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Datalink: Fiscal 2Q13 Financial Results

Quarter and six month sales up 23% and 18% Y/Y, respectively

(in US$ million) 2Q12 2Q13  6 mo. 12   6 mo. 13
 Revenues 120.0 148.2 239.1  281.7
 Growth   23%    18%
 Net income (loss)  3.2 2.9 5.4  4.0

Datalink Corp. reported results for its second quarter and six months that ended June 30, 2013.

Revenues for the quarter ended June 30, 2013, increased 23% to $148.2 million compared to $120.0 million for the quarter ended June 30, 2012 and increased 11% over revenues of $133.6 million in the first quarter of 2013. Revenues for the six months ended June 30, 2013, increased 18% to $281.7 million compared to $239.1 million for the six months ended June 30, 2012.

The company’s results for the quarter and six months ended June 30, 2013, include the results of operations from the acquisition of Strategic Technologies, Inc., which was completed on October 4, 2012.

GAAP Results
On a GAAP basis, the company reported net earnings of $2.9 million or $0.16 per diluted share for the second quarter ended June 30, 2013. This compares to net earnings of $3.2 million or $0.18 per diluted share in the second quarter of 2012. For the six months ended June 30, 2013, the company reported net earnings of $4.0 million or $0.22 per diluted share, compared to net earnings of $5.4 million, or $0.31 per diluted share, for the six months ended June 30, 2012. The decrease in net earnings is due to the amortization of intangible assets related to the acquisition of StraTech.

Non-GAAP Results
Non-GAAP net earnings for the second quarter of 2013 were $4.7 million, or $0.26 per diluted share, compared to non-GAAP net earnings of $4.0 million, or $0.23 per diluted share, in the second quarter of 2012. For the six months ended June 30, 2013, the company reported non-GAAP net earnings of $7.9 million, or $0.44 per diluted share, compared to non-GAAP net earnings of $6.9 million, or $0.40 per diluted share, for the six months ended June 30, 2012. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Highlights of the quarter and six months
ended June 30, 2013, include:

  • Record second quarter and first six month non-GAAP revenues and earnings.
  • Record $54.9 million combined customer support and professional services revenues in second quarter 2013, up 28% from second quarter 2012 and 12% from first quarter 2013. Second quarter professional services revenues alone were up 24% from the second quarter of 2012 and up 30% from first quarter 2013.
  • Continued growth in customers who did over $1 million of business with the company from 22 in second quarter 2012 to 26 in second quarter 2013.
  • Selection as the first Hitachi Data Systems partner authorized to provide OneCall support for Hitachi Unified Compute Platform Select for vSphere with Cisco Unified Computing System, and for Hitachi Virtual Storage Platform, converged infrastructure solutions.
  • Authorized by Cisco to provide OneCall support on all Cisco products Datalink sells with an initial focus on data center products.
  • Expansion of Datalink’s professional services portfolio with the addition of application, data, and infrastructure migration services.
  • Ranked #52 on CRN’s 2013 Solution Provider 500 list of North America’s top technology integrators – up from 59th last year and 72nd and 195th previous to that – based on annual revenues.

"We turned in a solid revenue and earnings performance in the second quarter and first half of 2013. That performance was fueled by three factors: our continually expanding mix of data center products and services, our emphasis on selling more complex projects with higher wallet share, and rising market demand for modern data center infrastructures," said Paul Lidsky, Datalink’s president and CEO. "Companies are increasingly aware of our ability to transform their data centers allowing them to drive business agility and facilitate advances such as private and hybrid cloud deployments. This continues to provide a strong foundation for our growth."

Outlook
Based on the company’s current backlog, sales pipeline and lengthening sales cycles, the company projects revenues of $140.0 million to $150.0 million for the third quarter of 2013 compared to $104.8 million for the third quarter of 2012. This represents an increase in expected revenues of between 34% and 43%. The company expects third quarter 2013 net earnings to be between $0.12 and $0.18 per diluted share on a GAAP basis, and net earnings of between $0.23 and $0.29 per diluted share on a non-GAAP basis. This compares to net earnings of $0.11 per diluted share and $0.16 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2012.

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the StraTech 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 $0.11 per diluted share for the third quarter of 2013.

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