QUANTUM CORP /DE/ Q2 FY2026 earnings call

• The company made solid progress in the quarter with revenue at the high end of the guidance range, non-GAAP operating expenses $5 million lower than the prior quarter, and positive adjusted EBITDA, demonstrating initial benefits of restructuring. • Reached a key milestone toward becoming debt-free by entering into a definitive agreement to convert approximately $52 million in term debt to senior secured convertible notes. • Added Geoff Barrall as Chief Product Officer to review the product portfolio and align with customer needs. • Regionally, EMEA performed well, APAC revenue more than doubled quarter-over-quarter following a shift to a new distribution model, and the Americas business rebounded. • Won the Library of Congress 100-year Archive project, highlighting Quantum's ActiveScale Cold Storage and Scalar i7 RAPTOR; also introduced new capabilities in ActiveScale. • Established a strategic partnership with Entanglement for AI and HPC data centers.

Second quarter revenue was $62.7 million, compared to $64.3 million in the first fiscal quarter of 2026 and $71.8 million in the prior year second quarter. GAAP gross margin for the second quarter was 37.6%, versus 35.3% in the prior quarter and 42.7% in the fiscal second quarter of 2025. Non-GAAP operating expenses for the second quarter were $24.8 million, down from $30 million in the first fiscal quarter of 2026 and $30.4 million in the year-ago quarter. Adjusted EBITDA improved to positive $0.5 million from negative $6.5 million in the first fiscal quarter of 2026.

• Fiscal third quarter revenue is expected to be approximately $67 million, plus or minus $2 million. • Third quarter non-GAAP operating expenses are expected to be approximately $25 million, plus or minus $2 million. • Non-GAAP adjusted net loss per share for the fiscal third quarter is anticipated to be a negative $0.51 plus or minus $0.10 per share based on an estimated 14 million shares outstanding. • Adjusted EBITDA for the fiscal third quarter is expected to be positive $1 million, plus or minus $1 million.

• Supply chain challenges affecting product gross margin, including an issue with too many SKUs and tight supply of certain components. • Transition to new distribution models may cause temporary pauses in monetizing bookings. • Volatility in GAAP earnings due to warrant valuation adjustments related to the debt amendment.

Q: Could you give more color on your pipeline build. So given the new senior sales additions, what is the current health of the North American pipeline? And then are there any new lead development processes implemented recently?

A: Yes, the pipeline is pretty good. It's pretty much across the board from tape, tape media anywhere DXi has a pretty solid pipeline as well. And StorNext. The changes in the sales force have been really impactful. The team is very energized. We are changing the lead generation program and trying to focus on qualifying leads down to opportunities and pass some of those to our channel partners.

Q: That backlog number is jaw-dropping, congratulations. That's amazing. So let's talk about that backlog. Let's frame this up in terms of bookings. Well, first, before we do that, that backlog is just product? Or is that kind of plus book services as well?

A: It's product only.

Q: Of that $25 million product backlog, is there a significant customer concentration, especially given that there's some hyperscalers there? I mean is there like [15%, 20%] of that backlog to some customer, or anything like that?

A: No, it's not specifically to one hyperscaler, it's fairly blended across products. There is a little bit from one of a hyperscaler but not in a meaningful way that this would skew this off.

Q: Did that Library of Congress one go into backlog? Or is that -- was that recognized into revenue within the quarter?

A: It's in backlog.

Q: Product gross margin while gross margin did improve significantly overall, Laura, as you know, that's because of basically cost takeouts in the service organization. When we look at the product gross margin, it's still down like 500-plus basis points year-over-year. Can you put a narrative behind why that is? And do you expect an improvement on that product gross margin, and if so, why?

A: The biggest issue we have is we have too many SKUs, we have too many platforms, and there's tightness in many of the platforms we have from a supply perspective. Prices are going up on some of the levers, some platforms have like aging DDR4 in there, which is tight. We are focusing on reducing platforms and figure out who the optimum partner is for us and how we stream on our supply chain so that we can deliver more consistent margins forward. It's something that takes though like 2, 3 quarters to get through