Datalink: Fiscal 4Q12 Financial Results

Datalink Corp. reported results for its fourth quarter and year that ended December 31, 2012.

Revenues for the quarter ended December 31, 2012, increased 28% to $147.3 million compared to $114.7 million for the prior-year period. Revenues for year ended December 31, 2012, increased 29% to $491.2 million compared to $380.0 million for the year ended December 31, 2011.

GAAP Results
On a GAAP basis, the company reported net earnings of $3.2 million or $0.18 per diluted share for the fourth quarter ended December 31, 2012. This compares to net earnings of $2.6 million or $0.15 per diluted share in the fourth quarter of 2011. For the year ended December 31, 2012, the company reported net earnings of $10.5 million or $0.60 per diluted share, compared to net earnings of $9.8 million, or $0.61 per diluted share, for the year ended December 31, 2011.

Non-GAAP Results
Non-GAAP net earnings for the fourth quarter of 2012 were $5.6 million, or $0.31 per diluted share, compared to non-GAAP net earnings of $4.1 million, or $0.24 per diluted share, in the fourth quarter of 2011. For the year ended December 31, 2012, the company reported non-GAAP net earnings of $15.3 million, or $0.88 per diluted share, compared to net earnings of $13.0 million, or $0.80 per diluted share, for the year ended December 31, 2011. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

The company’s results for the quarter and year ended December 31, 2012, include the results of operations from the acquisition of StraTech, which was completed on October 4, 2012. Excluding StraTech, revenues for the fourth quarter and year ended December 31, 2012, would have increased approximately 17% and 26%, respectively, compared to the prior year periods.

Paul Lidsky, Datalink’s president and CEO, commented: "2012 was another record year for Datalink. We reported record revenues and earnings for the fourth quarter and fiscal year in large part due to our continued focus on our expanded data center product and services offerings."

Other accomplishments
for 2012 and the fourth quarter include:

• A record $97.5 million in product revenues for the quarter, representing a 52% increase from the previous quarter and a 25% increase over the same period in 2011. In addition, service revenues were a record $49.8 million in the fourth quarter, up 22% over the previous quarter and 36% over the same period in 2011. These increases include incremental revenues from our StraTech acquisition, the contribution from 27 customers that purchased over one million dollars in product and services in the fourth quarter, and strong organic growth throughout the year.
• Continued growth in the customer base as well as multi-million dollar accounts among Global 1000 companies. The number of new customers jumped from 290 to 452 between 2011 and 2012, while the number of customers purchasing over $1 million worth of product and services rose from 77 to 102 in the same period.
• Acquisition of the assets of StraTech on October 4, 2012, which significantly increased the company’s footprint along the East Coast adding 400 new accounts, a second customer support center, and expanded managed services offerings and expertise. In addition, on a non-GAAP basis, the acquisition was accretive in its first quarter of operations, adding approximately $13.4 million of revenues during the quarter and $0.03 per share.
• Accelerating momentum for the company’s virtualized data center (VDC) solutions, with 20 solution projects sold in the fourth quarter compared to 7 in the comparable period in 2011, and 82 deals for the fiscal year compared to 35 in 2011.
• Major new services offerings, including unified monitoring and managed infrastructure services for the entire multi-vendor VDC stack and new managed services for backup, monitoring, archiving, cloud backup and cloud enablement services to help companies analyze the impact of cloud deployments on their business before full-scale cloud initiatives.
• Significant investments in customer support, information technology, human resources and field engineering to prepare the company for continued growth.

"Datalink’s collective accomplishments during 2012 reflect the successful execution on our acquisition and data center strategies. In addition, our strong fourth quarter 2012 performance left us with a record backlog going into the first quarter and accelerated activity that has carried over with strong sales in the first months of first quarter," Lidsky added. "As we exited the year, we continued to see increasing demand for unified data center solutions with flexible architectures. Our investments in our expanded data center portfolio support these market conditions, and our ability to deliver unified platforms to our customers should fuel continued growth in 2013."

Outlook
Based on the company’s current backlog, sales pipeline, historical seasonal trends and the addition of StraTech revenues, Datalink projects revenues of in the range of $127.0 million to $137.0 million for the first quarter of 2013 compared to $119.1 million for the first quarter of 2012. First quarter 2013 net earnings results are expected to be between $0.03 and $0.08 per diluted share on a GAAP basis, and between $0.15 and $0.20 per diluted share on a non-GAAP basis. This compares to net earnings of $0.12 per diluted share and $0.17 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2012.

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the StraTech acquisition to deferred revenue and costs, integration and transaction costs related to acquisitions, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $0.12 per diluted share for the first quarter of 2013.