QUANTUM CORP /DE/

Previous wording

The following discussion and analysis compares the change in the condensed consolidated financial statements for the quarter ended June 30, 2026 and June 30, 2025, 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, 2026 (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, 2025 and June 30, 2024, 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, 2025, filed with the SEC on September 11, 2025 and amended on September 23, 2025 and incorporated herein by reference. Our fiscal year ends on March 31 of each calendar year. "Fiscal 2027" refers to the fiscal year ending March 31, 2027, and "Fiscal 2026" refers to the fiscal year ended March 31, 2026.

Current wording

The following discussion and analysis compares our results of operations for the three and six months ended September 30, 2026 and September 30, 2025, and should be read together with the condensed consolidated financial statements and the related notes included in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and related notes 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, 2026 (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 affect our results of operations, liquidity, and capital resources. For comparisons of the three and six months ended September 30, 2025 and 2024, 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, 2025, filed with the SEC on November 13, 2025 and incorporated herein by reference. Our fiscal year ends on March 31. "Fiscal 2026" refers to the fiscal year ended March 31, 2026. In the tables below, "n/m" indicates a percentage change that is not meaningful.

Previous wording

In the three months ended June 30, 2026, product revenue increased $16.3 million, or 44%, as compared to the same period in fiscal 2026. The primary driver of this increase was strong demand across all secondary storage product lines including Scalar tape storage products, DXi backup appliances, and ActiveScale object storage appliances. Demand growth increased worldwide with product revenues increasing across all regions. Overall secondary storage revenue increased by $18.5 million, or 100.1% as compared to the same period in fiscal 2026. Devices and media revenues also increased by $0.4 million, or 4.2% as compared to fiscal 2026. These increases were partially offset by declines in primary storage.

Current wording

In the three months ended September 30, 2026, product revenue increased $27.2 million, or 77%, as compared to the same period in fiscal 2026. The primary driver of this increase was strong demand across all secondary storage product lines including Scalar tape storage products, ActiveScale object storage appliances, and DXi backup appliances. Overall, secondary storage revenue increased by $25.0 million, or 126.2% as compared to the same period in fiscal 2026. Devices and media revenues also increased by $4.0 million, or 53.2% as compared to fiscal 2026. These increases were partially offset by declines in primary storage.

Previous wording

Service and subscription revenue was essentially flat with a small decrease of $0.3 million, or 1%, in the three months ended June 30, 2026, compared to the same period in fiscal 2026.

Current wording

Service and subscription revenue remained flat with a small decrease of $0.6 million, or 2%, in the three months ended September 30, 2026, compared to the same period in fiscal 2026.

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 increased $0.5 million, or 25%, in the three months ended June 30, 2026, as compared to the same period in fiscal 2026, related to higher overall unit shipments.

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 increased $0.3 million, or 18%, in the three months ended September 30, 2026, as compared to the same period in fiscal 2026, related to higher overall unit shipments.

Previous wording

In the three months ended June 30, 2026, sales and marketing expenses decreased $1.6 million, or 13%, as compared with fiscal 2026. This decrease was primarily driven by an improved organizational structure following management changes in fiscal 2026.

Current wording

In the three months ended September 30, 2026, sales and marketing expenses increased $0.3 million, or 3%, as compared with fiscal 2026. This increase was primarily driven by variable expense due to growth in revenue compared to fiscal 2026.

Previous wording

In the three months ended June 30, 2026, research and development expenses decreased $0.6 million, or 10%, as compared with fiscal 2026. This decrease was the result of the efficiencies realized through improved organization design, further aligning commonalities between major products.

Current wording

In the three months ended September 30, 2026, research and development expenses increased $0.7 million, or 12%, as compared with fiscal 2026. This increase was the result of strategic investment into our product development teams.

Previous wording

In the three months ended June 30, 2026, restructuring charges decreased $2.4 million, or 99%, as compared with fiscal 2025. This decrease is because the corporate restructuring activities are largely complete.

Current wording

In the three months ended September 30, 2026, restructuring charges decreased $2.9 million, or 91%, as compared with fiscal 2026. The decrease is due to the corporate restructuring activities being largely complete.

Previous wording

In the three months ended June 30, 2026, the change in other expense resulted in a net increase of $0.6 million or 149%, compared to fiscal 2025. The increase was primarily related to differences in foreign currency gains and losses during each period.

Current wording

In the three months ended September 30, 2026, the change in other income (expense) resulted in a net increase of $0.3 million compared to fiscal 2026. The increase was primarily related to an increase in interest received partially offset by movements in foreign currency gains and losses during each period.

Previous wording

In the three months ended June 30, 2026, interest expense decreased by $4.4 million, or 68%, as compared to fiscal 2025. This decrease was primarily due to the restructuring and subsequent repayment of our Term Loan (as defined herein) in September 2025 and in June 2026, respectively.

Current wording

In the three months ended September 30, 2026, interest expense decreased by $6.2 million, or 100%, as compared to fiscal 2026. This decrease was primarily due to the repayment of our Term Loan (as defined herein) in June 2026. The Company had no outstanding debt during the three months ended September 30, 2026.

Previous wording

In the three months ended June 30, 2026, we recorded a non-cash loss of $16.3 million related to the change in fair value of our forbearance warrant which was issued in September 2025 and conversion warrant which was issued in June 2026. The loss was primarily driven by fluctuations in our stock price.

Current wording

In the three months ended September 30, 2026, we recorded a non-cash loss of $51.6 million related to the change in fair value of our forbearance warrant which was issued in September 2025 and conversion warrant which was issued in June 2026. The loss was primarily driven by fluctuations in our stock price.

Previous wording

Due to our history of net losses in the United States, the protracted period for utilizing tax attributes incertain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.

Current wording

Due to our history of net losses in the United States, the protracted period for utilizing tax attributes uncertain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets. Accordingly, we have established a full valuation allowance against our U.S. and certain foreign net deferred tax assets. Significant management judgment is required in assessing our ability to realize any future benefit from our net deferred tax assets. We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal. Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.

Previous wording

In the three months ended June 30, 2026, general and administrative expenses decreased $4.0 million, or 29%, as compared with fiscal 2026 This decrease was primarily driven by large non-recurring projects in the prior year related to restructuring and compliance related activities. Expenses also decreased as administrative efficiency gains were realized through more streamlined functions and process automation.

Current wording

In the six months ended September 30, 2026, general and administrative expenses decreased $3.8 million, or 16%, as compared with the same period in fiscal 2026. 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, 2026, we recorded a loss of $11.7 million on debt extinguishment, primarily related to the repayment of our Term Loan in June 2026. In the same period in fiscal 2025, the gain on debt extinguishment, net 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.

Current wording

In the six months September 30, 2026, we recorded a loss of $11.7 million on debt extinguishment, primarily related to the repayment of our Term Loan in June 2026. In the six months ended September 30, 2025, the loss on debt extinguishment relates to the transfer of the long-term debt to a new lender and the subsequent amendments which occurred during the first and second fiscal quarters.

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, cash and cash equivalents on our balance sheet and proceeds from the sale of common stock. We require significant cash resources to 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 investment 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, cash and cash equivalents on our balance sheet and proceeds from the sale of common stock. We require significant cash resources to 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 investment needs. We believe our existing cash and cash equivalents and cash flows from operations will be sufficient to fund our operations, working capital and capital expenditure needs for at least the next 12 months.

Previous wording

We had cash and cash equivalents of $54.4 million as of June 30, 2026, which excludes $0.1 million of short-term restricted cash. Our total outstanding Term Loan debt was fully repaid in the three months ended June 30, 2026.

Current wording

We had cash and cash equivalents of $67.4 million as of September 30, 2026, which excludes $0.1 million of short-term restricted cash. Our total outstanding Term Loan debt was fully repaid in the first quarter of fiscal 2027.

Previous wording

We generated cash flows from operations of approximately $0.9 million for the three months ended June 30, 2026, compared to negative cash flows of $16.9 million for the three months ended June 30, 2025. We generated net losses of approximately $155.3 million and $17.2 million for the three months ended June 30, 2026 and 2025, respectively. We have funded operations through the sale of common stock and debt borrowings as described in Note 4: Debt and Note 7 : Common Stock.

Current wording

We generated cash flows from operations of approximately $14.3 million for the six months ended September 30, 2026, compared to negative cash flows of $32.5 million for the six months ended September 30, 2025. We generated net losses of approximately $200.1 million and $63.7 million for the six months ended September 30, 2026 and 2025, respectively. We have funded operations through the sale of common stock and debt borrowings as described in Note 4: Debt and Note 7 : Common Stock.

Previous wording

Net cash used in investing activities was $0.4 million and $1.2 million for the three months ended June 30, 2026 and 2025, respectively, primarily attributable to capital expenditures.

Current wording

Net cash used in investing activities was $0.6 million and $1.6 million for the six months ended September 30, 2026 and 2025, respectively, consisting of capital expenditures.

Previous wording

We are also subject to ordinary course of business litigation, See Note 10: Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We are also subject to ordinary course of business litigation, See Note 10: Commitments and Contingencies, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

The preparation of our condensed 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.

Current wording

The preparation of our condensed consolidated financial statements in accordance with GAAP 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”. Other than the elimination of the fair value of the Convertible Note as a critical accounting estimate following its conversion on June 4, 2026, and the inclusion of the Conversion Warrant, issued on June 1, 2026, within our estimate of the fair value of warrant liabilities, there have been no material changes to our critical accounting estimates and policies during the six months ended September 30, 2026 from those disclosed in the Annual Report. For additional information on our significant accounting policies, see Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.