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EX-99.2 - EX-99.2 - DATALINK CORPa11-10644_1ex99d2.htm

Exhibit 99.1

 

DATALINK REPORTS 2011 FIRST QUARTER OPERATING RESULTS

 

Record First Quarter Results Beat Revenues and Earnings Guidance

 

CHANHASSEN, Minn., April 20, 2011 — Datalink (Nasdaq: DTLK), a leading provider of data center infrastructure and services, today reported results for its first quarter that ended March 31, 2011.  For the first quarter, revenues were $85.7 million compared to $62.5 million for the prior-year period, a 37% increase.  Product revenue was $55.6 million and services revenue was $30.1 million, up 46% and 23% respectively, from the first quarter of 2010.

 

GAAP Results

 

On a GAAP basis, the company reported net earnings of $1.7 million, or $0.12 per diluted share, for the first quarter ending March 31, 2011. This compares to loss of $891,000, or $0.07 per diluted share, in the first quarter of 2010.

 

Non-GAAP Results

 

Non-GAAP net earnings for the first quarter of 2011 were $2.2 million, or $0.16 per diluted share, compared to non-GAAP earnings of $107,000, or $0.01 per diluted share, in the first quarter of 2010.    A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

 

Paul Lidsky, Datalink’s president and CEO, commented, “The first quarter of 2011 was another record quarter for Datalink.  Our momentum from a record 2010 has continued into 2011.  We reported record first quarter revenues of $85.7 million, GAAP earnings of $1.7 million and non-GAAP earnings of $2.2 million, both of which also exceeded our internal plan and investor guidance given at the beginning of the quarter.  This represents our eighth consecutive quarter of

 



 

non-GAAP net earnings.   Other significant accomplishments for the first quarter of 2011 include:

 

·                  We continue to see an increase in multi-million dollar accounts with Global 500 companies. In the first quarter we had 14 customers each purchase over $1 million of product and services from us as compared to 5 customers in the first quarter of 2010.  In addition, we acquired 67 new customers in the first quarter of 2011.

·                  Our customer intimacy is a corner stone to our go to market strategy to deliver premier services to our customers, as evident in our 21% increase in services to $30.1 million.

·                  We completed a successful follow-on public offering, resulting in the company raising $17.5 million and increasing our public float by 4.3 million shares.  These funds are intended for future acquisitions to accelerate our growth and increase our profitability.

·                  We exited the quarter with a strong balance sheet.  Our working capital increased $21 million to $42.6 million, which includes the proceeds from our public offering, from the fourth quarter and we have no debt.

·                  We entered into a $10 million line of credit agreement, which gives us additional capital availability for organic growth.

·                  We were named by CRN to the Tech Elite 250 which serves as the industry’s definitive list of solution providers with both deep technical expertise and premier certifications. Datalink was recognized as a best-of-breed integrator who has invested in technical know-how and earned premier certifications in the area of data center expertise for North American customers.”

 

Outlook

 

Based on the company’s backlog and sales pipeline we expect revenues to be between $80 million and $86 million for the second quarter of 2011 and we expect second quarter 2011 net earnings to be between $0.07 and $0.11 per diluted share on a GAAP basis, and net earnings to be between $0.09 and $0.13 per diluted share on a non-GAAP basis.  This compares to revenues

 



 

of $70.9 million in the second quarter of 2010.   GAAP net earnings per share in the second quarter of 2010 were break-even and non-GAAP net earnings per share were $0.06 per share.

 

“I am pleased with the strong start to the new year and as our second quarter guidance suggests, we expect this growth to continue into the second quarter of 2011.  Our second quarter guidance represents a 13% to 20% increase in revenues,” said Lidsky.  “I believe that our second quarter forecast is indicative of the steadily increasing demand for unified data center infrastructure and that our customers and prospects continue to invest in this area.  Datalink’s investments in our expanded product and services portfolio position us to take full advantage of this expanding market,” he added.

 

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the Incentra acquisition to deferred revenue and costs, integration and transaction costs related to acquisitions, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $0.02 per diluted share for the second quarter of 2011.

 

Effect of Accounting Change

 

Effective January 1, 2011, the company was required to adopt a new revenue recognition accounting standard.  This new standard, which applies to all resellers of computer hardware, requires that the company now recognize product revenues upon shipment versus upon installation under its old revenue recognition method.  Accordingly the company’s first quarter 2011 results reflects this new revenue recognition policy.  As discussed in the company’s first quarter 2011 revenue guidance approximately $7.5 million of revenues were recognized in the first quarter of 2011 that would have been recognized in the fourth quarter of 2010 if the company had been recognizing revenue upon shipment in 2010.

 

During the first quarter of 2011 approximately $14 million of revenues that booked upon shipment had not yet been installed at March 31, 2011 in accordance with the new revenue

 



 

recognition accounting standard.  A more detailed disclosure and reconciliation will be provided in the company’s Form 10-Q for the first quarter of 2011.

 

Conference Call and Webcast Today

 

Datalink will hold a conference call at 4:00 p.m. central time, during which Datalink’s president and chief executive officer, Paul Lidsky, and vice president of finance and chief financial officer, Greg Barnum, will discuss company results and provide a business overview. Participants can access the conference call by dialing (877) 277-9804. Participants will be asked to identify the Datalink conference call and provide the designated identification number (53318947). A live Webcast of the conference call can be heard via Datalink’s website at www.datalink.com.

 

About Datalink

 

A complete data center solutions and services provider for Fortune 500 and mid-tier enterprises, Datalink transforms data centers so they become more efficient, manageable and responsive to changing business needs. Datalink helps leverage and protect storage, server, and network investments with a focus on long-term value, offering a full lifecycle of services, from consulting and design to implementation, management and support. Datalink solutions span virtualization and consolidation, data storage and protection, advanced networks, and business continuity. Each delivers measurable performance gains and maximizes the business value of IT. For more information, call 800.448.6314 or visit www.datalink.com.

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements.  This press release contains forward-looking statements, including our internal projections of anticipated 2011 results, which reflect our views regarding future events and financial performance.  These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated.  The words “aim, “believe,” “expect,” “anticipate,” “intend,” “estimate”, “should” and other expressions which indicate future events and trends identify forward-looking statements.  Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, including, but not limited to:  the level of continuing demand for storage, including the effects of current economic and credit conditions; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; revenue recognition policies that may unpredictably defer reporting of our revenues; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; risks associated with integrating possible future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility in our

 



 

stock price. Further, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably.  We cannot assure that we can grow or maintain our revenue and backlog from current levels.

 

Non-GAAP Details

 

Non-GAAP financial measures exclude the impact from acquisition accounting adjustments to deferred revenue and costs, stock-based compensation expense, amortization of acquisition intangible assets, integration and transaction costs related to acquisitions and the related effects on income taxes.  These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

 

These non-GAAP financial measures facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. We believe that the presentation of these non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to investors and management regarding financial and business trends relating to our financial condition and results of operations.

 

# # #

 

Company Contacts:

Media & Alliances:

 

Investors & Analysts:

Suzanne Gallagher

 

Greg Barnum

SVP of Marketing

 

Vice President and CFO

Phone: 720-566-5110

 

Phone: 952-279-4816

Email: sgallagher@datalink.com

 

Email: gbarnum@datalink.com

 

 

 

Investor Relations:

 

 

Kim Payne

 

 

Investor Relations Coordinator

 

 

Phone: 952-279-4794

 

 

Fax: 952-944-7869

 

 

Email: einvestor@datalink.com

 

 

website: www.datalink.com

 

 

 



 

DATALINK CORPORATION

STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

Products

 

$

55,600

 

$

38,176

 

Services

 

30,094

 

24,368

 

Total net sales

 

85,694

 

62,544

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

Cost of products

 

42,226

 

29,862

 

Cost of services

 

22,713

 

18,073

 

Amortization of intangibles

 

 

277

 

Total cost of sales

 

64,939

 

48,212

 

Gross profit

 

20,755

 

14,332

 

Operating expenses:

 

 

 

 

 

Sales and marketing

 

9,157

 

7,667

 

General and administrative

 

3,829

 

3,503

 

Engineering

 

4,387

 

3,926

 

Integration and transaction costs

 

 

389

 

Amortization of intangibles

 

382

 

382

 

Total operating expenses

 

17,755

 

15,867

 

Earnings (loss) from operations

 

3,000

 

(1,535

)

Interest income, net

 

3

 

5

 

Earnings (loss) before income taxes

 

3,003

 

(1,530

)

Income tax expense (benefit)

 

1,255

 

(639

)

Net earnings (loss)

 

$

1,748

 

$

(891

)

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

Basic

 

$

0.13

 

$

(0.07

)

Diluted

 

$

0.12

 

$

(0.07

)

Weighted average common shares outstanding:

 

 

 

 

 

Basic

 

13,626

 

12,737

 

Diluted

 

14,047

 

12,737

 

 



 

DATALINK CORPORATION

BALANCE SHEETS

(In thousands, except share data)

 

 

 

March 31,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

27,442

 

$

8,988

 

Short term investments

 

1,994

 

 

Accounts receivable, net

 

55,156

 

57,779

 

Inventories

 

2,230

 

2,210

 

Current deferred customer support contract costs

 

52,028

 

48,715

 

Inventories shipped but not installed

 

6,264

 

7,191

 

Income tax receivable

 

 

1,064

 

Other current assets

 

1,011

 

607

 

Total current assets

 

146,125

 

126,554

 

Property and equipment, net

 

2,096

 

2,126

 

Goodwill

 

23,146

 

23,146

 

Finite life intangibles, net

 

4,837

 

5,219

 

Deferred customer support contract costs non-current

 

22,436

 

18,742

 

Other assets

 

297

 

285

 

Total assets

 

$

198,937

 

$

176,072

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

24,394

 

$

28,749

 

Accrued commissions

 

3,460

 

3,546

 

Accrued sales and use tax

 

1,147

 

1,414

 

Accrued expenses, other

 

2,831

 

3,427

 

Income tax payable

 

57

 

 

Current deferred tax liability

 

3,723

 

3,723

 

Customer deposits

 

1,985

 

2,209

 

Current deferred revenue from customer support contracts

 

65,625

 

61,571

 

Other current liabilities

 

271

 

279

 

Total current liabilities

 

103,493

 

104,918

 

Deferred income tax liability

 

203

 

203

 

Deferred revenue from customer support contracts non-current

 

27,442

 

23,284

 

Other liabilities non-current

 

121

 

212

 

Total liabilities

 

131,259

 

128,617

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock, $.001 par value, 50,000,000 shares authorized, 17,170,131 and 13,569,533 shares issued and outstanding as of March 31, 2011 and December 31, 2010, respectively

 

17

 

14

 

Additional paid-in capital

 

61,804

 

43,332

 

Retained earnings

 

5,857

 

4,109

 

Total stockholders’ equity

 

67,678

 

47,455

 

Total liabilities and stockholders’ equity

 

$

198,937

 

$

176,072

 

 



 

DATALINK CORPORATION

RECONCILIATION  BETWEEN GAAP AND NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net earnings (loss) on a GAAP basis

 

$

1,748

 

$

(891

)

Adjustments:

 

 

 

 

 

Amortization of intangible assets

 

 

277

 

Purchase accounting adjustment to Incentra and MCSI deferred revenue and cost, net

 

36

 

373

 

Total gross margin adjustments

 

36

 

650

 

 

 

 

 

 

 

Stock based compensation expense included in sales and marketing

 

30

 

89

 

Stock based compensation expense included in general and administrative

 

296

 

128

 

Stock based compensation expense included in engineering

 

99

 

76

 

Integration and transaction costs

 

 

389

 

Amortization of intangible assets

 

382

 

382

 

Total operating expense adjustments

 

807

 

1,064

 

 

 

 

 

 

 

Income tax expense

 

352

 

716

 

 

 

 

 

 

 

Non-GAAP net earnings

 

$

2,239

 

$

107

 

 

 

 

 

 

 

Non-GAAP net earnings per share - Basic

 

$

0.16

 

$

0.01

 

Non-GAAP net earnings per share - Diluted

 

$

0.16

 

$

0.01

 

 

 

 

 

 

 

Shares used in non-GAAP per share calculation - Basic

 

13,626

 

12,737

 

Shares used in non-GAAP per share calculation - Diluted

 

14,047

 

12,846

 

 



 

DATALINK CORPORATION

STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings (loss)

 

$

1,748

 

$

(891

)

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

 

 

 

 

 

Provision for bad debts

 

24

 

92

 

Depreciation

 

240

 

215

 

Amortization of finite lived intangibles

 

382

 

659

 

Amortization of discount on short term investments

 

 

(11

)

Income tax payable (receivable)

 

1,121

 

(556

)

Stock based compensation expense

 

425

 

293

 

Changes in operating assets and liabilities, in 2010 net of effects of acquisition:

 

 

 

 

 

Accounts receivable, net

 

2,599

 

13,300

 

Inventories

 

907

 

(2,902

)

Deferred costs/revenues/customer deposits, net

 

981

 

288

 

Accounts payable

 

(4,355

)

(9,682

)

Accrued expenses

 

(949

)

(966

)

Other

 

(512

)

(480

)

Net cash provided by (used in) operating activities

 

2,611

 

(641

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Sale (purchase) of investments

 

(1,994

)

1,243

 

Purchases of property and equipment

 

(210

)

(308

)

Net cash provided by (used in) investing activities

 

(2,204

)

935

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from stock offering

 

17,490

 

 

Payment of note payable due to seller of acquired business

 

 

(3,000

)

Excess tax from stock compensation

 

97

 

(29

)

Proceeds from issuance of common stock from option exercise

 

460

 

144

 

Tax withholding payments reimbursed by restricted stock

 

 

(29

)

Net cash provided by (used in) financing activities

 

18,047

 

(2,914

)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

18,454

 

(2,620

)

Cash and cash equivalents, beginning of period

 

8,988

 

12,901

 

Cash and cash equivalents, end of period

 

$

27,442

 

$

10,281

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Cash paid for income taxes

 

$

38

 

$

56

 

Cash received for income tax refunds

 

$

 

$

110