Quantum Corporation

Good afternoon and welcome to Quantum Corporation's second quarter fiscal 2025 financial results conference call. 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, please press star zero on your telephone keypad. Please note today's conference call is being recorded for replay purposes. I will now turn the conference over to your host, Brian Cabrera. You may begin.

Good afternoon, and thank you for joining today's conference call to discuss Quantum's second 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 analysts. 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 revenue, 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 descriptions we provide about these and other additional risk factors under the risk factor section in our 10Qs and 10K 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. 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. Jamie?

Thank you, Brian, and thank you all for joining us. Earlier today, we announced our results for our second quarter fiscal 2025. Turning to slide three, here are some brief highlights from the quarter. We finished Q2 25 with $70.5 million in revenue, gap gross margin of 41.5%, and adjusted EBITDA approximately break-even. Sales bookings and customer win rates were largely in line with our expectations as we continue our business rotation toward our long-term initiatives and growth of profitable revenue streams. This quarter's execution resulted in a higher-than-anticipated backlog of approximately $14 million and $4 million above typical run rate. Evidence of our transformation can be seen in the progress of gross margin improving 490 basis points sequentially to above 41%, as well as non-GAAP operating expenses being reduced by approximately 9% year over year. These actions contributed to our achievement of break-even adjusted EBITDA for the quarter and have set a positive operating path towards EBITDA growth for the remainder of the year. Quantum continues to focus on business efficiency by enhancing operations and driving more automation into the business. Combined with this quarter's actions, our restructuring and operational improvements are expected to result in almost $40 million in total savings as of the end of our fiscal year 2025, compared to fiscal 2023. These actions are also improving our free cash flow, which is expected to be positive in the back half of fiscal year 2025 and driving fiscal 2026 to be cash flow positive for the first time in five years. Turning to slide four, let me share some proof points to our go-to-market strategy and how our innovation agenda continues to center on accelerating future growth. First example is this quarter, a leading broadcaster in the Americas and an existing Quantum customer for over a decade selected Myriad and significantly grew their existing active-scale environment with active-scale cold storage. This deal also leveraged our Quantum Go subscription solution highlighting our plans to empower our customers to innovate and allow them to focus on their data rather than their storage infrastructure costs. Another example of innovation yielding near-term results is our new DXIT series all-flash data protection appliance we recently launched. We've had multiple strategic wins against competition this quarter based on its superior data reduction and recovery rate. These deals have been closing rapidly, the majority in under 30 days from deal discovery, demonstrating the critical importance of cyber resilience in today's market and the compelling value proposition that our DXI solutions provide. While our future growth is led by myriad and active scale, it remains important to maintain a strong base with our traditional data protection offerings. The Scalar i7 Raptor, our latest tape innovation to support growing AI use cases, is now shipping under limited availability. Built to handle advanced AI workflows for hyperscale customers, MSPs, and large enterprises, the Scalar i7 Raptor delivers the most efficient, dense, and low-cost solution for AI data lakes. Demonstrating its leadership in the markets, we already have a multi-million dollar purchase order in-house from one of the world's leading cloud platforms. These are just some examples of our go-to-market progress and how our innovation can help accelerate our growth. Now let me hand the call over to Ken for a financial update.