Qualstar Reports Fiscal 2018 Third Quarter Results

Qualstar Corporation (NASDAQ: QBAK), a leading manufacturer of data storage solutions and high-efficiency power supplies, today announced its financial results for the three and nine months ended September 30, 2018.

(All amounts are in thousands, except per share data):

Results for the Three Months Ended September 30, 2018 vs. 2017

  • Net revenue increased 14.5% to $3,154 from $2,755
  • Total operating expenses decreased 29.7% to $848 from $1,206
  • Net income of $405 or $0.20 per basic and diluted share vs. net loss of $148 or $(0.07) per basic and diluted share

Results for the Nine Months Ended September 30, 2018 vs. 2017

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  • Net revenue increased 24.9% to $9,320 from $7,461
  • Total operating expenses decreased 8.4% to $2,634 from $2,876
  • Net income of $1,469 from a loss of $31, or $0.72 per basic and $0.70 per diluted share vs. ($0.02) per basic and diluted share

Highlights for the Three and Nine Months Ended September 30, 2018

  • Strong balance sheet and no debt
  • Cash, restricted cash and cash equivalents increased by 2.8% to $4,931 from $4,798 as of December 31, 2017
  • Revenue growth in the data storage segment is strong for both products and services, as Qualstar continues to defend market share in a very competitive landscape
  • Improved gross margin for the three months ended September 30, 2018 to 39.7% versus 38.4% from the same period last year, and for the nine months ended September 30, 2018, gross margin improved to 44.0% compared to 38.1% for the same period last year

We are pleased with the strong results of the third quarter, as we continue to execute our plan for revenue growth and product expansion throughout the major markets around the world, Mr. Bronson stated. Despite the competitive pressures that challenge our industry, Qualstar continues to maintain a very lean operating structure, and our cost control remains a key element of our strategy, he continued. Mr. Bronson concluded by saying, We continue to be optimistic with the continued success of the Company, as we pursue new opportunities in both our data storage segment and our power supply business. Overall, we believe we are well positioned to exploit new projects and strategic initiatives, aimed at increasing long term value for our shareholders.

About Qualstar Corporation

Qualstar, founded in 1984, is a diversified electronics manufacturer specializing in data storage and power supplies. Qualstar is a leading provider of high efficiency and high-density power supplies marketed under the N2Power„¢ brand, and of data storage systems marketed under the Qualstar„¢ brand. Our N2Power power supply products provide compact and efficient power conversion for a wide variety of industries and applications including, but not limited to, telecom, networking, broadcast, industrial, lighting, gaming and test equipment. Our Qualstar data storage products are used to provide highly scalable and reliable solutions to store and retrieve very large quantities of electronic data. Qualstars products are known throughout the world for high quality and Simply Reliable„¢ designs that provide years of trouble-free service. More information is available at www.qualstar.com or www.n2power.com or by phone at 805-583-7744.

Cautionary Statement Concerning Forward-Looking Statements

Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. These forward-looking statements are based upon the current expectations and beliefs of Qualstar’s management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Notwithstanding changes that may occur with respect to matters relating to any forward looking statements, Qualstar does not expect to, and disclaims any obligation to, publicly update any forward-looking statements whether as a result of new information, future events or otherwise. Qualstar, however, reserves the right to update such statements or any portion thereof at any time for any reason. In particular, the following factors, among others, could cause actual or future results to differ materially from those suggested by the forward-looking statements: Qualstars ability to successfully execute on its strategic plan and meet its long-term financial goals; Qualstars ability to successfully implement and recognize cost savings; Qualstars ability to develop and commercialize new products; industry and customer adoption and acceptance of Qualstars new products; Qualstars ability to increase sales of its products; the rescheduling or cancellation of customer orders; unexpected shortages of critical components; unexpected product design or quality problems; adverse changes in market demand for Qualstars products; increased competition and pricing pressure on Qualstars products; and the risks related to actions of activist shareholders, including the amount of related costs.

For further information on these and other cautionary statements, please refer to the risk factors discussed in Qualstars filings with the U.S. Securities and Exchange Commission including, but not limited to, Qualstars Annual Report on Form 10-K for the period ending December 31, 2017, the Managements Discussion and Analysis of Financial Condition and Results of Operations sections of such Form 10-K, and any subsequently filed reports. All of Qualstars filings are available without charge through the SECs website (www.sec.gov) or from Qualstars website (www.qualstar.com).

       
QUALSTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
 

 

Three Months Ended September 30,

   

Nine Months Ended September 30,

  2018     2017         2018     2017  
Net revenues $ 3,154   $ 2,755 $ 9,320   $ 7,461
Cost of goods sold   1,901     1,697         5,217     4,616  
Gross profit   1,253     1,058         4,103     2,845  
Operating expenses:
Engineering 123 131 372 427
Sales and marketing 351 360 1,000 886
General and administrative   374     715         1,262     1,563  
Total operating expenses   848     1,206         2,634     2,876  
Income (loss) from operations 405 (148 ) 1,469 (31 )
Other expenses                    
Income (loss) before income taxes 405 (148 ) 1,469 (31 )
Provision for income taxes                    
Net income (loss) $ 405   $ (148 )     $ 1,469   $ (31 )
Earnings (loss)per share:
Basic $ 0.20   $ (0.07 )     $ 0.72   $ (0.02 )
Diluted $ 0.20   $ (0.07 )     $ 0.70   $ (0.02 )
Shares used in per share calculation:
Basic   2,048     2,042         2,048     2,042  
Diluted   2,065     2,042         2,088     2,042  
 
     
QUALSTAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In thousands, except share amounts)
 

September 30, 2018

   

December 31, 2017

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,831 $ 4,698
Restricted cash 100 100
Accounts receivables, net 2,046 1,802
Inventories, net 2,718 1,564
Prepaid expenses and other current assets   188       163  
Total current assets   9,883       8,327  
Non-current assets:
Property and equipment, net 120 172
Other assets   119       68  
Total assets $ 10,122     $ 8,567  
 
Liabilities and Shareholders Equity
Current liabilities:
Accounts payable $ 1,082 $ 1,065
Accrued payroll and related liabilities 326 173
Deferred service revenue, short-term 710 834
Other accrued liabilities   453       454  
Total current liabilities   2,571       2,526  
Long-term liabilities:
Other long-term liabilities 39 52
Deferred service revenue   108       93  
Total long-term liabilities   147       145  
Total liabilities   2,718       2,671  
 
Shareholders equity:
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued
Common stock, no par value; 50,000,000 shares authorized, shares issued and outstanding 2,048,118 at September 30, 2018 and 2,042,019 shares at December 31, 2017 19,519 19,480
Accumulated deficit   (12,115 )     (13,584 )
Total shareholders equity   7,404       5,896  
Total liabilities and shareholders equity $ 10,122     $ 8,567  
 

Qualstar Corporation
Steven N. Bronson
Chief Executive Officer
805-617-4419
[email protected]

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