qtm-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number 001-13449


Quantum Corporation
(Exact name of registrant as specified in its charter)

Delaware

94-2665054

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

224 Airport Parkway

Suite 550

San Jose

95110

(Address of Principal Executive Offices)

(Zip Code)


(408)			944-4000
Registrant's telephone number, including area code



(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

QMCO

Nasdaq Global Market

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	x
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

As of the close of business on August 1, 2022, there were 102,667,712 shares of Quantum Corporation’s common stock issued and outstanding.

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QUANTUM CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, 2022

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		Page

PART I
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Stockholders’ Deficit	4
	Index to Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 6.	Exhibits	24

Signatures		25

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As used in this Quarterly Report on Form 10-Q, the terms "Quantum," "we," "us," and "our" refer to Quantum Corporation and its subsidiaries taken as a whole, unless otherwise noted or unless the context indicates otherwise.

Note Regarding Forward-Looking Statements

This report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including statements regarding COVID-19's anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described under Part II, Item 1A. Moreover, we operate in a competitive and changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Accordingly, you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We do not intend to update any of these forward-looking statements for any reason after the date of this report or to conform these statements to actual results or revised expectations, except as required by law.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

QUANTUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts, unaudited)


	June 30, 2022		March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	26,528	$	5,210
Restricted cash	255		283

Accounts receivable, net of allowance for doubtful accounts of $195 and $422	64,909		69,354
Manufacturing inventories	32,642		33,546
Service parts inventories	25,129		24,254
Prepaid expenses	10,715		7,853
Other current assets	4,574		4,697
Total current assets	164,752		145,197
Property and equipment, net	14,093		12,853
Intangible assets, net	8,420		9,584
Goodwill	12,969		12,969

Right-of-use assets, net	10,641		11,107
Other long-term assets	10,796		9,925
Total assets	$	221,671	$	201,635
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	33,867	$	34,220

Deferred revenue	74,267		86,517

Long-term debt, current portion	5,000		4,375


Accrued compensation	14,531		16,141
Other accrued liabilities	14,157		16,562
Total current liabilities	141,822		157,815
Deferred revenue	40,196		41,580

Revolving credit facility	17,300		17,735
Long-term debt, net of current portion	69,195		89,448

Operating lease liabilities	9,932		9,891
Other long-term liabilities	12,013		11,849
Total liabilities	290,458		328,318
Commitments and contingencies (Note 9)
Stockholders' deficit
Preferred stock, 20,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.01 par value; 125,000 shares authorized; 90,606 and 60,433 shares issued and outstanding	907		605
Additional paid-in capital	714,128		645,038
Accumulated deficit	(781,123)		(770,903)
Accumulated other comprehensive loss	(2,699)		(1,423)
Total stockholders’ deficit	(68,787)		(126,683)
Total liabilities and stockholders’ deficit	$	221,671	$	201,635

See accompanying Notes to Condensed Consolidated Financial Statements.

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QUANTUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts, unaudited)


	Three Months Ended June 30,
	2022		2021
Revenue:
Product	$	60,211	$	52,131
Service and subscription	33,423		32,831
Royalty	3,440		4,137
Total revenue	97,074		89,099
Cost of revenue:
Product	47,921		38,741
Service and subscription	15,105		13,080
Total cost of revenue	63,026		51,821
Gross profit	34,048		37,278
Operating expenses:
Research and development	12,125		11,291
Sales and marketing	15,962		13,952
General and administrative	12,314		11,825
Restructuring charges	725		266
Total operating expenses	41,126		37,334
Loss from operations	(7,078)		(56)
Other income (expense), net	751		(198)
Interest expense	(2,091)		(3,886)
Loss on debt extinguishment	(1,392)		—
Net loss before income taxes	(9,810)		(4,140)
Income tax provision	410		13
Net loss	$	(10,220)	$	(4,153)
Deemed dividend on warrants	(389)		—
Net loss attributable to common stockholders	$	(10,609)	$	(4,153)



Net loss per share attributable to common stockholders	$	(0.13)	$	(0.07)
Weighted average shares - basic and diluted	83,641		57,129


Net loss	$	(10,220)	$	(4,153)
Foreign currency translation adjustments, net	(1,276)		267
Total comprehensive loss	$	(11,496)	$	(3,886)

See accompanying Notes to Condensed Consolidated Financial Statements.

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QUANTUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)


	Three Months Ended June 30,
	2022		2021
Operating activities
Net loss	$	(10,220)	$	(4,153)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	2,586		1,809
Amortization of debt issuance costs	336		1,004
Loss on debt extinguishment	992		—
Provision for product and service inventories	1,631		976
Stock-based compensation	3,069		3,201



Other	(1,469)		326







Changes in assets and liabilities:
Accounts receivable, net	4,677		15,207
Manufacturing inventories	(412)		(3,769)
Service parts inventories	(1,384)		(588)

Accounts payable	(175)		(3,178)

Accrued restructuring charges	39		(454)
Accrued compensation	(1,610)		(4,852)
Deferred revenue	(13,634)		(6,306)
Other current assets	(2,739)		(5,291)
Other non-current assets	(261)		41
Other current liabilities	64		(1,545)
Other non-current liabilities	164		706
Net cash used in operating activities	(18,346)		(6,866)
Investing activities


Purchases of property and equipment	(3,036)		(1,150)
Deferred business acquisition payment	(2,000)		—


Net cash used in investing activities	(5,036)		(1,150)
Financing activities

Repayments of long-term debt and payment of amendment fees	(20,846)		(463)
Borrowings of credit facility	109,740		56,544
Repayments of credit facility and payment of amendment fees	(110,575)		(56,544)


Proceeds from issuance of common stock, net	66,324		—

Net cash provided by financing activities	44,643		(463)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	29		(14)
Net change in cash, cash equivalents and restricted cash	21,290		(8,493)
Cash, cash equivalents, and restricted cash at beginning of period	5,493		33,137
Cash, cash equivalents, and restricted cash at end of period	$	26,783	$	24,644
Cash, Cash Equivalents and Restricted Cash at end of period
Cash and cash equivalents	$	26,528	$	19,102
Restricted cash, current	255		542
Restricted cash, long-term	—		5,000
Cash, cash equivalents and restricted cash at the end of period	$	26,783	$	24,644
Supplemental disclosure of cash flow information
Cash paid for interest	$	1,863	$	2,860
Cash paid for income taxes, net	$	115	$	294
Non-cash transactions
Purchases of property and equipment included in accounts payable	$	133	$	146

Transferred of manufacturing inventory to services inventory	$	890	$	411
Transfer of manufacturing inventory to property and equipment	$	193	$	65
Paid-in-kind interest	$	319	$	—
Deemed dividend on warrants	$	389	$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

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QUANTUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

(in thousands, unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Deficit
Three Months Ended	Shares	Amount
Balance, March 31, 2021	56,915	$	570	$	626,664	$	(738,623)	$	(856)	$	(112,245)
Net loss	—	—		—		(4,153)		—		(4,153)
Foreign currency translation adjustments, net	—	—		—		—		267		267
Shares issued under employee stock purchase plan	365	3		(3)		—		—		—



Stock-based compensation	—	—		3,201		—		—		3,201
Balance, June 30, 2021	57,280	$	573	$	629,862	$	(742,776)	$	(589)	$	(112,930)

Balance, March 31, 2022	60,433	$	605	$	645,038	$	(770,903)	$	(1,423)	$	(126,683)
Net loss	—	—		—		(10,220)		—		(10,220)
Foreign currency translation adjustments, net	—	—		—		—		(1,276)		(1,276)
Shares issued under employee stock purchase plan	173	2		(2)		—		—		—




Shares issued in connection with rights offering, net	30,000	300		66,023		—		—		66,323
Stock-based compensation	—	—		3,069		—		—		3,069
Settlement of warrant down round provision	—	—		389		—		—		389
Deemed dividend on warrants	—	—		(389)		—		—		(389)
Balance, June 30, 2022	90,606	$	907	$	714,128	$	(781,123)	$	(2,699)	$	(68,787)

See accompanying Notes to Condensed Consolidated Financial Statements.

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INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


		Page
Note 1:	Description of Business and Summary of Significant Accounting Policies	6
Note 2:	Revenue	6
Note 3:	Balance Sheet Information	8
Note 4:	Long-Term Debt	9
Note 5:	Leases	10
Note 6:	Common Stock	11
Note 7:	Net Loss Per Share	12
Note 8:	Income Taxes	12
Note 9:	Commitments and Contingencies	12
Note 10:	Fair Value of Financial Instruments	14

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Quantum Corporation, together with its consolidated subsidiaries (“Quantum” or the “Company”), is a leader in storing and managing digital video and other forms of unstructured data, delivering top streaming performance for video and rich media applications, along with low-cost, long-term storage systems for data protection and archiving. The Company helps customers around the world capture, create and share digital data and preserve and protect it for decades. The Company’s software-defined, hyperconverged storage solutions span from non-violate memory express (“NVMe”), to solid state drives, (“SSD”), hard disk drives, (“HDD”), tape, the cloud, and video surveillance are tied together leveraging a single namespace view of the entire data environment. The Company works closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving needs.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K.

The unaudited consolidated interim financial statements reflect all adjustments, consisting only of normal and recurring items, necessary to present fairly our financial position as of June 30, 2022, the results of operations and comprehensive loss, statements of cash flows, and changes in stockholder's deficit for the three months ended June 30, 2022 and 2021. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment from the ongoing COVID-19 pandemic. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations, useful lives of intangible assets and property and equipment, stock-based compensation and provision for income taxes including related reserves. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Recently Adopted Accounting Pronouncement

None.

NOTE 2: REVENUE

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Based on how the Company manages its business, the Company has determined that it currently operates in one reportable segment. The Company operates in three geographic regions: (a) Americas; (b) Europe, Middle East and Africa (“EMEA”); and (c) Asia Pacific (“APAC”). Revenue by geography is based on the location of the customer from which the revenue is earned.

In the following table, revenue is disaggregated by major product offering and geographies (in thousands):


	Three Months Ended June 30,
	2022		2021
Americas1
Primary storage systems	$	11,414	$	7,194
Secondary storage systems	22,719		16,712
Device and media	4,972		6,521
Service and subscription	20,145		20,193
Total revenue	59,250

SEC Form 10-Q filed by Quantum Corporation