Second Quarter and Six Month Revenues Up 9% and
2% Year-Over-Year, Respectively
Second Quarter and Six Month Earnings from
Operations Up 212% and 182% Year-Over-Year, Respectively
Adding financial tables after last paragraph of release.
The corrected release reads:
DATALINK REPORTS 2016 SECOND QUARTER AND SIX
MONTH OPERATING RESULTS
Second Quarter and Six Month Revenues Up 9% and
2% Year-Over-Year, Respectively
Second Quarter and Six Month Earnings from
Operations Up 212% and 182% Year-Over-Year, Respectively
Datalink (Nasdaq: DTLK), a leading provider of IT services and
solutions, today reported results for its second quarter and six
months that ended June 30, 2016. Revenues for the quarter ended
June 30, 2016, increased 9% to $199.2 million compared to $182.6
million for the quarter ended June 30, 2015, and increased 21% over
revenues of $164.6 million in the first quarter of 2016. Revenues
for the six months ended June 30, 2016, increased 2% to $363.8
million compared to $358.0 million for the six months ended June
30, 2015.
GAAP Results
On a GAAP basis, the company reported net earnings of $3.9
million or $0.18 per diluted share for the second quarter ended
June 30, 2016. This compares to net earnings of $661,000 or $0.03
per diluted share in the second quarter of 2015. For the six months
ended June 30, 2016, the company reported net earnings of $3.4
million or $0.16 per diluted share, compared to net earnings of
$647,000, or $0.03 per diluted share, for the six months ended June
30, 2015. The income tax expense for the quarter and six months
ended June 30, 2016 includes discrete tax benefits of approximately
$1.6 million and $1.4 million, respectively, primarily due to
research and development tax credits for 2012 thru 2016. The
company has determined that certain activities it performs qualify
for research and development tax credits as defined by Internal
Revenue Code Section 41. Excluding this credit, earnings per
diluted share for the quarter and six months ended June 30, 2016
would have been $0.10 and $0.08, respectively.
Non-GAAP Results
Non-GAAP net earnings for the second quarter of 2016 were $3.9
million, or $0.18 per diluted share, compared to non-GAAP net
earnings of $2.7 million, or $0.12 per diluted share, in the second
quarter of 2015. For the six months ended June 30, 2016, the
company reported non-GAAP net earnings of $5.2 million, or $0.24
per diluted share, compared to non-GAAP net earnings of $5.0
million, or $0.22 per diluted share, for the six months ended June
30, 2015. A detailed reconciliation between GAAP and non-GAAP
information is contained in the tables included herein. The income
tax expense for the quarter and six months ended June 30, 2016
includes discrete tax benefits primarily for research and
development tax credits of $500,000 on an annualized basis for
2016. Excluding this credit, non-GAAP earnings per diluted share
for the quarter and six months ended June 30, 2016 would have been
$0.17 and $0.22, respectively.
Highlights
- Second quarter earnings from
operations increased 212% to $3.7 million on a GAAP basis and
35% to $6.4 million on a non-GAAP basis compared to second quarter
2015.
- A 132% year-over-year increase in
sales of all-flash storage, with flash now representing 51% of
the company’s storage sales compared to 21% 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 when part of a
converged solution.
- A 5% year-over-year increase in
total services revenues, reflecting the company’s emphasis on
growing its services business. Services comprised 41% of the
company’s year to date revenues in 2016, up from 40% in the first
six months of 2015.
- A continued increase in $1 million+
customers, with seven-figure spending by 40 organizations in
the second quarter of 2016 compared to 30 in the same period in
2015.
- A #45 ranking on CRN’s 2016 Solution
Provider 500 list of the top technology integrators, solution
providers and IT consultants in North America by revenue, as well
as its fifth consecutive CRN Tech Elite 250 honor reflecting the
company’s extensive list of advanced technical certifications.
- Strong balance sheet with the
company ending the quarter with over $70.8 million of cash and
investments and no debt.
Outlook
“We had a solid second quarter, highlighted by strong revenue
and earnings growth. Contributing to this growth were several
seven-figure data center modernization contracts that demonstrate
the complex mix of technologies and services required to optimize
data center operations today. Our ability to provide a full range
of consulting, project planning and management, implementation,
data migration and automation services were instrumental in
securing these contracts,” said Paul Lidsky, Datalink’s president
and CEO. “At the same time, the market has accepted flash storage
at a faster rate than we expected earlier in the year, which
impacts our overall revenue growth and gross margins. As a result
we no longer believe our annual growth rate will reach our original
forecast of 4% to 6% and instead our annual growth rate will be
more in line with industry averages.”
Conference Call and Webcast Today
Datalink 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
(855) 826-6150. Participants will be asked to identify the Datalink
conference call and provide the designated identification number
(40503009). 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 Six Months Ended June 30, June 30,
2016 2015
2016 2015 Net sales:
Products $ 123,631 $ 108,787 $ 214,306 $ 215,523 Services
75,562 73,844 149,519
142,460 Total net sales 199,193 182,631
363,825 357,983 Cost of
sales: Cost of products 99,959 88,186 173,058 173,968 Cost of
services 60,662 57,973 120,723
112,375 Total cost of sales 160,621
146,159 293,781 286,343
Gross profit 38,572 36,472
70,044 71,640 Operating expenses: Sales
and marketing 18,036 18,289 33,671 35,711 General and
administrative 7,293 6,475 14,126 13,484 Engineering 8,011 8,626
16,043 16,868 Integration and transaction costs 184 70 184 520
Amortization of intangibles 1,370 1,833
2,775 3,906 Total operating expenses
34,894 35,293 66,799
70,489 Earnings from operations 3,678 1,179 3,245
1,151 Interest income 152 56 280 127 Interest expense (75 ) (46 )
(148 ) (113 ) Other, net (137 ) (25 ) (187 )
(24 ) Earnings before income taxes 3,618 1,164 3,190 1,141
Income tax expense (benefit) (245 ) 503
(240 ) 494 Net earnings $ 3,863 $ 661 $
3,430 $ 647 Earnings per common share: Basic $
0.18 $ 0.03 $ 0.16 $ 0.03 Diluted $ 0.18 $ 0.03 $ 0.16 $ 0.03
Weighted average common shares outstanding: Basic 21,050 22,004
21,094 21,977 Diluted 21,733 22,639 21,654 22,518
DATALINK CORPORATION CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) June 30,
December 31, 2016
2015 (Unaudited) Assets Current
assets Cash and cash equivalents $ 43,783 $ 39,397 Short term
investments 26,968 20,579 Accounts receivable, net 126,175 163,900
Lease receivable 4,486 3,895 Inventories, net 7,615 7,997 Current
deferred customer support contract costs 126,727 124,705
Inventories shipped but not installed 17,635 16,616 Income tax
receivable 922 - Other current assets 6,272 3,251
Total current assets
360,583 380,340 Property and equipment, net 8,784
7,963 Goodwill 47,101 47,101 Finite-lived intangibles, net 6,481
9,256 Deferred customer support contract costs, non-current 61,752
60,240 Deferred taxes 9,177 9,177 Long-term lease receivable 6,342
7,017 Other assets 642 703 Total assets $ 500,862 $
521,797
Liabilities and Stockholders' Equity Current
liabilities Floor plan line of credit $ 26,980 $ 24,340 Accounts
payable 48,775 73,959 Lease payable 4,110 3,643 Accrued commissions
3,585 3,687 Accrued sales and use taxes 3,906 3,782 Accrued
expenses, other 8,347 6,998 Accrued income tax payable - 4,492
Customer deposits 4,436 4,398 Current deferred revenue from
customer support contracts 154,088 151,619 Other current
liabilities 509 1,050 Total current liabilities
254,736 277,968 Deferred revenue from customer support contracts,
non-current 73,966 72,262 Long-term lease payable 4,857 5,857 Other
liabilities, non-current 1,907 942 Total liabilities
335,466 357,029 Stockholders' equity
Common stock, $.001 par value, 50,000,000 shares authorized,
22,464,328 and 22,627,322 shares issued and outstanding as of June
30, 2016 and December 31, 2015, respectively 22 23 Additional
paid-in capital 115,820 114,431 Retained earnings 49,554
50,314 Total stockholders' equity 165,396
164,768 Total liabilities and stockholders' equity $ 500,862 $
521,797
DATALINK CORPORATION
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME (In
thousands, except per share data) (Unaudited)
Three Months Ended Six Months Ended June 30,
June 30, 2016 2015 2016 2015
Earnings from operations on a GAAP
basis $ 3,678 $ 1,179 $ 3,245 $ 1,151
GAAP operating margin 1.8 % 0.6 % 0.9 % 0.3 % Non-GAAP
Adjustments: Purchase accounting adjustment to StraTech deferred
revenue and cost, net 104 6 105
18 Total gross margin adjustments 104 6 105 18
Stock based compensation expense included in sales and
marketing 174 565 439 983 Stock based compensation expense included
in general and administrative 514 305 883 738 Stock based
compensation expense included in engineering 399 784 808 1,375
Integration and transaction costs 184 70 184 520 Amortization of
intangible assets 1,370 1,833
2,775 3,906 Total operating expense
adjustments 2,641 3,557 5,089
7,522 Non-GAAP earnings from operations
6,423 4,742 8,439 8,691 Non-GAAP operating margin 3.2 % 2.6 % 2.3 %
2.4 % Interest income (expense), net (60 ) (15 ) (55 ) (10 )
Income tax expense impact including Non-GAAP items 2,418
1,981 3,186 3,637
Non-GAAP net earnings $ 3,945 $ 2,746 $ 5,198
$ 5,044 Shares used in non-GAAP per share
calculation - Basic 21,050 22,004
21,094 21,977 Shares used in non-GAAP
per share calculation - Diluted 21,733 22,639
21,654 22,518 Net
earnings per common share - Basic $ 0.184 $ 0.030 $ 0.163 $ 0.029
Add: Impact of gross margin adjustments $ 0.005 $ 0.000 $ 0.005 $
0.001 Impact of operating expense adjustments $ 0.125 $ 0.162 $
0.241 $ 0.342 Tax impact on gross margin and operating expense
adjustments $ (0.127 ) $ (0.067 ) $ (0.162 ) $ (0.143 ) Non-GAAP
net earnings per share - Basic $ 0.187 $ 0.125 $
0.246 $ 0.230 Net earnings per common share -
Diluted $ 0.178 $ 0.029 $ 0.158 $ 0.029 Add: Impact of gross margin
adjustments $ 0.005 $ 0.000 $ 0.005 $ 0.001 Impact of operating
expense adjustments $ 0.122 $ 0.157 $ 0.235 $ 0.334 Tax impact on
gross margin and operating expense adjustments $ (0.123 ) $ (0.065
) $ (0.158 ) $ (0.140 ) Non-GAAP net earnings per share - Diluted $
0.182 $ 0.121 $ 0.240 $ 0.224
DATALINK CORPORATION CONSOLIDATED STATEMENT OF CASH
FLOWS (In thousands) (Unaudited)
Six Months Ended June 30, 2016
2015 Cash flows from operating
activities: Net earnings $ 3,430 $ 647 Adjustments to reconcile net
earnings to net cash provided by operating activities: Change in
fair value of trading securities (121 ) 8 Provision (benefit) for
bad debts 48 (160 ) Depreciation 1,526 1,679 Amortization of
finite-lived intangibles 2,775 3,906 Stock based compensation
expense 2,129 3,096 Changes in operating assets and liabilities:
Accounts receivable, net, and leases receivable 37,761 40,071
Inventories (637 ) 3,935 Deferred costs/revenues/customer deposits,
net 677 3,722 Accounts payable and leases payable (25,717 ) (39,437
) Accrued expenses 1,371 (4,189 ) Income tax receivable (922 ) 333
Income tax payable (4,492 ) - Other (2,537 )
2,372 Net cash provided by operating activities
15,291 15,983 Cash flows from
investing activities: Purchases, sales, and maturities of trading
securities, net (6,268 ) 5,511 Purchases of property and equipment
(2,347 ) (1,758 ) Net cash provided by (used
in) investing activities (8,615 ) 3,753
Cash flows from financing activities: Net payments under
floor plan line of credit 2,640 (3,344 ) Repurchase of common stock
(4,191 ) - Excess tax (benefit) from stock compensation (310 ) 170
Tax withholding related to stock-based awards (429 )
(887 ) Net cash used in financing activities (2,290 )
(4,061 ) Increase in cash and cash equivalents
4,386 15,675 Cash and cash equivalents, beginning of period
39,397 27,725 Cash and cash
equivalents, end of period $ 43,783 $ 43,400
Supplemental cash flow information: Cash paid for income
taxes $ 5,481 $ 113 Cash received for income tax refunds - 88 Cash
paid for interest expense 148 21
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728006630/en/
DatalinkInvestors &
AnalystsGreg BarnumVice President and CFOPhone:
952-279-4816Email: gbarnum@datalink.comorPressJill SchmidtJill Schmidt
PR847-904-2912jill@jillschmidtpr.com
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