Q1 2025 Quantum Corp Earnings Call

Greetings. Welcome to Quantum Corporation's first quarter fiscal year 2025 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: or 2025 financial results. At this time, all participants aren't illicit-only mode.

Operator: 2025 financial At this time, all participants are in a listen-only mode; a question and answer session will follow the form. If anyone should require operator assistance during the conference, please press star zero on your telephone. Please note this conference is being recorded. I will now turn the conference over to Brian Cabrera, Quantum's Chief Administrative Officer. Thank you.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

Brian Cabrera: I will now turn the conference over to Bernie Cabrera, Quantum's Chief Administrative Officer. Thank you, and you begin.

Please note, this conference is being recorded. I will now turn the conference over to Brian Cabrera, Quantum's Chief Administrative Officer. Thank you. You may begin.

Brian Cabrera: Good afternoon and thank you for joining today's conference call to discuss Quantum's first quarter fiscal 2025 financial results.

Brian Cabrera: Good afternoon, and thank you for joining today's conference call to discuss Quantum's first quarter fiscal 2025 financial results. I'm Brian Cabrera, Quantum's Chief Administrative Officer. Speaking first today is Jamie Lerner, our Chairman and CEO, followed by Ken Gianella, our CFO. We'll then open the call to questions from...

Brian Cabrera: Good afternoon and thank you for joining today's conference call to discuss Quantum's first quarter fiscal 2025 financial results.

Brian Cabrera: I'm Brian Cabrera, Quantum's Chief Administrative Officer.

Brian Cabrera: Speaking first today is Jamie Lerner, our Chairman and CEO, followed by Ken Gianella, RCFO. We'll then open the call to questions from analysts.

Brian Cabrera: I'm Brian Cabrera, Quantum's Chief Administrative Officer. Speaking first today is Jamie Lerner, our Chairman and CEO, followed by Ken Gianella, our CFO.

Brian Cabrera: Some of our comments during the call today may include forward-looking statements. All statements other than statements of historical fact should be viewed as forward-looking, including any projections of revenues, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, or other financial, operational, or performance topics. These statements involve known and unknown risks and uncertainties we refer to as risk factors. Risk factors may cause our actual results to differ materially from our forecast. For more information, please refer to the detailed description. We provide about these and additional risk factors under the risk factors section in our 10-Qs and 10-K, filed with the Securities and Exchange Commission.

Brian Cabrera: Some of our comments during the call today may include forward-looking statements. All statements, other than statements of historical fact, should be viewed as forward-looking, including any projections of revenues, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, or other financial, operational, or performance topics. These statements involve known and unknown risks and uncertainties, which we refer to as risk factors.

Speaker Change: We'll then open the call to questions from analysts.

Speaker Change: Some of our comments during the call today may include forward-looking statements.

Brian Cabrera: Risk factors may cause our actual results to differ materially from our forecast. For more information, please refer to the detailed description we provide about these and additional risk factors under the risk factors section in our 10-Qs and 10-K filed with the Securities and Exchange Commission. We do not intend to update or alter our forward-looking statements once they are issued, whether as a result of new information, future events, or otherwise, except, of course, as we are required by applicable law.

Speaker Change: All statements, other than statements of historical fact, should be viewed as forward-looking, including any projections of revenues, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, or other financial, operational, or performance topics.

Speaker Change: These statements involve known and unknown risks and uncertainties we refer to as risk factors.

Speaker Change: Risk factors may cause our actual results to differ materially from our forecast.

Speaker Change: For more information, please refer to the detailed description we provide about these and additional risk factors under the Risk Factors section in our 10-Qs and 10-K filed with the Securities and Exchange Commission.

Brian Cabrera: We do not intend to update or alter our forward-looking statements once they are issued, whether as a result of new information, future events, or otherwise, except, of course, as we are required by applicable law.

Speaker Change: We do not intend to update or alter our forward-looking statements once they are issued, whether as a result of new information, future events, or otherwise, except, of course, as we are required by applicable law.

Brian Cabrera: Please note that our press release and the management statements we make during today's call will include certain financial information in GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release.

Brian Cabrera: Please note that our press release and the management statements we make during today's call will include certain financial information in GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release. Now, I would like to turn the call over to our Chairman and CEO, Jamie Lerner.

Speaker Change: Please note that our press release and the management statements we make during today's call will include certain financial information in GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release.

Brian Cabrera: Now I would like to turn the call over to our Chairman and CEO, Jamie Lerner. Jamie?

Speaker Change: Now I would like to turn the call over to our Chairman and CEO, Jamie Lerner. Jamie? Thank you, Brian. And thank you all for joining us today.

James Lerner: Thank you, Brian. And thank you all for joining us today. Earlier today, we announced our results for our first quarter fiscal 2025. Turning to slide three, here are some brief highlights from the quarter. We finished Q1 2025 with 71.3 million in revenue, non-GAAP gross margin of 36.9 percent, and adjusted EBITDA of negative 3.1 million. These results were largely in line with our expectations, reflecting further rotation of our business toward our long-term initiatives. We continue to take steps to improve the company's capital structure and operational performance, as well as accelerating the growth of profitable revenue streams, which we will discuss further in today's call.

Jamie Lerner: Thank you, Brian, and thank you all for joining us today. Earlier today, we announced our results for our first quarter of fiscal 2025. Turning to slide 3, here are some brief highlights from the quarter. We finished Q1 2025 with $71.3 million in revenue, a non-gap gross margin of 36.9 percent, and adjusted EBITDA of negative $3.1 million. These results were largely in line with our expectations, reflecting further rotation of our business toward our long-term initiatives.

Speaker Change: Earlier today we announced our results for our first quarter fiscal 2025.

Speaker Change: Turning to slide three, here are some brief highlights from the quarter.

Speaker Change: We finished Q1 2025 with $71.3 million in revenue.

Speaker Change: non-GAAP gross margin of 36.9% and adjusted EBITDA of negative 3.1 million.

Speaker Change: These results were largely in line with our expectations, reflecting further rotation of our business toward our long-term initiatives.

Jamie Lerner: We continue to take steps to improve the company's capital structure and operational performance, as well as accelerate the growth of profitable revenue streams, which we will discuss further in today's call. First, as part of our ongoing strategic and financial initiatives, we have reached an agreement with our current lenders that significantly increases our liquidity, allows us to take action on improving our operational initiatives, and focus on driving Myriad, ActiveScale, and the rest of our business to the next level. We have added access to over $25 million.

Speaker Change: We continue to take steps to improve the company's capital structure and operational performance, as well as accelerating the growth of profitable revenue streams.

Speaker Change: which we will discuss further in today's call.

James Lerner: First, as part of our ongoing strategic and financial initiatives, we have reached an agreement with our current lenders that significantly increases our liquidity, allows us to take action on improving our operational initiatives. and focus on driving myriad active scale and the rest of our business to the next level. We added access to over $25 million. This injection of growth capital, combined with the restructuring of our existing debt, allows the company not only to improve its overall capital structure and balance sheet, but positions us well for continued innovation and growth in our target markets.

Speaker Change: First, as part of our ongoing strategic and financial initiatives, we have reached an agreement with our current lenders that significantly increases our liquidity, allows us to take action on improving our operational initiatives,

Speaker Change: and focus on driving Myriad, ActiveScale, and the rest of our business to the next level.

Speaker Change: We added access to over 25 million dollars.

Jamie Lerner: This injection of growth capital, combined with the restructuring of our existing debt, allows the company not only to improve its overall capital structure and balance sheet but positions us well for continued innovation and growth in our target market. Let me talk more about the company's continued transformation and driving the business to the next level. Quantum has proven experience managing unstructured data with deep roots in video, media, and entertainment. The ongoing exponential growth in unstructured data, particularly driven by AI use cases, is creating continued traction for our myriad and active-scale platforms that are uniquely positioned to address these workflows end-to-end.

Speaker Change: This injection of growth capital, combined with the restructuring of our existing debt, allows the company not only to improve its overall capital structure and balance sheet, but positions us well.

Speaker Change: for Continued Innovation and Growth in our Target Markets.

James Lerner: Let me talk more about the company's continued transformation and driving the business to the next level. Quantum has proven experience managing unstructured data with deep roots in video and media and entertainment. The ongoing exponential growth in unstructured data, particularly driven by AI use cases, is creating continued traction for our myriad and active scale platforms that are uniquely positioned to address these workflows and end. Our engineering team is delivering the committed myriad roadmap on time and on plan. With our customers successfully adopting these new features as they are released, giving us confidence in their robustness for commercial rollout.

Speaker Change: Let me talk more about the company's continued transformation and driving the business to the next level.

Speaker Change: Quantum is proven experience managing unstructured data with deep roots in video and media and entertainment.

Speaker Change: The ongoing exponential growth in unstructured data, particularly driven by AI use cases,

Speaker Change: is creating continued traction for our myriad and active scale platforms that are uniquely positioned to address these workflows end-to-end.

Jamie Lerner: Our engineering team is delivering the committed Myriad roadmap on time and on plan, with our customers successfully adopting these new features as they are released, giving us confidence in their robustness for commercial rollout. As I mentioned on the last call, while deal cycles can be long for this category of product, we currently have several proof-of-concept engagements underway and moving forward. These are concentrated primarily in visual effects and post-production, where we have extensive experience to accelerate adoption, along with life sciences, high-performance computing, industrial research, and manufacturing.

Speaker Change: Our engineering team is delivering the Committed Myriad roadmap on time and on plan.

Speaker Change: With our customers successfully adopting these new features as they are released, giving us confidence in their robustness for commercial rollout.

James Lerner: As I mentioned on the last call, while deal cycles can be long for this category of product, we currently have several proof of concept engagements underway and moving forward. These are concentrated primarily in visual effects and post-production, where we have extensive experience to accelerate adoption, along with life sciences, high performance computing, industrial research, and manufacturing. We have added to this global pipeline during the quarter with additional AI use cases, with one of note being a multi-billion dollar enterprise with a potential for a scaled engagement.

Speaker Change: As I mentioned on the last call, while deal cycles can be long for this category of product, we currently have several proof-of-concept engagements underway and moving forward.

Speaker Change: These are concentrated primarily in visual effects and post-production, where we have extensive experience to accelerate adoption, along with life sciences, high-performance computing, industrial research, and manufacturing.

Jamie Lerner: We have added to this global pipeline during the quarter with additional AI use cases, with one of note being a multi-billion dollar enterprise with the potential for a scaled engagement. Beyond Myriad, we are seeing momentum since deploying all Flash options across our full portfolio. In fact, our DXI-T10 had multiple closed deals within days of its formal launch announcement. We plan on aggressively targeting the enterprise backup market with our superior technology, delivering an all-flash format.

Speaker Change: We have added to this global pipeline during the quarter with additional AI use cases with one of note being a multi-billion dollar enterprise with a potential for a scaled engagement.

James Lerner: Beyond myriad, we are seeing momentum since deploying all-flash options across our portfolio. In fact, our DXI-T10 had multiple closed deals within days of its formal launch announcement. We plan on aggressively targeting the enterprise backup market with our superior technology, delivering an all-flash format, DXI immutability, and the one new form factor at one of the best total cost of ownership in the market. We solved some of the most complex and important data center and storage problems for the world's largest organizations. While we have had headwinds in the near term, we believe our solutions provide unique value that no other company can offer.

Speaker Change: Beyond Myriad, we are seeing momentum since deploying all Flash options across our full portfolio.

Speaker Change: In fact, our DXI-T10 had multiple closed deals within days of its formal launch announcement.

Speaker Change: We plan on aggressively targeting the enterprise backup market with our superior technology delivering an all-flash format

Jamie Lerner: DXi immutability, and the 1U form factor at one of the best total costs of ownership in the market. We solved some of the most complex and important data center and storage problems for the world's largest organizations. However, we have had headwinds in the near term.

Speaker Change: DXI immutability, and the 1U form factor at one of the best total cost of ownership in the market.

Speaker Change: We solved some of the most complex and important data center and storage problems for the world's largest organizations.

Jamie Lerner: We believe our solutions provide unique value that no other company can offer. This motivates us to come to work every day and drive these solutions forward. For example, we saw several notable ActiveScale wins in the quarter, including an NBA team that was an existing StoreNext customer with content archival needs leading to the purchase of more than 10 petabytes of active and cold storage. The deal included a net new ActiveScale deployment with cold storage.

Speaker Change: Well, we have had headwinds in the near term.

Speaker Change: We believe our solutions provide unique value that no other company can offer. This motivates us to come to work every day and drive these solutions forward.

James Lerner: This motivates us to come to work every day and drive these solutions forward. For example, we saw several notable active scale wins in the quarter, including an NBA team that was an existing Stornex customer with content archival needs leading to the purchase of more than 10 petabytes of active and cold storage. The deal included a net new active scale deployment with cold storage, cat TV, and Stornex expansion, demonstrating a seven-figure deal size when we sell the full product portfolio and the end. In addition to new active scale deployments into existing store next and tape installed based accounts, we saw active scale expansion deals as unstructured data continues to grow exponentially.

Speaker Change: For example, we saw several notable ActiveScale wins in the quarter, including an NBA team that was an existing StoreNext customer with content archival needs leading to the purchase of more than 10 petabytes of active and cold storage.

Speaker Change: The deal included a net new ActiveScale deployment with cold storage, CATDV, and StoreNext expansion, demonstrating a seven-figure deal size when we sell the full product portfolio end-to-end.

Jamie Lerner: Cat TV, and Stornex expansion, demonstrating a seven-figure deal size when we sell the full product portfolio end-to-end. In addition to new ActiveScale deployments into existing StoreNext and TAPE-installed-based accounts, we saw active scale expansion deals as unstructured data continues to grow exponentially. And we expect these footprints to continue to scale, as well as net new customer accounts in both media and entertainment and

Speaker Change: In addition to new ActiveScale deployments into existing StorNext and TAPE installed-based accounts, we saw ActiveScale expansion deals as unstructured data continues to grow exponentially.

James Lerner: And we expect these footprints to continue to scale, as well as net new customer accounts in both media and entertainment and healthcare.

Speaker Change: And we expect these footprints to continue to scale, as well as net new customer accounts in both media and entertainment and healthcare.

James Lerner: Finally, we remain committed to strong cost and discretionary spending controls through this transformation while continuing to evaluate and consider all possible alternatives. As we execute on our business initiatives that include achieving our operating performance driven by tangible proof points, accelerating growth of new products, and divesting non-core product and assets, our organization will become more focused and operationally efficient.

Jamie Lerner: Finally, we remain committed to strong cost and discretionary spending controls through this transformation while continuing to evaluate and consider all possible alternatives. As we execute on our business initiatives that include achieving our operating performance driven by tangible proof points, accelerating growth of new products, and divesting non-core products and assets, our organization will become more focused and operationally efficient. With that said, I would now like to turn it over to Ken to walk through our financial results and our updated financing in more detail. Ken?

Speaker Change: Finally, we remain committed to strong cost and discretionary spending controls through this transformation, while continuing to evaluate and consider all possible alternatives.

Speaker Change: As we execute on our business initiatives that include achieving our operating performance driven by tangible proof points

Speaker Change: accelerating growth of new products

Speaker Change: and divesting non-core product and assets, our organization will become more focused and operationally efficient.

Kenneth Gianella: With that, I would now like to turn it over to Ken to walk through our financial results and our updated financing in more detail. Ken.

Speaker Change: With that...

Speaker Change: I would now like to turn it over to Ken to walk through our financial results and our updated financing in more detail. Ken? Thank you, Jamie. Please turn to slide six and I'll provide an overview of the GAAP financial results for our fiscal first quarter.

Kenneth Gianella: Thank you, Jamie. Please turn to slide six, and I'll provide an overview of the gap financial results for our fiscal first quarter. Revenue was 71.3 million, a decrease of approximately 23% year-over-year, and essentially flat to the fourth quarter of 2024. The revenue year-over-year decrease was primarily driven by the loss of our largest hyper-scaler. While the full quarter results do not fully reflect the continued rotation of our business toward our long-term initiatives, we are pleased with the progress. For example, our gross margin for the period was 36.6% compared to 38.5% in a year-ago quarter, and 38.2% in the prior quarter.

Ken Gianella: Thank you, Jamie. Please turn to slide six, and I'll provide an overview of the GAAP financial results for our fiscal first quarter. Revenue was $71.3 million, a decrease of approximately 23% year-over-year and essentially flat to the fourth quarter of 2024. The revenue year-over-year decrease was primarily driven by the loss of our largest hyperscaler.

Ken Gianella: Revenue was $71.3 million, a decrease approximately 23% year-over-year, and essentially flat to the fourth quarter of 2024.

Speaker Change: The revenue year-over-year decrease was primarily driven by the loss of our largest hyperscaler. While the full quarter results do not fully reflect the continued rotation of our business toward our long-term initiatives, we are pleased with the progress.

Ken Gianella: While the full quarter results do not fully reflect the continued rotation of our business toward our long-term initiatives, we are pleased with the progress. For example, our gross margin for the period was 36.6%, compared to 38.5% in the year-ago quarter and 38.2% in the prior quarter. This lower margin was due to a very large-scale strategic video surveillance sale to the world's largest packaging and shipping company for all of their ground shipping locations. Also impacting the quarter's profitability was supply constraints that prevented us from shipping higher volumes of higher-margin products during the quarter.

Ken Gianella: These supply headwinds resulted in an increase in the quarter-end order backlog to approximately $15.5 million, substantially above our normal run rate of $8 to $10 million. While we anticipate gross margin returning to the low 40% next quarter, we expect higher supply lead times to persist through the end of the calendar year. Gap's net loss in the quarter was $28 billion.

Speaker Change: For example, our gross margin for the period was 36.6% compared to 38.5% in the year ago quarter and 38.2% in the prior quarter.

Kenneth Gianella: This lower margin was due to a very large-scale strategic video surveillance sale to the world's largest packing shipping company for all of their ground-shipping locations. Also impacting the quarter's profitability was supply constraints that prevented us from shipping higher volumes of higher margin products during the quarter. These supply headwinds resulted in an increase of the quarter and order backlog to approximately 15.5 million, substantially above our normal run rate of 8 to 10 million dollars. While we anticipate gross margin returning to the low 40% next quarter, we expect higher supply lead times to persist through the end of the calendar year.

Speaker Change: This lower margin was due to a very large scale strategic video surveillance sale to the world's largest packing shipping company for all of their ground shipping locations.

Speaker Change: Also impacting the quarter's profitability was supply constraints that prevented us from shipping higher volumes of higher margin products during the quarter.

Speaker Change: These supply headwinds resulted in an increase of the quarter end order backlog to approximately $15.5 million, substantially above our normal run rate of $8 to $10 million.

Speaker Change: While we anticipate gross margin returning to the low 40% next quarter, we expect higher supply lead times to persist through the end of the calendar year.

Kenneth Gianella: Gapnet loss in the quarter was 28.8 million, or a loss of 22 cents per share, compared with the loss of 9.1 million, or 10 cents per share, in the same quarter last year and compared to a loss of 18.9 million, or 20 cents per share, in the prior quarter.

Ken Gianella: 20.8 million or a loss of $0.22 per share compared with a loss of $9.1 million or $0.10 per share in the same quarter last year and compared to a loss of $18.9 million or $0.20 per share in the prior quarter. This hiring loss in Q125 was predominantly driven by one-time expenses of over $10.7 million. The gain or fair value of warrants was 1.7 million in the quarter compared to a 0.7 million gain in the same quarter of the prior year and a 2.2 million loss in the prior quarter.

Speaker Change: Gap net loss in the quarter was $28 million.

Speaker Change: $20.8 million or a loss of $0.22 per share compared with a loss of $9.1 million or $0.10 per share in the same quarter last year and compared to a loss of $18.9 million or $0.20 per share in the prior quarter.

Kenneth Gianella: This higher loss in Q125 was predominantly driven by one-time expenses of over $10.7 million. The gain or fair value of warrants was 1.7 million in the quarter compared to a 0.7 million gain in the same quarter in the prior year and a 2.2 million loss in the prior quarter.

Speaker Change: This higher loss in Q125 was predominantly driven by one-time expenses of over $10.7 million.

Speaker Change: The gain or fair value of warrants was 1.7 million in the quarter compared to a 0.7 million gain in the same quarter in the prior year and a 2.2 million loss in the prior quarter.

Kenneth Gianella: Director. We anticipate elevated levels of one time spending to persist into Q2 25 as we complete restructuring activities. However, they will significantly subside as we head into the back half of the fiscal year. Now turning to slide 7 for non-gap metrics. Non-GAAP gross margin for the quarter was 36.9% compared to 38.8% in the prior year and 38.5% in the prior quarter. Non-GAAP operating expenses were 30.8 million in the first quarter. A significant decrease from 35.5 million year over year and in the prior quarter. This decrease in operational expenses was the result of our proactive actions to improve process and productivity, and we anticipate operating at or below these levels as continued constructions begin to take hold into the back half of our fiscal year.

Ken Gianella: We anticipate elevated levels of one-time spending to persist into Q2-25 as we complete restructuring activities. However, they will significantly subside as we head into the back half of the fiscal year. Now turning to slide 7 for non-GAP metrics, the Non-Gap Gross Margin for the quarter was 36.9% compared to 38.8% in the prior year and 38.5% in the prior quarter. Non-GAAP operating expenses were $30.8 million in the first quarter, a significant decrease from $35.5 million year-over-year and in the prior quarter.

Speaker Change: We anticipate elevated levels of one-time spending to persist into Q2-25 as we complete restructuring activities. However, they will significantly subside as we head into the back half of the fiscal year.

Speaker Change: Now turning to slide 7 for non-GAAP metrics.

Speaker Change: Non-GAAP gross margin for the quarter was 36.9% compared to 38.8% in the prior year and 38.5% in the prior quarter.

Speaker Change: Non-GAAP operating expenses were $30.8 million in the first quarter, a significant decrease from $35.5 million year-over-year and in the prior quarter.

Ken Gianella: This decrease in operational expenses was the result of our proactive actions to improve processes and productivity, and we anticipate operating at or below these levels as continued cost actions begin to take hold into the back half of our fiscal year. Non-gap adjusted net loss in the first quarter was $8.4 million, or $0.09 loss per share, compared to a $4.1 million, or $0.04 loss per share, in the prior year quarter and a loss of $10.9 million, or $0.11 loss per share, in the prior quarter.

Speaker Change: This decrease in operational expenses was the result of our proactive actions to improve process and productivity, and we anticipate operating at or below these levels as continued cost actions begin to take hold into the back half of our fiscal year.

Kenneth Gianella: Non-GAAP adjusted net loss in the first quarter was 8.4 million or 9 cents loss per share compared to a 4.1 million or a 4 cent loss per share in the prior year quarter and a loss of 10.9 million or 11 cent loss per share in the prior quarter. Adjusted EBITDA in the first quarter was a negative 3.1 million, compared with a positive 1.5 million in the prior year first quarter and a negative 6.2 million in the prior quarter. This quarter's EBITDA reflects lower margin revenue mix and higher manufacturing costs due to supply chain constraints. We anticipate operational cost controls and improving revenue mix to drive higher EBITDA throughout the rest of the year.

Speaker Change: Non-gap adjusted net loss in the first quarter was $8.4 million or $0.09 loss per share compared to a $4.1 million or $0.04 loss per share in the prior year quarter and a loss of $10.9 million or $0.11 loss per share in the prior quarter.

Ken Gianella: Adjusted EBITDA in the first quarter was a negative $3.1 million compared with a positive $1.5 million in the prior year first quarter and a negative $6.2 million in the prior quarter. This quarter's EBITDA reflects lower margin revenue mix and higher manufacturing costs due to supply chain constraints. We anticipate operational cost controls and improving revenue mix to drive higher EBITDA throughout the rest of the year. We remain focused on improving total profitability, which will continue to be driven by our global restructuring, combined with our sales team's effort toward a more end-to-end, higher margin subscription-based solution.

Speaker Change: Adjusted EBITDA in the first quarter was a negative $3.1 million compared with a positive $1.5 million in the prior year first quarter and a negative $6.2 million in the prior quarter.

Speaker Change: This quarter's EBITDA reflects lower margin revenue mix and higher manufacturing costs due to supply chain constraints.

Speaker Change: We anticipate operational cost controls and improving revenue mix to drive higher EBITDA throughout the rest of the year.

Kenneth Gianella: We remain focused on improving EBITDA and total profitability, which will continue to be driven by our global restructuring combined with our sales team's effort toward a more end-to-end higher margin subscription-based solutions. We continue to anticipate our efforts will deliver sequential year-over-year improvements and profitability even on a lower revenue base in fiscal year 2025. Moving to slide 8, I want to provide an update on our annual recurring revenue and subscription metrics. Total recurring annual recurring revenue or ARR for the trailing 12 months was approximately 49 percent of our total revenue at 141 million, with a gross margin on the combined business being approximately 65 percent.

Speaker Change: We remain focused on improving EBITDA and total profitability, which will continue to be driven by our global restructuring, combined with our sales team's effort toward a more end-to-end, higher margin subscription-based solutions.

Ken Gianella: We continue to anticipate our efforts will deliver sequential year-over-year improvements in profitability, even on a lower revenue base in fiscal year 2025. Moving to slide eight, I want to provide an update on our annual recurring revenue and subscription metrics. Total annual recurring revenue, or ARR, for the trailing 12 months was approximately 49% of our total revenue at $141 million, with a gross margin on the combined business being approximately 65%.

Speaker Change: We continue to anticipate our efforts will deliver sequential year-over-year improvements and profitability, even on a lower revenue base in fiscal year 2025.

Speaker Change: Moving to slide 8, I want to provide an update on our annual recurring revenue and subscription metrics.

Speaker Change: Total annual recurring revenue, or ARR, for the trailing 12 months was approximately 49% of our total revenue at $141 million, with a gross margin on the combined business being approximately 65%.

Kenneth Gianella: As a company, we continue to focus on total ARR by maximizing our quantum service opportunities to both our partners and customers globally. The best way to demonstrate our progress is through our subscription ARR. The growth in subscriptions continues to demonstrate the progress we are making in our business transformation efforts. In Q125, the subscription portion of our total ARR increased approximately 29 percent year-over-year and approximately 5 percent sequentially to 18.8 million dollars. Over 92 percent of new unit sales were subscription-based. Now please turn to slide 9 for an overview of debt and liquidity at the end of the quarter.

Ken Gianella: As a company, we continue to focus on total ARR by maximizing our quantum service opportunities for both our partners and customers globally. The best way to demonstrate our progress is through our subscription ARR. The growth in subscriptions continues to demonstrate the progress we are making in our business transformation effort. In Q125, the subscription portion of our total ARR increased approximately 29% year-over-year and approximately 5% sequentially to $18.8 million. Over 92% of new unit sales were subscription-based.

Speaker Change: As a company, we continue to focus on total ARR by maximizing our quantum service opportunities to both our partners and customers globally.

Speaker Change: The best way to demonstrate our progress is through our subscription ARR. The growth in subscriptions continues to demonstrate the progress we are making in our business transformation efforts.

Speaker Change: In Q125, the subscription portion of our total ARR increased approximately 29% year-over-year and approximately 5% sequentially to $18.8 million. Over 92% of new unit sales were subscription-based.

Ken Gianella: Now please turn to slide 9 for an overview of debt and liquidity at the end of the quarter. Cash, cash equivalents, and restricted cash at the end of the first quarter were approximately $17.5 million. outstanding Debt Split Between Term and our Revolver with $75.8 million and $35.8 million, respectively. At quarter end, the company's net debt position was $94.3 million.

Speaker Change: Now please turn to slide 9 for an overview of debt and liquidity at the end of the quarter.

Kenneth Gianella: Cash, cash equivalents, and restricted cash at the end of the first quarter were approximately 17.5 million dollars. Outstanding debt split between Terminal Revolver was $75.8 million and $35.8 million, respectively. At quarter end, the company's net debt position was $94.3 million. As Jamie discussed at the top of the call, subsequent to the quarter end, and as mentioned in our press release today, we added the ability to draw over $25 million to give us more operational flexibility going forward, combined with reaching an agreement with our current lenders in which we were structured over $110 million of existing debt that significantly improves our overall liquidity and operational flexibility.

Speaker Change: Cash, cash equivalents, and restricted cash at the end of the first quarter were approximately $17.5 million. Outstanding debt split between Term and our revolver was $75.8 million and $35.8 million respectively.

Speaker Change: At quarter end, the company's net debt position was $94.3 million.

Ken Gianella: As Jamie discussed at the start of the call, subsequent to the quarter end, and as mentioned in our press release today, we added the ability to draw over $25 million to give us more operational flexibility going forward, combined with reaching an agreement with our current lenders in which we restructured over $110 million of existing debt that significantly improves our overall liquidity and operational flexibility. The agreement was executed giving Quantum an elevated blended interest rate of approximately 300 basis points, in addition to warrants and other considerations. There is an anticipated dilution related to the new warrants of approximately 7% on a fully diluted basis.

Speaker Change: As Jamie discussed at the top of the call,

Jamie Lerner: Subsequent to the quarter end, and as mentioned in our press release today, we added the ability to draw over $25 million to give us more operational flexibility going forward, combined with reaching an agreement with our current lenders in which we restructured over $110 million of existing debt that significantly improves our overall liquidity and operational flexibility.

Kenneth Gianella: The agreement was executed, giving quantum and elevated blended interest rate of approximately 300 basis points in addition to warrants and other considerations. There is an anticipated dilution related to the new warrants of approximately 7% on a fully diluted basis. The agreement has provisions that can reduce the issued warrants significantly in conjunction with paydown of the term loan at the company's discretion over the next couple of quarters. This agreement allows the company to focus on driving myriad, active scale, and the rest of our business to the next level while becoming more profitable through our restructuring initiatives.

Jamie Lerner: The agreement was executed giving Quantum an elevated blended interest rate of approximately 300 basis points in addition to warrants and other considerations.

Jamie Lerner: There is an anticipated dilution related to the new warrants of approximately 7% on a fully diluted basis.

Ken Gianella: The agreement has provisions that can reduce the issued warrants significantly in conjunction with pay down of the term loan at the company's discretion over the next couple of quarters. This agreement allows the company to focus on driving Myriad, ActiveScale, and the rest of its business to the next level while becoming more profitable through our restructuring initiative. Additionally, this amendment underscores our partner's commitment to the company's strategy and the long-term potential of Myriad and ActiveScale, including the company's commitment to getting back to profitability as we drive towards cash flow positive in the second half of fiscal year 2025.

Jamie Lerner: The agreement has provisions that can reduce the issued warrants significantly in conjunction with paydown of the term loan at the company's discretion over the next couple of quarters.

Jamie Lerner: This agreement allows the company to focus on driving Myriad, ActiveScale, and the rest of our business to the next level while becoming more profitable through our restructuring initiatives.

Kenneth Gianella: Additionally, this amendment underscores our partners' commitment to the company's strategy and the long-term potential of myriad and active scale, including the company's commitment to getting back to profitability as we drive towards cash flow positive in the second half of fiscal year 2025. With the new and restructured financing in place, combined with being back on file, the company can now fully focus on executing our business and expanding our value to our customers. With that, let's close out by turning this slide 10, and I'll now review the company's guidance for the second quarter of fiscal 2025. First, we anticipate total revenue in the second quarter to be approximately $73 million plus or minus $2 million.

Jamie Lerner: Additionally, this amendment underscores our partners commitment to the company's strategy and the long-term potential of Myriad and ActiveScale, including the company's commitment to getting back to profitability as we drive towards cash flow positive in the second half of fiscal year 2025.

Ken Gianella: With the new and restructured financing in place, combined with being back on file, the company can now fully focus on executing its business and expanding its value to its customers. With that, let's close out by turning to slide 10, and I'll now review the company's guidance for the second quarter of fiscal 2025. First, we anticipate total revenue in the second quarter to be approximately $73 million, plus or minus $2 million. This is factoring all potential impact for elongated lean times for all storage media.

Jamie Lerner: With the new and restructured financing in place, combined with being back on file, the company can now fully focus on executing our business and expanding our value to our customers.

Ken Gianella: We expect non-GAAP operating expenses to be approximately $30 million plus or minus $2 million, reflecting the aggressive cost reduction actions taken through fiscal year 24 and in-process actions in FY25. As a result, non-GAAP adjusted net loss per share for the second quarter is expected to be a negative six cents plus or minus two cents per share, based on an estimated approximately 96 million shares outstanding.

Jamie Lerner: With that, let's close out by turning to slide 10, and I'll now review the company's guidance for the second quarter of fiscal 2025.

Jamie Lerner: First, we anticipate total revenue in the second quarter to be approximately $73 million plus or minus $2 million.

Kenneth Gianella: This is factoring all potential impact for elongated lean times for all storage media. We expect non-GAAP operating expenses to be approximately $30 million plus or minus $2 million. Reflecting the aggressive cost reductions actions taken through fiscal year 24 and in process actions in FY25. As a result, non-GAAP adjusted net loss per share for the second quarter is expected to be a negative 6 cents plus or minus 2 cents per share based on an estimated approximately $60 million shares outstanding. Adjusted EBITDA for the second quarter is expected to be approximately break even. This improvement is driven by anticipated gross margin improvements to the low 40 percent and continued non-GAAP operating expenses to be on par with Q125 results.

Jamie Lerner: This is factoring all potential impact for elongated lean times for all storage media.

Jamie Lerner: We expect non-GAAP operating expenses to be approximately $30 million plus or minus $2 million, reflecting the aggressive cost reductions actions taken through FY24 and in-process actions in FY25.

Jamie Lerner: As a result, non-gap adjusted net loss per share for the second quarter is expected to be a negative 6 cents plus or minus 2 cents per share, based on an estimated approximately 96 million shares outstanding.

Ken Gianella: Adjusted EBITDA for the second quarter is expected to be approximately break-even. This improvement is driven by anticipated gross margin improvements to the low 40% and continued non-GAAP operating expenses to be on par with Q1 2025 results. In summary, we appreciate all our stakeholders' support through our transformation efforts. Quantum remains committed to improving our customers' experience, driving new and innovative products to market, and leveraging our global footprint to improve our overall operating model. All of this, combined with continuing our strategic initiatives, is actively underway, and we are making solid progress. With that, I'll now hand the call back to Jamie for closing remarks. Thanks, Ken.

Jamie Lerner: Adjusted EBITDA for the second quarter is expected to be approximately break-even. This improvement is driven by anticipated gross margin improvements to the low 40% and continued non-GAAP operating expenses to be on par with Q1 2025 results.

Kenneth Gianella: In summary, we appreciate all our stakeholder support through our transformation efforts. Quantum remains committed to improving our customer's experience, driving new and innovative products to market, and leveraging our global footprint to improve Quantum's overall operating model. All of this combined with continuing our strategic initiatives are actively underway, and we are making solid progress.

Jamie Lerner: In summary, we appreciate all our stakeholders' support through our transformation efforts. Quantum remains committed to improving our customers' experience, driving new and innovative products to market, and leveraging our global footprint to improve Quantum's overall operating model.

Jamie Lerner: All of this, combined with continuing our strategic initiatives, are actively underway and we are making solid progress.

Kenneth Gianella: Service.

James Lerner: With that, I'll hand the call back to Jamie for closing remarks. Thanks, Ken. As we discuss today, Quantum will continue to prioritize certain initiatives to improve our operating model and our customers' experience. This includes continuing to prioritize new products and services that help customers maximize their value. Operationally, we will execute our transition to subscription ARR, focused on improved operational efficiencies and work to strengthen our model while also evaluating all possible alternatives to improve shareholder value.

Jamie Lerner: With that, I'll now hand the call back to Jamie for closing remarks.

Jamie Lerner: As we discussed today, Quantum will continue to prioritize certain initiatives to improve our operating model and our customers' experience. This includes continuing to prioritize new products and services that help customers maximize their value. Operationally, we will execute our transition to subscription ARR, focus on improved operational efficiencies, and work to strengthen our model, while also evaluating all possible alternatives to improve shareholder value. With that, let's open it up for questions. Operator.

Jamie Lerner: Thanks Ken. As we discussed today, Quantum will continue to prioritize certain initiatives to improve our operating model and our customers' experience.

Jamie Lerner: This includes continuing to prioritize new products and services that help customers maximize their value.

Speaker Change: Operationally, we will execute our transition to subscription ARR, focus on improved operational efficiencies, and work to strengthen our model, while also evaluating all possible alternatives to improve shareholder value.

Operator: With that, let's open it up for questions. Operator.

Operator: Thank you. If you would 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.

Speaker Change: With that, let's open it up for questions. Operator?

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker Change: Thank you. If you would 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. You may press star 2 if you would like to remove your question from the queue.

Operator: For a participant choosing speaker equipment and maybe necessary to pick up the handset before pressing the star keys.

Speaker Change: for a participant choosing speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Operator: You may press star 2 if you would like to remove your question from the queue. For a participant choosing speaker equipment, it may be necessary to pick up the handset before pressing the star key. Our first question is from Nehal Chokshi with Northland Capital Markets. All right. Thank you. I'd like to start with the subscription transition, that particular slide page on the subscription transition. Overall, it looks pretty good, except that the subscription bookings were down to $3.2 million from $4.5 million a year ago. Is there a narrative behind that?

Nehal Chokshi: Our first question is from Nehal Chokshi with North to start with the subscription transition. The particular slide page on the subscription transition. Overall, it looks pretty good, except for the subscription bookings was down to 3.2 million from 4.5 million a year ago.

Speaker Change: Our first question is from Neil Chokshi with Northland Capital Markets. Please proceed.

Neil Chokshi: I'd like to start with the subscription transition, that particular slide page on the subscription transition. Overall, it looks pretty good except for that the subscription bookings was down to $3.2 million from $4.5 million a year ago. Is there a narrative behind that?

James Lerner: Is there an error behind that? I think mostly it was a little bit of delayed. We were hoping to bump that up this quarter, but we had delays, as we mentioned, with some supply chain elements getting out there that we couldn't add that into the number. Okay. Just to be clear. We were anticipating our higher shipments this quarter than what we gave in the results. Okay.

Jamie Lerner: I think mostly it was a little bit of a delay. We were hoping to bump that up this quarter, but we had delays, as we mentioned, with some of the supply chain elements getting out there, so we couldn't add that into the number. We were anticipating higher shipments this quarter than what we gave in the results. Okay, but can't you take in a booking without shipping?

Speaker Change: I think mostly it was a little bit of delayed. We were hoping to bump that up this quarter but we had delays as we mentioned with some of the supply chain elements getting out there that we couldn't add that into the into the number.

Speaker Change: We were anticipating higher shipments this quarter than what we gave in the results.

James Lerner: But can't you take in a booking without shipping? No. We rely for that one. It has to be in place for that. You can't revert the software unless you ship the hardware to run it on, because without the hardware, it doesn't have any value. Okay. We sell it separately, but these deals weren't separate. Got it. I understand. Okay.

Speaker Change: Okay, but can't you take in a booking without shipping?

Jamie Lerner: No. We relied on that one; it has to be in place for that. You can't rev-rack the software unless you've shipped the hardware to run it on, because without the hardware, it doesn't have any value.

Speaker Change: No.

Speaker Change: We relied for that one, it has to be in place for that. Yeah, you can't RevRack the software unless you've shipped the hardware to run it on, because without the hardware it doesn't have any value.

Speaker Change: Okay, unless we sell it separately but these deals weren't separate.

Jamie Lerner: Thank you. On the gross margin, the three components of product, service, and royalty, it looks like product actually did quite well on a Q-to-Q basis. I'm sorry, on a thank you note. Part of this is just when we get to scale, trying to clean up some of the regions where we were operating in. We had a little bit of staffing that we were working through and higher operating costs in some of our regions, predominantly North America and Europe, and we're looking to find ways to operate a little bit more effectively than we did in the past. It has nothing to do with selling.

James Lerner: On the gross margin, the three components of product service and on a QVQ basis did quite well, but the service gross margin went down to 600 basis points, both QVQ and year by year. Why is that? Part of this is just when we get to scale; it's trying to clean up some of the regions where we were operating in. We had a little bit more staffing that we were working through in higher operating costs in some of our regions, predominantly North America and Europe. We're looking to find ways to operate a little bit more effectively than we were in the past.

Speaker Change: Got it. Understood.

Speaker Change: Okay, on the gross margin, the three components of product, service, and royalty, it looks like product actually did quite well on a Q-to-Q basis.

Speaker Change: I'm sorry, on a...

Speaker Change: Yeah, on a cubicle basis it did quite well but the service gross margin went down 600 basis points both cubicle and year-over-year. Why is that?

Speaker Change: Part of this is just when we get to scale it's trying to

Speaker Change: Cleanup some of the regions where we were operating in we had a little bit

Speaker Change: staffing that we were working through and higher operating costs in some of our regions, predominantly North America and Europe, and we're looking to find ways to operate a little bit more effectively than we were in the past.

James Lerner: Okay, it has nothing to do with selling the receivables on the services business, right? No, that was purely an operational element that would follow through. It would improve the overall clogs of the business, but that was not an impact to it. This was more just the operational efficiencies that we saw in the regions in Q1. Okay.

Speaker Change: It has nothing to do with selling.

Jamie Lerner: They're receivables on the services business, right? No, that was purely an operational element that would follow through and improve the overall COGS of the business, but that was not an impact on it. This was more just operational efficiencies that we saw in the regions in Q1. And then, Jamie, can you comment on what the Q2 bookings trend was for Myriad and Active Scale? Yeah, I mean, we don't we don't put those numbers out, but we're pretty encouraged right now.

Speaker Change: They're receivables on the services business, right?

Speaker Change: No, that was purely an operational element that would follow through and improve the overall COGS of the business, but that was not an impact to it. This was more just operational efficiencies that we saw in the regions in Q1.

James Lerner: And then Jamie, can you comment on what the Q2 buttons trend for Maria than that could scale? Yeah, I mean, we don't put those numbers out, but we're pretty encouraged right now. I mean, Active Scale, you know, it's really starting to stand apart from its competitors really based on two things. One is its tremendous ease of install and ease of use, particularly at scale. And the fact that it's one of the only, but pretty much the only object store that has a racer-coded tape integration. So the ability to support flash, disk, and tape simultaneously, there's just no other object store that does that.

Speaker Change: Okay.

Speaker Change: And then, Jamie, can you comment on what is the QQ bookings trend for Myriad in that scale?

Jamie Lerner: Yeah, I mean, we don't put those numbers out, but...

Jamie Lerner: I mean, ActiveScale is really starting to stand apart from its competitors, really based on two things. One is its tremendous ease of installation and ease of use, particularly at scale. And the fact that it's one of the only, but pretty much the only, object store that has erasure coding built in.

Jamie Lerner: We're pretty encouraged right now. I mean, active scale.

Speaker Change: You know, it's really starting to stand apart from its competitors really based on two things one Is it it's tremendous ease of install and ease of use? Particularly at scale and the fact that it's the one of the only but pretty much the only object store that has a racer coded

Jamie Lerner: Uh... tape integration. So, the ability to support flash, disk, and tape simultaneously. There's just no other object store that does that.

Speaker Change: You know tape integration

Speaker Change: So the ability to support flash.

Speaker Change: disc and tape simultaneously. There's just no other object store that does that. So we're seeing good adoption of active scale. I think our partners are well trained to sell it. I think our sales team is well trained to sell it.

James Lerner: So we're seeing good adoption of Active Scale. I think our partners are well trained to sell it. I think our sales team is well trained to sell it. With Maria, we're at an earlier part in the growth curve. We've been getting a lot of independent testing validation that shows the product is outperforming. Even what are viewed today as the world's fastest file systems, we're outperforming those in some cases by 250%. Just two and a half times faster than our next closest competitor. So I really like how it's doing in trials. A lot of those trials are actually right now converting into sales.

Jamie Lerner: So, we're seeing good adoption of active scale, and I think our partners are well-trained to sell it. I think our sales team is well-trained to sell it. With Myriad, we're at an earlier stage in the growth curve. We've been getting a lot of independent testing validation that shows the product is outperforming. Even what are viewed today as the world's fastest file systems, we're outperforming those in some cases by 250 percent. Just two and a half times faster than our next closest competitor.

Speaker Change: With Myriad, we're at an earlier part in the growth curve.

Speaker Change: We've been getting a lot of independent testing validation that shows the product is outperforming. Even what are viewed today as the world's fastest file systems, we're outperforming those in some cases by 250%.

Speaker Change: just two-and-a-half times faster than our next closest competitor. So I really like how it's doing in trials. A lot of those trials are actually right now converting into sales.

Jamie Lerner: So, I really like how it's doing in trials. A lot of those trials are actually right now converting into sales. Myriad has a little bit of a more unique network configuration, but once configured, what it can do and its ease of use are incredible.

James Lerner: You know, Maria, it has a little bit of a more unique network configuration, but once configured, what it can do and its ease of use are incredible. So I think this quarter, the current quarter work in, you know, subsequent quarters, we're seeing the myriad trials that we were in last quarter converting. So I feel really good about that. I think we're getting a very high success rate and conversion rate on the trials. And where we have more work to do there is training our broader sales force, training the partner community on selling what is a new product and a very new architecture.

Speaker Change: Myriad has a little bit of a more unique network configuration, but once configured, what it can do and its ease of use are incredible. So I think this quarter, the current quarter we're in,

Jamie Lerner: So, I think this quarter, the current quarter we're in, and subsequent quarters, we're seeing the myriad trials that we were in last quarter converting. So I feel really good about that. I think we're getting a very high success rate and conversion rate on the trials, and where we have more work to do there is training our broader sales force, training the partner community on selling what is a new product and a very new architecture.

Speaker Change: you know subsequent quarters we're seeing the myriad trials that we were in last quarter converting so I feel really good about that I think we're getting a very high success rate and conversion rate on the trials

Speaker Change: and where we have more work to do there is training our broader Salesforce training the partner community on selling what is a new product and a very new architecture.

Jamie Lerner: So that's where a lot of our energy is going, not just having our best people be able to sell it, but having our top integrators, our top resellers, our top distributors, really starting to build that knowledge base as well. So we're putting a lot more energy into training and education around the Myriad product. Okay, awesome. That's a great color.

James Lerner: So that's where a lot of our energy is going, not just having our best people be able to sell it, but having our top integrators, our top resellers, our top distributors, really starting to build that knowledge base as well. So we're putting a lot more energy into training and education around the myriad product.

Speaker Change: So that's where a lot of our energy is going, is not just having our best people be able to sell it, but having our top integrators, our top resellers, our top distributors really starting to build that knowledge base as well. So we're putting a lot more energy into that.

Speaker Change: training and education around the Myriad product.

James Lerner: Okay. Awesome. That's great. I appreciate that.

Nehal Chokshi: I'll get back into the queue. Thank you. Thanks, Bill.

Speaker Change: Okay, awesome. That's great, Tyler. I appreciate that.

Speaker Change: I'll get back into the queue. Thank you.

Jamie Lerner: I appreciate that. I'll get back to the Q. Thank you. As a reminder, the star one on your telephone keypad if you would like to ask a question. Our next question is from Max Michaelis with Lake Street Capital Markets. Please proceed.

Maxwell Michaelis: As a reminder, the star one on your telephone keypad. If you would like to ask a question, our next question is from Max Michaelis with Lake Street Capital Markets. Hey guys, thanks for taking my questions. First question here, just related to really no mention of the fiscal year 25 guide you guys provided last quarter. Just kind of want to get a comment from you guys on maybe what went into stepping away from that or not reaffirming that was mainly just the supply chain constraints here or I guess I guess comment on what you guys are thinking for the full year guide.

Speaker Change: As a reminder, the star one on your telephone keypad, if you would like to ask a question. Our next question is from Max Michaelis with Lake Street Capital Markets. Please proceed.

Operator: Hey guys, thanks for taking my questions. First question here, just related to really no mention of the fiscal year 25 guide you guys provided last quarter. Just kind of want to get a comment from you guys on maybe what went into stepping away from that or not, reaffirming that, was it mainly just the supply chain constraints here, or I guess, I guess comment on what you guys are thinking for the full year guide.

Max Michaelis: Hey guys, thanks for taking my questions. First question here just related to

Max Michaelis: Really no mention of the fiscal year 25 guide you guys provided last quarter Just kind of want to get a comment from you guys on maybe what went into stepping away from that or not Reaffirming that was it mainly just the supply chain

Operator: or 2025 financial results. At this time, all participants aren't illicit only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.

Speaker Change: constraints here or I guess I guess comment on what you guys are thinking for the full year guide.

Operator: Well, first, we gave the full-year outlook at the beginning of the fiscal year, and traditionally, we give that at the beginning of the year and we don't reiterate it. So, I wouldn't read anything into it.

James Lerner: Well, first we gave the first the full year outlook at the beginning of the fiscal year, and traditionally we give that the beginning of the year, and we don't re-interrade it. So I don't want to read anything into it. I mean Q1 was slightly down, but that went into backlogged and what we anticipated. Q2 is kind of the same thing, and we do see some headwinds. But you know what? We are looking for elements to try to catch up here as that loosens up towards the back half of the year. So I wouldn't read into that in any way other than traditionally how we approach it.

Brian Cabrera: I will now turn the conference over to Bernie Cabrera, Quantum's Chief Administrative Officer. Thank you and you begin.

Speaker Change: Well, first, we gave the full-year outlook at the beginning of the fiscal year, and traditionally we give that at the beginning of the year and we don't reiterate it. So I wouldn't read anything into it. I mean, Q1 was...

Speaker Change: Slightly down, but that went into backlog than what we anticipated

Speaker Change: Q2 is kind of the same thing, and we do see some headwinds, but we are looking for elements to try to catch up here as that loosens up towards the back half of the year. So I wouldn't read into that in any way other than traditionally how we approach it.

Ken Gianella: I mean, Q1 was slightly down, but that went into backlog more than we anticipated. Q2 is kind of the same thing, and we do see some headwinds, but we are looking for elements to try to catch up here as that loosens up towards the back half of the year. So, I wouldn't read into that in any way other than traditionally how we approach it.

Kenneth Gianella: Okay, I think I forgot. So that the previous adjusted EBITDA guide for 10 to 20 million still sort of stands, is what you're saying. Yeah, I mean we set on the prior call when we put that out there it was going to be back half weighted. You might have heard in my prepared remarks where we were very clear about 10.7 million of gap expenses that we're hitting the company. That transition because if you guys remember, we were just getting back on file. Getting back on file coupled with active restructuring of the organization coupled with several new MPI launches that we're doing in the back half of the year, as well as now, as you heard Jamie mention.

Ken Gianella: Okay, I think I forgot. So, that previous adjusted EBITDA guide for 10 to 20 million still sort of stands, is what you're saying. Yeah.

Speaker Change: Okay, I think I forgot. So that that previous adjusted EBITDA guide for 10 to 20 million still sort of stands is what you're saying?

Ken Gianella: We said on the prior call when we put that out there that it was going to be back half-weighted. You might have heard in my prepared remarks where we were very clear about $10.7 million of gap expenses that were hitting the company. That transition, because, if you guys remember, we were just getting back on file, coupled with an active restructuring of the organization, coupled with several new MPI launches that we're doing in the back half of the year, as well as now, as you heard Jamie mention. One I'm really proud of is the DXI launch that went out and was a couple days out in public GA, and we won two big deals away from one of our key competitors.

Speaker Change: Yeah, I mean we said on the prior call when we put that out there it was going to be back half-weighted. You might have heard in my prepared remarks where we were very clear about $10.7 million of gap expenses that were hitting the company.

Speaker Change: That transition, because if you guys remember, we were just getting back on file.

Speaker Change: getting back on file coupled with active restructuring of the organization.

Speaker Change: Coupled with several new MPI launches that we're doing in the back half of the year as well as now as you heard Jamie mention What I'm really proud of is the DXI launch that went out and was a couple days out In public GA and and we won two big deals away from one of our key competitors. So

Kenneth Gianella: When I'm really proud of it's the DXI launch that went out and it was a couple days out in public GA and we won two big deals away from one of our key competitors. So you know we've invested a lot of capital dollars here in the back half of the year and in this first half of the year that once we get through this one time spend, we see the profitability really started to take into Q3 into Q4 to make us up to that number.

Ken Gianella: We've invested a lot of capital dollars here in the back half of the year and this first half of the year, and once we get through this one-time spend, we see the profitability really starting to take hold in Q3, into Q4, to make us up to that number. Okay, perfect.

Speaker Change: You know we we've invested a lot of capital dollars here in the back half of the year and in this First half of the year that once we get through this one time spend We see the profitability really starting to take hold Into q3 into q4 to make us up to that number

Brian Cabrera: Good afternoon and thank you for joining today's conference call to discuss Quantum's first quarter fiscal 2025 financial results.

Kenneth Gianella: Okay, perfect, thanks, guys, and then the last one for me, I think the number was 16 million of operational efficiencies. I kind of want to get an idea where we're at. I mean how much have we recognized, I guess, in Q1 out of that 16 million going forward throughout the year, and if we're on track there. I don't give that specific number; I don't want to, but I will say that we are on track, and our goal is to have that number at least fully in hand by the end of the calendar year. But I mean, can they give you a little more credit? I mean, we did have off X last quarter of over 35 million.

Ken Gianella: Thanks, guys. And then last one for me, I think the number was 16 million in operational efficiencies. I kind of want to get an idea of where we are. I mean, how much have we recognized, I guess, in Q1 out of that 16 million going forward throughout the year and if we're on track there? I don't give that specific number.

Brian Cabrera: I'm Brian Cabrera, Quantum's Chief Administrative Officer.

Speaker Change: okay perfect thanks guys and then last one for me I think the number was 16 million of operational efficiencies I kind of want to get an idea where we're at I mean how much have we recognized I guess in Q1 out of that 16 million going forward throughout the year and if we're on track there

Brian Cabrera: Speaking first today is Jamie Lerner, our chairman and CEO, followed by Ken Gianella, RCFO. We'll then open the call to questions from analysts.

Ken Gianella: I don't want to get into a thing of every quarter announcing kind of where we're at for a lot of reasons, but I will say that we are on track and our goal is to have that number at least fully in hand by the end of the calendar year. But I mean, can they give you a little more credit? I mean, we did have OPEX last quarter of over $35 million, and this quarter it was $30.8.

Speaker Change: I don't give that specific number. I don't want to get into a thing of every every quarter announcing kind of where we're at for a lot of reasons, but I will say that we are on track and our goal is to have that number at least fully in hand by the end of the calendar year.

Brian Cabrera: Some of our comments during the call today may include forward-looking statements. All statements other than statements of historical fact should be viewed as forward-looking, including any projections of revenues, margins, expenses, adjusted EBITDA, adjusted net income, cash flows or other financial, operational or performance topics. These statements involve known and unknown risks and uncertainties we refer to as risk factors. Risk factors may cause our actual results to differ materially from our forecast. For more information, please refer to the detailed description. We provide about these and additional risk factors under the risk factors section in our 10Qs and 10K, filed with the Securities and Exchange Commission.

Brian Cabrera: We do not intend to update or alter our forward-looking statements once they are issued, whether as a result of new information, future events or otherwise, except of course as we are required by applicable law. Please note that our press release and the management statements we make during today's call will include certain financial information in GAP and non-GAP measures. We include definitions and reconciliations of GAP to non-GAP items in our press release.

Speaker Change: But I mean, Ken, to give you a little more credit, I mean, we did have OPEC's last quarter of over $35 million, and this quarter it was $30.8 million. Correct. So that's...

Kenneth Gianella: Yes, and this quarter it was 30.8, correct. So that's about 5 million annualized. That's a pretty good, yeah we have more we can do, but I don't, other than one quarter where we had some anomalies, we've never had off X at 30.8. And I think we see a pretty clear path to getting under 30, which is just, you know, we've never been at levels of that kind of efficiency before, even before we made our acquisitions. So it's pretty good. I'm pretty pleased with it. Now, the gross margin, not so much, but we'll resolve that already.

James Lerner: Now I would like to turn the call over to our chairman and CEO, Jamie Lerner. Jamie? Thank you, Brian. And thank you all for joining us today. Earlier today, we announced our results for our first quarter fiscal 2025. Turning to slide three, here are some brief highlights from the quarter. We finished Q1 2025 with 71.3 million in revenue, non-GAP gross margin of 36.9 percent, and adjusted EBITDA of negative 3.1 million. These results were largely in line with our expectations reflecting further rotation of our business toward our long-term initiatives.

Ken Gianella: 5 million annualized. That's super important to get. We have more we can do, but... Other than one quarter where we had some anomalies, we've never had OPEX at 30.8, and I think we see a pretty clear path to getting under 30, which is. You know, we've never been at levels of that kind of efficiency before, even before we made our acquisition. It's pretty good.

Ken Gianella: over 5 million annualized. That's pretty good. Yeah. We have more we can do, but...

James Lerner: We continue to take steps to improve the company's capital structure and operational performance, as well as accelerating the growth of profitable revenue streams, which we will discuss further in today's call. First as part of our ongoing strategic and financial initiatives, we have reached an agreement with our current lenders that significantly increases our liquidity, allows us to take action on improving our operational initiatives, and Focus on driving myriad active scale and the rest of our business to the next level.

Ken Gianella: Other than one quarter where we had some anomalies, we've never had OPEX at 30.8, and I think we see a pretty clear path to getting under 30, which is...

James Lerner: We added access to over $25 million. This injection of growth capital, combined with the restructuring of our existing debt, allows the company not only to improve its overall capital structure and balance sheet, but positions us well for continued innovation and growth in our target markets.

Speaker Change: Just, you know, we've never been at levels of that kind of efficiency before, even before we made our acquisitions.

Ken Gianella: I'm pretty pleased. Now, the gross margin, not so much, but we'll resolve that. Alrighty, thanks guys for taking my questions. No further questions at this time. I would now like to turn the call back over to Jamie Lerner for closing. Yeah, look, thanks, everyone. Thanks for sticking with us. I do think there are better days ahead.

Speaker Change: It's a pretty good product. I'm pretty pleased with it.

Speaker Change: Now, the gross margin, not so much, but we'll resolve that.

Maxwell Michaelis: Thanks, guys, for taking my questions.

James Lerner: With no further questions at this time, I would now like to turn the call back over to Jamie Lerner for closing remarks. Yeah, look, thanks everyone. Thanks for sticking with us. I do think there's better days ahead. I'm really encouraged that our lenders supported us with a 25 million that we brought in. I feel really excited, you know, in what we can achieve in the explosion in AI and just how much our media and entertainment experience translates to AI success and how our products, particularly Myriad and Active Scale, are just turning out to be so unique in that space.

Speaker Change: All right, thanks guys for taking my questions.

James Lerner: Let me talk more about the company's continued transformation and driving the business to the next level. Quantum has proven experience managing unstructured data with deep roots in video and media and entertainment. The ongoing exponential growth in unstructured data, particularly driven by AI use cases, is creating continued traction for our myriad and active scale platforms that are uniquely positioned to address these workflows and end. Our engineering team is delivering the committed myriad roadmap on time and on plan.

Speaker Change: With no further questions at this time, I would now like to turn the call back over to Jamie Lerner for closing remarks.

Jamie Lerner: Yeah, well, thanks everyone. Thanks for sticking with us.

Jamie Lerner: I'm really encouraged that our lenders supported us with the $25 million that we brought in. I feel really excited about what we can achieve in the explosion in AI and just how much our media and entertainment experience translates to AI success and how our products, particularly Myriad and ActiveScale, are just turning out to be so unique in that space. And now that we have the runway to really play that out completely with our lender support, I really am encouraged about what's going to happen in the future for us. And I'm excited to talk more about how we're going to expand in these new markets in the coming quarters.

Jamie Lerner: I do think there's better days ahead. I'm really encouraged that our lenders supported us with the $25 million that we brought in.

Speaker Change: I feel really excited, you know, in what we can achieve in the explosion in AI.

Speaker Change: and just how much our media and entertainment experience translates to AI success and how our products, particularly Myriad and ActiveScale, are just turning out to be so unique in that space.

James Lerner: And now that we have the runway to really play that out completely with our lenders' support, I really am encouraged for what's going to happen in the future for us. And I'm excited to talk more over the coming quarters of how we're going to expand in these new markets. So thanks, everyone, and thanks for today's call. Thank you.

Speaker Change: and now that we have the runway to really play that out completely with our lender support, I really am encouraged for what's going to happen in the future for us and I'm excited to talk more over the coming quarters of how we're going to expand in these new markets. So, thanks everyone and thanks for today's call.

James Lerner: With our customers successfully adopting these new features as they are released, giving us confidence in their robustness for commercial rollout. As I mentioned on the last call, while deal cycles can be long for this category of product, we currently have several proof of concept engagements underway and moving forward. These are concentrated primarily in visual effects and post-production, where we have extensive experience to accelerate adoption, along with life sciences, high performance computing, industrial research, and manufacturing. We have added to this global pipeline during the quarter with additional AI use cases, with one of note being a multi-billion dollar enterprise with a potential for a scaled engagement.

Jamie Lerner: So thanks, everyone, and thanks for today's program. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Media Transcripts, etc. 2, [music] Thomas Niehauer was and remains the first three World's Highest Defence Program Tasmanian. He is the winner of two ??os.imnb.net Updated daily Monday, Tuesday, and Thursday.

Operator: This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. You You You. .

Speaker Change: Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Speaker Change: Music

James Lerner: Beyond myriad, we are seeing momentum since deploying all flash options across our portfolio. In fact, our DXI-T10 had multiple closed deals within days of its formal launch announcement. We plan on aggressively targeting the enterprise backup market with our superior technology, delivering an all flash format, DXI immutability, and the one new form factor at one of the best total cost of ownership in the market. We solved some of the most complex and important data center and storage problems for the world's largest organizations. While we have had headwinds in the near term, we believe our solutions provide unique value that no other company can offer. This motivates us to come to work every day and drive these solutions forward.

Speaker Change: Thank You for Watching.

James Lerner: For example, we saw several notable active scale wins in the quarter, including an NBA team that was an existing Stornex customer with content archival needs leading to the purchase of more than 10 petabytes of active and cold storage. The deal included a net new active scale deployment with cold storage, cat TV, and Stornex expansion demonstrating a seven-figure deal size when we sell the full product portfolio and the end. In addition to new active scale deployments into existing store next and tape installed based accounts, we saw active scale expansion deals as unstructured data continues to grow exponentially. And we expect these footprints to continue to scale as well as net new customer accounts in both media and entertainment and healthcare.

Speaker Change: [music]

James Lerner: Finally, we remain committed to strong cost and discretionary spending controls through this transformation while continuing to evaluate and consider all possible alternatives. As we execute on our business initiatives that include achieving our operating performance driven by tangible proof points, accelerating growth of new products, and divesting non-core product and assets, our organization will become more focused and operationally efficient.

Kenneth Gianella: With that, I would now like to turn it over to Ken to walk through our financial results and our updated financing in more detail. Ken. Thank you, Jamie.

Speaker Change: Copyright © 2021 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Kenneth Gianella: Please turn to slide six and I'll provide an overview of the gap financial results for our fiscal first quarter. Revenue was 71.3 million, a decrease of approximately 23% year-over-year, and essentially flat to the fourth quarter of 2024. The revenue year-over-year decrease was primarily driven by the loss of our largest hyper-scaler while the full quarter results do not fully reflect the continued rotation of our business toward our long-term initiatives, we are pleased with the progress.

Operator: Broadcasting in Indiana j Bandai India Thanks a?ipp Plus Julio, Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent, and many more. Thank you so much for watching. I'll see you next time. [music]

Kenneth Gianella: For example, our gross margin for the period was 36.6% compared to 38.5% in a year ago quarter, and 38.2% in the prior quarter. This lower margin was due to a very large-scale strategic video surveillance sale to the world's largest packing shipping company for all of their ground-shipping locations. Also impacting the quarter's profitability was supply constraints that prevented us from shipping higher volumes of higher margin products during the quarter. These supply headwinds resulted in an increase of the quarter and order backlog to approximately 15.5 million, substantially above our normal run rate of 8 to 10 million dollars.

Speaker Change: This..is Mala 27 Find Mala 27, Mall, California Find Mala 27, Mall, California Illegal Trade Ilem a a a a ill for

Kenneth Gianella: While we anticipate gross margin returning to the low 40% next quarter, we expect higher supply lead times to persist through the end of the calendar year. Gapnet loss in the quarter was 28.8 million or a loss of 22 cents per share compared with the loss of 9.1 million or 10 cents per share in the same quarter last year and compared to a loss of 18.9 million or 20 cents per share in the prior quarter.

Kenneth Gianella: This higher loss in Q125 was predominantly driven by one-time expenses of over $10.7 million. The gain or fair value of warrants was 1.7 million in the quarter compared to a 0.7 million gain in the same quarter in the prior year and a 2.2 million loss in the prior quarter. Director. We anticipate elevated levels of one time spending to persist into Q225 as we complete restructuring activities.

Speaker Change: Subscribe

Kenneth Gianella: However, they will significantly subside as we head into the back half of the fiscal year.

Kenneth Gianella: Now turning to slide 7 for non-gap metrics. Non-gap gross margin for the quarter was 36.9% compared to 38.8% in the prior year and 38.5% in the prior quarter. Non-gap operating expenses were 30.8 million in the first quarter.

Kenneth Gianella: A significant decrease from 35.5 million year over year and in the prior quarter. This decrease in operational expenses was the result of our proactive actions to improve process and productivity and we anticipate operating at or below these levels as continued constructions begin to take hold into the back half of our fiscal year.

Kenneth Gianella: Non-gap adjusted net loss in the first quarter was 8.4 million or 9 cents loss per share compared to a 4.1 million or a 4 cent loss per share in the prior year quarter and a loss of 10.9 million or 11 cent loss per share in the prior quarter. Adjusted EBITDA in the first quarter was a negative 3.1 million compared with a positive 1.5 million in the prior year first quarter and a negative 6.2 million in the prior quarter. This quarter's EBITDA reflects lower margin revenue mix and higher manufacturing costs due to supply chain constraints. We anticipate operational cost controls and improving revenue mix to drive higher EBITDA throughout the rest of the year.

Kenneth Gianella: We remain focused on improving EBITDA and total profitability which will continue to be driven by our global restructuring combined with our sales teams effort toward a more end-to-end higher margin subscription-based solutions. We continue to anticipate our efforts will deliver sequential year-over-year improvements and profitability even on a lower revenue base in fiscal year 2025.

Kenneth Gianella: Moving to slide 8, I want to provide an update on our annual recurring revenue and subscription metrics. Total recurring annual recurring revenue or ARR for the trailing 12 months was approximately 49 percent of our total revenue at 141 million with a gross margin on the combined business being approximately 65 percent. As a company we continue to focus on total ARR by maximizing our quantum service opportunities to both our partners and customers globally.

Kenneth Gianella: The best way to demonstrate our progress is through our subscription ARR. The growth in subscriptions continues to demonstrate the progress we are making in our business transformation efforts. In Q125 the subscription portion of our total ARR increased approximately 29 percent year-over-year and approximately 5 percent sequentially to 18.8 million dollars. Over 92 percent of new unit sales were subscription-based.

Kenneth Gianella: Now please turn to slide 9 for an overview of debt and liquidity at the end of the quarter. Cash, cash equivalents, and restricted cash at the end of the first quarter were approximately 17.5 million dollars. Outstanding debt split between Terminal Revolver was $75.8 million and $35.8 million respectively. At quarter end, the company's net debt position was $94.3 million.

Kenneth Gianella: As Jamie discussed at the top of the call, subsequent to the quarter end, and as mentioned in our press release today, we added the ability to draw over $25 million to give us more operational flexibility going forward combined with reaching an agreement with our current lenders in which we were structured over $110 million of existing debt that significantly improves our overall liquidity and operational flexibility. The agreement was executed giving quantum and elevated blended interest rate of approximately 300 basis points in addition to warrants and other considerations.

Kenneth Gianella: There is an anticipated dilution related to the new warrants of approximately 7% on a fully diluted basis. The agreement has provisions that can reduce the issued warrants significantly in conjunction with paydown of the term loan at the company's discretion over the next couple of quarters.

Kenneth Gianella: This agreement allows the company to focus on driving myriad, active scale, and the rest of our business to the next level while becoming more profitable through our restructuring initiatives. Additionally, this amendment underscores our partners' commitment to the company's strategy and the long-term potential of myriad and active scale, including the company's commitment to getting back to profitability as we drive towards cash flow positive in the second half of fiscal year 2025.

Kenneth Gianella: With the new and restructured financing in place, combined with being back on file, the company can now fully focus on executing our business and expanding our value to our customers.

Kenneth Gianella: With that, let's close out by turning this slide 10, and I'll now review the company's guidance for the second quarter of fiscal 2025. First, we anticipate total revenue in the second quarter to be approximately $73 million plus or minus $2 million. This is factoring all potential impact for elongated lean times for all storage media. We expect non-gap operating expenses to be approximately $30 million plus or minus $2 million. Reflecting the aggressive cost reductions actions taken through fiscal year 24 and in process actions in FY25.

Kenneth Gianella: As a result, non-gap adjusted net loss per share for the second quarter is expected to be a negative 6 cents plus or minus 2 cents per share based on an estimated approximately $60 million shares outstanding. Adjusted EBITDA for the second quarter is expected to be approximately break even. This improvement is driven by anticipated gross margin improvements to the low 40 percent and continued non-gap operating expenses to be on par with Q125 results.

Kenneth Gianella: In summary, we appreciate all our stakeholder support through our transformation efforts. Quantum remains committed to improving our customer's experience, driving new and innovative products to market, and leveraging our global footprint to improve quantum's overall operating model. All of this combined with continuing our strategic initiatives are actively underway and we are making solid progress. Service.

James Lerner: With that, I'll hand the call back to Jamie for closing remarks. Thanks, Ken. As we discuss today, Quantum will continue to prioritize certain initiatives to improve our operating model and our customers' experience. This includes continuing to prioritize new products and services that help customers maximize their value.

Operator: Operationally, we will execute our transition to subscription ARR, focused on improved operational efficiencies and work to strengthen our model while also evaluating all possible alternatives to improve shareholder value. With that, let's open it up for questions. Operator. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For a participant choosing speaker equipment and maybe necessary to pick up the handset before pressing the star keys.

Nehal Chokshi: Our first question is from Nehal Chokshi with North to start with the subscription transition. The particular slide page on the subscription transition. Overall, it looks pretty good, except for the subscription bookings was down to 3.2 million from 4.5 million a year ago.

James Lerner: Is there an error behind that? I think mostly it was a little bit of delayed. We were hoping to bump that up this quarter, but we had delays as we mentioned with some supply chain elements getting out there that we couldn't add that into the number. Okay. Just to be clear. We were anticipating our higher shipments this quarter than what we gave in the results. Okay.

James Lerner: But can't you take in a booking without shipping? No. We rely for that one. It has to be in place for that. You can't revert the software unless you ship the hardware to run it on, because without the hardware, it doesn't have any value. Okay. We sell it separately, but these deals weren't separate. Got it. I understand. Okay.

James Lerner: On the gross margin, the three components of product service and on a QVQ basis did quite well, but the service gross margin went down to 600 basis points, both QVQ and year by year. Why is that? Part of this is just when we get to scale, it's trying to clean up some of the regions where we were operating in. We had a little bit more staffing that we were working through in higher operating costs in some of our regions, predominantly North America and Europe. We're looking to find ways to operate a little bit more effectively than we were in the past.

James Lerner: Okay, it has nothing to do with selling the receivables on the services business, right? No, that was purely an operational element that would follow through. It would improve the overall clogs of the business, but that was not an impact to it. This was more just the operational efficiencies that we saw in the regions in Q1. Okay.

James Lerner: And then Jamie, can you comment on what the Q2 buttons trend for Maria than that could scale? Yeah, I mean, we don't put those numbers out, but we're pretty encouraged right now. I mean, active scale, you know, it's really starting to stand apart from its competitors really based on two things. One is it's tremendous ease of install and ease of use, particularly at scale. And the fact that it's the one of the only, but pretty much the only object store that has a racer-coded tape integration.

James Lerner: So the ability to support flash, disk and tape simultaneously, there's just no other object store that does that. So we're seeing good adoption of active scale. I think our partners are well trained to sell it. I think our sales team is well trained to sell it.

James Lerner: With Maria, we're at an earlier part in the growth curve. We've been getting a lot of independent testing validation that shows the product is outperforming. Even what are viewed today as the world's fastest file systems, we're outperforming those in some cases by 250%. Just two and a half times faster than our next closest competitor. So I really like how it's doing in trials. A lot of those trials are actually right now converting into sales.

James Lerner: You know, Maria, it has a little bit of a more unique network configuration, but once configured, what it can do and its ease of use are incredible. So I think this quarter, the current quarter work in, you know, subsequent quarters, we're seeing the myriad trials that we were in last quarter converting. So I feel really good about that. I think we're getting a very high success rate and conversion rate on the trials.

James Lerner: And where we have more work to do there is training our broader sales force training the partner community on selling what is a new product and a very new architecture. So that's where a lot of our energy is going not just having our best people be able to sell it, but having our top integrators, our top resellers, our top distributors, really starting to build that knowledge base as well. So we're putting a lot more energy into training and education around the myriad product.

Nehal Chokshi: Okay. Awesome. That's great. I appreciate that. I'll get back into the queue. Thank you. Thanks, Bill.

Maxwell Michaelis: As a reminder, the star one on your telephone keypad, if you would like to ask a question, our next question is from Max Michaelis with Lake Street Capital Markets. [inaudible] Chief Chief Chief Chief Chief Chief Chief Chief just, you know, we've never been at levels of that kind of efficiency before, even before we made our acquisitions. So it's pretty good. I'm pretty pleased with it. Now, the gross margin, not so much, but we'll resolve that already.

Maxwell Michaelis: Thanks, guys, for taking my questions.

James Lerner: With no further questions at this time, I would now like to turn the call back over to Jamie Lerner for closing remarks. Yeah, look, thanks everyone. Thanks for sticking with us. I do think there's better days ahead. I'm really encouraged that our lenders supported us with a 25 million that we brought in. I feel really excited, you know, in what we can achieve in the explosion in AI and just how much our media and entertainment experience translates to AI success and how our products, particularly myriad and active scale are just turning out to be so unique in that space.

James Lerner: And now that we have the runway to really play that out completely with our lenders support, I really am encouraged for what's going to happen in the future for us. And I'm excited to talk more over the coming quarters of how we're going to expand in these new markets. So thanks everyone and thanks for today's call. Thank you.

Operator: This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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