FalconStor: Fiscal 4Q11 Financial Results

FalconStor Software, Inc. announced financial results for its fourth quarter and full year ended December 31, 2011.

"We are very pleased that we exceeded $25.0 million in total revenue for Q4 2011, an increase of over $6.5 million, or 35% from Q3 2011," said Jim McNiel, president and CEO of FalconStor Software. "This reflects continued growth and momentum in our business and the markets we serve."

For the year ended December 31, 2011, revenues increased to $82.9 million, compared with $82.8 million for the same period a year ago. GAAP loss from operations for 2011 was $22.2 million compared with a loss from operations of $17.6 million in 2010. GAAP net loss was $23.4 million, or $0.50 per share for 2011 compared with a net loss of $35.4 million, or $0.78 per share in 2010. The 2011 and 2010 results include $10.3 million and $1.6 million, respectively, of costs associated with the ongoing government investigations. The $10.3 million of costs incurred in 2011 was comprised of $2.8 million in legal fees, and an accrual of $7.5 million for certain costs associated with the possible resolution of the government investigations. The $1.6 million of costs incurred in 2010 was comprised of legal fees. Additionally, the 2010 results included a $16.3 million valuation allowance within the tax provision.

Non-GAAP loss from operations in 2011 was $5.6 million compared with Non-GAAP loss from operations of $7.3 million in 2010. Non-GAAP net loss was $6.8 million, or $0.15 per share in 2011, compared with Non-GAAP net loss of $24.3 million or $0.54 per share in 2010. Non-GAAP results exclude the effects of costs associated with the ongoing government investigations, stock-based compensation net of the related income taxes and restructuring costs, when applicable.

Total revenues for the fourth quarter of 2011 were $25.4 million, a decrease of 4% compared with $26.5 million in the same period a year ago. GAAP loss from operations for the fourth quarter of 2011 was $5.5 million, compared with income from operations of $0.8 million for the same period a year ago. GAAP net loss for the quarter was $6.1 million, or $0.13 per share compared with a net loss of $0.1 million with breakeven earnings per share for the same period a year ago. Included in the operating results for the fourth quarter of 2011 and 2010 was $5.9 million and $1.6 million, respectively, of costs associated with the ongoing government investigations. The $5.9 million of costs incurred during the fourth quarter of 2011 was comprised of $0.6 million in legal fees, and an accrual of $5.3 million for certain costs associated with the possible resolution of the government investigations. The $1.6 million of costs incurred during the fourth quarter of 2010 was comprised of legal fees.

Non-GAAP income from operations was $1.9 million in the fourth quarter of 2011, compared with Non-GAAP income from operations of $4.0 million for the same period a year ago. Non-GAAP net income was $1.2 million, or $0.03 per diluted share in the fourth quarter of 2011, compared with Non-GAAP net income of $3.8 million, or $0.08 per diluted share, in the fourth quarter of 2010. Non-GAAP results exclude the effects of costs associated with the ongoing government investigations, stock-based compensation net of the related income taxes and restructuring costs, when applicable.

The company closed the year with $37.8 million in cash, cash equivalents, and marketable securities, up $0.4 million from December 2010. Cash flow from operations for the fourth quarter of 2011 was $1.5 million, and for the full year 2011 cash flow from operations was $3.1 million. Deferred revenue at December 31, 2011 was $27.1 million, an increase of 15% compared with the same period a year ago.

"Throughout 2011 we focused on our core mission of delivering leading-edge data protection solutions to our customers while strengthening our strategic alliances and channel partner relationships," said Jim McNiel, president and CEO of FalconStor Software. "Deepening partnerships with top-tier storage vendors, including HDS, HP, and Fujitsu, validated our technology and enhanced our market presence, setting the stage for greater sales opportunity. Further validation of our strength in migration comes from our newly announced partnership with Dell. With proven solutions that meet the sophisticated needs of today’s data center, FalconStor is poised for continued leadership and growth."