FalconStor Software Announces Fourth Quarter 2015 Results
/EINPresswire.com/ -- MELVILLE, NY--(Marketwired - February 16, 2016) - FalconStor Software®, Inc. (NASDAQ: FALC), a market leader in software-defined storage, today announced financial results for its fourth quarter ended December 31, 2015.
"Our strategy for 2015 was to launch our flagship product FreeStor® and execute upon a three-pronged, go-to-market plan which included OEMs, Managed and Cloud Service Providers and enterprise customers. We believe we over-achieved our go-to-market objectives which have resulted in adoption and accolades for the FreeStor product," said Gary Quinn, President and Chief Executive Officer. "We continue to deliver improved go-to-market metrics while innovating more and increasing the demand and awareness in the marketplace for FreeStor. We believe 2015 was the end of the transition for the Company and 2016 will begin to provide the results of an emerging software-defined storage leader."
Financial Highlights:
- Total revenue for the fourth quarter was $9.4 million compared with revenue of $9.7 million in the third quarter of 2015 and compared with $11.8 million in the fourth quarter of 2014.
- Total bookings for the fourth quarter increased 14% to $10.0 million compared with $8.8 million in the third quarter of 2015, and compared with $13.6 million in the fourth quarter of 2014. On a constant currency basis our fourth quarter 2015 bookings totaled $10.5 million compared with $9.3 million in the third quarter of 2015.
- In the fourth quarter of 2015 approximately 80% of our total bookings were ratable as compared with 81% in the fourth quarter of 2014. For all of fiscal 2015, approximately 81% of our total bookings were ratable compared with 77% in fiscal year 2014.
- In the fourth quarter of 2015 approximately 49% of our total product bookings were ratable compared with 57% in the fourth quarter of 2014. For all of fiscal 2015, approximately 56% of our total product bookings were ratable compared with 46% in fiscal year 2014.
- Our deferred revenue balance as of December 31, 2015 increased 2% compared with December 31, 2014 when excluding the impact of our joint-development agreement. Our deferred revenue balance as of December 31, 2015 sequentially increased 4% compared with September 30, 2015.
- The Company closed the quarter with $13.4 million of cash, cash equivalents and marketable securities, compared with $21.8 million at December 31, 2014.
- Non-GAAP operating expenses decreased 9% compared with the third quarter of 2015 and 25% when compared with the fourth quarter of 2014. Those non-GAAP expenses totaled $10.7 million in the fourth quarter of 2015, compared with non-GAAP expenses of $11.8 million in the third quarter of 2015 and non-GAAP expenses of $14.0 million in the fourth quarter of 2014.
- Non-GAAP gross margins were 77% in the fourth quarter of 2015, compared with non-GAAP gross margins of 75% in the third quarter of 2015 and 78% in the fourth quarter of 2014.
Business Highlights:
- During the quarter, FreeStor was named "2015 Product of the Year" by the SVC Awards (Virtualization/ Software-Defined Storage) and was the "2015 Storage Company of the Year" runner-up. FreeStor was the "2015 SDS Product of the Year" by DoIT, as well as the "2015 SDS Product of the Year" by ZDNet. Finally, FreeStor was the "2015 SDS Product of the Year" by IT168.com. FreeStor is also in consideration for additional awards to be announced in February and March 2016.
- During the quarter the Company announced the addition of industry leaders from the analyst community with Jimmie Chang - Director Marketing Asia along with the addition of Farid Yavari a visionary and architect for storage from eBay. These additions are a tribute to the success that FreeStor is achieving and the belief that the future of software-defined storage resides in the future of FreeStor.
- The Company was present and speaking at numerous events throughout the globe: VMworld Barcelona, Oracle OpenWorld, OpenStack -- Tokyo, Gartner Symposium and Gartner DC Conference.
- The Company announced the availability of its OpenStack Cinder driver to bring the FreeStor offering to the open source community.
- The Company continues to increase the awareness and demand for the FreeStor offering with new indicators from TrendKite showing that FreeStor and the Company enjoyed a 65% year-over-year increase in press and media coverage. FreeStor and the Company's "Share of Voice" increased by 145% relative to key competitors according to TrendKite, as well as a 176% year-over year increase in brand awareness according to Nielsen Ratings.
Financials
Total revenue for the fourth quarter of 2015 was $9.4 million compared with $11.8 million in the same period a year ago. GAAP loss from operations for the fourth quarter of 2015 was $2.0 million, compared with $2.3 million for the fourth quarter of 2014. Included in our operating results for the three months ended December 31, 2015 and 2014 was $0.8 million and $0.3 million of share-based compensation expense, respectively. In addition, included in our operating results for the three months ended December 31, 2014 was $0.1 million of restructuring costs and a benefit of $0.2 million in investigation and litigation costs. GAAP net loss for the quarter was $1.9 million compared with $2.5 million for the same period a year ago. Included in our net loss for the three months ended December 31, 2015 and 2014 was an income tax benefit of less than $0.1 million and an income tax provision of less than $0.1 million, respectively. GAAP net loss attributable to common stockholders for the fourth quarter of 2015, which includes the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock and the accrual of Series A redeemable convertible preferred stock dividends, was $2.3 million, or $0.06 per diluted share, compared with $2.8 million, or $0.06 per diluted share, for the same period a year ago.
Non-GAAP loss from operations was $1.3 million for the fourth quarter of 2015, compared with $2.2 million for the same period a year ago. Non-GAAP net loss was $1.2 million, or $0.03 per diluted share, in the fourth quarter of 2015, compared with $2.4 million, or $0.05 per diluted share, in the fourth quarter of 2014. Non-GAAP results exclude the effects of stock-based compensation, costs associated with the Company's investigations, litigation and settlement related costs, restructuring costs and the effects of our Series A redeemable convertible preferred stock.
Total revenue for the twelve months ended December 31, 2015 was $48.6 million compared with $46.3 million in the same period a year ago. Included in total revenue for the twelve months ended December 31, 2015 and 2014 was $11.3 million and $0.7 million of revenue associated with our joint-development agreement. GAAP loss from operations for the twelve months ended December 31, 2015 was $1.3 million, compared with $6.1 million for the twelve months ended December 31, 2014. Our operating results for the twelve months ended December 31, 2014, benefited from a litigation settlement of $5.3 million associated with our then outstanding lawsuit with the estate of our former Chief Executive Officer, as compared with expense of less than $0.1 million during the same period in 2015. Also included in the operating results for the twelve months ended December 31, 2015 and 2014 were; (i) $1.9 million and $1.5 million of share-based compensation expense, respectively; and (ii) $0.2 million and $1.1 million, respectively, of restructuring costs. GAAP net loss for the twelve months ended December 31, 2015 was $1.9 million compared with $7.2 million for the same period a year ago. Included in our net loss for the twelve months ended December 31, 2015 and 2014 was an income tax provision of $0.4 million and $0.5 million, respectively. GAAP net loss attributable to common stockholders for the twelve months ended December 31, 2015 and 2014 was $3.3 million, or $0.08 per diluted share, compared with $8.5 million, or $0.18 per diluted share, for the same period a year ago.
Non-GAAP income from operations was $0.8 million for the twelve months ended December 31, 2015, compared with a non-GAAP loss from operations of $8.9 million for the same period a year ago. Non-GAAP net income was $0.2 million, or $0.00 per diluted share, for the twelve months ended December 31, 2015, compared with a non-GAAP net loss of $10.0 million, or $0.22 per diluted share, for the twelve months ended December 31, 2014.
The Company closed the quarter with $13.4 million in cash, cash equivalents and marketable securities. Cash flow used in operations for the twelve months ended December 31, 2015 was $6.3 million compared with cash flow provided by operations of $0.5 million during the same period in 2014. Deferred revenue at December 31, 2015 was $25.7 million, compared with $36.5 million at December 31, 2014. Deferred revenue at December 31, 2014 included $11.3 million of deferred revenue related to our joint development agreement.
Conference Call
The Company will host a conference call to discuss its financial results on Tuesday, February 16, 2016 at 4:30 p.m. EDT. To participate in the conference call, please dial:
Toll Free: 1-888-278-8465 International: +1-913-312-1296 Conference ID: 7408796
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=r6c6a38ad63b2fb356c87ed9ffff363bd
Meeting: FalconStor Q4 2015 Earnings Meeting password: Q4numbers15 Meeting Number: 769 384 711
If you are unable to register via the Internet, please contact Melissa Keir, Investor Relations at 631-773-4334 or melissa.keir@falconstor.com.
A conference call replay will be available beginning February 16th at 7:30 p.m. EDT through 7:30 p.m. EDT on February 23rd. To listen to the replay of the call, dial toll free: 1-888-203-1112 or International: +1-719-457-0820, passcode: 7408796.
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) restructuring costs, (iii) effects of our Series A redeemable convertible preferred stock, and (iv) 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 software-defined storage 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 www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).
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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, December 31,
2015 2014
--------------- ---------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 6,013,382 $ 10,873,891
Marketable securities 7,420,042 10,900,722
Accounts receivable, net 6,635,262 8,898,680
Prepaid expenses and other current assets 1,742,668 1,596,916
Inventory 70,534 352,493
Deferred tax assets, net 205,816 316,586
--------------- ---------------
Total current assets 22,087,704 32,939,288
Property and equipment, net 1,565,932 2,147,188
Deferred tax assets, net 110,060 7,503
Software development costs, net 1,116,816 1,508,517
Other assets, net 1,139,377 1,373,964
Goodwill 4,150,339 4,150,339
Other intangible assets, net 256,137 196,037
--------------- ---------------
Total assets $ 30,426,365 $ 42,322,836
=============== ===============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 1,005,944 $ 1,266,504
Accrued expenses 6,783,514 6,939,198
Deferred tax liabilities, net 89,343 23,307
Deferred revenue, net 16,553,519 23,380,012
--------------- ---------------
Total current liabilities 24,432,320 31,609,021
Other long-term liabilities 735,089 630,444
Deferred tax liabilities, net 27,069 226,443
Deferred revenue, net 9,122,289 13,097,215
--------------- ---------------
Total liabilities 34,316,767 45,563,123
--------------- ---------------
Commitments and contingencies
Series A redeemable convertible preferred
stock 7,818,554 7,230,941
Total stockholders' deficit (11,708,956) (10,471,228)
--------------- ---------------
Total liabilities and stockholders' deficit $ 30,426,365 $ 42,322,836
=============== ===============
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------- -----------------------------
2015 2014 2015 2014
-------------- -------------- -------------- --------------
Revenue:
Product revenue $ 3,470,274 $ 4,566,976 $ 24,847,724 $ 17,723,000
Support and
services
revenue 5,925,026 7,226,933 23,723,267 28,550,515
-------------- -------------- -------------- --------------
Total revenue 9,395,300 11,793,909 48,570,991 46,273,515
-------------- -------------- -------------- --------------
Cost of revenue:
Product 323,843 683,976 1,942,985 2,791,950
Support and
service 1,863,312 1,972,358 7,739,149 7,838,766
-------------- -------------- -------------- --------------
Total cost of
revenue 2,187,155 2,656,334 9,682,134 10,630,716
-------------- -------------- -------------- --------------
Gross profit $ 7,208,145 $ 9,137,575 $ 38,888,857 $ 35,642,799
Operating
expenses:
Research and
development
costs 3,059,879 2,965,359 12,787,606 12,452,528
Selling and
marketing 4,216,300 6,409,467 18,021,989 24,426,438
General and
administrative 1,971,790 2,209,295 9,181,289 9,105,545
Investigation,
litigation, and
settlement
related
(benefits)
costs - (231,214) 8,842 (5,417,925)
Restructuring
costs - 89,746 172,995 1,135,310
-------------- -------------- -------------- --------------
Total operating
expenses 9,247,969 11,442,653 40,172,721 41,701,896
-------------- -------------- -------------- --------------
Operating loss (2,039,824) (2,305,078) (1,283,864) (6,059,097)
-------------- -------------- -------------- --------------
Interest and
other income
(loss), net 70,014 (157,635) (269,954) (642,633)
-------------- -------------- -------------- --------------
Loss before
income taxes (1,969,810) (2,462,713) (1,553,818) (6,701,730)
(Benefit)
provision for
income taxes (28,193) 45,858 375,543 510,091
-------------- -------------- -------------- --------------
Net loss $ (1,941,617) $ (2,508,571) $ (1,929,361) $ (7,211,821)
============== ============== ============== ==============
Less: Accrual of
Series A
redeemable
convertible
preferred stock
dividends 196,727 186,904 765,203 747,616
Less: Accretion
to redemption
value of Series
A redeemable
convertible
preferred stock 156,670 131,541 587,613 493,363
-------------- -------------- -------------- --------------
Net loss
attributable
to common
stockholders $ (2,295,014) $ (2,827,016) $ (3,282,177) $ (8,452,800)
============== ============== ============== ==============
Basic net loss
per share
attributable to
common
stockholders $ (0.06) $ (0.06) $ (0.08) $ (0.18)
============== ============== ============== ==============
Diluted net loss
per share
attributable to
common
stockholders $ (0.06) $ (0.06) $ (0.08) $ (0.18)
============== ============== ============== ==============
Weighted average
basic shares
outstanding 41,356,757 44,008,043 41,093,644 46,265,225
============== ============== ============== ==============
Weighted average
diluted shares
outstanding 41,356,757 44,008,043 41,093,644 46,265,225
============== ============== ============== ==============
FalconStor Software, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------- -----------------------------
2015 2014 2015 2014
-------------- -------------- -------------- --------------
GAAP loss from
operations $ (2,039,824) $ (2,305,078) $ (1,283,864) $ (6,059,097)
Non-cash stock
option expense
(1) 756,430 260,410 1,929,377 1,466,183
Legal related
(benefits)
costs (3) - (231,214) 8,842 (5,417,925)
Restructuring
costs (4) - 89,746 172,995 1,135,310
-------------- -------------- -------------- --------------
Non-GAAP (loss)
income from
operations $ (1,283,394) $ (2,186,136) $ 827,350 $ (8,875,529)
-------------- -------------- -------------- --------------
GAAP net loss
attributable to
common
stockholders $ (2,295,014) $ (2,827,016) $ (3,282,177) $ (8,452,800)
Non-cash stock
option expense,
net of income
taxes (2) 756,430 260,410 1,929,377 1,466,183
Legal related
(benefits)
costs (3) - (231,214) 8,842 (5,417,925)
Restructuring
costs (4) - 89,746 172,995 1,135,310
Effects of
Series A
redeemable
convertible
preferred stock
(5) 353,397 318,445 1,352,816 1,240,979
-------------- -------------- -------------- --------------
Non-GAAP net
(loss) income $ (1,185,187) $ (2,389,629) $ 181,853 $(10,028,253)
-------------- -------------- -------------- --------------
GAAP gross margin 77% 77% 80% 77%
Non-cash stock
option expense
(1) 0% 0% 0% 0%
-------------- -------------- -------------- --------------
Non-GAAP gross
margin 77% 78% 80% 77%
-------------- -------------- -------------- --------------
GAAP gross margin
- Product 91% 85% 92% 84%
Non-cash stock
option expense
(1) 0% 0% 0% 0%
-------------- -------------- -------------- --------------
Non-GAAP gross
margin - Product 91% 85% 92% 84%
-------------- -------------- -------------- --------------
GAAP gross margin
- Support and
Service 69% 73% 67% 73%
Non-cash stock
option expense
(1) 0% 0% 0% 0%
-------------- -------------- -------------- --------------
Non-GAAP gross
margin - Support
and Service 69% 73% 68% 73%
-------------- -------------- -------------- --------------
GAAP operating
margin (22%) (20%) (3%) (13%)
Non-cash stock
option expense
(1) 8% 2% 4% 3%
Legal related
(benefits)
costs (3) 0% (2%) 0% (12%)
Restructuring
costs (4) 0% 1% 0% 2%
-------------- -------------- -------------- --------------
Non-GAAP
operating margin (14%) (19%) 2% (19%)
-------------- -------------- -------------- --------------
GAAP Basic EPS $ (0.06) $ (0.06) $ (0.08) $ (0.18)
Non-cash stock
option expense,
net of income
taxes (2) 0.02 0.01 0.05 0.03
Legal related
(benefits)
costs (3) 0.00 (0.01) 0.00 (0.12)
Restructuring
costs (4) 0.00 0.00 0.00 0.02
Effects of
Series A
redeemable
convertible
preferred stock
(5) 0.01 0.01 0.03 0.03
-------------- -------------- -------------- --------------
Non-GAAP Basic
EPS $ (0.03) $ (0.05) $ 0.00 $ (0.22)
-------------- -------------- -------------- --------------
GAAP Diluted EPS $ (0.06) $ (0.06) $ (0.08) $ (0.18)
Non-cash stock
option expense,
net of income
taxes (2) 0.02 0.01 0.04 0.03
Legal related
(benefits)
costs (3) 0.00 (0.01) 0.00 (0.12)
Restructuring
costs (4) 0.00 0.00 0.00 0.02
Effects of
Series A
redeemable
convertible
preferred stock
(5) 0.01 0.01 0.03 0.03
-------------- -------------- -------------- --------------
Non-GAAP Diluted
EPS $ (0.03) $ (0.05) $ 0.00 $ (0.22)
-------------- -------------- -------------- --------------
Weighted average
basic shares
outstanding
(GAAP and as
adjusted) 41,356,757 44,008,043 41,093,644 46,265,225
============== ============== ============== ==============
Weighted average
diluted shares
outstanding
(GAAP) 41,356,757 44,008,043 41,093,644 46,265,225
============== ============== ============== ==============
Weighted average
diluted shares
outstanding (as
adjusted) 41,356,757 44,008,043 42,906,072 46,265,225
============== ============== ============== ==============
Footnotes:
- Represents non-cash, stock-based compensation charges as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------- -----------------------------
2015 2014 2015 2014
-------------- -------------- -------------- --------------
Cost of revenues
- Product $ - $ - $ - $ -
Cost of revenues
- Support and
Service 18,419 16,297 98,776 91,197
Research and
development
costs 577,355 59,924 806,348 282,416
Selling and
marketing 60,632 47,506 285,787 327,694
General and
administrative 100,024 136,683 738,466 764,876
-------------- -------------- -------------- --------------
Total non-cash
stock based
compensation
expense $ 756,430 $ 260,410 $ 1,929,377 $ 1,466,183
============== ============== ============== ==============
- Represents the effects of non-cash stock-based compensation expense recognized in accordance with the FASB Accounting Standards Codification, Topic 718, net of related income tax effects. For the three and twelve months ended December 31, 2015 and 2014, the tax expense for both GAAP and Non-GAAP basis approximate the same amount.
- Legal related costs represent expenses/gains in connection with the Company's investigations, litigation and settlement related costs for each respective period presented.
- Represents restructuring costs which were incurred during each respective period presented.
- 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.
Melissa Keir
Investor Relations
631-773-4334
melissa.keir@falconstor.com
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