12-Month Revenues Up 6.1%, Including 16%
Increase in Professional Services Revenues; Record Results in
Line with Guidance
Datalink (Nasdaq: DTLK), a leading provider of data center
infrastructure and services, today reported results for its fourth
quarter and the year ended December 31, 2014. Revenues for the
quarter ended December 31, 2014, increased 7.5% to a record $186.4
million compared to $173.4 million for the quarter ended December
31, 2013. On a GAAP basis, the company reported net earnings of
$3.7 million or $0.16 per diluted share for the fourth quarter
ended December 31, 2014. This compares to net earnings of $5.2
million or $0.24 per diluted share in the fourth quarter of 2013.
The company’s results for the quarter and year ended December 31,
2014, include the results of operations from the acquisition of
Bear Data Solutions, Inc. (“Bear”) on October 19, 2014. Bear
contributed approximately $16.0 million in revenues in the fourth
quarter of 2014 and lost $0.07 per diluted share on a GAAP
basis.
Revenues for the year ended December 31, 2014, increased 6.1% to
a record $630.2 million compared to $594.2 million for the year
ended December 31, 2013, and 3.4% without the revenues from the
acquisition of Bear. On a GAAP basis, the company reported net
earnings of $11.1 million or $0.50 per diluted share for the year
ended December 31, 2014, $0.57 per diluted share excluding the
acquisition of Bear. This compares to net earnings of $10.0 million
or $0.52 per diluted share in 2013.
Non-GAAP ResultsNon-GAAP net earnings for the fourth
quarter of 2014 were $6.4 million, or $0.28 per diluted share, and
$7.3 million or $0.33 per diluted share excluding the acquisition
of Bear, compared to $7.4 million, or $0.33 per diluted share, in
the fourth quarter of 2013. A detailed reconciliation between GAAP
and non-GAAP information is contained in the tables included
herein.
Fourth-quarter and year-end highlights include:
- Record Q4 revenues of $170.4 million
(excluding Bear revenues), in line with the $165 million to $175
million guidance issued last October.
- A 13% year-over-year increase in total
services revenues to a record $249.8 million in 2014.
- A 16% increase in professional services
revenues to a record $52.4 million or 8.3% of revenues, compared to
$45.2 million or 7.6% of revenues in 2013, driven in part by steady
expansion of advanced services designed to support complex data
center needs ranging from cloud-related projects to data center
relocation.
- Continued growth in converged data
center infrastructure sales, average customer spend and customers
who did over $1 million of business with the company.
- A #47 ranking on CRN’s list of top 500
technology integrators as well as recognition as one of only 26
companies to earn CRN’s new Triple Crown award for placing on the
publication’s 2014 Solution Provider 500, Fast Growth 150 and
Tech Elite 250 lists.
- Top NetApp ranking in FlexPod and
Clustered Data ONTAP sales in the Americas, based on revenues
during NetApp’s 2014 fiscal year, reflecting Datalink’s success in
selling Cisco/NetApp converged infrastructure to assist customers
in IT modernization.
- The acquisition of San Francisco-based
Bear Data Solutions, Inc. in October 2014, quadrupling Datalink’s
West Coast revenue base, as well as adding more than 1,000 new
midmarket and enterprise customers and expanding Datalink’s Cisco
expertise into strategic new areas.
Fourth-quarter revenues from the Bear acquisition were less than
expected, primarily because of delayed shipments of several large
orders. As a result, Datalink entered 2015 with over $16.5 million
of Bear-related backlog that is expected to be booked in the first
quarter.
“Our fourth-quarter and year-end 2014 performance demonstrates
our strong progress in transitioning from our roots as a storage
VAR to becoming a full-service data center provider,” said Paul
Lidsky, Datalink president and CEO. “Our continued growth, as well
as the steady increase in higher-margin service revenues and
customer wallet share, are directly related to the diversification
of our product and services portfolio to address the full spectrum
of data center challenges faced by businesses today.”
OutlookDatalink projects revenues of $175.0 million to
$185.0 million for the first quarter of 2015, approximately $30.0
million of which will come from the Bear acquisition, compared to
$139.6 million for the first quarter of 2014. This represents an
increase in expected revenues of between 25% and 33%, based on the
company’s current backlog, sales pipeline, and historical trends.
The company expects first quarter 2014 net earnings to be between
$0.05 and $0.10 per diluted share on a GAAP basis, and net earnings
of between $0.14 and $0.19 per diluted share on a non-GAAP basis.
This compares to net earnings of $0.01 per diluted share and $0.06
per diluted share on a GAAP and non-GAAP basis, respectively, for
the same period in 2014.
Non-GAAP earnings per share exclude the effect of acquisition
accounting adjustments to deferred revenue and costs, integration
and transaction costs related to acquisitions, stock-based
compensation expense, amortization of intangible assets, and the
related effects on income taxes. The company estimates this total
effect will be approximately $0.09 per diluted share for the first
quarter of 2015.
Conference Call and Webcast TodayDatalink will hold a
conference call shortly afterward at 4:00 p.m. Central Time during
which time Datalink president and chief executive officer, Paul
Lidsky, and chief financial officer, Greg Barnum, will discuss
company results and provide a business overview. Participants can
access the conference call by dialing (866) 953-6860. Participants
will be asked to identify the Datalink conference call and provide
the designated identification number (75380487). A live webcast of
the conference call can be accessed here or via Datalink’s investor
relations website at www.datalink.com.
About DatalinkA 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 2015 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 DetailsNon-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.
DATALINK CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data)
(Unaudited) Three Months
Ended Twelve Months Ended December 31,
December 31,
2014
2013
2014
2013
Net sales: Products $ 117,975 $ 111,553 $ 380,631 $ 373,008
Services 68,399 61,815
249,605 221,176 Total net sales
186,374 173,368 630,236
594,184 Cost of sales: Cost of products
94,395 85,752 300,852 291,671 Cost of services 52,450
46,957 192,557
168,655 Total cost of sales 146,845
132,709 493,409 460,326
Gross profit 39,529 40,659
136,827 133,858 Operating
expenses: Sales and marketing 16,403 17,551 61,877 60,842 General
and administrative 6,275 4,948 22,271 20,729 Engineering 7,507
7,126 29,128 27,536 Integration and transaction costs 626 15 626 95
Amortization of intangibles 2,346 1,671
6,428 7,251 Total
operating expenses 33,157 31,311
120,330 116,453 Earnings from
operations 6,372 9,348 16,497 17,405 Gain on settlement related to
StraTech acquisition - (611 ) 877 (611 ) Interest income 63 22 278
76 Interest/other expense, net (73 ) (3 )
(274 ) (183 ) Earnings before income taxes
6,362 8,756 17,378 16,687 Income tax expense 2,692
3,531 6,297 6,642
Net earnings $ 3,670 $ 5,225 $ 11,081
$ 10,045 Earnings per common share:
Basic $ 0.17 $ 0.24 $ 0.51 $ 0.53 Diluted $ 0.16 $ 0.24 $ 0.50 $
0.52 Weighted average common shares outstanding: Basic 21,723
21,516 21,598 19,078 Diluted 22,327 22,152 22,039 19,493
DATALINK CORPORATION CONSOLIDATED BALANCE
SHEETS (In thousands, except share data)
December 31, December 31,
2014
2013
(Unaudited) Assets Current assets Cash and cash
equivalents $ 27,725 $ 24,871 Short term investments 22,994 51,214
Accounts receivable, net 171,531 130,380 Net working capital
receivable from acquisition 741 - Lease receivable 2,482 866
Inventories, net 5,447 4,120 Current deferred customer support
contract costs 106,497 89,304 Inventories shipped but not installed
20,035 16,000 Income tax receivable 4,194 - Other current assets
3,563 1,279 Total current assets 365,209
318,034 Property and equipment, net 7,244 6,722 Goodwill
48,016 37,780 Finite-lived intangibles, net 16,603 13,509 Deferred
customer support contract costs non-current 58,484 49,044 Deferred
tax asset 5,660 7,116 Long term lease receivable 4,016 510 Other
assets 759 393 Total assets $ 505,991 $ 433,108
Liabilities and Stockholders' Equity Current
liabilities Floor plan line of credit $ 27,656 $ 19,977 Accounts
payable 86,266 60,421 Lease payable 2,319 409 Accrued commissions
5,334 7,133 Accrued sales and use tax 4,117 2,067 Accrued expenses,
other 7,730 8,033 Income tax payable - 11,586 Deferred tax
liability 1,982 1,694 Customer deposits 3,325 4,240 Current
deferred revenue from customer support contracts 131,061 110,567
Other current liabilities 746 187 Total current
liabilities 270,536 226,314 Deferred revenue from customer support
contracts non-current 70,663 59,576 Long-term lease payable 3,278
466 Other liabilities non-current 828 956 Total
liabilities 345,305 287,312
Stockholders' equity Common stock, $.001 par value, 50,000,000
shares authorized, 22,876,753 and 22,785,422 shares issued and
outstanding as of December 31, 2014 and December 31, 2013,
respectively 23 23 Additional paid-in capital 115,047 111,239
Retained earnings 45,616 34,534 Total stockholders'
equity 160,686 145,796 Total liabilities and
stockholders' equity $ 505,991 $ 433,108
DATALINK
CORPORATION RECONCILIATION BETWEEN GAAP AND NON-GAAP NET
INCOME (In thousands, except per share data)
(Unaudited) Three Months
Ended Twelve Months Ended December 31,
December 31, 2014 2013 2014 2013
Earnings from operations on a GAAP
basis $ 6,372 $ 9,348 $ 16,497 $ 17,405
GAAP operating margin 3.4 % 5.4 % 2.6 % 2.9 % Non-GAAP
Adjustments: Purchase accounting adjustment to StraTech deferred
revenue and cost, net 26 66 170
1,051 Total gross margin adjustments 26 66 170
1,051 Stock based compensation expense included in sales and
marketing 405 285 1,113 1,228 Stock based compensation expense
included in general and administrative 543 396 1,867 1,672 Stock
based compensation expense included in engineering 374 450 1,061
1,149 Integration and transaction costs 626 15 626 95
Amortization of intangible assets
2,346 1,671 6,428
7,251 Total operating expense adjustments 4,294
2,817 11,095 11,395
Non-GAAP earnings from operations 10,692 12,231
27,762 29,851 Non-GAAP operating margin 5.7 % 7.1 % 4.4 % 5.0 %
Interest income (expense), net (10 ) 19 4 (107 ) Income tax
expense impact including Non-GAAP items 4,326
4,876 11,245 11,838
Non-GAAP net earnings $ 6,356 $ 7,374 $ 16,521
$ 17,906 Non-GAAP net earnings per share - Basic $
0.29 $ 0.34 $ 0.76 $ 0.94 Non-GAAP net
earnings per share - Diluted $ 0.28 $ 0.33 $ 0.75
$ 0.92 Shares used in non-GAAP per share
calculation - Basic 21,723 21,516
21,598 19,078 Shares used in non-GAAP
per share calculation - Diluted 22,327 22,152
22,039 19,493
DATALINK CORPORATION CONSOLIDATED STATEMENT OF CASH
FLOWS (In thousands) (Unaudited)
Twelve Months Ended December 31,
2014
2013
Cash flows from operating activities: Net earnings $ 11,081
$ 10,045 Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities: Change in fair value of
trading securities 5 (187 ) Provision (benefit) for bad debts (152
) 115 Depreciation 2,667 2,102 Amortization of finite lived
intangibles 6,428 7,251 Loss (gain) on settlement related to
StraTech acquisition (877 ) 611 Deferred income taxes (1,278 )
(9,985 ) Stock based compensation expense 4,041 4,049 Changes in
operating assets and liabilities, net of acquisitions: Accounts
receivable and lease receivable, net (30,471 ) 12,909 Inventories
(4,587 ) (8,782 ) Deferred costs/revenues/customer deposits, net
4,033 7,630 Accounts payable and lease payable 13,150 (23,420 )
Accrued expenses (3,588 ) (814 ) Income tax payable (receivable)
(15,780 ) 14,016 Other (1,962 ) (270 ) Net
cash provided by (used in) operating activities (17,290 )
15,270 Cash flows from investing
activities: Sales and maturities of trading securities 108,292 -
Purchases of trading securities (80,077 ) (51,027 ) Purchases of
property and equipment (2,213 ) (2,742 ) Payment for acquisitions,
net of cash acquired (12,707 ) - Net
cash provided by (used in) investing activities 13,295
(53,769 ) Cash flows from financing
activities: Net borrowings (payments) under line of credit - (6,000
) Proceeds (payments) from floorplan line of credit 7,679 19,977
Proceeds from stock offering - 39,021 Excess tax from stock
compensation 817 885 Proceeds from issuance of common stock from
option exercise 88 252 Tax withholding payments reimbursed by
restricted stock (1,735 ) (1,080 ) Net cash
provided by financing activities 6,849
53,055 Increase in cash and cash equivalents 2,854
14,556 Cash and cash equivalents, beginning of period 24,871
10,315 Cash and cash equivalents, end
of period $ 27,725 $ 24,871
Supplemental cash flow information: Cash paid for income taxes $
22,579 $ 1,738 Cash received for income tax refunds $ 99 $ 11 Cash
paid for interest expense $ 278 $ 154 Supplemental non-cash
investing and financing activities: Non-cash stock issued as
consideration for acquisition $ 1,474 $ - Non-cash stock received
for settlement of StraTech acquisition $ - $ 2,647
DatalinkInvestors &
AnalystsGreg Barnum, 952-279-4816Vice President and
CFOgbarnum@datalink.comorInvestor
RelationsKim Payne, 952-279-4794Investor Relations
CoordinatorFax: 952-944-7869einvestor@datalink.com
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