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FalconStor Software Announces Second Quarter 2018 Results Including Operating Profitability for Four Consecutive Quarters

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AUSTIN, Texas, Aug. 14, 2018 (GLOBE NEWSWIRE) -- FalconStor Software, Inc. (OTCQB:FALC), a market leader in software-defined storage and data management, today announced financial results for its second quarter ended June 30, 2018.

Key Financial Highlights for the Second Quarter of Fiscal 2018:

  • Non-GAAP Operating Income increased to $0.2 million from a Non-GAAP Operating Income (Loss) of ($0.4) million in the second quarter of 2017, marking the fourth consecutive quarter of Non-GAAP Operating profitability.
  • Non-GAAP Gross Margin increased to 84% from 74% in the second quarter of 2017.
  • Cash and cash equivalents increased to $4.0 million from $1.0 million at December 31, 2017.

Key Product Highlights

  • FalconStor recognized by CRN in its 2018 Software-Defined Data Center 50 list, which recognizes companies whose innovative offerings provide a hardware-agnostic approach to complex IT management, including centralized control of data storage and protection.
  • Over 20 key hardware and software technology vendor certifications were achieved or renewed; including VMWare compatibility updates.
  • Our advanced application-aware data protection and recovery capabilities were expanded for several enterprise applications including Oracle database, Microsoft Exchange, and Linux.

"We are pleased with the financial stability the team has created during the last year, as Q2 marked the fourth consecutive quarter of operating profit since launching our turnaround efforts in Q3 2017," said Todd Brooks, CEO, FalconStor. "Driving our success is a dedicated global team and seasoned leadership group, which we further strengthened in Q2 by appointing storage and data management veterans, Teresa de Onis, as Sr. Director of Marketing, and Mark Delsman, as Vice President of Engineering. During this period, we also turned our attention to growth and began reviewing our refocused product vision with key partners. Their early feedback and acceptance has been encouraging. We are excited about FalconStor's evolution."

Additional Financial Highlights for the Second Quarter 2018

While our Non-GAAP Operating Income was $0.2 million for the quarter, we recorded a GAAP Net Loss for the three months ended June 30, 2018 of $1.0 million, as compared to a GAAP Net loss of $0.6 million for the same period of the previous year, in part as a result of the impact of new revenue recognition guidance, in addition to other non cash restructuring charges incurred in connection with our cost reduction efforts. Excluding the effects of stock-based compensation, restructuring costs and the effects of our Series A redeemable convertible preferred stock, we delivered a GAAP Net loss of $0.2 million, as compared to a GAAP Net loss of $0.5 million in the prior year period.

Overall, total revenue for the three months ended June 30, 2018 was $4.0 million as compared to $6.7 million in the prior year period. This decline in revenue was significantly impacted by our adoption of new revenue recognition accounting guidance on January 1, 2018 using the modified retrospective transition method, which resulted in a $1.2 million decrease in revenue.

Net cash provided by operations increased by $2.3 million to $0.7 million for the three months ended June 30, 2018, as compared to $1.6 million of net cash used by operations for the three months ended June 30, 2017.

We ended the quarter with $4.0 million of cash and cash equivalents, as compared to $1.0 million at December 31, 2017.

   
  Three Months Ended,
(in millions except per share data) June 30,
2018
March 31,
2018
  June 30, 2017
Revenue $   4.0   $   5.0   $ 6.7  
Non-GAAP Expenses $   3.9   $   4.6   $ 7.2  
Non-GAAP Gross Margin   84%     85%     74%  
Non-GAAP Operating Income (Loss) $   0.2   $   0.4   $ (0.4)  
Non-GAAP Net Income (Loss) $   (0.2)   $   0.3   $ (0.5)  
Non-GAAP Diluted EPS $   —   $   —   $ (0.01)  
Cash (used in) provided by operations $   0.7   $   1.2   $ (1.6)  

Non-GAAP results above exclude the effects of stock-based compensation, restructuring costs and the effects of our Series A redeemable convertible preferred stock. A reconciliation between GAAP and non-GAAP information is provided on page 6 of this release.

     
    Three Months Ended June 30, Change
(in millions except per share data)   2018 2017 Period to Period
Total revenue   $ 4.0   100%   $ 6.7   100%   $ (2.7)   (40)%  
Total cost of revenue   $ 0.6   16%   $ 1.8   26%   $ (1.1)   (64)%  
Total operating expenses   $ 4.1   101%   $ 5.5   81%   $ (1.4)   (26)%  
GAAP operating income (loss)   $ (0.7)   (17)%   $ (0.5)   (8)%   $ (0.2)   32%  
GAAP net income (loss)   $ (1.0)   (25)%   $ (0.6)   (10)%   $ (0.4)   57%  
GAAP diluted EPS   $ (0.02)     $ (0.02)     $    
 


 
    Six Months Ended June 30, Change
(in millions except per share data)   2018 2017 Period to Period
Total revenue   $   9.0   100%   $   12.8   100%   $   (3.8)   (29)%  
Total cost of revenue   $   1.4   15%   $   3.2   25%   $   (1.8)   (57)%  
Total operating expenses   $   7.7   86%   $   11.2   88%   $   (3.5)   (31)%  
GAAP operating income (loss)   $   (0.1)   (1)%   $   (1.7)   (13)%   $   1.5   (93)%  
GAAP net income (loss)   $   (0.5)   (6)%   $   (1.8)   (14)%   $   1.3   (72)%
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