Market Overview

FalconStor Software Announces Third Quarter 2018 Results

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AUSTIN, Texas, Nov. 14, 2018 /PRNewswire/ -- FalconStor Software, Inc. (OTCQB:FALC), a market leader in software-defined storage and data management, today announced financial results for its third quarter ended September 30, 2018.

Key Financial Highlights for the Third Quarter of Fiscal 2018:

  • Achieved Non-GAAP Operating Income of $0.1 million, marking the fifth consecutive quarter of Non-GAAP Operating profitability.
  • Non-GAAP Gross Margin increased to 83% from 80% in the third quarter of 2017.
  • Cash and cash equivalents increased to $2.8 million from $1.0 million at December 31, 2017.

Key Product Highlights

  • Our RecoverTrac™ automated data recovery technology was awarded its third patent (United States Patent and Trademark Office, Patent No. 10,073,745).
  • Our Virtual Tape Library solution has been tested by Evaluator Group, an independent lab, and verified to achieve 39TB/hour single-node backup speeds without affecting application performance, making it the fastest solution on the market.
  • Our FreeStor solution is being renamed FalconStor Data Mastery Platform, and three cloud data management use cases are now supported for customers seeking to migrate and replicate data to and from the cloud.

I am pleased with the operating profitability which continued in the third quarter, and the commercial foundation we are building to begin driving growth" said Todd Brooks, CEO FalconStor. "While we are likely a quarter or two away from returning to growth across the globe, billings in our Americas region increased by 24 percent in the quarter as compared to Q3 of 2017. The efforts of our team to redefine our product vision, rebuild our marketing engine, and re-engage our partner base are clearly beginning to deliver results."

Additional Financial Highlights for the Third Quarter 2018

While our Non-GAAP Operating Income was $0.1 million for the quarter, we recorded a GAAP Net Loss for the three months ended September 30, 2018 of $0.7 million, as compared to GAAP Net Income of $1.2 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 Income of $0.0 million, as compared to GAAP Net Income of $1.2 million in the prior year period.

Overall, total revenue for the three months ended June 30, 2018 was $4.1 million as compared to $6.1 million in the prior year period. This decline in revenue was significantly impacted by our adoption of new revenue recognition accounting guidance under Topic 606 on January 1, 2018 using the modified retrospective transition method, which resulted in a $1.7 million decrease in revenue.

Net cash used by operations decreased by $1.2 million to $0.3 million for the nine months ended September 30, 2018, as compared to $1.6 million of net cash used by operations for the nine months ended September 30, 2017.

We ended the quarter with $2.8 million of cash and cash equivalents, as compared to $1.0 million at December 31, 2017.


Three Months Ended,


September 30,        


September 30,

(in millions except per share data)

2018

June 30, 2018

2017

Revenue

$                 4.1

$                 4.0

$                 6.1

Non-GAAP Expenses

$                 4.0

$                 3.9

$                 5.0

Non-GAAP Gross Margin

83%

84%

80%

Non-GAAP Operating Income

$                 0.1

$                 0.2

$                 1.1

Non-GAAP Net Income (Loss)

$                  —

$                (0.2)

$                 1.2

Non-GAAP Diluted EPS

$                  —

$                   —

$               0.02

Cash (used in) provided by operations

$               (0.3)

$                 0.7

$               (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 September 30,

Change

(in millions except per share data)   

2018

2017

Period to Period








Total revenue

$        4.1

100 %

$       6.1

100%

$       (2.0)

(33)%

Total cost of revenue

$        0.7

17 %

$       1.2

20%

$       (0.5)

(43)%

Total operating expenses

$        3.6

89 %

$       3.6

59%

$         —

— %

GAAP operating income (loss)

$       (0.2)

(6)%

$       1.3

21%

$       (1.5)

*

GAAP net income (loss)

$       (0.7)

(17)%

$       1.2

20%

$       (1.9)

*

GAAP diluted EPS

$     (0.01)


$      0.02


$     (0.03)


 


Nine Months Ended September 30,

Change

(in millions except per share data)    

2018

2017

 Period to Period








Total revenue

$      13.1

100 %

$     18.9

100 %

$       (5.8)

(31)%

Total cost of revenue

$        2.1

16 %

$       4.5

24 %

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