Datalink: Fiscal 1Q08 Financial Results

Datalink Corporation reported that revenues for the quarter ended March
31, 2008, were $47.7 million compared to $40.9 million for the
prior-year period, an increase of 17 percent. Datalink’s
results for the 2008 and 2007 first quarters include three months and
two months, respectively, of Midrange Computer Solutions, Inc. (MCSI)
results of operations following the acquisition which closed on January
31, 2007.

GAAP Results
On a GAAP basis, the company reported net earnings of $505,000 or $0.04
per diluted share for the first quarter ended March 31, 2008. This
compares to a net loss of $719,000 or $0.06 per diluted share in the
first quarter of 2007.

Non-GAAP Results
Non-GAAP net earnings for the first quarter of 2008 were $769,000 or
$0.06 per diluted share compared to a non-GAAP net loss of $153,000 or
$0.01 per diluted share in the first quarter of 2007. A detailed
reconciliation between GAAP and non-GAAP information is contained in the
tables included herein.

Charlie Westling, Datalink’s President and
CEO, commented, “We are pleased with our
strong first quarter performance and that the company was able to report
results that were at the high end of our previous revenue and earnings
guidance range. This performance is a result of a solid product and
service backlog entering the quarter, continued favourable customer
spending activity during the quarter and higher gross margins on
products and services. Highlights for the quarter included:

• 
  An overall gross margin of 27.3%, which represents the highest gross
  margin since the fourth quarter of 2004;
  
• 
  A record level of services revenue totaling $19.2 million;
  
• 
  Improved levels of productivity, as gross profit dollars per employee
  on an annualized basis increased to $260,000 in the first quarter of
  2008, up 20% from $217,000 in the first quarter of 2007;
  
• A strong cash and investment position of $26.4 million at the end of
  the first quarter, up from $25.2 million at the end of 2007.”

Westling continued, “As we head into the
second quarter of 2008 we believe that we can build off our strong
performance from the last three quarters and continue our profitable
growth this year by executing on our key initiatives. Datalink’s
priorities are:

• Continuing to increase employee productivity by leveraging investments
  in field and customer support areas;
• Further penetrating the enterprise customer base;
• Targeting high growth market segments and deploying new technologies;
• Delivering greater value to customers through more solutions and
  services; and
• Pursuing acquisitions that will enable the company to build critical
  mass in key locations and provide additional services to our customers.”

Outlook
The company ended the quarter with a backlog of $30 million compared to
$23 million at the end of the first quarter of 2007. Based on Datalink’s
current backlog and opportunities that Datalink is currently seeing
across its customer base, the company expects revenue to be between $48
million and $52 million, with GAAP net earnings to be between $0.05 and
$0.09 per diluted share in the second quarter of 2008. On a non-GAAP
basis, the company expects second quarter earnings to be in the range of
$0.07 to $0.11 per diluted share. This compares with revenues of $40.3
million in the second quarter of 2007 and a loss of $0.03 per diluted
share and breakeven earnings per diluted share on a GAAP and non-GAAP
basis, respectively. Non-GAAP earnings per share exclude the effect of
purchase accounting adjustments to deferred revenue, stock-based
compensation expense, amortization of intangible assets, and the related
effects on income taxes. The company estimates this total effect will be
$.02 per diluted share for the second quarter.

Datalink Corporation