Datalink: Fiscal 4Q14 Financial Results

 Datalink Corp. reported results for its fourth quarter and the year ended December 31, 2014.

Revenues for the quarter ended December 31, 2014, increased 7.5% to a record $186.4 million compared to $173.4 million for the quarter ended December 31, 2013.

On a GAAP basis, the company reported net earnings of $3.7 million or $0.16 per diluted share for the fourth quarter ended December 31, 2014. This compares to net earnings of $5.2 million or $0.24 per diluted share in the fourth quarter of 2013.

The company’s results for the quarter and year ended December 31, 2014, include the results of operations from the acquisition of Bear Data Solutions, Inc. on October 19, 2014. Bear contributed approximately $16.0 million in revenues in the fourth quarter of 2014 and lost $0.07 per diluted share on a GAAP basis.

Revenues for the year ended December 31, 2014, increased 6.1% to a record $630.2 million compared to $594.2 million for the year ended December 31, 2013, and 3.4% without the revenues from the acquisition of Bear. On a GAAP basis, the company reported net earnings of $11.1 million or $0.50 per diluted share for the year ended December 31, 2014, $0.57 per diluted share excluding the acquisition of Bear. This compares to net earnings of $10.0 million or $0.52 per diluted share in 2013.

Non-GAAP Results
Non-GAAP net earnings for the fourth quarter of 2014 were $6.4 million, or $0.28 per diluted share, and $7.3 million or $0.33 per diluted share excluding the acquisition of Bear, compared to $7.4 million, or $0.33 per diluted share, in the fourth quarter of 2013.

Fourth-quarter and year-end highlights include:

• Record Q4 revenues of $170.4 million (excluding Bear revenues), in line with the $165 million to $175 million guidance issued last October.
• A 13% year-over-year increase in total services revenues to a record $249.8 million in 2014.
• A 16% increase in professional services revenues to a record $52.4 million or 8.3% of revenues, compared to $45.2 million or 7.6% of revenues in 2013, driven in part by steady expansion of advanced services designed to support complex data center needs ranging from cloud-related projects to data center relocation.
• Continued growth in converged data center infrastructure sales, average customer spend and customers who did over $1 million of business with the company.
• A #47 ranking on CRN‘s list of top 500 technology integrators as well as recognition as one of only 26 companies to earn CRN‘s new Triple Crown award for placing on the publication’s 2014 Solution Provider 500, Fast Growth 150 and Tech Elite 250 lists.
• Top NetApp ranking in FlexPod and Clustered Data ONTAP sales in the Americas, based on revenues during NetApp’s 2014 fiscal year, reflecting Datalink’s success in selling Cisco/NetApp converged infrastructure to assist customers in IT modernization.
• The acquisition of San Francisco-based Bear Data Solutions, Inc. in October 2014, quadrupling Datalink’s West Coast revenue base, as well as adding more than 1,000 new midmarket and enterprise customers and expanding Datalink’s Cisco expertise into strategic new areas. Fourth-quarter revenues from the Bear acquisition were less than expected, primarily because of delayed shipments of several large orders. As a result, Datalink entered 2015 with over $16.5 million of Bear-related backlog that is expected to be booked in the first quarter.

“Our fourth-quarter and year-end 2014 performance demonstrates our strong progress in transitioning from our roots as a storage VAR to becoming a full-service data center provider,” said Paul Lidsky, Datalink president and CEO. “Our continued growth, as well as the steady increase in higher-margin service revenues and customer wallet share, are directly related to the diversification of our product and services portfolio to address the full spectrum of data center challenges faced by businesses today.”

Outlook
Datalink projects revenues of $175.0 million to $185.0 million for the first quarter of 2015, approximately $30.0 million of which will come from the Bear acquisition, compared to $139.6 million for the first quarter of 2014. This represents an increase in expected revenues of between 25% and 33%, based on the company’s current backlog, sales pipeline, and historical trends. The company expects first quarter 2014 net earnings to be between $0.05 and $0.10 per diluted share on a GAAP basis, and net earnings of between $0.14 and $0.19 per diluted share on a non-GAAP basis. This compares to net earnings of $0.01 per diluted share and $0.06 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2014.

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments 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 $0.09 per diluted share for the first quarter of 2015.