x
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the quarterly period ended September 30, 2017
|
|
||
OR
|
||
|
||
¨
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the transition period from _______ to _______
|
Delaware
(State or other jurisdiction of incorporation or organization)
|
94-2665054
(I.R.S. Employer Identification No.)
|
224 Airport Parkway, Suite 550, San Jose, California
(Address of principal executive offices)
|
95110
(Zip Code)
|
(408) 944-4000
(Registrant’s telephone number, including area code)
|
Large accelerated filer
¨
|
Accelerated filer
x
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
Emerging growth company
o
|
|
|
|
|
Page
Number
|
|
|
|
Item 1.
|
|
|
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 5.
|
Other Information
|
|
Item 6.
|
||
|
||
|
|
September 30, 2017
|
|
March 31, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
9,504
|
|
|
$
|
12,958
|
|
Restricted cash
|
1,969
|
|
|
1,832
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $317 and $16, respectively
|
105,771
|
|
|
116,056
|
|
||
Manufacturing inventories
|
29,119
|
|
|
27,661
|
|
||
Service parts inventories
|
19,915
|
|
|
19,849
|
|
||
Other current assets
|
8,795
|
|
|
9,969
|
|
||
Total current assets
|
175,073
|
|
|
188,325
|
|
||
Long-term assets:
|
|
|
|
||||
Property and equipment, net of accumulated depreciation
|
10,745
|
|
|
11,186
|
|
||
Restricted cash
|
20,000
|
|
|
20,000
|
|
||
Other long-term assets
|
5,332
|
|
|
5,516
|
|
||
Total long-term assets
|
36,077
|
|
|
36,702
|
|
||
|
$
|
211,150
|
|
|
$
|
225,027
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
48,488
|
|
|
$
|
41,611
|
|
Accrued warranty
|
2,950
|
|
|
3,263
|
|
||
Deferred revenue
|
77,090
|
|
|
84,683
|
|
||
Accrued restructuring charges
|
1,743
|
|
|
869
|
|
||
Convertible subordinated debt, net
|
57,034
|
|
|
62,827
|
|
||
Accrued compensation
|
23,180
|
|
|
24,104
|
|
||
Other accrued liabilities
|
12,927
|
|
|
12,998
|
|
||
Total current liabilities
|
223,412
|
|
|
230,355
|
|
||
Long-term liabilities:
|
|
|
|
||||
Deferred revenue
|
35,906
|
|
|
37,642
|
|
||
Accrued restructuring charges
|
423
|
|
|
481
|
|
||
Long-term debt, net
|
70,631
|
|
|
65,028
|
|
||
Other long-term liabilities
|
5,112
|
|
|
7,520
|
|
||
Total long-term liabilities
|
112,072
|
|
|
110,671
|
|
||
Stockholders' deficit:
|
|
|
|
||||
Common stock, $0.01 par value; 125,000 shares authorized; 34,663 and 34,063 shares issued and outstanding at September 30, 2017 and March 31, 2017, respectively
|
347
|
|
|
341
|
|
||
Capital in excess of par
|
476,409
|
|
|
473,850
|
|
||
Accumulated deficit
|
(604,832
|
)
|
|
(593,295
|
)
|
||
Accumulated other comprehensive income
|
3,742
|
|
|
3,105
|
|
||
Total stockholders’ deficit
|
(124,334
|
)
|
|
(115,999
|
)
|
||
|
$
|
211,150
|
|
|
$
|
225,027
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Product revenue
|
$
|
63,606
|
|
|
$
|
88,575
|
|
|
$
|
135,224
|
|
|
$
|
160,401
|
|
Service revenue
|
34,165
|
|
|
36,620
|
|
|
69,411
|
|
|
72,438
|
|
||||
Royalty revenue
|
9,280
|
|
|
9,547
|
|
|
19,274
|
|
|
18,187
|
|
||||
Total revenue
|
107,051
|
|
|
134,742
|
|
|
223,909
|
|
|
251,026
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cost of product revenue
|
48,561
|
|
|
64,352
|
|
|
99,510
|
|
|
114,484
|
|
||||
Cost of service revenue
|
14,717
|
|
|
14,664
|
|
|
29,807
|
|
|
30,170
|
|
||||
Total cost of revenue
|
63,278
|
|
|
79,016
|
|
|
129,317
|
|
|
144,654
|
|
||||
Gross margin
|
43,773
|
|
|
55,726
|
|
|
94,592
|
|
|
106,372
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
10,190
|
|
|
11,401
|
|
|
20,795
|
|
|
22,459
|
|
||||
Sales and marketing
|
26,179
|
|
|
26,146
|
|
|
54,003
|
|
|
52,513
|
|
||||
General and administrative
|
12,158
|
|
|
12,572
|
|
|
24,667
|
|
|
25,532
|
|
||||
Restructuring charges
|
31
|
|
|
15
|
|
|
2,366
|
|
|
2,067
|
|
||||
Total operating expenses
|
48,558
|
|
|
50,134
|
|
|
101,831
|
|
|
102,571
|
|
||||
Income (loss) from operations
|
(4,785
|
)
|
|
5,592
|
|
|
(7,239
|
)
|
|
3,801
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income
|
77
|
|
|
10
|
|
|
175
|
|
|
166
|
|
||||
Interest expense
|
(2,617
|
)
|
|
(1,485
|
)
|
|
(5,175
|
)
|
|
(2,993
|
)
|
||||
Loss on debt extinguishment, net
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
||||
Net income (loss) before income tax provision (benefit)
|
(7,364
|
)
|
|
4,117
|
|
|
(12,278
|
)
|
|
974
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income tax provision (benefit)
|
499
|
|
|
45
|
|
|
(741
|
)
|
|
422
|
|
||||
Net income (loss)
|
$
|
(7,863
|
)
|
|
$
|
4,072
|
|
|
$
|
(11,537
|
)
|
|
$
|
552
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted
|
$
|
(0.23
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.34
|
)
|
|
$
|
0.02
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
34,561
|
|
|
33,804
|
|
|
34,337
|
|
|
33,549
|
|
||||
Diluted
|
34,561
|
|
|
34,048
|
|
|
34,337
|
|
|
33,699
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Net income (loss)
|
$
|
(7,863
|
)
|
|
$
|
4,072
|
|
|
$
|
(11,537
|
)
|
|
$
|
552
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
673
|
|
|
206
|
|
|
828
|
|
|
(133
|
)
|
||||
Net unrealized gain (loss)
on revaluation of
long-term intercompany balances |
(204
|
)
|
|
(57
|
)
|
|
(192
|
)
|
|
(15
|
)
|
||||
Total other comprehensive income (loss)
|
469
|
|
|
149
|
|
|
636
|
|
|
(148
|
)
|
||||
Total comprehensive income (loss)
|
$
|
(7,394
|
)
|
|
$
|
4,221
|
|
|
$
|
(10,901
|
)
|
|
$
|
404
|
|
|
Six Months Ended
|
||||||
|
September 30, 2017
|
|
September 30, 2016
|
||||
|
|
|
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(11,537
|
)
|
|
$
|
552
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation
|
2,525
|
|
|
2,710
|
|
||
Amortization and write off of debt issuance costs
|
855
|
|
|
336
|
|
||
Service parts lower of cost or market adjustment
|
2,319
|
|
|
2,659
|
|
||
Tax benefit from settlement
|
(1,656
|
)
|
|
—
|
|
||
Non-cash interest expense
|
621
|
|
|
—
|
|
||
Deferred income taxes
|
144
|
|
|
17
|
|
||
Share-based compensation
|
3,330
|
|
|
3,648
|
|
||
Non-cash loss on debt extinguishment
|
9
|
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
10,284
|
|
|
(1,951
|
)
|
||
Manufacturing inventories
|
(1,752
|
)
|
|
2,429
|
|
||
Service parts inventories
|
(2,737
|
)
|
|
(766
|
)
|
||
Accounts payable
|
6,537
|
|
|
4,875
|
|
||
Accrued warranty
|
(313
|
)
|
|
(59
|
)
|
||
Deferred revenue
|
(9,329
|
)
|
|
(9,162
|
)
|
||
Accrued restructuring charges
|
817
|
|
|
(219
|
)
|
||
Accrued compensation
|
(1,236
|
)
|
|
1,049
|
|
||
Other assets and liabilities
|
815
|
|
|
(3,737
|
)
|
||
Net cash provided by (used in) operating activities
|
(304
|
)
|
|
2,381
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(1,156
|
)
|
|
(1,249
|
)
|
||
(Increase) decrease in restricted cash
|
6
|
|
|
(5
|
)
|
||
Return of capital from investments
|
278
|
|
|
—
|
|
||
Net cash used in investing activities
|
(872
|
)
|
|
(1,254
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings of long-term debt
|
164,650
|
|
|
6,500
|
|
||
Repayments of long-term debt
|
(160,245
|
)
|
|
(11,959
|
)
|
||
Repayments of convertible subordinated debt
|
(6,000
|
)
|
|
—
|
|
||
Payment of taxes due upon vesting of restricted stock
|
(1,775
|
)
|
|
(673
|
)
|
||
Proceeds from issuance of common stock
|
1,010
|
|
|
658
|
|
||
Net cash used in financing activities
|
(2,360
|
)
|
|
(5,474
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
82
|
|
|
5
|
|
||
Net decrease in cash and cash equivalents
|
(3,454
|
)
|
|
(4,342
|
)
|
||
Cash and cash equivalents at beginning of period
|
12,958
|
|
|
33,870
|
|
||
Cash and cash equivalents at end of period
|
$
|
9,504
|
|
|
$
|
29,528
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Purchases of property and equipment included in accounts payable
|
$
|
335
|
|
|
$
|
217
|
|
|
As of
|
||||||||||||||
|
September 30, 2017
|
|
March 31, 2017
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
Convertible subordinated debt
(1)
|
$
|
57,034
|
|
|
$
|
56,805
|
|
|
$
|
62,827
|
|
|
$
|
60,667
|
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt:
(2)
|
|
|
|
|
|
|
|
||||||||
Revolving credit agreement
|
22,144
|
|
|
23,518
|
|
|
16,852
|
|
|
18,490
|
|
||||
Term loan agreement
|
48,487
|
|
|
50,004
|
|
|
48,176
|
|
|
50,026
|
|
||||
Total long-term debt
|
$
|
70,631
|
|
|
$
|
73,522
|
|
|
$
|
65,028
|
|
|
$
|
68,516
|
|
|
|
|
|
|
|
(1)
Fair value based on quoted market prices in less active markets (level 2).
|
|||
|
(2)
Fair value based on outstanding borrowings and market interest rates (level 2).
|
|
As of
|
||||||
|
September 30, 2017
|
March 31, 2017
|
|||||
Manufacturing inventories:
|
|
|
|
||||
Finished goods
|
$
|
14,264
|
|
|
$
|
15,070
|
|
Work in process
|
1,006
|
|
|
606
|
|
||
Materials and purchased parts
|
13,849
|
|
|
11,985
|
|
||
|
$
|
29,119
|
|
|
$
|
27,661
|
|
|
As of
|
||||||
|
September 30, 2017
|
|
March 31, 2017
|
||||
Service parts inventories:
|
|
|
|
||||
Finished goods
|
$
|
14,802
|
|
|
$
|
14,851
|
|
Component parts
|
5,113
|
|
|
4,998
|
|
||
|
$
|
19,915
|
|
|
$
|
19,849
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Beginning balance
|
$
|
3,161
|
|
|
$
|
3,444
|
|
|
$
|
3,263
|
|
|
$
|
3,430
|
|
Additional warranties
|
1,445
|
|
|
1,783
|
|
|
2,916
|
|
|
3,782
|
|
||||
Adjustments for warranties in prior fiscal years
|
(75
|
)
|
|
86
|
|
|
(79
|
)
|
|
225
|
|
||||
Settlements
|
(1,581
|
)
|
|
(1,942
|
)
|
|
(3,150
|
)
|
|
(4,066
|
)
|
||||
Ending balance
|
$
|
2,950
|
|
|
$
|
3,371
|
|
|
$
|
2,950
|
|
|
$
|
3,371
|
|
|
As of
|
||||||
|
September 30, 2017
|
|
March 31, 2017
|
||||
Convertible subordinated debt:
|
|
|
|
||||
4.50% convertible subordinated notes
|
$
|
57,090
|
|
|
$
|
63,090
|
|
Unamortized debt issuance costs
|
(56
|
)
|
|
(263
|
)
|
||
Convertible subordinated debt, net of unamortized debt issuance costs
|
$
|
57,034
|
|
|
$
|
62,827
|
|
|
As of
|
||||||
|
September 30, 2017
|
|
March 31, 2017
|
||||
Long-term debt:
|
|
|
|
||||
Revolving credit agreement
|
$
|
23,525
|
|
|
$
|
18,500
|
|
Term loan agreement
|
50,000
|
|
|
50,000
|
|
||
Unamortized discount and debt issuance costs
|
(2,894
|
)
|
|
(3,472
|
)
|
||
Long-term debt, net of unamortized discount and debt issuance costs
|
$
|
70,631
|
|
|
$
|
65,028
|
|
|
Debt Maturity Due by Period
|
||||||||||||||||||||||||||
|
Less than 1 Year
|
|
1 Year
|
|
2 Years
|
|
3 Years
|
|
4 Years
|
|
More than 5 Years
|
|
Total
|
||||||||||||||
4.50% convertible subordinated notes
|
$
|
57,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
57,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revolving credit agreement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,525
|
|
|
—
|
|
|
23,525
|
|
|||||||
Term loan agreement
|
1,875
|
|
|
2,500
|
|
|
2,500
|
|
|
2,500
|
|
|
40,625
|
|
|
—
|
|
|
50,000
|
|
|||||||
Total long-term debt
|
$
|
1,875
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
64,150
|
|
|
$
|
—
|
|
|
$
|
73,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total debt
|
$
|
58,965
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
|
$
|
64,150
|
|
|
$
|
—
|
|
|
$
|
130,615
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Severance and benefits
|
$
|
29
|
|
|
$
|
(39
|
)
|
|
$
|
1,599
|
|
|
$
|
1,450
|
|
Facilities
|
2
|
|
|
54
|
|
|
$
|
758
|
|
|
617
|
|
|||
Other
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
|
$
|
31
|
|
|
$
|
15
|
|
|
$
|
2,366
|
|
|
$
|
2,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended September 30, 2017
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||||||
|
Severance
and Benefits |
|
Facilities
|
|
Total
|
|
Severance
and Benefits |
|
Facilities
|
|
Total
|
||||||||||||
Beginning balance
|
$
|
1,228
|
|
|
$
|
1,565
|
|
|
$
|
2,793
|
|
|
$
|
814
|
|
|
$
|
2,649
|
|
|
$
|
3,463
|
|
Restructuring costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
54
|
|
||||||
Adjustment of prior estimates
|
(35
|
)
|
|
20
|
|
|
(15
|
)
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
||||||
Cash payments
|
(473
|
)
|
|
(138
|
)
|
|
(611
|
)
|
|
(635
|
)
|
|
(325
|
)
|
|
(960
|
)
|
||||||
Ending balance
|
$
|
720
|
|
|
$
|
1,447
|
|
|
$
|
2,167
|
|
|
$
|
140
|
|
|
$
|
2,378
|
|
|
$
|
2,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Six Months Ended September 30, 2017
|
|
Six Months Ended September 30, 2016
|
||||||||||||||||||||
|
Severance and Benefits
|
|
Facilities
|
|
Total
|
|
Severance and Benefits
|
|
Facilities
|
|
Total
|
||||||||||||
Beginning balance
|
$
|
130
|
|
|
$
|
1,220
|
|
|
$
|
1,350
|
|
|
$
|
354
|
|
|
$
|
2,383
|
|
|
$
|
2,737
|
|
Restructuring costs
|
1,570
|
|
|
—
|
|
|
1,570
|
|
|
1,489
|
|
|
480
|
|
|
1,969
|
|
||||||
Adjustment of prior estimates
|
(35
|
)
|
|
776
|
|
|
741
|
|
|
(39
|
)
|
|
179
|
|
|
140
|
|
||||||
Cash payments
|
(945
|
)
|
|
(549
|
)
|
|
(1,494
|
)
|
|
(1,664
|
)
|
|
(664
|
)
|
|
(2,328
|
)
|
||||||
Ending balance
|
$
|
720
|
|
|
$
|
1,447
|
|
|
$
|
2,167
|
|
|
$
|
140
|
|
|
$
|
2,378
|
|
|
$
|
2,518
|
|
|
As of September 30, 2017
|
||||||||||
|
Severance and
Benefits
|
|
Facilities
|
|
Total
|
||||||
Estimated timing of future payouts:
|
|
|
|
|
|
||||||
Next twelve months
|
$
|
720
|
|
|
$
|
1,024
|
|
|
$
|
1,744
|
|
October 2018 through Sept 2022
|
—
|
|
|
423
|
|
|
423
|
|
|||
|
$
|
720
|
|
|
$
|
1,447
|
|
|
$
|
2,167
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Share-based compensation:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue
|
$
|
201
|
|
|
$
|
234
|
|
|
$
|
418
|
|
|
$
|
514
|
|
Research and development
|
245
|
|
|
333
|
|
|
531
|
|
|
736
|
|
||||
Sales and marketing
|
633
|
|
|
606
|
|
|
1,153
|
|
|
1,218
|
|
||||
General and administrative
|
638
|
|
|
477
|
|
|
1,228
|
|
|
1,180
|
|
||||
|
$
|
1,717
|
|
|
$
|
1,650
|
|
|
$
|
3,330
|
|
|
$
|
3,648
|
|
Share-based compensation by type of award:
|
|
|
|
|
|
|
|
||||||||
Restricted stock units
|
1,559
|
|
|
1,511
|
|
|
3,020
|
|
|
3,347
|
|
||||
Stock purchase plan
|
158
|
|
|
139
|
|
|
310
|
|
|
301
|
|
||||
|
$
|
1,717
|
|
|
$
|
1,650
|
|
|
$
|
3,330
|
|
|
$
|
3,648
|
|
|
Three and Six Months Ended
|
||||||
|
September 30, 2017
|
|
September 30, 2016
|
||||
Option life (in years)
|
0.5
|
|
|
0.5
|
|
||
Risk-free interest rate
|
1.13
|
%
|
|
0.40
|
%
|
||
Stock price volatility
|
44.99
|
%
|
|
81.88
|
%
|
||
Weighted-average grant date fair value per share
|
$
|
2.18
|
|
|
$
|
0.23
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
(7,863
|
)
|
|
$
|
4,072
|
|
|
$
|
(11,537
|
)
|
|
$
|
552
|
|
|
|
|
|
|
|
|
|
||||||||
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted average shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
34,561
|
|
|
33,804
|
|
|
34,337
|
|
|
33,549
|
|
||||
Dilutive shares from stock plans
|
—
|
|
|
244
|
|
|
—
|
|
|
150
|
|
||||
Diluted
|
34,561
|
|
|
34,048
|
|
|
34,337
|
|
|
33,699
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Basic and diluted net income (loss) per share
|
$
|
(0.23
|
)
|
|
$
|
0.12
|
|
|
$
|
(0.34
|
)
|
|
$
|
0.02
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue |
|
September 30, 2016
|
|
% of
revenue |
|
Change
|
|
% Change
|
|||||||||
Product revenue
|
$
|
63,606
|
|
|
59.4
|
%
|
|
$
|
88,575
|
|
|
65.7
|
%
|
|
$
|
(24,969
|
)
|
|
(28.2
|
)%
|
Service revenue
|
34,165
|
|
|
31.9
|
%
|
|
36,620
|
|
|
27.2
|
%
|
|
(2,455
|
)
|
|
(6.7
|
)%
|
|||
Royalty revenue
|
9,280
|
|
|
8.7
|
%
|
|
9,547
|
|
|
7.1
|
%
|
|
(267
|
)
|
|
(2.8
|
)%
|
|||
Total revenue
|
$
|
107,051
|
|
|
100.0
|
%
|
|
$
|
134,742
|
|
|
100.0
|
%
|
|
$
|
(27,691
|
)
|
|
(20.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue |
|
September 30, 2016
|
|
% of
revenue |
|
Change
|
|
% Change
|
|||||||||
Product revenue
|
$
|
135,224
|
|
|
60.4
|
%
|
|
$
|
160,401
|
|
|
63.9
|
%
|
|
$
|
(25,177
|
)
|
|
(15.7
|
)%
|
Service revenue
|
69,411
|
|
|
31.0
|
%
|
|
72,438
|
|
|
28.9
|
%
|
|
$
|
(3,027
|
)
|
|
(4.2
|
)%
|
||
Royalty revenue
|
19,274
|
|
|
8.6
|
%
|
|
18,187
|
|
|
7.2
|
%
|
|
$
|
1,087
|
|
|
6.0
|
%
|
||
Total revenue
|
$
|
223,909
|
|
|
100.0
|
%
|
|
$
|
251,026
|
|
|
100.0
|
%
|
|
$
|
(27,117
|
)
|
|
(10.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of revenue
|
|
September 30, 2016
|
|
% of revenue
|
|
Change
|
|
% Change
|
|||||||||
Tape automation systems
|
$
|
18,580
|
|
|
17.4
|
%
|
|
$
|
23,844
|
|
|
17.7
|
%
|
|
$
|
(5,264
|
)
|
|
(22.1
|
)%
|
Disk backup systems
|
3,679
|
|
|
3.4
|
%
|
|
10,023
|
|
|
7.4
|
%
|
|
(6,344
|
)
|
|
(63.3
|
)%
|
|||
Devices and media
|
14,320
|
|
|
13.4
|
%
|
|
14,564
|
|
|
10.8
|
%
|
|
(244
|
)
|
|
(1.7
|
)%
|
|||
Scale-out tiered storage*
|
27,027
|
|
|
25.2
|
%
|
|
40,144
|
|
|
29.8
|
%
|
|
(13,117
|
)
|
|
(32.7
|
)%
|
|||
Total product revenue
|
$
|
63,606
|
|
|
59.4
|
%
|
|
$
|
88,575
|
|
|
65.7
|
%
|
|
$
|
(24,969
|
)
|
|
(28.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
* Scale-out tiered storage was referred to as “scale-out storage solutions” in our previous filings.
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
Gross
margin %
|
|
September 30, 2016
|
|
Gross
margin %
|
|
Change
|
|
Basis point change
|
|||||||||
Product gross margin
|
$
|
15,045
|
|
|
23.7
|
%
|
|
$
|
24,223
|
|
|
27.3
|
%
|
|
$
|
(9,178
|
)
|
|
(360
|
)
|
Service gross margin
|
19,448
|
|
|
56.9
|
%
|
|
21,956
|
|
|
60.0
|
%
|
|
(2,508
|
)
|
|
(310
|
)
|
|||
Royalty gross margin
|
9,280
|
|
|
100.0
|
%
|
|
9,547
|
|
|
100.0
|
%
|
|
(267
|
)
|
|
—
|
|
|||
Gross margin
|
$
|
43,773
|
|
|
40.9
|
%
|
|
$
|
55,726
|
|
|
41.4
|
%
|
|
$
|
(11,953
|
)
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
Gross
margin %
|
|
September 30, 2016
|
|
Gross
margin %
|
|
Change
|
|
Basis point change
|
|||||||||
Product gross margin
|
$
|
35,714
|
|
|
26.4
|
%
|
|
$
|
45,917
|
|
|
28.6
|
%
|
|
$
|
(10,203
|
)
|
|
(220
|
)
|
Service gross margin
|
39,604
|
|
|
57.1
|
%
|
|
42,268
|
|
|
58.4
|
%
|
|
(2,664
|
)
|
|
(130
|
)
|
|||
Royalty gross margin
|
19,274
|
|
|
100.0
|
%
|
|
18,187
|
|
|
100.0
|
%
|
|
1,087
|
|
|
—
|
|
|||
Gross margin
|
$
|
94,592
|
|
|
42.2
|
%
|
|
$
|
106,372
|
|
|
42.4
|
%
|
|
$
|
(11,780
|
)
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Research and development
|
$
|
10,190
|
|
|
9.5
|
%
|
|
$
|
11,401
|
|
|
8.5
|
%
|
|
$
|
(1,211
|
)
|
|
(10.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Research and development
|
$
|
20,795
|
|
|
9.3
|
%
|
|
$
|
22,459
|
|
|
8.9
|
%
|
|
$
|
(1,664
|
)
|
|
(7.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Sales and marketing
|
$
|
26,179
|
|
|
24.5
|
%
|
|
$
|
26,146
|
|
|
19.4
|
%
|
|
$
|
33
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Sales and marketing
|
$
|
54,003
|
|
|
24.1
|
%
|
|
$
|
52,513
|
|
|
20.9
|
%
|
|
$
|
1,490
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
General and administrative
|
$
|
12,158
|
|
|
11.4
|
%
|
|
$
|
12,572
|
|
|
9.3
|
%
|
|
$
|
(414
|
)
|
|
(3.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
General and administrative
|
$
|
24,667
|
|
|
11.0
|
%
|
|
$
|
25,532
|
|
|
10.2
|
%
|
|
$
|
(865
|
)
|
|
(3.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Restructuring charges
|
$
|
31
|
|
|
0.0
|
%
|
|
$
|
15
|
|
|
0.0
|
%
|
|
$
|
16
|
|
|
106.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Restructuring charges
|
$
|
2,366
|
|
|
1.1
|
%
|
|
$
|
2,067
|
|
|
0.8
|
%
|
|
$
|
299
|
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Other income (expense)
|
$
|
77
|
|
|
0.1
|
%
|
|
$
|
10
|
|
|
0.0
|
%
|
|
$
|
67
|
|
|
670.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Other income (expense)
|
$
|
175
|
|
|
0.1
|
%
|
|
$
|
166
|
|
|
0.1
|
%
|
|
$
|
9
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Interest expense
|
$
|
2,617
|
|
|
2.4
|
%
|
|
$
|
1,485
|
|
|
1.1
|
%
|
|
$
|
1,132
|
|
|
76.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
revenue
|
|
September 30, 2016
|
|
% of
revenue
|
|
Change
|
|
%
Change
|
|||||||||
Interest expense
|
$
|
5,175
|
|
|
2.3
|
%
|
|
$
|
2,993
|
|
|
1.2
|
%
|
|
$
|
2,182
|
|
|
72.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
pre-tax loss |
|
September 30, 2016
|
|
% of
pre-tax income |
|
Change
|
|
%
Change
|
|||||||||
Income tax provision (benefit)
|
$
|
499
|
|
|
(6.8
|
)%
|
|
$
|
45
|
|
|
1.1
|
%
|
|
$
|
454
|
|
|
1,008.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||||||||
(Dollars in thousands)
|
September 30, 2017
|
|
% of
pre-tax loss |
|
September 30, 2016
|
|
% of
pre-tax income |
|
Change
|
|
%
Change
|
|||||||||
Income tax provision (benefit)
|
$
|
(741
|
)
|
|
6.0
|
%
|
|
$
|
422
|
|
|
43.3
|
%
|
|
$
|
(1,163
|
)
|
|
(275.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
Change
|
|
% Change
|
|||||||
Cost of revenue
|
$
|
201
|
|
|
$
|
234
|
|
|
$
|
(33
|
)
|
|
(14.1
|
)%
|
Research and development
|
245
|
|
|
333
|
|
|
(88
|
)
|
|
(26.4
|
)%
|
|||
Sales and marketing
|
633
|
|
|
606
|
|
|
27
|
|
|
4.5
|
%
|
|||
General and administrative
|
638
|
|
|
477
|
|
|
161
|
|
|
33.8
|
%
|
|||
|
$
|
1,717
|
|
|
$
|
1,650
|
|
|
$
|
67
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|||||||||
|
September 30, 2017
|
|
September 30, 2016
|
|
Change
|
|
% Change
|
|||||||
Cost of revenue
|
$
|
418
|
|
|
$
|
514
|
|
|
$
|
(96
|
)
|
|
(18.7
|
)%
|
Research and development
|
531
|
|
|
736
|
|
|
(205
|
)
|
|
(27.9
|
)%
|
|||
Sales and marketing
|
1,153
|
|
|
1,218
|
|
|
(65
|
)
|
|
(5.3
|
)%
|
|||
General and administrative
|
1,228
|
|
|
1,180
|
|
|
48
|
|
|
4.1
|
%
|
|||
|
$
|
3,330
|
|
|
$
|
3,648
|
|
|
$
|
(318
|
)
|
|
(8.7
|
)%
|
|
|
|
|
|
|
|
|
(i)
|
Restrictions on our ability to manage or fund our existing operations, which could result in a material and adverse effect on our future results of operations and financial condition.
|
(ii)
|
Unwillingness on the part of the lenders to:
|
•
|
Provide a waiver or amendment for any covenant violations we may experience in future periods, thereby triggering a default under, or termination of, the credit facility, or
|
•
|
Approve any amendments to the credit facility we may seek to obtain in the future.
|
(iii)
|
Further impairment of our financial flexibility, which could require us to raise additional funding in the capital markets sooner than we otherwise would, and on terms less favorable to us, if available at all.
|
|
Six Months Ended
|
||||||
|
September 30, 2017
|
|
September 30, 2016
|
||||
Net income (loss)
|
$
|
(11,537
|
)
|
|
$
|
552
|
|
Net cash provided by (used in) operating activities
|
(304
|
)
|
|
2,381
|
|
||
Net cash used in investing activities
|
(872
|
)
|
|
(1,254
|
)
|
||
Net cash used in financing activities
|
$
|
(2,360
|
)
|
|
$
|
(5,474
|
)
|
|
Payments Due by Period
|
||||||||||||||||||
|
Less than
1 year
|
|
1 – 3 years
|
|
3 –5 years
|
|
More than
5 years
|
|
Total
|
||||||||||
Long-term debt
|
$
|
7,458
|
|
|
$
|
22,966
|
|
|
$
|
64,518
|
|
|
$
|
—
|
|
|
$
|
94,942
|
|
Convertible subordinated debt
|
57,411
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,411
|
|
|||||
Purchase obligations
|
54,501
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,501
|
|
|||||
Operating leases:
|
|
|
|
|
|
|
|
|
|
||||||||||
Lease payments
|
9,019
|
|
|
13,726
|
|
|
4,833
|
|
|
1,706
|
|
|
29,284
|
|
|||||
Sublease rental income
|
(1,482
|
)
|
|
(1,969
|
)
|
|
(327
|
)
|
|
—
|
|
|
(3,778
|
)
|
|||||
Total operating leases
|
7,537
|
|
|
11,757
|
|
|
4,506
|
|
|
1,706
|
|
|
25,506
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total contractual cash obligations
|
$
|
126,907
|
|
|
$
|
34,723
|
|
|
$
|
69,024
|
|
|
$
|
1,706
|
|
|
$
|
232,360
|
|
(a)
|
Evaluation of disclosure controls and procedures.
We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by the Quarterly Report on Form 10-Q. This control evaluation was performed under the supervision and with the participation of management, including our principal executive officer (‘PEO’) and our principal financial officer (‘PFO’). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including the PEO and PFO, as appropriate, to allow timely decisions regarding the required disclosure. Based on the controls evaluation, our PEO and PFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls were effective.
|
(b)
|
Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
|
•
|
Our ability to invest in the growth areas of our business is constrained by the financial covenants contained in our credit facility, which require us to maintain a minimum fixed charge coverage ratio and liquidity levels;
|
•
|
We must dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, research and development and other cash requirements;
|
•
|
Our flexibility in planning for, or reacting to, changes and opportunities in the markets in which we compete may be limited, including our ability to engage in mergers and acquisitions activity, which may place us at a competitive disadvantage;
|
•
|
We are subject to mandatory field audits and control of cash receipts by the lenders if we do not maintain liquidity above certain thresholds;
|
•
|
We may be more vulnerable to adverse economic and industry conditions; and
|
•
|
We may be unable to make payments on other indebtedness or obligations.
|
•
|
Incur debt;
|
•
|
Incur liens;
|
•
|
Make acquisitions of businesses or entities or sell certain assets;
|
•
|
Make investments, including loans, guarantees and advances;
|
•
|
Engage in transactions with affiliates;
|
•
|
Pay dividends or engage in stock repurchases; and
|
•
|
Enter into certain restrictive agreements.
|
•
|
A change in competitive strategy that adversely affects a reseller’s willingness or ability to distribute our products;
|
•
|
The reduction, delay or cancellation of orders or the return of a significant amount of products;
|
•
|
Our inability to gain traction in developing new indirect sales channels for our branded products;
|
•
|
The loss of one or more of such distributors or resellers;
|
•
|
Any financial difficulties of such distributors or resellers that result in their inability to pay amounts owed to us; or
|
•
|
Changes in requirements or programs that allow our products to be sold by third parties to government customers.
|
•
|
Increased costs related to fulfillment of our warranty obligations;
|
•
|
The reduction, delay or cancellation of orders or the return of a significant amount of products;
|
•
|
Focused failure analysis causing distraction of the sales, operations and management teams; or
|
•
|
The loss of reputation in the market and customer goodwill.
|
•
|
We will introduce new products in the time frame we are forecasting;
|
•
|
We will not experience technical, quality, performance-related or other difficulties that could prevent or delay the introduction and market acceptance of new products;
|
•
|
Our new products will achieve market acceptance and significant market share, or that the markets for these products will continue or grow as we have anticipated;
|
•
|
Our new products will be successfully or timely qualified with our customers by meeting customer performance and quality specifications which must occur before customers will place large product orders; or
|
•
|
We will achieve high volume production of these new products in a timely manner, if at all.
|
•
|
Competitors consolidating, having greater resources and becoming more competitive with us;
|
•
|
Companies that we have not historically competed against entering into one or more of our primary markets and increasing competition in such market(s);
|
•
|
Customers that are also competitors becoming more competitive with us and/or reducing their purchase of our products; and
|
•
|
Competitors acquiring our current suppliers or business partners and negatively impacting our business model.
|
•
|
Competitors consolidating, having greater resources and becoming more competitive with us;
|
•
|
Companies that we have not historically competed against entering into one or more of our primary markets and increasing competition in such market(s);
|
•
|
Customers that are also competitors becoming more competitive with us and/or reducing their purchase of our products; and
|
•
|
Competitors acquiring our current suppliers or business partners and negatively impacting our business model.
|
•
|
The size of the installed base of devices and similar products that use tape media cartridges;
|
•
|
The performance of our strategic licensing partners, which sell tape media cartridges;
|
•
|
The relative growth in units of newer device products, since the associated media cartridges for newer products typically sell at higher prices than the media cartridges associated with older products;
|
•
|
The media consumption habits and rates of end users;
|
•
|
The pattern of device retirements; and
|
•
|
The level of channel inventories.
|
•
|
Open source license terms may be ambiguous and may subject us to unanticipated obligations regarding our products, technologies and intellectual property;
|
•
|
Open source software generally cannot be protected under trade secret law; and
|
•
|
It may be difficult for us to accurately determine the origin of the open source code and whether the open source software infringes, misappropriates or violates third party intellectual property or other rights.
|
•
|
Reduced or limited protection of our intellectual property;
|
•
|
Compliance with multiple and potentially conflicting regulatory requirements and practices;
|
•
|
Commercial laws that favor local businesses;
|
•
|
Exposure to economic fluctuations including inflationary risk and continuing sovereign debt risk;
|
•
|
Shortages in component parts and raw materials;
|
•
|
Import, export and trade regulation changes that could erode our profit margins or restrict our ability to transport our products;
|
•
|
The burden and cost of complying with foreign and U.S. laws governing corporate conduct outside the U.S. including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act and other similar regulations;
|
•
|
Adverse movement of foreign currencies against the U.S. dollar (the currency in which our results are reported) and uncertain global economic conditions generally;
|
•
|
Inflexible employee contracts and employment laws that may make it difficult to terminate or change the compensation structure for employees in some foreign countries in the event of business downturns;
|
•
|
Recruiting employees in highly competitive markets and wage inflation in certain markets;
|
•
|
Potential restrictions on the transfer of funds between countries;
|
•
|
Political instability, military, social and infrastructure risks, especially in emerging or developing economies;
|
•
|
Import and export duties and value-added taxes;
|
•
|
Natural disasters and other potential effects of climate change, including earthquakes, flooding, typhoons and tsunamis; and
|
•
|
Cultural differences that affect the way we do business.
|
•
|
Fluctuations in IT spending as a result of economic conditions or fluctuations in U.S. federal government spending;
|
•
|
Failure by our contract manufacturers to complete shipments in the last month of a quarter during which a substantial portion of our products are typically shipped or other delays in shipping due to factors outside of our control;
|
•
|
Changes in product and revenue mix;
|
•
|
New product announcements by us or our competitors which may cause delays in purchasing;
|
•
|
Customers canceling, reducing, deferring or rescheduling significant orders as a result of excess inventory levels, weak economic conditions or other factors;
|
•
|
Seasonality, including customer fiscal year-ends and budget availability impacting customer demand for our products;
|
•
|
Declines in large orders (defined as orders greater than $200,000);
|
•
|
Declines in royalty or software revenues;
|
•
|
Product development and ramp cycles and product performance or quality issues of ours or our competitors;
|
•
|
Poor execution of and performance against expected sales and marketing plans and strategies;
|
•
|
Reduced demand from our OEM or distribution, VAR, DMR and other large customers;
|
•
|
Increased competition which may, among other things, increase pricing pressure or reduce sales;
|
•
|
Restructuring actions or unexpected costs;
|
•
|
Foreign exchange fluctuations; and
|
•
|
Interruptions in deliveries of supplier and/or customer shipments due to natural disasters and other potential effects of climate change, including earthquakes, flooding, hurricanes, typhoons, tsunamis, and wildfires.
|
•
|
Receive shipments of inventory required to build products;
|
•
|
Access, use, or ship previously built inventory;
|
•
|
Ship finished products required to recognize revenue;
|
•
|
Maintain sufficient availability of employees or third party resources required to build or ship product or perform other necessary operational or administrative duties;
|
•
|
Maintain the technology infrastructure required to build or ship product, perform other necessary operational or administrative duties, or communicate effectively within or outside of the company; or
|
•
|
Access key facilities.
|
•
|
Sole source of product supply
|
•
|
Cost and purchase commitments
|
•
|
Financial condition and stability
|
•
|
Quality and supplier conduct
|
•
|
General economic conditions;
|
•
|
Changes in interest rates;
|
•
|
Fluctuations in the stock market in general and market prices for technology companies in particular;
|
•
|
Large or sudden purchases or sales of stock by existing or new investors, including activist investors;
|
•
|
Quarterly variations in our results of operations;
|
•
|
Failure to meet our expectations or the expectations of securities analysts and investors;
|
•
|
Failure to comply with applicable regulatory requirements or any investigations or enforcement actions related to a potential failure to comply with applicable regulations;
|
•
|
Significant changes in our brand or reputations;
|
•
|
New products, services, innovations and strategic developments by our competitors or us, or business combinations and investments by our competitors or us;
|
•
|
Changes in financial estimates by us or securities analysts and recommendations by securities analysts;
|
•
|
Changes in our capital structure, including issuance of additional debt or equity to the public or incurring additional debt;
|
•
|
Changes in our Board or Senior Management; and
|
•
|
Strategic acquisitions.
|
•
|
Failure to realize anticipated synergies from the acquisition;
|
•
|
Difficulties in assimilating and retaining employees;
|
•
|
Potential incompatibility of business cultures or resistance to change;
|
•
|
Coordinating geographically separate organizations;
|
•
|
Diversion of management’s attention from ongoing business concerns;
|
•
|
Coordinating infrastructure operations in a rapid and efficient manner;
|
•
|
The potential inability to maximize our financial and strategic position through the successful incorporation of acquired technology and rights into our products and services;
|
•
|
Failure of acquired technology or products to provide anticipated revenue or margin contribution;
|
•
|
Insufficient revenues to offset increased expenses associated with the acquisition;
|
•
|
Costs and delays in implementing or integrating common systems and procedures;
|
•
|
Reduction or loss of customer orders due to the potential for market confusion, hesitation and delay;
|
•
|
Impairment of existing customer, supplier and strategic relationships of either company;
|
•
|
Insufficient cash flows from operations to fund the working capital and investment requirements;
|
•
|
Difficulties in entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;
|
•
|
The possibility that we may not receive a favorable return on our investment, the original investment may become impaired, and/or we may incur losses from these investments;
|
•
|
Dissatisfaction or performance problems with the acquired company;
|
•
|
The assumption of risks of the acquired company that are difficult to quantify, such as litigation;
|
•
|
The cost associated with the acquisition, including restructuring actions, which may require cash payments that, if large enough, could materially and adversely affect our liquidity; and
|
•
|
Assumption of unknown liabilities or other unanticipated adverse events or circumstances.
|
|
QUANTUM CORPORATION
|
|
|
|
|
|
/s/ FUAD AHMAD
|
|
Fuad Ahmad
|
|
Chief Financial Officer
|
|
(Principal Financial and Principal Accounting Officer)
|
|
Date: November 9, 2017
|
Exhibit
Number
|
|
Exhibit Description
|
3.1
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
2.
|
The date of filing of this Corporation’s original Certificate of Incorporation with the Secretary of State of Delaware was January 28, 1987. The most recent Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on August 8, 2007. An amendment to the Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on April 17, 2017.
|
3.
|
Pursuant to Section 242 of the Delaware General Corporation Law, this Certificate of Amendment hereby amends the provisions of the Corporation’s Amended and Restated Certificate of Incorporation by deleting the first paragraph of Article IV and substituting therefor the paragraph set forth below:
|
4.
|
This Certificate of Amendment to the Amended and Restated Certificate of Incorporation has been duly adopted by the Board of Directors and the stockholders of the Corporation in accordance with the provisions of Section 242 of the Delaware General Corporation Law.
|
QUANTUM CORPORATION
|
|
/s/ Shawn D. Hall
|
Shawn D. Hall
|
Secretary and General Counsel
|
1)
|
I have reviewed this quarterly report on Form 10-Q of Quantum Corporation;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date: November 9, 2017
|
|
|
|
/s/ ADALIO SANCHEZ
|
|
Adalio Sanchez
|
|
Interim Chief Executive Officer and Director
|
1)
|
I have reviewed this quarterly report on Form 10-Q of Quantum Corporation;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date: November 9, 2017
|
|
|
|
/s/ FUAD AHMAD
|
|
Fuad Ahmad
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
Date: November 9, 2017
|
|
|
|
QUANTUM CORPORATION
|
|
|
|
/s/ ADALIO SANCHEZ
|
|
Adalio Sanchez
|
|
Interim Chief Executive Officer and Director
|
|
Date: November 9, 2017
|
|
|
|
QUANTUM CORPORATION
|
|
|
|
/s/ FUAD AHMAD
|
|
Fuad Ahmad
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|