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Quantum Q4 Loss Narrows Y/Y, Meets Ests. - Analyst Blog

Despite posting a loss in the fourth quarter of fiscal 2014, shares of Quantum Corp. ( QTM ) have been trending upward since May 7. The company's loss per share of 2 cents matched the Zacks Consensus Estimate and was narrower than a loss of 4 cents per share reported in the year-ago quarter. The adjusted loss per share excludes amortization of intangible assets and restructuring charges but includes stock-based compensation expense.

Quarter Details

Total revenue for the fourth quarter was $127.9 million, down 8.6% on a year-over-year basis but was marginally above the Zacks Consensus Estimate of $127.0 million. The year-on-year decrease was primarily due to lower sales of tape automation and disk systems.

Revenue from StorNext and Lattus scale-out storage solutions increased 9% year-over-year, driven by a 50% increase in North America revenue. Year over year, Product revenues declined 14.2% to $79.4 million; Royalty revenues grew 5.2% to $10.9 million and Service revenues grew 1.9% to $37.6 million.

Adjusted gross margin in the quarter was 41.5%, up from 41.4% in the year-ago quarter due to better cost management.

Adjusted operating loss came in at $3.4million versus a loss of $7.1 million reported in the year-ago quarter. The narrower year over year loss was primarily due to lower cost, which was offset by lower revenue base. The company's total operating expenses decreased 8.2% on a year-over-year basis. Research and development expenses decreased 11.6%, sales and marketing expenses dipped 15.1% and general administrative expenses also fell 7.3%.

Adjusted net loss was $5.3 million or 2 cents per share compared with net loss of $9.4 million or 4 cents in the year-ago quarter. Adjusted net loss excluded one-time items but included stock-based compensation expense.

Quantum generated $35.5 million in operating cash, up from $15.5 million in the prior quarter. Cash, cash equivalents and restricted cash were $99.1 million versus $80.1.0 million in the previous quarter. There was no long-term debt.

Outlook

For the first quarter of fiscal 2015, management expects revenues to be in the range of $125.0-$130.0 million (mid-point $127.5 million). The Zacks Consensus Estimate is pegged at $128.0 million. This apart, the company expects non-GAAP gross margin in the range of 44.0%-45.0%. The company expects non-GAAP operating expenses to be approximately $54.0 million.

For fiscal 2015, management expects revenues to be in the range of $540.0-$550.0 million (mid-point $545.0 million). The Zacks Consensus Estimate is pegged at $540.0 million. The company expects non-GAAP gross margin in the range of 45.0%-46.0%. Non-GAAP operating expenses are expected to be in the range of $215.0 million to $220.0million.

Our Take

Quantum's fourth quarter results were modest with the bottom line matching the Zacks Consensus Estimate and the top line beating the same by a slight margin. However, year-over-year comparisons were unfavorable. The year-on-year decrease was primarily due to lower sales of tape automation and disk systems. Quantum's first quarter revenue guidance was also weak.

Nonetheless, new product launches and go-to-market strategies should act as growth catalysts, given the increasing demand for data security and big data management.

However, the company competes with bellweathers such as International Business Machines Corporation ( IBM ), Hewlett-Packard Company ( HPQ ) and Oracle Corporation ( ORCL ) who are slowly tightening their grip on the market. Moreover, a tepid IT spending environment and Quantum's broad European exposure may temper its growth prospects to some extent.

Currently, Quantum has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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