Acquisition Will Expand Key West Coast
Market; Company Also Updates Q3 Guidance
Datalink (Nasdaq:DTLK), a leading provider of data center
infrastructure and services, today announced an agreement to
acquire privately held Bear Data Solutions, Inc. (Bear). The
acquisition of San Francisco-based Bear will quadruple Datalink’s
West Coast revenue base to more than $200 million, expand its Cisco
expertise into strategically important new areas, and add more than
1,000 new midmarket and enterprise customers to whom Datalink can
market its comprehensive portfolio of data center offerings.
Bear primarily serves California-based customers from offices in
San Francisco, San Jose, Irvine and San Diego. Bear had 2013
revenues of $130 million with a large percentage coming from
networking products, including Cisco wireless, routing and core
switches being requested by Datalink customers. The addition of
those products will help strengthen Datalink’s customer
relationships by increasing dependence on the company’s services,
and that Bear’s focus on lower-margin networking sales will open
the door for Datalink to sell higher-margin solutions such as
converged data center infrastructure and a fuller range of managed,
professional and advanced services to Bear’s customer base.
“This is an important strategic acquisition that will
significantly expand our West Coast operations and give us a large
new base of customers for solutions and services that are beyond
the scope of Bear’s current offerings,” said Paul Lidsky, Datalink
president and CEO. “As with our successful acquisitions of
Incentra, Midwave and StraTech over the past five years, bringing
Bear’s personnel and customers into the Datalink family will help
expand our geographic reach, deepen our technical knowledge and
capabilities, and accelerate our growth rate for shareholders and
investors.”
Datalink is purchasing Bear for $18.5 million, including $16.8
million in cash and $1.7 million in Datalink common stock. Datalink
will record a one-time acquisition-related charge of approximately
$750,000, or $.02 per fully diluted share, in the fourth quarter of
2014. The company expects the acquisition to be accretive to
earnings by approximately $.08 to $.10 per fully diluted share in
the first twelve months of operations, excluding one-time
integration charges and amortization of intangibles.
“Becoming part of Datalink is a significant benefit for our
customers and employees,” said Don James, Bear president and CEO.
“Our customers will gain from the addition of Datalink’s technical
skills, expanded services set and 24x7 customer support center, and
our employees will have the opportunity to work for a larger
company with a bigger portfolio that is being continually expanded
to meet the evolving requirements of the data center market.”
James, his leadership team and most of Bear’s 80 employees,
including 25 account executives and 17 field engineers, are
expected to remain with Datalink. A joint integration team is
currently developing a plan to merge operations, with most of the
integration work taking place during the fourth quarter of 2014.
Datalink expects the integration to save $1 million to $2 million
in 2015 through shared synergies.
In connection with the acquisition, Datalink has issued an
aggregate of 125,000 shares of restricted stock to 13 of the Bear
employees. One-half of the restricted shares will vest after two
years of service to Datalink and the remaining shares will vest in
equal portions at the completion of service during each of years
three and four. Datalink has issued these restricted shares outside
of its stockholder-approved equity plans in accordance with Nasdaq
rules for “inducement grants”.
Third Quarter 2014 Guidance
Datalink today also updated its guidance for the third quarter
of 2014. Datalink expects third quarter 2014 revenues to be
approximately $145 million. This compares to revenues of $139.6
million in the third quarter of 2013. Datalink expects earnings per
share to be in the range of $0.15 per share to $0.16 per share on a
GAAP basis, and $0.18 per share to $0.19 per share on a non-GAAP
basis. Datalink’s previous guidance was for revenues in the range
of $150 million to $160 million with earnings per share in the
range of $0.11 per share to $0.17 per share on a GAAP basis, and
$0.16 per share to $0.22 per share on a non-GAAP basis.
Datalink will report its third quarter financial results and
hold an investor conference call after the market closes on October
21, 2014.
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 network infrastructures, business continuity,
and cloud enablement. 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 (i) the
anticipated timing of the acquisition, (ii) the expected impact of
the acquisition on Datalink, (iii) Datalink’s plans with respect to
the acquired business and (iv) our internal projections of certain
anticipated 2014 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, 2013, 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 (including a failure
of anticipated synergies to materialize); 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,
severance costs 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:Investors &
AnalystsGreg Barnum, 952-279-4816Vice President and
CFOgbarnum@datalink.comorPressS&S
Public Relations, Inc.Jill Schmidt,
847-415-9311jills@sspr.comorInvestor
RelationsKim PayneInvestor Relations CoordinatorPhone:
952-279-4794Fax: 952-944-7869einvestor@datalink.com
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