Revenues Affected by Late Orders &
Shipments; Flash Storage & Services Sales Continue to
Increase
Datalink (Nasdaq: DTLK), a leading provider of IT services and
solutions, today reported first quarter 2016 financial results.
Revenues for the quarter ended March 31, 2016, declined 6% to
$164.6 million compared to $175.4 million for same period in 2015.
Results were affected by approximately $10 million of delayed
shipments from three of our primary vendors. Shipment of those
orders, as expected in the first quarter, would have produced
revenues comparable to the first quarter of 2015. The delayed
shipments created a record backlog going into our second
quarter.
On a GAAP basis, the company reported a net loss of $433,000 or
$0.02 per diluted share for the first quarter of 2016. This
compares to a net loss of $14,000 or $0.00 per diluted share in the
first quarter of 2015. Non-GAAP net earnings for the first quarter
of 2016 were $1.2 million, or $0.05 per diluted share, compared to
non-GAAP net earnings of $2.4 million, or $0.11 per diluted share,
in the first quarter of 2015. A detailed reconciliation between
GAAP and non-GAAP information is contained in the tables included
herein.
“Our first-quarter performance was impacted by both unfulfilled
orders and the unusually slow early-quarter spending cadence that
has also been reported by other major industry manufacturers, but
we believe those are anomalies that will be corrected in the second
quarter. Our sales momentum has been strong since late March and
both our flash storage business and the number of large projects in
our pipeline continue to grow,” said Paul Lidsky, Datalink’s
president and CEO. “We still face the challenges created by the
shift in IT spending habits away from regular technology refreshes
to business-driven IT investments, but we continue to rebalance our
workforce skill sets to address that shift. We also have a strong
balance sheet that enables us to invest in new services and
next-generation technology that meets the evolving needs of our
clients and allows us to take advantage of new strategic
acquisition opportunities.”
First-Quarter Highlights
- A 149% year-over-year increase in
sales of all-flash storage, with flash now representing 56% of
Datalink’s storage sales compared to 22% in 2015. Flash storage
yields lower gross margins than traditional storage but helps to
offset continued declines in traditional storage revenues and also
drives migration and other consulting services.
- An 8% year-over-year increase in
total services revenues, including an increase in managed
services that are a source of recurring income. Services comprised
45% of revenues during the quarter compared to 39% in the
comparable quarter of 2015.
- Industry recognition, including
placement on the 2016 CRN Tech Elite 250 and 2016 CRN Elite 150
Managed Service Provider lists.
- Strong balance sheet with the
company ending the quarter with over $66 million of cash and
investments and no debt.
- Stock re-purchase program, the
company repurchased 600,000 shares of common stock at an average
price of $6.98 per share in the first quarter. The company has
re-purchased a total of 1,229,000 shares at an average price of
$7.33 per share since the inception of the program in September
2015.
Outlook
“Based on our current sales momentum, the major transformational
projects currently in our pipeline, and growth drivers like flash
storage and our new security practice, we believe the 4% to 6%
growth rates that we projected in February are still attainable.
That is double the annual 2% to 3% growth predicted for the
industry overall,” Lidsky said. “This remains a challenging time,
but our initiatives over the past few years to help clients utilize
IT to support business objectives have positioned the company to
adapt to the new ways in which organizations want to consume IT
services and technologies.”
As previously reported, the company has discontinued near-term
quarterly guidance because of the volatility of current IT spending
patterns, revenue fluctuations from quarter to quarter related to
variable delivery timetables for complex consulting services and
associated products, and a transition to annual guidance that has
been adopted by other IT companies.
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) 826-6150. Participants will be asked to identify the Datalink
conference call and provide the designated identification number
(40502972). 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,
and (ii) 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, 2015, including, but not limited to:
the level of continuing demand for IT services and solutions
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; 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.
DATALINK CORPORATION CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
data) (Unaudited) Three Months Ended
March 31,
2016
2015
Net sales: Products $ 90,675 $ 106,736 Services
73,957 68,616 Total net sales 164,632
175,352 Cost of sales: Cost of products 73,099 85,782
Cost of services 60,061 54,402 Total cost of
sales 133,160 140,184 Gross profit
31,472 35,168 Operating expenses: Sales and marketing
15,635 17,422 General and administrative 6,870 6,989 Engineering
8,032 8,242 Integration and transaction costs - 450 Amortization of
intangibles 1,405 2,073 Total operating
expenses 31,942 35,176 Loss from operations
(470) (8) Interest income 165 71 Interest expense (73) (67) Other,
net (50) (19) Loss before income taxes (428)
(23) Income tax expense (benefit) 5 (9) Net
loss $ (433) $ (14) Loss per common share: Basic $
(0.02) $ (0.00) Diluted $ (0.02) $ (0.00) Weighted average common
shares outstanding: Basic 21,158 21,949 Diluted 21,158 21,949
DATALINK CORPORATION CONSOLIDATED BALANCE
SHEETS (In thousands, except share data)
(Unaudited) March 31, December
31,
2016
2015
Assets Current assets Cash and cash equivalents $
30,128 $ 39,397 Short-term investments 35,974 20,579 Accounts
receivable, net 111,960 163,900 Lease receivable 3,816 3,895
Inventories, net 9,399 7,997 Current deferred customer support
contract costs 123,280 124,705 Inventories shipped but not
installed 16,498 16,616 Income tax receivable 691 - Other current
assets 3,176 3,251 Total current assets
334,922 380,340 Property and equipment, net 8,324 7,963
Goodwill 47,101 47,101 Finite-lived intangibles, net 7,851 9,256
Deferred customer support contract costs, non-current 58,533 60,240
Deferred tax asset 9,177 9,177 Long-term lease receivable 6,513
7,017 Other assets 735 703 Total assets $ 473,156 $
521,797
Liabilities and Stockholders' Equity Current
liabilities Floor plan line of credit $ 25,159 $ 24,340 Accounts
payable 42,312 73,959 Lease payable 3,882 3,643 Accrued commissions
1,729 3,687 Accrued sales and use taxes 2,204 3,782 Accrued
expenses, other 5,961 6,998 Accrued income tax payable - 4,492
Customer deposits 4,122 4,398 Current deferred revenue from
customer support contracts 149,766 151,619 Other current
liabilities 451 1,050 Total current liabilities
235,586 277,968 Deferred revenue from customer support contracts,
non-current 70,123 72,262 Long-term lease payable 5,105 5,857 Other
liabilities non-current 1,739 942 Total liabilities
312,553 357,029 Stockholders' equity
Common stock, $.001 par value, 50,000,000 shares authorized,
22,577,888 and 22,627,322 shares issued and outstanding as of March
31, 2016 and December 31, 2015, respectively 22 23 Additional
paid-in capital 110,700 114,431 Retained earnings 49,881
50,314 Total stockholders' equity 160,603
164,768 Total liabilities and stockholders' equity $ 473,156 $
521,797
DATALINK CORPORATION RECONCILIATION
BETWEEN GAAP AND NON-GAAP NET INCOME (In thousands, except
per share data) (Unaudited) Three
Months Ended March 31, 2016 2015
Loss from operations on a GAAP basis $ (470) $ (8) GAAP
operating margin -0.3% 0.0% Non-GAAP Adjustments: Purchase
accounting adjustment to StraTech deferred revenue and cost, net
1 12 Total gross margin adjustments 1 12 Stock
based compensation expense included in sales and marketing 265 418
Stock based compensation expense included in general and
administrative 369 433 Stock based compensation expense included in
engineering 409 591 Integration and transaction costs - 450
Amortization of intangible assets 1,405 2,073 Total
operating expense adjustments 2,448 3,965
Non-GAAP earnings from operations 1,979 3,969 Non-GAAP operating
margin 1.2% 2.3% Interest & other income (expense), net
42 (15) Income tax expense impact including Non-GAAP items
849 1,593 Non-GAAP net earnings $ 1,172 $ 2,361
Non-GAAP net earnings per share - Basic $ 0.06 $ 0.11
Non-GAAP net earnings per share - Diluted $ 0.05 $ 0.11
Shares used in non-GAAP per share calculation - Basic 21,158
21,949 Shares used in non-GAAP per share calculation -
Diluted 22,115 22,466
DATALINK
CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (In
thousands) (Unaudited) Three Months
Ended March 31,
2016
2015
Cash flows from operating activities: Net loss $ (433) $
(14) Adjustments to reconcile net earnings to net cash provided by
operating activities: Change in fair value of trading securities 37
- Benefit for bad debts (49) (94) Depreciation 756 843 Amortization
of finite-lived intangibles 1,405 2,073 Stock-based compensation
expense 1,043 1,442 Changes in operating assets and liabilities:
Accounts receivable, net and leases receivable 52,572 30,298
Inventories (1,284) 8,687 Deferred costs/revenues/customer
deposits, net (1,136) 2,299 Accounts payable and leases payable
(32,160) (41,917) Accrued expenses (4,573) (3,316) Income tax
receivable (691) (284) Income tax payable (4,492) - Other
240 1,649 Net cash provided by operating activities
11,235 1,666 Cash flows from investing
activities: Purchases, sales and maturities of trading securities,
net (15,432) 22,994 Purchases of property and equipment
(1,117) (1,216) Net cash (used in) provided by
investing activities (16,549) 21,778
Cash flows from financing activities: Net payments under floor plan
line of credit 819 1,991 Repurchase of common stock (4,191) -
Excess tax (benefit) from stock compensation (277) 179 Tax
withholdings related to stock-based awards (306)
(639) Net cash (used in) provided by financing activities
(3,955) 1,531 Increase (decrease) in
cash and cash equivalents (9,269) 24,975 Cash and cash equivalents,
beginning of period 39,397 27,725 Cash and
cash equivalents, end of period $ 30,128 $ 52,700
Supplemental cash flow information: Cash paid for income taxes $
5,463 $ 97 Cash received for income tax refunds $ - $ 2 Cash paid
for interest expense $ 73 $ 21
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160427006705/en/
DatalinkCompany Contacts:Investors &
AnalystsGreg BarnumVice President and CFOPhone:
952-279-4816Email: gbarnum@datalink.comorPressJill SchmidtJill Schmidt Public
RelationsPhone: 847-921-1295Email: jill@jillschmidtpr.com
Datalink Corp. (NASDAQ:DTLK)
Historical Stock Chart
From Apr 2024 to May 2024
Datalink Corp. (NASDAQ:DTLK)
Historical Stock Chart
From May 2023 to May 2024