) reported first quarter fiscal 2014 adjusted earnings per share
of 3 cents, comprehensively beating the Zacks Consensus Estimate
of 3 cents loss per share. The adjusted loss per share excludes
amortization of intangible assets and restructuring charges but
includes stock-based compensation expense.
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Total revenue for the first quarter was $148.0 million, up 5.1%
on a year-over-year basis and above the Zacks Consensus Estimate
of $138.0 million. The year-on-year growth was due to higher
sales of disk system and software, a one-time royalty payment
) and improved OEM and branded tape sales.
Year over year, Product revenues declined 8.3% to $86.0 million;
Royalty revenues grew 1.1% to $36.5 million and Service revenues
grew 132.3% to $25.5 million.
Reported gross margin in the quarter was 47.3%, up from 39.6% in
the year-ago quarter due to better cost management.
Operating margin was 4.0% versus (9.9%) in the year-ago quarter.
The company's total operating expenses decreased 8.1% on a
year-over-year basis. Research and development expenses decreased
10.0%, sales and marketing expenses dipped 12.4% and general
administrative expenses also fell 12.4%.
Net income on a GAAP basis was $3.4 million or 1 cent per share
compared with net loss of $16.7 million or 7 cents in the
year-ago quarter. Excluding one-time items but including
stock-based compensation expense, adjusted earnings for the first
quarter were 3 cents per share compared with a loss of 5 cents
per share in the year-ago quarter.
Balance Sheet & Cash Flow
Quantum generated $9.2 million in operating cash, down from $16.0
million in the prior quarter. Cash, cash equivalents and
restricted cash were $79.8 million versus $72.0 million in the
previous quarter. There was no long-term debt.
Management affirmed that it will continue to introduce new
products and focus more on increasing brand value.
For the second quarter of 2014, management expects revenues to be
in the range of $135.0-$140.0 million. This apart, the company
expects GAAP gross margin in the range of 41.0%-42.0% and
non-GAAP gross margin in the range of 42.0%-43.0%. The company
expects GAAP operating expenses to range between $63.0 million
and $65.0 million. Non-GAAP operating expenses are likely to be
in a range of $58.0 million to $60.0 million.
Quantum's first quarter was impressive with both the top and
bottom lines surpassing the Zacks Consensus Estimate.
Year-over-year comparisons were encouraging too. Quantum's second
quarter guidance was weak citing restricted spending by the
federal government and delay in closing large deals. But solid
momentum in disk systems and software revenues could turn the
Also, we are encouraged by the new product launches during the
quarter, which could become key drivers for growth, given the
increasing need for data security and big data management.
The company is facing intense competition from
), and NetApp Inc. as they are slowly tightening their grip on
the market. Though the company's commentary on its product
strategy is encouraging, persisting Euro concerns and a high debt
burden make us a little apprehensive about the stock.
Currently, Quantum has a Zacks Rank #3 (Hold).