QUANTUM CORP /DE/ Q3 FY2025 earnings call

• Revenue for Q3 '25 was $72.6 million, up sequentially and above guidance midpoint. - Subscription ARR increased 29% year-over-year to $21.3 million, with over 90% of new sales in the quarter on subscription. - GAAP gross margin was 43.8%, up 230 basis points quarter-over-quarter. - Adjusted EBITDA was $4.7 million, surpassing expectations and generating improved free cash flow. - Continued progress in shifting to a subscription-based model. - Entered into a standby equity purchase agreement to strengthen balance sheet and support debt reduction. - Secondary storage revenue grew 15% year-over-year due to success of new DXi data protection appliances. - Won large deals with a top European retailer, a major American multinational technology manufacturer, and the Japanese research informatics institute. - Myriad is collaborating with quantum computing and AI/ML leaders for innovation.

In the third quarter of fiscal 2025, Quantum Corporation reported $72.6 million in revenue. Secondary storage revenue grew 15% year-over-year. Subscription ARR increased 29% year-over-year to $21.3 million, with over 90% of new sales in the quarter on subscription. GAAP gross margin was 43.8%, up 230 basis points quarter-over-quarter. Adjusted EBITDA was $4.7 million, an increase of $5 million quarter-over-quarter. The revenue contribution from subscription ARR was a significant part of the overall revenue mix, with over 90% of new unit sales in the quarter being subscription-based.

• Reiterated full-year financial revenue guidance of $280 million, plus or minus $5 million, with Q4 revenue approximately $66 million, plus or minus $2 million. - Expect to hold Q4 non-GAAP operating expenses effectively flat at $30 million, plus or minus $1 million. - Non-GAAP adjusted net loss per share for Q4 expected to be a negative $1.16, plus or minus $0.05 per share. - Full-year adjusted EBITDA outlook remains $3 million, plus or minus $1 million, with Q4 adjusted EBITDA approximately $1.7 million.

• Supply chain headwinds, including long lead times for certain parts and uncertainty around tariffs. - Uncertainties related to debt repayment and shareholder approval for the standby equity purchase agreement.

Q: Eric Martinuzzi asked about the FPA purchase arrangement with Yorkville, how it works and when shareholder approval is expected.

A: Jamie Lerner said it's a tool to raise capital, work towards being debt-free, stop burning cash, and enter growth mode, with nothing announced yet on use and it being a Board decision. Ken Gianella added it's a great tool to manage liquidity and pay down debt.

Q: Eric Martinuzzi asked about temporary manufacturing headwinds and tariff impact on guidance.

A: Jamie Lerner said it's due to manufacturing new i7 product with long lead times for parts and concerns about tariffs, with estimates involved and watching geopolitical stuff.

Q: Nehal Chokshi asked about U.S. federal deal focus and product.

A: Jamie Lerner said it's on high-margin, differentiated products like high-speed analytic platforms, cybersecurity-focused storage, shipboard systems, and national laboratories, with Ken Gianella adding Fed revenue is up 54% year-over-year.

Q: Nehal Chokshi asked about OpEx guidance and more cost takeout.

A: Ken Gianella said there's room to optimize but majority of efforts are substantially complete, with Q1 typically having higher OpEx.

Q: Nehal Chokshi asked about backlog trajectory and demand trajectory for key products.

A: Ken Gianella said backlog target is 8%-10%, and Jamie Lerner talked about strength in various areas like data protection, StorNext in media and entertainment, i7 tape product, and Myriad's growth with AI, noting growth in primary and secondary expected.