Data Domain: Fiscal 1Q09 Financial Results

Data Domain, Inc. announced results for its first quarter ended March 31, 2009. Net revenue for the first quarter of 2009 was $79.0 million, an increase of 50% compared to the first quarter of 2008, and a decrease of 7% from the fourth quarter of 2008.

Under U.S. generally accepted accounting principles (GAAP), Data Domain posted net income of $1.3 million for the first quarter of 2009, or $0.02 per share. This compared to a GAAP net income of $13.9 million in the fourth quarter 2008, or $0.21 per share. The fourth quarter net income was positively impacted by the release of $13.2 million related to the Company’s deferred tax asset valuation allowance which resulted in a net $5.7 million tax benefit in the fourth quarter of 2008. Without this one-time item, fourth quarter 2008 net income would have been $749,000, or $0.01 per share. For the first quarter 2008, GAAP net income was $2.7 million, or $0.04 per share.

Excluding the impact of stock-based compensation, non-GAAP net income for the first quarter of 2009 was $4.9 million, or $0.07 per share. This compares to non-GAAP net income of $6.7 million, or $0.10 per share, in the fourth quarter of 2008, which excluded the impact of stock-based compensation and the release of the deferred tax asset valuation allowance. For the first quarter of 2008, non-GAAP net income was $7.7 million, or $0.11 per share.

"Data Domain’s first quarter results were marked by significant customer wins in large enterprise accounts, as evidenced by the number of transactions in excess of a million dollars," said Frank Slootman, president and chief executive officer of Data Domain. "The Company added 218 new customers during the quarter, increasing its worldwide roster of customers to over 3,100. With the significant performance increases Data Domain delivered through recent product additions and operating system upgrades, we are well positioned to continue our push into the enterprise marketplace."

"Data Domain executed well in a challenging sales environment during the first quarter and continues to build out key elements of its infrastructure to fuel future growth," added Michael Scarpelli, chief financial officer for Data Domain. "Operating margins were very healthy in the quarter at 3% GAAP and 11% non-GAAP. In addition, we achieved operating profit while hiring an additional 50 net new employees, bringing total headcount to 827, and we generated approximately $12 million in operating cash flow for the quarter."

Financial Outlook

• We estimate revenues for the second quarter of 2009 to be between $82 million and $87 million.
• We estimate that for the second quarter of 2009 GAAP income (loss) per share will be approximately $(0.01) to $0.01 and non-GAAP income per share will range from $0.05 to $0.07. The non-GAAP income (loss) per share projections exclude stock-based compensation expense that we estimate will be in the range of $7.1 million to $7.3 million as well as tax benefits that we estimate will be in the range of $3.3 million to $3.5 million related to stock-based compensation.
• We reiterate our previous revenue estimates for the full year 2009 to be between $365 million and $385 million.

First Quarter Highlights

• In March, the Company announced the availability of its new platform operating software, which accelerates the backup throughput of its current product line up to 100% from initial product specifications without any additional hardware or disk provisioning.  The upgrade enabled new levels of performance across all systems and customer types — from demanding data center environments to remote offices at the edge.
• Also in March, Data Domain introduced the DD660, a new quad-core processor-based midrange system that provides up to a 50% price/performance improvement and a 50% larger base system capacity as compared to its dual- core predecessor. The Company also announced support for 1 TB disk drives, in both the base model DD660 and in all expansion shelves for both the DD660 and DD690.
• In February Data Domain announced that its flagship DD690 enterprise storage system has been recognized by SearchStorage.com and Storage Magazine with the 2008 Product of the Year Award. The DD690 was the recipient of the publications’ highly coveted Gold Award, the top achievement in its category.
• In January, Data Domain announced that results from TheInfoPro’s latest Wave 11 European Storage Study again indicated Data Domain is the top In Plan deduplication vendor among IT storage users at large European enterprises participating in the study.