What changed in this filing

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Item 1. Business

2021-05-26 compared with 2020-06-24 · 100 added, 96 removed, 155 unchanged (56% of the section changed)

COVID-19 Risks and Uncertainties

We are subject to the risks arising from COVID-19 which have caused substantial financial market volatility and have adversely affected both the U.S.

and the global economy.

For many of our customers, the COVID-19 pandemic has significantly affected their business.

Movie and television production has been paused, professional and collegiate sports seasons have been postponed or cancelled, and many corporations and enterprises have put information technology spending on hold while they assess the short- and long-term impact of the pandemic.

While our supply chain remains intact and operating, we have experienced issues related to our logistics network.

The reduced capacity within and across freight lanes (aircraft, personnel, customs clearance, etc.) has caused late deliveries from re-routes and mis-shipments, as well as increased expedite and other charges to deliver and receive products.

To date, we have experienced minimal impact on product availability, although future capacity constraints across the network due to lost capacity from factory down time, closures, as well as reduced staff and demand signal fluctuations are expected to impact product availability in the months and possibly quarters to come.

We believe that these social and economic impacts have had a negative effect on sales due to the decline in our customers' ability or willingness to purchase our products and services.

The extent of the impact will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue.

Our management continues to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

We are a leader in storing and managing digital video and other forms of unstructured data.

We help customers around the world to ingest, process, and analyze digital data at high speed, and preserve and protect it for decades.

Our customers include some of the world’s largest corporations, government agencies, service providers, broadcasters, movie studios, sports leagues and teams, and enterprises in all industries.

We work closely with a broad network of distributors, VARs, DMRs, OEMs and other suppliers to solve our customers most pressing business challenges.

Our Customer Solution

Our customers are typically managing and storing large amounts of digital video and other forms of “video-like” data such as high-resolution images.

This data is generally referred to as “unstructured” data, and video and digital images represent the largest subset of this data.

This unstructured data is growing rapidly, and already represents the vast majority of the data being created every day.

This data has unique requirements, and our portfolio has been designed to address these requirements end-to-end.

When this data is first created, it requires very high-speed performance, which we provide using a combination of non-volatile memory express (“NVMe”), solid state drives (“SSD”), and hard disk drives (“HDD”).

Once this data is ingested and processed, it typically needs to be stored and protected forever.

We provide both object storage systems and tape storage systems for low-cost, long-term protection and archiving, and the complete solution is managed by our StorNext software.

StorNext is both a high-speed file system as well as a data management platform.

In addition to providing customers access to their data across the various types of storage systems above, StorNext can also move data to and from public cloud storage, which our customers are increasingly using as part of their overall data infrastructure.

We also offer a portfolio of products designed for video surveillance recording and storage, including a line of network video recording servers, and a line of hyperconverged storage systems for surveillance recording and management.

With the exception of our tape storage systems, which are based on hardware we have designed, all of our products are powered by our software, and run on commodified server hardware.

Our product portfolio is increasingly software-defined, and our technology roadmap is moving to becoming completely software-defined.

We are a member of the consortium that develops, patents, and licenses Linear Tape-Open, (or “LTO® tape”) technology to media manufacturing companies.

We receive royalty payments for LTO media technology sold under licensing agreements.

We have also entered into various licensing agreements with respect to our technology, patents and similar intellectual property which provide licensing revenues in certain cases and may expand the market for products and solutions using these technologies.

Industry Background

Digital video and imaging data is growing exponentially, and in the next few years is likely to represent the vast majority of the data produced in the world.

This class of data presents a unique set of challenges for our customers.

These data sets are exponentially larger than the average corporate database, they need to be stored and protected for decades, and many of the data services designed for databases and other corporate applications do not work with this data.

In addition, video and image data is very difficult to search, and yet it is the data that has the most value to the business lines of many of our customers.

Lastly, these datasets typically have a lifecycle that initially requires very high performance for creation, intake, cataloging, analysis and collaboration, which then needs to be archived and protected for decades at a low cost.

With these challenges in mind, our mission is to design products to address these needs, enabling our customers with solutions that will help them create, innovate and protect.

Some examples across the industries that we serve include:

The media and entertainment industry producing high-resolution content for movies and TV shows, including content in streaming services;

Large corporations producing video content for marketing and advertising, and for internal training and communication purposes;

Surveillance cameras for city surveillance, critical infrastructure, higher education, retail, restaurants, and more;

Scientific research and applications;

Life sciences, genome sequencing and microscopy;

Military and defense applications that manage images and video from drones and satellites;

Video, image, and sensor data captured on the manufacturing floor;

Video, image, and sensor data produced by cars as part of ADAS and autonomous vehicle development.

High-Performance Shared Storage Systems

Quantum is a technology company whose mission is to deliver innovative solutions to organizations around the world.

We design, manufacture and sell technology and services that help customers capture, create and share digital content, and protect it for decades.

We emphasize innovative technology in the design and manufacture of our products to help our customers unlock the value in their video and unstructured data in new ways to solve their most pressing business challenges.

Massive unstructured data growth may be the defining factor for industries and economies of the 21st century.

This data lives everywhere – it is created and processed at the edge, moved to both the cloud and the core data center, and stored and protected in multiple locations.

This accelerated data growth, along with the lack of visibility and control over the data, are contributing to organizations' challenges of managing unstructured data sprawl and harnessing the value that is in this unstructured data.

Advancements in artificial intelligence and analytics are driving new lifecycle requirements, including the need to ensure data accessibility for decades and beyond, and protecting against data loss, disaster and cyber-attacks.

By managing data across its lifecycle, Quantum is empowering customers to navigate the new data landscape and manage data and storage for greater productivity and efficiency.

Products and Services

High-Performance File System Software

At the core of our high-performance shared storage product line is our StorNext software that enables high-speed ingest, editing, processing and management of digital video and image datasets.

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StorNext provides fast streaming performance and data access, a shared file storage environment for macOS, Microsoft Windows, and Linux workstations, and intelligent data management to protect data across its lifecycle.

StorNext runs on standard servers and is sold with storage arrays that are used within the StorNext environment.

StorNext is sold as software based on a subscription licensing model, runs on standard servers, and is sold with storage arrays that are used within the StorNext environment.

These storage arrays include:

• The Quantum F-Series :

A line of ultra-fast, highly available NVMe storage servers for editing, rendering, and processing of video content and other large unstructured datasets.

A line of ultra-fast, highly available non-volatile memory express ("NVMe") storage servers for editing, rendering, and processing of video content and other large unstructured datasets.

• The Quantum H-Series:

A line of high-performance storage arrays, offered with either hard disk drives ("HDDs"), solid state drives ("SSDs"), or some combination of the two.

• Quantum QXS-Series:

A line of high performance, reliable hybrid storage arrays, offered with either HDDs, SSDs, or some combination of the two.

A line of high performance, storage arrays, offered with either HDD, SSD, or some combination of the two.

Customers are now deploying our StorNext file system with a combination of NVMe storage and more traditional SSD and HDD storage to balance cost and performance.

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For customers that archive video and image data for years, StorNext is also integrated with our tape storage, and can assign infrequently used but important data to tape to create a large-scale active archive.

In addition, Quantum also offers the Quantum All-Terrain File System ("ATFS"), which is an easy-to-use Network Attached Storage ("NAS") platform with integrated data classification.

Object Storage Systems

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Our ActiveScale object storage provides high levels of data durability and facilitates the management of many petabytes and billions of objects.

ActiveScale object storage software stores data in object format and uses patented erasure-encoding software to protect data across storage nodes and across multiple geographic sites.

ActiveScale object storage software is sold via a subscription licensing model, stores data in object format and uses patented erasure-encoding software to protect data across storage nodes and across multiple geographic sites.

CatDV Asset Management Platform

CatDV is an agile asset management and workflow orchestration platform that provides powerful asset management, automation, and collaboration tools for any organization that manages large volumes of digital media.

The software application indexes and catalogs video files, digital images, audio files, and other types of files.

CatDV helps organizations browse their content and streamline their workflows.

CatDV can be used with StorNext file storage, with ActiveScale object storage, as well as third party storage.

Our Scalar® tape systems are low-cost, long-term data storage used by large cloud providers and leading enterprises to archive and preserve digital content for decades.

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Our tape systems are used by thousands of enterprises around the world as well as by large cloud service providers.

In addition to our tape systems, we also sell LTO tape cartridges as well as standalone LTO tape drives for small business and desktop use.

In addition to our tape systems, we also sell Linear Tape Open ("LTO") tape cartridges as well as standalone LTO tape drives for small business and desktop use.

Backup Storage Systems

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We offer a broad portfolio of products designed for the capture and analysis of video surveillance and security.

These products include network video recording servers, as well as hyperconverged storage systems for video surveillance management and recording.

These products include network video recording servers, as well as hyper-converged storage systems for video surveillance management and recording.

In addition, we offer appliances designed for video surveillance analytics and to run different types of access control systems.

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Our R-Series includes a removable storage magazine which allows data generated in the vehicle to be easily uploaded to a shared storage environment, such as our StorNext file system, for processing and analytics.

We offer a broad range of services to complement our systems and technology, including managed services, implementation and training services, and support services for our customers around the world.

We offer a broad range of services to complement our systems and technology, including managed services, professional services, implementation and training services, and support services for our customers around the world.

Our customers are increasingly looking to purchase our technology using an as-a-service model, or different forms of managed services, and we now offer a full line of these services to meet these needs.

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Product Sales Channels

We utilize distributors, VARs and DMRs in our sales process.

We utilize distributors, value-added resellers ("VARs") and direct market resellers ("DMRs") in our sales process.

Our reseller program provides our channel partners the option of purchasing products directly or through distribution channels and provides them access to a more comprehensive product line.

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OEM Relationships

We sell our products to several OEM customers that resell our hardware products under their own brand names and typically assume responsibility for product sales, end user service and support.

We sell our products to several original equipment manufacturer ("OEM") customers that resell our hardware products under their own brand names and typically assume responsibility for product sales, end user service and support.

We also license our software to certain OEM customers that include this software in their own brand name products.

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In addition, we sell to OEMs, distributors, VARs and DMRs to reach end user customers.

Sales to our top five customers represented 23%, 33%, 29% revenue in fiscal 2020, fiscal 2019 and fiscal 2018, respectively, of which no customer represented 10% or more of our total revenue.

Sales to our top five customers represented 16%, 23%, and 33% of revenue in fiscal 2021, fiscal 2020 and fiscal 2019, respectively, of which no customer represented 10% or more of our total revenue.

The markets in which we participate are highly competitive, characterized by rapid technological change and changing customer requirements.

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Should it ultimately be determined that licenses for third-party patents are required, we will undertake best efforts to obtain such licenses on commercially reasonable terms.

See Item 3 Legal Proceedings for additional disclosures regarding lawsuits alleging patent infringement.

See Note 11 Commitments and Contingencies for additional disclosures regarding lawsuits alleging patent infringement.

On occasion, we have entered into various patent licensing and cross-licensing agreements with other companies.

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We have also sold certain patents, retaining a royalty-free license for these patents.

We, along with HPE and IBM, belong to the LTO Consortium, an organization that licenses the Consortium members’ patents covering the LTO specifications.

Media manufacturers and other parties take licenses to the LTO Consortium patent pool in exchange for a royalty payment to the Consortium, which then distributes the royalties to each of the three Consortium members.

We are a member of the consortium that develops, patents, and licenses Linear Tape-Open, (or “LTO® tape”) technology to media manufacturing companies.

We receive royalty payments for LTO media technology sold under licensing agreements.

Segment Information

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We usually experience the lowest demand for our products and services in the first and second quarters of each calendar year, or our fiscal fourth quarter and fiscal first quarter, respectively.

We believe that product backlog has not been a meaningful indicator of net revenue that can be expected for any period.

On a historical basis we do not believe that product backlog was a meaningful indicator of net revenue that can be expected for any period.

Our products are manufactured based on forecasts of customer demand and we work with our manufacturers and suppliers to support increases and decreases in demand.

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Product orders are confirmed and, in most cases, shipped to customers within four to six weeks.

More complex systems and product configurations often have longer lead times, sometimes as much as 26 weeks.

More complex systems and product configurations often have longer lead times, sometimes as

much as 26 weeks.

Much of the product backlog is from these more complex systems and typically increases at the end of each fiscal quarter, with these products typically being shipped in the following quarter.

Product backlog at any point in time may not translate into net revenue in any subsequent period, as unfilled orders can generally be canceled at any time by the customer.

During the fourth quarter of fiscal year 2021, there were supply chain shortages experienced industry-wide which restricted our ability to fulfill all orders.

These shortages combined with customer bookings have created a significant backlog entering the first quarter of fiscal year 2022.

Executive Officers and Management Team

Following are the names and positions of our management team as of June 22, 2020 , including a brief account of the business experience of each.

Position with Quantum

President, Chief Executive Officer and Chairman of the Board

Michael Dodson

Chief Financial Officer

Elizabeth King

Chief Revenue Officer

Lewis Moorehead

Chief Accounting Officer

Regan MacPherson

Senior Vice President, Chief Legal & Compliance Officer and Secretary

Senior Vice President, Engineering

Following are the names and positions of our management team as of May 18, 2021, including a brief account of the business experience of each.

Name Position with Quantum

Lerner President, Chief Executive Officer and Chairman of the Board

Michael Dodson Chief Financial Officer

Elizabeth King Chief Revenue Officer

Lewis Moorehead Chief Accounting Officer

Cabrera Chief Legal and Compliance Officer

Lerner, 51, was appointed as President and CEO of the Company, effective July 1, 2018, and was appointed Chairman of the Board on August 7, 2018.

He also serves on the Company’s Board.

Lerner has previously served as Vice President and Chief Operating Officer at Pivot3 Inc.

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Dodson started his career with Ernst & Young in San Jose, California.

Since July 2013, he has served on the Board of Directors of Sigma Designs, Inc., a provider of system-on-chip solutions, including as Lead Independent Director since January 2014 and Chairman of the Audit Committee since 2015.

He has also served on Board of Directors of A10 Network since February 2020 and was named Chairman of their Audit Committee in June 2020.

From 2013 through 2020, he served on the Board of Directors of Sigma Designs, Inc., a provider of system-on-chip solutions, including as Lead Independent Director starting in 2014 and Chairman of the Audit Committee starting in 2015.

He has also served on Board of Directors of A10 Network from February 2020 until April 2021 and was named Chairman of their Audit Committee in June 2020.

In addition, Mr.

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Prior to joining Quantum, Mr.

Moorehead was the Director of Finance, Accounting and Tax at Carvana, Co., a publicly traded on-line retailer, from November 2016 to October 2018.

Moorehead was the Director of Finance, Accounting and Tax at Carvana, Co., a publicly traded on-line retailer,

from November 2016 to October 2018.

From September 2004 to October 2016, he served as Managing Partner at Quassey, an investment firm.

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He has also held finance and accounting positions at eTelecare Global Solutions, Rivers and Moorehead PLLC, Intelligentias, Inc., American Express and PricewaterhouseCoopers.

He holds a Bachelor of Business Administration (B.B.A.), cum laude, in Accounting from the University of Wisconsin-Whitewater.

Regan MacPherson, 57, joined Quantum in October 2019 as Chief Legal & Compliance Officer.

Prior to joining Quantum, she was the Vice President and Chief Compliance Officer at Marvell Semiconductor, Inc.

from June 2017 to October 2019.

MacPherson served as Senior Vice President and General Counsel of Seagate Technology, PLC from March 2016 to June 2017.

MacPherson also served as Vice President and Interim General Counsel from August 2015 to March 2016, Deputy General Counsel from September 2013 to August 2015, in addition to varying roles of increasing responsibility from July 2005 to September 2013, at Seagate Technology plc.

MacPherson holds a Juris Doctor from Southwestern Law School and a Bachelor of Arts in political science from San Francisco State University.

Don Martella, 52, joined Quantum in August 2006 as Vice President, Tape Automation Engineering in connection with Quantum’s acquisition of ADIC.

In April 2011, he assumed his current role as Senior Vice President of Engineering.

In that capacity he is responsible for our research and development and advanced manufacturing activities.

Before joining Quantum, Mr.

Martella held leadership positions in R&D and Quality at ADIC;

and engineering and management roles at Oracle (formerly StorageTek) in the tape business.

Martella holds a master's in business administration and a Bachelor of Science in electrical and computer engineering from the University of Colorado.

As of March 31, 2020, we had 829 employees.

He holds a Bachelor of Business Administration (B.B.A.), in Accounting from the University of Wisconsin-Whitewater.

Cabrera, 56, most recently served as the Assistant United States Attorney from October 2018 to April 2020 and as Special Assistant United States Attorney from October 2017 to October 2018 in the Office of the United States Attorney, Northern District of California.

From May 2014 to June 2017, Mr.

Cabrera served as Senior Vice President & General Counsel of NVIDIA Corporation.

Prior to NVIDIA, Mr.

Cabrera served as General Counsel and Corporate Secretary, Chief Ethics & Compliance Officer of Synopsys, Inc.

from 2006 to 2014.

From 1999 to 2006, Mr.

Cabrera served as Senior Vice President, Operations, General Counsel and Corporate Secretary of Callidus Software, Inc.

Prior to Callidus Software, Mr.

Cabrera held various legal positions with PeopleSoft, Inc., Netscape Communications Corporation, Silicon Graphics and Bronson, Bronson & McKinnon.

Human Capital

Our Chief Human Resources Officer ("CHRO") leads our human capital initiatives which includes the design and execution of all people strategies.

The CHRO partners directly with the Board of Directors, the Leadership and Compensation Committee, and Senior Management on the design, cost, and effectiveness of our people programs to ensure they are competitive and rewards our teams for driving company performance.

This past year we saw the evolution and pivot of our business strategy to cloud and data services which tested our organization’s agility and overall effectiveness.

This inflection point served as a springboard to drive additional improvements across our business, including as it relates to our people strategy.

Our workforce is distributed over 18 countries, with 827 employees globally as of March 31, 2021, with 509 in the U.S.

and 318 internationally.

We mobilize and engage our teams to support our cloud and data services strategy using the following objectives and measures.

Overall Employee Satisfaction

To measure employee engagement and satisfaction, we surveyed our employees four different times throughout fiscal year including (1) assessing their concerns when the pandemic first began, (2) conducted our annual Pulse Survey to measure our employees’ opinions on leadership and business strategy, culture, work environment, management, career development, and rewards and recognition, (3) assessed our employees’ thoughts on new people programs initiatives introduced in the year, and (4) our employees thoughts for what our work environment will look like beyond the pandemic.

Response to COVID-19 Pandemic

In February 2020, our CHRO addressed the rising concerns of the COVID-19 pandemic at the regular executive staff meeting.

As the pandemic ensued, the CHRO with other leaders in the business formed the COVID-19 Task Force that met daily to determine employee safety protocols, build and communicate a workforce pandemic guide, produce regular communications about working from home and what to do if you test positive for the virus.

Highlights from fiscal year 2021 included:

• Work-from-home :

To support the transition to working from home, we ensured all our team members were equipped with the online meeting and chat tools for each virtual collaboration.

We allowed our employees to take home equipment from the office including chairs or monitors to make them more comfortable at home.

As the duration of the pandemic ensued, we communicated to our employees the importance of mental health and well-being.

We encourage our teams to take advantage of our virtual mental health resources and utilize virtual health care when doctor’s offices were closed.

In addition, we implemented a Summer Hours program that allows people to take every other Friday off as a way to prevent employee burn out and spend time away from their workstations.

• Essential worker safety :

For our essential workers that could not work remotely, we provided all personal protective equipment including hand sanitizing stations, masks, gloves, added cleaning services and ensured social distancing.

We provide the employees with a mobile application to personally screen for symptoms before accessing our sites.

The safety of our employees and work environments remain a top priority.

We published our pandemic guide with all written safety policies and protocols.

• Workforce of the future :

Following the results of our Post Pandemic survey, we will continue to offer a hybrid work-from-home policy and use of current office space as centers of collaboration where our employees will have larger dedicated spaces for team meetings, customer engagements, or other social gatherings.

To ensure we offer our employees the best work environment for productivity and success that suits their needs, we will also have space designated for single day use workstations.

Culture of Excellence, Accountability, and Innovation

Our company goals and leadership attributes set the tone for our culture of excellence and accountability.

Through our Code of Conduct, Culture of Compliance survey, and monthly compliance newsletter, employees are empowered to ask questions, use their voice and report concerns without fear of retaliation.

Our company culture supports and inspires innovation.

Employees are encouraged to seek out new projects or experiences even outside their own working group.

The leadership team created regular “no internal meetings” days so employees can have more time to work on innovative projects, plan, take a training course, or use the uninterrupted time for personal development.

Talent Development

Our talent is our greatest asset.

We are actively growing our employees from a skills and leadership perspective while also retaining our high potential and most critical talent.

We offer a worldwide mentorship program that last six months in duration and is available to any interested employee.

All of our senior leaders participate in the program and get paired with an employee on key developmental skills or behaviors.

In addition, we focus our performance reviews on a semi-annual basis in order to closely monitor and discuss our talent successes, needs, and aspirations.

Our managers and employees participate in semi-annual discussions that help facilitate conversations of employee contributions, goals and expectations.

Available Information

We were founded in 1980 and reincorporated in Delaware in 1987.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website at https://www.quantum.com generally when such reports are available on the SEC website.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business