FalconStor: Fiscal 2Q13 Financial Results

 

FalconStor Software, Inc. announced financial results for its second quarter ended June 30, 2013.

"The FalconStor customer base continues to receive value in the form of optimized storage, BC and lower TCO," said Gary Quinn, president and CEO, FalconStor. "We are strengthening our balance sheet, and reviewing our current product portfolio for additional investments. We are excited about our joint-efforts into the flash memory market segment, we are rebalancing our routes-to-market – both by customer segment and geography – and we look to rationalize our costs to maximize stockholder value."

Financial and Business Highlights and Overview:

• Appointed Gary Quinn president and CEO in July 2013.
• Reached an agreement in principle with Hale Capital Partners on August 5, 2013 for an equity investment of up to $15 million in the form of redeemable convertible preferred stock, subject to certain closing conditions.
• Signed an agreement to sell the company’s investment in Tianjin Zhongke Blue Whale Technologies Co., Ltd., a Chinese joint venture, for $3.0 million on August 7, 2013, subject to certain closing conditions.
• As a result of these strategic initiatives, the company notified the investment banking firm Wells Fargo Securities, LLC that the company was ending Wells Fargo’s retention as the company’s exclusive financial advisor.
• A Joint Motion for Preliminary Approval of the Class Action lawsuit was filed with the courts on June 14, 2013. In January 2013, the parties to the Class Action reached an agreement in principle to settle the Class Action for $5.0 million.

Financials
Total revenues for the second quarter of 2013 were $14.0 million, a decrease of 15% compared with $16.5 million in the same period a year ago. GAAP loss from operations for the second quarter of 2013 was $4.6 million, compared with an operating loss of $6.3 million for the second quarter of 2012. GAAP net loss for the quarter was $5.2 million, or $0.11 per share, compared with a net loss of $6.6 million, or $0.14 per share, for the same period a year ago. Included in the operating results for the second quarter of 2013 and 2012 were expenses of $0.1 million and $0.9 million, respectively, of investigation, litigation and settlement related costs.

Non-GAAP loss from operations was $4.2 million for the second quarter of 2013, compared with non-GAAP loss from operations of $4.4 million for the same period a year ago. Non-GAAP net loss was $4.9 million, or $0.10 per share, in the second quarter of 2013, compared with a non-GAAP net loss of $4.7 million, or $0.10 per share, in the second quarter of 2012. Non-GAAP results exclude the effects of stock-based compensation and costs associated with the company’s investigations, litigation and settlement related costs.

For the six months ended June 30, 2013, total revenues were $29.3 million, compared with $35.8 million for the same period a year ago. GAAP loss from operations for the six month period ended June 30, 2013 was $8.4 million compared with a GAAP loss of $8.4 million for the six months ended June 30, 2012. GAAP net loss was $9.6 million, or $0.20 per share, for the six months ended June 30, 2013, compared with a loss of $9.1 million, or $0.19 per share, in the same period a year ago.

Non-GAAP loss from operations was $7.1 million for the six months ended June 30, 2013, compared with a loss of $6.3 million in 2012. Non-GAAP net loss was $8.3 million, or $0.17 per share, compared with a loss of $7.0 million, or $0.15 per share, in the same period a year ago.

The company closed the quarter with $21.9 million in cash, cash equivalents and marketable securities. Deferred revenue at June 30, 2013 was $22.7 million, compared with $24.1 million at December 31, 2012.

To read the earnings call transcript