Exhibit 99.1
Contacts: Herman Chin Christine Rogers
Public Relations Investor Relations
631-962-1163 631-962-1160
herman.chin@falconstor.com christine.rogers@falconstor.com
-------------------------- -------------------------------
FALCONSTOR SOFTWARE ANNOUNCES Q4 AND FULL YEAR FINANCIAL RESULTS
ACHIEVES PROFITABILITY AND POSITIVE CASH FLOW FOR Q4 2004
REVENUES INCREASE 87% FROM SAME PERIOD A YEAR AGO
MELVILLE, N.Y., February 8, 2005--FalconStor Software, Inc. (Nasdaq: FALC), a
leading provider of network storage software solutions, today announced
financial results for its fourth quarter and fiscal year ended December 31,
2004.
The Company reached profitability for the first time in the fourth quarter of
2004. Revenues for the quarter increased 87% to $9.5 million, compared with $5.1
million for the same period a year ago. Net income for the fourth quarter of
2004 was $0.3 million, or $0.01 per share, compared with a net loss for the
fourth quarter of 2003 of $2.2 million, or $0.05 per share. Non-GAAP net loss
for the fourth quarter 2003 was $1.6 million, or $0.03 per share, which excludes
a lease abandonment charge of $0.6 million.
For the twelve months ended December 31, 2004, revenues increased 69% to $28.7
million compared with $16.9 million for the year ended December 31, 2003. Net
loss for 2004 was $5.9 million, or $0.13 per share, compared with a net loss for
2003 of $7.4 million or $0.16 per share. Non-GAAP net loss was $3.6 million, or
$0.08 per share for 2004 and $6.8 million, or $0.15 per share for 2003. Non-GAAP
net loss for 2004 excludes a litigation settlement charge of $1.3 million and
legal fees of $1.0 million, each associated with patent infringement litigation
that was resolved in the third quarter of 2004. Non-GAAP net loss for 2003
excludes a lease abandonment charge of $0.6 million.
Revenues for the fourth quarter of 2004 increased 27% compared with the previous
quarter from $7.5 million to $9.5 million. Net income for the fourth quarter of
2004 was $0.3 million, or $0.01 per share, compared with a net loss for the
third quarter of 2004 of $2.3 million, or $0.05 per share. Non-GAAP net loss for
the third quarter of 2004 was $0.6 million, or $0.01 per share, which excludes a
litigation settlement charge of $1.3 million and related legal fees of $0.4
million.
The Company achieved positive cash flow for the first time, closing the quarter
with $34 million in cash, cash equivalents and marketable securities, an
increase of $1.1 million compared with the previous quarter. Deferred revenue at
December 31, 2004, increased by $2.8 million, or 107%, compared with the same
period a year ago and by $1.2 million, or 28%, compared with the balance at
September 30, 2004. Gross margins for the fourth quarter increased to 86%
compared with 77% in the same period a year ago and 80% in the third quarter of
2004.
"In addition to the profitability and positive cash flow milestones, 2004 was a
year of continued expansion across our product portfolio and global customer
base, and in our market recognition and strategic partnerships with major
players in the industry," said ReiJane Huai, Chairman and CEO of FalconStor
Software. "We will leverage our business momentum to further our growth in 2005
and beyond."
2004 COMPANY HIGHLIGHTS INCLUDE:
Strengthening FalconStor's leadership position in the network storage market
through the development and delivery of innovative disk-based backup, business
continuity/disaster recovery, compliance, information lifecycle management, and
iSCSI-based software solutions for a wide range of customers including the SMB
market and large enterprises.
The general availability of a disk-based library from a Tier 1 OEM powered by
FalconStor's VirtualTape Library software.
The launching by another Tier 1 OEM of iSCSI Storage Services, powered by
FalconStor's award-winning iSCSI Storage Server for Windows Storage Server 2003
software solution.
Establishment of new, and expansion of existing, agreements with OEM partners
and distributors to deliver advanced storage services powered by FalconStor
software.
Continued recognition by leading industry publications and events, including:
o FalconStor's VirtualTape Library solution -named "Editor's Choice" by
STORAGE PIPELINE magazine, and "best of the best" by COMPUTER TECHNOLOGY
REVIEW magazine
o FalconStor's iSCSI Storage Server -- NETWORK COMPUTING Editor's Choice
Award, Best of Microsoft TechEd Europe 2004 in the Data Management Solution
category, and Best of Microsoft TechEd China 2004 in the Software Solution
category.
Successful deployment of FalconStor's Business Continuity/Disaster Recovery
(BC/DR), VirtualTape Library (VTL) and iSCSI Storage solutions in the financial,
legal, telecommunications, insurance, manufacturing, healthcare, entertainment,
retail, education, and government sectors around the world.
Joint certifications with technology companies to optimize interoperability in
an IT environment including:
o IPStor(R) Enterprise Edition solution- completed certification with LSI
Logic PCI-X Fibre Channel HBAs.
o iSCSI Storage Server solution- received Novell's "YES CERTIFIED" status for
NetWare 6.5
o VirtualTape Library solution - obtained Enterprise Backup Solution (EBS)
certification from HP; certified with Sony Electronics' SAIT drives and
PetaSite storage systems; IBM's TotalStorage Proven for TotalStorage FAStT,
Enterprise 3494 Tape Library, Enterprise Tape Drive 3592 Model J1A, and
2109 Model S16 SAN Fibre Channel Switch; Network Appliance NearStore
nearline storage systems and the NetApp Data ONTAP operating system; and
Engenio Information Technologies,
The company will host a conference call on Tuesday, February 8th at 4:30 p.m.
Eastern Time, to discuss the results. To participate in the call, Toll Free:
800-218-8862 or International: 303-262-2052. To view the presentation, please
copy and paste the following link into your browser:
https://falconstor.webex.com/falconstor/j.php?ED=85002977&UID=26933067
Follow the instructions to register and join this meeting.
Meeting Name: FalconStor Q4 Earnings
Meeting password: ipstor
Meeting number: 761 431 625
A conference call replay will be available beginning 2/8 at 6:30 PM ET through
6:30 PM on 2/9. To listen to the replay of the call, dial Toll Free:
800-405-2236 or International: 303-590-3000
Passcode: 11022157# or visit our website at www.falconstor.com/investors.asp.
ABOUT FALCONSTOR
FalconStor Software, Inc. (Nasdaq: FALC) is a leading developer of network
storage software designed to optimize the storage, protection and availability
of enterprise data. FalconStor's flagship product, IPStor, enables corporate IT
to deploy a hardware-agnostic, network-centric foundation to maximize operating
efficiency and business continuity, and to meet the availability requirements of
mission-critical applications. IPStor-powered network storage solutions are
available and supported by major OEMs, as well as system integrators and
resellers worldwide.
Founded in 2000, FalconStor is headquartered in Melville, NY, with offices
throughout Europe and the Asia Pacific regions including Paris, Tokyo and
Taiwan. FalconStor is an active member of the Technical Support Alliance Network
(TSANet), Storage Networking Industry Association (SNIA) and Fibre Channel
Industry Association (FCIA). For more information, visit www.falconstor.com or
call 1-631-777-5188.
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 storage and networking industries; competition in
the storage networking software market; the potential failure of FalconStor's
OEM partners to introduce or to market products incorporating FalconStor's
products; intellectual property issues; 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.
RECONCILIATION OF GAAP TO NON-GAAP
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
Reconciliation of GAAP to Non-GAAP:
- ----------------------------------
Non-GAAP net income (loss) .............................. $ 338,834 $(1,606,817) $(3,588,847) $(6,818,793)
Lease abandonment charge ................................ -- 550,162 -- 550,162
Payment of settlement related to patent
litigation ........................................... -- -- 1,300,000 --
Legal fees associated with patent
litigation ........................................... -- -- 1,000,000 --
----------- ----------- ----------- -----------
GAAP net income (loss) .................................. $ 338,834 $(2,156,979) $(5,888,847) $(7,368,955)
=========== =========== =========== ===========
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 in this press release because we believe they
are useful to investors in allowing for greater transparency to supplemental
information used by management in its financial and operational decision-making.
###
FalconStor and IPStor are registered trademarks of FalconStor Software, Inc. All
other company and product names contained herein may be trademarks of the
respective holders.
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
2004 2003
----------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents .......................................... $15,484,573 $ 8,486,144
Marketable securities .............................................. 18,488,616 28,199,242
Accounts receivable, net ........................................... 10,269,822 7,109,922
Prepaid expenses and other current assets .......................... 850,036 1,273,125
----------- -----------
Total current assets ...................................... 45,093,047 45,068,433
----------- -----------
Property and equipment, net ........................................... 4,662,269 3,861,069
Goodwill .............................................................. 3,512,796 3,366,642
Other intangible assets, net .......................................... 307,620 396,940
Other assets .......................................................... 2,719,460 3,799,949
----------- -----------
Total assets .............................................. $56,295,192 $56,493,033
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 821,433 $ 562,305
Accrued expenses ................................................... 3,722,034 2,777,391
Deferred revenue ................................................... 4,097,279 2,202,179
----------- -----------
Total current liabilities ................................. 8,640,746 5,541,875
Deferred revenue ...................................................... 1,290,496 395,609
----------- -----------
Total liabilities ......................................... 9,931,242 5,937,484
----------- -----------
Commitments
Total stockholders' equity ................................ 46,363,950 50,555,549
----------- -----------
Total liabilities and stockholders' equity ................ $56,295,192 $56,493,033
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FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003
(unaudited) (unaudited)
Revenues
Software license revenue ............................ $ 7,594,527 $ 3,661,430 $ 21,487,866 $ 12,250,616
Maintenance revenue ................................. 1,245,490 762,505 4,442,724 2,473,504
Software services and other revenue ................. 656,727 667,799 2,778,088 2,220,015
------------ ------------ ------------ ------------
9,496,744 5,091,734 28,708,678 16,944,135
Operating expenses:
Amortization of purchased and
capitalized software ........................... 222,583 412,964 1,393,908 1,394,301
Cost of maintenance, software services
and other revenue .............................. 1,069,687 776,126 4,150,309 2,580,141
Software development costs ....................... 2,437,812 1,962,409 9,050,092 7,067,605
Selling and marketing ............................ 4,030,020 3,073,301 14,277,167 10,966,548
General and administrative ....................... 1,541,631 750,599 5,108,516 2,878,192
Litigation settlement ............................ - - 1,300,000 -
Lease abandonment charge ......................... - 550,162 - 550,162
------------ ------------ ------------ ------------
9,301,733 7,525,561 35,279,992 25,436,949
------------ ------------ ------------ ------------
Operating income (loss) .................. 195,011 (2,433,827) (6,571,314) (8,492,814)
------------ ------------ ------------ ------------
Interest and other income ........................... 160,489 253,477 714,412 1,121,391
Impairment of long-lived assets ..................... - 35,000 - 35,000
------------ ------------ ------------ ------------
Income (loss) before income
taxes ............................. 355,500 (2,145,350) (5,856,902) (7,336,423)
------------ ------------ ------------ ------------
Provision for income taxes .......................... 16,666 11,629 31,945 32,532
------------ ------------ ------------ ------------
Net income (loss) .......................... $ 338,834 $ (2,156,979) $ (5,888,847) $ (7,368,955)
============ ============ ============ ============
Basic net income (loss) per share ................... $ 0.01 $ (0.05) $ (0.13) $ (0.16)
============ ============ ============ ============
Diluted net income (loss) per share ................. $ 0.01 $ (0.05) $ (0.13) $ (0.16)
============ ============ ============ ============
Weighted average basic shares outstanding ........... 47,307,612 46,376,183 46,967,422 45,967,830
============ ============ ============ ============
Weighted average diluted shares outstanding ......... 51,249,985 46,376,183 46,967,422 45,967,830
============ ============ ============ ============
