Q1 2023 Quantum Corp Earnings Call

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Good afternoon, everyone, and thank you for participating in today's conference call to discuss quantum financial results for the first quarter fiscal year 2020-P. At time, all participants are in only mode. A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press 0 on your telephone pad. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Brian Berra from Quantum.

Good afternoon. Thank you for joining today's conference call to discuss Quantum's first quarter fiscal 2023 financial results. I'm Brian Cabrera, Quantum's legal and compliance officer.

Joining me today are Jamie Lerner, our Chairman and CEO , and Mike Dodson, our CFO . This afternoon we issued a press release, which you can access under the Investor Relations section of our website at www.quantum.com. We are using my presentation in conjunction with today's call, and this is also accessible under the same section of our website.

During today's call, let's may include forward look statements.

All statements other than statements of historical fact should be viewed as forward looking. These statements include any projections of revenue, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, backlog, or other financial items. These states may also concern the expected development, performance, and market share, or competitive performance of our product sources.

All forward-looking statements are based on information available to Quantum as of today's date.

We advise caution in Reliney statements and they involve known and unknown risks and uncertainties we refer to as risk factors. And uncertainties we refer to as risk factors.

factors may cause our actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in our business.

We include detailed information about these and additional risk factors under the sections labeled risk factors in our quarterly report on Form 10-Q and our annual report on Form 10-K , which we file with the Securities and Exchange Commission.

We do not intend to update or alter our forward-looking statements whereas the results of new efficient future events or other ways except of course as we are required by applicable law.

Please note that our release.

and the management statements we make during this call will include certain financial information in GAP and non- GAAP measures . We include definitions and reconciliation of GAP and non-GAP items in our press release. The GAP is a very important part of the GAP and we will include the GAP and the management statements in our press release. The GAP is a very important part of the GAP and the management statements in our press release. The GAP is a very important part of the GAP and the management statements in our press release. The GAP is a very important part of the GAP and the management statements in our press release.

If you are unable to listen to the entire call at this time, we will make a record available for at least nine days in the installation section of our website.

Now I would like to turn the call over to our chairman and CEO , Jamie Lerner.

Thank you, Brian , and thank you all for joining us today.

Earlier this afternoon, we announced results for our first quarter of the fizzle year, with revenue results that exceeded the high end of guidance.

A revenue growth driven by continued strong, hypercell sales, as well as sequential growth in our video surveillance business.

In addition to the strong results, our backlog as of July 31st was $67 million.

A near record level.

Demand continues to be strong and we are confident in the prospects for.

We also delivered our fifth consecutive quarter of growth in the number of subscription customers, now it over 450, which is an increase of 2% year over year and 29% sequentially.

We used the progress we made thus far, but this only represents a fraction of the total opportunity that still lies ahead.

Currently, we have over 10,000 ACT customers and 23,000 systems under contract.

which represents huge potential toward growing recurrent over the next few years.

have these cameras come up for new or have a need to refresh their quantum press.

They have been very receptive to moving to subscription licensing, most on multi-contracts.

As one example, in May we closed a large subscription deal with a well-known shoe and apparel company who has been at summer for many years.

using quantum storage solutions to create all their advertising, marketing content.

Has he expanded their brain? The amount of video and image data they are creating hasn't...

and their light infrastructure was training their creative team.

to address this need, they upgraded their old Storenext infrastructure to Storenext 7, moving to subscription software on an IVIR contract, and added F-speed NVMe storage to their infrastructure to provide increased performance and better efficiency.

Next, software licensing is the largest component of Dell. And this is a great example of how large brands and enterprises are creating more video and data as it's a very repeatable Dell we can get to our install base of customers around the world.

We are continuing to expand our software offering and customer down of our services technology.

StarNext software is now available for purchase in the Amazon Web Server Marketplace.

Think customers in new way to just store next, run it on the public cloud.

We will be showcasing the new offering later this quarter at the Internet Broadcasting Conference in Amsterdam. Thank you.

We have close to 1000 customers that are now using the mic quantum to its delivery platform that we announced in April . The mic quantum to its delivery platform that we announced in April .

and now have over 2500 customers and close to 4,000 products.

Connected to our analytics software.

where we are in hundreds of thousand data points our customers improve their operations every day.

This service delivered platform enables Qwam to become more active with our customers.

Increase the value we are providing, and ultimately monetize these services to drive us in recurring revs. We continue to drive us in recurring revs.

Also, during the summer, some of our largest winds were at international management agencies for national film and archives and little preservation, Alibalt Cultural Rx.

In addition to the size of these opportunities, these ones are all suitable because they combine on file or object storage software that can tape, and in some cases, CatDV, which is used to index, catalog, and browse archives.

These ones provide example of a unique to end architecture for data archiving and deal preservation that the quantum can provide.

I'm also pleased to that we had a strong quarter in our videos surveillance business. We are now in our videos surveillance business.

where we had big win, one of the world's large transportation companies, as well as with transportation authorities for surveillance of public transit systems, university hospitals and casinos. These wins provide for evidence of our six-footed-to-pivot-three acquisition, while also serving as an example of the large opportunities available to significantly go this further.

As demonstrated this quarter, the business is characterized by large wins and although many fluctuate from quarter to quarter, we're about this initial moment as we continue to ramp it up.

All of these organizations, cloud providers, Fortune 500 enterprises, household brands, hospitals and research institutions, and government agencies around the world trust Quantum to store, manage and protect their most valuable assets, their digital data.

The product solutions we provide are more relevant than ever with the exponential growth in young and unstructured deaths that is mission critical to these organisms.

With the same position we have at these accounts combined with our large install bay customers,

for poised to significantly recurring revenue over the next few years, while driving improved margins and more predictable revenue streams. and more predictable revenue streams. and more predictable revenue streams.

In summary, we have taken the necessary steps to position for continued improvement.

in our future operating form.

The programs we put in place to control PV, mass counting, and pricing will begin to show more meaningful results in Fisk Q2 in which specs can deliver sequential improvements to gross margins. Leave it though, as we'll discuss.

The man remains strong with backlog currently at recoupled.

We are continuing to include the conversion rate of theadows.

We are committed to disciplined action on our initiative, delivering and improving gross margins, producing operating expenses that are collectively expected to result in substantial on-year improvements suggested EVITA for the coming quarters.

Now I'd like to turn the call over to Mike to have a more detail on the results than we can question.

Thank you, Jamie. Welcome everyone and thank you for joining the call today.

Now, turn to results for the first quarter. You came just above the high of guidance at 90.1 million.

Representing an increase of 9% year over year, and 2% can put 95.2 million in the prior quarter. And 2% can put 95.2 million in the prior year, recording.

Backlog at the end of the first quarter was approximately 47 minutes.

Holy re-flecting the time of orders.

Instantly, inked to a near record of approximately 67 million at July 31st, 2022. Approximately 7% of the first co-ending backlog was related to hyperscared customers.

and approximately 25 million of any backlog chip-a-bolted customers if we were not supply-trained. The chip-a-bolted customers if we were not supply-trained.

Although we are seeing some end of improved supply, we continue to be constrained primarily on tape drives, as well as broad beverages of component.

During the first quarter, secondary storage revenues were up one percent sequentially, primarily driven by eye-linked strong demand for scale of customer.

largely offset decrease in backup and data protection products.

Primary storage sometimes had another solider and was up in my sense sequentially, primarily driven by significant increase to video surveillance solutions.

In conjunction, we'll focus on driving the trend to a recurrence or subscription model. Last quarter, we introduced a series of supplemental metrics to track our cordolecruce.

First of these metrics, annual recurring revenue or AR, which increased 11% sequentially to 8.2 million.

This figure includes software subscription across all our transition product rings, including StoreNext, ActiveScale, DXI, FDB.

Additionally, at quarter end, the cumulative number of colors under a subscription contract increased to over 450 customers. The number of colors under a subscription contract increased to over 450 customers.

represents 200 year-over-year growth and sequence growth of 29%.

Another key map we introduced was Total Track Value or CB. The quantially increased by 10% to 16 million at the end of the first quarter, up from 13.11 million in the prior quarter.

Growth margin of first quarter with 5% compared to 38% in the prior quarter.

The SQL decreased reflectable factors.

including our peak and purchase variance, driven from constraints in the supply chain, continued inflationary loss pressures and life-just costs.

Product revenue maximally weighted towards our high-oat customers.

Roughly 1% of the sequential decline in margin is a cut to the less favorable mix.

2% of the decline in gross margin is due to a higher PP and other elastic supply chain costs.

Assuming no mean deterioration in the raw market environment or supply chain dynamics, the company believes that Grosjean in the first quarter represents a low point.

As last as stated order, it will take additional time to realize meaningful and some terms of both products.

and a pricing car to offset the inflation loss environment.

Gap operating expenses in the first quarter for 41.1.

10 to 41.8 million in the prior quarter.

Non-gathering expenses during the first quarter decreased point million to 30.3 million compared to 37 to 2 million in the pro-order. The

I want to emphasize that operating expense in the first quarter does not reflect the full dissipated benefit, and the cost reductions implemented in early.

We continue to expect to reduce the quarterly operating expense run rate, targeting approximately 35 minutes by the end of 2020-23.

Exhaust compensation, restructuring charges, and non-rearing charges, unguap adjusted net loss in the first course 3.7 men or 4 cents per day. Exhaust compensation, restructuring charges, unguap adjusted net loss in the first course 3.7 men or 4 cents per day.

compared to adjusted net loss of $2.8 million or for share in their corner.

A jubidah for the first quarter was just above the midpoint of guidance at 0.3 million compared to 0.1 million in the prior.

As we have discussed, personally, dry tenured improvements in our adjusted EBITDA remained one of our highest priorities. This premium provides gold aswe?

We expect to address the recombination of in revenue, the handing gross margin, and reducing operating expenses.

We expect the reduction actions they would product price entries and supply chain incentives will include contribute to positive results during the second half of fiscal 2020. The second half of fiscal 2020.

There is a full dilation of our non-zulks to the motically comparable gap there in both the press release and form 10-tune release tank.

Now, I'll turn it on sheet, like the and cash, all of which reflect the company's successful rights offering that was clothed in April .

Cash and K-Quivolums at the end of the earth were 20.8 million compared to 5.5 million in the prior corners.

Outstanding term debt at the end of the first quarter decreased to $78.4 million from $98.7 million at the end of the prior quarter.

This piece of approximate 20 million was the paydown that turned after completed the rights offering.

At the end of the first quarter, the outstanding balance in the company's revolving line of credit was $17.3 million, compared to $17.7 million in the prior quarter.

In the first quarter, interest 6D increased to 2.1 million, compared to 0.5 million in the per quarter, and 3.9 million during the same quarter a year ago. In the last quarter, interest 6.9 million during the same quarter a year ago.

Cash and cash equivalents increased by $21.3 million during the pandemic.

Netcast used in operating activities was 18.2 million.

Excluding changes in assets and lies.

Net Ash used by offering activities for the quarter was 3.1 million.

which are probably two-thirds of the number of interest in the early floods in Kel gefoeihu,

The net cash use related to changes in assets and liabilities was $15.2 million driven primarily season semality, slated decline and deferred revenues.

Historically, the heaviest cash collections for server contract renewals have been the December and March quarters with decreases in cash collections in the June and September quarters. 759 mo Edward White removable

and it did to the normal seasonality. One other, if you're contributing to the Grunt Quarter, sequentially decline of 13.6 million and deferred revenue. revenue.

with a lengthy contract, a new negotiation with one of our log customers that was not completed by the end of the quarter and represented an annual contract value of just over a form. And represented an annual contract value of just over a form.

Also, a use of cash during the quarter was an increase in other current assets of approximately $2.7 million, represented by the pre-pand for key inventory as well as annual subscription for group insurance.

Net cash used.

and investing activities with $1,000,000.

which included capex of $3 million and a $2 million deferred business acquisition payment.

The Metacash provided by financing activities during the quarter was $44.6 million, and primarily represents the net proceeds of the rights offering plus approximately 20.6 million used to pay down outstanding turn debt.

Now moving to our financial outlook.

As we have outlined, our fiscal 2023 plan is to continue to grow our revenues while implementing cost reduction programs.

We anticipate the most challenging area will be to address the fresh, armed-girl smartgains. We'll be to address the fresh, armed-girl smartgains.

We do expect in the back half of fiscal 2023 to see measurable improvements in adjusted Napa.

We expect revenue for the second quarter to be in the range of $95 million.

plus or minus 4 million.

Non-GAP adjusted that loss is expected to be 1.5 million plus or minus 1 million.

and adjusted net loss per share of two cents.

Plus your minus 2 cents per share.

using an anticipated basic share count of 94.5 million shares.

We expect adjusted EBITDA in the second quarter to be 2.5 million plus or minus 1 million. So

With that, I'll turn the call back to Jamie for closing remarks. Jamie. Jamie.

Thanks, Mike. In closing, the man continues to be strong, with strong revenue results and a large backlog. The man continues to be strong, with strong revenue results and a large backlog.

We're very pleased with the growth in subscription customers and we see huge potential to continue to grow recurring revenue over the next few years.

We have taken the steps to improve supply chain.

and deliver improvements in gross margin and adjusted evasiveness in the coming quarters. and adjusted evasiveness in the coming quarters.

That will open it up for questions. Operator.

At this time we will be conducting a question and answer session. If you would like to ask a question please press star 1 on your telephone keypad.

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We ask that you please limit to one question and one follow up.

For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys. One moment please Wally Pol for questions.

Our first question is from Craig Ellis with B. Riley Securities. Please proceed with your question.

Thanks for taking the question and I'll start with the clarification on the gross margin outlook. So if I step three months, I think we're looking at gives and takes in gross margin that at the time we was going to sustain a 38% gross margin until we got some benefit from some of the initiatives that the current had underway and now we're at 35% and I think the view is that

This will be the bottom and we hope for leverage against that bottom in the back half of the year. So given the significant change versus our recent worst gross margins could potentially bottom, what gives you the confidence that 35% is the bottom and maybe more importantly, what are the specific things that are gonna drive materially higher gross margin from here?

Yeah, sure Craig. What we experienced in Q1, we really expected and we understood our PPV. A lot of the broker buys that we did were two or three quarters ago, but the inventory didn't move out until this quarter. So we knew that this was going to be the toughest quarter for gross margin. And in our prepared remarks last quarter, we really said we expected to see meaningful improvement in the back half of the year. So we knew it was going to be tough.

especially the PPV because we knew that was being amortized. Right? The inflationary cost pressures continued, but we do feel confident. We can see PPV getting a lot better. We are no longer putting things on airplanes, there are boats. You know, we've done a lot that we can to control those costs. So we feel confident, you know, unless there are some other, you know, macro events that impact the supply chain.

that this should be the low point. Okay, then let me just ask a follow up because I think when we talked about the potential for gross margin in the current quarter, it was relatively late in the quarter. So I think that the inputs would have been known and yet we were still basis points below. So how do you feel about the business's ability to really provide the kind of inputs for forecasting and use the inputs that you need so that...

we've got the book for a line item like that and the ability to execute against that line item.

Yeah, I think we have very clear visibility into PPV, and we know that's improving. We also are getting more traction on the price increases that we put into place, as well as efforts to reduce our discounts. We're seeing more and more traction there. So we have a number of programs and plays that we're seeing improvements in. It still will be, you know, it'll be a gradual improvement. We would expect next quarter.

and then more improvement further in Q3 and Q4.

And finally, just to clarify, Mike, are you intimate that gross margin should be flatish, fiscal 2Q, and then you get those initiative benefits in the back half or are you looking for something up or down?

No, we're in the future, I guess so.

We're definitely expecting an end improvement in Q2.

Okay.

I'll just ask one more to Jamie and then I'll hop back in the queue. So Jamie nice to see

Can customers go up by almost 100 progress in the quarter? But when I look at the incremental value for ARR customer, it looks like sequential it went from 13,000 to 8,000. So that's down pretty significantly from where we started. And I know that we've gone from a resource-centric mix with subscription to some of the other solutions. So that's it. Thank you.

Talk about what a reasonable set of expectations be from this level of incremental ARR per customer and where...

should a community normalize him to long-term or culturally humming. Thank you.

Yeah, I mean...

You've got to understand the mix of products available under subscription has changed significantly.

We started predominantly with STORNX, which is probably our

you know, tends to have a large deal size. And now we've added DXI to that, which is a high runner product, but it has an ASP of below $25,000. So what you're seeing is we're building momentum and customers, the ASP is coming down because again, we've added more products, more products that are high runners. And so,

You know, I think we're still...

kind of characterizing the business, as we've just begun adding these new products. So in terms of fully understanding the ASP, it's three year value, I still think we've got some work to do there, but I mean really what we're looking for at this point is... but I mean really what we're looking for at this point is...

View customers want to go to subscription.

Do they have pushback? Are there problems with the model? Right now. Do they have pushback? Right now.

We're not seeing a lot of problems in pushback.

And so we're just trying to pick up the velocity. You know, and again, as we stayed in our last turn, it's called our goal is to double ARR this year. And I think we're on a...

We're on a path to achieve that. And so I feel pretty good about that part of the business. Obviously, all of our huge amount of our effort is all around the EBITDA. And that's where I feel really good for the first time in several quarters where that EBITDA is jumping from 300,000 to 2.5 million. I mean, that really shows you the work that we're doing on pricing. That we're doing on pricing.

discounting, controlling our spend in op-X and managing our suppliers and managing the unexpected price increases. And that's all coming more in the control. And again, we're seeing that EBITDA return, which really for us as business operators is the best thing we've seen in a few quarters. And we're just excited about that. We're gonna grow that every quarter. We're just gonna bring our revenue up every quarter. We should see you line a site to that.

and we see that we're just gonna keep expanding EBITDA over the next several quarters and get returned to the levels we used to be at. But to follow up on Mike's comments, we really view that 35% as our low point. This quarter looks much more in the, you know, a hundred to 200 basis points above that. We see that pretty clearly right now, and I think we'll be able to build on that every quarter as we get the business back to historic levels.

Got it.

Got it. Thanks, Jamie. Bye.

Thanks Greg.

Our next question is from Eric Martinuzzi with Lake Street. Please proceed with your question.

My question is on the revenue guidance for Q2. I am not expecting a lot of volatility in the service of the Royalty revenue, but based on the midpoint of the guidance, we would be down sequentially. I am assuming that is in the product area. Is that assumption correct? Why would that be given normal seasonality?

Question is on the revenue guidance for Q2. I'm not expecting a lot of volatility in the service of the Royalty revenue, but based on the midpoint of the guidance, we would be down sequentially. So I'm assuming that it's in the product area. Is that assumption correct? And why would that be given normal seasonality? I'm not expecting a lot of volatility in the service. I'm assuming that the income of the Royalty revenue is in the service. I'm assuming that the income of the Royalty revenue is in the service.

I don't think those assumptions are correct.

So what I've done is I got it to 92, two quarters ago, then the 94 and this quarter we're now. other towards me, look whatever time I ate Architect or who did this video. Then the 94 and this quarter we're now. you

Current quarter guiding to 95. From guiding up every quarter.

Now, we all know that we've had late in quarter.

Supply.

Portuation.

predominantly we've had the rug pulled out from us a few times where our suppliers committed to delivering certain quantities to us and told us with days and weeks left in the quarter they couldn't do it.

So my guide incorporates that.

The 95 incorporates that I've got to reserve several million dollars for those surprises occurring. If those surprises don't occur, I expect we're going to be at the top end of the range. Right now, I am expecting quarter on quarter growth, but I am.

taking several million dollars away from that until the supply chain and the late breaking surprises are thing of the past. If you don't get surprised, I think you'll see it at the high end of the range.

If we do get surprised, it won't be related to any business performance that we related to what product.

did we get shorted by a supplier? It won't be related to the sales of a part of the business being lower than we expected. Our sales are pretty much, we're hitting our expectations.

and the shipments and revenue are really tied to availability of materials. And as we said, right now about 93% of our constrained materials are entirely related to tape drives.

Gotcha. So just conservatism on the product side. Understand. Chimping over to the service side historically, we would see, given the healthy products, we would see a step up in service. And yet that's kind of stalled out here in the 3334 range.

Should we expect that to grow over time as we move back to a positive comp in the product?

Mike, do you want to address the – Yeah.

and service projections.

Yeah, I think

When we look at service, I mean, we address the cash implications as just the seasonality. I think on a longer term basis, you know, the struggle that we have there, the challenge that we have there is the golden glide. So it's, you know, underneath that we're growing the service, but we're also dealing with the golden glide of, you know, older, established products.

as they come off and they're not renewed. So I think that's why you see a bit of a stall, Eric, is it's that struggle.

Okay, and then just macro commentary. You guys do have a global view, given thousands of customers worldwide. Curious to know what you're seeing in Europe , is your guidance being impacted? And this is both an FX question and a macro demand question, but just curious to hear what are your larger customers in Europe .

Are they on track? Are they getting more tentative? Have we seen any sales cycles extended? And then is there an FX impact in your outlook?

I mean I can look.

Yeah Mike why don't I covered the macro and you talk at our acts okay

You know, right now in Europe ,

We are not seeing anything that I would call widespread, broad-based.

swirling down on technology spending.

I think people are being judicious, so I'm seeing more process steps where people are... I think people are being judicious, I think people are being judicious, I think people are being judicious, are.

seeking greater approval. There are process steps to justify and make sure that people are making justified orders. But at this page, we're not seeing a broad-bitty slowdown.

Okay, and on the FX side to date, we haven't seen a significant impact on our business to the FX.

First, we think of our revenue streams after you back out the service business, because that's basically amortizing to per revenue down. The level of business that we have outside the U.S. Denominate and the foreign currency is about 20% of our total revenues.

And when you look at that level and the mix of currency movements, we just haven't seen a significant impact.

Okay, that's encouraging. Then a couple of housekeeping items if I may. The weighted average share count upon which you're basing your guidance for non-GAP adjusted net loss per share for Q2 is 94 and a half million shares. And I saw the Q that you filed as of August 1st. We've got 102.7 million shares. So help me understand the Delta there.

you have a

Yeah, I'm not familiar with 102.

Eric, but when we look at what our share counts, you know, how they've moved the last few quarters because it's the impact of the rights offering, right? And on just the basic level because as long as we have a loss, we don't have the derivative effect of all the other equity instruments.

But for Q4, we were at 60.3 million.

Then Q1, we're at 83.6 million.

And really, what we expect.

Looking at the schedule now, Eric, is I would expect 9.6 million for Q2. It looks like the 94.5 really includes a dilute of effect, but that's only if we were profitable.

Okay, so 91.6 versus 94.5. Got it. Yeah. All right, and then last housekeeping item, the, what should we use for interest expense in Q2? I know you had 2.1 million in Q1, but that had some puts and takes in it.

Yeah, I think that, I mean, the $2 million is a good number for right now.

That's a plus. Great job. Thank you for my questions.

Thanks for taking my questions. Sure.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Our next question is from Mihal Chakshi with Northern Capital. Please proceed with your question.

Oh, yes. Thank you. Seems like solid results. Congratulations on that. Here's slide nine. Show your shipable backlog and then order a schedule for future quarters within those order schedule for future quarters. That is what happened within the June quarters. Does that mean that there are orders shipable within this separate quarter?

you

Yeah, um...

Let me turn to that slide and see.

Are you looking you're looking at the?

The light blue shipable or the

I'm just wondering if because that's you know orders that were scheduled for future quarters within the June quarter does that mean that it's shippable in the September quarter? Some portion of that shipping was in the quarter.

Not necessarily because some of it could go out beyond a quarter.

But I guess the question is, is some of that still shippable within the September quarter?

Yeah.

Got it. Okay.

Because otherwise what it looks like is that you have very little visibility into your September quarter guidance relative to your June quarter guidance.

So that's essentially what my question is, is that what gives you this confidence to guide the Flash Q2 with what appears to be, if I were to just use a Q2 change in shippable backlog plus your revenue as a gauge for what your orders were in the quarter. It looks like it went down significantly.

But what you're trying to say is that no, that's not the case.

Or orders that are shipable within the September quarter remain quite robust actually. And that gives you confidence to guide the way that you have guided. That correct. That correct. That correct. That correct. That correct. That correct. That correct. That correct. That correct.

Yeah, definitely when you look at that July orders, that has...

Q2 business in it, right?

Yep, got it, very good.

Okay, and then Jamie, last quarter you talked about your four levers to achieving a 25 million EBITDA and I wouldn't say the near future but you know near to mid-term future and then the 50 million annualized EBITDA target.

mid to long term basis.

How do you feel about the...

So how those lovers have been coming along, we're all too to when you made them out a quarter ago.

Yeah, I think we're...

but we feel we're on our plan.

If you look at this quarter, we're bringing up gross margin.

You know, we're looking at...

Kind of that 50 to 100 basis points a quarter bringing that up. I think we'll do better than that this quarter

We're looking at getting greater supply. We're seeing.

We're selling faster than we're getting supply, but the supply is coming up.

There's Evita and that supply. We need to get the company well over 100 million. We need to get the company well over 100 million.

You know, given our max.

We see that coming together. We see that supply coming together.

Our pricing and discounting has been put in place. I think that's being generally accepted at first There was some grumbling but I think people generally understood it's we're in an inflationary period We're putting that in place and then we've taken

a series of op-x reduction measures that are behind us at this point and those are taking effect and all that's coming together and it's good to see us go

You know from 300k but uh

2.5 million, that's the kind of growth I think our investors want to see. And we've got to keep walking that up. But it's taking a lot of work to get here. And now we're restoring that evita, we'll, you know, and get free cash flow restored again as we bring it up.

You know to go from 300k to 2.5 is a good jump. We need to get that 2.5 up to 5 million you know and

Up to 25 up to 50 and we'll keep working it up but I

You know what I feel also good about is you know most of supply chain issues are now under control We're not paying broker fees. We're not paying expedite fees 93% of our supply chain issue is all about tape drives.

So we have everything else. We have our servers, we have our hard drives, we have our network cards, we have our power supplies, we have all the stuff we need to build tape libraries, literally 93% of our issue.

So we have everything else. We have our servers, we have our hard drives, we have our network cards, we have our power supplies, we have all the stuff we need to build tape libraries, literally 93% of our issue right now is just... literally 93% of our issue right now is just...

getting the tape drives ship to us and we just put them in libraries and ship them. and we just put them in libraries and ship them.

Okay, that's very helpful. To put that 93% in perspective, where was that a quarter and two quarters ago?

It was still pretty high, it was in the the bow 80s.

So we had, you know, think of it as 80% of our issue was tape drives, 20% was other sundry items. We've gotten all those items kind of worked down and...

Basically, our supply chain issue is laser focused on a single supplier.

Okay, and if I recall correctly, one of the longer term key lovers was territory and vertical sales fillings. Presumably, that's something that's gonna be worked on as you go through this fiscal year, not something that you worked on, Miss Most Recent Fistle Quarter. Correct.

We've been working on that as well. I mean we're putting those people in place now.

The hiring environment has changed drastically.

There's a lot of talent available. I think there's a lot of people coming out of companies right now that are doing reductions in force. So I am seeing a much more favorable hiring environment for Quantum.

and we are getting really good talent that we're placing into key territories. So I feel like we're getting much.

closer to full strength in our sales organization and we'll see that as we get people through boot camps training. I think we're going to see the sales come through and we're hiring people to address mix.

I mean, everyone knows a big part of our mix is hyperscaler. Those are big volume deals, but they're lower margin.

And I feel really good about how that business is performing. So the people who are hiring are in higher margin businesses to help us with mix. They're going after enterprise, media and entertainment. And. And.

The Federal. U.S. Federal. Absolutely. U.S. Federal. balanced.

OK, great, thank you.

We have reached the end of the question and answer session and I will now turn the call over to Jamie Lerner for closing remarks.

Okay, thanks everyone. Thanks for attending today and this concludes our call. We'll see you next quarter. Thanks everyone.

This concludes today's conference and you may disconnect your lines at this time. Thank you for participation.

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