Quantum Corporation (QMCO) Earnings

Management highlights

### Overall Financial Results - Total GAAP revenue for the quarter (ended June 30, 2026) was $80.8 million, up 4% sequentially from the prior quarter and 25.7% year-over-year from $64.3 million, exceeding the high end of the company's prior guidance range. - GAAP gross margin reached 39.3%, up 360 basis points sequentially and nearly 400 basis points year-over-year, the highest gross margin in five quarters; gross profit grew 40% year-over-year. - GAAP operating income was $5 million, compared to an operating loss of $12.6 million in the year-ago quarter; non-GAAP operating income was $6.6 million, compared to a year-ago non-GAAP operating loss of $7.4 million. - Non-GAAP adjusted net income was $4 million ($0.18 per share), marking the first positive non-GAAP adjusted net income since 2023, compared to a non-GAAP net loss of $3.1 million ($0.21 per share) in the prior quarter and a $14.5 million ($1.58 per share) loss in the year-ago quarter. - Adjusted EBITDA was a positive $8 million, $5.5 million above the high end of prior guidance, with a $14.5 million year-over-year improvement on $16.5 million of incremental year-over-year revenue. - Positive operating cash flow of approximately $0.9 million, with capital expenditures of $0.4 million (less than 0.5% of revenue). ### Balance Sheet and Capital Structure - Following a private placement that generated $94.6 million in net proceeds, the company repaid all outstanding debt, ending the quarter with zero debt, compared to $144.8 million in total debt at the end of the prior fiscal year. - Ended the quarter with $54.6 million in total cash, cash equivalents, and restricted cash, up from $16.2 million at the end of the prior fiscal year; the company is now debt-free, cash flow positive, and profitable. ### Operational and Business Highlights - The company has now delivered sequential revenue growth in each of the last two historically seasonally weak quarters, with growing backlog and a expanding sales pipeline. - Large deal momentum increased dramatically this quarter, with a sharp rise in deals valued at over $1 million, the majority of which exceed $3 million. - Customer demand is driven by growing data volumes paired with constrained budgets, power availability, and infrastructure resources, increasing demand for Quantum's cost-efficient, low-power storage solutions that improve storage economics and cyber resilience. - Supply chain teams and primary partner Avnet performed well to deliver results above guidance despite ongoing component shortages.

Guidance

- Fiscal second quarter 2027 revenue is expected to be approximately $82 million ± $2 million; at the midpoint, this represents ~31% year-over-year revenue growth. Near-term revenue upside is dependent on how much order fulfillment the company can achieve amid ongoing supply constraints. - Non-GAAP adjusted operating expenses are expected to be approximately $27 million ± $1 million, a sequential increase driven by higher sales commissions on stronger performance and increased R&D hiring pace. - Non-GAAP adjusted net income per share is anticipated to be $0.12 ± $0.10 per share, based on an estimated 39.4 million weighted average basic shares outstanding. - Adjusted EBITDA for the second quarter is expected to be $6 million ± $1 million, a sequential decrease from the first quarter's $8 million result driven by planned higher operating expenses and conservative margin forecasting amid ongoing uncertainty. - Management expects year-over-year gross margin improvement in the second quarter, despite ongoing expected pricing volatility from component shortages.

Segment performance

The call does not break out formal financial performance by product segment with absolute revenue values or revenue contribution percentages. However, it notes the following high-level segment performance: 1) Active Scale: Strong growing demand, with a significant renewal and expansion win with a leading European biometrics institution; large seven-figure deals are increasingly common for this offering. 2) Tape storage solutions, including Scalar I7 tape libraries: Strong industry-wide adoption of LTO tape, with tape capacity shipments up 15% sequentially quarter-over-quarter; tape-related royalty revenue is growing, and the company's tape opportunity funnel reached its highest level in years; secured an eight-figure hyperscaler deployment in APAC for the Scalar I7. 3) Services: Service revenue grew approximately 10% quarter-over-quarter, stabilizing after multiple years of decline. Geographic performance: Revenue in the Americas increased more than 20% sequentially, while APAC revenue increased more than 50% sequentially.

Risks & headwinds

- Ongoing supply chain constraints for key components, specifically tape drive availability and certain disk drives, mean customer demand currently outpaces the company's ability to fulfill orders. While management expects supply conditions to improve over the course of the year, component availability and pricing pressures remain key areas of concern. - Forward-looking financial and operational results are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from management projections, as detailed in the company's SEC filings. - Pricing volatility is expected to continue as the company navigates ongoing component shortages.

Analyst Q&A

• Q: The company just posted $8 million adjusted EBITDA on ~$81 million revenue, but guides $6 million EBITDA on $82 million revenue for next quarter. What drives this step-down, is it OPEX or gross margin changes? /

  A: The step-down is primarily OPEX-related, driven by two factors: planned increased investment in R&D, Quantum's main growth area, and higher anticipated sales commissions from stronger revenue performance. On the margin side, management is being intentionally conservative in Q2 margin guidance due to continued uncertainty around large deals in the pipeline. (231 characters)

• Q: What is the current backlog level, after last quarter's $45 million, and are tape drive supply constraints improving per IBM's projected easing in the back half of the year? /

  A: Management did not disclose an exact new backlog number, but confirmed it is significantly higher than the prior quarter. As of August, no inflection in tape drive supply has been seen, with supply remaining flat over the past several months despite IBM's projection of increased production in the back half of the year; management expects an update from IBM during an upcoming meeting. (332 characters)

• Q: Can we expect the trend of larger $3+ million deals to continue for the rest of the year, and are these large deals concentrated in a specific customer segment? /

  A: Most of the recent large deals are large enterprise deals, with only one hyperscaler deal in the recent quarter. As Active Scale gains stronger market foothold in the enterprise segment, the trend of more large deals will continue as the company grows. (187 characters)

• Q: What is the update on Active Scale customer adoption, and what share of total bookings does Active Scale represent currently, and how is that expected to grow? /

  A: Active Scale is growing very quickly, with increasing traction and growing numbers of seven-figure enterprise deals, plus frequent customer expansion after initial implementation as customers see cost, power, and scalability benefits. Management does not disclose public bookings breakdown by product, but confirms Active Scale is a growing share of the company's overall solution portfolio. (261 characters)