Quantum Corporation

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Quantum's financial results for the fourth quarter and full fiscal year 2022. 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. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Brian Cabrera from Quantum.

Good afternoon, and thank you for joining today's conference call to discuss Quantum's fourth quarter and fiscal 2022 financial results. I'm Brian Cabrera, Quantum's chief legal and compliance officer. Joining me today are Jamie Lerner, our chairman and CEO, and Mike Dodson, our CFO. This afternoon, we issued a press release, which you can access under the investor relations section of our website at www. We are using a slide presentation in conjunction with today's call, and this is also accessible under the same section of our website. During today's call, our comments may include forward-looking statements. All statements other than statements of historical fact should be viewed as forward-looking. These statements include any projections of revenue, margins, expenses, adjusted EBITDA, adjusted net income, cash flows, or other financial items. These statements may also concern the expected development, performance, and market share or competitive performance of our products or services. All forward-looking statements are based on information available to Quantum as of today's date. We advise caution in relying on these statements as they involve known and unknown risks. and uncertainties we refer to as risk factors. Risk factors may cause our actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in our business. We include detailed information about these and additional risk factors under the sections labeled risk factors in our quarterly report on Form 10-Q and annual report on Form 10-K which we file with the Securities and Exchange Commission. We do not intend to update or alter our forward-looking statements, 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 GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release. If you are unable to listen to the entire call at this time, we will make a recording available for at least 90 days in the investor relations section of our website. 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 this afternoon, we announced results for our fourth fiscal quarter and fiscal year 2022. I'm encouraged by the progress we made throughout the year, delivering growth and recurring software revenue, integrating three acquisitions to build out our portfolio of solutions for video and unstructured data, and resetting our balance sheet with a recently completed rights offering. Today I will talk more about the progress we are making in our supply chain and how we plan to improve Quantum's earning power going forward. Our fourth fiscal quarter revenue was up year on year and exceeded our preliminary results. And our backlog remains at near record levels. Our fiscal year 2022 revenue grew 6.7% year on year, and we made significant progress toward building recurring revenue, exiting fiscal year 2022 with $7.4 million of subscription software ARR and $160.5 million in high-value recurring revenue. The number of active subscription customers grew to 356 an increase of 290% year over year. And we expect continued growth in the fiscal year 2023 based on all the work we have done over the last four quarters to transition our product lines. Earlier this quarter, we completed an oversubscribed rights offering to strengthen our balance sheet by reducing debt and increasing our cash position. With the completion of the rights offering, we have reduced our net debt balance by two-thirds, from just under $150 million at the end of fiscal 2019 to currently just under $50 million. In addition, we have reduced cash paid for interest expense from $24.3 million in fiscal year 2021 to an estimated $8 million annual interest expense in fiscal year 2023. Mike will discuss more about our balance sheet in his section, as well as how we have reset all debt covenants to more favorable levels. Now I'd like to talk about our plans to increase earnings over the next four quarters. Through sales growth, operational expense reductions, and price increases, Combined with supply chain initiatives to drive margin expansion, our goal is to deliver substantial year-on-year improvements to adjusted EBITDA. While our sales are ramping, we are tightening operational expenses across the company. We are reducing discretionary spending, reducing our facilities footprint, and expanding our global engineering presence as we continue to integrate recent acquisitions. Now I'd like to talk about supply chain. As we stated in the press release, our backlog remains just over 60 million. And much of this backlog is tape storage systems for our hyperscale and enterprise customers. We are seeing signs of improved tape drive supply from our key supplier, though we expect the environment will remain constrained in the short to medium term. Starting last year under the new supply chain leadership of Eric Isom, we put in place a strategy to improve supply chain execution, and this is now starting to show results. Our strategy is based on four main elements. Reducing reliance on broker buys by purchasing long lead components well in advance. Replacing components that are supply constrained with more common and often cheaper components. Stronger engagement with and management of critical suppliers. Localizing supply of tape storage components in Mexico near our contract manufacturer. The first encouraging sign we are seeing is that POs placed last year for long lead time items are now being delivered, which is reducing the number of components we need to buy on the broker market. Certain components last year had lead times that increased to 60 weeks almost overnight. This left us gapped on supply, so we had to purchase components on the broker market at higher prices to cover the gap. During this period, we also qualified over 70 alternative components in our tape storage systems. And these efforts are now showing results, with broker buys decreasing 80% from fiscal Q4 to this quarter. In addition, as we are starting to get ahead of demand, we have started to see reduction in freight expedite charges from Asia, particularly this quarter. Going forward, we expect to use all ocean freight for key bulk materials. Longer term, as we localize more materials in Mexico, we will further reduce freight costs and geopolitical risks. I'm confident that by executing on the programs above, we'll be able to increase the earnings power of quantum while building high-value recurring revenue based on software and services. Now I'd like to turn the call over to Mike to provide more detail on the results. Then we can take questions. Mike?