Quantum(US:QMCO)2024-11-14 01:42Revenue Performance - Total revenue for the three months ended September 30, 2024, was $70,469 thousand, a decrease of $5,211 thousand or 7% compared to $75,680 thousand for the same period in 2023[108]. - For the six months ended September 30, 2024, total revenue decreased by $26.4 million, or 16%, to $141.8 million compared to $168.2 million in the same period in 2023[123]. Product and Service Revenue - Product revenue decreased by $6,162 thousand, or 14%, to $36,785 thousand, primarily due to customers transitioning to subscription-based offerings[109]. - Service and subscription revenue increased by $816 thousand, or 3%, to $31,321 thousand, driven by new support bookings[109]. - Product revenue decreased by $23.7 million, or 23%, primarily due to a $20 million decrease in demand from large hyperscale customers[124]. - Service and subscription revenue decreased by $2.7 million, or 4%, driven by certain long-lived products reaching their end-of-service-life[125]. - The transition to subscription-based offerings is expected to continue affecting product revenue, particularly in Primary and Secondary storage systems[109]. Profitability and Expenses - Gross profit for the three months ended September 30, 2024, was $29,268 thousand, down $3,468 thousand or 11% from $32,736 thousand in the same period in 2023[111]. - Gross profit for the six months ended September 30, 2024, was $55.4 million, representing a gross margin of 39.1%, down from 40.7% in the same period in 2023[127]. - Operating expenses totaled $36,202 thousand, a slight decrease of $246 thousand or 1% compared to $36,448 thousand in the prior year[115]. - Operating expenses increased by $2.8 million, or 4%, to $80.1 million, with general and administrative expenses rising by $12.1 million, or 53%[130]. - General and administrative expenses rose by $3,736 thousand, or 36%, to $13,977 thousand, primarily due to non-recurring costs related to financial statement restatements[115]. - Research and development expenses decreased by $888 thousand, or 10%, to $8,264 thousand, reflecting improved organizational efficiencies[115]. Interest and Taxation - Interest expense increased by $2,276 thousand, or 59%, to $6,131 thousand due to a higher effective interest rate on the Term Loan[118]. - Interest expense increased by $2.9 million, or 41%, due to a higher effective interest rate on the Term Loan[134]. - The income tax provision for the six months ended September 30, 2024, was $605,000, a decrease of $458,000, or 43%, compared to $1.1 million in 2023[138]. Cash Flow and Debt - Net cash used in operating activities was $17.2 million for the six months ended September 30, 2024, compared to $11.3 million for the same period in 2023, primarily due to lower earnings[144]. - Net cash used in investing activities was $3.2 million for the six months ended September 30, 2024, down from $3.9 million in the same period in 2023, attributed to capital expenditures[145][147]. - Net cash provided by financing activities was $11.5 million for the six months ended September 30, 2024, compared to $14.8 million for the same period in 2023, primarily related to borrowings on the Term Loan[147][148]. - The net increase in cash and cash equivalents was a decrease of $8.9 million for the six months ended September 30, 2024, compared to a decrease of $421,000 in the same period in 2023[146]. - As of September 30, 2024, the company had cash and cash equivalents of $16.7 million, with total outstanding Term Loan debt of $104.7 million and PNC Credit Facility borrowings of $28.4 million[141]. Risks and Liabilities - The company continues to face longer sales cycles and an unpredictable macro environment, impacting future performance[103]. - The company is subject to various debt covenants, and failure to comply could adversely affect its financial condition and ability to service obligations[142]. - The company has contingent liabilities primarily related to product liability and potential intellectual property infringement, with little historical cost associated with such indemnifications[149]. - There have been no material changes to the company's quantitative and qualitative disclosures about market risk from those described in the Form 10-K[155]. Other Financial Metrics - The change in fair value of warrant liabilities increased by $0.1 million, or 2%, to $5.2 million for the six months ended September 30, 2024[135]. - Loss on debt extinguishment was $3.0 million for the six months ended September 30, 2024, related to the prepayment of the Term Loan[136]. - Other income (expense) was $(1.4) million, a decrease of $745,000, or 118%, primarily due to fluctuations in foreign currency exchange rates[133].