QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Quantum Corporation | ||
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code |
(Former name, former address and former fiscal year, if changed since last report) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | x | ¨ | No | |||||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). | x | ¨ | No | |||||||||||
Large accelerated filer | ☐ | x | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised | ||||||||||||||
☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | ||||||||||||||
Yes | x | No |
Page | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 6. | ||||||||
June 30, 2020 | March 31, 2020 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | |||||||||||
Manufacturing inventories | |||||||||||
Service parts inventories | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Restricted cash | |||||||||||
Right-of-use assets, net | |||||||||||
Other long-term assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Deficit | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Deferred revenue | |||||||||||
Accrued restructuring charges | |||||||||||
Long-term debt, current portion | |||||||||||
Accrued compensation | |||||||||||
Other accrued liabilities | |||||||||||
Total current liabilities | |||||||||||
Deferred revenue | |||||||||||
Long-term debt, net of current portion | |||||||||||
Operating lease liabilities | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 9) | |||||||||||
Stockholders' deficit | |||||||||||
Preferred stock, | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total stockholders’ deficit | ( | ( | |||||||||
Total liabilities and stockholders’ deficit | $ | $ |
Three Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Revenue: | |||||||||||
Product | $ | $ | |||||||||
Service | |||||||||||
Royalty | |||||||||||
Total revenue | |||||||||||
Cost of revenue: | |||||||||||
Product | |||||||||||
Service | |||||||||||
Total cost of revenue | |||||||||||
Gross profit | |||||||||||
Operating expenses: | |||||||||||
Research and development | |||||||||||
Sales and marketing | |||||||||||
General and administrative | |||||||||||
Restructuring charges | |||||||||||
Total operating expenses | |||||||||||
Income (loss) from operations | ( | ||||||||||
Other income (expense), net | ( | ||||||||||
Interest expense | ( | ( | |||||||||
Net loss before income taxes | ( | ( | |||||||||
Income tax provision | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Net loss per share - basic and diluted | $ | ( | $ | ( | |||||||
Weighted average shares - basic and diluted | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Foreign currency translation adjustments, net | |||||||||||
Total comprehensive loss | $ | ( | $ | ( |
Three Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Operating activities | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | |||||||||||
Depreciation and amortization | |||||||||||
Amortization of debt issuance costs | |||||||||||
Long-term debt related costs | |||||||||||
Provision for product and service inventories | |||||||||||
Stock-based compensation | |||||||||||
Bad debt expense | |||||||||||
Deferred income taxes | ( | ||||||||||
Unrealized foreign exchange loss | |||||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable, net | |||||||||||
Manufacturing inventories | ( | ( | |||||||||
Service parts inventories | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued restructuring charges | ( | ||||||||||
Accrued compensation | ( | ( | |||||||||
Deferred revenue | ( | ( | |||||||||
Other assets and liabilities | ( | ( | |||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||
Investing activities | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities | |||||||||||
Senior Secured Term Loan borrowings, net of debt issuance costs | |||||||||||
PNC Credit Facility borrowings | ( | ||||||||||
PNC Credit Facility repayments | ( | — | |||||||||
Paycheck Protection Program borrowing | |||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||
Net change in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid (received) for income taxes, net of refunds | $ | ( | $ | ||||||||
Non-cash transactions | |||||||||||
Purchases of property and equipment included in accounts payable | $ | $ | |||||||||
Purchases of property and equipment included in accrued liabilities | $ | $ | |||||||||
Transfer of inventory to property and equipment | $ | $ | |||||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statement of cash flows: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash, current | |||||||||||
Restricted cash, long-term | |||||||||||
Total cash, cash equivalents and restricted cash at the end of period | $ | $ |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
Net income | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net | — | — | — | — | ||||||||||||||||||||||||||||||||||
Shares issued under employee incentive plans, net | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | $ | ( | $ | ( |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Deficit | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | ||||||||||||||||||||||||||||||||||
Warrants issued related to long-term debt | — | — | — | — | ||||||||||||||||||||||||||||||||||
Warrants issued to consultants | — | — | — | — | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 | $ | $ | $ | ( | $ | ( | $ | ( |
Page | ||||||||
Note 1: | ||||||||
Note 2: | ||||||||
Note 3: | ||||||||
Note 4: | ||||||||
Note 5: | ||||||||
Note 6: | ||||||||
Note 7: | ||||||||
Note 8: | ||||||||
Note 9: | ||||||||
Note 10: |
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities. | |||||||
Level 2: | Other than quoted prices that are observable in the market for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |||||||
Level 3: | Inputs are unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. |
Three Months Ended | |||||||||||
June 30, 2020 | June 30, 20191 | ||||||||||
Americas2 | |||||||||||
Primary storage systems | $ | $ | |||||||||
Secondary storage systems | |||||||||||
Device and media | |||||||||||
Service | |||||||||||
Total revenue | |||||||||||
EMEA | |||||||||||
Primary storage systems | |||||||||||
Secondary storage systems | |||||||||||
Device and media | |||||||||||
Service | |||||||||||
Total revenue | |||||||||||
APAC | |||||||||||
Primary storage systems | |||||||||||
Secondary storage systems | |||||||||||
Device and media | |||||||||||
Service | |||||||||||
Total revenue | |||||||||||
Consolidated | |||||||||||
Primary storage systems | |||||||||||
Secondary storage systems | |||||||||||
Device and media | |||||||||||
Service | |||||||||||
Royalty3 | |||||||||||
Total revenue | $ | $ |
June 30, 2020 | ||||||||
Contract liabilities (deferred revenue) | $ | |||||||
Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period |
Current | Non-Current | Total | ||||||||||||||||||
As of June 30, 2020 | $ | $ | $ |
June 30, 2020 | March 31, 2020 | ||||||||||
Finished goods: | |||||||||||
Manufactured finished goods | $ | $ | |||||||||
Distributor inventory | |||||||||||
Total finished goods | |||||||||||
Work in progress | |||||||||||
Raw materials | |||||||||||
Total manufacturing inventories | $ | $ |
June 30, 2020 | March 31, 2020 | ||||||||||
Finished goods | $ | $ | |||||||||
Component parts | |||||||||||
Total service parts inventories | $ | $ |
June 30, 2020 | March 31, 2020 | ||||||||||
Senior Secured Term Loan | $ | $ | |||||||||
Amended PNC Credit Facility | |||||||||||
Paycheck Protection Program Loan | |||||||||||
Less: current portion | ( | ( | |||||||||
Less: unamortized debt issuance costs (1) | ( | ( | |||||||||
Long-term debt, net | $ | $ |
June 30, 2020 | March 31, 2020 | |||||||||||||
Operating lease right-of-use asset | $ | $ | ||||||||||||
Other accrued liabilities | ||||||||||||||
Operating lease liability | ||||||||||||||
Total operating lease liabilities | $ | $ |
Three Months Ended June 30, | ||||||||||||||
Lease Cost | 2020 | 2019 | ||||||||||||
Operating lease cost | $ | $ | ||||||||||||
Variable lease cost | ||||||||||||||
Short-term lease cost | ||||||||||||||
Total lease cost | $ | $ |
Maturity of Lease Liabilities | Operating Leases | |||||||
For the fiscal year ended March 31, | ||||||||
2021, excluding the three months ended June 30, 2020 | $ | |||||||
2022 | ||||||||
2023 | ||||||||
2024 | ||||||||
2025 | ||||||||
Thereafter | ||||||||
Total lease payments | $ | |||||||
Less: imputed interest | ( | |||||||
Present value of lease liabilities | $ |
Lease Term and Discount Rate | June 30, 2020 | March 31, 2020 | ||||||||||||
Weighted average remaining operating lease term (years) | ||||||||||||||
Weighted average discount rate for operating leases | % | % |
Balance as of March 31, 2020 | Severance and Benefits | Facilities | Total | |||||||||||||||||
Restructuring costs | $ | $ | $ | |||||||||||||||||
Cash payments | ( | ( | ||||||||||||||||||
Balance as of June 30, 2020 | $ | $ | $ | |||||||||||||||||
Balance as of March 31, 2019 | $ | $ | $ | |||||||||||||||||
Restructuring costs | ||||||||||||||||||||
Adjustments to prior estimates | ||||||||||||||||||||
Cash payments | ( | ( | ||||||||||||||||||
Balance as of June 30, 2019 | $ | $ | $ | |||||||||||||||||
Three Months Ended | ||||||||
June 30, 2020 | June 30, 2019 | |||||||
June 30, | ||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||||||
Senior Secured Term Loan | $ | $ | $ | $ | ||||||||||||||||||||||
Three Months Ended | |||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||
Net loss | $ | (10,736) | $ | (3,807) | |||||||
Interest expense, net | 6,437 | 6,306 | |||||||||
Provision for income taxes | 419 | 338 | |||||||||
Depreciation and amortization expense | 1,286 | 1,021 | |||||||||
Stock-based compensation expense | 1,958 | 987 | |||||||||
Long-term debt related costs | 965 | — | |||||||||
Restructuring charges | 1,052 | 263 | |||||||||
Cost related to financial restatement and related activities | — | 7,990 | |||||||||
Adjusted EBITDA | $ | 1,381 | $ | 13,098 | |||||||
The following is a reconciliation of Adjusted Net Income (Loss) to the most comparable U.S. GAAP financial measure, Net Loss (in thousands): | |||||||||||
Three Months Ended | |||||||||||
June 30, 2020 | June 30, 2019 | ||||||||||
Net loss | $ | (10,736) | $ | (3,807) | |||||||
Restructuring charges | 1,052 | 263 | |||||||||
Stock-based compensation | 1,958 | 987 | |||||||||
Long-term debt related costs | 965 | — | |||||||||
Cost related to financial restatement and related activities | — | 7,990 | |||||||||
Adjusted net income (loss) | $ | (6,761) | $ | 5,433 | |||||||
Adjusted net income per share: | |||||||||||
Basic | $ | (0.17) | $ | 0.15 | |||||||
Diluted | $ | (0.17) | $ | 0.13 | |||||||
Weighted average shares outstanding: | |||||||||||
Basic | 39,905 | 36,045 | |||||||||
Diluted | 39,905 | 40,973 |
Three Months Ended | |||||||||||
(in thousands) | June 30, 2020 | June 30, 2019 | |||||||||
Total revenue | $ | 73,305 | $ | 105,631 | |||||||
Total cost of revenue (1) | 42,453 | 59,805 | |||||||||
Gross profit | 30,852 | 45,826 | |||||||||
Operating expenses | |||||||||||
Research and development (1) | 10,162 | 8,383 | |||||||||
Sales and marketing (1) | 11,570 | 15,856 | |||||||||
General and administrative (1) | 11,563 | 18,576 | |||||||||
Restructuring charges | 1,052 | 263 | |||||||||
Total operating expenses | 34,347 | 43,078 | |||||||||
Income (loss) from operations | (3,495) | 2,748 | |||||||||
Other income (expense) | (385) | 89 | |||||||||
Interest expense | (6,437) | (6,306) | |||||||||
Income (loss) before income taxes | (10,317) | (3,469) | |||||||||
Income tax provision | 419 | 338 | |||||||||
Net loss | $ | (10,736) | $ | (3,807) |
Three Months Ended | |||||||||||
(in thousands) | June 30, 2020 | June 30, 2019 | |||||||||
Cost of revenue | $ | 169 | $ | 92 | |||||||
Research and development | 471 | 123 | |||||||||
Sales and marketing | 336 | 117 | |||||||||
General and administrative | 982 | 655 | |||||||||
Total | $ | 1,958 | $ | 987 |
Three Months Ended | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2020 | % of revenue | June 30, 20191 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
Product revenue | |||||||||||||||||||||||||||||||||||
Primary storage systems | $ | 10,214 | 14 | % | $ | 14,622 | 14 | % | $ | (4,408) | (30) | % | |||||||||||||||||||||||
Secondary storage systems | 18,492 | 25 | 37,712 | 36 | (19,220) | (51) | |||||||||||||||||||||||||||||
Devices and media | 10,981 | 15 | 13,462 | 13 | (2,481) | (18) | |||||||||||||||||||||||||||||
Total product revenue | $ | 39,687 | 54 | % | $ | 65,796 | 62 | % | $ | (26,109) | (40) | ||||||||||||||||||||||||
Service revenue | 30,386 | 42 | 33,381 | 32 | (2,995) | (9) | |||||||||||||||||||||||||||||
Royalty revenue | 3,232 | 4 | 6,454 | 6 | (3,222) | (50) | |||||||||||||||||||||||||||||
Total revenue | $ | 73,305 | 100 | % | $ | 105,631 | 100 | % | $ | (32,326) | (31) |
Three Months Ended | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2020 | Gross margin % | June 30, 2019 | Gross margin % | $ Change | Basis point change | |||||||||||||||||||||||||||||
Product gross profit | $ | 9,305 | 23.4 | % | $ | 18,596 | 28.3 | % | $ | (9,291) | (490) | ||||||||||||||||||||||||
Service gross profit | 18,315 | 60.3 | 20,776 | 62.2 | (2,461) | (190) | |||||||||||||||||||||||||||||
Royalty gross profit | 3,232 | 100.0 | 6,454 | 100.0 | (3,222) | — | |||||||||||||||||||||||||||||
Gross profit | $ | 30,852 | 42.1 | % | $ | 45,826 | 43.4 | % | $ | (14,974) | (130) |
Three Months Ended | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2020 | % of revenue | June 30, 2019 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
Research and development | 10,162 | 13.9 | % | 8,383 | 7.9 | % | $ | 1,779 | 21 | % | |||||||||||||||||||||||||
Sales and marketing | 11,570 | 15.8 | 15,856 | 15.0 | (4,286) | (27) | |||||||||||||||||||||||||||||
General and administrative | 11,563 | 15.8 | 18,576 | 17.6 | (7,013) | (38) | |||||||||||||||||||||||||||||
Restructuring charges | 1,052 | 1.4 | 263 | 0.2 | 789 | 300 | |||||||||||||||||||||||||||||
Total operating expenses | $ | 34,347 | 46.9 | % | $ | 43,078 | 40.8 | % | $ | (8,731) | (20) |
Three Months Ended | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2020 | % of revenue | June 30, 2019 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
Other income (expense) | $ | (385) | (1) | % | $ | 89 | — | % | $ | 474 | (533) | % | |||||||||||||||||||||||
Interest expense | (6,437) | (9) | (6,306) | 6 | 131 | (2) |
Three Months Ended | |||||||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2020 | % of revenue | June 30, 2019 | % of revenue | $ Change | % Change | |||||||||||||||||||||||||||||
Income tax provision | $ | 419 | 1 | % | $ | 338 | — | % | $ | 81 | 24 | % |
Three Months Ended June 30, | |||||||||||
(Dollars in thousands) | 2020 | 2019 | |||||||||
Cash provided by (used in): | |||||||||||
Operating activities | $ | (8,987) | $ | 903 | |||||||
Investing activities | (484) | (444) | |||||||||
Financing activities | 26,329 | (413) | |||||||||
Effect of exchange rate changes | (16) | (53) | |||||||||
Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 16,842 | $ | (7) |
Incorporated by Reference | ||||||||||||||||||||||||||||||||
Exhibit Number | Exhibit Description | Form | Filing Date | Exhibit | Filed or Furnished Herewith | |||||||||||||||||||||||||||
4.1 | 8-K | 6/16/2020 | 4.1 | |||||||||||||||||||||||||||||
4.2 | 8-K | 6/16/2020 | 4.2 | |||||||||||||||||||||||||||||
4.3 | 8-K | 6/16/2020 | 4.3 | |||||||||||||||||||||||||||||
4.4 | 8-K | 6/16/2020 | 4.4 | |||||||||||||||||||||||||||||
4.5 | 8-K | 6/16/2020 | 4.5 | |||||||||||||||||||||||||||||
10.1 | 8-K | 6/16/2020 | 10.1 | |||||||||||||||||||||||||||||
10.2 | 8-K | 6/16/2020 | 10.2 | |||||||||||||||||||||||||||||
10.3 | 8-K | 4/16/2020 | 10.1 | |||||||||||||||||||||||||||||
10.4 | 8-K | 4/16/2020 | 10.2 | |||||||||||||||||||||||||||||
10.5 | 8-K | 4/16/2020 | 10.3 | |||||||||||||||||||||||||||||
10.6 | 8-K | 4/6/2020 | 10.2 | |||||||||||||||||||||||||||||
31.1 | X | |||||||||||||||||||||||||||||||
31.2 | X | |||||||||||||||||||||||||||||||
32.1 | X | |||||||||||||||||||||||||||||||
32.2 | X | |||||||||||||||||||||||||||||||
101 | Interactive data files | X | ||||||||||||||||||||||||||||||
104 | Cover page interactive data file, submitted using inline XBRL (contained in Exhibit 101) | X |
Quantum Corporation | ||||||||||||||
(Registrant) | ||||||||||||||
August 5, 2020 | /s/ J. Michael Dodson | |||||||||||||
(Date) | J. Michael Dodson | |||||||||||||
Chief Financial Officer | ||||||||||||||
(Principal Financial Officer) | ||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 1,348 | $ 1,247 |
Preferred stock shares authorized (shares) | 20,000,000 | 20,000,000 |
Preferred stock shares issued (shares) | 0 | 0 |
Common stock par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock shares authorized (shares) | 125,000,000 | 125,000,000 |
Common stock shares issued (shares) | 39,905,000 | 39,905,000 |
Common stock shares outstanding (shares) | 39,905,000 | 39,905,000 |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Quantum Corporation, together with its consolidated subsidiaries (“Quantum” or the “Company”), was founded in 1980 and reincorporated in Delaware in 1987, and is headquartered in San Jose, California. The Company is a leader in storing and managing digital video and other forms of unstructured data, delivering top streaming performance for video and rich media applications, along with low-cost, long-term storage systems for data protection and archiving. The Company helps customers around the world capture, create and share digital data and preserve and protect it for decades. The Company’s software-defined, hyperconverged storage solutions span from non-violate memory express (“NVMe”), to solid state drives, (“SSD”), hard disk drives, (“HDD”), tape and the cloud and are tied together leveraging a single namespace view of the entire data environment. The Company works closely with a broad network of distributors, value-added resellers (“VARs”), direct marketing resellers (“DMRs”), original equipment manufacturers (“OEMs”) and other suppliers to meet customers’ evolving needs. Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of June 30, 2020, results of operations and comprehensive loss and changes in stockholder's deficit for the three months ended June 30, 2020 and 2019. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations. COVID-19 Risks and Uncertainties Quantum is subject to the risks arising from COVID-19 which have caused substantial financial market volatility and have adversely affected both the U.S. and the global economy. For many of our customers, the COVID-19 pandemic has significantly affected their business. Movie and television production has been paused, professional and collegiate sports seasons have been postponed or cancelled, and many corporations and enterprises have put information technology spending on hold while they assess the short- and long-term impact of the pandemic. While our supply chain remains intact and operating, we have experienced issues related to our logistics network. The reduced capacity within and across freight lanes (aircraft, personnel, customs clearance, etc.) has caused late deliveries from re-routes and mis-shipments, as well as increased expedite and other charges to deliver and receive products. To date, the Company has experienced minimal impact on product availability, although future capacity constraints across the network due to lost capacity from factory down time, closures, as well as reduced staff and demand signal fluctuations are expected to impact product availability in the months and possibly quarters to come. Quantum believes that these social and economic impacts have had a negative effect on sales due to the decline in customers' ability or willingness to purchase its products and services. The extent of the impact will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue. The Company’s management continues to actively monitor the situation and may take further actions altering its business operations that tare determined to be in the best interests of its employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. Use of Estimates Company management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with GAAP. These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented with consideration given to the potential impacts of COVID-19 pandemic. However, actual results could differ materially from these estimates and be significantly affected by the severity and duration of the pandemic, the extent of actions to contain or treat COVID-19, how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of the global economic downturn that results from the pandemic. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Our financial instruments consist of Level 2 liabilities. Recently Adopted Accounting Pronouncements The Company adopted the guidance in ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses of Financial Instruments ("CECL") on April 1, 2020. The ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses over the lifetime of the asset rather than incurred losses. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements. The Company adopted the guidance in ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract on April 1, 2020. The ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancelable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The adoption of ASU 2018-15 did not have a material impact on the condensed consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted Recent accounting pronouncements issued by the Financial Accounting Standards Board (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not have, or are not expected to have, a material impact on our present or future consolidated financial statements.
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REVENUE |
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REVENUE | REVENUEBased on how the Company manages its business, the Company has determined that it currently operates in one reportable segment. The Company operates in three geographic regions: (a) Americas; (b) Europe, Middle East and Africa (“EMEA”); and (c) Asia Pacific (“APAC”). Revenue by geography is based on the location of the customer from which the revenue is earned. In the following table, revenue is disaggregated by major product offering and geographies (in thousands):
1 Primary and Secondary storage system revenue has been adjusted for June 30, 2019 due to certain reclassifications from Primary to Secondary storage systems. 2 Revenue for Americas geographic region outside of the United States is not significant. 3 Royalty revenue is not allocable to geographic regions. Contract Balances The following table presents the Company’s contract liabilities and certain information related to this balance as of and for the three months ended June 30, 2020 (in thousands):
Remaining Performance Obligations Transaction price allocated to the remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and contractually agreed upon amounts, yet to be invoiced, that will be recognized as revenue in future periods. Remaining performance obligations are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized and foreign exchange adjustments. The Company applied the practical expedient in accordance within ASC 606, Revenue from Contracts with Customers (“ASC 606”), to exclude amounts for variable consideration constituting a sale- or usage-based royalty promised in exchange for a license of intellectual property from remaining performance obligations. Remaining performance obligation consisted of the following (in thousands):
The Company expects to recognize approximately 67% of the remaining performance obligations within the next 12 months. The Company's non-current remaining performance obligations are expected to be recognized in the next 13 to 60 months.
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INVENTORIES |
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INVENTORIES | INVENTORIES Manufacturing and service inventories consist of the following (in thousands): Manufacturing inventories
Service parts inventories
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LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | LONG-TERM DEBT The Company’s long-term debt consisted of the following (in thousands):
(1) The unamortized debt issuance costs related to the Senior Secured Term Loan are presented as a reduction of the carrying amount of the corresponding debt balance on the accompanying condensed consolidated balance sheets. Unamortized debt issuance costs related to the Amended PNC Credit Facility are presented within other assets on the accompanying condensed consolidated balance sheets. Senior Secured Term Loan On December 27, 2018, the Company entered into a senior secured term loan totaling $165.0 million with U.S. Bank, National Association (the “the Senior Secured Term Loan”). In connection with the Senior Secured Term Loan, the Company amended its existing Revolving Credit Facility with PNC, providing for borrowing under loans up to a maximum principal amount of the lesser of: (a) $45.0 million or (b) the amount of the borrowing base (the “Amended PNC Credit Facility”). The maturity date under the Senior Secured Term Loan and the Amended PNC Credit Facility (collectively, the “Credit Agreements”) is December 27, 2023. On March 30, 2020, the Company entered into an amendment to the Senior Secured Term Loan (the “March 30, 2020 Amendment”) which included deferral of payment of the scheduled amortization payment of $0.4 million due on March 31, 2020 to April 1, 2020; and, (b) deferral of payment of the interest due on March 31, 2020 to April 1, 2020. On March 31, 2020, the Company entered into an additional amendment to the Senior Secured Term Loan (the “March 31, 2020 Amendment”) which, among other things, included (a) payment deferral of the scheduled amortization payment of $0.4 million due on April 1, 2020 to June 30, 2020; (b) payment of $1.9 million of the interest due on April 1, 2020 (of the total interest due of $5.0 million) in kind rather than in cash; and (c) the waiver of compliance with the total net leverage ratio covenant, as defined in the Senior Secured Term Loan agreement. On June 16, 2020, the Company entered into an amendment to the Senior Secured Term Loan (the "June 2020 Amendment" and collectively with the March 30, 2020 Amendment and March 31, 2020 Amendment, (the “Term Loan Amendments”). The June 2020 Amendment provided an additional borrowing of $20.0 million which was immediately drawn in full. The amendment also (a) waived the excess cash flow payment (the “ECF Payment”), as defined in the Senior Secured Term Loan agreement, of $5.3 million for the year ended March 31, 2020; (b) deferred payment of the scheduled amortization payments due on June 30, 2020, September 30, 2020, and December 31, 2020 until the maturity date; (c) amended the definition of “EBITDA” to, among other things, add an add-back for certain costs, expenses and fees incurred in connection with the transactions contemplated by the amendment; (d) waived compliance with the total net leverage ratio, fixed charge coverage ratio, minimum liquidity and minimum EBITDA financial covenants for the quarters ending on June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021; (e) added a financial covenant that requires a minimum monthly average undrawn availability of $7.0 million under the Amended PNC Credit Facility during the period from June 30, 2020 through and including May 31, 2021; and (f) amended the covenant levels for the total net leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants, commencing with the quarter ending June 30, 2021. The June 2020 Amendment modified the equity clawback provision to allow the Company to prepay up to 50% of the aggregate principal amount of the outstanding Senior Secured Term Loan balance with cash proceeds of a public offering of the Company’s common stock at a prepayment premium of 5% of the principal amount being repaid (the “Equity Clawback”). The amendment also added an exit fee of 2% of the aggregate principal amount repaid excluding amounts repaid that are subject to the Equity Clawback. In connection with the June 2020 Term Loan Amendment, the Company issued to the lenders warrants (the “2020 Term Loan Warrants”) to purchase 3,400,000 shares of the Company’s common stock, at an exercise price of $3.00 per share. The exercise price and the number of shares underlying the 2020 Term Loan Warrants are subject to adjustment in the event of specified events, including dilutive issuances of common stock linked equity instruments at a price lower than the exercise price of the warrants, a subdivision or combination of the Company’s common stock, a reclassification of the Company’s common stock or specified dividend payments. The 2020 Term Loan Warrants are exercisable until June 16, 2030. Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Company’s common stock at the time of exercise. The Company accounted for the Term Loan Amendments as modifications of the Senior Secured Term Loan. In connection with the modifications, the Company incurred $11.9 million in costs including $11.3 million related to the value of the 2020 Term Loan Warrants and $0.6 million in fees paid to the lenders. These debt issuance costs are reflected as a reduction to the carrying amount of the Senior Secured Term Loan and are amortized to interest expense over the remaining loan term. Approximately $0.8 million in third party costs were expensed related to the Term Loan Amendments. Amended PNC Credit Facility On April 3, 2020, the Company entered into an amendment to the Amended PNC Credit Facility (the “April 2020 PNC Amendment”), which amended certain terms, including to waive compliance with the total net leverage ratio and total leverage ratio covenants for the quarter ending March 31, 2020. On June 16, 2020, the Company entered into an amendment to the Amended PNC Credit Facility (the “June 2020 PNC Amendment” and collectively with the April 2020 PNC Amendment, the “PNC Amendments” and including the Term Loan Amendments, the “Amendments”). The amendment amended certain terms, including: (a) the definition of “EBITDA” to, among other things, add an add-back for certain costs, expenses and fees incurred in connection with the transactions contemplated by the amendment; (b) waived compliance with the total net leverage ratio, total leverage ratio, fixed charge coverage ratio, minimum liquidity and minimum EBITDA financial covenants for the quarters ending on June 30, 2020, September 30, 2020, December 31, 2020, and March 31, 2021; (c) added a financial covenant that requires a minimum monthly average undrawn availability level of $7.0 million for the period from June 30, 2020 through and including May 31, 2021; (d) added a financial covenant that requires a minimum liquidity of not less than $10.0 million at the end of each quarter and a minimum average liquidity level $10.0 million for the ninety days preceding the last day of each quarter, beginning with the quarter ending June 30, 2021; (e) amended the covenant levels for the total net leverage ratio, total leverage ratio, fixed charge coverage ratio, and minimum EBITDA financial covenants, commencing with the quarter ending June 30, 2021; and (f) continued to include a covenant that requires a minimum of $5.0 million of PNC qualified cash at all times. The June 2020 PNC Amendment also adjusted the applicable margin for advances under the Amended PNC Credit Facility such that (i) advances designated as “Domestic Rate Loans” and “Swing Loans” will have an applicable margin of (a) 4.50% for the period from the June 16, 2020 until the date quarterly financial statements are delivered to PNC for the fiscal quarter ending June 30, 2021 and (b) thereafter, ranging from 3.50% to 4.50% based on the Company’s applicable total leverage ratio and (ii) advances designated as “LIBOR Rate Loans” will have an applicable margin of (a) 5.50% for the period from June 16, 2020, until the date quarterly financial statements are delivered to PNC for the fiscal quarter ending June 30, 2021 and (b) thereafter, ranging from 4.50% to 5.50% based on the Company’s applicable total leverage ratio. The Company accounted for the PNC Amendments as modifications of the Amended PNC Credit Facility. In connection with the modifications, the Company incurred $0.5 million in fees paid to the lenders which was recorded to other assets and is amortized to interest expense over the remaining term of the Amended PNC Credit Facility. Registration Rights Agreement In connection with the June 2020 Term Loan Amendment, the Company entered into an amended and restated registration rights agreement (the “Amended Registration Rights Agreement”) with the holders of the warrants previously issued to the Senior Secured Term Loan lenders in December 2018 and the 2020 Term Loan Warrants (collectively, the “Term Loan Warrants”). The Amended Registration Rights Agreement grants the holders of the Term Loan Warrants certain registration rights for the shares of common stock issuable upon the exercise of the applicable Term Loan Warrants, including (i) the ability of a holder to request that the Company file a Form S-1 registration statement with respect to at least 40% of the registrable securities held by such holder as of the issuance date of the applicable Term Loan Warrants; (ii) the ability of a holder to request that the Company file a Form S-3 registration statement with respect to outstanding registrable securities if at any time the Company is eligible to use a Form S-3 registration statement; and (iii) certain piggyback registration rights related to potential future equity offerings of the Company, subject to certain limitations. As of June 30, 2020, the interest rates on the Senior Secured Term Loan and the Amended PNC Credit Facility were 12.0% and 7.8%, respectively. As of June 30, 2020, the Amended PNC Credit Facility had a borrowing base of $26.8 million, $25.4 million of which was available at that date. As of June 30, 2020, the Company was required to maintain a $5.0 million restricted cash reserve as part of the Amended PNC Credit Facility. This balance is presented as long-term restricted cash within the accompanying condensed consolidated balance sheet as of June 30, 2020. Paycheck Protection Program On April 13, 2020, the Company entered into a Paycheck Protection Program (“PPP”) Term Loan (“PPP Loan”) effective April 11, 2020 with PNC in an aggregate principal amount of $10.0 million pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The PPP Loan bears interest at a fixed rate of 1% per annum, with interest deferred up to a maximum of 10 months after the expiration of the covered period, as defined in the PPP Loan agreement, payable monthly thereafter. The PPP Loan has an initial term of two years and is unsecured and guaranteed by the Small Business Administration. Under the terms of the PPP Note, the Company may apply for forgiveness of the amount due on the PPP Loan. The Company used the proceeds from the PPP Loan for qualifying expenses as defined in the PPP, and intends to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act. However, the Company cannot assure at this time that the PPP Loan will be forgiven partially or in full.
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LEASES |
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LEASES | LEASES Supplemental balance sheet information related to leases was as follows:
Components of lease cost were as follows (in thousands):
Operating cash outflows related to operating leases totaled $1.4 million and $1.3 million for the three months ended June 30, 2020 and 2019.
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RESTRUCTURING CHARGES |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING CHARGES | RESTRUCTURING CHARGES The following table summarizes the restructuring activities for the three months ended June 30, 2020 and 2019 (in thousands):
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NET LOSS PER SHARE |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||
NET LOSS PER SHARE | NET LOSS PER SHARE The following outstanding stock-based instruments which are comprised of performance share units, restricted stock units, stock options and warrants were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive (in thousands):
The dilutive impact related to common shares from restricted stock units, stock options and warrants is determined by applying the treasury stock method of determining value to the assumed vesting of outstanding restricted stock units and the exercise of outstanding options and warrants. The dilutive impact related to common shares from contingently issuable performance share units is determined by applying a two-step approach using both the contingently issuable share guidance and the treasury stock method. For the three months ended June 30, 2020, there were 0.8 million contingently issuable market based restricted stock units excluded from the calculation of diluted net income (loss) per share, respectively, as their market performance condition had not yet been achieved. These shares will be earned based on the Company’s achievement of certain average stock price targets in addition to a time-based vesting period.
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INCOME TAXES |
3 Months Ended |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The effective tax rate for the three months ended June 30, 2020 and 2019 was -4.1% and -9.7%, respectively. Income tax provisions for each of these periods reflect expenses for foreign and state taxes and differed from the federal statutory tax rate of 21% in both periods due primarily to unbenefited losses experienced in jurisdictions with valuation allowances on deferred tax assets as well as the forecasted mix of earnings in domestic and international jurisdictions. As of June 30, 2020, including interest and penalties, the Company had $109.1 million of unrecognized tax benefits, $90.8 million of which, if recognized, would favorably affect the effective tax rate without consideration of the valuation allowance. As of June 30, 2020, the Company had accrued interest and penalties related to these unrecognized tax benefits of $1.2 million. The Company recognizes interest and penalties related to income tax matters in the income tax provision in the condensed consolidated statements of operations. As of June 30, 2020, $102.7 million of unrecognized tax benefits were recorded as a contra deferred tax asset in other long-term assets in the condensed consolidated balance sheets and $6.4 million (including interest and penalties) were recorded in other long-term liabilities in the condensed consolidated balance sheets. During the next 12 months, it is reasonably possible that approximately $9.2 million of tax benefits, inclusive of interest and penalties, that are currently unrecognized could be recognized as a result of the expiration of applicable statutes of limitations.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Commitments to Purchase Inventory The Company uses contract manufacturers for its manufacturing operations. Under these arrangements, the contract manufacturer procures inventory to manufacture products based upon our forecast of customer demand. The Company has similar arrangements with certain other suppliers. The Company is responsible for the financial impact on the supplier or contract manufacturer of any reduction or product mix shift in the forecast relative to materials that the third party had already purchased under a prior forecast. Such a variance in forecasted demand could require a cash payment for inventory in excess of current customer demand or for costs of excess or obsolete inventory. As of June 30, 2020, the Company had issued non-cancelable commitments for $19.2 million to purchase inventory from its contract manufacturers and suppliers. Legal Proceedings On July, 22 2016, Realtime Data LLC d/b/a IXO (“Realtime Data”) filed a patent infringement lawsuit against the Company in the U.S. District Court for the Eastern District of Texas, alleging infringement of U.S. Patents Nos. 7,161,506, 7,378,992, 7,415,530, 8,643,513, 9,054,728, and 9,116,908. The lawsuit has been transferred to the U.S. District Court for the Northern District of California for further proceedings. Realtime Data asserts that the Company has incorporated Realtime Data’s patented technology into its compression products and services. Realtime Data seeks unspecified monetary damages and other relief that the Court deems appropriate. On July 31, 2017, the District Court stayed proceedings in this litigation pending decision in Inter Partes Review proceedings before the Patent Trial and Appeal Board relating to the Realtime patents. In those proceedings the asserted claims of the ’506 patent, the ’992 patent, and the ’513 patent were found unpatentable. In addition, on July 19, 2019, all claims of the ’728 patent, the ’530 patent, and the ’908 patent were found invalid under 35 U.S.C. § 101. The stay remains in effect pending Realtime’s appeal of those rulings. The Company believes the probability that this lawsuit will have a material adverse effect on our business, operating results or financial condition is remote. On July 14, 2020, Starboard Value LP, Starboard Value and Opportunity Master Fund Ltd., Starboard Value and Opportunity S LLC, and Starboard Value and Opportunity C LP (collectively, “Starboard”) filed a lawsuit against Quantum Corporation, Quantum’s former CEO and board member Jon Gacek, and former Quantum board member Paul Auvil in the California Superior Court in Santa Clara County. The complaint alleges that between 2012 and 2014, Starboard purchased a large number of shares of Quantum’s common stock, obtained three seats on Quantum’s board of directors and then, in July 2014, entered into an agreement with Quantum whereby Starboard would not seek control of Quantum’s board but would instead support Quantum’s slate of board nominees so long as Quantum met certain performance objectives by the end of fiscal 2015. The complaint further alleges that Quantum did not meet those performance objectives but hid that by improperly recognizing revenue in fiscal 2015, with the alleged objective of entrenching Messrs. Gacek and Auvil and then-current management. Mr. Gacek resigned from the board effective May 1, 2017 and as CEO effective November 7, 2017; Mr. Auvil resigned from the board effective November 8, 2017. The complaint’s accounting allegations largely repeat allegations made in now-concluded shareholder class actions, shareholder derivative actions and SEC investigation, the settlement of which we previously reported in the Company’s Form 10-Q filed with the SEC on January 29, 2020 and Form 10-K filed with the SEC on August 6, 2019 (among other SEC filings). Based on these allegations, the complaint asserts putative claims for intentional misrepresentation/fraud in the inducement, intentional misrepresentation/fraud and negligent misrepresentation against Quantum, Gacek and Auvil, false promise/promissory fraud and unjust enrichment against Quantum and breach of fiduciary duty against Gacek and Auvil. Starboard is demanding a jury trial, and seeks unspecified damages including punitive damages, an award of rescission or rescissory damages, and award of restitution in an amount necessary to compensate for the alleged unjust enrichment of Quantum, attorney fees and costs and other relief deemed just or appropriate by the court. At this time the Company is unable to estimate the range of possible outcomes with respect to this matter. Additionally, from time to time, the Company is a party to various legal proceedings and claims arising from the normal course of business activities. Based on current available information, the Company does not expect that the ultimate outcome of any currently pending unresolved matters, individually or in the aggregate, will have a material adverse effect on the Company’s results of operations, cash flows or financial position.
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The Company’s assets, measured and recorded at fair value on a recurring basis, may consist of money market funds which are included in cash and cash equivalents in the Condensed Consolidated Balance Sheets and are valued using quoted market prices (level 1 fair value measurements) at the respective balance sheet dates. No impairments charges were recognized for non-financial assets in the three months ended June 30, 2020 and 2019. The Company has no non-financial liabilities measured and recorded at fair value on a non-recurring basis. Long-term Debt The table below represents the carrying value and total estimated fair value of long-term debt as of June 30, 2020 and 2019. The fair value has been classified as Level 2 within the fair value hierarchy.
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DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. All intercompany balances and transactions have been eliminated. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. However, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included within the Company's most recent Annual Report on Form 10-K. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring items) necessary to present fairly the Company’s financial position as of June 30, 2020, results of operations and comprehensive loss and changes in stockholder's deficit for the three months ended June 30, 2020 and 2019. Interim results are not necessarily indicative of full year performance because of the impact of seasonal and short-term variations.
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Use of Estimates | Use of EstimatesCompany management has made estimates and assumptions relating to the reporting of certain assets and liabilities in conformity with GAAP. These estimates and assumptions have been applied using methodologies that are consistent throughout the periods presented with consideration given to the potential impacts of COVID-19 pandemic. However, actual results could differ materially from these estimates and be significantly affected by the severity and duration of the pandemic, the extent of actions to contain or treat COVID-19, how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of the global economic downturn that results from the pandemic. | ||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
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Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements The Company adopted the guidance in ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses of Financial Instruments ("CECL") on April 1, 2020. The ASU requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses over the lifetime of the asset rather than incurred losses. The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements. The Company adopted the guidance in ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract on April 1, 2020. The ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancelable term of the cloud computing arrangements plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The adoption of ASU 2018-15 did not have a material impact on the condensed consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted Recent accounting pronouncements issued by the Financial Accounting Standards Board (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not have, or are not expected to have, a material impact on our present or future consolidated financial statements.
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REVENUE (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenue from external customers by geographic areas | In the following table, revenue is disaggregated by major product offering and geographies (in thousands):
1 Primary and Secondary storage system revenue has been adjusted for June 30, 2019 due to certain reclassifications from Primary to Secondary storage systems. 2 Revenue for Americas geographic region outside of the United States is not significant. 3 Royalty revenue is not allocable to geographic regions.
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Schedule of deferred revenue, by arrangement | The following table presents the Company’s contract liabilities and certain information related to this balance as of and for the three months ended June 30, 2020 (in thousands):
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Schedule of remaining performance obligation | Remaining performance obligation consisted of the following (in thousands):
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INVENTORIES (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of manufacturing inventories | : Manufacturing inventories
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Schedule of service part inventories | Service parts inventories
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LONG-TERM DEBT (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The Company’s long-term debt consisted of the following (in thousands):
(1) The unamortized debt issuance costs related to the Senior Secured Term Loan are presented as a reduction of the carrying amount of the corresponding debt balance on the accompanying condensed consolidated balance sheets. Unamortized debt issuance costs related to the Amended PNC Credit Facility are presented within other assets on the accompanying condensed consolidated balance sheets.
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LEASES (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet | Supplemental balance sheet information related to leases was as follows:
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Components of lease cost | Components of lease cost were as follows (in thousands):
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Maturity of operating lease liability |
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Schedule of lease terms and discount rates |
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RESTRUCTURING CHARGES (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity for accrued restructuring charges | The following table summarizes the restructuring activities for the three months ended June 30, 2020 and 2019 (in thousands):
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NET LOSS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of antidilutive securities excluded from computation of diluted net income (loss) per share | The following outstanding stock-based instruments which are comprised of performance share units, restricted stock units, stock options and warrants were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive (in thousands):
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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying value and total estimated fair value |
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REVENUE Certain Information Related to Contract Liabilities (Details) $ in Thousands |
3 Months Ended |
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Jun. 30, 2020
USD ($)
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Revenue from Contract with Customer [Abstract] | |
Contract liabilities (deferred revenue) | $ 110,746 |
Revenue recognized in the period from amounts included in contract liabilities at the beginning of the period | $ 28,812 |
REVENUE Remaining Performance Obligation (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
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Revenue from Contract with Customer [Abstract] | |
Current | $ 89,965 |
Non-Current | 45,122 |
Total | $ 135,087 |
INVENTORIES Schedule of Manufacturing Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Mar. 31, 2020 |
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Inventories | ||
Finished goods | $ 15,196 | $ 16,294 |
Work in progress | 1,415 | 1,001 |
Raw materials | 13,370 | 11,901 |
Total manufacturing inventories | 29,981 | 29,196 |
Manufactured finished goods | ||
Inventories | ||
Finished goods | 14,912 | 15,790 |
Distributor inventory | ||
Inventories | ||
Finished goods | $ 284 | $ 504 |
INVENTORIES Schedule of Service Parts Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Mar. 31, 2020 |
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Inventory Disclosure [Abstract] | ||
Finished goods | $ 16,685 | $ 15,845 |
Component parts | 4,426 | 4,657 |
Total service parts inventories | $ 21,111 | $ 20,502 |
LONG-TERM DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Apr. 13, 2020 |
Mar. 31, 2020 |
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Debt Instrument | |||
Less: current portion | $ (925) | $ (7,321) | |
Less: unamortized debt issuance costs | (24,578) | (13,660) | |
Long-term debt, net of current portion | 169,705 | 146,847 | |
Notes Payable | Paycheck Protection Program Loan | |||
Debt Instrument | |||
Amended PNC Credit Facility | 10,000 | $ 10,000 | 0 |
Line of Credit | Amended PNC Credit Facility | |||
Debt Instrument | |||
Amended PNC Credit Facility | 0 | 2,620 | |
Senior Secured Debt | Senior Secured Term Loan | |||
Debt Instrument | |||
Senior Secured Term Loan | $ 185,208 | $ 165,208 |
LEASES - Supplemental Balance Sheet (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Mar. 31, 2020 |
Jun. 30, 2019 |
---|---|---|---|
Leases [Abstract] | |||
Operating lease right-of-use asset | $ 12,325 | $ 12,689 | |
Other accrued liabilities | 3,075 | 3,065 | |
Operating lease liabilities | 10,402 | 10,822 | |
Present value of lease liabilities | $ 13,477 | $ 13,887 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesCurrent | us-gaap:OtherLiabilitiesCurrent |
LEASES - Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Operating lease cost | $ 1,331 | $ 1,272 |
Variable lease cost | 212 | 66 |
Short-term lease cost | 53 | 2 |
Total lease cost | $ 1,596 | $ 1,340 |
LEASES - Schedule of Lessee Operating Lease Liability Maturity (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Lessee, Operating Lease, Liability, Payment, Due | ||
2021, excluding the three months ended June 30, 2020 | $ 3,574 | |
2022 | 4,048 | |
2023 | 3,022 | |
2024 | 2,888 | |
2025 | 2,290 | |
Thereafter | 2,901 | |
Total lease payments | 18,723 | |
Less: imputed interest | (5,246) | |
Present value of lease liabilities | $ 13,477 | $ 13,887 |
LEASES - Supplemental Balance Sheet Information (Details) |
Jun. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Weighted average remaining lease term and discount rate | ||
Weighted average remaining operating lease term (years) | 4 years 9 months 21 days | 4 years 11 months 26 days |
Weighted average discount rate for operating leases (percentage) | 13.98% | 13.91% |
LEASES - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Operating cash flows from operating leases | $ 1.4 | $ 1.3 |
RESTRUCTURING CHARGES - Summary of Restructuring Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Restructuring Reserve | ||
Beginning balance | $ 2,876 | |
Restructuring charges | $ 1,052 | 263 |
Restructuring costs | 33 | |
Adjustments to prior estimates | 230 | |
Cash payments | (594) | (734) |
Ending balance | 458 | 2,405 |
Severance and Benefits | ||
Restructuring Reserve | ||
Beginning balance | 0 | |
Restructuring charges | 1,052 | |
Restructuring costs | 0 | |
Adjustments to prior estimates | 0 | |
Cash payments | (594) | 0 |
Ending balance | 458 | 0 |
Facilities | ||
Restructuring Reserve | ||
Beginning balance | 2,876 | |
Restructuring charges | 0 | |
Restructuring costs | 33 | |
Adjustments to prior estimates | 230 | |
Cash payments | 0 | (734) |
Ending balance | $ 0 | $ 2,405 |
RESTRUCTURING CHARGES - Narrative (Details) $ in Millions |
3 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Restructuring and Related Activities [Abstract] | |
Severance costs | $ 1.0 |
NET LOSS PER SHARE - Anti-dilutive shares excluded from the computations of diluted net income (loss) (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||
Antidilutive shares excluded | 6,340 | 5,481 |
NET LOSS PER SHARE - Additional Information (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Antidilutive shares excluded | 6,340 | 5,481 |
Restricted Stock Units (RSUs) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Antidilutive shares excluded | 800 |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Income Tax Contingency | ||
Effective income tax rate (percentage) | (4.10%) | (9.70%) |
Unrecognized tax benefits | $ 109.1 | |
Unrecognized tax benefits that would impact effective tax rate | 90.8 | |
Accrued interest and penalties related to unrecognized tax benefits | 1.2 | |
Increase in unrecognized tax benefits, reasonably possible | 9.2 | |
Deferred Tax Asset | ||
Income Tax Contingency | ||
Unrecognized tax benefits | 102.7 | |
Other Noncurrent Liabilities | ||
Income Tax Contingency | ||
Unrecognized tax benefits | $ 6.4 |
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions |
Jun. 30, 2020
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Remaining purchase commitments | $ 19.2 |
FAIR VALUE OF FINANCIAL INSTRUMENTS - Debt (Details) - Level 2 fair value measurements - USD ($) $ in Thousands |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Senior Secured Term Loan | $ 185,208 | $ 164,175 |
Fair Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Senior Secured Term Loan | $ 185,208 | $ 156,918 |
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