Datalink Reports 2004 Fourth-Quarter and Full-Year Operating Results; Company Achieves Profitability in the Fourth Quarter; Results Consistent with Recent Guidance.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- Live Webcast of Conference Call at 9:30 AM Central Time Today, February February: see month. 16, 2005 Datalink Corporation Datalink Corporation (NASDAQ: DTLK) is an American data storage corporation with operations throughout the United States. The company engages in the design, installation, and support of data storage infrastructures that store, protect, and provide continuous access to (Nasdaq:DTLK), a leading independent information storage architect, reported that revenues for the quarter ended December December: see month. 31, 2004, rose 23 percent to $26.0 million from $21.1 million in the prior year. The company reported net earnings of $445,000, or $.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share compared to a net loss of $2.1 million, or $.20 per diluted share in the year-ago fourth quarter. The net loss for the prior year quarter includes restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $1.8 million or $.18 per diluted share. Datalink's fourth-quarter revenues and per-share results were consistent with management's updated guidance, which forecasted revenues of $25.8 million to $26.0 million and per share earnings of $.02 to $.04 per diluted share. For the 12 months ended December 31, 2004, revenues were $93.3 million, versus $91.1 million generated in the prior year. Datalink's net loss narrowed to $3.1 million, or $.31 per diluted share, from a net loss of $5.2 million, or $.50 per diluted share, for the 2003 12 months. The prior year net loss includes restructuring charges of $2.1 million or $.20 per diluted share. Greg GREG Great Egg Harbor National Scenic and Recreational River (US National Park Service) Meland Meland is a municipality in the county of Hordaland, Norway. Meland was separated from Alversund October 15, 1923. The northern part of Holsnøyni was transferred from Herdla to Meland January 1, 1964. , Datalink's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , commented, "In 2004, we improved our execution against the key elements of our strategy and positioned the company for accelerated success." The company's accomplishments include: --Attaining profitability in the fourth quarter; the company grew revenues through increased productivity while cutting costs during the year --Growing its customer support business; billings for customer support contracts increased 13 percent from the prior year --Improving gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. ; gross profit margins were 28.6 percent in the fourth quarter reflecting higher value-add products and services for customers and better pricing from vendors The company has effectively positioned its storage solutions to take advantage of the best technologies in the industry, particularly around opportunities with Enhanced Data Recovery (EDR (Enhanced Data Rate) An acronym occasionally used to reflect an advancement in transmission or transfer speed. For example, Bluetooth 2.0 + EDR provides a dramatic increase in speed over the previous version. See Bluetooth. ). Datalink's customers are realizing the benefits of having the company's professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. teams deploy disk-based recovery innovations, including tape emulation (architecture) emulation - When one system performs in exactly the same way as another, though perhaps not at the same speed. A typical example would be emulation of one computer by (a program running on) another. , disk-to-disk-to-tape, point-in-time copy and replication In database management, the ability to keep distributed databases synchronized by routinely copying the entire database or subsets of the database to other servers in the network. There are various replication methods. , to enhance their EDR capabilities. Meland continued, "In October October: see month. 2003, we restructured our business to lower costs and create a more effective organization. Since that time, our operating results have improved each quarter, culminating with a profitable 2004 fourth quarter. Through this difficult operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. our employees have stayed focused on contributing to the success of Datalink and our customers. Said Meland, "While we are pleased with our progress, we are very focused on delivering stronger results this year." In 2005, the company plans to: --Further increase employee productivity and improve market share in key geographic locations --Grow its revenue base and increase market share in key opportunity areas, like EDR and information life cycle management --Expand customer support and professional services business capabilities and financial results --Generate sustained profitable growth during the year Outlook: For the quarter ending March 31, 2005, Datalink expects revenues to range from $22 million to $26 million, with a net loss before sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. charges of $.05 to $.13 per diluted share. Datalink expects to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in the first quarter of 2005 primarily due to normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. costs which are more heavily weighted to the early part of the company's year. The higher costs relate to payroll taxes Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. , public reporting costs and benefit accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. . Datalink also will incur expenses related to Sarbanes-Oxley compliance requirements Compliance requirements are a series of directives established by United States Federal government agencies that summarize hundreds of Federal laws and regulations applicable to Federal assistance (also known as Federal aid or Federal funds). which will contribute to the expected first-quarter operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. . These compliance and other costs are projected to decline as the year progresses. Additionally, as previously announced, Datalink will take a one time non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3 million or $.30 per diluted share in the quarter ended March 31, 2005. The accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. primarily represents the difference between the company's original lease payment and the amount it will receive from the sub-lessee over the remaining lease term. The company expects to generate increased revenues and return to profitability in the second quarter of 2005. Webcast A live Webcast of the Datalink conference call to discuss the improved fourth-quarter guidance is scheduled for today, February 16 at 9:30 a.m. Central Time and can be heard via Datalink's Website at www.datalink.com. Datalink Corporation is an information storage architect. The company analyzes, designs, implements, and supports information storage infrastructures that store, protect, and provide continuous access to information. Datalink's specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. capabilities and solutions span storage area networks, network-attached storage See NAS. , direct-attached storage Direct-attached storage (DAS) refers to a digital storage system directly attached to a server or workstation, without a storage network in between. It is a retronym, mainly used to differentiate non-networked storage from SAN and NAS. , and IP-based storage, using industry-leading hardware, software, and technical services. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . This press release contains forward-looking statements, including our internal projections of anticipated first quarter 2005 operating results, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "aim," "believe," "expect," "anticipate," "intend," "estimate" and other expressions which indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, including, but not limited to: the level of continuing demand for storage, including the effects of economic conditions; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; revenue recognition policies that may unpredictably defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. reporting of our revenues; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; risks associated with possible future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in our stock price. The company also cannot assure that its cost reduction initiatives and management changes will lead to continued profitability. Further, the company's revenues for any particular quarter are not necessarily reflected by the company's backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of contracted orders.
DATALINK CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2004 2003 2004 2003
---- ---- ---- ----
Net sales:
Products $17,880 $13,801 $63,235 $61,350
Services 8,103 7,272 30,048 29,787
-----------------------------------------
Total net sales 25,983 21,073 93,283 91,137
-----------------------------------------
Cost of sales:
Cost of product sales 12,818 10,877 48,568 47,477
Cost of service sales 5,733 4,891 21,175 20,198
-----------------------------------------
Total cost of sales 18,551 15,768 69,743 67,675
-----------------------------------------
Gross profit 7,432 5,305 23,540 23,462
-----------------------------------------
Operating expenses:
Sales and marketing 3,588 2,112 12,438 10,985
General and administrative 2,448 2,780 10,366 10,960
Engineering 915 929 3,764 4,220
Restructuring charges - 1,772 (63) 2,078
Amortization of intangibles 65 108 261 724
-----------------------------------------
7,016 7,701 26,766 28,967
-----------------------------------------
Loss from operations 416 (2,396) (3,226) (5,505)
Interest income, net 29 17 83 74
-----------------------------------------
Loss before income taxes 445 (2,379) (3,143) (5,431)
Income tax benefit - (276) - (276)
-----------------------------------------
Net loss $445 $(2,103) $(3,143) $(5,155)
=========================================
Net loss per share:
Basic $0.04 $(0.21) $(0.31) $(0.50)
Diluted $0.04 $(0.21) $(0.31) $(0.50)
Weighted average shares
outstanding:
Basic 10,298 10,240 10,268 10,227
Diluted 10,298 10,240 10,268 10,227
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
December 31, December 31,
2004 2003
---- ----
(Unaudited)
Assets
Current assets
Cash and cash equivalents $12,663 $12,565
Accounts receivable, net 11,485 8,541
Inventories 627 1,969
Deferred customer support contract costs 10,770 7,723
Inventories shipped but not installed 2,343 2,160
Other current assets 284 329
------------ ------------
Total current assets 38,172 33,287
------------ ------------
Property and equipment, net 3,134 4,500
Goodwill 5,500 5,500
Intangibles, net 225 485
Other assets 38 45
------------ ------------
Total assets $47,069 $43,817
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $11,031 $10,139
Accrued commissions 1,227 475
Accrued income taxes 109 72
Accrued sales and use tax 510 350
Accrued expenses, other 1,276 837
Deferred revenue from customer support
contracts 14,012 9,926
------------ ------------
Total current liabilities 28,165 21,799
Deferred rent 392 522
------------ ------------
Total liabilities 28,557 22,321
------------ ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,282,545 and
10,241,963 shares issued and outstanding
as of December 31, 2004 and December 31,
2003, respectively 10 10
Additional paid-in capital 26,624 26,158
Deferred compensation (307) 0
Accumulated deficit (7,815) (4,672)
------------ ------------
Total stockholders' equity 18,512 21,496
------------ ------------
Total liabilities and stockholders' equity $47,069 $43,817
============ ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Twelve Months Ended
December 31,
2004 2003
---- ----
Cash flows from operating activities:
Net loss $(3,143) $(5,155)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for bad debts 6 (34)
Depreciation and amortization 1,781 2,092
Amortization of intangibles 260 724
Impairment of customer base intangible - 926
Deferred rent (130) 181
Loss on sale of assets - 10
Stock compensation expense 42 194
Changes in operating assets and liabilities:
Accounts receivable (2,950) 3,912
Inventories 1,159 2,340
Deferred customer support contract costs (3,047) 400
Other current assets 45 2,024
Other assets 7 24
Accounts payable 892 (3,528)
Accrued expenses 1,351 (117)
Income taxes 37 (146)
Deferred revenue from customer support contracts 4,086 (631)
-------------------
Net cash provided by operating activities 396 3,216
-------------------
Cash flows from investing activities:
Purchase of property and equipment (415) (1,096)
-------------------
Net cash used in investing activities (415) (1,096)
-------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 117 111
-------------------
Net cash provided by financing activities 117 111
-------------------
Increase in cash and cash equivalents 98 2,231
Cash and cash equivalents, beginning of period 12,565 10,334
-------------------
Cash and cash equivalents, end of period $12,663 $12,565
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