Datalink Reports 2006 First-Quarter Operating Results; First Quarter Sales Rise 61 Percent over the Same Period in 2005; Net Earnings Increase to $833,000 versus a Loss of $4.7 Million in the Same Period in 2005.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, April 12, 2006 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 March 31, 2006, rose 61 percent to $34.3 million from $21.2 million for the prior-year period. During the first quarter of 2006 a customer accounted for 24 percent of revenues. The company reported net earnings of $833,000, or $.08 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 $4.7 million, or $.46 per diluted share, in the 2005 first quarter. The net loss in the first quarter of 2005 includes the previously announced 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 $3.5 million, or $.34 per diluted share, related to subleasing a portion of the company's corporate headquarters facility. Charlie Westling West´ling n. 1. A westerner. , Datalink's President and 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 very pleased to be building a track record of strong performance; first quarter sales and net earnings came in above expectations. Datalink continues to make significant progress against its strategic initiatives to increase productivity, more effectively deliver storage solutions and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. and strengthen its resources in key geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. locations." 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. Westling, the company's accomplishments included: --Fourth consecutive quarter of profitability and the first profitable first quarter since 2001; --Seventh consecutive quarter of year-over-year revenue growth; --Solid growth in customer support business, with revenues 27 percent higher on a year-over-year basis; and --A strong book of business going forward, 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. at the beginning of the second quarter was $17.5 million and is currently at $25 million. Westling continued, "We are off to a good start for 2006, and we believe that we can continue our profitable growth for the rest of the year by executing on our key initiatives. We remain focused on: --Continuing to increase employee productivity by leveraging the investments in our field and customer support areas; --Further penetrating penetrating breaching the tissues of the body. our enterprise customer base; --Targeting high growth market segments and deploying new technologies; and --Delivering greater value to customers through solutions and services." Outlook For the 2006 second quarter ending June June: see month. 30, 2006, Datalink expects revenues of between $32 million and $36 million, with net earnings ranging from $.03 to $.10 per diluted share. The net amounts do not reflect any income tax benefit or expense. Webcast A live Webcast of the Datalink first-quarter results conference call is scheduled for today, April 12, 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 second quarter 2006, 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
March 31,
2006 2005
---- ----
Net sales:
Products $24,944 $13,655
Services 9,340 7,586
------------------
Total net sales 34,284 21,241
--------- --------
Cost of sales:
Cost of product sales 18,640 10,368
Cost of service sales 6,503 5,114
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Total cost of sales 25,143 15,482
------------------
Gross profit 9,141 5,759
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Operating expenses:
Sales and marketing 4,177 3,293
General and administrative 2,789 2,546
Engineering 1,469 1,128
Charge for sublease reserve - 3,502
Amortization of intangibles - 65
------------------
8,435 10,534
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Earnings (loss) from operations 706 (4,775)
Interest income, net 127 74
------------------
Earnings (loss) before income taxes 833 (4,701)
Income tax benefit - -
------------------
Net earnings (loss) $833 $(4,701)
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Net earnings (loss) per common share
Basic $0.08 $(0.46)
Diluted $0.08 $(0.46)
Weighted average common shares outstanding:
Basic 10,447 10,298
Diluted 10,702 10,298
DATALINK CORPORATION
BALANCE SHEETS
(In thousands)
March 31, December 31,
2006 2005
---- ----
(Unaudited)
Assets
Current assets
Cash and cash equivalents $13,525 $13,434
Accounts receivable, net 21,330 18,673
Inventories 987 831
Deferred customer support contract costs 20,434 16,500
Inventories shipped but not installed 6,741 5,064
Other current assets 361 261
----------- ------------
Total current assets 63,378 54,763
----------- ------------
Property and equipment, net 2,410 2,476
Goodwill 5,500 5,500
Intangibles, net - 0
Other assets 390 404
----------- ------------
Total assets $71,678 $63,143
=========== ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $21,659 $19,660
Accrued commissions 1,511 1,359
Accrued income taxes 51 70
Accrued sales and use tax 1,061 645
Accrued expenses, other 1,373 1,893
Sublease reserve current 389 384
Deferred revenue from customer support
contracts 26,540 21,367
----------- ------------
Total current liabilities 52,584 45,378
Deferred rent 272 289
Sublease reserve non-current 1,595 1,641
----------- ------------
Total liabilities 54,451 47,308
----------- ------------
Commitments and contingencies
Stockholders' equity
Common stock, $.001 par value, 50,000,000
shares authorized, 10,541,570 and
10,404,105 shares issued and outstanding
as of March 31, 2006 and December 31,
2005, respectively 11 10
Additional paid-in capital 27,113 26,555
Accumulated deficit (9,897) (10,730)
----------- ------------
Total stockholders' equity 17,227 15,835
----------- ------------
Total liabilities and stockholders'
equity $71,678 $63,143
=========== ============
DATALINK CORPORATION
STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2006 2005
---- ----
Cash flows from operating activities:
Net earnings (loss) $833 $(4,701)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Provision for bad debts 9 6
Depreciation 262 362
Amortization of intangibles - 66
Deferred rent (17) (37)
Charge for sublease reserve - 3,239
Amortization of sublease reserve (41) -
Stock compensation expense 3 17
Changes in operating assets and liabilities:
Accounts receivable (2,666) 69
Inventories (1,833) (1,544)
Deferred customer support costs/revenues, net 1,239 990
Accounts payable 1,999 1,884
Accrued expenses 29 (487)
Other (89) (505)
------------------
Net cash used in operating activities (272) (641)
------------------
Cash flows from investing activities:
Purchase of property and equipment (196) (253)
------------------
Net cash used in investing activities (196) (253)
------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 559 22
------------------
Net cash provided by financing activities 559 22
------------------
Increase (decrease) in cash and cash equivalents 91 (872)
Cash and cash equivalents, beginning of period 13,434 12,663
------------------
Cash and cash equivalents, end of period $13,525 $11,791
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