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

February 24, 2016

(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 February 24, 2016, the Company issued a press release announcing its fourth quarter and twelve months ending December 31, 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 February 24, 2016 announcing the Company’s fourth quarter and twelve months ending December 31, 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:  February 24, 2016

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EXHIBITS INDEX

Exhibit 99.1                              Press release dated February 24, 2016 announcing the Company’s fourth quarter and twelve months ending December 31, 2015 earnings (furnished pursuant to Item 12).

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Exhibit 99.1

10050 Crosstown Circle, Suite 500, Eden Prairie, MN  55344

DATALINK REPORTS 2015 FOURTH QUARTER AND TWELVE MONTH OPERATING RESULTS

Fourth Quarter and Twelve Month Revenues Up 12% and 21% Year-Over-Year, Respectively;

Professional Services Revenues Increased 28% to 9% of Total Revenues in 2015

EDEN PRAIRIE, Minn., February 24, 2016 — Datalink (Nasdaq: DTLK), a leading provider of IT services and solutions, today reported results for its fourth quarter and twelve months that ended December 31, 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 December 31, 2015 increased 12% to $208.8 million compared to $186.4 million for the quarter ended December 31, 2014, and increased 5% over revenues of $198.0 million in the third quarter of 2015.  Revenues for the twelve months ended December 31, 2015, increased 21% to $764.8 million compared to $630.2 million for the twelve months ended December 31, 2014.

The company’s fourth quarter results include a series of additional, low-margin fulfillment orders from one of Datalink’s largest customers totaling approximately $11 million.  Without these orders, revenue growth for the fourth quarter would have been 6%. In addition, without these orders, overall gross margin for the fourth quarter would have increased to approximately 18.3%.

GAAP Results

On a GAAP basis, the company reported net earnings of $2.7 million or $0.12 per diluted share for the fourth quarter ended December 31, 2015.  This compares to net earnings of $4.5 million or $0.20 per diluted share in the fourth quarter of 2014. For the twelve months ended December 31, 2015, the company reported net earnings of $4.7 million or $0.21 per diluted share, compared to net earnings of $11.1 million, or $0.50 per diluted share, for the twelve months ended December 31, 2014.

Non-GAAP Results

Non-GAAP net earnings for the fourth quarter of 2015 were $4.5 million, or $0.20 per diluted share, compared to non-GAAP net earnings of $6.4 million, or $0.28 per diluted share, in the fourth quarter of 2014.  For the twelve months ended December 31, 2015, the company reported non-GAAP net earnings of $12.4 million, or $0.56 per diluted share, compared to non-GAAP net earnings of $16.5 million, or $0.75 per diluted share, for the twelve months ended December 31, 2014.  A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Highlights of the quarter and twelve months ended December 31, 2015, include:

·                  An 18% year-over-year increase in total services revenues in the twelve months ended December 31, 2015 and a 16% increase in the fourth quarter of 2015 compared to the same periods in 2014, marking continued progress toward the goal of building the company’s higher-margin, business outcome-oriented services.

·                  A 28% year-over-year increase in professional services revenues to a record $67.1 million, increasing the portion of Datalink revenues coming from professional services from 8% in 2014 to 9% in 2015.

·                  A record number of seven-figure contracts awarded to Datalink’s Consulting Services practice, including engagements for large data center consolidation and transformation, infrastructure virtualization, and application and data migration projects.

·                  A 13% year-over-year increase in the number of converged data center infrastructure sales, providing a key building block for other IT initiatives like private clouds where Datalink can offer additional consulting, managed and support services.

·                  A 48% year-over-year increase in twelve-month Cisco revenues, reflecting ongoing growth in the company’s networking products business.

·                  A quadrupling of solid state storage revenues during 2015 — with flash storage now representing 27% of Datalink’s storage sales compared to 6% in 2014 -  yielding lower gross margins than traditional storage but helping to offset continued declines in traditional storage revenues.

·                  Multiple industry recognitions, including a 2015 CRN® Triple Crown Award for achievements in the areas of revenue, growth and certifications.

·                  Fourth-quarter company re-purchase of 600,000 shares of common stock at an average price of $7.74 per share.  Through February 24, 2016, the company has re-purchased a total of 1,229,000 shares at an average price of $7.33 per share.

The company also eliminated approximately $10 million in operating expenses on an annualized basis in 2015 in an expense control initiative announced at the end of the second quarter to deal with ongoing margin erosion. The full impact of that workforce rebalancing will be realized in 2016.

“IT sales today have moved away from three- to five-year technology refresh cycles toward utilizing IT to achieve specific business benefits such as cost management, efficiency improvements, risk mitigation, increased IT security and better user experiences. We have adjusted our sales model accordingly, and the change is helping us navigate the shift in IT spending,” said Paul Lidsky, Datalink’s president and CEO.  “Over time, we expect these changes to offset continued margin pressures caused by growth in our networking and solid state storage business and deliver strong results for our investors.”

Outlook

“Due to the volatility of current IT spending patterns and the recent cautionary comments made by some our larger strategic OEM partners we will not be issuing quarterly guidance for the near future,” stated Paul Lidsky.  “Datalink intends to continue to execute against its strategy to improve upon its position as an IT services and solutions provider.  The company’s long term strategy is focused on supporting its clients’ success at improving operational efficiency, managing costs, and migrating risk via improvements in IT security and compliance.”  For the year ending December 31, 2016, Datalink expects to grow revenues between 4% and 6%, or about 2% and 3% higher than the current industry IT spending estimates of between 2% and 3%.  These estimates exclude approximately $22 million of low margin fulfillment revenues in 2015 that the company will not pursue in 2016.  The decrease in these fulfillment revenues are not expected to have an impact on our earnings as associated costs will also be eliminated. The company will continue to focus on growing Datalink-delivered professional services revenues at a much faster pace by delivering more value added consulting services such as data center relocation, cloud consulting and security assessments. The company expects this continued focus on professional services growth will in turn result in improved earnings.

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) 826-6120. Participants will be asked to identify the Datalink conference call and provide the designated identification number (40502959). 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 fourth quarter and months ended December 31, 2015 and, (iii) Datalink’s projections of certain anticipated 2016 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

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

DATALINK CORPORATION

CONSOLIDATED 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

CONSOLIDATED STATEMENT OF CASH FLOWS

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