last Q2 with what appears to be, if I were to just use a Q-to-Q change in shippable backlog plus your revenue as a gauge for what your orders were in the quarter, it looks like it went down significantly. But what you are trying to say is that, no, that’s not the case. Orders that are shippable within the September quarter… Jamie Lerner: Right. Nehal Chokshi: … remain quite robust actually and that… Jamie Lerner: Right. Nehal Chokshi: … gives you confidence to guide the way that you have guided, is that correct? Jamie Lerner: Yeah. Definitely when you look at that July orders, that has Q2 business ahead, right? Nehal Chokshi: Yeah. Got it. Very good. Okay. And then, Jamie, last quarter, you talked about your four levers to achieving a $25 million EBITDA in, I wouldn’t say, the near future, but near- to mid-term future and then the $50 million annualized EBITDA target mid- to long-term basis. Jamie Lerner: Yeah. Nehal Chokshi: How do you feel about those -- how those levers have been coming along relative to when you laid them out a quarter ago? Jamie Lerner: Yeah. I think we are -- we feel we are on our plan. If you look at this quarter, we are bringing up gross margin. We are looking at kind of that 50 basis points to 100 basis points a quarter, bringing that up. I think we will do better than that this quarter. We are looking at getting greater supply. We are seeing -- we are selling faster than we are getting supply, but the supply is coming up and there’s EBITDA and that supply, we need to get the company well over $100 million, given our mix. We see that coming together. We see that supply coming together. Our pricing and discounting has been put in place. I think that’s being generally accepted. At first, there was some grumbling, but I think people generally understood it is -- we are in an inflationary period, so putting that in place. And then we have taken a series of OpEx reduction measures that are behind us at this point and those are taking effect. And all that’s coming together and it’s good to see us go from $300,000 EBITDA to $2.5 million, that’s the kind of growth I think our investors want to see and we have got to keep walking that up. But it’s taken a lot of work to get here and now we are restoring that EBITDA and get free cash flow restored again, as we bring it up. But to go from $300,000 to $2.5 million is a good jump. We need to get that $2.5 million up to $5 million and up to $25 million, up to $50 million and we will keep working it out. But I -- what I feel also good about is most of the supply chain issues are now under control. We are not paying broker fees. We are not paying expedite fees, 93% of our supply chain issue is all about tape drives. So we have everything else. We have our servers. We have our hard drives. We have our network cards. We have our power supplies. We have all the stuff we need to build tape libraries, literally 93% of our issue right now is just getting the tape drives shipped to us and we just put them in libraries and ship them. Nehal Chokshi: Okay. That’s very helpful. And just with that 93% perspective, where was that a quarter and two quarters ago? Jamie Lerner: It was still pretty high. It was in the low 80s. So we had, I think, of it as 80% of our issue with tape drives, 20% was other sundry items. We have gotten all those items kind of worked down and basically our supply chain issue is laser-focused on a single supplier. Nehal Chokshi: Okay. If I recall correctly, we had a longer term key levers was territory and vertical sales fill-ins, presumably that’s something that’s going to be worked on as you go through this fiscal year, not something that you worked on in this most recent fiscal quarter, correct? Jamie Lerner: We have been working on that as well. I mean we are putting those people in place now. The hiring environment has changed drastically. There’s a lot of talent available. I think there’s a lot of people coming out of companies right now that are doing reductions in force. So, I am seeing a much more favorable hiring environment for Quantum and we are getting really good talent that we are placing into key territories. So I feel like we are getting much closer to full strength in our sales organization and we will see that as we get people through boot camps, training. I think we are going to see the sales come through. And we are hiring people to address mix, I mean, everyone knows a big part of our mix is hyperscalers. Those are big volume deals, but they are lower margin. And I feel really good about how that business is performing. So the people we are hiring are in higher margin businesses to help us with mix. They are going after enterprise, media and entertainment and… Nehal Chokshi: Federal. Jamie Lerner: other key vert -- yeah, U.S. federal, absolutely. Other key verticals for us that will help us get our mix more balanced. Nehal Chokshi: Okay. Great. Thank you. Operator: We have reached the end of the question-and-answer session and I will now turn the call over to Jamie Lerner for closing remarks. Jamie Lerner: Okay. Thanks, everyone. Thanks for attending today and this concludes our call. We will see you next quarter. Thanks, everyone. Mike Dodson: Thank you. Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
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Quantum Corporation, listed on NASDAQ as QMCO, is a company that specializes in data storage and management solutions. It faces competition from other tech companies in the data storage industry. On July 8, 2025, QMCO is set to release its quarterly earnings, with Wall Street estimating an earnings per share (EPS) of -$1.17 and projected revenue of $65.85 million.

The company recently announced a delay in filing its Annual Report on Form 10-K for the fiscal year ending March 31, 2025. This delay, as highlighted by Business Wire, is due to a review of accounting related to certain revenue matters. Consequently, the release of fiscal 2025 financial results and the business update conference call, initially scheduled for July 3, 2025, will be postponed.

QMCO's financial metrics reveal some challenges. The company has a negative P/E ratio of -0.35, indicating negative earnings. Its price-to-sales ratio is 0.20, suggesting the market values its sales at a low level compared to its stock price. The enterprise value to sales ratio is 0.65, reflecting the company's valuation in relation to its revenue.

The enterprise value to operating cash flow ratio is -18.88, indicating difficulties in generating positive cash flow from operations. The earnings yield is -2.83%, further highlighting financial struggles. The debt-to-equity ratio is -0.75, suggesting more liabilities than equity, which could concern investors. The current ratio is 0.37, indicating potential liquidity issues, as the company may struggle to cover short-term liabilities with current assets.

Quantum Corporation's Financial Challenges and Legal Investigation

  • Quantum Corporation (NASDAQ:QMCO) reported an EPS of -$1.16, meeting expectations but highlighted revenue shortfall and ongoing financial challenges.
  • The Law Offices of Frank R. Cruz launched an investigation into Quantum for potential violations of federal securities laws, affecting investors.
  • Quantum announced a delay in filing its Annual Report, indicating issues with accounting related to certain revenue matters and potential liquidity concerns.

Quantum Corporation (NASDAQ:QMCO) specializes in data storage and management solutions. On June 30, 2025, QMCO reported an earnings per share (EPS) of -$1.16, aligning with the estimated EPS of -$1.16. The company generated a revenue of $65.7 million, slightly below the estimated $65.85 million. Despite meeting EPS expectations, the revenue shortfall highlights ongoing financial challenges.

The Law Offices of Frank R. Cruz has launched an investigation into Quantum for potential violations of federal securities laws. This investigation is on behalf of investors who may have suffered financial losses due to the company's actions. On June 30, 2025, Quantum disclosed its inability to meet certain obligations, triggering the investigation. Investors are encouraged to contact the law firm to explore potential claims.

Quantum has also announced a delay in filing its Annual Report on Form 10-K for the fiscal year ending March 31, 2025. The company submitted a Notification of Late Filing on Form 12b-25. This delay affects the release of Quantum's fiscal 2025 financial results and the business update conference call, initially set for July 3, 2025. The delay is due to a review of accounting related to certain revenue matters.

Quantum's financial metrics further illustrate its challenges. The company has a price-to-earnings (P/E) ratio of approximately -0.39, indicating negative earnings. The price-to-sales ratio is about 0.23, suggesting the market values the company's sales at a low multiple. The enterprise value to sales ratio is approximately 0.67, reflecting the company's valuation in relation to its revenue.

The enterprise value to operating cash flow ratio is around -19.55, highlighting difficulties in generating positive cash flow from operations. The earnings yield is approximately -2.55%, emphasizing financial difficulties. Additionally, the debt-to-equity ratio is about -0.75, indicating a negative equity position, and the current ratio is approximately 0.37, suggesting potential liquidity concerns.

Quantum Corporation's Upcoming Earnings Report: A Financial Overview

  • Quantum Corporation (NASDAQ:QMCO) faces significant financial challenges with an estimated EPS of -$1.16 and projected revenue of $65.85 million.
  • The company's negative earnings are highlighted by a P/E ratio of -0.43, indicating profitability issues.
  • Liquidity concerns are evident with a current ratio of 0.37, suggesting potential short-term operational difficulties.

Quantum Corporation, listed as NASDAQ:QMCO, is preparing to release its quarterly earnings on June 16, 2025. The company is known for its data storage and management solutions, catering to a wide range of industries. Despite its established presence, QMCO faces financial challenges, with Wall Street estimating an earnings per share (EPS) of -$1.16 and projected revenue of $65.85 million.

The company's financial metrics reveal significant hurdles. With a price-to-earnings (P/E) ratio of -0.43, QMCO is currently experiencing negative earnings. This indicates that the company is not generating profit relative to its share price. Additionally, the price-to-sales ratio of 0.25 suggests that the market values QMCO at 25 cents for every dollar of sales, reflecting investor skepticism.

QMCO's enterprise value to sales ratio stands at 0.69, which shows how the market values the company relative to its sales. However, the enterprise value to operating cash flow ratio of -20.22 highlights the company's struggles in generating positive cash flow. This is a critical concern for investors, as it indicates potential difficulties in sustaining operations without external funding.

The company's earnings yield of -2.32% further underscores its financial difficulties. This metric, which represents the inverse of the P/E ratio, suggests that QMCO is not providing returns to its shareholders. Moreover, the debt-to-equity ratio of -0.75 indicates a negative equity position, raising concerns about the company's financial stability and ability to meet its obligations.

Liquidity is another area of concern for QMCO, with a current ratio of 0.37. This ratio measures the company's ability to cover its short-term liabilities with its short-term assets. A ratio below 1 suggests potential liquidity issues, which could impact QMCO's ability to operate effectively in the short term. As the company prepares to release its earnings, these financial metrics will be closely scrutinized by investors and analysts alike.

Quantum Corporation's Capital Utilization Efficiency Compared to Peers

  • Quantum Corporation (NASDAQ:QMCO) has a Return on Invested Capital (ROIC) of 0.87%, significantly lower than its Weighted Average Cost of Capital (WACC) of 14.52%, indicating inefficiencies in capital utilization.
  • Quantum Computing, Inc. and other peers like PowerFleet, Inc. and Rimini Street, Inc. also show negative ROICs, suggesting they are not generating sufficient returns to cover their costs of capital.
  • Usio, Inc. stands out with a remarkable ROIC of 133.16% compared to its WACC of 11.75%, indicating highly efficient capital utilization.

Quantum Corporation (NASDAQ:QMCO) specializes in data storage and management solutions, offering services and products that help businesses store, manage, and protect their data. In the competitive landscape, Quantum faces peers like Quantum Computing, Inc., PowerFleet, Inc., Rimini Street, Inc., Ribbon Communications Inc., and Usio, Inc., each with varying efficiencies in capital utilization.

Quantum's Return on Invested Capital (ROIC) is 0.87%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 14.52%. This indicates that Quantum is not generating sufficient returns to cover its cost of capital, suggesting inefficiencies in how it uses its capital. The ROIC to WACC ratio of 0.06 further highlights this challenge.

In comparison, Quantum Computing, Inc. has a negative ROIC of -33.77% against a WACC of 19.70%, resulting in a ROIC to WACC ratio of -1.71. This suggests even greater inefficiencies in capital utilization compared to Quantum. Similarly, PowerFleet, Inc. and Rimini Street, Inc. also show negative ROICs, indicating they are not generating returns that meet their respective costs of capital.

Ribbon Communications Inc. presents a slightly better scenario with a positive ROIC of 3.03% but still falls short of its WACC of 13.02%, resulting in a ROIC to WACC ratio of 0.23. This indicates that while Ribbon is generating some returns, it is not enough to cover its cost of capital effectively.

Usio, Inc. stands out with a remarkable ROIC of 133.16% compared to its WACC of 11.75%, leading to a ROIC to WACC ratio of 11.33. This indicates that Usio is highly efficient in capital utilization, generating substantial returns that far exceed its cost of capital, making it the most efficient among the peers analyzed.

Quantum Corporation's Capital Utilization Efficiency Compared to Peers

  • Quantum Corporation (NASDAQ:QMCO) has a Return on Invested Capital (ROIC) of 0.87%, significantly lower than its Weighted Average Cost of Capital (WACC) of 14.52%, indicating inefficiencies in capital utilization.
  • Quantum Computing, Inc. and other peers like PowerFleet, Inc. and Rimini Street, Inc. also show negative ROICs, suggesting they are not generating sufficient returns to cover their costs of capital.
  • Usio, Inc. stands out with a remarkable ROIC of 133.16% compared to its WACC of 11.75%, indicating highly efficient capital utilization.

Quantum Corporation (NASDAQ:QMCO) specializes in data storage and management solutions, offering services and products that help businesses store, manage, and protect their data. In the competitive landscape, Quantum faces peers like Quantum Computing, Inc., PowerFleet, Inc., Rimini Street, Inc., Ribbon Communications Inc., and Usio, Inc., each with varying efficiencies in capital utilization.

Quantum's Return on Invested Capital (ROIC) is 0.87%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 14.52%. This indicates that Quantum is not generating sufficient returns to cover its cost of capital, suggesting inefficiencies in how it uses its capital. The ROIC to WACC ratio of 0.06 further highlights this challenge.

In comparison, Quantum Computing, Inc. has a negative ROIC of -33.77% against a WACC of 19.70%, resulting in a ROIC to WACC ratio of -1.71. This suggests even greater inefficiencies in capital utilization compared to Quantum. Similarly, PowerFleet, Inc. and Rimini Street, Inc. also show negative ROICs, indicating they are not generating returns that meet their respective costs of capital.

Ribbon Communications Inc. presents a slightly better scenario with a positive ROIC of 3.03% but still falls short of its WACC of 13.02%, resulting in a ROIC to WACC ratio of 0.23. This indicates that while Ribbon is generating some returns, it is not enough to cover its cost of capital effectively.

Usio, Inc. stands out with a remarkable ROIC of 133.16% compared to its WACC of 11.75%, leading to a ROIC to WACC ratio of 11.33. This indicates that Usio is highly efficient in capital utilization, generating substantial returns that far exceed its cost of capital, making it the most efficient among the peers analyzed.

Quantum Corporation's Financial Performance and Capital Efficiency Compared to Peers

  • Quantum Corporation (NASDAQ:QMCO) has a ROIC of 0.87%, significantly lower than its WACC of 14.78%, indicating inefficiencies in capital utilization.
  • Ribbon Communications Inc. shows better capital efficiency with a ROIC of 2.93% compared to its WACC of 9.36%.
  • Usio, Inc. demonstrates exceptional capital efficiency with a ROIC of 133.16% against a WACC of 11.91%, suggesting strong growth potential.

Quantum Corporation (NASDAQ:QMCO) specializes in data storage and management solutions, competing with firms like Quantum Computing, Inc., PowerFleet, Inc., Rimini Street, Inc., Ribbon Communications Inc., and Usio, Inc. in the technology sector.

In evaluating Quantum's financial performance, the Return on Invested Capital (ROIC) is a crucial metric. Quantum's ROIC is 0.87%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 14.78%. This disparity indicates that Quantum is not generating sufficient returns to cover its cost of capital, suggesting inefficiencies in how it uses its capital.

Comparatively, Quantum Computing, Inc. has a negative ROIC of -33.77% against a WACC of 17.45%, resulting in a ROIC to WACC ratio of -1.93. This shows even greater inefficiency in capital utilization than Quantum. Similarly, PowerFleet, Inc. and Rimini Street, Inc. also have negative ROICs, indicating they are not generating returns that exceed their costs of capital.

Ribbon Communications Inc. presents a more favorable picture with a ROIC of 2.93% and a WACC of 9.36%, resulting in a ROIC to WACC ratio of 0.31. This suggests that Ribbon is more efficient in using its capital compared to Quantum. However, Usio, Inc. stands out with a ROIC of 133.16% and a WACC of 11.91%, leading to a ROIC to WACC ratio of 11.19, indicating exceptional capital efficiency and strong growth potential.

Quantum Corporation's Financial Performance and Capital Efficiency Compared to Peers

  • Quantum Corporation (NASDAQ:QMCO) has a ROIC of 0.87%, significantly lower than its WACC of 14.78%, indicating inefficiencies in capital utilization.
  • Ribbon Communications Inc. shows better capital efficiency with a ROIC of 2.93% compared to its WACC of 9.36%.
  • Usio, Inc. demonstrates exceptional capital efficiency with a ROIC of 133.16% against a WACC of 11.91%, suggesting strong growth potential.

Quantum Corporation (NASDAQ:QMCO) specializes in data storage and management solutions, competing with firms like Quantum Computing, Inc., PowerFleet, Inc., Rimini Street, Inc., Ribbon Communications Inc., and Usio, Inc. in the technology sector.

In evaluating Quantum's financial performance, the Return on Invested Capital (ROIC) is a crucial metric. Quantum's ROIC is 0.87%, which is significantly lower than its Weighted Average Cost of Capital (WACC) of 14.78%. This disparity indicates that Quantum is not generating sufficient returns to cover its cost of capital, suggesting inefficiencies in how it uses its capital.

Comparatively, Quantum Computing, Inc. has a negative ROIC of -33.77% against a WACC of 17.45%, resulting in a ROIC to WACC ratio of -1.93. This shows even greater inefficiency in capital utilization than Quantum. Similarly, PowerFleet, Inc. and Rimini Street, Inc. also have negative ROICs, indicating they are not generating returns that exceed their costs of capital.

Ribbon Communications Inc. presents a more favorable picture with a ROIC of 2.93% and a WACC of 9.36%, resulting in a ROIC to WACC ratio of 0.31. This suggests that Ribbon is more efficient in using its capital compared to Quantum. However, Usio, Inc. stands out with a ROIC of 133.16% and a WACC of 11.91%, leading to a ROIC to WACC ratio of 11.19, indicating exceptional capital efficiency and strong growth potential.