QBAK Qualstar Corporation

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, 2019.

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

Results for the Three Months Ended September 30, 2019 vs. 2018

• Net revenue increased 17.4% to $3,703 from $3,154
• Total operating expenses increased 8.1% to $917 from $848
• Net Income of $49 or $0.03 per basic and diluted share vs. net income of $405 or $0.20 per basic and diluted share

Results for the Nine Months Ended September 30, 2019 vs. 2018

• Net revenue increased 7.3% to $9,998 from $9,320
• Total operating expenses decreased 3.8% to $2,533 from $2,634
• Net income of $179 compared to $1,469 for the prior year period, a decrease of 87.8%, or $0.09 per basic and diluted share vs. $0.72 per basic and $0.70 per diluted share
• Cash provided by operations of $211 vs. $112

Highlights for the Three and Nine Months Ended September 30, 2019

• Strong balance sheet and no debt
• Cash, restricted cash and cash equivalents decreased by 10.4% to $4,371 from $4,881 as of December 31, 2018
• Revenue growth in the data storage products segment has increased for the three months ended September 30, 2019 from the same period last year by 45.5% to $1,148 from $789 and for the nine months ended September 30, 2019 by 55.1% to $3,060 from $1,973 for the same period last year
• Gross profit decreased for the three months ended September 30, 2019 from the same period last year by 23.9% to $954 from $1,253 and for the nine months ended September 30, 2019 by 34.7% to $2,679 from $4,103 for the same period last year. The decrease in gross profit for the nine months ended September 30, 2019 from the same period last year is primarily attributable to a one-time charge for the write-down of raw materials inventory purchased from a discontinued power supply contract manufacturer and a reduction of gross margin of 84.7% to $148 from $970 in the current phase of our Optical Drive Assembly (“ODA”) product development with Sony.
• Under the Stock Repurchase Program, during the three and nine months ended September 30, 2019 a total of 22,458 and 115,164 shares were repurchased, respectively, and as of September 30, 2019 a total of 133,266 shares have been repurchased since the program began. The program expires December 5, 2019.

"Our data storage systems business continues to experience tremendous organic growth," said Steven N. Bronson, CEO, and President of Qualstar. Mr. Bronson also stated, "We are excited about the progress of the Optical Drive development project."

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. Qualstar’s 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. Forward looking statements include the statement by Mr. Bronson that the Company’s data storage systems business continues to experience tremendous organic growth. 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: Qualstar’s ability to successfully execute on its strategic plan and meet its long-term financial goals; Qualstar’s ability to successfully implement and recognize cost savings; Qualstar’s ability to develop and commercialize new products; industry and customer adoption and acceptance of Qualstar’s new products; Qualstar’s 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 Qualstar’s products; increased competition and pricing pressure on Qualstar’s 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 Qualstar’s filings with the U.S. Securities and Exchange Commission including, but not limited to, Qualstar’s Annual Report on Form 10-K for the period ending December 31, 2018, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of such Form 10-K, and any subsequently filed reports. All of Qualstar’s filings are available without charge through the SEC’s website (www.sec.gov) or from Qualstar’s website (www.qualstar.com).

-Financial Tables to Follow-

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,

 

2019

2018

2019

2018

 

Net revenues

$

3,703

 

 

$

3,154

 

 

$

9,998

 

 

$

9,320

 

Cost of goods sold

 

2,749

 

 

 

1,901

 

 

 

7,319

 

 

 

5,217

 

Gross profit

 

954

 

 

 

1,253

 

 

 

2,679

 

 

 

4,103

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Engineering

 

122

 

 

 

123

 

 

 

473

 

 

 

372

 

Sales and marketing

 

368

 

 

 

351

 

 

 

982

 

 

 

1,000

 

General and administrative

 

427

 

 

 

374

 

 

 

1,078

 

 

 

1,262

 

Total operating expenses

 

917

 

 

 

848

 

 

 

2,533

 

 

 

2,634

 

Income from operations

 

37

 

 

 

405

 

 

146

 

 

 

1,469

Other income

 

12

 

 

 

-

 

 

33

 

 

 

-

Income before income taxes

 

49

 

 

 

405

 

 

179

 

 

 

1,469

Provision for income taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income

$

49

 

 

$

405

 

$

179

 

 

$

1,469

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.03

 

 

$

0.20

 

 

$

0.09

 

 

$

0.72

 

Diluted

$

0.03

 

 

$

0.20

 

$

0.09

 

 

$

0.70

Shares used in per share calculation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,922

 

 

 

2,048

 

 

 

1,967

 

 

 

2,048

 

Diluted

 

1,922

 

 

 

2,065

 

 

 

1,967

 

 

 

2,088

 

QUALSTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,271

 

 

$

4,781

 

Restricted cash

 

 

100

 

 

 

100

 

Accounts receivables, net

 

 

2,177

 

 

 

1,809

 

Inventories, net

 

 

2,728

 

 

 

2,897

 

Prepaid expenses and other current assets

 

 

250

 

 

 

180

 

Total current assets

 

9,526

 

 

9,767

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

132

 

 

 

112

 

Right-of-use

 

 

734

 

 

 

-

 

Other assets

 

 

133

 

 

 

119

 

Total non-current assets

 

 

999

 

 

 

231

 

Total assets

 

$

10,525

 

 

$

9,998

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,325

 

 

$

1,023

 

Accrued payroll and related liabilities

 

 

177

 

 

 

185

 

Deferred service revenue, short-term

 

 

671

 

 

 

736

 

Lease liabilities, current

 

 

272

 

 

 

-

 

Other accrued liabilities

 

 

405

 

 

 

559

 

Total current liabilities

 

2,850

 

 

2,503

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Other long-term liabilities

 

 

53

 

 

 

40

 

Lease liabilities, long term

 

 

494

 

 

 

-

 

Deferred service revenue

 

 

257

 

 

 

127

 

Total long-term liabilities

 

804

 

 

167

 

Total liabilities

 

 

3,654

 

 

 

2,670

 

 

 

 

 

 

 

 

 

 

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 1,914,852 at September 30, 2019 and 2,030,017 shares at December 31, 2018

 

 

18,790

 

 

 

19,426

 

Accumulated deficit

 

 

(11,919

)

 

 

(12,098

)

Total shareholders’ equity

 

6,871

 

 

7,328

 

Total liabilities and shareholders’ equity

 

$

10,525

 

 

$

9,998

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191107005371/en/

Steven N. Bronson Chief Executive Officer Qualstar Corporation 805-617-4419 IR@Qualstar.com