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Qualstar Reports Fiscal 2012 Second Quarter Results

February 02, 2012 by Jeff Shepard

Qualstar Corp. reported financial results for the second quarter of fiscal 2012 ended December 31, 2011. Fiscal 2012 Second Quarter Financial Results Revenues for the second quarter of fiscal 2012 were $3.6 million, compared to $4.1 million for the same quarter of fiscal 2011, a decrease of $0.5 million or 13.4 percent. Loss from operations was $1.0 million compared to $0.3 million in the second quarter of fiscal 2011. Net loss was $971,000 or $0.08 per basic and diluted share, compared to a net loss of $296,000, or $0.02 per basic and diluted share for the second quarter of fiscal 2011.

Tape library segment revenues were $1.6 million for the second quarter, compared to $2.6 million in the second quarter of fiscal 2011, a decrease of $1.0 million, or 39.0 percent. Power supply segment revenues were $2.0 million for the quarter, compared to $1.5 million in the prior year quarter, an increase of $0.5 million, or 29.4 percent.

Gross profit decreased to $0.8 million, or 23.3 percent of net revenues, for the three months ended December 31, 2011, from $1.6 million, or 39.4 percent of net revenues, for the three months ended December 31, 2010. The decrease in gross profit is attributed to a change in product mix, lower absorption of labor and overhead and an increase in rework expenses and inventory reserves.

Research and development ("R&D") expenses for the second quarter of fiscal 2012 were $650,000, or 18.3 percent of revenues, compared to $725,000 or 17.7 percent of revenues, for the second quarter of fiscal 2011. The decrease is due primarily to lower compensation expenses related to reductions in personnel. Sales and marketing expenses were $448,000, or 12.6 percent of revenues, compared to $581,000 or 14.1 percent of revenues, in the corresponding period last year. The decrease in sales and marketing expenses is attributed to lower compensation expenses related to reductions in personnel. General and administrative expenses were $741,000 or 20.8 percent of revenues, compared to $650,000, or 15.8 percent of revenues, for the same period last year. The increase in general and administrative expense is due to higher legal and bad debt expenses.

Commenting on the Company’s business results, Bill Gervais, president and chief executive of Qualstar, said, "We had a challenging quarter, particularly in the data storage sector of our business. Sales were impacted by a number of purchase delays around the globe but primarily among companies with a presence in southern Europe or U.S companies with customers in that region where Euro uncertainties have brought normal business activities to a near halt. Also, we took a conservative approach and increased accounts receivable reserves for three long-time customers in Portugal, Italy and Belgium."

"Our recently-announced RLS-8350 tape libraries began shipments late in the quarter and have received favorable customer comments. In the power supply segment, we shipped nearly 35,000 units but incurred higher than normal rework expenses resulting from a defective semiconductor lot that was not discovered until after the products were delivered. We have taken corrective action to prevent this in the future," he said.

Fiscal 2012 Six-Month Financial Results Qualstar reported revenues of $8.2 million for the first six months of fiscal 2012, compared with $9.3 million for the first six months of fiscal 2011. The Company’s net loss for the first six months of fiscal 2012 was $0.9 million, or $(0.07) per basic and diluted share, compared with a net loss of $0.1 million, or $(0.01) per basic and diluted share, in the first six months of fiscal 2011.

Cash, cash equivalents and marketable securities were $21.4 million at December 31, 2011, Inventory, net of reserves, at December 31, 2011 was $6.3 million, compared to $5.7 million at June 30, 2011.