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8-K - 8-K - DATALINK CORPa13-17117_18k.htm

Exhibit 99.1

 

DATALINK REPORTS 2013 SECOND QUARTER AND SIX MONTH OPERATING RESULTS

 

Second Quarter and Six Month Revenues Up 23% and 18% Year-Over-Year, Respectively

 

EDEN PRAIRIE, Minn., July 25, 2013 — Datalink (Nasdaq: DTLK), a leading provider of data center infrastructure and services, today reported results for its second quarter and six months that ended June 30, 2013.  Revenues for the quarter ended June 30, 2013, increased 23% to $148.2 million compared to $120.0 million for the quarter ended June 30, 2012 and increased 11% over revenues of $133.6 million in the first quarter of 2013.  Revenues for the six months ended June 30, 2013, increased 18% to $281.7 million compared to $239.1 million for the six months ended June 30, 2012.

 

The company’s results for the quarter and six months ended June 30, 2013, include the results of operations from the acquisition of Strategic Technologies, Inc. (“StraTech”), which was completed on October 4, 2012.

 

GAAP Results

 

On a GAAP basis, the company reported net earnings of $2.9 million or $0.16 per diluted share for the second quarter ended June 30, 2013.  This compares to net earnings of $3.2 million or $0.18 per diluted share in the second quarter of 2012. For the six months ended June 30, 2013, the company reported net earnings of $4.0 million or $0.22 per diluted share, compared to net earnings of $5.4 million, or $0.31 per diluted share, for the six months ended June 30, 2012.  The decrease in net earnings is due to the amortization of intangible assets related to the acquisition of StraTech.

 



 

Non-GAAP Results

 

Non-GAAP net earnings for the second quarter of 2013 were $4.7 million, or $0.26 per diluted share, compared to non-GAAP net earnings of $4.0 million, or $0.23 per diluted share, in the second quarter of 2012.  For the six months ended June 30, 2013, the company reported non-GAAP net earnings of $7.9 million, or $0.44 per diluted share, compared to non-GAAP net earnings of $6.9 million, or $0.40 per diluted share, for the six months ended June 30, 2012.  A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

 

Highlights of the quarter and six months ended June 30, 2013, include:

 

·                  Record second quarter and first six month non-GAAP revenues and earnings.

·                  Record $54.9 million combined customer support and professional services revenues in second quarter 2013, up 28% from second quarter 2012 and 12% from first quarter 2013.  Second quarter professional services revenues alone were up 24% from the second quarter of 2012 and up 30% from first quarter 2013.

·                  Continued growth in customers who did over $1 million of business with the company from 22 in second quarter 2012 to 26 in second quarter 2013.

·                  Selection as the first Hitachi Data Systems partner authorized to provide OneCall support for Hitachi Unified Compute Platform Select for VMware vSphere with Cisco Unified Computing System, and for Hitachi Virtual Storage Platform, converged infrastructure solutions.

·                  Authorized by Cisco to provide OneCall support on all Cisco products Datalink sells with an initial focus on data center products.

·                  A major expansion of Datalink’s professional services portfolio with the addition of application, data, and infrastructure migration services.

·                  Ranked #52 on CRN’s 2013 Solution Provider 500 list of North America’s top technology integrators — up from 59th last year and 72nd and 195th previous to that — based on annual revenues.

 



 

“We turned in a solid revenue and earnings performance in the second quarter and first half of 2013.  That performance was fueled by three factors: our continually expanding mix of data center products and services, our emphasis on selling more complex projects with higher wallet share, and rising market demand for modern data center infrastructures,” said Paul Lidsky, Datalink’s president and CEO. “Companies are increasingly aware of our ability to transform their data centers allowing them to drive business agility and facilitate advances such as private and hybrid cloud deployments.   This continues to provide a strong foundation for our growth.”

 

Outlook

 

Based on the company’s current backlog, sales pipeline and lengthening sales cycles, the company projects revenues of $140.0 million to $150.0 million for the third quarter of 2013 compared to $104.8 million for the third quarter of 2012.  This represents an increase in expected revenues of between 34% and 43%. The company expects third quarter 2013 net earnings to be between $0.12 and $0.18 per diluted share on a GAAP basis, and net earnings of between $0.23 and $0.29 per diluted share on a non-GAAP basis.  This compares to net earnings of $0.11 per diluted share and $0.16 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2012.

 

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the StraTech acquisition to deferred revenue and costs, integration and transaction costs related to acquisitions, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $0.11 per diluted share for the third quarter of 2013.

 

Conference Call and Webcast Today

 

Datalink will hold a conference call today at 4:00 p.m. Central Standard Time, during which Datalink’s president and chief executive officer, Paul Lidsky, and vice president of finance and chief financial officer, Greg Barnum, will discuss company results and provide a business overview. Participants can access the conference call by dialing (866) 318-8611. Participants will be asked

 



 

to identify the Datalink conference call and provide the designated identification number (27422046). A live Webcast of the conference call can be heard via Datalink’s website at www.datalink.com.

 

About Datalink

 

A complete data center solutions and services provider for Fortune 500 and mid-tier enterprises, Datalink transforms data centers so they become more efficient, manageable and responsive to changing business needs. Datalink helps leverage and protect storage, server, and network investments with a focus on long-term value, offering a full lifecycle of services, from consulting and design to implementation, management and support. Datalink solutions span virtualization and consolidation, data storage and protection, advanced networks, and business continuity. Each delivers measurable performance gains and maximizes the business value of IT. For more information, call 800.448.6314 or visit www.datalink.com.

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. This press release contains forward-looking statements, including our internal projections of certain anticipated 2013 results, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “should” and other expressions which indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, many of which are included under “Risk Factors” in our annual report on Form 10-K for our year ended December 31, 2012, including, but not limited to: the level of continuing demand for data center solutions and services including the effects of current economic and credit conditions and the ability of organizations to outsource data center infrastructure-related services to service providers such as us; the migration of organizations to virtualized server environments, including using a private cloud computing infrastructure; the extent to which customers deploy disk-based backup recovery solutions; the realization of the expected trends identified for advanced network infrastructures; reliance by manufacturers on their data service partners to integrate their specialized products; continued preferred status with certain principal suppliers; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; our ability to hire and retain key technical and sales personnel; continued productivity of our sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; success of the implementation of our enterprise resource planning system; risks associated with integrating completed and future acquisitions; the ability to execute our acquisition strategy; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility in our stock price. Furthermore, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably. We cannot assure you that we can grow or maintain our revenue and backlog

 



 

from current levels.  Additional factors that may cause actual results to differ from our assumptions and expectations include those set forth in our most recent filing on Form 10-K filed with the Securities and Exchange Commission.  Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made.  We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

 

Non-GAAP Details

 

Non-GAAP financial measures exclude the impact from acquisition accounting adjustments to deferred revenue and costs, stock-based compensation expense, amortization of acquisition intangible assets, integration and transaction costs related to acquisitions and the related effects on income taxes.  These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

 

These non-GAAP financial measures facilitate management’s internal comparisons to our historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. We believe that the presentation of these non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to investors and management regarding financial and business trends relating to our financial condition and results of operations.

 

# # #

 

Company Contacts:

 

Investors & Analysts:

Greg Barnum

Vice President and CFO

Phone:  952-279-4816

Email:  gbarnum@datalink.com

 

Media & Alliances:

Suzanne Gallagher

SVP of Marketing

Phone: 720-566-5110

Email: sgallagher@datalink.com

 



 

Investor Relations:

Kim Payne

Investor Relations Coordinator

Phone:  952-279-4794

Fax:      952-944-7869

Email:  einvestor@datalink.com

website: www.datalink.com

 



 

DATALINK CORPORATION

STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

Products

 

$

93,295

 

$

77,294

 

$

177,699

 

$

157,534

 

Services

 

54,860

 

42,748

 

104,043

 

81,596

 

Total net sales

 

148,155

 

120,042

 

281,742

 

239,130

 

 

 

 

 

 

 

 

 

 

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of products

 

72,747

 

59,805

 

138,813

 

122,389

 

Cost of services

 

41,804

 

32,204

 

79,476

 

61,382

 

Total cost of sales

 

114,551

 

92,009

 

218,289

 

183,771

 

Gross profit

 

33,604

 

28,033

 

63,453

 

55,359

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

15,572

 

12,220

 

28,779

 

24,777

 

General and administrative

 

5,051

 

4,628

 

10,694

 

9,352

 

Engineering

 

6,136

 

5,155

 

13,124

 

10,949

 

Integration and transaction costs

 

25

 

 

73

 

20

 

Amortization of intangibles

 

1,841

 

619

 

3,823

 

1,238

 

Total operating expenses

 

28,625

 

22,622

 

56,493

 

46,336

 

Earnings from operations

 

4,979

 

5,411

 

6,960

 

9,023

 

Interest expense, net

 

(17

)

(2

)

(116

)

(12

)

Earnings before income taxes

 

4,962

 

5,409

 

6,844

 

9,011

 

Income tax expense

 

2,032

 

2,190

 

2,806

 

3,631

 

Net earnings

 

$

2,930

 

$

3,219

 

$

4,038

 

$

5,380

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.17

 

$

0.19

 

$

0.23

 

$

0.32

 

Diluted

 

$

0.16

 

$

0.18

 

$

0.22

 

$

0.31

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

17,600

 

17,053

 

17,566

 

17,012

 

Diluted

 

18,103

 

17,445

 

17,986

 

17,383

 

 



 

DATALINK CORPORATION

BALANCE SHEETS

(In thousands, except share data)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

23,102

 

$

10,315

 

Accounts receivable, net

 

92,443

 

143,958

 

Receivable due from seller of StraTech acquisition

 

4,243

 

4,243

 

Inventories, net

 

1,417

 

2,554

 

Current deferred customer support contract costs

 

89,335

 

87,052

 

Inventories shipped but not installed

 

12,257

 

8,784

 

Income tax receivable

 

318

 

2,430

 

Other current assets

 

818

 

852

 

Total current assets

 

223,933

 

260,188

 

Property and equipment, net

 

6,772

 

6,082

 

Goodwill

 

37,780

 

37,780

 

Finite-lived intangibles, net

 

16,937

 

20,760

 

Deferred customer support contract costs non-current

 

43,865

 

40,771

 

Deferred tax asset

 

4,297

 

4,471

 

Long term lease receivable

 

803

 

 

Other assets

 

455

 

455

 

Total assets

 

$

334,842

 

$

370,507

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Line of credit

 

$

 

$

6,000

 

Accounts payable

 

43,494

 

83,880

 

Accrued commissions

 

5,200

 

8,730

 

Accrued sales and use tax

 

905

 

3,489

 

Accrued expenses, other

 

6,211

 

6,027

 

Current deferred taxes

 

9,034

 

9,034

 

Customer deposits

 

5,077

 

3,645

 

Current deferred revenue from customer support contracts

 

110,029

 

105,167

 

Other current liabilities

 

162

 

157

 

Total current liabilities

 

180,112

 

226,129

 

Deferred revenue from customer support contracts non-current

 

52,494

 

48,167

 

Other liabilities non-current

 

751

 

828

 

Total liabilities

 

233,357

 

275,124

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock, $.001 par value, 50,000,000 shares authorized, 18,919,304 and 18,726,723 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

 

19

 

19

 

Additional paid-in capital

 

72,938

 

70,875

 

Retained earnings

 

28,528

 

24,489

 

Total stockholders’ equity

 

101,485

 

95,383

 

Total liabilities and stockholders’ equity

 

$

334,842

 

$

370,507

 

 



 

DATALINK CORPORATION

RECONCILIATION  BETWEEN GAAP AND NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations on a GAAP basis

 

$

4,979

 

$

5,411

 

$

6,960

 

$

9,023

 

GAAP operating margin

 

3.4

%

4.5

%

2.5

%

3.8

%

 

 

 

 

 

 

 

 

 

 

Non-GAAP Adjustments:

 

 

 

 

 

 

 

 

 

Purchase accounting adjustment to StraTech deferred revenue and cost, net

 

297

 

8

 

809

 

20

 

Total gross margin adjustments

 

297

 

8

 

809

 

20

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation expense included in sales and marketing

 

334

 

209

 

606

 

372

 

Stock based compensation expense included in general and administrative

 

302

 

421

 

828

 

708

 

Stock based compensation expense included in engineering

 

217

 

95

 

360

 

235

 

Integration and transaction costs

 

25

 

 

73

 

20

 

Amortization of intangible assets

 

1,841

 

619

 

3,823

 

1,238

 

Total operating expense adjustments

 

2,719

 

1,344

 

5,690

 

2,573

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP earnings from operations

 

7,995

 

6,763

 

13,459

 

11,616

 

Non-GAAP operating margin

 

5.4

%

5.6

%

4.8

%

4.9

%

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

(17

)

(2

)

(116

)

(12

)

Income tax expense impact including Non-GAAP items

 

3,271

 

2,738

 

5,471

 

4,700

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net earnings

 

$

4,707

 

$

4,023

 

$

7,872

 

$

6,904

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP net earnings per share - Basic

 

$

0.27

 

$

0.24

 

$

0.45

 

$

0.41

 

Non-GAAP net earnings per share - Diluted

 

$

0.26

 

$

0.23

 

$

0.44

 

$

0.40

 

 

 

 

 

 

 

 

 

 

 

Shares used in non-GAAP per share calculation - Basic

 

17,600

 

17,053

 

17,566

 

17,012

 

Shares used in non-GAAP per share calculation - Diluted

 

18,103

 

17,445

 

17,986

 

17,383

 

 



 

DATALINK CORPORATION

STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings

 

$

4,038

 

$

5,380

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Benefit for bad debts

 

(44

)

(4

)

Depreciation

 

989

 

861

 

Amortization of finite lived intangibles

 

3,823

 

1,238

 

Deferred income taxes

 

174

 

 

Stock based compensation expense

 

1,794

 

1,316

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

50,756

 

16,313

 

Inventories

 

(2,336

)

3,974

 

Deferred costs/revenues/customer deposits, net

 

5,244

 

1,758

 

Accounts payable

 

(40,386

)

(25,770

)

Accrued expenses

 

(5,930

)

(1,410

)

Income tax payable (receivable)

 

2,112

 

(871

)

Other

 

(38

)

1,246

 

Net cash provided by operating activities

 

20,196

 

4,031

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Maturities of investments

 

 

596

 

Sale of investments

 

 

2,294

 

Purchases of property and equipment

 

(1,679

)

(2,479

)

Net cash provided by (used in) investing activities

 

(1,679

)

411

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net payments under line of credit

 

(6,000

)

 

Excess tax from stock compensation

 

277

 

553

 

Proceeds from issuance of common stock from option exercise

 

237

 

321

 

Tax withholding payments reimbursed by restricted stock

 

(244

)

(730

)

Net cash provided by (used in) financing activities

 

(5,730

)

144

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

12,787

 

4,586

 

Cash, beginning of period

 

10,315

 

18,947

 

Cash, end of period

 

$

23,102

 

$

23,533

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Cash paid for income taxes

 

$

242

 

$

3,949

 

Cash paid for interest expense

 

$

68

 

$