Science & Technology
Science and Technology
Science and Technology
Tue, November 16, 2010 
MELVILLE, N.Y.--([ BUSINESS WIRE ])--FalconStor Software, Inc. (NASDAQ: FALC), the provider of TOTALLY Opena" data protection solutions, announced that it filed its Quarterly Report on Form 10-Q for the third quarter of 2010.
"Gartner and others agree that traditional backup is broken due to exponential data growth, server virtualization, and round-the-clock demands on mission-critical applications a" and it is in FalconStora™s DNA to address this problem"
Total revenues for the third quarter of 2010 were $19.0 million, a decrease of 6% over the previous quarter and down 12% compared with the same period a year ago. GAAP loss from operations for the third quarter of 2010 was $4.8 million, down from $5.1 million in the previous quarter and up from $2.5 million for the same period a year ago.
Non-GAAP loss from operations was $2.6 million in the third quarter of 2010, down from $2.8 million in the previous quarter and up from a $0.2 million loss for the same period a year ago.
For the nine months ended September 30, 2010, revenues were $56.4 million, compared with $67.0 million for the same period a year ago. GAAP loss from operations for the nine month period was $18.4 million compared with a loss of $3.0 million in 2009.
Non-GAAP loss from operations was $11.3 million for the nine months ended September 30, 2010, compared with non-GAAP income from operations of $3.7 million in 2009.
GAAP net loss was $26.4 million, or $0.58 per share for the three months ended September 30, 2010, and $35.3 million, or $0.78 per share for the nine-month period ended September 30, 2010. The net loss includes tax provisions of $21.8 million and $17.0 million for the three and nine months ended September 30, 2010, respectively. During the third quarter of 2010, the Company concluded that its domestic deferred tax assets could not be realized on a more-likely-than-not basis, therefore a valuation allowance of $16.2 million was required to be recorded on these previously recognized deferred tax assets. This valuation allowance had no cash impact and was recorded within the tax provision for the three and nine months ended September 30, 2010.
GAAP net loss for the three and nine months ended September 30, 2009 was $2.0 million, or $0.05 per share, and $1.6 million, or $0.04 per share, respectively.
Non-GAAP operating results exclude stock-based compensation expenses of $2.2 million for the three months ended September 30, 2010 and 2009 and $2.3 million for the three months ended June 30, 2010. For the nine months ended September 30, 2010 and 2009, non-GAAP operating results exclude stock-based compensation expense of $7.2 million and $6.7 million, respectively.
The Company closed the quarter with $33.8 million in cash, cash equivalents, and marketable securities. Deferred revenue at September 30, 2010 was $20.5 million.
aGartner and others agree that traditional backup is broken due to exponential data growth, server virtualization, and round-the-clock demands on mission-critical applications a" and it is in FalconStora™s DNA to address this problem,a said Jim McNiel, interim president and interim CEO of FalconStor Software. aWe have the technology and the expertise to redefine data protection to match the way IT directors view their data center a" as a collection of services. As a result, we are building the industrya™s first service-oriented data protection solution for primary data centers and the cloud. It is upon this foundation that we expect to grow our business.a
The Company will host a conference call to discuss its financial results on Tuesday, November 16, 2010 at 8:00 a.m. EST. To participate in the conference call, please dial:
Toll Free: 1-877-941-6012
International: +1-480-248-5085
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?ED=143523172&RG=1&UID ]
Meeting: FalconStor Q3 2010 Earnings
Meeting password: q3numbers
Meeting Number: 484 349 617
If you are unable to register via the Internet, please contact Joanne Ferrara, Investor Relations at 631-773-5813 or [ joanne.ferrara@falconstor.com ].
A conference call replay is scheduled to be available beginning November 16, 2010 at 10:30 a.m. EST through 11:59 p.m. EST on November 20, 2010. To listen to the replay of the call, dial toll free: 1-800-406-7325 or International: +1-303-590-3030, passcode: 4386406, or visit our website at [ www.falconstor.com/investors ].
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 Companya™s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Companya™s operating performance. In addition, these non-GAAP financial measures facilitate managementa™s internal comparisons to the Companya™s historical operating results and comparisons to competitorsa™ 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 noncash stock-based compensation charges for all periods presented. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of GAAP to Non-GAAP Financial Measures, which is included in this press release.
About FalconStor
FalconStor Software, Inc. (NASDAQ: FALC) is the market leader in disk-based data protection.FalconStor delivers proven, comprehensive data protection solutions that facilitate the continuous availability of business-critical data with speed, integrity and simplicity.The Companya™s TOTALLY Opena" technology solutions, built upon the award-winning IPStor® platform, include the industry leading Virtual Tape Library (VTL) with deduplication, Continuous Data Protector (CDP), File-interface Deduplication System (FDS), and Network Storage Server (NSS), each enabled with WAN-optimized replication for disaster recovery and remote office protection, and the HyperFSa" file system. FalconStor products are available as OEM or branded solutions from industry leaders, including Acer, Data Direct Networks, Dynamic Solutions International, EMC, Fujitsu, Hitachi Data Systems, HP, Huawei, Pillar Data Systems, SGI, SeaChange and Spectra Logic and are deployed by thousands of customers worldwide, from small businesses to Fortune 1000 enterprises.
FalconStor is headquartered in Melville, N.Y., with offices throughout Europe and the Asia Pacific region.FalconStor is an active member of the Storage Networking Industry Association (SNIA).For more information, visit [ www.falconstor.com ] or call 1-866-NOW-FALC (866-669-3252).
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 FalconStora™s products and services; technological change in the storage and networking industries; competition in the network storage software market; the potential failure of FalconStora™s OEM partners to introduce or to market products incorporating FalconStora™s products; intellectual property issues; and other risk factors discussed in FalconStora™s reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.
FalconStor, FalconStor Software and IPStor are registered trademarks and TOTALLY Open and HyperFS are 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 readera™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 readera™s own risk.
FalconStor Software, Inc. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| September 30, 2010 | December 31, 2009 | ||||||||
| (unaudited) | |||||||||
| Assets | |||||||||
| Current assets: | |||||||||
Cash and cash equivalents | $ | 8,808,032 | $ | 15,752,528 | |||||
| Marketable securities | 23,952,698 | 24,952,966 | |||||||
| Accounts receivable, net | 19,177,614 | 24,948,261 | |||||||
| Prepaid expenses and other current assets | 1,721,781 | 1,556,787 | |||||||
| Income tax receivable | 515,082 | 830,816 | |||||||
| Inventory | 2,049,972 | 329,657 | |||||||
| Deferred tax assets, net | - | 4,320,773 | |||||||
| Total current assets | 56,225,179 | 72,691,788 | |||||||
| Property and equipment, net | 6,120,576 | 7,601,727 | |||||||
| Long-term marketable securities | 1,087,313 | 1,077,466 | |||||||
| Deferred tax assets, net | 85,918 | 9,698,859 | |||||||
| Other assets, net | 2,425,569 | 2,958,229 | |||||||
| Goodwill | 4,150,339 | 4,150,339 | |||||||
| Other intangible assets, net | 475,470 | 823,416 | |||||||
| Total assets | $ | 70,570,364 | $ | 99,001,824 | |||||
| Liabilities and Stockholders' Equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 1,188,625 | $ | 1,570,190 | |||||
| Accrued expenses | 8,227,244 | 8,454,743 | |||||||
| Deferred revenue, net | 15,233,041 | 16,570,076 | |||||||
| Total current liabilities | 24,648,910 | 26,595,009 | |||||||
| Other long-term liabilities | 2,422,714 | 608,907 | |||||||
| Deferred revenue, net | 5,243,547 | 5,644,994 | |||||||
| Total liabilities | 32,315,171 | 32,848,910 | |||||||
| Commitments and Contingencies | |||||||||
| Total stockholders' equity | 38,255,193 | 66,152,914 | |||||||
| Total liabilities and stockholders' equity | $ | 70,570,364 | $ | 99,001,824 | |||||
FalconStor Software, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||||||
| Revenues : | |||||||||||||||||
| Product revenues | $ | 11,366,493 | $ | 14,397,983 | $ | 33,382,701 | $ | 46,087,209 | |||||||||
| Support and services revenues | 7,609,339 | 7,142,186 | 22,983,495 | 20,942,665 | |||||||||||||
| 18,975,832 | 21,540,169 | 56,366,196 | 67,029,874 | ||||||||||||||
| Cost of revenues: | |||||||||||||||||
| Product | 2,120,727 | 855,566 | 6,179,952 | 2,015,567 | |||||||||||||
| Support and service | 3,104,108 | 3,456,215 | 10,020,153 | 10,133,565 | |||||||||||||
| Total cost of revenues | 5,224,835 | 4,311,781 | 16,200,105 | 12,149,132 | |||||||||||||
Gross profit | $ | 13,750,997 | $ | 17,228,388 | $ | 40,166,091 | $ | 54,880,742 | |||||||||
| Operating expenses: |
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|
|
|
|
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| |||||||||
| Research and development costs | 6,445,992 | 6,911,215 | 20,211,811 | 19,890,526 | |||||||||||||
| Selling and marketing | 9,724,007 | 10,391,931 | 31,165,975 | 31,023,224 | |||||||||||||
| General and administrative | 2,403,954 | 2,388,860 | 7,217,428 | 6,996,357 | |||||||||||||
| Total operating expenses | 18,573,953 | 19,692,006 | 58,595,214 | 57,910,107 | |||||||||||||
Operating loss | (4,822,956 | ) | (2,463,618 | ) | (18,429,123 | ) | (3,029,365 | ) | |||||||||
Interest and other income, net | 205,518 | 239,516 | 103,077 | 18,811 | |||||||||||||
| Loss before income | |||||||||||||||||
| taxes | (4,617,438 | ) | (2,224,102 | ) | (18,326,046 | ) | (3,010,554 | ) | |||||||||
| Provision (benefit) for income taxes | 21,799,389 | (192,697 | ) | 16,996,344 | (1,394,902 | ) | |||||||||||
| Net loss | $ | (26,416,827 | ) | $ | (2,031,405 | ) | $ | (35,322,390 | ) | $ | (1,615,652 | ) | |||||
| Basic net loss per share | $ | (0.58 | ) | $ | (0.05 | ) | $ | (0.78 | ) | $ | (0.04 | ) | |||||
| Diluted net loss per share | $ | (0.58 | ) | $ | (0.05 | ) | $ | (0.78 | ) | $ | (0.04 | ) | |||||
| Weighted average basic shares | |||||||||||||||||
| outstanding | 45,836,621 | 44,803,379 | 45,367,998 | 44,812,807 | |||||||||||||
| Weighted average diluted shares | |||||||||||||||||
| outstanding | 45,836,621 | 44,803,379 | 45,367,998 | 44,812,807 | |||||||||||||
FalconStor Software, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited) | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||||||
| GAAP loss from operations | $ | (4,822,956) | $ | (2,463,618) | $ | (18,429,123) | $ | (3,029,365) | |||||
| Add: non-cash stock option expense (1) | 2,197,947 | 2,241,792 | 7,170,617 | 6,712,549 | |||||||||
| Non-GAAP (loss) income from | |||||||||||||
| operations | (2,625,009) | (221,826) | (11,258,506) | 3,683,184 | |||||||||
| |||||||||||||
| GAAP net loss | $ | (26,416,827) | $ | (2,031,405) | $ | (35,322,390) | $ | (1,615,652) | |||||
| Add: non-cash stock option expense, | |||||||||||||
| net of income taxes (2) | (300,169) | 2,149,332 | 3,106,827 | 5,187,743 | |||||||||
| Non-GAAP net (loss) income | (26,716,996) | 117,927 | (32,215,563) | 3,572,091 | |||||||||
| GAAP gross margin a" Product | 81% | 94% | 81% | 96% | |||||||||
Add: non-cash stock option expense (1) | 0% | 0% | 0% | 0% | |||||||||
| Non-GAAP gross margin - Product | 81% | 94% | 82% | 96% | |||||||||
| GAAP gross margin a" Support | |||||||||||||
| and Service | 59% | 52% | 56% | 52% | |||||||||
| Add: non-cash stock option expense (1) | 4% | 6% | 4% | 5% | |||||||||
| Non-GAAP gross margin a" Support and Service | 63% | 57% | 60% | 57% | |||||||||
| GAAP operating margin Add: non-cash stock option expense (1) | (25%) 12% | (11%) 10% | (33%) 13% | (5%) 10% | |||||||||
| Non-GAAP operating margin | (14%) | (1%) | (20%) | 5% | |||||||||
| |||||||||||||
| GAAP Basic EPS | $ | (0.58) | $ | (0.05) | $ | (0.78) | $ | (0.04) | |||||
| Add: non-cash stock option expense, | |||||||||||||
| net of income taxes (2) | (0.01) | 0.05 | 0.07 | 0.12 | |||||||||
| Non-GAAP Basic EPS | (0.58) | 0.00 | (0.71) | 0.08 | |||||||||
| |||||||||||||
| GAAP Diluted EPS | $ | (0.58) | $ | (0.05) | $ | (0.78) | $ | (0.04) | |||||
| Add: non-cash stock option expense, | |||||||||||||
| net of income taxes (2) | (0.01) | 0.05 | 0.07 | 0.11 | |||||||||
| Non-GAAP Diluted EPS | (0.58) | 0.00 | (0.71) | 0.08 | |||||||||
| |||||||||||||
| Weighted average basic shares Outstanding (GAAP and as adjusted) | 45,836,621 | 44,803,379 | 45,367,998 | 44,812,807 | |||||||||
| Weighted average diluted shares Outstanding (GAAP and as adjusted) | 45,836,621 | 46,823,133 | 45,367,998 | 46,041,703 | |||||||||
Footnotes:
(1) Represents non-cash, stock-based compensation charges as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||
| Cost of revenues - Product | $ | 9,755 | $ | 7,086 | $ | 23,696 | $ | 21,027 | ||||||
| Cost of revenues a" Support and service | 277,839 | 397,414 | 887,930 | 1,149,568 | ||||||||||
| Research and development costs | 680,179 | 813,929 | 2,480,509 | 2,281,750 | ||||||||||
| Selling and marketing | 978,559 | 731,571 | 2,875,275 | 2,425,043 | ||||||||||
| General and administrative | 251,615 | 291,792 | 903,207 | 835,161 | ||||||||||
| Total non-cash stock-based | ||||||||||||||
| compensation expense | $ | 2,197,947 | $ | 2,241,792 | $ | 7,170,617 | $ | 6,712,549 | ||||||
(2) Represents the effects of non-cash stock-based compensation expense recognized in accordance with the FASB Accounting Standards Codification, Topic 718, for the three and nine months ended September 30, 2010 and 2009, net of related income tax effects.
