FalconStor Software, Inc. (NASDAQ: FALC), the provider of disk-based
data protection solutions, today announced financial results for its
third quarter ended September 30, 2012.
Total revenues for the third quarter of 2012 were $17.1 million,
compared with $18.9 million for the same period a year ago, a decline of
9%. Total revenues for the third quarter of 2012 increased 4% compared
with the second quarter of 2012.
The global macroeconomic weakness continues to factor in soft IT
spending, lower business confidence, and uncertainty in the marketplace,
which has resulted in lower than anticipated revenues for the quarter.
"While our revenues fell short of our expectations, we are pleased that
we were able to achieve sequential revenue growth during a difficult
macro environment," said Jim McNiel, president and CEO of FalconStor.
"The uncertainty surrounding the global marketplace continues to cause
disruptions in our business, specifically with budget freezes, elongated
sales cycles, or, in some cases, lost deals due to competitive pricing
and sales strategies. Finally, we believe that the steps we took during
the third quarter to reduce our operating expenses in response to the
current environment have left us well-positioned to execute on our plan
to invest in our existing and our new product initiatives."
Retention of Financial Advisor
FalconStor has retained the investment banking firm Wells Fargo
Securities, LLC as its exclusive financial advisor to assist the Company
in exploring and evaluating strategic alternatives to maximize
stockholder value. The Company intends to disclose developments
regarding the process only when or if the Board has approved a specific
GAAP loss from operations for the quarter was $3.6 million, compared
with an operating loss of $5.1 million for the same period a year ago.
GAAP net loss for the third quarter was $3.6 million, or $0.08 per
share, compared with $5.4 million, or $0.12 per share in the third
quarter of 2011. Included in the operating results for the third quarter
of 2012 was a net reduction of $1.4 million of investigation,
litigation, and settlement costs. The net reduction of $1.4 million
resulted from the Company recording a receivable in the third quarter
for the recovery of $1.1 million of previously accrued legal fees and
$0.4 million of certain costs previously accrued associated with the
class action and derivative suits, as a result of a settlement reached
with one of our insurance carriers in October 2012. These amounts were
partially offset by $0.1 million of overall legal fees not recoverable
through insurance. During the same period in 2011, the Company had
recorded $0.5 million of costs associated with the then outstanding
government investigations and related class actions, which was comprised
of overall legal fees.
Non-GAAP loss from operations was $3.1 million in the third quarter of
2012, compared with a loss from operations of $2.3 million for the same
period a year ago. Non-GAAP net loss was $3.1 million, or a loss of
$0.07 per share, in the third quarter of 2012, compared with a net loss
of $2.6 million, or $0.06 per share, in the third quarter of 2011.
Non-GAAP results exclude the effects of stock-based compensation, costs
associated with the Company's investigations, litigation and settlement
related costs, and restructuring cost.
For the nine months ended September 30, 2012, total revenues were $52.9
million, compared with $57.4 million for the same period a year ago.
GAAP loss from operations for the nine month period was $12.0 million
compared with a loss of $16.8 million in 2011. GAAP net loss was $12.6
million, or $0.27 per share, for the nine months ended September 30,
2012, compared with a loss of $17.3 million, or $0.37 per share, in the
same period a year ago.
Non-GAAP loss from operations was $9.4 million for the nine months ended
September 30, 2012, compared with a loss of $7.5 million in 2011.
Non-GAAP net loss was $10.1 million, or $0.21 per share, compared with a
loss of $8.0 million, or $0.17 per share, in the same period a year ago.
The Company closed the quarter with $25.8 million in cash, cash
equivalents, and marketable securities. Deferred revenue at September
30, 2012 was $23.6 million, a decrease of 5% compared with the same
period a year ago.
The Company will host a conference call to discuss its financial results
on Wednesday November 7, 2012 at 4:30 p.m. EST. To participate in the
conference call, please dial:
Toll Free: 1-877-941-8631International: +1-480-629-9821
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
Meeting: FalconStor Q3 2012 EarningsMeeting password: q3numbersMeeting
Number: 769 916 414
If you are unable to register via the Internet, please contact Joanne
Ferrara, Investor Relations at 631-773-5813 or email@example.com.
A conference call replay is scheduled to be available beginning November
7 at 6:30 p.m. EST through 11:59 p.m. EST on November 13. To listen to
the replay of the call, dial toll free: 1-800-406-7325 or International:
+1-303-590-3030, passcode: 4572048, 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 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) costs associated with the Company's class action
and derivative lawsuits, government investigations, and related legal
fees, (ii) noncash stock-based compensation charges and any potential
tax effects and (iii) restructuring costs, when applicable. For a
reconciliation of our GAAP and non-GAAP financial results, please refer
to our Non-GAAP Operating Data GAAP Reconciliation, presented in this
FalconStor Software, Inc. (NASDAQ: FALC) is a market leader in
disk-based data protection. The company's mission is to transform
traditional backup and disaster recovery (DR) into next-generation
service-oriented data protection. Built upon an award-winning platform,
FalconStor solutions deliver disk-based
data protection, WAN-optimized
replication and DR
automation. FalconStor solutions are available through a worldwide
network of partners, including solution providers, top-tier strategic
partners and major OEMs. Thousands of customers worldwide, from small
businesses to Fortune 100 enterprises, entrust their data to FalconStor
solutions. FalconStor maintains headquarters in Melville, N.Y., and
offices throughout Europe and the Asia Pacific region. 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
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 and FalconStor Software are registered trademarks of
FalconStor Software, Inc. in the US and other countries. All other
company and product names contained herein may be trademarks of their
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Investigation, litigation andsettlement related costs
Weighted average basic sharesoutstanding
Weighted average diluted sharesoutstanding
Reconciliation of GAAP to Non-GAAP Financial Measures
(1) Represents non-cash, stock-based compensation charges as
Total non-cash stock-basedcompensation expense
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