qtm-20240630

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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, 2024


☐			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	☐
Non-accelerated filer	x	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 14, 2024 there were 95,849,938 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, 2024

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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 Changes in 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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 5.	Other Information	26
Item 6.	Exhibits	27

Signatures		28

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As used in this Quarterly Report on Form 10-Q, the terms the "Company," "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 Annual Report contains forward-looking statements. All statements contained in this report other than statements of historical fact, including, but not limited to, statements regarding our future operating results and financial position; our business strategy, focus and plans; our market growth and trends; our products, services and expected benefits thereof; 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 the competitive pressures that we face; risks associated with executing our strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of our products and the delivery of our services effectively; the protection of our intellectual property assets, including intellectual property licensed from third parties; risks associated with our international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs; our response to emerging technological trends; the execution and performance of contracts by us and our suppliers, customers, clients and partners; the hiring and retention of key employees; risks associated with business combination and investment transactions; the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of the transformation and restructuring plans; the outcome of any claims and disputes; the ability to meet stock exchange continued listing standards; the possibility that the Nasdaq may delist our securities; risks related to our ability to implement and maintain effective internal control over financial reporting in the future; and those risks described under Item 1A. Risk Factors. 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 undertake no obligation 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.

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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, 2024		March 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	17,287	$	25,692
Restricted cash	256		168

Accounts receivable, net of allowance for credit losses of $99 and $22, respectively	61,364		67,788
Manufacturing inventories	18,467		17,753
Service parts inventories	8,513		9,783
Prepaid expenses	3,880		2,186
Other current assets	8,965		8,414
Total current assets	118,732		131,784
Property and equipment, net	10,988		12,028
Intangible assets, net	1,207		1,669
Goodwill	12,969		12,969

Right-of-use assets, net	9,344		9,425
Other long-term assets	19,849		19,740
Total assets	$	173,089	$	187,615
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	31,509	$	26,087
Accrued compensation	16,091		18,214
Deferred revenue, current portion	74,802		78,511
Term debt, current portion	5,000		82,496
Revolving credit facility	—		26,604

Warrant liabilities	3,163		4,046
Other accrued liabilities	25,043		13,986
Total current liabilities	155,608		249,944
Deferred revenue, net of current portion	36,759		38,176
Revolving credit facility	35,800		—
Long-term debt, net of current portion	65,132		—
Operating lease liabilities	9,464		9,621
Other long-term liabilities	11,577		11,372
Total liabilities	314,340		309,113
Commitments and contingencies (Note 9)
Stockholders' deficit
Preferred stock, 20,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.01 par value; 225,000 shares authorized; 95,850 and 95,850 shares issued and outstanding	959		959
Additional paid-in capital	708,041		707,116
Accumulated deficit	(848,200)		(827,380)
Accumulated other comprehensive loss	(2,051)		(2,193)
Total stockholders’ deficit	(141,251)		(121,498)
Total liabilities and stockholders’ deficit	$	173,089	$	187,615

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,
		2024		2023

Revenue:
Product		$	40,994	$	58,577
Service and subscription		27,447		30,953
Royalty		2,902		2,965
Total revenue		71,343		92,495
Cost of revenue:
Product		32,555		44,451
Service and subscription		12,653		12,403
Total cost of revenue		45,208		56,854
Gross profit		26,135		35,641
Operating expenses:
Sales and marketing		13,295		15,839
General and administrative		21,065		12,699
Research and development		8,308		10,913
Restructuring charges		1,192		1,329
Total operating expenses		43,860		40,780
Loss from operations		(17,725)		(5,139)
Other expense		(41)		(998)
Interest expense		(3,790)		(3,201)
Change in fair value of warrant liabilities		1,666		726
Loss on debt extinguishment, net		(695)		—
Net loss before income taxes		(20,585)		(8,612)
Income tax provision		235		530
Net loss		$	(20,820)	$	(9,142)

Net loss per share - basic		$	(0.22)	$	(0.10)
Net loss per share - diluted		$	(0.22)	$	(0.10)
Weighted average shares - basic		95,850		93,673
Weighted average shares - diluted		95,850		93,711

Net loss		$	(20,820)	$	(9,142)
Foreign currency translation adjustments, net		142		249
Total comprehensive loss		$	(20,678)	$	(8,893)

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,
	2024		2023

Operating activities
Net loss	$	(20,820)	$	(9,142)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1,780		2,752
Amortization of debt issuance costs	804		520
Loss on debt extinguishment	695		—
Provision for product and service inventories	407		516
Stock-based compensation	925		1,901



Change in fair value of warrant liabilities	(1,666)		469
Other	275		750







Changes in assets and liabilities:
Accounts receivable, net	6,346		6,255
Manufacturing inventories	(1,325)		(692)
Service parts inventories	1,475		(516)
Prepaid expenses	(1,694)		(2,287)
Accounts payable	6,828		(5,421)

Accrued restructuring charges	—		110
Accrued compensation	(2,123)		(816)
Deferred revenue	(5,126)		(2,929)
Other current assets	(551)		(487)
Other non-current assets	649		(935)
Other current liabilities	11,017		(954)
Other non-current liabilities	208		1,462
Net cash used in operating activities	(1,896)		(9,444)
Investing activities


Purchases of property and equipment	(1,620)		(2,299)



Net cash used in investing activities	(1,620)		(2,299)
Financing activities
Borrowings of long-term debt, net of debt issuance costs	—		12,889
Repayments of long-term debt and payment of amendment fees	(13,537)		(1,997)
Borrowings of credit facility	105,568		108,186
Repayments of credit facility and payment of amendment fees	(96,829)		(107,834)


Proceeds from issuance of common stock, net	—		(9)

Net cash provided by (used in) financing activities	(4,798)		11,235
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3)		(2)
Net change in cash, cash equivalents and restricted cash	(8,317)		(510)
Cash, cash equivalents, and restricted cash at beginning of period	25,860		26,175
Cash, cash equivalents, and restricted cash at end of period	$	17,543	$	25,665

Cash and cash equivalents	$	17,287	$	25,465
Restricted cash, current	256		200

Cash and cash equivalents at the end of period	$	17,543	$	25,665
Supplemental disclosure of cash flow information
Cash paid for interest	$	2,134	$	2,665
Cash paid for income taxes, net	$	495	$	307
Non-cash transactions
Purchases of property and equipment included in accounts payable	$	218	$	977

Transfer of manufacturing inventory to services inventory	$	65	$	(226)
Transfer of manufacturing inventory to property and equipment	$	—	$	143
Paid-in-kind interest	$	684	$	191

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 Loss		Total Stockholders' Deficit
Three Months Ended	Shares	Amount
Balance, March 31, 2023	93,574	$	936	$	702,370	$	(786,094)	$	(1,581)	$	(84,369)
Net loss	—	—		—		(9,142)		—		(9,142)
Foreign currency translation adjustments, net	—	—		—		—		249		249
Shares issued under employee incentive plans, net	131	2		(2)		—		—		—


Warrants issued in connection with debt refinancing				40				—		40

Stock-based compensation	—	—		1,901		—		—		1,901
Balance, June 30, 2023	93,705	$	938	$	704,309	$	(795,236)	$	(1,332)	$	(91,321)

Balance, March 31, 2024	95,850	$	959	$	707,116	$	(827,380)	$	(2,193)	$	(121,498)
Net loss	—	—		—		(20,820)		—		(20,820)
Foreign currency translation adjustments, net	—	—		—		—		142		142


Stock-based compensation	—	—		925		—		—		925
Balance, June 30, 2024	95,850	$	959	$	708,041	$	(848,200)	$	(2,051)	$	(141,251)

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	7
Note 3:	Balance Sheet Information	9
Note 4:	Long-Term Debt	10
Note 5:	Leases	13
Note 6:	Restructuring Charges	13
Note 7:	Common Stock	14
Note 8:	Net Loss Per Share	15
Note 9:	Income Taxes	16
Note 10:	Commitments and Contingencies	16
Note 11:	Fair Value of Financial Instruments	17
Note 12:	Subsequent Event	18

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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”), stores and manages digital video and other forms of unstructured data, providing 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-volatile memory express (“NVMe”), to solid state drives (“SSD”) hard disk drives (“HDD”) tape and the cloud and 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 condensed 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, 2024, the results of operations and comprehensive loss, statements of cash flows, and changes in stockholders’ deficit for the three months ended June 30, 2024 and 2023. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.

Going Concern

These consolidated financial statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern. In our Annual Report on Form 10-K for the fiscal year ended March 31, 2024 issued on June 28, 2024, it was stated that the Company believed it was probable that it would be in violation of the net leverage covenant at the next testing date which was July 2024. With the signing of the August 2024 Amendments, this testing requirement has been waived and the Company is currently in compliance with all covenants. Further, the August 2024 Amendments provide the Company with revised covenants and additional liquidity such that the Company believes that it will continue as a going concern and the substantial doubt no longer exists. See Note 12: Subsequent Events for further details.

Use of Estimates

The preparation of financial statements in conformity with 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. Such estimates include, but are not limited to, the determination of standalone selling price for revenue arrangements with multiple performance obligations, inventory adjustments, useful lives of intangible assets and property and equipment, stock-based compensation, fair value of warrants, 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.

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Restricted Cash

Restricted cash is comprised of bank guarantees and similar required minimum balances that serve as cash collateral in connection with various items including insurance requirements, value added taxes, ongoing tax audits and leases in certain countries.

Recently Issued but not Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. ASU 2023-07 will be effective for our fiscal year beginning April 1, 2024, and interim periods within our fiscal year beginning April 1, 2025, with early adoption permitted and requires application on a fully retrospective basis. We are currently evaluating the impact of this standard on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires greater disaggregation of tax information in rate reconciliation and income taxes paid by jurisdiction. ASU 2023-09 will be effective for our fiscal year beginning April 1, 2025, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statement disclosures.

NOTE 2: REVENUE

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 offerings and geographies (in thousands):


	Three Months Ended June 30,
	2024				2023

Americas1



Product revenue	23,630				36,636
Service and subscription	15,114				17,954
Total revenue	38,744		54	%	54,590		59	%

EMEA



Product revenue	12,974				15,849
Service and subscription	9,663				11,106
Total revenue	22,637		32	%	26,955		29	%

APAC



Product revenue	4,390				6,092
Service and subscription	2,670				1,893
Total revenue	7,060		10	%	7,985		9	%

Consolidated



Product revenue	40,994				58,577
Service and subscription	27,447				30,953
Royalty2	2,902		4	%	2,965		3	%
Total revenue	$	71,343	100	%	$	92,495	100	%

1 Revenue for Americas geographic region outside of the United States is not significant.

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2 Royalty revenue is not allocatable to geographic regions.

Revenue by Solution


	Three Months Ended June 30,
	2024	%		2023	%

Primary storage systems	16,870	24	%

SEC Form 10-Q filed by Quantum Corporation