MELVILLE, NY--(Marketwired - March 09, 2017) - FalconStor Software, Inc. (
"We continue to add new FreeStor® customers and are seeing more existing FalconStor legacy customers switch to FreeStor for all of the benefits that a software-defined solution can provide in today's transformation of the storage industry," said Gary Quinn, President and CEO. "Although sales of our FreeStor offering continue to grow at respectable growth rates, we are seeing our legacy customer base move from our traditional backup solutions to modern backup solutions and this trend has not yet been eclipsed by the success of FreeStor."
Business Highlights:
Financial Highlights:
Financials
Total revenue for the fourth quarter of 2016 was $7.4 million compared with $9.4 million in the same period a year ago. Cost of revenue was $1.9 million for the fourth quarter of 2016, compared with $2.2 million in the same period a year ago. Operating expenses were $6.1 million for the fourth quarter of 2016, compared with $9.2 million in the same period a year ago. GAAP loss from operations for the fourth quarter of 2016 was $0.6 million, compared with $2.0 million in the same period a year ago. Included in our operating results for the three months ended December 31, 2016 and 2015 was income of $0.1 million and expense of $0.8 million of share-based compensation income/expense, respectively. GAAP net loss for the quarter was $1.2 million, compared with $1.9 million in the same period a year ago. Included in our net loss for the three months ended December 31, 2016 was an income tax provision of $0.2 million and an income tax benefit of less than $0.1 million in the same period a year ago. GAAP net loss attributable to common stockholders for the fourth quarter of 2016, which includes the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock and the accrual of Series A redeemable convertible preferred stock dividends, was $2.1 million, or $0.05 per diluted share, compared with $2.3 million, or $0.06 per diluted share, for the same period a year ago.
Non-GAAP loss from operations was $0.7 million for the fourth quarter of 2016, compared with $1.3 million for the same period a year ago. Non-GAAP net loss was $1.3 million, or $0.03 per diluted share, in the fourth quarter of 2016, compared with $1.2 million, or $0.03 per diluted share for the same period a year ago. Non-GAAP results exclude the effects of stock-based compensation and the effects of our Series A redeemable convertible preferred stock.
Total revenue for the twelve months ended December 31, 2016 was $30.3 million compared with $48.6 million in the same period a year ago. Included in total revenue for the twelve months ended December 31, 2015 was $11.3 million of revenue associated with our joint-development agreement which did not repeat in 2016. Cost of revenue was $8.3 million for the twelve months ended December 31, 2016, compared with $9.7 million in the same period a year ago. Operating expenses were $32.3 million for the twelve months ended December 31, 2016, compared with $40.2 million in the same period a year ago. GAAP loss from operations for the twelve months ended December 31, 2016 was $10.3 million, compared with $1.3 million in the prior year. Included in the operating results for the twelve months ended December 31, 2016 and 2015 were; (i) $2.3 million and $1.9 million of share-based compensation expense, respectively; and (ii) $0.2 million of restructuring costs in both periods. GAAP net loss for the twelve months ended December 31, 2016 was $11.0 million compared with $1.9 million for the prior year. Included in our net loss for the twelve months ended December 31, 2016 and 2015 was an income tax provision of $0.6 million and $0.4 million, respectively. GAAP net loss attributable to common stockholders for the twelve months ended December 31, 2016 and 2015 was $13.0 million, or $0.30 per diluted share, compared with $3.3 million, or $0.08 per diluted share, for the prior year.
Non-GAAP loss from operations was $7.8 million for the twelve months ended December 31, 2016, compared with non-GAAP income from operations of $0.8 million for the prior year. Non-GAAP net loss was $8.5 million, or $0.20 per diluted share, for the twelve months ended December 31, 2016, compared with non-GAAP net income of $0.2 million, or $0.00 per diluted share, for the prior year.
The Company closed the quarter with $3.4 million in cash and cash equivalents. Cash flow used in operations for the twelve months ended December 31, 2016 was $9.4 million compared with $6.3 million during the prior year. Deferred revenue at December 31, 2016 was $23.7 million, compared with $25.7 million at December 31, 2015.
Conference Call
The Company will host a conference call to discuss its financial results on Thursday, March 9, 2017 at 4:30 p.m. EST. To participate in the conference call, please dial:
Toll Free: 1-888-256-1030
International: +1-913-312-1472
Conference ID: 2910776
To view the presentation, please copy and paste the following link into your browser and register for this meeting. Once you have registered for the meeting, you will receive an email message confirming your registration.
https://falconstor.webex.com/falconstor/j.php?RGID=r3385410c95fc9b4bc71cfcdba535e601
Meeting: FalconStor Q4 2016 Earnings
Meeting Password: Q4numbers16
Meeting Number: 793 433 874
If you are unable to register via the Internet, please contact Dori White, Investor Relations at 631-773-5819 or dori.white@falconstor.com.
A conference call replay will be available beginning March 9, 2017 at 7:30 p.m. EST through 7:30 p.m. EDT on March 16, 2017. To listen to the replay of the call, dial toll free: 1-888-203-1112 or International: +1-719-457-0820, passcode: 2910776.
Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company's management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company's operating performance. In addition, these non-GAAP financial measures facilitate management's internal comparisons to the Company's historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) costs associated with the Company's class action and derivative lawsuits, government investigations, and related legal fees, (ii) restructuring costs, (iii) effects of our Series A redeemable convertible preferred stock, and (iv) non-cash stock-based compensation charges and any potential tax effects. For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Non-GAAP Operating Data GAAP Reconciliation, presented in this release.
About FalconStor Software
FalconStor Software, Inc. (
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This press release includes forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include: delays in product development; market acceptance of FalconStor's products and services; technological change in the data protection industry; competition in the data protection market; intellectual property issues; the enforcement of any rights that the holder of our Series A redeemable convertible preferred stock has under the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock; and other risk factors discussed in FalconStor's reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.
FalconStor, FalconStor Software, FreeStor and Intelligent Abstraction are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.
Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.
FalconStor Software, Inc. and Subsidiaries | ||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
December 31, 2016 |
December 31, 2015 |
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(unaudited) | ||||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 3,391,528 | $ | 6,013,382 | ||||||
Marketable securities | -- | 7,420,042 | ||||||||
Accounts receivable, net | 5,003,972 | 6,635,262 | ||||||||
Prepaid expenses and other current assets | 1,245,085 | 1,742,668 | ||||||||
Inventory | 6,181 | 70,534 | ||||||||
Deferred tax assets, net | -- | 205,816 | ||||||||
Total current assets | 9,646,766 | 22,087,704 | ||||||||
Property and equipment, net | 1,174,942 | 1,565,932 | ||||||||
Deferred tax assets, net | 577,735 | 110,060 | ||||||||
Software development costs, net | 547,558 | 1,116,816 | ||||||||
Other assets, net | 973,949 | 1,139,377 | ||||||||
Goodwill | 4,150,339 | 4,150,339 | ||||||||
Other intangible assets, net | 209,456 | 256,137 | ||||||||
Total assets | $ | 17,280,745 | $ | 30,426,365 | ||||||
Liabilities and Stockholders' Deficit | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 419,877 | $ | 1,005,944 | ||||||
Accrued expenses | 4,471,010 | 6,783,514 | ||||||||
Deferred tax liabilities, net | -- | 89,343 | ||||||||
Deferred revenue, net | 15,236,123 | 16,553,519 | ||||||||
Total current liabilities | 20,127,010 | 24,432,320 | ||||||||
Other long-term liabilities | 1,170,844 | 735,089 | ||||||||
Deferred tax liabilities, net | 254,776 | 27,069 | ||||||||
Deferred revenue, net | 8,430,692 | 9,122,289 | ||||||||
Total liabilities | 29,983,322 | 34,316,767 | ||||||||
Commitments and contingencies | ||||||||||
Series A redeemable convertible preferred stock | 9,000,000 | 7,818,554 | ||||||||
Total stockholders' deficit | (21,702,577 | ) | (11,708,956 | ) | ||||||
Total liabilities and stockholders' deficit | $ | 17,280,745 | $ | 30,426,365 | ||||||
FalconStor Software, Inc. and Subsidiaries | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Revenue: | ||||||||||||||||||
Product revenue | $ | 2,650,901 | $ | 3,470,274 | $ | 10,116,897 | $ | 24,847,724 | ||||||||||
Support and services revenue | 4,785,353 | 5,925,026 | 20,146,449 | 23,723,267 | ||||||||||||||
Total revenue | 7,436,254 | 9,395,300 | 30,263,346 | 48,570,991 | ||||||||||||||
Cost of revenue: | ||||||||||||||||||
Product | 222,213 | 323,843 | 932,446 | 1,942,985 | ||||||||||||||
Support and service | 1,676,129 | 1,863,312 | 7,351,857 | 7,739,149 | ||||||||||||||
Total cost of revenue | 1,898,342 | 2,187,155 | 8,284,303 | 9,682,134 | ||||||||||||||
Gross profit | $ | 5,537,912 | $ | 7,208,145 | $ | 21,979,043 | $ | 38,888,857 | ||||||||||
Operating expenses: | ||||||||||||||||||
Research and development costs | 2,227,278 | 3,059,879 | 11,702,956 | 12,787,606 | ||||||||||||||
Selling and marketing | 2,533,442 | 4,216,300 | 13,918,493 | 18,021,989 | ||||||||||||||
General and administrative | 1,369,840 | 1,971,790 | 6,470,579 | 9,181,289 | ||||||||||||||
Investigation, litigation, and settlement related costs | -- | -- | -- | 8,842 | ||||||||||||||
Restructuring costs | -- | -- | 177,389 | 172,995 | ||||||||||||||
Total operating expenses | 6,130,560 | 9,247,969 | 32,269,417 | 40,172,721 | ||||||||||||||
Operating loss | (592,648 | ) | (2,039,824 | ) | (10,290,374 | ) | (1,283,864 | ) | ||||||||||
Interest and other (loss) income, net | (386,610 | ) | 70,014 | (121,213 | ) | (269,954 | ) | |||||||||||
Loss before income taxes | (979,258 | ) | (1,969,810 | ) | (10,411,587 | ) | (1,553,818 | ) | ||||||||||
Provision (benefit) for income taxes | 211,869 | (28,193 | ) | 587,207 | 375,543 | |||||||||||||
Net loss | $ | (1,191,127 | ) | $ | (1,941,617 | ) | $ | (10,998,794 | ) | $ | (1,929,361 | ) | ||||||
Less: Accrual of Series A redeemable convertible preferred stock dividends | 195,904 | 196,727 | 777,890 | 765,203 | ||||||||||||||
Less: Accretion to redemption value of Series A redeemable convertible preferred stock | 668,177 | 156,670 | 1,181,446 | 587,613 | ||||||||||||||
Net loss attributable to common stockholders | $ | (2,055,208 | ) | $ | (2,295,014 | ) | $ | (12,958,130 | ) | $ | (3,282,177 | ) | ||||||
Basic net loss per share attributable to common stockholders | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.30 | ) | $ | (0.08 | ) | ||||||
Diluted net loss per share attributable to common stockholders | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.30 | ) | $ | (0.08 | ) | ||||||
Weighted average basic shares outstanding | 43,818,413 | 41,356,757 | 43,091,878 | 41,093,644 | ||||||||||||||
Weighted average diluted shares outstanding | 43,818,413 | 41,356,757 | 43,091,878 | 41,093,644 | ||||||||||||||
FalconStor Software, Inc. and Subsidiaries | |||||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
GAAP loss from operations | $ | (592,648 | ) | $ | (2,039,824 | ) | $ | (10,290,374 | ) | $ | (1,283,864 | ) | |||||
Non-cash stock option expense (1) | (63,944 | ) | 756,430 | 2,328,218 | 1,929,377 | ||||||||||||
Legal related costs (3) | -- | -- | -- | 8,842 | |||||||||||||
Restructuring costs (4) | -- | -- | 177,389 | 172,995 | |||||||||||||
Non-GAAP (loss) income from operations | $ | (656,592 | ) | $ | (1,283,394 | ) | $ | (7,784,767 | ) | $ | 827,350 | ||||||
GAAP net loss attributable to common stockholders | $ | (2,055,208 | ) | $ | (2,295,014 | ) | $ | (12,958,130 | ) | $ | (3,282,177 | ) | |||||
Non-cash stock option expense, net of income taxes (2) | (63,944 | ) | 756,430 | 2,328,218 | 1,929,377 | ||||||||||||
Legal related costs (3) | -- | -- | -- | 8,842 | |||||||||||||
Restructuring costs (4) | -- | -- | 177,389 | 172,995 | |||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 864,081 | 353,397 | 1,959,336 | 1,352,816 | |||||||||||||
Non-GAAP net (loss) income | $ | (1,255,071 | ) | $ | (1,185,187 | ) | $ | (8,493,187 | ) | $ | 181,853 | ||||||
GAAP gross margin | 74 | % | 77 | % | 73 | % | 80 | % | |||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Non-GAAP gross margin | 74 | % | 77 | % | 73 | % | 80 | % | |||||||||
GAAP gross margin - Product | 92 | % | 91 | % | 91 | % | 92 | % | |||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Non-GAAP gross margin - Product | 92 | % | 91 | % | 91 | % | 92 | % | |||||||||
GAAP gross margin - Support and Service | 65 | % | 69 | % | 64 | % | 67 | % | |||||||||
Non-cash stock option expense (1) | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Non-GAAP gross margin - Support and Service | 65 | % | 69 | % | 64 | % | 68 | % | |||||||||
GAAP operating margin | (8 | %) | (22 | %) | (34 | %) | (3 | %) | |||||||||
Non-cash stock option expense (1) | (1 | %) | 8 | % | 8 | % | 4 | % | |||||||||
Legal related (benefits) costs (3) | 0 | % | 0 | % | 0 | % | 0 | % | |||||||||
Restructuring costs (4) | 0 | % | 0 | % | 1 | % | 0 | % | |||||||||
Non-GAAP operating margin | (9 | %) | (14 | %) | (26 | %) | 2 | % | |||||||||
GAAP Basic EPS | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.30 | ) | $ | (0.08 | ) | |||||
Non-cash stock option expense, net of income taxes (2) | 0.00 | 0.02 | 0.05 | 0.05 | |||||||||||||
Legal related (benefits) costs (3) | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
Restructuring costs (4) | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 0.02 | 0.01 | 0.05 | 0.03 | |||||||||||||
Non-GAAP Basic EPS | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.20 | ) | $ | 0.00 | ||||||
GAAP Diluted EPS | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.30 | ) | $ | (0.08 | ) | |||||
Non-cash stock option expense, net of income taxes (2) | 0.00 | 0.02 | 0.05 | 0.04 | |||||||||||||
Legal related (benefits) costs (3) | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
Restructuring costs (4) | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||
Effects of Series A redeemable convertible preferred stock (5) | 0.02 | 0.01 | 0.05 | 0.03 | |||||||||||||
Non-GAAP Diluted EPS | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.20 | ) | $ | 0.00 | ||||||
Weighted average basic shares outstanding (GAAP and as adjusted) | 43,818,413 | 41,356,757 | 43,091,878 | 41,093,644 | |||||||||||||
Weighted average diluted shares outstanding (GAAP) | 43,818,413 | 41,356,757 | 43,091,878 | 41,093,644 | |||||||||||||
Weighted average diluted shares outstanding (as adjusted) | 43,818,413 | 41,356,757 | 43,091,878 | 42,906,072 | |||||||||||||
Footnotes: | |||
(1) | Represents non-cash, stock-based compensation charges as follows: | ||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||
Cost of revenues - Product | $ | -- | $ | -- | $ | -- | $ | -- | ||||||
Cost of revenues - Support and Service | (4,618 | ) | 18,419 | 80,903 | 98,776 | |||||||||
Research and development costs | 1,229 | 577,355 | 1,653,336 | 806,348 | ||||||||||
Selling and marketing | 9,502 | 60,632 | 241,481 | 285,787 | ||||||||||
General and administrative | (70,057 | ) | 100,024 | 352,498 | 738,466 | |||||||||
Total non-cash stock based compensation expense | $ | (63,944 | ) | $ | 756,430 | $ | 2,328,218 | $ | 1,929,377 | |||||
(2) | Represents the effects of non-cash stock-based compensation expense recognized in accordance with the FASB Accounting Standards Codification, Topic 718, net of related income tax effects. For the three and twelve months ended December 31, 2016 and 2015, the tax expense for both GAAP and Non-GAAP basis approximate the same amount. Included in share-based compensation expense for the twelve months ended December 31, 2016 and 2015 was $1.5 million and $0.5 million, respectively, related to costs associated with our exclusive source code license and development agreement which were paid through the issuance of our common stock. | ||
(3) | Legal related costs represent expenses/gains in connection with the Company's investigations, litigation and settlement related costs for each respective period presented. | ||
(4) | Represents restructuring costs which were incurred during each respective period presented. | ||
(5) | Represents the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock and accrual of Series A redeemable convertible preferred stock dividends. | ||
Contact Information:
For more information, contact:
FalconStor Software, Inc.
Dori White
Investor Relations
631-773-5819