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8-K - 8-K - DATALINK CORPa11-28216_18k.htm
EX-99.2 - EX-99.2 - DATALINK CORPa11-28216_1ex99d2.htm

Exhibit 99.1

 

DATALINK REPORTS 2011 THIRD QUARTER AND NINE MONTH OPERATING RESULTS

 

Record Third Quarter and Nine Month Revenues Up 30% and 31% Year-Over-Year, Respectively

 

CHANHASSEN, Minn., October 19, 2011 — Datalink (Nasdaq: DTLK), a leading provider of data center infrastructure and services, today reported results for its third quarter and nine month period that ended September 30, 2011.  Revenues for the quarter ended September 30, 2011, increased 30% to $90.1 million compared to $69.2 million for the prior-year period.  Revenues for nine months ended September 30, 2011, increased 31% to $265.3 million compared to $202.6 million for the nine months ended September 30, 2010.

 

GAAP Results

On a GAAP basis, the company reported net earnings of $2.8 million or $0.16 per diluted share for the third quarter ended September 30, 2011.  This compares to net earnings of $771,000 or $0.06 per diluted share in the third quarter of 2010.  For the nine months ended September 30, 2011, the company reported net earnings of $7.2 million, or $0.45 per diluted share, compared to a net loss of $115,000, or $0.01 per diluted share, for the nine months ended September 30, 2010.

 

Non-GAAP Results

Non-GAAP net earnings for the third quarter of 2011 were $3.5 million, or $0.21 per diluted share, compared to non-GAAP net earnings of $1.4 million or $0.11 per diluted share, in the third quarter of 2010.  For the nine months ended September 30, 2011, the company reported non-GAAP net earnings of $8.9 million, or $0.56 per diluted share, compared to net earnings of $2.2 million, or $0.17 per diluted share, for the nine months ended September 30, 2010.  A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

 

Paul Lidsky, Datalink President and CEO, commented, “Both revenue and earnings for the third quarter and first nine months of 2011 were records for Datalink.  In addition, this represents our tenth consecutive quarter of non-GAAP net earnings.  Our momentum from a record first half of 2011 has continued and our pipeline, and order flow in the first few weeks of the quarter indicate that this momentum should continue through the fourth quarter.”

 

Significant accomplishments for the third quarter of 2011 include:

 



 

·      Continued growth in multi-million dollar accounts among Global 1000 companies. In the first nine months of 2011, we had 52 customers purchase over $1 million of product and services from Datalink as compared to 37 customers in the first nine months of 2010.  In addition, the company acquired 69 new customers in the third quarter of 2011.

·      Validating Datalink’s commitment to customer intimacy as a cornerstone of its go-to-market strategy to deliver premier services to our customers, the company experienced a 14% increase in services to a record $34.5 million in the third quarter.

·      On October 3, 2011 Datalink acquired the assets of Midwave Corporation, doubling the company’s footprint in the Twin Cities and making it the dominant data center services and infrastructure provider in the region.  The acquisition also doubles Datalink’s Cisco technology and services revenues, expands its managed services portfolio with the addition of a data center infrastructure monitoring service, adds an established security practice including product, services and consulting, and doubles the size of its consulting services team.

·      Datalink exited the quarter with a strong balance sheet.  The company’s working capital increased $5.5 million to $51.6 million, with no debt outstanding.  After the Midwave acquisition the company will still have working capital in excess of $35 million, cash and investments of approximately $20 million and no debt.

 

Outlook

Based on the company’s backlog, sales pipeline, and the results from the acquisition of Midwave, we expect revenues to be between $110 million and $115 million for the fourth quarter of 2011.  This compares to revenues of $91.1 million in the fourth quarter of 2010.  Fourth quarter 2011 net earnings are anticipated to be between $0.17 and $0.22 per diluted share on a GAAP basis, and net earnings to be between $0.22 and $0.27 per diluted share on a non-GAAP basis.  This guidance includes an expected $15 million of revenues from the Midwave acquisition in the fourth quarter.

 

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 $0.05 per diluted share for the fourth 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 third quarter and nine months of 2011 results reflects this new revenue recognition policy.  The company’s revenue for the first nine months of 2011 includes $8.6 million of revenues that were recognized in the first nine months of 2011 that would have been recognized in the fourth quarter of 2010 if the company had been recognizing revenue upon shipment in 2010.

 



 

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 (15261354). 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 our acquisition of Midwave Corporation or any 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:

Investors & Analysts:

Greg Barnum

Vice President and CFO

Phone:  952-279-4816

Email:  gbarnum@datalink.com

 

Media & Alliances:

S&S Public Relations, Inc.

Mallory Primm

Phone: 847-415-9301

Email: mprimm@sspr.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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

55,671

 

$

39,166

 

$

167,811

 

$

121,332

 

Services

 

34,469

 

30,054

 

97,504

 

81,307

 

Total net sales

 

90,140

 

69,220

 

265,315

 

202,639

 

 

 

 

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of products

 

42,963

 

30,014

 

128,156

 

93,995

 

Cost of services

 

25,937

 

22,264

 

73,485

 

60,056

 

Amortization of intangibles

 

 

277

 

 

831

 

Total cost of sales

 

68,900

 

52,555

 

201,641

 

154,882

 

Gross profit

 

21,240

 

16,665

 

63,674

 

47,757

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

8,760

 

8,270

 

27,321

 

24,035

 

General and administrative

 

3,927

 

3,361

 

11,451

 

10,686

 

Engineering

 

3,886

 

3,730

 

12,091

 

11,986

 

Other income

 

(574

)

(503

)

(574

)

(503

)

Integration and transaction costs

 

 

 

 

581

 

Amortization of intangibles

 

382

 

382

 

1,147

 

1,147

 

Total operating expenses

 

16,381

 

15,240

 

51,436

 

47,932

 

Earnings (loss) from operations

 

4,859

 

1,425

 

12,238

 

(175

)

Interest income (expense)

 

(8

)

3

 

(4

)

11

 

Earnings (loss) before income taxes

 

4,851

 

1,428

 

12,234

 

(164

)

Income tax expense (benefit)

 

2,058

 

657

 

4,996

 

(49

)

Net earnings (loss)

 

$

2,793

 

$

771

 

$

7,238

 

$

(115

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.17

 

$

0.06

 

$

0.47

 

$

(0.01

)

Diluted

 

$

0.16

 

$

0.06

 

$

0.45

 

$

(0.01

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

16,432

 

12,821

 

15,488

 

12,783

 

Diluted

 

16,963

 

12,909

 

15,962

 

12,783

 

 



 

DATALINK CORPORATION

BALANCE SHEETS

(In thousands, except share data)

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

30,820

 

$

8,988

 

Short term investments

 

4,241

 

 

Accounts receivable, net

 

50,918

 

57,779

 

Inventories

 

662

 

2,210

 

Current deferred customer support contract costs

 

52,213

 

48,715

 

Inventories shipped but not installed

 

3,239

 

7,191

 

Income tax receivable

 

466

 

1,064

 

Other current assets

 

454

 

607

 

Total current assets

 

143,013

 

126,554

 

Property and equipment, net

 

2,106

 

2,126

 

Goodwill

 

23,146

 

23,146

 

Finite life intangibles, net

 

4,072

 

5,219

 

Deferred customer support contract costs non-current

 

24,924

 

18,742

 

Other assets

 

327

 

285

 

Total assets

 

$

197,588

 

$

176,072

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

14,012

 

$

28,749

 

Accrued commissions

 

2,536

 

3,546

 

Accrued sales and use tax

 

767

 

1,414

 

Accrued expenses, other

 

4,187

 

3,427

 

Deferred taxes

 

3,188

 

3,723

 

Customer deposits

 

1,841

 

2,209

 

Deferred revenue from customer support contracts

 

64,688

 

61,571

 

Other current liabilities

 

150

 

279

 

Total current liabilities

 

91,369

 

104,918

 

Deferred income taxes

 

925

 

203

 

Deferred revenue from customer support contracts non-current

 

30,234

 

23,284

 

Other liabilities non-current

 

116

 

212

 

Total liabilities

 

122,644

 

128,617

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock, $.001 par value, 50,000,000 shares authorized, 17,531,236 and 13,569,533 shares issued and outstanding as of September 30, 2011 and December 31, 2010, respectively

 

17

 

14

 

Additional paid-in capital

 

63,580

 

43,332

 

Retained earnings

 

11,347

 

4,109

 

Total stockholders’ equity

 

74,944

 

47,455

 

Total liabilities and stockholders’ equity

 

$

197,588

 

$

176,072

 

 



 

DATALINK CORPORATION

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) on a GAAP basis

 

$

2,793

 

$

771

 

$

7,238

 

$

(115

)

Adjustments:

 

 

 

 

 

 

 

 

 

Amortization of intangible assets

 

 

277

 

 

831

 

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

 

23

 

127

 

92

 

783

 

Total gross margin adjustments

 

23

 

404

 

92

 

1,614

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation expense included in sales and marketing

 

276

 

135

 

393

 

314

 

Stock based compensation expense included in general and administrative

 

240

 

125

 

848

 

359

 

Stock based compensation expense included in engineering

 

169

 

76

 

369

 

229

 

Integration and transaction costs

 

 

 

 

581

 

Amortization of intangible assets

 

382

 

382

 

1,147

 

1,147

 

Total operating expense adjustments

 

1,067

 

718

 

2,757

 

2,630

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

366

 

516

 

1,162

 

1,897

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net earnings

 

$

3,517

 

$

1,377

 

$

8,925

 

$

2,232

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net earnings per share - Basic

 

$

0.21

 

$

0.11

 

$

0.58

 

$

0.17

 

Non-GAAP net earnings per share - Diluted

 

$

0.21

 

$

0.11

 

$

0.56

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Shares used in non-GAAP per share calculation - Basic

 

16,432

 

12,821

 

15,488

 

12,783

 

Shares used in non-GAAP per share calculation - Diluted

 

16,963

 

12,909

 

15,962

 

12,890

 

 



 

DATALINK CORPORATION

STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings (loss)

 

$

7,238

 

$

(115

)

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

 

 

 

 

 

Provision for bad debts

 

(6

)

14

 

Depreciation

 

716

 

681

 

Amortization of finite lived intangibles

 

1,147

 

1,978

 

Deferred income taxes

 

187

 

 

Stock based compensation expense

 

1,670

 

902

 

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

 

 

 

 

 

Accounts receivable, net

 

6,867

 

8,185

 

Inventories

 

5,500

 

(8,383

)

Deferred costs/revenues/customer deposits, net

 

19

 

7,637

 

Accounts payable

 

(14,737

)

(5,772

)

Accrued expenses

 

(897

)

71

 

Income tax payable

 

598

 

456

 

Other

 

(114

)

(228

)

Net cash provided by operating activities

 

8,188

 

5,426

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Sale of short term investments

 

5,737

 

2,730

 

Purchase of short term investments

 

(9,978

)

 

Purchases of property and equipment

 

(696

)

(1,027

)

Net cash provided by (used in) investing activities

 

(4,937

)

1,703

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from stock offering, net of offering costs

 

17,453

 

 

Payment of note payable due to seller of acquired business

 

 

(3,000

)

Excess tax from stock compensation

 

287

 

(28

)

Proceeds from issuance of common stock from option exercise

 

841

 

251

 

Tax withholding payments reimbursed by restricted stock

 

 

(100

)

Net cash provided by (used in) financing activities

 

18,581

 

(2,877

)

 

 

 

 

 

 

Increase in cash and cash equivalents

 

21,832

 

4,252

 

Cash and cash equivalents, beginning of period

 

8,988

 

12,901

 

Cash and cash equivalents, end of period

 

$

30,820

 

$

17,153

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Cash paid for income taxes

 

$

4,010

 

$

62

 

Cash received for income tax refunds

 

$

113

 

$

538