Quantum Corp (QMCO) 2011 Q2 法說會逐字稿

Good day ladies and gentlemen thank you for standing by. Welcome to Quantum's second quarter 2011 teleconference. During today's presentation all parties will be in a listen-only mode following the presence the conference will be open for questions. If you have a question, (Operator Instructions). This conference is being recorded today, Wednesday October 27th, 2010. I would now like to turn the conference over too General Counsel, Mr. Shawn Hall. Please go ahead, sir.

Thanks and good afternoon and welcome. With me today or Rick Belluzzo our CEO, John Gacek he is our CFO sand COO and Bill Britts our EVP for sales and market much, the webcast of this call or earnings release an I want day sieve reconciliation of any GAAP and non-GAAP financial measured at the Investor Relations section of our web sigh at www.quantum.com and will be archived for one year.

During the course of today's discussion we will make forward-looking statements within the meaning of the Private Securities and Litigation Reform of 1995. The forward-looking statements include statements regarding our business strategy, opportunities and priorities, anticipated product launch and plans, future financial performance including expected revenue and gross margin and expense performance and debt covenant compliance and trends in our business and in the markets in which we compete. We would like to caution you that our at the same times are based on current expectations an involve risks and uncertainties that could cause actual result to differ materially.

We refer you to the Risk Factors and cautionary language contain in today's press release announcing our fiscal Q2 financial results as well as our reports filed with the Securities and Exchange Commission from time to time including our most recent 10-K filed on June 11th, 2010. Such reports content and identify important factors that could cause actual result to differ materially from those contained in our forward-looking statements. All such are risk factors identify in our press release and in our filings with the SEC or incorporated by reference in today's discussion. We undertake no obligation to forward-looking statements in the future, and with that I will turn the call over to John Gacek.

Thanks, Shawn. Good afternoon and thank you for joining us as we report our second quarter of fiscal 2011. I'm going to walk through our results for the quarterly period and he ended September 30th, 2010 and comment on significant accomplishments for the quarter as we continue to focus on becoming a growing and more profitable storage systems company. For fiscal Q2 we delivered solid results including revenue of $167.7 million, soft revenue including related service revenue of $30.6 million, non-GAAP gross margin of 45.2%, non-GAAP operating profit of $19.1 million or 11.4% and non-GAAP EPS of $0.6 per share. We arevery pleased with the gross margin, operating profit and EPS, especially given the fact that we were toward the lower end of our revenue expectations for the quarter.

Before walking through the detailed results I want to emphasize a few key points from the past quarter. First, as we indicated in our June quarter earns call, that was going to be the last quarter for which we expected to receive more than a minimal amount of revenue from our OEM de-duplication software agreements with and as we said we would replace that revenue and the related profit with growth in our branded business. We have done that. So to provide some context on our overall Q2 performance I want to walk through the following. If you excluded EMC de-duplication revenue from both Q2 and Q1 of fiscal 2011, we posted a sequential $13.2 million increase in revenue, an $11.1 million increase in gross margin dollars, and a 300 -- which equates to a 330 basis point increase in gross margin. And these -- results demonstrate the earnings power that we have at Quantum an as we progress and grow our brands of business you will see further expansion in all of those measures.

The second key point is that our -- is that our StorNext business had its best quarter in the history of the company. With strong adoption in our core rich media markets and expansion into adjacent markets and we are starting to see broader opportunities for us to grow our StorNext revenue. Third, we generated $26 million in cash from operations and $24.9 million in EBITDA for the quarter and we paid off $22 million of our remaining convertible debt during the quarter.

And, finally, on the product side we launched our DXI 6700, a mid-range fiber channel VTL project which was followed bit announcement of our DXI 8500 enterprise product just after quarter end. That product will begin shipping in the next several weeks. Both products reflect the work that we have done over the last year to deliver significantly greater performance in our DXI line. With the DXI 8500 performing -- providing the industry's highest single unit VTL performance. We have already received several sizeable orders for this products and we will have a strong sales momentum of our first customer shipments.

Now I will walk through the detailed results for Q2. I would like to refer everyone to the finance statements and supporting schedules included in the press release and on our website. It will be helpful to refer to those documents as a comment. Revenue for the second quarter ended September 30th was $167.7 million compared to $174.9 million a year ago. A year-over-year decline of $7.2 million. The primary driver of the decline was lower OEM revenue, which decreased 29%, due to the anticipated declines in devices and de-duplication software revenue and finally in service revenue. In contrast we saw an overall increase of 4% in our branded revenue with strong growth in our disk systems and software and a slight decline in tape automation. Royalty revenue was $17.7 million for Q2 compared to $16.8 million in the same quarter a year ago. We saw growth in LTO royalties this quarter while DLT royalties de cleaned slightly.

For the quarter, non-royalty revenue totalled $150.1 million of which 80% was branded and 20% was OEM. That compares to non-royalty revenue of $158.1 million a year ago, of which 73% was branded and 27% was OEM. The decrease in non-royalty revenue was related decreases in the OEM revenue as described earlier partially set off by growth in branded disk an software revenue. For the remainder of fiscal 2011 we expect our branded business to grow for tape, disk systems and software products.

Looking further at various revenue classifications devices an media totalled $22.5 million compared to $27.7 million in Q2 a year ago. The decline was primarily attributable to anticipated declines in OEM devices and media. I mentioned this last quarter, I'm going to mention it again as a point of reference OEM devices revenue less than a million of it this quarter is OEM compared to over $5 million in the same quarter last year. Tape automation systems revenue was $62.9 million compared to $65.5 million in Q2 of fiscal 2010 the majority of the decline was related to expected reduction in OEM automation. Branded entry-level automation products saw moderate growth related to our i40 and i80 broads. Mid-range branded tape grew slightly over the same periods in the prior year with new customer acquisition of 16% and growth in upgrade revenue. Enterprise automation experienced year-over-year growth in both EMEA and a pack region but was down in North America for the same period. Primarily as a result of lower than expected upgrade revenue. However, in Q2 we continue to see the positive trend of adding new enterprise tape end-users and we did so at an accelerated rate this past quarter.

This systems and software product and related service revenue was $30.6 million, up from $28.2 million a year ago. From a branded perspective disk systems and software product an the related service revenue was up $6.7 million, an increase of 29% over the same period in the prior year. On a year-over-year comparison StorNext grew 53% and Quantum branded DXi revenue grew 19%. Our StorNext revenue was the highest in the history of the Company as was the case with software branded DXi revenue also achieved its highest revenue in the history of the Company with the growth being driven primarily by large deals or deals over $200,000.

The enterprise market continued to be strong for our DXi 7500 and we feel we are well positioned to continue to grow our footprint here as we get ready to begin shipping our newest enterprise disk space de-duplication and replication products, the DXi 85 hundred in the next several weeks. As I said earlier the DXi 8500 has the highest single unit detailed performance in the industry. In addition, it provides high performance in other presentation options including NAS and OST and is designed to anchor a multi-tier enterprise worldwide disaster recovery and data retention strategy.

In the mid-range this was the second quarter in which all DXi 6500 models were shipping for the entire quarter and we saw approximately a 50% sequential increase in revenue across all geographies adding to our mid-range disk systems in Q2 we introduced and began shipping the DXi 6700 our new de-duplication and replication appliance that leverages a VTL enter-face to offer mid-range and enterprise customers an under matched combination ever performance, simplicity and value for Fibre Channel environments. As we look forward to the remaining two quarters in fiscal 2011, we expect our disk systems and software products to be a significant driver of growth. The end user market in opportunities large, channel partners are supportive and we have excellent. The addition of the DXi 8500 and 6700 rounds out the refresh and the expansion of our DXi family so that from top to bottom we can now offer customers our latest software right on the latest high performance hardware.

Turning to service, revenue was $37.7 million in Q2 compared to $39.7 million a year ago. The $2 million decline was primarily the result of a reduction in OEM out of warranty repair. Branded product service revenue remained relatively into the this quarter compared to Q2 of fiscal 2010. Moving to gross margins non-GAAP gross margin in Q2 was 45.2% compared to 47.1% in the prior period. This 190 basis point decline reflects a significant decrease in OEM de-duplication software in Q2 of this quarter and a reduction of warranty benefits that we had in Q2 of fiscal 2010. Warranty benefits in the prior quarter or the year a year ago were attributable to significantly decreasing our overall service and repair costs and a declining number of in warranty units prepared of numerous legacy products reaching the end of their warranty coverage.

) Stepping back we are very pleased with the quarter's gross margin, especially the sequential strength that we showed as we lost significant OEM de-duplication software that had 100% margin last quarters and we were able to replace that revenue plus some with high margin branded revenue. As mentioned earlier, excluding the OEM de-duplication software revenue in both Q2 and Q1 of fiscal 2011, we had a sequential increase in gross margin dollars of $11.1 million and 330 basis points. On the expense side non-GAAP operating expense totalled $56.7 million compared to $54.1 million a year ago. Half of the overall increase was related to marketing and sales and the other half related to increases in R&D spend. The increase in marketing and sales primarily related to additional headcount and associated costs and advertising and marketing programs for our new products. The increase in R&D spending was related to investments in our disk systems and software engineering teams.

Non- GAAP operating profit for the quarter was $19.1 million or 11.4% of revenue compared to $28.3 million or 16.2% of revenue in the same quarter a year ago. We tightly managed our operating expenses during the quarters and you can see the flexibility in our cost model. Interest expense for the quarter was $6 million compared to $6.9 million a year earlier. This included cash interest of $5.6 million and amortization of that issue cost of $400,000. The current coupon on -- coupon interest rate for our remaining senior debt which was $185.1 million at September 30th will be approximately 3.8% for the quarter ended December 31 and the average coupon rate for our total debt will be approximately 7.3% for the quarter.

We expect interest expense will be approximately $6 million for the third quarter of fiscal 2011. For the second quarter we had net tax expense of $400,000 related to foreign and state taxes and as I say each quarter, you know, we still believe it's reasonable to model a million per quarter for tax expense. So summing it up for Q3 we had non-GAAP net income of $13 million and non-GAAP EPS of $0.06 cents.

Focusing on cash flow in the balance sheet at September 30th I would like to highlight several key points. Cash provided by operations for the quarter was $26.2 million. We paid down $500,000 of our senior debt and $22 million of done you believe debt in Q2. At the end of the quarter the composition of our debt was $185 million of senior debt and $122 million outstanding with the EMC. We ended the quarter with $98 million in cash. Non- GAAP EBITDA for the second quarter was $24.9 million. We are in compliance with all debt covenants at September 30th and we expect to be in compliance with our debt covenants during the next 12 months. For purposes of calculating our debt covenants EBITDA for the last 12 months was 97 on $4 million.

On a sequential basis manufacturing inventory decreased $4.3 million, accounts receivable decreased $4.7 million. We also had an accelerated payment of $11.1 million from one customer. CapEx was $5.5 million this quarter, quite a bit higher than our normal run rate primarily related to purchases of disk systems hardware used in tests and development of our new DXi 8500 product. Purchase of service part -- excuse me purchase of service part inventory were approximately $800,000. Depreciation and amortization and service parts lower of cost or market expense totals $13.3 million for the quarter. In all we are very pleased with our progress and continue to see improvement in our financial results and our balance sheet.

Now I would like to take a minute to point out and explain the 8-K that we filed yesterday regarding an amendment to our senior debt. That amendment allows Quantum to refinance our EMC debt with an expanded variety of options. As you may recall, we only -- as you may recall, we were previously very limited as to the refinancing options available. Practically only a convertible debt instrument could have been used. As a result of the amendment we can now utilize more traditional methods of refinancing such as subordinated debt, such as issuing sub debt, issuing of preferred stock or common stock, warrant or any combination. At this time we have approximately four years remaining on our senior term loan and four years remaining on the $100 million of the EMC debts so we're going to take our time to look at those. We will look at all of the financing alternatives and we will decide what is the best approach for Quantum and our shareholders.

In addition and completely separate from the amendment we have also notified the term debt holders of our intent to repay $20 million in principal this and as a result our senior debt will be $165 million at the end of the October. So as we look forward on our can't structure and our strategy, its to continue to pay down our senior debt and to look at financing alternatives that are creative to Quantum. Moving on to guidance for Q3 we are forecasting revenue of $185 million to $200 million , non-G APP gross margins of 45% to 47% an total non-GAAP operating expenses of $58 million to $62 million. Interest and taxes should be somewhere in similar to Q2 and the math EPS range of $0.8 to $0.10 in non-GAAP EPS.

For fiscal 2011we continue to forecast revenue of $700 million to $750 million, non-GAAP gross margin of 45% to 47% and non-GAAP operating expenses of 235 to 245. We expect interest expense of $24 million for the year and income taxes of $4 million. With our stock price rising the weighted average shares moves up to $230 million. Now let me call -- or turn the call over to

Well, thank you, John. I would like to starts today by reinforcing the fact that Q2 was a solid quarter in terms of both improved performance and also in is terms of the detailed progress that we are making in transitioning Quantum to a growing company. Our results this quarter improved over Q1 in virtually all elements that we were focused on including revenue, gross margin, operating income, net income and cash generation. And all of this was achieved with minimal OEM de-duplication software revenue from EMC. Reinforcing the strength much of our business model. Said another way our Q2 performance can be viewed as the foundation for which we can achieve further improvement as we grow revenue. Which is the primary objective of the Company. And we remain determined to make FY 2011 the first growth year for Quantum since FY 2007.

On the revenue front we continue to make progress on the underlying elements of the go to market program while our total revenue for the first half of FY 2011 was essentially flat compared to the first half of FY 2010, what kept us from -- showing growth was the expected reduction in OEM -- in our OEM business. In fact, looking just at the first half of branded revenue we grew 5% year-over-year with significant growth in disk systems and software. Of course, this isn't good enough and it is where we have focused our investment both in terms of enhancing our product offering and building greater revenue or market momentum.

Let me address our revenue efforts by saying a few words on the opportunity. Earlier this year we stacked two key marketing goals for FY 2011, the first was to gain market share open systems tape automation an the second was to significantly grow our disk systems and software business. These goals were established based on three factors. First, the significant improvement in the competitiveness of our entire product line including the nearly complete refresh and expansion of most of our entire tape systems, disk systems and software product platform. The other two factors were a continued healthy underlying market for our disk systems and software products and a couple of major disruptions in the market which allowed us greater opportunity to build momentum with the channel. At Quantum, our mission this year is to combine these factors to deliver growth even with the decline in some elements of the tape business and the loss of all but a minimal amount of EMC OEM de-duplication software revenue.

As we sit here halfway through the year, I would say that the opportunities that framed our view at FY 2011 remain fully intact and while some elements have taken longer to develop we remain focused on capitalizing on these three opportunities. First, our product offer -- offerings continue to improve and the combination of the recent launch of the DXi 6500 and the DXi 6700 with the earlier DXi 6005 and DXi 4500 introduction position us well across our entire DXi product line. Giving us performance leadership in some segments and price performance leadership across the entire family. There will be further product introductions in the second half of this fiscal year that we expect will continue to allow us to make even more gains. Our tape systems portfolio is also solid across the entire product line from the entry-level Scalar i40 to the interpose Scalar i6000 and in all these products we have expanded our leadership in terms of management and innovation.

Finally, with the launch of the StorNext 4.0 product earlier this year we have been able to further enhance our position as a leader in high performance file sharing and archiving. As an example this week we announced a new Archive Conversion Utility in StorNext to minimize the burden associated with legacy storage platform migrations and significantly reduce the expense and time it takes to move files from existing legacy archives to StorNext. The first release of this conversion tool will support the conversion of data from Oracle/Sun's SAMFS and QFS software platform.

Our product offering and solutions -- and solution set are advancing allowing for greater opportunity. Next recent external data reinforces the fact that data de-duplication is a very strong growth segment of the storage industry. In fact, in a recent survey conducted by the info pro it showed that de-duplication is the number one investment priority for around 25% of both enterprise and SMB storage customers ahead of all other priorities. Making the next couple of years significant years for the broad adoption of de-duplication and the backup process of large and small storage customers. And while the competitive environment is aggressive we are seeing significant growth in our opportunities for DXi. Although not as significant as de-duplication our store mechanics business also has fundamental growth potential coming from the rapid growth in under structured data, rich media an the need for tiered storage solutions.

And, finally, these changes are coupled with the fact that M&A disruption has opened the market For expanding our go to market reach with the independent barchanne. The acquisition of data domain by EMC has created new levels of interest and engagement from traditional partners and Oracle's acquisition of sun has created opportunity in the enterprise tape market as or coal's aggressive moves have resulted in openings in customers along with channel partners motivated to find alternatives. There is no doubt that we are in the early phase of seeing advantages or advancements to our key business.

In short, these elements were the foundation for growth -- for our growth plan for 2011 and they remain intact. Our challenge of course is to move more aggressively on a worldwide basis to capitalize on these forces. In other words, continue our product introduction rhythm and implement sales and marketing programs to enable deeper engagement with the channels and generate more opportunity to expand our relevance and sharpen our competitive position. We are progressing on all of these fronts and in some cases the results are taking longer to materialize yet the underlying momentum is developing.

Let me provide some additional detail. At the center of most of this effort is the channel. During FY 2011 we have implemented a strategy to gain both focus and reach with -- and in Q2 we saw increased traction. Channel revenue grew by 20% sequentially with significantly greater contribution from our top partners a category we call focus partners, a category we call focused partners. For example in North America disk systems and tape automation revenue from focus partners more than doubled from Q1. On the DXi side specifically although we still -- we still aren't at the level that we would like to be in terms of manage our overall mid-range DXi revenue from the channel it grew by 50% sequentially. We also continue to add through channel partners including net -- that want an alternative EMC Data Domain.

Another area of focus has been to expand our Le generation program as a result of our efforts here we have increased the opportunities created through our own marketing an telemarketing initiative by 41% in North America over the last two quarters allowing us to deliver significantly more to the channel. As part of these initiatives we have placed greater focus on our very large tape install basin creasing the frequency of our outreach and doing more segmentation and targeting of our messaging and developing more compelling DXi offerings, particularly around our mid-range DXi products. Combined with the Le generation work we are doing I don't understand our install base this resulted in a 50% increase in our North American mid-range DXi pipeline in Q2. The benefits which will also carry into Q3 and Q4.

On the branding front we have had expanded -- we have expanded our efforts to enhance market awareness of Quantum through online marketing events and PR. And we are seeing results. For example, requests for more information from our website were up more than 60% from Q1 to Q2. Another example has been two customers speaking slots that we secured at the recent Storage Networking World show. Barclaycard U.S. presented on how it is leveraging our DXi and tape products and building a light out disaster recovery facility and CERN the European high energy physics organization discussed the use of StorNext in one of its major research projects. In addition, as a result of the nomination we submitted Barclaycard won a best practice award at this show. As we move forward we are also working to drive increased share for Quantum amongst storage and other market influencer by expanding our presence in social media.

Finally, we are continued to make progress in our competitive position. The competitive environment is complex, particularly in the area disk space backup and de-duplication. Where we have worked to combine product improvements with enhanced messaging and training. This has given our sales team and channel partners more to work with in providing customers with the solutions they need while also enabling our sales team and channel partners to be more effective in focusing their time and efforts on opportunities where we are better positioned to win and refuting the competitive.

As evidenced -- as evidenced this -- is working and in fact our win rate and close rates in North America were both up in Q2 when compared to the prior quarter. As we begin the second half of FY 2011 we will continue to focus on building greater revenue momentum across all these avenues. The progress we've made to date speaks to the work that we've done. Yet we need to gain greater uniformity across geography, territories and partners to make this progress more consistent and sustainable. We had very good proof -- very good proof of success when these elements align well in a territory. However, we still need to do much more work to build a mid-range velocity DXi business to compliment our very -- our large DL profile. As John mentioned in Q2 our business continued to be driven by a number of these very large opportunities with only mixed results in building more run rate performance. Improvements here will be essential over the coming months. With that said our continued success in large DXI deals is clearly a reflection of our strength notice enterprise market.

In Q2 these deals included a multi-site multi million dollars purchase from a fortune 50 company that already had over 20 it. X i systems as well as large deals with the US cabin department, a European central bank answered top US investment firm. At the same time we had a number of customers that purchased both DXi itch 4500 and DXi 6500 appliances including a large US federal agency a leading provider of business commerce solution answered large telecommunication provider. On the we have four deals for archives with more than one terabyte of date and we saw increased adoption of new functionality -- of the new functionality that is in StorNext 4.0. It is worth noting that approximately half of the deals involves StorNext were integrated with hardware software solutions that also included Quantum Scalar libraries.

Key wins include in new business with one of the largest media and entertainment convertible debt goal in the world, a European music company and two Asian televisions stations as well as follow on business with an American television network. A North American agency that provides meets row logical information and weather forecast and a European International broadcast channel. Our priorities and plans for Q3 remain consistent with Q2. We will aggressively pursue our seals and marketing agenda building more channel presence, faster disk systems and software growth and expansion of our tape customer base. All of this is consistent with the guidance that John provided which represents another quarter of sequential growth.

As I said before, the primary risk factor we face continues to be economic uncertainty but over the last few years we have seen varying levels of caution resulting in delayed purchase decisions. I feel the environment in Q2 was improvements proved over Q1 especially in media. I am confident that the underlying market demand is there and that there is risk mostly around cautious purchase decisions, namely, delays in decisions and downsizing configurations. Well, with that I will turn the call back over to the operator to take any of your questions. Operator.

Thank you, sir we will now begin the question-and-answer session. (Operator Instructions).

And our first question comes from the line of Brian Marshall with Gleacher and company. Please go ahead.

Great. Thanks, guys. A couple quick questions. With regards to the guidance can you talk a little bit about you know how we get sort of the range there? Can you talk a little bit about what it would take to kind of shade the high end of the range?

Sure. I'll start and Bill can -- Bill can answer. You know, we reported 167 and we're moving to a seasonally strong quarter, but the move from 167 all the way to 200 as an example that's a fairly high percentage, 20% type of range. We feel like we have a lot of opportunity right now and our funnels are as full as they've ever been. The product portfolio across this tape software is really strong and it's just a matter of executing on those opportunities. And, you know, we're trying to be realistic about the range but also sort of indicate that we've got a chance to have a very strong quarter as well. Bill and I and Rick we were all just in Europe, you know, things are improving there and in North America we met with the teams and we're seeing an uptake in win rates and many, many positive things, but we still have to go close all the business. You want to add to that.

I just think the key is that we're gaining that traction with that independent storage channel, the people that really have a reason why they want to propose Quantum and we spent a lot of time the last quarter trying to make sure that they're trained, that they understand the have a prop around our product, that we've enabled them to be able to be able to introduced our solutions into their go to market and as that pays off then we start to get increasing returns because we get the leverage from having not just our sales force obviously but the channel sales force that has a much broader range to be able to get to the opportunity that we see.

I think one thing, Brian, that we tried to get people to focus on we're super focused on growing revenue but I want to emphasize, you know, that we are delivering profits along with it and even in this quarter, you now e we are a little bit lower in the range than we expected to be, yet our -- gross margin and our earnings were -- higher and I think it's just a testament to our teams an the business model that we have and -- as we ad revenue, you know, we're going to have a lot of profitability and is different than in the past we are running at growth. I guess I'm making appointments that we're going to run at growth an we're going to be profitable.

Yes. We've had discipline and that just drives revenue growth with lower margins which we another there are segment that are business that system company. That means we've got to grow revenue the hard way, but it's revenue that has sustain ability, good margins and that's -- you know, I think both John and Bill have said that those opportunities have -- never been better, but there's a lot of just a number of deals and work to close that we're very, very focused on.

That's a good point. I think your guidance for gross margins in September was actually down sequentially and obviously they are he up almost 20 basis points sequentially. You walked away from some and that's why he saw a little bit lower than expected on the to line?

No. Thing Rick is talking about we're always -- you know, we can chase rather, I mean the media business as an profit margin we choose not to, I would say that what really was different here is our mix was really -- nice as far as the types of products. StorNext clearly had a very strong quarter, which is you know knots 100% margin, but it's close and again I'm trying to emphasize on kind of the points between all three of us. Don't get us wrong. We're driving to the high end of that range, but if we hit the high end evidence wasn't our profitable is going to be much higher than people think, too.

Okay. One final question and I will get back in the queue. With regards to the new OEM deal that you guys I think might have you had some recent success here over the past two day or two can you talk about a little bit outsize of that potential opportunity relative to your last OEM deal that has.

Sure. I probably open I will answer it partially. So there's an announcement what Brian is referring to is the announcement with Fujitsu as part of the all the proceeds that is going on there Fujitsu that is confirmed that their product is based on our DXi software. There's a real nice quote about how it's most stable or the best in the industry. I can't remember exactly what was for newer. Most marketing and sales do you remember. Most marketing and sales sure so we are confirm tag transmission Fujitsu but consistent with the past, you know, it is an EMC like agreement for sure and consistent with the past we haven't included any of that rather in our forecast or our plan and as it becomes significant or material we absolutely will -- bring it up on the call in some way. You know, Fujitsu is a -- the fifth largest computer vendor, they have a big PS group and certainly have a net F but since we don't control that business it's -- really hard ensure naive of us to try and forecast what it's going to be. As it grows, though, you know we'll talk about it more.

Yes. Certainly upside.

Yes. Upside.

Understood. Thanks, guys.

Thank you. And our next question comes from the line of Chad Bennett with Northland capital markets. Please go ahead.

Yes. Just a quick question. Real quick one for you, John, poneying up on the last question. So do you recognize any -- kind of meaningful revenue from that OEM arrangement this quarter?

We didn't -- we didn't disclose any so you can assume no.

Okay. And then the new 8500 product that's going to be shipping in the next several weeks I believe you said, is that -- is that going to be an incremental market to -- the 7500 or will there be some -- cannibalistic there in terms of the markets it addresses?

Yes. It's in the same market so -- you think of it as the higher end product. I think you'll see customers buy new units that are 8500 and customers who have 7500s may just increase the capacity of those. The two products work together. The 8500 is just based on -- you know, higher end set of -- processors and hardware and it has our latest software in it. It's unbelievably fast. I mean it is really fast and so to that extent I think it does open us up so tomorrow new because some of those large customers really have a need for getting their backup servers back online an some of those companies have knots implemented de-duplication because of performance and now this product will open up, you know, that -- group, but it is still enterprise product and in that same classification. It's just a much faster enterprise product.

So -- implied I believe you -- guys gave a target a couple years -- or a couple quarters ago when -- you gave the yearly guidance and all of us look at it differently but basically of doubling the disk and software rather year-over-year this year. I assume you haven't changed your guidance so you're not changing your thoughts on that?

Yes. I mean I would just acknowledge that statement meant a lot of different things to different people. I mean I would just tell you we are definitely aggressively focused on doubling and beyond that business. The market supports that, our investments are consistent with that and -- we're focused very, very aggressively on -- achieving that -- level. I mean I think there's just, you know, discussion about the timing and all of the -- you know, what base you start from with OEM, with IMC, all that such. That aside you know we are aggressively growing it, it's a big part of achieving since we reinforced the guidance it is a big part of achieving our revenue. You know, I could just tell you when you look at our funnels and you look at our, you know the DXi part of the business is -- very, very strong and is the most significant growth segment. So all of that there's no real new message intended here that's -- that varies at you will from that initial statement.

Okay. And just one last one from me probably for John on the debt. So it sounds like you're going to be you've indicated towards the -- debt -- the senior debt you're going to pay off another $20 million on your senior facility. I guess do you have the ability to -- partially pay down EMC or -- I guess I'm trying to understand now that you're kind of the hands cuffs are off on the -- terms there on the EMC debt if you're going to do this anyways no matter what or what the logic was there?

Yes. So, you know, it wasn't linked to the amendment. We have some excess cash flow requirements in our senior debt so -- and they're annual and, you know, based upon our guidance and our free cash flow we would be paying down debts sometime during this year and, you know, if the sooner we do it the more interest we save. We wanted to get the amendment done. That was a step. And we also want to reduce our interest cost. So once we got the amendment done, you know, we're going to look at kind of aggressively paying down the senior debt as well and it's really money that we're going to payout at some points during the year. You know, I think that number will be -- you know, probably at least $40 million. Maybe more than that depending on how things shakeout here. So they weren't related but -- the whole strategy is now a little bit more linked up. And as far as EMC goes, we could actually refinance part of it. We don't have to refinance it all. Now we have a lot more flexibility on thinking about it that way. You know, we can't pay it out of cab. We can only pay the debts when they're due or we can refinance them.

Got it okay. Thanks. Great job on giving more metrics on DX I progress. Thanks.

Thank you.

Thank you and our next question comes from the line of Alex executers with Merriman and Company. Please go ahead.

Yes. Thanks for taking the question and I apologize for the backgrounds noise. You know, I'll turn it off on the tape business where your main competitors recently changed how the channel I believe around maintenance. Any early indications out of storage techs on how that's aim pick off some of those partners or is it too early? Is there any tangible thing you can talk about with that.

Sure so what Alex is meanings the disruption in the channel that Rick also mentioned with the -- sun acquisition by Oracle an then just the strategy that business is employing and -- we've been saying for a couple quarters that those changes create opportunities for us. And I think recently there was an article out that talked about how Oracle was changing how partners were compensated on maintenance and all of those things are creating opportunities for us and -- we both, Bill, Rick and I, we all think that that's going to be our business because we are a channel company, we are going to support the channel and it creates opportunities to go into accounts that we frankly haven't been into before. Having said that, sales cycles for type is somewhere between three and six and you usually buy those products as need arises so I don't think you're going to see a big tidal wave of activity for us. I think you're going for the second quarter see, though, an increase in our tape business over time and we already see it in new customers acquired. In my script I didn't give a number, but I said that we had a continuous trends of significant number of new enterprise tape accounts and it actually accelerated this quarter over last quarter. So those are -- those are super important trends. I'm going to let Bill add any more color he's got.

Yes. There are two thing that I guess I would emphasize. One is we've got a program right now where we're running it kind of we started it last quarter piloting with about 15 key partners that had big Oracle storage tech installed base and maintenance revenue and we've engaged with them to basically go out and pitch a tech refresh to their install base of customers and it's going to be more likely when they come -- when these mantes tans contracts come due that you get the opportunity. The second part of that is equally important is that creates also the opportunity to very dues disk space backup with de-duplication as part of that overall value proposition and not just -- the intersection with our focus partners in the storage tech or expect interest expense storage tech partners that want to do something different that's where that intersects.

Bill, just as a follow-up -- a separate question can you talk about price debt economy is from EMC2 amounts Chan quarter-over-quarter and I know that you guys use the prices as beats of your just talk quick I to that. I will appreciate it.

I think the key thing is it's really about price performance and so we're -- trying to be very aggressive at being able to make sure that people understand kind of the value of the overall solution and that can take different shapes depending on whether tape is included, whether you pitch a mid-range product versus an so there are elements to this that kind of make the competitive dynamics I think I think our favor because EMC certainly they try to sell what's best for EMC first rather than for the customer. So I think from that standpoint we're getting traction. The other is quite frankly they're the ones with, you know, the big market share position and we're attacking them, the bars understand it and you know it just didn't look good when you gets to the end of the sales cycle and EMC says yes, I'll match that price. So we're using all those things to our advantage but at the end of the day the product is standing up head to head against them in these -- winds that we're referencing in the quarter those are very, very powerful in terms of what they signify to the Chan fell because it shows that we can go head to head against EMC and win.

All right. Thanks, guys.

Thank you. And our next question comes from the line of Eric Martinuzzi with Craig-Hallum. Please go ahead.

Thanks. I have a question about the branded disk business. You talk about in the press release that increased 29% year-over-year and 19% sequentially. I'm not that familiar with the historical trends there. What -- would keep that 19% sequential growth going or why would it decrease?

Well, I would start by saying that it's -- I mean we had lumpiness in previously quarters and so there is a at times challenge that we've had as we're trying to build quiescence in this business. So that would be the first point. The second point I would say he is we have -- you know, we in tipped do alot better than that if we're going to double the disk systems and software business we've got to go more than 29% and it depends on the comparisons but we believe that number has to, you know, significantly improve and that's what our plans or based on.

I think the key thing to remember is that if you go back a year ago, we really didn't have a mid-range product. That was super competitive. So that's a very, very big difference. And then the other is the fact that we have a channel now that as we kind of referenced earlier we're building a very, very strong pipeline with them. So you combine those factors and you've got a lot of tail wind to be able to help continue to grow that disk and software number.

So if you take those comments an just apply them directly to the next quarter, we mentioned in our call we have our funnels have never been larger and we have the new products that are out and the channel is very receptive. So I think to Rick's point our -- we believe that number on a sequential basis is going to go up and on a year-over-year basis it'll go up and -- for all the reasons that everybody mentioned. You know we're driving on that what were.

Mm-hmm.

We don't expect to go the other way. I'll say it that way, too.

Okay. And then just the announcement this weak week with the StorNext Archive Conversion Utility. You talk about that being available December 2010. Is there an issue -- you know, do you feel like you're inhibited from migrating or displacing a storage tech account until you have that out there or if wouldn't help accelerate things.

No I would say first the answer to that is no. This is a file system product that is basically -- I don't know if it's been discontinued but it's clearly not being invested in and there's a big large installed base there and that's all we did was try -- you know, base close come out with a solution that makes it easier for people to transition to us. As the leader in the segment. We announced it a little earlier because it is a longer sales cycle that people have to go through to make the decision to do that and so we do expect that it gives us opportunity for tape library as well, but it's -- it really is an incremental opportunity. It's very strong message to the channel. I was in Europe last week and I made a tour talking to many, many channel partners and there were some that really saw this as a very, very strong message. Again, that we're going to attack that base with better, with better solutions that there is opportunities for them to be able to go into their install base with solutions and install base is very fragile right now and take advantage of growth potential. That's what this is and we'll continue to look for opportunities like this to be very aggressive to take advantage of the disruptions that I referred to in the script.

What else are you doing? This is obviously one tool in your tool box. Are there other things you're doing, you know, that could mover the needless here? Is therein certain at this pricing, is there, you know, a training effort, things that we might see on the marketing side, what else.

Yes. We've got a number of plays offers if you will that are in play right now that really try to attack this tech refresh opportunity. So we have offers that would enable an end user customer to be able to do a tech refresh, in other words, replace their storage tech library basically trading offer OpEx and for CapEx and to be able to so do so at that so their three year TCO becomes a very freight forward investment decision for them and we're rolling that out through our own kind of marketing but channel partners that we talked about earlier.

We are also trying to technologies solution that are different by including disk as Bill mentioned earlier.

Yes.

Part of that a degrees I ever disk back and tech refresh, knots just a tape library replacements and that message and StorNext does that, too. That message resonates well. Like if and our disk offering you know Oracle down have anything to competes with us there and -- so we're really going after that.

Mm-hmm. Okay. And then the housekeeping item here. I don't know if you covered it or not but your head count at the end of September and your expectation for the helped count the end of December.

I think it's about 1900 is what we're at today issue and I think it'll be around 1900. We have -- we know we have a number of reps outstanding we're recruiting heavily in engineering in particular would be the first place, but we don't -- I don't expect from to be a drastic change.

Thanks.

Thank you. And our next question with Glenn Hanus with Needham and company. Please go ahead yes. Good afternoon, guys.

Hi Glenn.

Just going back to the Fujitsu dealing for a second could you comment on the timing when we might start to see revenue and I'm not quite sure I heard you right with -- did you say the structure would be sort of a licensing kind of arrangement similar to IMC or did you say the deal was dissimilar to EMC?

The licensing is similar, the scale is dissimilar. So EMC is just a -- -- huge partner and they stole a lot of product right away and a royalty -- or a license revenue reflected that. So it is 100% margin and it is in similar structure as what we had with EMC. We have some revenue now. It's not significant yet. We have just re -- refreshed the software, if you will, and obvious there I they have signed a -- arrangements with net app that will increase the fee on the street selling the product so you know I don't know when it's going to be. Obviously there's going to be more than there was this quarter next quarters but I don't know when it's going to be significant enough for us to talk about.

I would just mention I was just with them last week and there is a certain amount of expertise that we have certainly learned when you're in this business that's unique about how do you size, sell this de-duplication solution and you see in the market that a lot of players haven't been able to get therein spite of having some product. And I think Fujitsu is kind of in that place. They understand that they're working on it and are actually quite happy with the relationship and -- have -- a positive view of the latest product releases an where that -- and where that may go, but they're going through a big roll out and set of changes on their own so you know we think it's upside as we said before and what the net provides is upside, too. We don't know really how -- large it will be because they're going to have to go at some level through that same -- that same process, but we think it's a good thing. If nothing else, it also allows us to validate the fact that our technology is leadership meaningful significant and that works, you know in general positively for us as we go out and work to expand our position.

It's kind of tactical but compared to like a tape library OEM where we have to have a forecast because we have to Mr. something. Here there isn't -- we don't have to do anything. There is not a forecast. You know, they -- go and they -- drive the revenue and then they tell us what they sold. So it's different in that we don't really -- we don't really know and that's why we're being circumspect about when and what.

Do you have any sense of where -- net app is in terms of sort of training their field to be active with this?

We don't.

Okay. So just shifting gears you know last quarters you had some variable regional sales execution, especially on the tape side, can you talk about how that's been addressed and how you're feeling about the -- sales execution and straightening that out?

Oh yes. I think -- I mean I will start and Bill can. I think from a numbers perspective I think that improved dramatically and I think we've all met with the sales teams over the lat couple weeks and our sales team is on their toes. They liked products, they like the channel and I think they're doing great. Bill, you want to add anything to that.

I think that says it well. I mean we're very, very focused on converting this opportunity in the pipeline this quarter and all the reviews in the last months all -- everyone is aligned around that.

Sales guys like having a bigger pipeline to go work for sure and this is as big as we've had in a long time.

With StorNext could you comment a little bit on the -- competitive economy fairly for that and your go to market and how to get there directs versus OEM versus channel.

I think it's important to realize that StorNext is a very sophisticated high performance file system that has the ability to integrate tiered storage, call it a big archive, an so where it's positioned best and where we've had just markets leading success is really in those areas where you have these tremendously large archives that have a work flow that basically installed base the file system in this kind of deeper storage or archived type application. So when you start to think about the vertical markets in the use case, it very -- it is very much a very high-end of the enterprise space and so the go to market while it's not direct it's really around system integrators and people that are putting together these very specialized work flows and large archives and so it typically pulls a lot of hardware with it both disk and tape and a lot of these big installations and so we really focus the go to market around partners and system integrate torso if you will that can bring all that together. So the progress that we've made, the record quarter, a lot of that was driven by the fact that we continue to get increasing returns in the rich media, media and entertainment market, and we're starting to see the applicability of StorNext in some of these other use cases that are in adjacent markets and that's why we continue to invest.

Okay. And on the -- with the total year guidance suggests that perhaps March could be sequentially up. Can you -- I mean to get into even the middle or upper half of your -- range there, John, can you comment at all on -- the March quarter?

Well, I mean I think you have to take the math that we gave and sort of do the if -- and if. You now if it's this, it's this and if it's this, it's this. Clearly, what we would like to see is a very strong Q3 and -- then we would go from there and we're -- we are driving hard to take advantage of our sequentially strong quarter, the momentum in the channel and you know all the things going on around it. If we have great momentum all through that quarters and we you know deliver where we think we can and we'll have a different discussion around cure when we get there with you I think this is a port Neal Visual do them on these calls is this the game we're trying to win rights now. We're super focused on Q3 and our teams are driving hard to a -- very good strong Q3. And that will set us up for Q4.

All right. Thank you.

Thank you and our next question comes from the line of Joe Feshbach with Joe Feshbach Partners. Please go ahead.

Hey. Nice work. A couple quick questions. Implicit in your guidance I guess your -- for Q -- for Q3 versus Q2 you're looking for a -- something like a $17 million to $33 million sequential increase in absolute dollars if I have done the math correctly and it seemed -- do I have that right?

Yes. That's right

obviously royalties, you know, the royalty stream shouldn't change much plus or minus. Is that I reasonable way to think about it. It's not going to change in those kind of persons for sure. And service generally doesn't change much either. And other disk media doesn't change so really down to tape automation and disk and software. For those revenue increments.

James I would stop for a second here and remember that -- the December quarter is seasonally a very big quarter. That will be true for our OEMs, that's true for our branded business, but even your comments about media. You know, its normal that in storage people always talk about budget flush and what people spend out of their budget. I mean all of those dynamics its unclear how they will go this year, but often that creates improvement across a lot of aspects of the storage business. So I think we expect to see that at some level because it is the typical quarter to do that. We think we will benefits many aspects of the business. Having said that, clearly where we're focused in building momentum is around, you know, tape automation disk systems and software branded through the channel as we've discussed in this call and we expect our momentum and set of opportunities to also be positive there and I'm not sure if that answers your question but I want today make that clarification.

I'm well aware of seasonality is, you know, is a none trivial factor in sequential increase but still as you look towards the mid point of that range it would seem to me that, you know, you have a chance -- you know, improvements police in your guidance there's certainly a shot at 30% to 50% type sequential increases in disk and software kind of at any minimum to really get there.

So not commenting on that piece, but that's how you do that. Basically you've got service and you have royalty that aren't going to grow 30%. That's right.

Correct.

And so if you do what you did, those -- products lines would interest grow greater than the overall percentage that's correct and that's kind of the point.

Yes and so I'm just looking for maybe a little clarity on you know how one would think about the division between tape automation and -- disk and software and within disk and software how much growth you're seeing from -- you know, how you see StorNext playing out versus branded DXi and also the -- you know, you mentioned early in the call that you already had closed some deals in the 8500. That would seem to me to be a very high ST compared to your velocity type products in the 6500. So I don't know if you can just put a little more meat on the bone about how you helped us with the road map so we get the sub components kind of more fine tuned.

Yes. So we don't give product guidance which is what you're kind of asking me for but at a high level -- at a high level DX if us a growth market and we've got new products an we would expect that to grow a lot. Software StorNext is obvious starting gross so you get into the percentage versus dollar amount and on the tape side obviously the biggest of all of them and we have very positive things going on including devices and media as Rick pointed out, you know, on those as well. So, you know, we're not going prognosticate how the split is going to be. We do like the perspective of where we are and we recognize that we had we have a lot of work and we recognize that we have some unique right now in a hot market and a grate van nylon them so we're pushing on all of them, but wear not prepared to say where they just its too d too difficult to do.

Yes. How about just the one quick question which is on the 8500 you mentioned you had a few deals, I don't know whether you said several or whatever, already in the bag. Are those the same kind ever magnitude as kind of interpose 7500 deals that you've closed in the past where you see low to -- you know, low to mid six figures up to seven figure deals.

Yes. That's right.

Okay.

They're bigger shall lumpier deals for sure.

Bigger lumpier. At least you've got a couple. Okay. Well, great. Excellent.

Thanks.

Thank you, ladies and gentlemen. If there are any additional (Operator Instructions). And our next question comes from the line of Brian Freed with Wunderlich Securities. Please go ahead, hey, guys. Good afternoon.

Hey, Brian.

I wanted to get one little bit of clarification. You know, Rick, you mentioned the doubling comment and said it meant different things to different people and -- in the context of your guidance for $700 to $750 million what I took it to mean was that was a target, not guidance, so more of a goal than guidance and, two, that you were looking to double the -- product piece of your branded disk and software year-over-year. Am I in the ballpark of what you meant?

Yes. That's right. I mean we have a lot of different -- you know, when you look at our guidance range e we have a lot of different things going on there and clearly to perform well there we have to have very strong disk and software. So that is true and -- yet it is -- it is a goal that we have other factors that were driving revenue. I mine we've had more opportunity today around tape and other things than we've had for awhile. So we're pushing anneal of those, but to have a good year and relative to that range we have to have very strong disk and we have to take that brands the DXi business and you know teleconference and -- get to run rates that are -- that are doubling and moving beyond that and that's -- you know, that's the focus that -- we have. So I think your interpretation is correct.

Okay. And then my -- second question you guys have talked a bit about your focus on the channel and obviously there have been a few channels out there such as Datalink who have been pretty public about their -- you know, their shift and emphasize towards you guys, you know, that's been disruption both on the storage tech and data domain side of the thing. Can you give any kind of context in terms of the -- numbers of material channels and by material I would say VARs doing, you know, $60 million in total revenue a year and up who -- you feel you have kind of added, not necessarily perfect numbers but just kind of some sort of metrics that would give us a sense what's the -- ground swell there?

I'm going to start. You know, we have a number of Quantum channel partners today who have sell our tape products and they were selling data domain disk products and our first goal is do get instead of that. It's obviously the easiest place to go since they are a partner selling primary storage. So we're focused on those. And then the next group is other net partners who don't sell any Quantum products answerer' also focused on those, but in addition to that we've got a lot of -- tape partners that sell are he very shows to some of our exert it was in the disk space and we're very pleased to work with tape with them as well. So the problem with the question is that it becomes again sort of like talking about our products. We have a group of partners that we call our focus partners and we have a set of those worldwide and we made penetration into all of them and we're tracking our progress with all of them and that is somewhere in the 50 range world wide I would say looking at Bill.

Yes.

Call focus partners. There's probably a hundred partners that matter at a revenue level, if you will, and we're work being them, too, and then we have lots of part sell our paper products that aren't going to sell an 8500 but they might sell a 45 money or a 6510 or 63520 and actually we're focused on them as well on the way you can be which is really around marketing materials and programs and the like. So it's a real mortise thing for us to talk pleasure base ponds revenue to be candid and how we're doing and we're trying to -- share that with you guys. Internally we manage it much more -- loosely than that.

Okay.

The only thing I would kind of add to John's comments is really around these focus partners these are partners that have pretty large markets. So I'm not kind of pinning it down to say we're looking at all partners above $50 million in revenue. It really depends on kind of what is that proper were portfolio how do they lineup to go to market and if they ever -- if they're competing against EMC on a primary disk basis, those are very good profiles for us to go after and that's where we're getting the traction where people are looking for what's a really good disk base backup with de-duplication alternative EMC that's where it fits very well. The second part is really around making sure that they really understand our products and that they are trained, that they're enabled to be able to carry on that campaign more independently from us an that's where we're also focusing alot of energy. The one to many types of marketing activities you know if think about it in terms of we call at that Quantum alliance these are people that they have access to all of our marketing materials, they get light touch in terms of sales support. If they have a project, they get as much support as they need, but we're also focusing on being able to make sure that what we've got in terms of this totally refreshed product line that they know how to position those products to at least identify opportunity. So really the channel if you think about the segmentation that makes sense it varies depending on their go to market and their product portfolio, but the unique opportunity that we didn't have go back a year ago when EMC was our primary OEM partners the unique opportunity is really to be very, very strategic and important to these partners that have fairly significant primary storage businesses that compete against EMC.

Okay. Thanks.

Thank you. And our next question comes from the line of shabbily with Capstone Investments go ahead.

Thank you very much. I just want to elaborate on that prior question about the -- doubling target of your disk systems app software segment and to -- achieve that target which would mean hitting about 167 or so for the year that's just a targets I know it would imply basically spiking that segment from $30.6 million in the September quarter to like nearly $50 million think in the December quarter. That's like a 60% plus consequential growth. I'm wondering what could gets you there to hit that target? Now, mentioned that the mid-range was -- the 6500 continuing to do well, the channel doing well, the 8500 and you have EMEA, you know, growing well for you again. Maybe just elaborate on how you can achieve that target.

Well, I think that we have -- you know, wave said all along that our plan was going to be a second half driven plan and in fact, you know, when we look at what we've done the last six months, building up to this, we've -- you know, we built the channel, we are have been very aggressive in creating opportunities and leads an funnels, all of these things products have all significantly moved in their right direction and you're right. If you do various amounts of math and look at growth, you can say there's a lot of -- progress that needs to take place. That's a true statement. At the same time when we look at all of the opportunities and the size of the funnels an the size of the markets, we say that -- those things will support that kind of growth and -- that's -- what we're doing, but you're right. We have to really, you know, drive that business, we have to see results, we think this is an important quarter because of seasonality, because of the product line, because often work we've done we really have -- felt it's going to be a largely a second half phenomena and that means this quarter and that's -- where our -- attention is. I don't know Bill if you want to add to that but --

I think it's about product, it's about converting pipeline, it's about getting leverage from the channel and there's lots of action underneath that to make that happen.

Yes. We don't sit here and look at that number and say we've got to close every opportunity that comes our way. You know, we have a large amounts of opportunity that you can do various amounts of math that shows you how you can get to those kinds of numbers. I will also say, though, on the other side is we found that alot of these deals because of the competitive environment take a lot of effort to close and we're putting every ounce of energy into making that happen, but there -- you know, it's very, very competitive, there's a lot of -- dynamics under way that often make it take long tore get things done, but -- that's-- you know, we have to get scale in the business that we've -- that we've started to build.

Okay. Thank you.

Ladies and gentlemen, is this your final opportunity to ask a question. (Operator Instructions). One moment, please. And, management, there are no further questions in queue at this time. Please continue okay.

Great. I'll just close by thanking you again for joining us and I think that the -- you know, we've had a -- had a really good discussion on this transition for the Company that -- started with the business that was declining for a variety of reasons. You know, we've moved into a business that's now -- you know, first half was roughly flats on revenue and we are really looking at the second half to be the half that we now start to -- drive growth around a number of the initiatives that we've talked about here today. So with that we look forward to reporting on that at the end of the current quarter and look forward to talking to you then. Thanks a lot.

Ladies and gentlemen, this concludes the Quantum's second quarter 2011 teleconference. It would like replace of today's conference please dial 1-800-406-73235. For international participants please dial 303-590-3030 and enter the access code 4371388 followed by the pound key. Receipt playback be able available until November 3. At& t would like to thank you for your participation. You may now disconnect.