DTLK Datalink Corp.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

October 21, 2015

(Date of Report — date of earliest event reported)

DATALINK CORPORATION

(Exact name of registrant as specified in charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

10050 Crosstown Circle Suite 500, Eden Prairie, MN 55344

(Address of principal executive offices)

952-944-3462

(Registrant’s telephone number, including area code)

(Former Name and Address)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operation and Financial Condition

On October 21, 2015, the Company issued a press release announcing its third quarter and nine months ending September 30, 2015 earnings.  The full text of this press release is furnished on Exhibit 99.1 hereto and incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits

(d)                                 Exhibits:

99.1                        Press release dated October 21, 2015 announcing the Company’s third quarter and nine months ending September 30, 2015 earnings (furnished pursuant to Item 12).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  October 21, 2015

2

EXHIBITS INDEX

Exhibit 99.1                              Press release dated October 21, 2015 announcing the Company’s third quarter and nine months ending September 30, 2015 earnings (furnished pursuant to Item 12).

3

Exhibit 99.1

DATALINK REPORTS 2015 THIRD QUARTER AND NINE MONTH OPERATING RESULTS

Third Quarter and Nine Month Revenues Up 37% and 25% Year-Over-Year, Respectively

EDEN PRAIRIE, Minn., October 21, 2015 — Datalink (Nasdaq: DTLK), a leading provider of data center infrastructure and services, today reported results for its third quarter and nine months that ended September 30, 2015.  Financial results for both reporting periods include the results of operations from the acquisition of Bear Data Solutions, which closed on October 19, 2014.

Revenues for the quarter ended September 30, 2015 increased 37% to $198.0 million compared to $145.0 million for the quarter ended September 30, 2014, and increased 8% over revenues of $182.6 million in the second quarter of 2015.  Revenues for the nine months ended September 30, 2015, increased 25% to $556.0 million compared to $443.9 million for the nine months ended September 30, 2014.

GAAP Results

On a GAAP basis, the company reported net earnings of $1.3 million or $0.06 per diluted share for the third quarter ended September 30, 2015.  This compares to net earnings of $3.5 million or $0.16 per diluted share in the third quarter of 2014. For the nine months ended September 30, 2015, the company reported net earnings of $2.0 million or $0.09 per diluted share, compared to net earnings of $7.4 million, or $0.33 per diluted share, for the nine months ended September 30, 2014.

Non-GAAP Results

Non-GAAP net earnings for the third quarter of 2015 were $3.3 million, or $0.15 per diluted share, compared to non-GAAP net earnings of $4.2 million, or $0.19 per diluted share, in the third quarter of 2014.  For the nine months ended September 30, 2015, the company reported non-GAAP net earnings of $8.3 million, or $0.37 per diluted share, compared to non-GAAP net earnings of $10.3 million, or $0.46 per diluted share, for the nine months ended September 30, 2014.  A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Highlights of the quarter and nine months ended September 30, 2015, include:

·                  A 20% year-over-year increase in total services revenues in the first nine months of 2015 and a 16% increase in the third quarter of 2015 compared to 2014, marking continued progress toward our goal of building the company’s higher margin services business that helps customers transform their data centers to support their business needs.

·                  A 33% year-over-year increase in professional services revenues to a record $48.5 million in the first nine months of 2015, simultaneously increasing the portion of Datalink revenues coming from professional services to 9% of total revenues from 8% in the first nine months of 2014.

·                  Multiple new seven-figure contracts awarded to Datalink’s Advanced Services practice, including engagements for large data center consolidation and transformation, infrastructure virtualization and application and data migration projects.

·                  An 21% quarter-over-quarter increase in the number of converged data center infrastructure sales, a key building block for other IT initiatives like private clouds, where Datalink can offer additional consulting, managed and support services.  A 55% year-over-year increase in nine month Cisco revenues, reflecting ongoing growth in the company’s networking products business.

·                  A five-fold increase in our revenues from the emerging solid state storage providers in the first nine months of 2015 yielding lower gross margins than traditional storage but helping to offset continued declines in traditional storage revenues caused by the

transition to flash storage, falling storage prices, and an industry wide move away from three-year technology refresh cycles in favor of upgrading technology to achieve specific business benefits.

The company is on track with the workforce rebalancing and other expense control strategies that were announced at the end of the second quarter that we anticipate will eliminate approximately $10 million of operating expenses on an annualized basis when fully implemented in the first quarter of 2016.

“Included in our third quarter results are a number of one-time, low margin fulfillment orders from one of our largest customers totaling $10.7 million.  Without these orders our revenue growth for the third quarter would have been a solid 29%, which is significantly higher than our OEM partners, and our third-quarter gross margins and operating margin percentages would have been higher as well,” said Paul Lidsky, Datalink’s president and CEO.  “At the same time, we expect continued margin pressures because of the growth in our networking and solid state storage business.  We have responded by building our services revenues and adjusting our expense model, and we will continue to do both in order to drive profitable growth and deliver strong results for our investors.”

Outlook

Datalink projects revenues of $195.0 million to $210.0 million for the fourth quarter of 2015, compared to $186.4 million for the fourth quarter of 2014.  This represents an increase in expected revenues of between 5% and 13%, based on the company’s current backlog, sales pipeline, historical trends, and expected continued softness in storage spending countered by continued growth in the company’s networking and services business during the quarter.  The company expects fourth quarter 2015 net earnings to be between $0.13 and $0.19 per diluted share on a GAAP basis, and net earnings of between $0.20 and $0.26 per diluted share on a non-GAAP basis.  This compares to net earnings of $0.16 per diluted share and $0.28 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 $0.07 per diluted share for the third quarter of 2015.

Conference Call and Webcast Today

Datalink will hold a conference call shortly after 4:00 p.m. Central Time during which time Datalink’s 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 (855) 793-2451. Participants will be asked to identify the Datalink conference call and provide the designated identification number (60747550). A live webcast of the conference call can be accessed here or via Datalink’s investor relations website at www.datalink.com.

About Datalink

Datalink is a complete IT services provider that helps companies transform their technology, operations, and service delivery to meet business challenges. Combining extensive experience, a full lifecycle of services and a comprehensive approach to producing IT innovations that empower positive business outcomes, Datalink delivers success across cloud IT transformation, next generation technology, and security. 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) anticipated margin pressure and plans to drive profitable growth, (ii) anticipated financial performance for third quarter and months ended September 30, 2015 and, (iii) Datalink’s projections of certain anticipated fourth quarter and full year 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, 2014, 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; customers switching to solid state storage solutions; 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.

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Company Contacts:

Investors & Analysts

Greg Barnum

Vice President and CFO

Phone:  952-279-4816

Email:  gbarnum@datalink.com

Press

Jill Schmidt

S&S Public Relations, Inc.

Phone: 847-415-9311
Email: jills@sspr.com

DATALINK CORPORATION

STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

DATALINK CORPORATION

BALANCE SHEETS

(In thousands, except share data)

DATALINK CORPORATION

RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

DATALINK CORPORATION

STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)