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Quantum(QMCO) - 2024 Q4 - Annual Report
QMCOQuantum(QMCO)2024-06-28 20:36
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Revenue and Profit - Product gross profit for 2024 was 38,459,000,adecreaseof38,459,000, a decrease of 16,364,000 or 29.8% from 2023, with a gross margin of 22.0% compared to 19.9% in the previous year[7] - Service and subscription gross profit increased to 76,299,000,up76,299,000, up 1,563,000 or 2.1%, with a gross margin of 60.3%, improving from 56.0%[7] - Total gross profit for 2024 was 124,889,000,down124,889,000, down 18,375,000 or 12.8%, with an overall gross margin of 40.1%, compared to 33.9% in 2023[7] - Total revenue for the three months ended September 30, 2023, was 75,680thousand,adecreaseof2575,680 thousand, a decrease of 25% from 100,565 thousand in the same period of 2022[38] - Product revenue decreased by 33% to 42,947thousand,whileserviceandsubscriptionrevenuedecreasedby742,947 thousand, while service and subscription revenue decreased by 7% to 30,505 thousand[38] - Total revenue for the six months ended September 30, 2023, was 168,174thousand,adecreaseof16168,174 thousand, a decrease of 16% from 199,398 thousand in the same period of 2022[45] - Service and subscription revenue for the six months ended September 30, 2023, was 61,458thousand,down861,458 thousand, down 8% from 66,782 thousand in the same period of 2022[45] - Total revenue for the nine months ended December 31, 2023, was 240.1million,adecreaseof240.1 million, a decrease of 72.8 million or 23% compared to 312.9millioninthesameperiodof2022[89]−Productrevenuedecreasedby312.9 million in the same period of 2022[89] - Product revenue decreased by 64.6 million, or 32%, to 138.6millionfortheninemonthsendedDecember31,2023,primarilyduetolowerdemandfromlargehyperscalecustomers[90]ExpensesandLosses−Operatingexpensestotaled138.6 million for the nine months ended December 31, 2023, primarily due to lower demand from large hyperscale customers[90] Expenses and Losses - Operating expenses totaled 159,946,000 for 2024, a slight decrease of 929,000or0.6929,000 or 0.6% from 2023, representing 38% of revenue[21] - Research and development expenses decreased by 7,257,000 or 14% to 44,555,000in2023,representing1144,555,000 in 2023, representing 11% of revenue[21] - Operating expenses totaled 77.2 million for the six months ended September 30, 2023, a decrease of 2.9millionor42.9 million or 4% compared to 80.1 million in the same period of 2022[100] - Total operating expenses were 35.397millionforthethreemonthsendedDecember31,2023,adecreaseof35.397 million for the three months ended December 31, 2023, a decrease of 3.124 million, or 8%, compared to the same period in 2022[116] - General and administrative expenses increased by 0.9million,or80.9 million, or 8%, to 11.893 million for the three months ended December 31, 2023, primarily due to higher project expenses[116] - Research and development expenses decreased by 2.5million,or222.5 million, or 22%, to 8.763 million for the three months ended December 31, 2023, driven by cost reduction measures[117] - Interest expense increased to 15,089,000in2024,up15,089,000 in 2024, up 4,529,000 or 43% from 10,560,000in2023,representing510,560,000 in 2023, representing 5% of revenue[11] - Interest expense increased by 40% to 3,855 thousand, compared to 2,745thousandinthesameperiodof2022[43]−Interestexpenseincreasedby2,745 thousand in the same period of 2022[43] - Interest expense increased by 2.2 million, or 46%, for the six months ended September 30, 2023, due to a higher effective interest rate on the Term Loan[50] - Interest expense increased by 1.2million,or461.2 million, or 46%, to 3.9 million for the three months ended December 31, 2023, due to a higher effective interest rate on the Term Loan[87] Cash Flow and Financing - Net cash used in operating activities was 10.2millionfortheyearendedMarch31,2024,primarilyduetolowerrevenueandtimingofvendorpayments[24]−Netcashprovidedbyfinancingactivitieswas10.2 million for the year ended March 31, 2024, primarily due to lower revenue and timing of vendor payments[24] - Net cash provided by financing activities was 15.7 million for the year ended March 31, 2024, primarily due to borrowings under the Term Loan credit facility[26] - Net cash used in operating activities was 10,156thousand,comparedto10,156 thousand, compared to 4,894 thousand in the same period of 2022[33] - Net cash used in operating activities was 4.9millionfortheyearendedMarch31,2023,primarilyduetoworkingcapitalchanges[53]−Netcashusedininvestingactivitieswas4.9 million for the year ended March 31, 2023, primarily due to working capital changes[53] - Net cash used in investing activities was 15.6 million for the year ended March 31, 2023, mainly from capital expenditures of 12.6million[54]−Thecompanyhadcashandcashequivalentsof12.6 million[54] - The company had cash and cash equivalents of 25.7 million as of March 31, 2024, with total outstanding Term Loan debt of 87.9million[52]TaxandValuation−ThecompanyhasestablishedafullvaluationallowanceagainstitsU.S.andcertainforeignnetdeferredtaxassetsduetoahistoryofnetlosses[37]−ThecompanyhasestablishedafullvaluationallowanceagainstitsU.S.andcertainforeignnetdeferredtaxassetsduetouncertaintyinrealizingfuturetaxableincome[88]−Thecompanyreevaluatesuncertaintaxpositionsquarterly,basedonchangesinfacts,circumstances,andtaxlaw[148]InventoryandAssets−Servicepartsinventoriesarerecordedatthelowerofcostornetrealizablevalue,withadjustmentsmadebasedonproductlifecyclesandwarrantyservicecontracts[150]−Thecompanymayrecordadjustmentstotheestimatedfairvalueofacquiredassetsandliabilitiesduringameasurementperiodofuptooneyearfromtheacquisitiondate[151]−Thecompanyreportedtotaldebtobligationsof87.9 million[52] Tax and Valuation - The company has established a full valuation allowance against its U.S. and certain foreign net deferred tax assets due to a history of net losses[37] - The company has established a full valuation allowance against its U.S. and certain foreign net deferred tax assets due to uncertainty in realizing future taxable income[88] - The company reevaluates uncertain tax positions quarterly, based on changes in facts, circumstances, and tax law[148] Inventory and Assets - Service parts inventories are recorded at the lower of cost or net realizable value, with adjustments made based on product life cycles and warranty service contracts[150] - The company may record adjustments to the estimated fair value of acquired assets and liabilities during a measurement period of up to one year from the acquisition date[151] - The company reported total debt obligations of 114.546 million and future lease commitments of 21.127millionasofDecember31,2023[144]MarketandRiskFactors−Thecompanyhasexposuretoforeigncurrencyriskduetooperationsininternationalmarkets,affectingtransactiongainsorlossesrecognizedinfinancialstatements[155]−ThecompanyexpectstobeinviolationofitsnetleveragecovenantasoftheJune30,2024testingdate,whichcouldtriggerdefaultsonoutstandingbalances[82]−Totalcurrentliabilitiesincreasedto21.127 million as of December 31, 2023[144] Market and Risk Factors - The company has exposure to foreign currency risk due to operations in international markets, affecting transaction gains or losses recognized in financial statements[155] - The company expects to be in violation of its net leverage covenant as of the June 30, 2024 testing date, which could trigger defaults on outstanding balances[82] - Total current liabilities increased to 249.9 million as of March 31, 2024, compared to $157.9 million in the previous year[61] - The company is evaluating strategies to obtain additional funding, including potential asset sales, to improve liquidity[82] Revenue Sources - The company’s revenue is derived from three main sources: products, service and subscription, and royalties[146]