Exhibit 99.1
FALCONSTOR
SOFTWARE
Contact: Joanne Ferrara, Investor Relations
631-773-5813
JOANNE.FERRARA@FALCONSTOR.COM
FALCONSTOR SOFTWARE ANNOUNCES Q2 QUARTERLY RESULTS
REVENUES INCREASE 40% FROM PRIOR YEAR
MELVILLE, N.Y., July 26, 2007--FalconStor Software, Inc. (NASDAQ: FALC), the
market leader in disk-based data protection solutions, today announced financial
results for its second quarter ended June 30, 2007.
Revenues for the second quarter of 2007 increased 40% to $17.8 million, compared
with $12.7 million for the same period a year ago. Net income for the quarter
was $1.4 million, or $0.03 per diluted share, which includes $1.9 million in
expenses related to stock-based compensation, compared with a net loss of $1.3
million, or $0.03 per diluted share, in Q2 2006, which included $2.4 million in
expenses related to stock-based compensation. Pro forma net income, which
excludes stock-based compensation expense, was $3.3 million or $0.06 per diluted
share in the second quarter 2007, compared with pro forma net income of $1.1
million or $0.02 per diluted share for the second quarter of 2006.
For the six months ended June 30, 2007, revenues increased 56% to $34.1 million,
compared with $21.9 million for the same period a year ago. Net income for the
six-month period was $0.8 million, or $0.02 per diluted share, which includes
$4.1 million in stock-based compensation expense, compared with a net loss of
$4.9 million, or $0.10 per diluted share, in the same period a year ago which
included $4.7 million in stock-based compensation expense. Pro forma net income,
which excludes stock-based compensation expense, was $5.0 million, or $0.10 per
diluted share, compared with a loss of $0.3 million, or $0.01 per diluted share,
in 2006.
Compared with the previous quarter, revenues increased 9% from $16.3 million in
the first quarter to $17.8 million in the second quarter. Net income for the
second quarter was $1.4 million, or $0.03 per diluted share, which includes $1.9
million in expenses related to stock-based compensation, compared with a net
loss of $0.6 million, or $0.01 per share, in the first quarter, which included
$2.2 million in expenses related to stock-based compensation. Excluding
stock-based compensation, pro forma net income increased to $3.3 million, or
$0.06 per diluted share, in the second quarter compared with a pro forma net
income of $1.6 million, or $0.03 per diluted share, in the first quarter.
The Company closed the quarter with $56.2 million in cash, cash equivalents and
marketable securities, which is an increase of $3.9 million compared with the
previous quarter. Deferred revenue at June 30, 2007, increased to $18.1 million,
or by 63% compared with the same period a year ago.
"We are pleased with the continuing expansion in revenue, strategic partnerships
and our product portfolio," said ReiJane Huai, Chairman and CEO of FalconStor.
"In addition to powering the fastest, biggest and smartest VTL in the enterprise
space, we will be releasing a series of purpose-built, competitively positioned
data protection solutions targeting mid-range customers to broaden our channel
distribution, expand our market coverage and further our business momentum."
The company will host a conference call on Thursday, July 26th at 4:30 p.m. EDT,
to discuss the results. To participate in the conference call, please dial:
Toll Free: 1 800-240-8658
International: 1 303-262-2130
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?ED=100393732&UID=0
Meeting: FalconStor Q2 2007 Earnings
Meeting password: q2numbers
Meeting Number: 486 738 639
A conference call replay is scheduled to be available beginning 7/26 at 6:30
PM EDT through 11:59 PM EDT on 7/31. To listen to the replay of the call,
dial toll free: 1 800-405-2236 or International: 1 303-590-3000, passcode:
11093411#, or visit our website at WWW.FALCONSTOR.COM/INVESTORS.ASP
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 to supplemental information used by management in its financial and
operational decision-making. For a reconciliation of our GAAP and non-GAAP
financial results, please refer to our ProForma Condensed Consolidated
Statements of Operations, presented in this release.
ABOUT FALCONSTOR
FalconStor Software, Inc. (NASDAQ: FALC) is the market leader in disk-based data
protection. We deliver proven, comprehensive data protection solutions that
facilitate the recovery of business-critical data with speed, integrity, and
simplicity. Our technology-independent solutions, built upon the award-winning
IPStor(R) virtualization platform, include the industry-leading VirtualTape
Library (VTL) with Single Instance Repository (SIR) for de-duplication,
Continuous Data Protection (CDP), Storage Virtualization, and Replication for
disaster recovery and remote office protection. Our products are available from
major OEMs and solution providers including EMC, SUN, Brocade, H3C, and COPAN
and are deployed by thousands of customers worldwide, from small businesses to
Fortune 1000 enterprises.
FalconStor is headquartered in Melville, New York, with offices throughout
Europe and the Asia Pacific region. FalconStor is an active member of the
Storage Networking Industry Association (SNIA). For more information, visit
www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).
###
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 network storage 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.
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2007 2006
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents .......................... $26,225,644 $15,605,329
Marketable securities .............................. 29,931,899 25,354,259
Accounts receivable, net ........................... 20,506,847 24,134,257
Prepaid expenses and other current assets .......... 2,044,561 1,244,937
----------- -----------
Total current assets ........................ 78,708,951 66,338,782
----------- -----------
Property and equipment, net ........................... 7,107,128 5,960,317
Goodwill .............................................. 3,512,796 3,512,796
Other intangible assets, net .......................... 380,169 407,316
Other assets .......................................... 2,028,606 2,011,433
----------- -----------
Total assets ................................ $91,737,650 $78,230,644
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................... $ 1,700,825 $ 1,432,510
Accrued expenses ................................... 5,288,812 6,505,536
Deferred revenue ................................... 14,116,551 11,466,552
----------- -----------
Total current liabilities ................... 21,106,188 19,404,598
Other long-term liabilities ........................... 133,184 137,317
Deferred revenue ...................................... 4,030,451 3,645,482
----------- -----------
Total liabilities ........................... 25,269,823 23,187,397
----------- -----------
Commitments
Total stockholders' equity .................. 66,467,827 55,043,247
----------- -----------
Total liabilities and stockholders' equity .. $91,737,650 $78,230,644
=========== ===========
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
2007 2006 2007 2006
(unaudited) (unaudited)
Revenues
Software license revenue ............................... $ 11,980,480 $ 8,726,021 $ 22,417,985 $ 14,402,710
Maintenance revenue..................................... 4,535,780 2,908,514 8,869,319 5,499,517
Software services and other revenue .................... 1,234,284 1,033,692 2,803,918 1,974,320
------------ ------------ ------------ ------------
17,750,544 12,668,227 34,091,222 21,876,547
Operating expenses:
Amortization of purchased and capitalized
software .......................................... 24,286 101,333 49,822 253,055
Cost of maintenance, software services and
other revenue ..................................... 2,462,050 2,320,065 5,206,338 4,304,662
Software development costs .......................... 5,341,481 4,905,137 10,857,666 9,512,240
Selling and marketing ............................... 7,500,433 5,686,742 14,469,184 10,590,747
General and administrative .......................... 1,922,723 1,390,140 3,860,503 2,711,434
------------ ------------ ------------ ------------
17,250,973 14,403,417 34,443,513 27,372,138
------------ ------------ ------------ ------------
Operating income (loss) ..................... 499,571 (1,735,190) (352,291) (5,495,591)
------------ ------------ ------------ ------------
Interest and other income ........................... 594,376 384,009 1,093,747 670,660
------------ ------------ ------------ ------------
Income (loss) before income
taxes ............................... 1,093,947 (1,351,181) 741,456 (4,824,931)
------------ ------------ ------------ ------------
Provision for income taxes ............................. (285,621) (46,386) (83,537) 116,750
------------ ------------ ------------ ------------
Net income (loss) ........................... $ 1,379,568 $ (1,304,795) $ 824,993 $ (4,941,681)
============ ============ ============ ============
Basic net income (loss) per share ...................... $ 0.03 $ (0.03) $ 0.02 $ (0.10)
============ ============ ============ ============
Diluted net income (loss) per share .................... $ 0.03 $ (0.03) $ 0.02 $ (0.10)
============ ============ ============ ============
Weighted average basic shares outstanding .............. 49,378,812 48,047,291 48,988,778 48,026,914
============ ============ ============ ============
Weighted average diluted shares outstanding ............ 53,007,181 48,047,291 50,802,963 48,026,914
============ ============ ============ ============
FALCONSTOR SOFTWARE, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2007
(UNAUDITED)
GAAP RECONCILIATION
Three Months Ended Six Months Ended
June 30, 2007 June 30, 2007
2007 2006 2007 2006
(unaudited) (unaudited)
Net income (loss) (GAAP) ..................... $ 1,379,568 $ (1,304,795) $ 824,993 $ (4,941,681)
Adjustment (1) ............................... 1,938,021 2,396,102 4,128,106 4,660,622
-------------- -------------- -------------- --------------
Adjusted net income (loss) (2) ............... 3,317,589 1,091,307 4,953,099 (281,059)
============== ============== ============== ==============
Basic EPS (GAAP) ............................. $ 0.03 $ (0.03) $ 0.02 $ (0.10)
Adjustment ................................... 0.04 0.05 0.08 0.10
-------------- -------------- -------------- --------------
Adjusted Basic EPS ........................... 0.07 0.02 0.10 (0.01)
============== ============== ============== ==============
Diluted EPS (GAAP) ........................... $ 0.03 $ (0.03) $ 0.02 $ (0.10)
Adjustment ................................... 0.04 0.05 0.08 0.10
-------------- -------------- -------------- --------------
Adjusted Diluted EPS ......................... 0.06 0.02 0.10 (0.01)
============== ============== ============== ==============
Weighted average basic shares
outstanding ................................ 49,378,812 48,047,291 48,988,778 48,026,914
============== ============== ============== ==============
Weighted average diluted shares
outstanding ................................ 53,007,181 49,377,595 50,802,963 48,026,914
============== ============== ============== ==============
Footnotes:
(1) Represents non-cash stock-based compensation charges as follows:
Three Months Ended Three Months Ended
June 30, 2007 June 30, 2007
2007 2006 2007 2006
(unaudited) (unaudited)
Cost of maintenance, software services and
other revenue $ 224,454 $ 356,159 $ 509,303 $ 699,549
Software development costs 756,294 1,078,138 1,679,950 2,133,099
Selling and marketing 714,610 684,686 1,433,527 1,345,538
General and administrative 242,663 277,119 505,326 482,436
---------- ---------- ---------- ----------
Total non-cash stock-based compensation
expense $1,938,021 $2,396,102 $4,128,106 $4,660,622
========== ========== ========== ==========
(2) Pro forma amounts exclude stock option expenses recognized for GAAP purposes under FAS 123R. As discussed earlier in this
release, these supplemental non-GAAP financial measures should not be used as a substitute for their comparable GAAP
measures. The pro forma amounts exclude any tax related effects of FAS 123R as these effects are not deemed to be
material.
