Datalink: Fiscal 1Q09 Financial Results

Datalink Corporation, an independent information storage architect, reported that revenues for the quarter ended March 31, 2009, were $39.9 million compared to $47.7 million for the prior-year period, a decrease of 16 percent.

GAAP Results
On a GAAP basis, the company reported a net loss of $596,000 or $0.05 per diluted share for the first quarter ended March 31, 2009. This compares to net earnings of $505,000 or $0.04 per diluted share in the first quarter of 2008.

Non-GAAP Results
Non-GAAP net loss for the first quarter of 2009 was $273,000 or $0.02 per diluted share compared to non-GAAP net earnings of $769,000 or $0.06 per diluted share in the first quarter of 2008. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Charlie Westling, Datalink’s President and CEO, commented: “First quarter results reflect the continuing negative impact of the economic slowdown that many of our customers are experiencing. Customers continue to scrutinize projects very closely and delay larger implementations wherever possible in an effort to conserve cash in this uncertain environment. Despite these challenging conditions, we were pleased to be able to come through the quarter with a stronger cash position and deliver results that were in line with revenue expectations and an operating loss that was at the more favourable end of expectations. We saw several positives during the quarter, including:

• Total services revenues during the first quarter of 2009 increased 7 percent on a year-over-year basis, as both customer support and professional services revenues were at higher levels than the first quarter of 2008;
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  Overall gross profit margin in the first quarter remained strong at 26.5 percent, which represents the seventh consecutive quarter of gross margin in excess of 26 percent;
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  Good progress was made in reducing our cost structure through various initiatives undertaken midway through the first quarter, with our quarterly break even sales run-rate, on a non-GAAP basis, approaching the low $40 million range as we head into the second quarter;
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  A stronger balance sheet, with cash and investments increasing to $29.1 million at the end of the first quarter, up $1.4 million from the end of the fourth quarter of 2008.”

Westling continued, “Against the backdrop of continuing economic challenges as we head into the second quarter of 2009, we plan to build upon our current platform and financial strength, expand our market share and improve our competitive position in the marketplace.”

Outlook
The company ended the first quarter of 2009 with a backlog of approximately $29 million, which represents firm orders expected to be recognized as revenue within the next 90 days. After a slow period of bookings activity throughout January, February and early March, we did see bookings pick up considerably during the last few weeks of March, and this increased activity has continued through the first two weeks of April. While we expect customers to continue to be cautious with their IT and storage purchasing activity during the second quarter, we believe that we will be able to generate sequentially higher revenues and earnings for the second quarter of 2009. Specifically, we expect revenues to be between $40 and $45 million for the second quarter, with GAAP results ranging from a loss of $0.03 per diluted share to earnings of $0.03 per diluted share and on a non-GAAP basis results in the range of a loss of $0.01 per diluted share to earnings of $0.05 per diluted share. This compares with revenues of $49.7 million in the second quarter of 2008 with GAAP earnings of $0.08 per diluted share and non-GAAP earnings of $0.10 per diluted share. Non-GAAP earnings per share exclude the effect of purchase accounting adjustments from the MCSI acquisition to deferred revenue, stock-based compensation expense, amortization of acquisition related intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $.02 per diluted share for the second quarter of 2009.