SAN JOSE, Calif., May 10, 2016 /PRNewswire/ -- Quantum Corp. (NYSE: QTM) today reported results for the fiscal fourth quarter (FQ4) and full year 2016 (FY16) ended March 31, 2016.

Total revenue was $120.0 million for FQ4 and $476.0 million for the year. These results were down from the comparable prior year periods, reflecting weakness in the enterprise storage market that has also impacted many other companies in the industry.

Despite the challenging environment, Quantum generated $33.1 million in scale-out storage and related service revenue in FQ4. This was a 4 percent increase over the same quarter the year before — representing the 19^th consecutive quarter of year-over-year growth — and was driven by a 44 percent increase in Americas product sales. For FY16, Quantum had $126.5 million in total scale-out storage and related service revenue. This was a 23 percent increase over fiscal 2015, and when deals over $1 million ("mega deals") are excluded, total revenue in this category increased 34 percent for the full year.

Quantum also reported the following revenue totals for FQ4 and FY16, respectively:

• Disk backup systems and related service: $18.1 million and $73.2 million.
• Branded tape automation and related service: $34.6 million and $146.3 million.
• OEM tape automation and related service: $10.1 million and $43.0 million.
• Devices and media: $13.1 million and $45.8 million.
• Royalty: $11.0 million and $41.2 million.

With a non-cash goodwill impairment charge of $55.6 million included, the company had a GAAP operating loss of $50.2 million in FQ4 and a GAAP net loss of $52.4 million, or $0.20 per diluted share. On a non-GAAP basis, Quantum generated operating income of $8.7 million for FQ4, resulting in the highest non-GAAP operating margin in five quarters and reflecting the cost structure reductions the company made in the second half of FY16. Non-GAAP net income for FQ4 was $6.5 million, or $0.02 per diluted share.

For the full year, Quantum had a GAAP net loss of $74.7 million, or $0.28 per diluted share, again including the fourth quarter goodwill impairment charge of $55.6 million. On a non-GAAP basis, the company had a net loss of $2.6 million, or $0.01 per diluted share, for FY16. The positive impact of Quantum's cost structure reductions in the second half of the year are clear from a comparison of bottom line results for that period with the first half of the year — a $24.9 million improvement on a GAAP basis when the goodwill impairment charge is excluded and a $26.3 million non-GAAP improvement.

"In fiscal 2016 we made progress in key areas despite the weakness in the enterprise storage market making this a difficult year for the storage industry, overall," said Jon Gacek, president and CEO of Quantum. "We grew scale-out storage 23 percent, expanded our reach in high-growth vertical markets and use cases, introduced a range of new, award-winning solutions, reduced our cost structure and improved our balance sheet. All of this provides a strong foundation for fiscal 2017 that makes us confident we will be able to achieve total revenue growth and higher profitability this year.

"We are excited about the opportunity to expand our scale-out storage leadership in media and entertainment while building on our momentum in video surveillance and unstructured data archives for technical workflows. Our ability to provide high-performance, low-cost capacity and easy access in a single, integrated tiered storage solution encompassing flash, spinning disk, object storage, tape and the cloud will be an increasingly key differentiator for customers.

"Finally, our new CFO, Fuad Ahmad, will focus on further balance sheet optimization to enhance free cash flow and on opportunities to further strengthen our capital structure."

Fiscal 2017 Outlook
Noting that the fiscal first quarter is typically its weakest, Quantum provided the following guidance for the first quarter:

• Total revenue of $111 million to $115 million.
• GAAP and non-GAAP gross margin of 43-44 percent.
• GAAP and non-GAAP operating expenses of $54 million to $55 million and $52 million to $53 million, respectively.
• Interest expense of $1.5 million and taxes of $400,000.
• GAAP and non-GAAP loss per share of $0.02 to $0.03 and $0.01 to $0.02, respectively.

For the full fiscal 2017 year, the company expects:

• Total revenue of at least $500 million, with scale-out storage and related service revenue driving the year-over-year growth and rising to 35-40 percent of total revenue.
• A decline in overall data protection revenue, with modest growth in disk backup and related service revenue offset by declines in branded and OEM tape backup revenue.
• Royalty revenue of approximately $35 million.
• GAAP and non-GAAP gross margin of 43-44 percent.
• GAAP and non-GAAP operating expense of $207 million and $200 million, respectively.
• Interest expense of $6.1 million and taxes of $1.6 million.
• GAAP and non-GAAP earnings per share of $0.01 and $0.04, respectively.

"We have a growing opportunity funnel in scale-out storage and multiple deals of significant size that we are actively working," said Gacek. "As the year progresses, we believe we will close at least some of these deals, but we are not ready to include them in our guidance at this time."

Fiscal Fourth Quarter 2016 Business Highlights

• In its first full quarter shipping, Quantum's new Xcellis™ workflow storage system gained strong market traction. The company secured Xcellis deals at a broad range of customers, including a top U.S. broadcast network, a leading chemical manufacturer, an NFL team and a pioneering virtual reality company. Optimized for demanding workflows and powered by Quantum's StorNext^® platform, Xcellis addresses the explosive growth of unstructured data and the opportunity to capitalize on its strategic value by enabling users to share and leverage this data more quickly, easily and cost-effectively.
• Demonstrating its expanding ecosystem partnerships in video surveillance, the company highlighted joint development initiatives with video management system (VMS) leaders 3VR, Genetec Inc. and Milestone Systems, as well as HauteSpot Networks, a leading provider of solutions for IP video. As members of the Quantum Advantage Program™ for technology partners, these companies have certified interoperability with Quantum offerings, including StorNext 5 data management and Quantum disk products.
• Quantum announced that Q-Cloud^® Protect is now available as a cloud-based appliance running on top of the Amazon Web Services (AWS) Marketplace infrastructure. Q-Cloud Protect™ is a virtual deduplication appliance that works with Quantum DXi^® systems to provide a hybrid-cloud backup and disaster recovery (DR) solution. It is designed for companies with single sites looking to protect their business against localized disasters, organizations eliminating tape for off-site protection and users seeking a hybrid-cloud approach to backup and DR.
• Quantum products continued to garner industry awards and honors. Xcellis won the 2016 Storage Visions Award for Visionary Products, Professional-Class System and was named a finalist in the StudioDaily Prime Awards, which "represent the top tier of new technology, creative thinking, and high-end craftsmanship in media and entertainment" (Xcellis won the award in the following quarter). Xcellis also won an innovation award in China and was shortlisted for a product of the year award in Europe. In addition, Quantum's Artico™ active archive appliance was a finalist in the Storage magazine/SearchStorage.com's Product of the Year Awards.

Conference Call and Audio Webcast Notification
Quantum will hold a conference call today, May 10, 2016, at 2:00 p.m. PDT to discuss its fiscal fourth quarter and full year 2016 results. Press and industry analysts are invited to attend in listen-only mode.
Dial-in number: 1-503-343-6063 (U.S. and International); access code: 90829818
Replay number: 1-404-537-3406 (U.S. and International); access code: 90829818
Replay expiration: May 17, 2016
Webcast site: www.quantum.com/investors

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. Quantum's end-to-end, tiered storage foundation enables customers 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, Artico, DXi, Q-Cloud, Q-Cloud Protect, Quantum Advantage Program, StorNext and Xcellis 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: This press release contains "forward-looking" statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Specifically, but without limitation, statements relating to: i) our confidence that we will be able to achieve total revenue growth and higher profitability this year; ii) our opportunity to expand our scale-out storage leadership in media and entertainment while building on our momentum in video surveillance and unstructured data archives for technical workflows; iii) our ability to provide high-performance, low-cost capacity and easy access in a single, integrated tiered storage solution encompassing flash, spinning disk, object storage, tape and the cloud being an increasingly key differentiator for customers; iv) our focus on further balance sheet optimization to enhance free cash flow and on opportunities to further strengthen our capital structure; v) all of our statements under the heading "Fiscal 2017 Outlook," including our statement that we have a growing opportunity funnel in scale-out storage and multiple deals of significant size that we are actively working and that we believe we will close at least some of these deals, 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 statements. More detailed information about these 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 5, 2016 and in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 12, 2015. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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. ("Symform") and are not part of Quantum's future core operations.

Symform Expenses, Net
Quantum acquired a cloud storage services platform from 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. Management believed that it was appropriate to exclude these amounts in fiscal 2015 in order to provide investors with a view of Quantum's results consistent with how management viewed and ran the business. Beginning fiscal 2016, Symform has been fully integrated into our core operations and therefore, Symform revenue and expenses are no longer excluded from our results.

Goodwill Impairment
The goodwill impairment was recorded in the fourth quarter of fiscal 2016 and resulted in a full write-off of Quantum's goodwill balance. The impairment 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 impairment in order to provide investors the ability to compare Quantum's period-over-period results from continuing operations.

Loss on Debt Extinguishment
The loss on debt extinguishment relates to specific debt repurchase actions undertaken in fiscal 2015 and 2016. The losses are excluded from non-GAAP financial measures because they are not considered a core operating activity and management believes that it is appropriate to exclude the losses 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.

Contact:
Brad Cohen
Public Relations
Quantum Corp.
+1 (408) 944-4044
brad.cohen@quantum.com

Brinlea Johnson or Allise Furlani
Investor Relations
The Blueshirt Group
+1 (212) 331-8424 or +1 (212) 331-8433
brinlea@blueshirtgroup.com or allise@blueshirtgroup.com