Datalink: Fiscal 3Q14 Financial Results

Datalink Corp. reported results for its third quarter and nine months that ended September 30, 2014.

Revenues for the quarter ended September 30, 2014 increased 4% to $144.9 million compared to $139.5 million for the quarter ended September 30, 2013. Revenues for the nine months ended September 30, 2014, increased 5% to $443.9 million compared to $420.8 million for the nine months ended September 30, 2013.

GAAP Results
On a GAAP basis, the company reported net earnings of $3.5 million or $0.16 per diluted share for the third quarter ended September 30, 2014. This compares to net earnings of $818,000 or $0.04 per diluted share in the third quarter of 2013. For the nine months ended September 30, 2014, the company reported net earnings of $7.4 million or $0.34 per diluted share, compared to net earnings of $4.8 million, or $0.26 per diluted share, for the nine months ended September 30, 2013.

Non-GAAP Results
Non-GAAP net earnings for the third quarter of 2014 were $4.2 million, or $0.19 per diluted share, compared to non-GAAP net earnings of $2.5 million, or $0.13 per diluted share, in the third quarter of 2013. For the nine months ended September 30, 2014, the company reported non-GAAP net earnings of $10.3 million, or $0.47 per diluted share, compared to non-GAAP net earnings of $10.6 million, or $0.57 per diluted share, for the nine months ended September 30, 2013. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

The company’s results for the quarter and nine months ended September 30, 2014, reflect the full impact of the additional 3.8 million common shares issued in connection with the follow-on stock offering which closed on August 14, 2013.

Highlights of quarter and nine months ended September 30, 2014, include:

• Record third quarter and first nine month revenues, all from organic growth.
• 14% and 13% year-over-year increases in total services revenues during both the third quarter and nine months, respectively, continuing Datalink’s strategic emphasis on growing services to help increase gross margins and drive greater relevancy with customers.
• An 8% increase in the number of customers spending more than $1 million with the company during the first nine months of 2014 compared to the first nine months of 2013.
• The addition of new cloud and residency services to Datalink’s Advanced Services portfolio, which is designed to support complex needs ranging from data migration and data center relocation to cloud service management and BC/DR.

In addition, on October 20, 2014, the company announced the acquisition of California-based Bear Data Solutions, Inc., which will quadruple its West Coast revenue base to more than $200 million and add more than 1,000 new midmarket and enterprise customers for Datalink’s products and services

“One of the most striking achievements of this reporting period is our continued growth in the services segment. Fully 44% of our Q3 revenues came from services compared to 40% a year ago. That includes professional, advanced and managed services that enhance our margins and open up new account opportunities from customers that want a true technology partner – not just a hardware reseller,” said Paul Lidsky, Datalink’s president and CEO. “In addition, we continue to grow faster overall than most of the IT market as a result of our ongoing product and services diversification and our ability to support a full range of data center needs, including complex projects like converged data center infrastructure deployments, cloud enablement, data migration and data center relocation. We expect the acquisition of Bear to accelerate that growth and strengthen our foothold in the key West Coast market.“

Outlook
Based on the company’s current backlog and sales pipeline, the company projects revenues of $165.0 million to $175.0 million for the fourth quarter of 2014 compared to $173.4 million for the fourth quarter of 2013. The company expects fourth quarter 2014 net earnings to be between $0.20 and $0.25 per diluted share on a GAAP basis, and net earnings of between $0.27 and $0.32 per diluted share on a non-GAAP basis. This compares to net earnings of $0.24 per diluted share and $0.34 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2013. This guidance does not include the results from the recently announced acquisition of Bear Data Systems, Inc.