Datalink: Fiscal 2Q14 Financial Results
Partial return to normal sales cadence
This is a Press Release edited by StorageNewsletter.com on July 29, 2014 at 2:51 pm| (in $ million) | 2Q13 | 2Q14 | 6 mo. 13 | 6 mo. 14 |
| Revenues | 147.8 | 159.4 | 281.3 | 298.9 |
| Growth | 8% | 6% | ||
| Net income (loss) | 2.9 | 3.6 | 4.0 | 3.9 |
Datalink Corp. reported results for its second quarter and six months that ended June 30, 2014.
Revenues for the quarter ended June 30, 2014 increased 8% to $159.4 million compared to $147.8 million for the quarter ended June 30, 2013, and increased 14% over revenues of $139.5 million in the first quarter of 2014. Revenues for the six months ended June 30, 2014, increased 6% to $298.9 million compared to $281.3 million for the six months ended June 30, 2013.
GAAP Results
On a GAAP basis, the company reported net earnings of $3.6 million or $0.16 per diluted share for the second quarter ended June 30, 2014. This compares to net earnings of $2.9 million or $0.16 per diluted share in the second quarter of 2013. For the six months ended June 30, 2014, the company reported net earnings of $3.9 million or $0.18 per diluted share, compared to net earnings of $4.0 million, or $0.22 per diluted share, for the six months ended June 30, 2013.
Non-GAAP Results
Non-GAAP net earnings for the second quarter of 2014 were $4.9 million, or $0.22 per diluted share, compared to non-GAAP net earnings of $4.7 million, or $0.26 per diluted share, in the second quarter of 2013. For the six months ended June 30, 2014, the company reported non-GAAP net earnings of $6.1 million, or $0.28 per diluted share, compared to non-GAAP net earnings of $7.8 million, or $0.43 per diluted share, for the six months ended June 30, 2013. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.
The company’s results for the quarter and six months ended June 30, 2014, reflect the full impact of the additional 3.8 million common shares issued in connection with the follow-on stock offering which closed on August 14, 2013. The dilution earnings from the additional shares outstanding on the 2014 first quarter and six months were approximately $0.05 and $0.06 per share, respectively.
Highlights of the quarter and six months ended June 30, 2014, include:
- Record second quarter and first six month revenues, exceeding guidance issued in May and fueled in part by placement of orders that had been delayed in the 1Q14 as customers evaluated newer solid state storage and hybrid cloud strategies.
- 11% and 13% year-over-year increases in total services revenues during the second quarter and six months, respectively.
- Continued increases in converged data center infrastructure orders, including a 7% quarter-over-quarter and 18% year-over-year increase.
- A 15% increase in the number of customers spending more than $1 million with the company during the first six months of 2014 compared to the first six months of 2013.
- A #1 partner ranking for NetApp FlexPod and clustered Data ONTAP sales in the Americas during NetApp’s 2014 fiscal year, based on revenues.
- Continued investment in Datalink’s Advanced Services offerings, with revenues increasing 43% to $3.1 million in the second quarter of 2014 as compared to the first quarter of 2014.
- A #47 ranking on CRN’s 2014 Solution Provider 500 list of North America’s top technology integrators based on annual revenues, marking a steady climb from #72 just four years ago.
“The second quarter of 2014 saw a partial return to a normal sales cadence as some customers completed their due diligence on newer technologies like flash storage and cloud computing that had postponed sales we originally expected to close in the first quarter. We expect more of these delayed orders to get placed in the third quarter and that is reflected in our guidance,” said Paul Lidsky, Datalink’s president and CEO. “At the same time, the combination of increased services and converged technologies revenues demonstrates the validity of our end-to-end data center product and services model and its potential for building our business.”
Outlook
Based on the company’s current backlog and sales pipeline, the company projects revenues of $150.0 million to $160.0 million for the third quarter of 2014 compared to $139.6 million for the third quarter of 2013. This represents an increase in expected revenues of between 7% and 15%. The company expects third quarter 2014 net earnings to be between $0.11 and $0.17 per diluted share on a GAAP basis, and net earnings of between $0.16 and $0.22 per diluted share on a non-GAAP basis. This compares to net earnings of $0.04 per diluted share and $0.13 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2013.
Comments
Abstracts of the earnings call transcript:
Gregory T. Barnum, CFO:
"So in the second quarter of 2014, our product revenues increased 5% to $98.2 million and our service revenues increased 11% to $61.2 million when compared to the second quarter of last year. Within the service component of revenue then, we saw customer support revenues increase 13% to $49.2 million and professional service revenues increased 4% to $12 million. For the first 6 months of 2014, we saw total revenues increase 6%, with product revenues increasing 2% and services increasing 13%.
"In addition, professional services now make up 8% of our total revenues in the first 6 months of 2014 compared to only 7% of total revenues in the first 6 months of last year. This growth is a key focus area as we need these higher-margin professional service revenues to increase as a percentage of our total revenues in order to offset any product margin pressures.
"Our revenue mix for the quarter was 27% storage, 23% networking and servers, 11% software, 1% tape and 38% service."
Paul F. Lidsky, president, chairman and CEO:
"Another validation of our strategy has been seen in the continued sales growth of converged data center technology, which integrates networking, computer - computing, storage, and in some cases, virtualization. These solutions generated $25 million in product revenue from 26 different customers in the second quarter of 2014. That's a revenue increase of 7% over - quarter-over-quarter and 18% year-over-year for the comparable 6-month period
"[flash storage] That pipeline has nearly tripled from what we had at the end of the first quarter. In addition, we have already sold flash storage solutions from NetApp, EMC, Pure, Nimble and Tintri, both from a stand-alone basis, and in a few cases, as part of a virtual data center stack. We expect this technology to continue to be a catalyst for spending in 2014 and beyond and once again create more opportunities for additional services sales.
"In the first 6 months of the year, our base of repeat customers grew 8% from 1,783 to 1,918 year-over-year, and spending by that group increased 10%. And the number of customers spending more than $1 million with us climbed 15% from 59 to 68 as we succeeded in selling large strategic data center projects. We saw a similar increase this quarter-over-quarter."
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