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01/10 17:12
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a decrease in revenue and gross margin, increased net loss, and negative EBITDA, signaling financial struggles. Although operating expenses decreased, this was due to nonrecurring factors. The Q&A highlights strategic focus but also notes unmet expectations for key products and unclear responses on debt details. The lack of immediate guidance and restructuring efforts indicate potential instability. Overall, the financial and strategic challenges overshadow any positives, suggesting a likely negative stock price reaction.
Revenue $64.3 million, a decrease from $72.3 million in the prior year first quarter. The decrease in revenue primarily reflects a shift in product mix as the company transitions towards a higher-value business.
GAAP Gross Margin 35.3%, a decrease from 37.4% in the fiscal first quarter of 2025. The decrease is primarily attributable to an increase in inventory provisions for certain end-of-life products and import tariffs, partially offset by improvements in operational efficiency in the service organization.
GAAP Operating Expenses $35.3 million, a decrease from $43.9 million in the year-ago quarter. The $8.6 million year-over-year decrease primarily reflects significant nonrecurring accounting and legal expenses incurred in the year-ago quarter associated with the company's restatement of financial results for prior fiscal years.
Non-GAAP Operating Expenses $30 million, a slight decrease from $30.8 million in the year-ago quarter. Savings due to restructuring plans were largely offset by increases in the cost of compliance relating to auditing and legal fees.
GAAP Net Loss $17.2 million or a loss of $1.87 per share, compared to a net loss of $19.9 million or a loss of $4.15 per share in the year-ago first quarter. The reduction in GAAP net loss was largely driven by the aforementioned cost of restatement.
Non-GAAP Net Loss $14.5 million or a loss of $1.58 per share, compared to a net loss of $7.6 million or a loss of $1.59 per share in the same quarter a year ago. The higher non-GAAP net loss reflected a combination of lower revenues, increased inventory provisions, and increased import tariffs.
Adjusted EBITDA Negative $6.5 million, compared to negative $2.2 million in the prior year quarter. The lower adjusted EBITDA was primarily a result of factors contributing to the higher net loss.
Cash, Cash Equivalents, and Restricted Cash Approximately $37.5 million at the end of the first fiscal quarter.
Net Debt Position Approximately $66.8 million, representing a reduction of more than 40% from the net debt position at the end of fiscal 2025.
DXi T-Series models: Launched two new DXi T-Series models, including the industry's first one new all-flash deduplication appliances offering up to 480 terabytes, aimed at fast recovery in the multibillion-dollar backup market.
ActiveScale cold storage and Scalar i7 RAPTOR Tape library: Positioned as solutions for the lowest cost archiving, targeting the explosion of AI and data growth. These products are used by the world's largest hyperscalers.
StorNext: Reinvigorated solution for media and entertainment, offering Ethernet-based parallel client with aggregate read performance of up to 90 gigabytes per second, making it highly capable for modern creative workflows.
APAC market expansion: Added new distributors in South Asia, India, and China to expand reach, strengthen support, and drive increased sales in fast-growing markets.
Cost reduction and restructuring: Reduced operating expenses, rightsized the organization, and implemented cost reduction actions to align with current revenue and growth.
Sales execution improvements: Restructured sales teams, focused on metrics and accountability, and placed greater emphasis on channel partners to improve sales processes.
Debt and liquidity management: Raised $83 million in new capital, paid down revolving credit facility, and reduced net debt position by over 40% from the end of fiscal 2025.
Leadership changes: Appointed new executives, including a Chief Revenue Officer and Vice President of Americas Sales, and added experienced Board members to strengthen oversight and guidance.
Product-first approach: Shifted focus to a product-first strategy, aligning solutions with growth trends in AI, media, data protection, and long-term archiving.
Revenue Decline: Revenue decreased year-over-year from $72.3 million to $64.3 million, reflecting a shift in product mix and transition towards a higher-value business, which could impact financial stability.
Gross Margin Reduction: Gross margin dropped to 35.3% from 37.4% year-over-year, driven by increased inventory provisions for end-of-life products and import tariffs, which could strain profitability.
Increased Operating Expenses: Despite cost reductions, operating expenses remain high due to compliance costs, auditing, and legal fees, limiting the company's ability to allocate resources effectively.
Net Loss: The company reported a GAAP net loss of $17.2 million, an increase from the prior quarter, driven by lower revenues and higher inventory provisions, which could hinder financial recovery.
Debt and Liquidity Challenges: Net debt position remains at $66.8 million despite reductions, and reliance on equity financing raises concerns about long-term financial sustainability.
Sales Execution Risks: Challenges in sales distribution and execution, as highlighted by the CEO, indicate potential risks in achieving revenue growth and market penetration.
Supply Chain and Tariff Issues: Import tariffs and supply chain adjustments have negatively impacted costs, posing risks to operational efficiency and profitability.
Product Transition Risks: The shift towards new product lines and end-of-life provisions for older products could disrupt revenue streams and customer retention.
Market Competition: The company faces competitive pressures in AI, media, data protection, and archiving markets, which could impact its ability to capture market share.
Strategic Execution Risks: The need for restructuring, new leadership, and operational realignment highlights risks in executing the company's strategic objectives effectively.
Revenue Expectations: Revenue for the second quarter of fiscal 2026 is expected to be approximately $61 million, plus or minus $2 million.
Operating Expenses: Non-GAAP operating expenses for the second quarter are anticipated to be approximately $27 million, plus or minus $2 million, reflecting benefits from recent cost reduction actions.
Net Loss Per Share: Non-GAAP adjusted net loss per share for the fiscal second quarter is expected to be negative $0.26, plus or minus $0.10 per share, based on an estimated 13.3 million shares outstanding.
Adjusted EBITDA: Adjusted EBITDA for the fiscal second quarter is expected to be approximately breakeven.
Debt Restructuring: The company is making progress with current lenders on potential transactions to restructure remaining outstanding term debt and expects to announce more definitive plans before the next earnings call.
Capital and Liquidity: Approximately $83 million in new capital has been raised through a standby equity purchase agreement, strengthening the balance sheet and supporting ongoing operations.
Product and Market Focus: The company is focusing on growth trends in AI, media and entertainment, data protection, and long-term archiving, with new product launches like the DXi T-Series models and ActiveScale cold storage solutions.
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The earnings call presents a mixed picture: positive trends in cost reduction and product backlog, but concerns about supply chain issues and declining gross margins. The Q&A highlights cautious guidance and management's focus on operational improvements. Despite restructuring benefits, uncertainties in supply chain and manufacturing persist. The lack of clear guidance and management's cautious tone suggest a balanced outlook. Given the absence of a market cap, a neutral stock price movement is predicted, considering both positive restructuring impacts and operational challenges.
The earnings call reveals a decrease in revenue and gross margin, increased net loss, and negative EBITDA, signaling financial struggles. Although operating expenses decreased, this was due to nonrecurring factors. The Q&A highlights strategic focus but also notes unmet expectations for key products and unclear responses on debt details. The lack of immediate guidance and restructuring efforts indicate potential instability. Overall, the financial and strategic challenges overshadow any positives, suggesting a likely negative stock price reaction.
The earnings call shows mixed signals: while there is a slight revenue increase and improved EBITDA, the significant net loss and debt remain concerning. The Q&A reveals some uncertainty, particularly around manufacturing headwinds and the Standby Equity Purchase Agreement, which could impact investor confidence. The positive aspects, such as increased ARR and cost reduction, are balanced by the negative financials and unclear guidance, leading to a neutral outlook.
The earnings call indicates several negative factors: a 7% revenue decline, ongoing supply chain issues, competitive pressures, and a significant net debt position. Despite cost controls and some positive developments in subscription ARR and product pipelines, these concerns, coupled with no shareholder return plan and reduced gross margins, outweigh the positives. The Q&A highlighted persistent operational headwinds and unclear management responses, further contributing to a negative sentiment. The guidance provided was not strong enough to offset these issues, leading to a prediction of a negative stock price reaction.
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