QUANTUM CORP /DE/

Previous wording

The following discussion and analysis compares the change in the consolidated financial statements for quarters ending June 30, 2025 and June 30, 2024 and should be read together with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the “Annual Report”). In particular, the risk factors contained in Part I, Item 1A of the Annual Report under the heading “Risk Factors” may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources. For comparisons of quarters ended June 30, 2024 and June 30, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on August 14, 2024, and incorporated herein by reference. Our fiscal year ends on March 31 of each calendar year. "Fiscal 2025" refers to the fiscal year ended March 31, 2025.

Current wording

The following discussion and analysis compares the change in the consolidated financial statements for quarters and six months ended September 30, 2025 and September 30, 2024, and should be read together with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the “Annual Report”). In particular, the risk factors contained in Part I, Item 1A of the Annual Report under the heading “Risk Factors” may reflect trends, demands, commitments, events, or uncertainties that could materially impact our results of operations and liquidity and capital resources. For comparisons of quarters and six months ended September 30, 2024 and September 30, 2023, see our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, filed with the SEC on November 14, 2024, and incorporated herein by reference. Our fiscal year ends on March 31 of each calendar year. "Fiscal 2025" refers to the fiscal year ended March 31, 2025.

Previous wording

We continue to actively monitor, evaluate and respond to the current uncertain macro environment, including the impact of higher interest rates, inflation, tariffs, lingering supply chain challenges, and a stronger U.S. dollar. During the quarter we continued to experience longer sales cycle for opportunities with our enterprise as well as commercial customers.

Current wording

We continue to actively monitor, evaluate and respond to the current uncertain macro environment, including the impact of changing interest rates, inflation, tariffs, lingering supply chain challenges, and fluctuation in the U.S. dollar. During the quarter we continued to experience longer sales cycle for opportunities with our enterprise as well as commercial customers.

Previous wording

Service and subscription revenue decreased $1.8 million, or 7%, in the three months ended June 30, 2025 compared to the same period in fiscal 2024. This decrease was due to certain long-lived products reaching their end-of-service-life.

Current wording

Service and subscription revenue decreased $4.6 million, or 15%, in the three months ended September 30, 2025 compared to the same period in fiscal 2025. This decrease was due to certain long-lived products reaching their end-of-service-life.

Previous wording

In the three months ended June 30, 2025, sales and marketing expenses decreased $0.6 million, or 5%, as compared with the same period in fiscal 2024. This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.

Current wording

In the three months ended September 30, 2025, sales and marketing expenses decreased $1.8 million, or 13%, as compared with the same period in fiscal 2025. This decrease was primarily driven by improved operational efficiency and increased leverage of our channel.

Previous wording

In the three months ended June 30, 2025, general and administrative expenses decreased $7.5 million, or 36%, as compared with the same period in fiscal 2024. This decrease was primarily driven by higher expense in the prior year related to compliance focused outside services.

Current wording

In the three months ended September 30, 2025, general and administrative expenses decreased $3.0 million, or 21%, as compared with the same period in fiscal 2025. This decrease was primarily driven by higher expense in the prior year related to compliance focused outside services.

Previous wording

In the three months ended June 30, 2025, research and development expenses decreased $1.6 million, or 20%, as compared with the same period in fiscal 2024. This decrease was the result of the continued consolidation of acquisition costs, and efficiencies realized through improved organization design.

Current wording

In the three months ended September 30, 2025, research and development expenses decreased $2.6 million, or 31%, as compared with the same period in fiscal 2025. This decrease was the result of efficiencies realized through improved organization design, including the consolidation of common functions and increased weighting of resources in lower-cost regions.

Previous wording

In the three months ended June 30, 2025, interest expense increased $2.7 million, or 72%, as compared with the same period in fiscal 2024 due to a higher effective interest rate on our Term Loan.

Current wording

In the three months ended September 30, 2025, interest expense increased $0.1 million, or 2%, as compared with the same period in fiscal 2025 due to a higher effective interest rate on our Term Loan.

Previous wording

In June 30, 2024, we recorded a non-cash loss of $1.7 million related to the change in fair value of our warrant liabilities driven by fluctuations in our stock price. As of June 30, 2025, there were no outstanding warrants.

Current wording

In the three months ended September 30, 2025, we recorded a non-cash gain of $1.5 million related to the change in fair value of our Forbearance Warrant liabilities. In the three months ended September 30, 2024, we recorded a non-cash gain of $3.6 million.

Previous wording

In June 30, 2025, gain on debt extinguishment was related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees. In June 30, 2024, loss on debt extinguishment was related to prepayment of our long-term debt.

Current wording

In September 30, 2025, loss on debt extinguishment was related to the net of discount on issuance of term loans to a new lender and write-off of all unamortized debt issuance costs and fees. In September 30, 2024, loss on debt extinguishment was related to prepayment of our long-term debt.

Previous wording

In the three months ended June 30, 2025, product revenue decreased $5.1 million, or 12%, as compared to the same period in fiscal 2024. The primary driver of the decrease was in Primary storage systems with a large video surveillance order in the prior period.

Current wording

In the six months ended September 30, 2025, product revenue decreased $$9.0 million, or 11%, as compared to the same period in fiscal 2025. The primary driver of the decrease was in Primary storage systems with a large video surveillance order in the prior period.

Previous wording

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium. Royalty revenue saw a decrease of $1.1 million, or 38%, in the three months ended June 30, 2025 compared to the same period in fiscal 2024 due to decreased market volume.

Current wording

We receive royalties from third parties that license our linear-tape open media patents through our membership in the linear-tape open consortium. Royalty revenue saw a decrease of $1.7 million, or 33%, in the six months ended September 30, 2025 compared to the same period in fiscal 2025 due to both lower market volume and a mix weighted towards LTO types with lower royalty rates.

Previous wording

Product gross margin decreased by $3.3 million, or by 560 basis points, for the three months ended June 30, 2025, as compared with the same period in fiscal 2024. This decrease was primarily due to an inventory provision accrued for certain end-of-life products, as well as supply chain logistics costs including import tariffs.

Current wording

Product gross margin decreased by $6.2 million, or by 550 basis points, for the six months ended September 30, 2025, as compared with the same period in fiscal 2025. This decrease was primarily due to an inventory provision accrued for certain end-of-life products, as well as supply chain logistics costs including import tariffs.

Previous wording

We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities. Our principal sources of liquidity include cash from operating activities, and cash and cash equivalents on our balance sheet. We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures. Our future liquidity requirements will depend on multiple factors, including our research and development plans and capital asset needs.

Current wording

We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities. Our principal sources of liquidity include cash from operating activities, and cash and cash equivalents on our balance sheet. We require significant cash resources to meet obligations to pay principal and interest on our outstanding debt, provide for our research and development activities, fund our working capital needs, and make capital expenditures. Our future liquidity requirements will depend on multiple factors, including our ability to raise additional capital, research and development plans and capital asset needs.

Previous wording

We had cash and cash equivalents of $37.4 million as of June 30, 2025, which consisted primarily of bank deposits and money market accounts. As of June 30, 2025, our total outstanding Term Loan debt was $104.3 million and our revolving credit facility agreement with PNC Bank, National Association, as amended from time to time (the “PNC Credit Facility”) had an available borrowing base of $23.3 million, of which the entire amount was available to borrow at that date. As discussed in Note 13: Subsequent Events, the Company terminated the PNC Credit Facility on August 13, 2025.

Current wording

We had cash and cash equivalents of $14.7 million as of September 30, 2025, which consisted primarily of bank deposits and money market accounts. As of September 30, 2025, our total outstanding Term Loan debt was $106.1 million.

Previous wording

We generated negative cash flows from operations of approximately $16.9 million and $1.9 million for the quarters ended June 30, 2025 and 2024, respectively, and generated net losses of approximately $17.2 million and $19.9 million for the quarters ended June 30, 2025 and 2024, respectively. We have funded operations through the sale of Common Stock, term debt borrowings and PNC Credit Facility borrowings described in Note 4: Debt.

Current wording

We generated negative cash flows from operations of approximately $32.5 million and $17.2 million for the six months ended September 30, 2025 and 2024, respectively, and generated net losses of approximately $63.7 million and $32.0 million for the six months ended September 30, 2025 and 2024, respectively. We have funded operations through the sale of Common Stock, Term Loan borrowings and PNC Credit Facility borrowings described in Note 4: Debt.

Previous wording

On January 25, 2025, the Company entered into a SEPA, in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $200 million of Common Stock at any time during the three-year period following the date of the SEPA. As of June 30, 2025, the Company has issued approximately 7.5 million shares of Common Stock under the SEPA for net proceeds of approximately $82.8 million.

Current wording

On January 25, 2025, the Company entered into the SEPA, in which pursuant to and subject to its terms, the Company has the right, but not the obligation, to sell up to $200 million of Common Stock at any time during the three-year period following the date of the SEPA. As of September 30, 2025, the Company has issued approximately 7.5 million shares of Common Stock under the SEPA for net proceeds of approximately $82.8 million, of which 6.3 million shares of Common Stock for net proceeds of approximately $66.9 million were issued in the six months ended September 30, 2025. No shares were issued in the three months ended September 30, 2025.

Previous wording

Net cash used in operating activities was $16.9 million for the three months ended June 30, 2025. This use of cash was primarily attributed to lower earnings.

Current wording

Net cash used in operating activities was $32.5 million for the six months ended September 30, 2025. This use of cash was primarily attributed to lower earnings.

Previous wording

Net cash used in investing activities was $1.6 million in the three months ended June 30, 2024, which was attributable to capital expenditures.

Current wording

Net cash used in investing activities was $1.6 million in the six months ended September 30, 2025, which was attributable to capital expenditures.

Previous wording

Net cash used in investing activities was $1.2 million in the three months ended June 30, 2025, which was attributable to capital expenditures.

Current wording

Net cash used in investing activities was $3.2 million in the six months ended September 30, 2024, which was attributable to capital expenditures.

Previous wording

Net cash provided by financing activities was $39.0 million for the three months ended June 30, 2025, which was related primarily to borrowings on our Term Loan.

Current wording

Net cash provided by financing activities was $32.8 million for the six months ended September 30, 2025, which was related primarily to borrowings on our Term Loan.

Previous wording

Net cash used in financing activities was $4.8 million for the three months ended June 30, 2024, which was related primarily to borrowings on our PNC Credit Facility.

Current wording

Net cash provided by financing activities was $11.5 million for the six months ended September 30, 2024, which was related primarily to proceeds from shares issued under the SEPA.

Previous wording

We are also subject to ordinary course litigation.

Current wording

We are also subject to ordinary course litigation. See Note 10: Commitments and Contingencies to the unaudited condensed consolidated financial statements for a discussion of our legal matters.

Previous wording

We have contractual obligations and commercial commitments, some of which, such as purchase obligations, are not recognized as liabilities in our financial statements. There have not been any material changes to the contractual obligations disclosed in the Annual Report.

Current wording

We have contractual obligations and commercial commitments, some of which, such as purchase obligations, are not recognized as liabilities in our condensed consolidated financial statements. There have not been any material changes to the contractual obligations disclosed in the Annual Report.

Previous wording

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report. On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We consider certain accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change. Our accounting policies that include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in the Annual Report under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies.” For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report. On an ongoing basis, we evaluate estimates, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We consider certain accounting policies to be critical to understanding our financial statements because the application of these policies requires significant judgment on the part of management, which could have a material impact on our financial statements if actual performance should differ from historical experience or if our assumptions were to change. Our accounting policies that include estimates that require management’s subjective or complex judgments about the effects of matters that are inherently uncertain are summarized in the Annual Report under the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies.” For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.