FalconStor Software Announces Second Quarter 2017 Results
Tweet
Share
E-mailGet Alerts FALC Hot Sheet
Join SI Premium – FREE
MELVILLE, NY -- (Marketwired) -- 08/10/17 -- FalconStor Software, Inc. (NASDAQ: FALC), a market leader in storage software, today announced financial results for its second quarter ended June 30, 2017.
"During Q2, the company has taken steps to realign our cost structure with our revenue outlook. In doing so, we have reduced our annualized costs by over $10 million on a proforma basis which helps us in our pursuit of profitability while simultaneously increasing our revenue sequentially. The company has also taken key steps to focus on its existing customers and ensure they are receiving all of the benefits available with the FreeStor® application," stated Todd Oseth, CEO of Falconstor. "We believe our software continues to lead the market in helping customers utilize public and private clouds for data protection in the most flexible and economical way possible," he continued.
Financial Overview:
Change
Period to
Three Months Ended June 30, Period
-------------------------------
(in millions except per share
data) 2017 2016
--------------- --------------- --------------
Total revenue $ 6.7 100% $ 8.1 100% $ (1.3) (17)%
Total cost of revenue $ 1.8 26% $ 2.3 29% $ (0.5) (24)%
Total operating expenses $ 5.5 81% $ 9.4 116% $ (3.9) (41)%
Operating loss (GAAP) $ (0.5) (8)% $ (3.6) (45)% $ 3.1 (86)%
Net loss (GAAP) $ (0.6) (10)% $ (3.5) (44)% $ 2.9 (82)%
EPS GAAP $ (0.02) $ (0.09) $ 0.07
Included in operating results above for the three months ended June 30, 2017 and 2016 were $0.1 million and $1.1 million of share-based compensation expense, respectively, and $0.8 million and $0.6 million of severance expense, respectively. Included in net loss for the three months ended June 30, 2017 and 2016 was an income tax provision of $0.1 million and $0.2 million, respectively. Due to cost rationalization initiatives completed during 2016 and continued into 2017 we reduced our net loss by 82% for the three months ended June 30, 2017 as compared to the prior year period.
Change
Period to
Six Months Ended June 30, Period
-------------------------------
(in millions except per share
data) 2017 2016
--------------- --------------- --------------
Total revenue $ 12.8 100% $ 15.5 100% $ (2.7) (18)%
Total cost of revenue $ 3.2 25% $ 4.3 28% $ (1.1) (25)%
Total operating expenses $ 11.2 88% $ 19.1 123% $ (7.9) (41)%
Operating loss (GAAP) $ (1.7) (13)% $ (7.9) (51)% $ 6.2 (79)%
Net loss (GAAP) $ (1.8) (14)% $ (7.8) (51)% $ 6.1 (78)%
EPS GAAP $ (0.05) $ (0.20) $ 0.15
Included in operating results above for the six months ended June 30, 2017 and 2016 were $0.5 million and $2.1 million of share-based compensation expense, respectively, and $0.8 million and $1.0 million of severance expense, respectively. Included in net loss for the six months ended June 30, 2017 and 2016 was an income tax provision of $0.2 million and $0.3 million, respectively. Due to cost rationalization initiatives completed during 2016 and continued into 2017 we to reduced our net loss by 78% for the six months ended June 30, 2017 as compared to the prior year period.
Deferred revenue at June 30, 2017 was $21.3 million, compared with $23.7 million at December 31, 2016. Our cash balance at June 30, 2017 was $1.6 million, compared with $3.4 million at December 31, 2016.
Three Months Ended,
--------------------------------------
June 30, March 31, June 30,
(in millions except per share data) 2017 2017 2016
------------ ------------ ------------
Revenue $ 6.7 $ 6.0 $ 8.1
Bookings $ 3.9 $ 5.5 $ 8.8
Non-GAAP Expenses $ 7.2 $ 7.0 $ 10.5
Non-GAAP Gross Margin 74% 77% 72%
Non-GAAP Operating Loss $ (0.4) $ (0.9) $ (2.4)
Non-GAAP Net Loss $ (0.5) $ (0.9) $ (2.3)
Non-GAAP EPS $ (0.01) $ (0.02) $ (0.05)
Cash (used in) provided by operations $ (1.6) $ 0.1 $ (3.8)
- We now have over 380 customers using our FreeStor platform, not including the customers of our MSP and OEM partners.
- Revenue from our FreeStor platform increased 71% to $1.9 million for the second quarter of 2017, compared with the second quarter of 2016.
- In June 2017, our Board of Directors, approved a comprehensive plan to increase operating performance (the "2017 Plan"). The 2017 Plan will result in a realignment and reduction in workforce and a change in the leadership of the Company. The 2017 Plan was substantially completed as of June 30, 2017 and we ended the quarter with 97 employees worldwide. These actions are anticipated to result in an annualized cost savings of approximately $10.0 million. In connection with the 2017 Plan, we incurred severance expense of $0.8 million. In making these changes, we prioritized customer support and development while consolidating operations and cutting direct sales resources, therefore allowing us to focus on our install base and develop more efficient market channels.
- During 2017, we continued to innovate and further enhance our FreeStor product. The latest enhancements were delivered in May 2017; including Quality of Service (QoS) capability, chargeback support, improved levels of robustness and performance in I/O Cluster and I/O Multi-Cluster failover, additional client agent management and monitoring, and the integration of Optimized Backup and Deduplication capability into FreeStor, allowing more efficient use of storage.
Non-GAAP results exclude the effects of stock-based compensation, restructuring costs and the effects of our Series A redeemable convertible preferred stock. A reconciliation between GAAP and non-GAAP information is provided on page 6 of this release. See the press release filed on May 4, 2017 for a reconciliation between GAAP and non-GAAP information for the three months ended March 31, 2017.
Conference Call
The Company will host a conference call to discuss its financial results on Thursday, August 10, 2017 at 4:30 p.m. EDT. To participate in the conference call, please dial:
Toll Free: 1-800-533-7619
International: +1-785-830-1923
Conference ID: 4337744
To view the presentation, please copy and paste the following link into your browser and register for this meeting. Once you have registered for the meeting, you will receive an email message confirming your registration.
https://falconstor.webex.com/falconstor/j.php?RGID=r936834b6041ceae2ea610692154886ae
Meeting: FalconStor Q2 2017 Earnings
Meeting Password: Q2numbers17
Meeting Number: 797 034 145
If you are unable to register via the Internet, please contact Gavin McLaughlin, Investor, Press and Analyst Relations at +1 719-352-3217 or [email protected].
A conference call replay will be available beginning August 10, 2017 at 7:30 p.m. EDT through 7:30 p.m. EDT on August 17th. To listen to the replay of the call, dial: Toll Free: 1-888-203-1112; International: +1 719-457-0820; Passcode: 4337744
Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company's management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company's operating performance. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) restructuring costs, (ii) effects of our Series A redeemable convertible preferred stock, and (iii) non-cash stock-based compensation charges and any potential tax effects. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Non-GAAP Operating Data GAAP Reconciliation, presented in this release.
About FalconStor Software
FalconStor Software, Inc. (NASDAQ: FALC) is a leading storage software company offering a converged data services software platform that is hardware agnostic. Our open, integrated flagship solution FreeStor® reduces vendor lock-in and gives enterprises the freedom to choose the applications and hardware components that make the best sense for their business. We empower organizations to modernize their data center with the right performance, in the right location, all while protecting existing investments. FalconStor's mission is to maximize data availability and system uptime to ensure nonstop business productivity while simplifying data management to reduce operational costs. Our award-winning solutions are available and supported worldwide by OEMs as well as leading service providers, system integrators, resellers and FalconStor. The Company is headquartered in Melville, N.Y. with offices throughout Europe and the Asia Pacific region. For more information, visit http://www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).
Follow us on Twitter - Watch us on YouTube - Connect with us on LinkedIn
This press release includes forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include: delays in product development; market acceptance of FalconStor's products and services; technological change in the data protection industry; competition in the data protection market; results and costs associated with governmental investigations; intellectual property issues; and other risk factors discussed in FalconStor's reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.
FalconStor, FalconStor Software, FreeStor and Intelligent Abstraction are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.
Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
June 30, 2017 2016
------------- -------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,647,695 $ 3,391,528
Accounts receivable, net 2,986,927 5,003,972
Prepaid expenses and other current assets 875,598 1,245,085
Inventory 6,181 6,181
------------- -------------
Total current assets 5,516,401 9,646,766
Property and equipment, net 858,978 1,174,942
Deferred tax assets, net 580,395 577,735
Software development costs, net 396,630 547,558
Other assets, net 1,010,247 973,949
Goodwill 4,150,339 4,150,339
Other intangible assets, net 174,200 209,456
------------- -------------
Total assets $ 12,687,190 $ 17,280,745
============= =============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 685,384 $ 419,877
Accrued expenses 3,783,381 4,471,010
Deferred revenue, net 13,998,843 15,236,123
------------- -------------
Total current liabilities 18,467,608 20,127,010
Other long-term liabilities 1,217,275 1,170,844
Deferred tax liabilities, net 267,174 254,776
Deferred revenue, net 7,272,609 8,430,692
------------- -------------
Total liabilities 27,224,666 29,983,322
------------- -------------
Commitments and contingencies
Series A redeemable convertible preferred
stock 9,000,000 9,000,000
Total stockholders' deficit (23,537,476) (21,702,577)
------------- -------------
Total liabilities and stockholders'
deficit $ 12,687,190 $ 17,280,745
============= =============
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2017 2016 2017 2016
------------- ------------- ------------- -------------
Revenue:
Product revenue $ 2,499,655 $ 2,939,594 $ 4,420,707 $ 5,220,452
Support and services
revenue 4,234,671 5,128,357 8,352,734 10,279,830
------------- ------------- ------------- -------------
Total revenue 6,734,326 8,067,951 12,773,441 15,500,282
------------- ------------- ------------- -------------
Cost of revenue:
Product 351,969 319,974 550,684 564,247
Support and service 1,418,663 1,999,125 2,672,579 3,761,345
------------- ------------- ------------- -------------
Total cost of
revenue 1,770,632 2,319,099 3,223,263 4,325,592
------------- ------------- ------------- -------------
Gross profit $ 4,963,694 $ 5,748,852 $ 9,550,178 $ 11,174,690
Operating expenses:
Research and
development costs 2,025,132 3,304,079 4,319,995 6,960,856
Selling and marketing 2,109,599 4,124,350 4,160,141 8,393,150
General and
administrative 1,345,343 1,833,479 2,966,894 3,539,404
Restructuring - 93,405 (236,302) 177,389
------------- ------------- ------------- -------------
Total operating
expenses 5,480,074 9,355,313 11,210,728 19,070,799
------------- ------------- ------------- -------------
Operating loss (516,380) (3,606,461) (1,660,550) (7,896,109)
------------- ------------- ------------- -------------
Interest and other
(loss) income, net (29,121) 237,251 125,800 355,434
------------- ------------- ------------- -------------
Loss before income
taxes (545,501) (3,369,210) (1,534,750) (7,540,675)
Provision for income
taxes 94,300 165,672 217,248 290,819
------------- ------------- ------------- -------------
Net loss $ (639,801) $ (3,534,882) $ (1,751,998) $ (7,831,494)
============= ============= ============= =============
Less: Accrual of Series
A redeemable
convertible preferred
stock dividends 215,089 195,366 419,664 387,974
Less: Accretion to
redemption value of
Series A redeemable
convertible preferred
stock - 170,981 - 334,650
------------- ------------- ------------- -------------
Net loss
attributable to
common stockholders $ (854,890) $ (3,901,229) $ (2,171,662) $ (8,554,118)
============= ============= ============= =============
Basic net loss per share
attributable to common
stockholders $ (0.02) $ (0.09) $ (0.05) $ (0.20)
============= ============= ============= =============
Diluted net loss per
share attributable to
common stockholders $ (0.02) $ (0.09) $ (0.05) $ (0.20)
============= ============= ============= =============
Weighted average basic
shares outstanding 44,440,751 43,159,285 44,265,525 42,521,018
============= ============= ============= =============
Weighted average diluted
shares outstanding 44,440,751 43,159,285 44,265,525 42,521,018
============= ============= ============= =============
FalconStor Software, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
2017 2016 2017 2016
-------------- -------------- -------------- --------------
GAAP loss from
operations $ (516,380) $ (3,606,461) $ (1,660,550) $ (7,896,109)
Non-cash stock
option
expense (1) 97,155 1,127,346 $ 542,569 $ 2,117,956
Restructuring
costs (3) - 93,405 (236,302) 177,389
-------------- -------------- -------------- --------------
Non-GAAP loss
from operations $ (419,225) $ (2,385,710) $ (1,354,283) $ (5,600,764)
-------------- -------------- -------------- --------------
GAAP net loss
attributable to
common
stockholders $ (854,890) $ (3,901,229) $ (2,171,662) $ (8,554,118)
Non-cash stock
option
expense, net
of income
taxes (2) 97,155 1,127,346 542,569 2,117,956
Restructuring
costs (3) - 93,405 (236,302) 177,389
Effects of
Series A
redeemable
convertible
preferred
stock (4) 215,089 366,347 419,664 722,624
-------------- -------------- -------------- --------------
Non-GAAP net
loss $ (542,646) $ (2,314,131) $ (1,445,731) $ (5,536,149)
-------------- -------------- -------------- --------------
GAAP gross
margin 74% 71% 75% 72%
Non-cash stock
option
expense (1) 0% 1% 1% 0%
----------------------------- -------------- --------------
Non-GAAP gross
margin 74% 72% 75% 73%
-------------- -------------- -------------- --------------
GAAP gross
margin -
Product 86% 89% 88% 89%
Non-cash stock
option
expense (1) 0% 0% 0% 0%
-------------- -------------- -------------- --------------
Non-GAAP gross
margin -
Product 86% 89% 88% 89%
-------------- -------------- -------------- --------------
GAAP gross
margin -
Support and
Service 66% 61% 68% 63%
Non-cash stock
option
expense (1) 0% 1% 1% 1%
-------------- -------------- -------------- --------------
Non-GAAP gross
margin -
Support and
Service 67% 62% 69% 64%
-------------- -------------- -------------- --------------
GAAP operating
margin (8%) (45%) (13%) (51%)
Non-cash stock
option
expense (1) 1% 14% 4% 14%
Restructuring
costs (3) 0% 1% (2%) 1%
-------------- ----------------------------- --------------
Non-GAAP
operating
margin (6%) (30%) (11%) (36%)
-------------- -------------- -------------- --------------
GAAP Basic EPS $ (0.02) $ (0.09) $ (0.05) $ (0.20)
Non-cash stock
option
expense, net
of income
taxes (2) 0.00 0.03 0.01 0.05
Restructuring
costs (3) 0.00 0.00 (0.01) 0.00
Effects of
Series A
redeemable
convertible
preferred
stock (4) 0.00 0.01 0.01 0.02
-------------- -------------- -------------- --------------
Non-GAAP Basic
EPS $ (0.01) $ (0.05) $ (0.03) $ (0.13)
-------------- -------------- -------------- --------------
GAAP Diluted EPS $ (0.02) $ (0.09) $ (0.05) $ (0.20)
Non-cash stock
option
expense, net
of income
taxes (2) 0.00 0.03 0.01 0.05
Restructuring
costs (3) 0.00 0.00 (0.01) 0.00
Effects of
Series A
redeemable
convertible
preferred
stock (4) 0.00 0.01 0.01 0.02
-------------- -------------- -------------- --------------
Non-GAAP Diluted
EPS $ (0.01) $ (0.05) $ (0.03) $ (0.13)
-------------- -------------- -------------- --------------
Weighted average
basic shares
outstanding
(GAAP and as
adjusted) 44,440,751 43,159,285 44,265,525 42,521,018
============== ============== ============== ==============
Weighted average
diluted shares
outstanding
(GAAP and as
adjusted) 44,440,751 43,159,285 44,265,525 42,521,018
============== ============== ============== ==============
Footnotes:
(1) Represents non-cash, stock-based compensation charges as follows:
Three Months Ended June Six Months Ended June
30, 30,
----------------------- -----------------------
2017 2016 2017 2016
----------- ----------- ----------- -----------
Cost of revenue - Product $ - $ - $ - $ -
Cost of revenue - Support
and Service 8,834 44,066 65,285 68,837
Research and development
costs 54,813 825,635 184,528 1,571,797
Selling and marketing 7,198 75,342 63,738 143,072
General and administrative 26,310 182,303 229,018 334,250
----------- ----------- ----------- -----------
Total non-cash stock based
compensation expense $ 97,155 $1,127,346 $ 542,569 $2,117,956
=========== =========== =========== ===========
(2) Represents the effects of non-cash stock-based compensation expense recognized, net of related income tax effects. For the three and six months ended June 30, 2017 and 2016, the tax expense for both GAAP and Non-GAAP basis approximate the same amount. Included in share-based compensation expense for the three and six months ended June 30, 2016, was $0.8 million and $1.5 million, related to costs associated with our exclusive source code license and development agreement which were paid through the issuance of our common stock.
(3) Represents restructuring costs which were incurred during each respective period presented.
(4) Represents the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock and accrual of Series A redeemable convertible preferred stock dividends.
For more information, contact:FalconStor Software, Inc.Gavin McLaughlinAn Outside EdgeInvestor, Press and Analyst Relations+1 719 352 3217 / +44 7973 264246Email contact
Source: FalconStor Software, Inc.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- The tech crown switches hands: Apple dethrones Nvidia as $4 trillion king
- Samsung Biologics announces all-cash offer to acquire PolyPeptide, accelerating multi-modality strategy and expanding global network across U.S., Europe, and India
- Delta Remodels Reports 500+ Projects Over 39 Years
Create E-mail Alert Related Categories
Press ReleasesRelated Entities
Twitter, Dividend, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
