FalconStor: Fiscal 4Q13 Financial Results

FalconStor Software, Inc. announced financial results for its fourth quarter and full-year ended December 31, 2013.

“We are pleased to have achieved our goal of reaching profitability in the fourth quarter of 2013. The company’s improving financial picture reflects the completion of our stabilization efforts and the steps we’re taking to build for future growth,” said Gary Quinn, president and CEO, FalconStor. “While we will continue to pay close attention to our cost structure, we are also introducing innovative technology and updated sales programs, which are examples of intensified focus on delivering value to our customers.”

Financial and Business Highlights and Overview

• Achieved profitability on a non-GAAP basis in Q4 2013; non-GAAP operating income improved to $0.8 million, compared with a $1.6 million non-GAAP operating loss in the previous quarter; non-GAAP net income improved to $0.6 million, compared with a $1.8 million non-GAAP net loss in the previous quarter; Q4 2013 non-GAAP product revenue bookings increased 16% compared with the previous quarter.
• Closed the quarter with $28.1 million of cash, cash equivalents and marketable securities, compared with $29.5 million at September 30th.
• Deferred revenues as of December 31, 2013 totaled $29.8 million, an increase of 18% compared with the third quarter of 2013 and an increase of 23% compared with December 31, 2012.
• Received $3.0 million upon completion of the second milestone of our joint development agreement.
• Closed on the sale of our interest in Tianjin Zhongke Blue Whale Technologies Co., Ltd., for $3.0 million. In 2007, the company invested approximately $0.9 million in Blue Whale.

During the fourth quarter of 2013:

• incurred an additional $1.3 million of expenses associated with the company-wide ‘rebalancing’ which commenced during the third quarter of this year;
• made a final payment of $1.7 million related to the government investigations;
• made a $5.0 million settlement payment in connection with the preliminary approval by the court of a settlement of the class action litigation pending against the company.

The company launched CDP and Network Storage Server version 7.5 releases. CDP version 7.5 has been named a finalist in the Storage Magazine/Search Storage.com 2013 Product of the Year Awards in the backup and DR software and services category.

Financials
Total revenues for the fourth quarter of 2013 were $14.6 million, a decrease of 35% from $22.5 million in the same period a year ago.

GAAP loss from operations for the fourth quarter of 2013 was $1.0 million, compared with an operating loss of $1.7 million for the fourth quarter of 2012.

GAAP net income for the quarter was $0.9 million compared with a net loss of $2.3 million for the same period a year ago.

Net income attributable to common stockholders for the quarter, which includes the effects of the accretion to redemption value of the Series A preferred stock and the accrual of preferred stock dividends, was $0.6 million, or $0.01 per share, compared with a loss of $2.3 million, or $0.05 per share, for the same period a year ago.

Included in the operating results for the fourth quarter of 2013 and 2012 were expenses of $1.3 million and $0 million, respectively, related to restructuring charges, and $0.1 million and $1.5 million, respectively, of investigation, litigation and settlement related costs.

In addition, included in net income for the fourth quarter of 2013 was a gain, net of taxes, of $1.9 million related to the sale of our interest in Tianjin Zhongke Blue Whale Information Technologies co., Ltd. , a Chinese joint venture.

Non-GAAP income from operations was $0.8 million for both the fourth quarter of 2013 and 2012. Non-GAAP net income was $0.6 million, or $0.01 per share, in the fourth quarter of 2013, compared with a non-GAAP net income of $0.1 million, or $0.00 per share, in the fourth quarter of 2012. Non-GAAP results exclude the effects of stock-based compensation, costs associated with the company’s investigations, litigation and settlement related costs, restructuring costs, certain tax items, the effects of preferred stock and the gain on the sale of Blue Whale.

For the year ended December 31, 2013, total revenues were $58.6 million, a decline of 22% from $75.4 million for the same period a year ago.

GAAP loss from operations for the year ended December 31, 2013 was $13.6 million compared with a GAAP loss of $13.7 million for the year ended December 31, 2012.

GAAP net loss was $10.9 million for the year ended December 31, 2013, compared with a net loss of $15.0 million in the same period a year ago.

Net loss attributable to common stockholders for the year was $11.3 million, or $0.24 per share, compared with $15.0 million, or $0.32 per share, for the same period a year ago.

Non-GAAP loss from operations was $7.9 million for the year ended December 31, 2013, compared with a loss of $8.6 million in 2012. Non-GAAP net loss was $9.5 million, or $0.20 per share, compared with a loss of $9.9 million, or $0.21 per share, in the same period a year ago.

The company closed the quarter with $28.1 million in cash, cash equivalents and marketable securities. Deferred revenue at December 31, 2013 was $29.8 million, compared with $24.1 million at December 31, 2012.