FalconStor: Fiscal 4Q20 Financial Results

(in $ million)	4Q19	4Q20	FY19	FY20
Revenue	4.1	3.7	16.5	14.8
*Growth*		-10%		*-10%*
Net income (loss)	0.6	0.0	(0.7)	(1.8)

FalconStor Software, Inc. announced financial results for its fourth quarter and fiscal year 2020, which ended on December 31, 2020.

“We continue to make good progress vs. our strategic plans to reinvent FalconStor, enhance the value we deliver to our customers, and innovate within the cloud-based data protection market,” said Todd Brooks, CEO. “While our revenue in 4FQ20 decreased Y/Y by 10% and did not repeat the 11.7% Y/Y increase we delivered in the third quarter of 2020, we remained profitable and ended FY20 with $1.8 million in GAAP operating income. We believe we have created a scalable foundation from which to build. Over the next year, we expect our Y/Y revenue growth to become more stable as our sales pipeline becomes more predictable, and our shift to subscription revenue continues. Our third quarter performance and new customer bookings in fiscal year 2020, which increased Y/Y by 26%, are encouraging signals.”

“As we move forward, we will continue our maniacal focus in our core mission to modernize backup and archival for the multi-cloud world with our innovative, patent-pending solution, StorSafe, which enables our enterprise customers to more efficiently exploit public-cloud storage and reduce associated costs, while improving data portability, accessibility, and security – including ransomware protection,” he added. “Movement to the cloud can be inhibited by many factors, but dealing with the complexity of legacy environments and the costs of storage in the cloud are two areas where we provide differentiated capability built over many years of customer engagement and innovation. We believe for larger enterprise clients that this represents a significant portion of the available market.”

FY20 Financial Results
• New Customer Bookings: $3.1 million, compared to $2.4 million in FY19
• Total Revenue: $14.8 million, compared to $16.5 million in FY19
• Total Cost of Revenue: $1.8 million, compared to $2.9 million in FY19
• Total Operating Expenses: $11.1 million, compared to $14.3 million in FY199
• GAAP Operating Income (loss): $1.8 million, compared to $(0.7) million in FY19
• Ending Cash: $1.9 million, compared to $1.5 million in FY19

4FQ20 Financial Results
• Total Revenue: $3.7 million, compared to $4.1 million in 4FQ19
• Total Cost of Revenue: $0.5 million, compared to $0.2 million in 4FQ19
• Total Operating Expenses: $3.2 million, compared to $3.3 million in 4FQ19
• GAAP Operating Income: $0.0 million, compared to $0.6 million in 4FQ19

Comments

The company continues to have the lowest annual revenue of any storage public companies in the world.

It is shrinking especially since FY11 and is now far below FY09 sales at $89.5 million.

FalconStor generated 11.7% Y/Y revenue growth in 3FQ20, but has not been consistent each quarter. In fact, in 4F20, sales declined Y/Y by 10%.

Results for 4FQ20 are not as positive as in 3FQ20.

Nevertheless, CEO Todd Brooks commented: "We are excited about the results that we've been able to generate in 2020."

In FY20, revenue decreased by 10% to $14.8 million compared to $16.5 million in FY19. This increase of $1.8 million was primarily driven 73% by firm's decisions to exit non-core markets and to stop selling hardware with $0.4 million of a decrease in non-core market revenue and $0.9 million decrease in hardware revenue Y/Y.

Product revenue did increase Y/Y in 2020 by 5%. New customer sales and bookings increased during the year by 26% compared to 2019.

Percent of annual sales in non-core markets, such as China has decreased from 23% in 2017 to less than 5% in 2020.

Today, the company has 600 active customers that manage over 1EB of data.

For the year ended December 31, 2020, it had 2 customers that accounted for 10% or more of total revenue, the same as former year.

As of December 31, 2020 and 2019, it had 1 customer who accounted for more than 10% of gross accounts receivable balance, respectively.

The firm has now had 44 full-time and part-time employees, consisting of 16 in R&D, 8 in sales and marketing, 15 in service, and 5 in general and administrative.

It said that going forward, it will focus on 6 key initiatives:

First, on increasing subscription-based recurring based revenue.

Second, on generating consistent quarterly Y/Y revenue growth.

Third, on continuing to innovate with long-term data retention and recovery solutions.

Fourth, continuing to serve the needs of its most strategic customers with BC driven data replication products.

Fifth, implementing a disciplined M&A strategy.

And then finally, on continuing to improve capital structure and liquidity profile.

No guidance was revealed.

Revenue
in $ million

Growth

2004

28.7