SAN JOSE, Calif., Jan. 29, 2015 /PRNewswire/ -- Quantum Corp. (NYSE: QTM) today reported results for the fiscal third quarter 2015 ended Dec. 31, 2014.

Fiscal Third Quarter 2015 Results

(Unless otherwise noted, all comparisons are relative to the fiscal third quarter 2014.)

• Total revenue was $142.1 million, down slightly due primarily to a 33 percent decline in OEM tape automation revenue. In addition, total revenue was $1.4 million lower than it would have been had foreign exchange rates remained the same year-over-year.
• Total branded revenue grew to $116.2 million, a 2 percent increase.
• Scale-out storage and related service revenue increased 77 percent to a record $27 million, with significant contributions from both StorNext Pro™ Solutions and Lattus™ extended online storage systems.
• DXi^® backup and deduplication appliance revenue increased 5 percent to $24 million, driven by the strong performance of Quantum's new DXi6900 platform.
• GAAP operating income was $9.6 million, up from an operating loss of $0.1 million.
• GAAP net income was $6.9 million, or $0.03 per diluted share, up from a net loss of
  $2.5 million, or $0.01 per diluted share.
• Non-GAAP operating income increased to $13.6 million, from $8.6 million.
• Non-GAAP net income improved to $10.9 million, or $0.04 per diluted share, up from
  $6.2 million, or $0.02 per diluted share.
• Quantum generated $2.6 million in cash from operations and ended the quarter with nearly
  $110 million in total cash and cash equivalents.

"We are very pleased with our strong third quarter results, as we continued to build on the momentum we saw in the first half of our fiscal year," said Jon Gacek, president and CEO of Quantum. "Branded revenue increased year-over-year for the third consecutive quarter, driven by scale-out storage revenue growth of nearly 80 percent as well as higher DXi revenue. Reflecting the improvements we've made in our operating model, we also significantly increased net income year-over-year and delivered our best operating margins in four years — nearly
7 percent and 10 percent on a GAAP and non-GAAP basis, respectively.

"With our market momentum, our strong solutions portfolio and the significant leverage our financial model provides, we are well-positioned to drive year-over-year growth and increased profit in the final quarter of fiscal 2015 and in the coming year."

In addition to reporting its third quarter results, Quantum also announced that it has entered into an agreement to repurchase $50 million of its convertible notes due November 2015 in an all-cash transaction expected to close on Jan. 30, 2015. (For additional information, see Quantum's SEC Form 8-K filed today.)

Fiscal Fourth Quarter 2015 Outlook

For the fiscal fourth quarter, Quantum expects:

• Revenue of approximately $130 million to $135 million, based on typical seasonality.
• GAAP and non-GAAP gross margin of approximately 43-45 percent.
• GAAP operating expenses of approximately $55 million to $56 million and non-GAAP operating expenses of $52 million to $53 million.
• GAAP operating income of $2.5 million to $3.5 million and non-GAAP operating income of
  $6 million to $7 million.
• Interest expense of $2.1 million and taxes of $0.5 million.
• GAAP net loss of $0.8 million to $1.8 million, or a loss of less than $0.01 to a loss of $0.01 per diluted share, and non-GAAP net income of $3 million to $4 million, or $0.01 to $0.02 per diluted share.

Fiscal Third Quarter 2015 Business Highlights

• Quantum extended its line of high-performance StorNext Pro Solutions with the introduction of StorNext Pro Foundation, a low-cost, integrated shared storage system designed specifically for smaller workgroups. Built on proven StorNext 5 collaboration and workflow software, StorNext Pro Foundation brings the capabilities of Quantum's award-winning StorNext Pro Solutions to a new audience of media professionals in post and broadcast as well as those managing corporate and government video.
• Avere Systems and Quantum announced a joint storage solution designed to optimize workflows for the oil and gas industry. Leveraging Quantum's Lattus system, the combination extends online storage by delivering fast access to seismic data via a cost-effective private cloud solution with the extreme scalability and performance needed in the oil and gas market.
• Reflecting the strength of Quantum's solutions in helping enterprise customers manage and protect their data in some of the most demanding environments, revenue from deals over $200,000 increased by more than 20 percent. These wins included a $4 million StorNext-Lattus deal for managing video at one of the world's largest consumer electronics companies ($3 million of which was recognized in the quarter) and StorNext^® deals of more than $300,000 each to two of the top U.S. broadcast networks and an international radio broadcaster. Other wins over $200,000 included DXi6900 sales to a large European banking group, a multinational biopharmaceutical company and a major Asian insurance provider as well as tape automation deals with one of the top international shipping companies, a leading business process and document management firm, and a major American cable network.
• For the second consecutive year, Quantum won top honors for "Vendor's Reseller Channel Programme of the Year" at the Storage Virtualisation Cloud Awards. The company was recognized for ongoing dedication to the channel through its Quantum Alliance global partner program.

Conference Call and Audio Webcast Notification

Quantum will hold a conference call today, Jan. 29, 2015, 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: 719-325-2448, conference ID: 5771187. Quantum will provide a live audio webcast of the conference call beginning today, Jan. 29, 2015, at 2:00 p.m. PST. Site for the webcast and related information: www.quantum.com/investors.

Following completion of the call, a recorded replay of the webcast will be available at www.quantum.com/investors. For those without access to the Internet, a replay of the call will be available beginning at 5:00 p.m. PST on Jan. 29, 2015 through Feb. 3, 2015 at 5:00 p.m. PST. To listen to the telephonic replay, call 719-457-0820, replay passcode: 5771187.

About Quantum

Quantum is a leading expert in scale-out storage, archive and data protection, providing solutions for capturing, sharing and preserving 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 data workflow challenges. With Quantum, customers can Be Certain™ they have the end-to-end storage foundation to maximize the value of their data by making it accessible whenever and wherever needed, retaining it indefinitely and reducing total cost and complexity. See how at www.quantum.com/customerstories.

Quantum, the Quantum logo, Be Certain, DXi, StorNext, StorNext Pro and Lattus 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 statement that we are well-positioned to drive year-over-year growth and increased profit in the final quarter of fiscal 2015 and in the coming year and all of our statements under the section titled Fiscal Fourth Quarter 2015 Outlook 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 6, 2014 and in Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 7, 2014. 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 and Board of Directors use 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 the items below 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. 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 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.

Proxy Contest and Related Costs

Proxy contest and related costs are expenses incurred to respond to activities and inquiries of Starboard Value LP, including their proxy solicitation. The Company has not incurred significant expenses in connection with such matters in historical periods and these costs are not considered core operating activities. 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.

Crossroads Patent Litigation Costs

Crossroads patent litigation costs are expenses incurred to defend ourselves and perform other activities related to a patent infringement lawsuit filed by Crossroads Systems, Inc. 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.

Acquisition Expenses

The acquisition expenses were those expenses incurred to acquire Symform, Inc. and are not part of Quantum's future core operations.

Symform Expenses, Net

Quantum acquired a cloud storage services platform from Symform, Inc. ("Symform") in July 2014. Symform revenue comprises revenue generated from the Symform cloud storage services platform. Symform expenses consist of costs related to running, maintaining and further developing the Symform cloud storage services platform as well as the costs of integrating Symform into Quantum's business. Net Symform expenses represent Symform expenses less Symform revenue, and non-GAAP gross margin excludes both Symform revenue and cost of revenue. Management believes that it is appropriate to exclude these amounts in order to provide investors with a view of Quantum's results consistent with how management views and is running the business.

Loss on Debt Extinguishment

The loss on debt extinguishment relates to a specific debt repurchase action undertaken in January 2015. The loss is excluded from non-GAAP financial measures because it is not considered a core operating activity and management believes that it is appropriate to exclude the loss in order to provide investors the ability to compare Quantum's period-over-period 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 fourth quarter of fiscal year 2014, Quantum identified errors related to the accounting for rent expense and 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 of fiscal 2014 have been revised. Revenue for the third quarter of fiscal 2014 has been reduced by $0.1 million and general and administrative expense has been reduced by less than $0.1 million. For additional information, refer to our Form 10-K filed with the Securities and Exchange Commission on June 6, 2014.

Contact:
Brad Cohen
Public Relations
Quantum Corp.
(408) 944-4044
brad.cohen@quantum.com

Brinlea Johnson or Allise Furlani
Investor Relations
The Blueshirt Group
(212) 331-8424 or (212) 331-8433
brinlea@blueshirtgroup.com or allise@blueshirtgroup.com

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SOURCE Quantum Corp.