FalconStor: Fiscal 3Q08 Financial Results

FalconStor Software, Inc. announced financial results for its third quarter ended September 30, 2008. 

Revenues for the third quarter of 2008 increased 6% to $19.6 million, compared with $18.5 million for the same period a year ago. GAAP loss from operations for the quarter was $1.4 million, compared with operating income of $1.1 million in the third quarter of 2007. GAAP net loss for the quarter was $1.6 million, or $0.03 per share, compared with GAAP net income of $6.3 million, or $0.12 per diluted share, in the third quarter of 2007. In the third quarter of 2008, the Company´s GAAP tax expense was $0.5 million, compared with a tax benefit of $4.5 million in the third quarter of 2007.  Stock-based compensation expense was $1.6 million in the third quarter of 2008 and $2.1 million in the third quarter of 2007.  

“We remain confident in the performance of our products and our prospects for success,” said ReiJane Huai, Chairman and CEO of FalconStor. “FalconStor is well positioned to help IT departments under pressure in current conditions to deliver on their objectives, while reducing their operating costs and their capital expenditures. Our innovative data protection software, our strong balance sheet, and our ability to generate positive cash flow from operations, even in these difficult economic times, all point to long-term success.”    

Non-GAAP income from operations was $0.3 million in the third quarter of 2008, compared with non-GAAP income from operations of $3.2 million in the third quarter of 2007. Non-GAAP net income was $0.4 million, or $0.01 per diluted share, in the third quarter of 2008, compared with $8.4 million, or $0.16 per diluted share, in the third quarter of 2007. In the third quarter of 2008, the Company´s non-GAAP tax expense was $0.1 million, compared with a tax benefit of $4.5 million in the third quarter of 2007.  Non-GAAP results exclude the effects of stock-based compensation expense net of the related income taxes.

For the nine months ended September 30, 2008, revenues increased 21% to $63.6 million compared with $52.6 million for the same period a year ago.  GAAP income from operations for the nine-month period was $1.2 million, compared with $0.7 million in 2007. GAAP net income was $0.6 million, or $0.01 per diluted share for the nine months ended September 30, 2008, compared with net income of $7.1 million, or $0.13 per diluted share, in the same period a year ago. For the first nine months of 2008, the Company recorded a GAAP tax provision of $1.8 million compared with a tax benefit of $4.6 million in the prior year period. Stock-based compensation expense for the nine month period was $6.6 million in 2008 and $6.2 million in 2007.      

Non-GAAP income from operations was $7.8 million for the nine months ended September 30, 2008, compared with non-GAAP income from operations of $7.0 million for the same period in 2007. Non-GAAP net income for the first nine months of 2008 was $5.8 million, or $0.11 per diluted share, compared with $13.3 million, or $0.25 per diluted share in the same period a year ago. The Company recorded a non-GAAP tax expense for the nine month period of $3.2 million in 2008 compared with a tax benefit of $4.6 million in 2007.  Non-GAAP results exclude the effects of stock-based compensation expense net of the related income taxes.

The Company closed the quarter with $48.0 million in cash, cash equivalents, and marketable securities. Cash flows from operations for the third quarter of 2008 were $4.4 million. During the third quarter of 2008, the Company repurchased one million shares at a total purchase price of $7.4 million, or an average price of $7.37 per share. During the first nine months of 2008, the Company repurchased a total of 3.6 million shares at a total price of $28.7 million or an average price of $8.07 per share.  

For the year ending December 31, 2008, the Company anticipates:

• Revenues to be in the range of $85 million to $87 million
• Non-GAAP net income to be between $0.12 and $0.14 per diluted share, which excludes stock-based compensation, net of income taxes.