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FalconStor Software, Inc.
Chief Financial Officer
AUSTIN, TEXAS (March 12, 2020) – FalconStor Software, Inc. (OTCQB: FALC), a market leader in data protection software for global enterprises, today announced financial results for its fourth quarter ended December 31, 2019.
Key Financial Highlights for the Close of Fiscal 2019
- Continued to demonstrate the growth potential of our innovative and modern long-term archive retention and reinstatement product with 38% sales growth compared to 2018,
- Increased new customer sales year-over-year by 22% across all product lines compared to 2018,
- Achieved total year-over-year sales growth of more than 6% in our core regions, which excludes China, compared to 2018,
- Intentionally reduced our sales exposure in China to 3% of total sales in 2019 from 12% in 2018,
- Entered into an amendment to our term loan on December 27, 2019, providing the Company with an additional $1,000,000 of gross proceeds for operations and R&D investment.
Key Product Highlights
- Continued investment in our patent-pending next generation long-term archive retention and reinstatement product, StorSafeTM, scheduled for launch in 1H 2020,
- Released our expanded unified management and analytics console, StorSightTM which integrates with all FalconStor products,
- Expanded partnerships with cloud storage providers, object storage providers, and managed service providers.
“The strategic decisions we made throughout 2019 to place additional commercial focus on our long-term archive retention and reinstatement product, within our core regions, delivered encouraging growth in those areas throughout 2019, and has created a focused and healthy foundation for continued growth in 2020”, said Todd Brooks, CEO FalconStor. “According to IDC, up to 75% of data managed by an enterprise is directly related to routine data backup and archive. Our long-term archive retention and reinstatement solution allows an enterprise to leverage existing backup policies and procedures, while ensuring the most stringent backup window is met, data storage capacity is reduced by up to 95%, and Cloud and Object storage alternatives such as Hitachi Content Platform (HCP), Wasabi, IBM-COS, AWS, and Azure are available for improved data storage efficiency.”
“To build upon the foundation we have built, I am excited by the progress our team has made in developing our next generation long-term archive retention and reinstatement product, StorSafeTM, which will retain the core benefits of our existing product, while adding innovative multi-cloud archive data storage orchestration capabilities to dramatically reduce storage costs, improve security, simplify compliance, and streamline archive data portability. Archive data is critical for the modern enterprise, not only in terms of risk and compliance management, but also in terms of active use of archive data for strategic advantage. StorSafeTM is scheduled for beta launch in the first half of 2020.”
Additional Financial Highlights for the Fourth Quarter 2019
While we delivered a 6% sales increase within our core regions, which excludes China, total global sales revenue for the three months ended December 31, 2019 decreased to $4.1 million compared to $4.8 million in the prior year. This global revenue decrease was primarily driven by our intentional strategy to decrease commercial focus in China, and work to refocus development efforts within our business continuity driven data replication products to those enhancements and innovations aligned with our largest and most strategic customers.
Overall, our total operating expenses decreased 7.1% from $3.6 million for the quarter ended December 31, 2018 to $3.3 million for the quarter ended December 31, 2019. This decrease was primarily attributable to tighter expense controls and overall operational efficiencies which better align our current business plan on a run-rate basis. These efficiencies include among other items, stream-lined personnel related costs, global overhead costs and efficiencies realized on our redesigned go-to-market coverage models. We will continue to evaluate the appropriate headcount levels to properly align our resources with our current and long-term outlook and to take actions in areas of the Company that are not performing.
Total cost of revenue decreased 77.7% to $0.2 million for the three months ended December 31, 2019, compared with $0.9 million for the same period of the year. Cost of sales during the current quarter reflects a cumulative $0.4 million one time correction to properly eliminate intercompany transfer pricing adjustments associated with our Asia Pacific sales during the previous three quarters of the current year. Excluding this correction, we recorded $0.6 million in cost of sales, compared to $0.9 million during the fourth quarter of 2018.
During the three months ended December 31, 2019, we recorded GAAP Operating Income of $0.6 million, compared to GAAP Operating Income of $0.3 million for the prior year period.
We ended the quarter with $1.5 million of cash and cash equivalents, compared to $3.1 million at December 31, 2018.
On August 6, 2019, following stockholder approval, the Company filed a certificate of amendment (which was effective August 8, 2019) to the Company’s Restated Certificate of Incorporation, as amended, with the Delaware Secretary of State to reduce the authorized shares of common stock, $.001 par value per share, to 30,000,000. In connection with this event, the Company effected a 100-for-1 reverse stock split of its issued and outstanding common stock. The par value and authorized shares of common stock were not adjusted as a result of the reverse stock split. All of the share and per share information presented in the accompanying financial statements have been adjusted to reflect, unless otherwise stated, the reverse common stock split on a retroactive basis for all periods and as of all dates presented.
|Three Months Ended,|
|(in millions except per share data)||December 31, 2019||September 30, 2019||December 31, 2018|
|Non-GAAP Gross Margin||95%||81%||81%|
|Non-GAAP Operating Income (Loss)||$0.9||$0.1||$0.7|
Non-GAAP results above exclude the effects of stock-based compensation, restructuring costs and the effects of our Series A redeemable convertible preferred stock. A reconciliation between GAAP and non-GAAP information is provided on page 6 of this release.
|Three Months Ended December 31,|
|(in millions except per share data)||2019||2018||Change|
|Total cost of revenue||$0.2||5%||$0.9||19%||$(0.7)||(78)%|
|Total operating expenses||$3.3||81%||$3.6||75%||$(0.3)||(7)%|
|GAAP operating income (loss)||$0.6||14%||$0.3||7%||$0.2||78%|
|Twelve Months Ended December 31,|
|(in millions except per share data)||2019||2018||Change|
|Total cost of revenue||$2.9||18%||$3.0||17%||$(0.1)||(2)%|
|Total operating expenses||$14.3||81%||$14.9||84%||$(0.6)||(4)%|
|GAAP operating income (loss)||$(0.7)||(4)%||$—||—%||$(0.6)||1,282%|
Conference Call and Webcast Information
The Company will host a conference call to discuss its financial results on Thursday, March 12, 2020 at 3:30 p.m. CDT. To participate in the conference call, please dial:
Toll Free: 1-800-367-2403
Conference ID: 9722775
To view the presentation, please copy and paste the following link into your browser and register for this meeting. Once you have registered for the meeting, you will receive an email message confirming your registration.
A conference call replay will be available beginning March 12th at 6:30 PM CDT through 6:30 PM CDT on March 19th. To listen to the replay of the call, dial:
Toll Free: 1-888-203-1112