Qualstar Reports Results for the Fourth Quarter and Year Ending December 31, 2018

Qualstar reports a 15.1% increase in revenue and a profit of $0.73
per share

SIMI VALLEY, Calif.–(BUSINESS WIRE)–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 twelve-month periods ended December
31, 2018.

Year Ended December 31, 2018 Financial Results

Qualstar reported revenues of $12.2 million for the year ended December
31, 2018, an increase of 15.1% compared with $10.6 million for the year
ended December 31, 2017. Net income for the year ended December 31,
2018, was $1.5 million or $0.73 per basic and $0.72 per diluted share.
This compares with a net income for the year ended December 31, 2017, of
$0.6 million, or $0.31 per basic and diluted share.

Data Storage segment revenues were $6.3 million for the year ended
December 31, 2018, compared with $4.3 million for the same period last
year, an increase of $2.0 million or 46.5%, primarily due to new
reseller relationships, whose customers have a high demand for tape
libraries and our partnership with Sony Imaging Products & Solutions
Inc. to develop an enterprise-class optical disk archive library. Power
supply segment revenues were $5.9 million for the year ended December
31, 2018, compared with $6.3 million in the year ended December 31,
2017, a decrease of $(0.4) million, or (6.3)%, primarily due to the
variable life cycles of our customer’s production.

Gross margin was 41.0% of revenues, or $5.0 million, for the year ended
December 31, 2018, an increase from the gross margin of 39.6% of
revenues, or $4.2 million, for the year ended December 31, 2017.

Cash, cash equivalents and restricted cash were $4.9 million at December
31, 2018, compared to $4.8 million of cash, cash equivalents and
restricted cash at December 31, 2017.

In December 2018, Qualstar entered into a stock buyback program
permitting the Company to repurchase shares on the open market. The
Company has repurchased 52,206 shares at an average share price of
$5.26. Total spending for the program through March 1, 2019, was $0.3
million.

Quarter Ended December 31, 2018 Financial Results

Revenues for the quarter ended December 31, 2018, were $2.9 million,
compared with $3.2 million for the quarter ended December 31, 2017, a
decrease of $(0.3) million or (9.4)%. Income from operations for the
quarter ended December 31, 2018, was $0.02 million compared with $0.7
million for the quarter ended December 31, 2017. Basic and diluted net
income per share was $0.01 for the quarter ended December 31, 2018,
compared to per share of $0.33 for the quarter ended December 31, 2017.

Data Storage segment revenues were $1.6 million for the quarter ended
December 31, 2018, compared with $1.5 million for the same period last
year, an increase of $0.1 million or 6.7%, primarily due to new reseller
relationships, whose customers have a high demand for tape libraries.
Power supply segment revenues were $1.3 million for the quarter,
compared with $1.6 million in the quarter ended December 31, 2017, a
decrease of $(0.3) million, or (18.8)%, due to the production cycles of
our customers.

Gross margin was 31.0% of revenues or $0.9 million for the quarter ended
December 31, 2018, a decrease from the gross margin of 43.8% of revenues
or $1.4 million for the quarter ended December 31, 2017.

“We are extremely pleased with our overall performance for 2018, and
groundwork that has been put in place for future growth. We will
continue to expand our product offerings through organic efforts and
pursue complementary acquisitions,” said Steven N. Bronson, Chief
Executive Officer and President of Qualstar.

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 sold 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 substantial 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. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

2018   2017   2018   2017
     
Net revenues $ 2,909 $ 3,180 $ 12,229 $ 10,641
Cost of goods sold   1,967     1,776     7,184     6,392
Gross profit   942     1,404     5,045     4,249
Operating expenses:
Engineering 130 108 502 535
Sales and marketing 337 353 1,337 1,239
General and administrative   454     255     1,716     1,818
Total operating expenses   921     716     3,555     3,892
Income from operations 21 688 1,490 657
Other income              
Income before income taxes 21 688 1,490 657
Provision for income taxes   4     17     4     17
Net income $ 17   $ 671   $ 1,486   $ 640
 
Net income per share:
Basic $ 0.01   $ 0.33   $ 0.73   $ 0.31
Diluted $ 0.01   $ 0.33   $ 0.72   $ 0.31
Shares used to compute net income per share:
Basic   2,030     2,042     2,030     2,042
Diluted   2,030     2,057     2,057     2,042
 
QUALSTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 
  December 31,
  2018       2017  
ASSETS  
Current assets:
Cash and cash equivalents $ 4,781 $ 4,698
Restricted cash 100 100
Accounts receivable, net 1,809 1,802
Inventories, net 2,897 1,564
Prepaid expenses and other current assets   180       163  
Total current assets   9,767       8,327  
Property and equipment, net 112 172
Other assets   119       68  
Total assets $ 9,998     $ 8,567  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,023 $ 1,065
Accrued payroll and related liabilities 185 173
Deferred service revenue 736 834
Other accrued liabilities   559       454  
Total current liabilities   2,503       2,526  
 
Other long-term liabilities 40 52
Deferred service revenue, long term   127       93  
Total long-term liabilities   167       145  
Total liabilities   2,670       2,671  
 

Commitments and contingencies

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; 2,030,017
and 2,042,019 shares issued and outstanding as of December 31, 2018
and 2017, respectively
19,426 19,480
Accumulated deficit   (12,098 )     (13,584 )
Total shareholders’ equity   7,328       5,896  
Total liabilities and shareholders’ equity $ 9,998     $ 8,567  

Contacts

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

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