Quantum Corporation

09/11/2025 | Press release | Distributed by Public on 09/11/2025 14:23

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis compares the change in the consolidated financial statements for quarters ending June 30, 2025 and June 30, 2024 and should be read together with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the "Annual Report"). In particular, the risk factors contained in Part I, Item 1A of the Annual Report under the heading "Risk Factors" may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources. For comparisons of quarters ended June 30, 2024 and June 30, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on August 14, 2024, and incorporated herein by reference. Our fiscal year ends on March 31 of each calendar year. "Fiscal 2025" refers to the fiscal year ended March 31, 2025.
The following discussion contains forward-looking statements, such as statements regarding anticipated impacts on our business, our future operating results and financial position, our business strategy and plans, our market growth and trends, and our objectives for future operations. Please see "Note Regarding Forward-Looking Statements" for more information about relying on these forward-looking statements.
OVERVIEW
We are a technology company whose mission is to deliver innovative solutions to organizations across the world. We design, manufacture and sell technology and services that help customers capture, create and share digital content, and protect it for decades. We emphasize innovative technology in the design and manufacture of our products to help our customers unlock the value in their video and unstructured data in new ways to solve their most pressing business challenges.
We generate revenue by designing, manufacturing, and selling technology and services. Our most significant expenses are related to compensating employees; designing, manufacturing, marketing, and selling our products and services; data center costs in support of our cloud-based services; and interest associated with our long-term debt and income taxes.
Macroeconomic Conditions
We continue to actively monitor, evaluate and respond to the current uncertain macro environment, including the impact of higher interest rates, inflation, tariffs, lingering supply chain challenges, and a stronger U.S. dollar. During the quarter we continued to experience longer sales cycle for opportunities with our enterprise as well as commercial customers.
The macro environment remains unpredictable and our past results may not be indicative of future performance.
RESULTS OF OPERATIONS
Three Months Ended June 30,
(in thousands) 2025 2024
Total revenue $ 64,286 $ 72,265
Total cost of revenue(1)
41,574 45,208
Gross profit 22,712 27,057
Operating expenses
Sales and marketing(1)
12,655 13,295
General and administrative(1)
13,569 21,065
Research and development (1)
6,661 8,308
Restructuring charges (1)
2,423 1,192
Total operating expenses 35,308 43,860
Loss from operations (12,596) (16,803)
Other income (expense), net (430) (41)
Interest expense (6,516) (3,790)
Change in fair value of warrant liabilities - 1,666
Gain (loss) on debt extinguishment 2,559 (695)
Net loss before income taxes (16,983) (19,663)
Income tax provision 223 235
Net loss $ (17,206) $ (19,898)
(1) Includes stock-based compensation as follows:
Three Months Ended June 30,
(in thousands) 2025 2024
Cost of revenue $ (21) $ 190
Research and development 68 188
Sales and marketing 76 88
General and administrative (652) 459
Total $ (529) $ 925
Comparison of the Three Months Ended June 30, 2025 and 2024
Revenue
Three Months Ended June 30,
(dollars in thousands) 2025 % of
revenue 		2024 % of
revenue 		$ Change % Change
Product revenue $ 37,535 58 % $ 42,652 59 % $ (5,117) (12) %
Service and subscription 24,943 39 % 26,711 37 % (1,768) (7) %
Royalty 1,808 3 % 2,902 4 % (1,094) (38) %
Total revenue $ 64,286 100 % $ 72,265 100 % $ (7,979) (11) %
Product Revenue
In the three months ended June 30, 2025, product revenue decreased $5.1 million, or 12%, as compared to the same period in fiscal 2024. The primary driver of the decrease was in Primary storage systems with a large video surveillance order in the prior period.
Service and Subscription Revenue
Service and subscription revenue decreased $1.8 million, or 7%, in the three months ended June 30, 2025 compared to the same period in fiscal 2024. This decrease was due to certain long-lived products reaching their end-of-service-life.
Royalty Revenue
We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium. Royalty revenue saw a decrease of $1.1 million, or 38%, in the three months ended June 30, 2025 compared to the same period in fiscal 2024 due to decreased market volume.
Gross Profit and Margin
Three Months Ended June 30,
(dollars in thousands) 2025 Gross
margin % 		2024 Gross
margin % 		$ Change Basis point change
Product $ 6,790 18.1 % $ 10,097 23.7 % $ (3,307) (560)
Service and subscription 14,114 56.6 % 14,058 52.6 % 56 400
Royalty 1,808 100.0 % 2,902 100.0 % (1,094) -
Gross profit $ 22,712 35.3 % $ 27,057 37.4 % $ (4,345) (210)
Gross profit and margin percentages are key metrics that management monitors to assess the performance on the business.
Product Gross Margin
Product gross margin decreased by $3.3 million, or by 560 basis points, for the three months ended June 30, 2025, as compared with the same period in fiscal 2024. This decrease was primarily due to an inventory provision accrued for certain end-of-life products, as well as supply chain logistics costs including import tariffs.
Service and Subscription Gross Margin
Service and subscription gross margins increased 400 basis points for the three months ended June 30, 2025, as compared with the same period in fiscal 2024. This increase was primarily driven by improvements in our operational efficiency and logistics costs.
Royalty Gross Margin
Royalties do not have significant related cost of sales.
Operating Expenses
Three Months Ended June 30,
(dollars in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change
Sales and marketing $ 12,655 20 % $ 13,295 18 % $ (640) (5) %
General and administrative 13,569 21 % 21,065 29 % (7,496) (36) %
Research and development 6,661 10 % 8,308 11 % (1,647) (20) %
Restructuring charges 2,423 4 % 1,192 2 % 1,231 103 %
Total operating expenses $ 35,308 55 % $ 43,860 61 % $ (8,552) (19) %
In the three months ended June 30, 2025, sales and marketing expenses decreased $0.6 million, or 5%, as compared with the same period in fiscal 2024. This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.
In the three months ended June 30, 2025, general and administrative expenses decreased $7.5 million, or 36%, as compared with the same period in fiscal 2024. This decrease was primarily driven by higher expense in the prior year related to compliance focused outside services.
In the three months ended June 30, 2025, research and development expenses decreased $1.6 million, or 20%, as compared with the same period in fiscal 2024. This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design.
In the three months ended June 30, 2025, restructuring expenses increased $1.2 million, or 103% as compared with the same period in fiscal 2024. The increase was the result of cost reduction initiatives in the current year.
Other Income (Expense)
Three Months Ended June 30,
(dollars in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change
Other income (expense) $ (430) (1) % $ (41) (-) % $ (389) (949) %
The change in other income (expense), net during the three months ended June 30, 2025 compared with the same period in fiscal 2024 was related primarily to fluctuations in foreign currency exchange rates during the three months ended June 30, 2025.
Interest Expense
Three Months Ended June 30,
(dollars in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change
Interest expense $ (6,516) (10) % $ (3,790) (5) % $ (2,726) 72 %
In the three months ended June 30, 2025, interest expense increased $2.7 million, or 72%, as compared with the same period in fiscal 2024 due to a higher effective interest rate on our Term Loan.
Warrant liabilities
Three Months Ended June 30,
(dollars in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change
Change in fair value of warrant liabilities $ - - % $ 1,666 3 % $ (1,666) (100) %
In June 30, 2024, we recorded a non-cash loss of $1.7 million related to the change in fair value of our warrant liabilities driven by fluctuations in our stock price. As of June 30, 2025, there were no outstanding warrants.
Gain (Loss) on debt extinguishment
Three Months Ended June 30,
(dollars in thousands) 2025 % of revenue 2024 % of revenue $ Change % Change
Gain (loss) on debt extinguishment
$ 2,559 4 % $ (695) (1) % $ 3,254 (468) %
In June 30, 2025, gain on debt extinguishment was related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees. In June 30, 2024, loss on debt extinguishment was related to prepayment of our long-term debt.
Income Taxes
Three Months Ended June 30,
(dollars in thousands) 2025 % of pretax income 2024 % of pretax income $ Change % Change
Income tax provision $ 223 (1) % $ 235 (1) % $ (12) (5) %
The income tax provision for the three months ended June 30, 2025 and 2024 is primarily influenced by foreign and state income taxes. Due to our history of net losses in the United States, the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities. Our principal sources of liquidity include cash from operating activities, and cash and cash equivalents on our balance sheet. We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures. Our future liquidity requirements will depend on multiple factors, including our research and development plans and capital asset needs.
We had cash and cash equivalents of $37.4 million as of June 30, 2025, which consisted primarily of bank deposits and money market accounts. As of June 30, 2025, our total outstanding Term Loan debt was $104.3 million and our revolving credit facility agreement with PNC Bank, National Association, as amended from time to time (the "PNC Credit Facility") had an available borrowing base of $23.3 million, of which the entire amount was available to borrow at that date. As discussed in Note 13: Subsequent Events, the Company terminated the PNC Credit Facility on August 13, 2025.
We generated negative cash flows from operations of approximately $16.9 million and $1.9 million for the quarters ended June 30, 2025 and 2024, respectively, and generated net losses of approximately $17.2 million and $19.9 million for the quarters ended June 30, 2025 and 2024, respectively. We have funded operations through the sale of Common Stock, term debt borrowings and PNC Credit Facility borrowings described in Note 4:Debt.
On January 25, 2025, the Company entered into a SEPA, in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $200 million of Common Stock at any time during the three-year period following the date of the SEPA. As of June 30, 2025, the Company has issued approximately 7.5 million shares of Common Stock under the SEPA for net proceeds of approximately $82.8 million.
We are subject to various debt covenants under our credit agreements. Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations. As discussed in Note 1: Description of Business and Summary of Significant Accounting Policies-Going Concern, we believe we will be in violation of our net leverage ratio financial covenant as of the December 31, 2025 testing date and the violation will cause the Term Loan outstanding balance to become due as an event of default. As a result, we classified the Term Loan as a current liability in the accompanying consolidated balance sheets. Additionally, the we are evaluating strategies to restructure or refinance our debt, including potential covenant waivers. We may be unable to obtain additional funding. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.
Cash Flows
The following table summarizes our condensed consolidated cash flows for the periods indicated.
Three Months Ended June 30,
(in thousands) 2025 2024
Cash provided by (used in):
Operating activities $ (16,891) $ (1,896)
Investing activities (1,192) (1,620)
Financing activities 39,027 (4,798)
Effect of exchange rate changes - (3)
Net decrease in cash, cash equivalents and restricted cash
$ 20,944 $ (8,317)
Cash Used In Operating Activities
Net cash used in operating activities was $16.9 million for the three months ended June 30, 2025. This use of cash was primarily attributed to lower earnings.
Net cash used in operating activities was $1.9 million for the three months ended June 30, 2024. This use of cash was primarily attributed to cash used in operations excluding changes in assets and liabilities of $16.3 million offset in part by cash provided by working capital changes.
Cash Used in Investing Activities
Net cash used in investing activities was $1.2 million in the three months ended June 30, 2025, which was attributable to capital expenditures.
Net cash used in investing activities was $1.6 million in the three months ended June 30, 2024, which was attributable to capital expenditures.
Cash Provided by Financing Activities
Net cash provided by financing activities was $39.0 million for the three months ended June 30, 2025, which was related primarily to borrowings on our Term Loan.
Net cash used in financing activities was $4.8 million for the three months ended June 30, 2024, which was related primarily to borrowings on our PNC Credit Facility.
Commitments and Contingencies
Our contingent liabilities consist primarily of certain financial guarantees, both express and implied, related to product liability and potential infringement of intellectual property. We have little history of costs associated with such indemnification requirements and contingent liabilities associated with product liability may be mitigated by our insurance coverage. In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties with respect to certain matters, such as intellectual property infringement or other claims. We also have indemnification agreements with our current and former officers and directors. It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of our indemnification claims, and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.
We are also subject to ordinary course litigation.
Off Balance Sheet Arrangements
Except for the indemnification commitments described under "Commitments and Contingencies" above, we do not currently have any other off-balance sheet arrangements and do not have any holdings in variable interest entities.
Contractual Obligations
We have contractual obligations and commercial commitments, some of which, such as purchase obligations, are not recognized as liabilities in our financial statements. There have not been any material changes to the contractual obligations disclosed in the Annual Report.
Critical Accounting Estimates and Policies
The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report. On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We consider certain accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change. Our accounting policies that include estimates that require management's subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in the Annual Report under the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates and Policies." For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Recently Issued and Adopted Accounting Pronouncements
See Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.
Quantum Corporation published this content on September 11, 2025, and is solely responsible for the information contained herein. Distributed via SEC EDGAR on September 11, 2025 at 20:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]