Quantum(US:QMCO)2024-11-14 01:41Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $70.5 million, a decrease of approximately 7% year-over-year and down about 1% from the prior quarter [14] - GAAP gross margin was 41.5%, compared to 43.3% in the same quarter last year and 36.6% in the prior quarter [16] - GAAP net loss for the quarter was $13.5 million, or a loss of $2.82 per share, including approximately $4.7 million of one-time expenses related to debt and restructuring activities [17] - Adjusted EBITDA was essentially breakeven at a negative $300,000, compared to a positive $1.7 million in the prior year and a negative $3.1 million in the prior quarter [19] - Non-GAAP operating expenses were $30.4 million, a reduction of approximately 9% year-over-year [18] Business Line Data and Key Metrics Changes - Sales bookings were consistent with overall business expectations, despite operational headwinds related to the supply chain [15] - Backlog remained elevated at approximately $14 million, above the target run rate of $8 million to $10 million [16] - Subscription portion of total annual recurring revenue (ARR) increased approximately 28% year-over-year to $19.6 million, with over 88% of new unit sales being subscription-based [24] Market Data and Key Metrics Changes - The company is experiencing longer lead times for high-speed all-flash systems, which have increased from about 2-3 weeks to up to 10 weeks [37] - The transition to a new manufacturing partner is expected to impact operations in the upcoming quarter [27][50] Company Strategy and Development Direction - The company is focusing on reallocating resources towards high-priority growth initiatives, particularly Myriad and ActiveScale [34] - The go-to-market strategy is evolving to enhance sales resources dedicated to select product lines [34] - The company anticipates that operational improvements and new product introductions will drive revenue growth and profitability in the second half of FY 2025 and beyond [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing operational headwinds, particularly related to supply chain issues, but expressed confidence in the bookings and backlog [37][40] - The company expects to return to positive cash flow in the back half of FY 2025 and anticipates FY 2026 to be cash flow positive for the first time in five years [9][26] - The updated fiscal year FY 2025 outlook is set at a target of $280 million in revenue, with adjusted EBITDA expected to be $3 million [31] Other Important Information - The company has achieved almost $40 million in total savings as of the end of FY 2025 compared to FY 2023 [9] - Cash, cash equivalents, and restricted cash at the end of Q2 were approximately $17 million, with outstanding debt totaling $104.7 million [25] Q&A Session Summary Question: Revenue shortfall and supply chain issues - Management indicated that the sales team brought in the necessary purchase orders, but longer lead times for high-speed all-flash systems impacted fulfillment [37][38] Question: Metrics around Myriad and ActiveScale - Management reported significant pipeline growth and over 1,000 customers on subscription software [41] Question: Cash usage and future cash flow - Management discussed the anticipated return to positive cash flow in the back half of FY 2025, with significant one-time expenses expected to subside [42][43] Question: Conversion rates needed for breakeven cash flow - Management noted that while win rates are slightly down, the focus on recurring revenue and operational efficiency is key to achieving breakeven cash flow [46] Question: Elevated backlog persistence - Management acknowledged that elevated backlog may persist due to ongoing operational headwinds and a factory transition [50]