Press release

FalconStor Software Announces First Quarter 2021 Results Including 20% Total Revenue Growth, GAAP Net Income After Tax of $425,248

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Sponsored by Businesswire

FalconStor Software, Inc. (OTCQB: FALC), a trusted data protection leader modernizing backup and archival solutions for the multi-cloud world, today announced financial results for its first quarter of fiscal year 2021, which ended on March 31, 2021, recording solid product revenue growth, significant customer expansions and continuing profitability of $425,248.

“We continue to make good progress against our strategic plans to reinvent FalconStor, enhance the value we deliver to our customers, and innovate within the cloud-based data protection market,” said Todd Brooks, FalconStor CEO. “During the first quarter, we continued to stabilize growth as we delivered a 20% year-over-year increase in total revenue. Our growth was driven by a 104% year-over-year increase in product revenue, which continues to reflect our shift to a subscription model and growth in new customer wins. Over the next year, we expect our year-over-year revenue growth to continue to stabilize as our sales pipeline becomes more predictable, and we expand our markets.”

“Migration to the cloud, data center rationalization and infrastructure optimization are top priorities for enterprise CIOs in the post-pandemic world, and FalconStor plays a vital role in each,” added Brooks. “As the economy continues to recover, we will continue to work with enterprises and managed service providers to modernize backup and archival solutions software for the cloud era, reducing the cost and complexity of leveraging the cloud while improving essential data portability and security, including protection against ransomware attacks.”

First Quarter 2021 Financial Results

  • Product Revenue: 104% product revenue growth to $2.1 million, compared to $1.05 million in the first quarter of fiscal year 2020
  • New Customer Billings: $3.2 million, compared to $1.1 million in first quarter of fiscal year 2020
  • Total Revenue: $3.8 million, compared to $3.2 million in first quarter of fiscal year 2020
  • Total Cost of Revenue: $0.6 million, compared to $0.5 million in first quarter of fiscal year 2020
  • Total Operating Expenses: $3.2 million, compared to $3.0 million in first quarter of fiscal year 2020
  • GAAP Net Income (Loss): $0.4 million, compared to $(0.7) million in first quarter of fiscal year 2020
  • Ending Cash: $2.0 million, compared to $1.0 million in first quarter of fiscal year 2020

First Quarter 2021 Business Highlights

  • Delivered updates to our next-generation long-term data retention and recovery technology in StorSafe, built with a bridge to all industry-leading public clouds for long-term archival optimization, including AWS, Microsoft Azure, IBM Cloud, and Wasabi
  • Continued to demonstrate enterprise scalability of our product, including expansion to 3 petabytes of data across 8 nodes and multiple data centers for a large government institution
  • Continued our win trajectory in IBM environments, specifically IBM I and AS/400 system implementations
  • Continued to deliver additional multi-tenant capabilities to enable managed service providers to better serve their clients

Conference Call and Webcast Information

WHO: Todd Brooks, Chief Executive Officer, FalconStor and Brad Wolfe, Chief Financial Officer, FalconStor

WHEN: Wednesday, May 5, 2021, 4:00 P.M. Central Time

To register for our earnings call, please click the following link:

FALCONSTOR FIRST QUARTER 2021 FINANCIAL TELECONFERENCE AND PRESENTATION

As an alternative, you can copy and paste the following link into your web browser to register:

https://attendee.gotowebinar.com/register/7579497014553976332

Conference Call:

Please dial the following if you would like to interact with and ask questions to FalconStor hosts:

Toll Free: 1-866-901-6455

Access Code: 867-930-041

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) restructuring costs, (ii) effects of our Series A redeemable convertible preferred stock, and (iii) 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 reconciliation of GAAP to Non-GAAP financial measures presented in this release.

About FalconStor Software

FalconStor is a data protection technology company enabling enterprises to modernize their data backup and archival operations across multiple sites and public clouds. We deliver increased data security and provide fast recovery from ransomware attacks, while driving down an enterprise’s data storage footprint by up to 90%. As an established technology leader with 47 patents and patent applications, we have over an exabyte of data under management and offer products that are used by more than 600 enterprise customers. Our products are offered through and supported by a worldwide network of leading service providers, systems integrators, resellers, managed services providers (“MSPs”) and original equipment manufacturers (“OEMs”). To learn more, visit www.falconstor.com and stay connected with us on YouTube, Twitter, and LinkedIn.

FalconStor and FalconStor Software 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

 

 

 

March 31, 2021

 

December 31, 2020

 

 

(unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

2,020,989

 

 

$

1,920,656

 

Accounts receivable, net

 

2,954,033

 

 

2,836,571

 

Prepaid expenses and other current assets

 

2,063,111

 

 

1,837,596

 

Contract assets, net

 

380,119

 

 

254,483

 

Inventory

 

15,061

 

 

15,275

 

Total current assets

 

7,433,313

 

 

6,864,581

 

Property and equipment, net

 

196,630

 

 

197,020

 

Operating lease right-of-use assets

 

202,495

 

 

536,272

 

Deferred tax assets, net

 

312,342

 

 

330,552

 

Software development costs, net

 

17,639

 

 

19,278

 

Other assets, net

 

862,515

 

 

863,964

 

Goodwill

 

4,150,339

 

 

4,150,339

 

Other intangible assets, net

 

84,052

 

 

100,134

 

Contract assets

 

188,119

 

 

343,934

 

Total assets

 

$

13,447,444

 

 

$

13,406,074

 

Liabilities and Stockholders’ Deficit

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

917,570

 

 

$

453,791

 

Accrued expenses

 

2,374,705

 

 

2,293,765

 

Operating lease liabilities

 

235,962

 

 

665,074

 

Short-term loan, net of debt issuance costs and discounts

 

3,396,568

 

 

3,320,863

 

Deferred revenue, net

 

4,151,083

 

 

4,603,270

 

Total current liabilities

 

11,075,888

 

 

11,336,763

 

Other long-term liabilities

 

698,323

 

 

703,889

 

Notes payable, net

 

 

 

754,000

 

Operating lease liabilities

 

 

 

 

Deferred tax liabilities, net

 

520,905

 

 

513,027

 

Deferred revenue, net

 

2,303,675

 

 

1,765,859

 

Total liabilities

 

14,598,791

 

 

15,073,538

 

Commitments and contingencies

 

 

 

 

Series A redeemable convertible preferred stock

 

13,415,006

 

 

12,940,722

 

Total stockholders’ deficit

 

(14,566,353

)

 

(14,608,186

)

Total liabilities and stockholders’ deficit

 

$

13,447,444

 

 

$

13,406,074

 

FalconStor Software, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2021

 

2020

Revenue:

 

 

 

 

Product revenue

 

$

2,139,729

 

 

$

1,048,963

 

Support and services revenue

 

1,688,597

 

 

2,131,224

 

Total revenue

 

3,828,326

 

 

3,180,187

 

Cost of revenue:

 

 

 

 

Product

 

222,834

 

 

139,460

 

Support and service

 

426,173

 

 

407,920

 

Total cost of revenue

 

649,007

 

 

547,380

 

Gross profit

 

$

3,179,319

 

 

$

2,632,807

 

Operating expenses:

 

 

 

 

Research and development costs

 

659,940

 

 

674,924

 

Selling and marketing

 

1,396,640

 

 

981,191

 

General and administrative

 

837,867

 

 

1,093,169

 

Restructuring costs

 

302,313

 

 

287,460

 

Total operating expenses

 

3,196,760

 

 

3,036,744

 

Operating income (loss)

 

(17,441

)

 

(403,937

)

Gain on debt extinguishment

 

754,000

 

 

 

Interest and other expense

 

(266,695

)

 

(245,839

)

Income (loss) before income taxes

 

469,864

 

 

(649,776

)

Income tax expense (benefit)

 

44,616

 

 

70,064

 

Net income (loss)

 

$

425,248

 

 

$

(719,840

)

Less: Accrual of Series A redeemable convertible preferred stock dividends

 

277,170

 

 

285,760

 

Less: Accretion to redemption value of Series A redeemable convertible preferred stock

 

197,114

 

 

26,090

 

Net income (loss) attributable to common stockholders

 

$

(49,036

)

 

$

(1,031,690

)

Basic net income (loss) per share attributable to common stockholders

 

$

(0.01

)

 

$

(0.17

)

Diluted net income (loss) per share attributable to common stockholders

 

$

(0.01

)

 

$

(0.17

)

Weighted average basic shares outstanding

 

5,949,463

 

 

5,919,643

 

Weighted average diluted shares outstanding

 

5,949,463

 

 

5,919,643

 

FalconStor Software, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2021

 

2020

GAAP income (loss) from operations

 

$

(17,441

)

 

$

(403,937

)

Non-cash stock option expense (1)

 

$

4,471

 

 

$

4,510

 

Restructuring costs (3)

 

302,313

 

 

287,460

 

Non-GAAP income (loss) from operations

 

$

289,343

 

 

$

(111,967

)

 

 

 

 

 

GAAP net income (loss) attributable to common stockholders

 

$

(49,036

)

 

$

(1,031,690

)

Non-cash stock option expense, net of income taxes (2)

 

4,471

 

 

4,510

 

Restructuring costs (3)

 

302,313

 

 

287,460

 

Effects of Series A redeemable convertible preferred stock (4)

 

474,284

 

 

311,850

 

Non-GAAP net income (loss) attributable to common stockholders

 

$

732,032

 

 

$

(427,870

)

 

 

 

 

 

GAAP gross margin

 

83

%

 

83

%

Non-cash stock option expense (1)

 

0

%

 

0

%

Non-GAAP gross margin

 

83

%

 

83

%

 

 

 

 

 

GAAP gross margin – Product

 

90

%

 

87

%

Non-cash stock option expense (1)

 

0

%

 

0

%

Non-GAAP gross margin – Product

 

90

%

 

87

%

 

 

 

 

 

GAAP gross margin – Support and Service

 

75

%

 

81

%

Non-cash stock option expense (1)

 

0

%

 

0

%

Non-GAAP gross margin – Support and Service

 

75

%

 

81

%

 

 

 

 

 

GAAP operating margin

 

%

 

(13

%)

Non-cash stock option expense (1)

 

%

 

%

Restructuring costs (3)

 

8

%

 

9

%

Non-GAAP operating margin

 

8

%

 

(4

%)

 

 

 

 

 

GAAP Basic EPS

 

$

(0.01

)

 

$

(0.17

)

Non-cash stock option expense, net of income taxes (2)

 

0.00

 

 

0.00

 

Restructuring costs (3)

 

0.05

 

 

0.05

 

Effects of Series A redeemable convertible preferred stock (4)

 

0.08

 

 

0.05

 

Non-GAAP Basic EPS

 

$

0.12

 

 

$

(0.07

)

 

 

 

 

 

GAAP Diluted EPS

 

$

(0.01

)

 

$

(0.17

)

Non-cash stock option expense, net of income taxes (2)

 

0.00

 

 

0.00

 

Restructuring costs (3)

 

0.05

 

 

0.05

 

Effects of Series A redeemable convertible preferred stock (4)

 

0.08

 

 

0.05

 

Non-GAAP Diluted EPS

 

$

0.12

 

 

$

(0.07

)

 

 

 

 

 

Weighted average basic shares outstanding (GAAP and Non-GAAP)

 

5,949,463

 

 

5,919,643

 

Weighted average diluted shares outstanding (GAAP)

 

5,949,463

 

 

5,919,643

 

Weighted average diluted shares outstanding (Non-GAAP)

 

5,972,288

 

 

5,919,643

 

Footnotes:

(1)

Represents non-cash, stock-based compensation charges as follows:

 

 

Three Months Ended March 31,

 

 

2021

 

2020

Cost of revenue – Product

 

$

227

 

 

$

 

Cost of revenue – Support and Service

 

181

 

 

103

 

Research and development costs

 

 

 

428

 

Selling and marketing

 

2,677

 

 

184

 

General and administrative

 

1,386

 

 

3,795

 

Total non-cash stock based compensation expense

 

$

4,471

 

 

$

4,510

 

 (2)

Represents the effects of non-cash stock-based compensation expense recognized, net of related income tax effects. For the three months ended March 31, 2021 and 2020, the tax expense for both GAAP and Non-GAAP basis approximate the same amount.

 

 

 

 (3)

Represents restructuring costs which were incurred during each respective period presented.

 

 

(4)

Represents the effects of the accretion to redemption value of the Series A redeemable convertible preferred stock, accrual of Series A redeemable convertible preferred stock dividends and deemed dividend on Series A redeemable convertible preferred stock.
 

 

(5)

Represents the impact of an increase in diluted shares outstanding resulting from Non-GAAP adjustments to a GAAP net loss in the three months ended March 31, 2020.