) reported third quarter fiscal 2013 adjusted earnings per share
(EPS) of 1 cent, which is slightly better than the Zacks
Consensus Estimate of a break even. The adjusted or non-GAAP
earnings per share exclude amortization of acquisition-related
intangible assets, but include stock-based compensation expense.
Total revenue for the third quarter was $159.4 million, down 8.1%
on a year-over-year basis. The year-on-year decline in revenues
was due to weaker-than-expected original equipment manufacturer
(OEM) sales, lower sales of branded tapes and lower automation
revenues. But higher sales of disk system and software provided
Year over year, Product revenue decreased 9.3% to $112.5 million,
Service revenue slipped 0.1% to $35.3 million, and Royalty
revenue decreased 17.9% to $11.5 million.
Reported gross margin in the quarter was 42.7%, marginally up
from 42.5% in the year-ago quarter due to better cost management.
Operating loss margin was (3.5%) versus operating profit margin
of 4.0% in the year-ago quarter. The company's total operating
expenses increased 10.4% on a year-over-year basis. Higher
operating expenses were mainly due to a 5.6% year-over-year
increase in research and development expenses.
Net loss on a GAAP basis was $8.1 million or 4 cents per share
compared with net earnings of $3.9 million or 2 cents in the
year-ago quarter. Excluding the amortization of
acquisition-related intangible assets but including stock-based
compensation expense, adjusted net loss for the third quarter was
1 cent per share compared with net income of 3 cents in the
Balance Sheet & Cash Flow
Quantum generated $6.0 million in operating cash. Cash, cash
equivalents and restricted cash were $54.9 million versus $32.9
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 fourth quarter 2013, management expects revenues to be in
the range of $145.0-$150.0 million. The sequentially weak revenue
guidance was due to typical seasonality, but the company expects
better revenues from disk systems and software. This apart, the
company expects GAAP gross margin of 41.0% and non-GAAP gross
margin of 42.0%. The company expects GAAP operating expenses to
range between $66.0 million and $68.0 million. Non-GAAP operating
expenses are likely to be in a range of $61.0 million to $63.0
Quantum's third quarter was decent after three straight quarters
of loss and better than the Zacks Consensus Estimate. However,
Quantum provided a weak fourth quarter revenue guidance citing
seasonality. But solid momentum showed by disk systems and
software revenues could turn the tables. Also, we are encouraged
by the new product launches during the quarter.
The company is facing intense competition from
) 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 high debt burden make us a little
apprehensive about the stock.
Currently, Quantum has a Zacks Rank #3 (Hold).
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