Datalink Reports 2005 Second Quarter and Six-Month Operating Results; Revenues Increase 34 Percent Over Prior Year and 35 Percent Sequentially From the Previous Quarter.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, July July: see month. 13, 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 June June: see month. 30, 2005, rose 34 percent to $28.7 million from $21.5 million for the same period in the prior year, and was up sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen 35 percent versus first quarter 2005 revenues of $21.2 million. The company reported net earnings of $446,000, 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 $1.0 million, or $.10 per diluted share in the 2004 second quarter. The second quarter results exceeded previously issued revenue guidance of $23 to $27 million and an estimated earnings range of an $.08 per diluted share net loss to net income of $.02 per diluted share. For the six-months ended June 30, 2005, revenues increased 20 percent to $50.0 million, from $41.7 million generated in the comparable 2004 period. Datalink's 2005 six-month net loss was $4.3 million, or $.41 per diluted share and includes the previously announced 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. in the first quarter of $3.5 million, or $.34 per diluted share related to subleasing a portion of the company's corporate headquarters facility. The one time charge primarily represents the difference between the company's original lease payment commitment for the portion of the corporate office facility which is being sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. and the amount Datalink will receive from the sub-lessee over the remaining lease term. As a result of this 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. , Datalink expects to reduce its facility expense by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $950,000 per year. Excluding the sublease charge, Datalink's net loss for the six months was $753,000 or $.07 per diluted share which is improved from a net loss of $2.9 million or $.28 per diluted share in the same period a year ago. 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, "We are pleased with our second-quarter results which demonstrate that the company is successfully executing on a number of key initiatives." According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Meland, the company's accomplishments include: --Growing product revenues 43 percent for the quarter and 24 percent year to date. During the second quarter, the company had four customers generating more than $1 million in revenues each. Additionally, Datalink maintained its overall gross profit margin 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. above 26 percent reflecting ongoing success in selling and delivering higher value-add storage solutions for customers. --Expanding the professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. provided for customers. Professional service revenues rose more than 50 percent in both the second quarter and six-month period compared to the prior year. Increasingly, customers are looking to Datalink's storage experts to help them with the design, implementation and support of their mission critical storage projects. --Building a strong level of business going into the third quarter. Datalink has a 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 business for its third quarter of $19 million. Included in the backlog is an order from a new customer for $8.3 million. Meland continued, "Our focus on improving the company's financial performance is working. Our top priorities are to deliver sustainable profitable growth while expanding our storage expertise capabilities. We have renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. momentum and a solid base of business heading into the second half of the year." Outlook: For the third quarter ending September September: see month. 30, 2005, Datalink expects revenues to be between $27 million and $31 million, with earnings ranging from $.02 to $.10 per diluted share. The net amounts do not reflect any income tax benefit or expense. Webcast A live Webcast of the Datalink conference call to discuss the second-quarter results is scheduled for today, July 13 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 third 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. Further, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably.
DATALINK CORPORATION
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Net sales:
Products $19,918 $13,918 $33,573 $27,147
Services 8,823 7,545 16,409 14,520
------------------------------------
Total net sales 28,741 21,463 49,982 41,667
------------------------------------
Cost of sales:
Cost of product sales 15,153 10,871 25,521 21,313
Cost of service sales 5,974 5,360 11,088 10,114
------------------------------------
Total cost of sales 21,127 16,231 36,609 31,427
------------------------------------
Gross profit 7,614 5,232 13,373 10,240
------------------------------------
Operating expenses:
Sales and marketing 3,838 2,692 7,131 5,761
General and administrative 2,245 2,643 4,791 5,509
Engineering 1,078 942 2,206 1,810
Charge for sublease reserve - - 3,502 -
Restructuring charges - (63) - (63)
Amortization of intangibles 65 65 130 130
------------------------------------
7,226 6,279 17,760 13,147
------------------------------------
Earnings (Loss) from operations 388 (1,047) (4,387) (2,907)
Interest income, net 58 16 132 36
------------------------------------
Earnings (Loss) before income
taxes 446 (1,031) (4,255) (2,871)
Income tax expense (benefit) - - - -
------------------------------------
Net earnings (loss) $446 $(1,031) $(4,255) $(2,871)
====================================
Net earnings (loss) per share:
Basic $0.04 $(0.10) $(0.41) $(0.28)
Diluted $0.04 $(0.10) $(0.41) $(0.28)
Weighted average shares
outstanding:
Basic 10,308 10,265 10,301 10,259
Diluted 10,376 10,265 10,301 10,259
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
June 30, December 31,
2005 2004
---- ----
(Unaudited)
Assets
Current assets
Cash and cash equivalents $9,319 $12,663
Accounts receivable, net 13,181 11,485
Inventories 2,331 627
Deferred customer support contract costs 12,711 10,770
Inventories shipped but not installed 2,093 2,343
Other current assets 253 284
------------ ------------
Total current assets 39,888 38,172
------------ ------------
Property and equipment, net 2,840 3,134
Goodwill 5,500 5,500
Intangibles, net 94 225
Other assets 431 38
------------ ------------
Total assets $48,753 $47,069
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $11,675 $11,031
Accrued commissions 916 1,227
Accrued income taxes 91 109
Accrued sales and use tax 599 510
Accrued expenses, other 1,511 1,276
Sublease reserve current 525 -
Deferred revenue from customer support
contracts 16,747 14,012
------------ ------------
Total current liabilities 32,064 28,165
Deferred rent 318 392
Sublease reserve non-current 2,025 -
------------ ------------
Total liabilities 34,407 28,557
------------ ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,309,205 and
10,282,545 shares issued and outstanding
as of June 30, 2005 and December 31,
2004, respectively 10 10
Additional paid-in capital 26,680 26,624
Deferred compensation (274) (307)
Accumulated deficit (12,070) (7,815)
------------ ------------
Total stockholders' equity 14,346 18,512
------------ ------------
Total liabilities and stockholders'
equity $48,753 $47,069
============ ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2005 2004
---- ----
Cash flows from operating activities:
Net loss $(4,255) $(2,871)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Provision for bad debts 18 18
Depreciation 684 1,009
Amortization of intangibles 131 130
Deferred rent (74) (51)
Charge for sublease reserve 3,502 -
Stock compensation expense 33 17
Changes in operating assets and liabilities:
Accounts receivable (1,714) 997
Inventories (1,453) (1,359)
Deferred customer support contract
costs/revenues, net 794 841
Accounts payable 644 (93)
Accrued expenses 13 1,228
Other (897) 122
-------------------
Net cash used in operating activities (2,574) (12)
-------------------
Cash flows from investing activities:
Purchase of property and equipment (826) (183)
-------------------
Net cash used in investing activities (826) (183)
-------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 56 81
-------------------
Net cash provided by financing activities 56 81
-------------------
Decrease in cash and cash equivalents (3,344) (114)
Cash and cash equivalents, beginning of period 12,663 12,565
-------------------
Cash and cash equivalents, end of period $9,319 $12,451
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