Exhibit 99.1
For more information, contact:
FalconStor Software, Inc.
Vincent Sita
Chief Financial Officer
vincent.sita@falconstor.com
FalconStor Software Announces Third Quarter of 2022 Results
Delivered Hybrid Cloud Revenue Growth and Positive Net Income
AUSTIN, TEXAS (November 9, 2022) - FalconStor Software, Inc. (OTCQB: FALC), a trusted data protection leader modernizing disaster recovery and backup for the hybrid cloud world, today announced financial results for its third quarter 2022, which ended on September 30, 2022.
“Our focus on recurring revenue growth through hybrid cloud data protection solutions and increased profitability enabled delivery of quarter-over-quarter revenue and net income growth for the second consecutive quarter,” said Todd Brooks, FalconStor CEO. “The hybrid cloud reseller relationship we formed with IBM in the second quarter of 2022 continued to expand during the quarter with new customers taking advantage of our joint offerings and existing customers expanding their monthly usage. IBM’s hybrid cloud focus is a key element of its growth strategy, as detailed in IBM’s first, second, and third quarter 2022 earnings announcements. We are excited to help the tens of thousands of IBM customers around the globe to leverage IBM hybrid cloud solutions.
“Total revenue increased to $3.1 million in the quarter from $2.4 million in the second quarter 2022, and $2.0 million in the first quarter 2022. Our aggressive focus on advancing critical hybrid cloud relationships and our efforts to realign to a subscription- and monthly consumption-based recurring revenue model continue to challenge our year-over-year revenue growth as third quarter revenue was $3.1 million, compared to $3.3 million in the third quarter of 2021." stated Brooks. "Our continued focus on tightly managing operating expenses resulted in delivering $0.2 million in GAAP net income during the quarter, compared to a $0.9 million GAAP net loss in the second quarter 2022. We are excited by the progress we have made and are working hard to continue delivering quarter-over-quarter revenue and profitability growth.
Third Quarter 2022 Financial Results
1
Guidance
Given Q3 2022 results, we are maintaining our full-year 2022 guidance as follows.
*Adjusted EBITDA adds back Depreciation, Amortization, Restructuring, Severance, Board expenses, Stock Based Compensation as well as Non-Operating Expenses including Income Taxes and Interest & Other Income Expenses
Conference Call and Webcast Information
WHO: Todd Brooks, Chief Executive Officer, FalconStor and Vincent Sita, Chief Financial Officer, FalconStor
WHEN: Wednesday, November 9, 2022, 4:00 PM Central; 5:00 PM Eastern
To register for our earnings call, please click the following link:
FALCONSTOR THIRD QUARTER 2022 FINANCIAL TELECONFERENCE AND PRESENTATION
As an alternative, you can copy and paste the following link into your web browser to register:
https://register.gotowebinar.com/register/5496583298725631503
Conference Call:
Please dial the following if you would like to interact with and ask questions of FalconStor hosts:
Toll Free: 877-309-2074
Access Code: 747-802-445
Non-GAAP Financial Measures
The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) depreciation, (ii) amortization, (iii) restructuring expenses, (iv) severance expenses, (v) board expenses, (vi) stock based compensation, (vii) non-operating expenses (income) including income taxes and interest & other expenses (income). For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Net Income (Loss) to Adjusted EBITDA presented in this release.
2
About FalconStor Software
FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers, systems integrators, resellers, and original equipment manufacturers.
# # #
FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.
Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.
CONTACT INFORMATION
For more information, contact:
Vincent Sita
Chief Financial Officer FalconStor Software Inc.
investorrelations@falconstor.com
CONTACT US AROUND THE GLOBE
Corporate Headquarters |
|
Europe Headquarters |
501 Congress Avenue |
|
GERMANY |
Suite 150 |
|
Landsberger Straße 302 |
Austin, Texas 78701 |
|
80687 München, Germany |
Tel: +1.631.777.5188 |
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salesemea@falconstor.com |
salesinfo@falconstor.com |
|
|
3
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
1,666,054 |
|
|
$ |
3,181,209 |
|
Accounts receivable, net |
|
|
2,288,133 |
|
|
|
2,855,135 |
|
Prepaid expenses and other current assets |
|
|
885,734 |
|
|
|
1,074,972 |
|
Contract assets, net |
|
|
273,945 |
|
|
|
209,936 |
|
Inventory |
|
|
- |
|
|
|
7,744 |
|
Total current assets |
|
|
5,113,866 |
|
|
|
7,328,996 |
|
Property and equipment, net |
|
|
95,796 |
|
|
|
153,904 |
|
Operating lease right-of-use assets |
|
|
49,626 |
|
|
|
112,405 |
|
Deferred tax assets, net |
|
|
26,327 |
|
|
|
30,190 |
|
Software development costs, net |
|
|
60,123 |
|
|
|
42,695 |
|
Other assets, net |
|
|
97,212 |
|
|
|
106,023 |
|
Goodwill |
|
|
4,150,339 |
|
|
|
4,150,339 |
|
Other intangible assets, net |
|
|
27,437 |
|
|
|
51,362 |
|
Contract assets |
|
|
445,017 |
|
|
|
692,712 |
|
Total assets |
|
$ |
10,065,743 |
|
|
$ |
12,668,626 |
|
Liabilities and Stockholders' Deficit |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
450,250 |
|
|
$ |
297,033 |
|
Accrued expenses |
|
|
1,355,927 |
|
|
|
1,099,257 |
|
Operating lease liabilities |
|
|
49,626 |
|
|
|
76,940 |
|
Deferred revenue, net |
|
|
3,504,907 |
|
|
|
4,557,317 |
|
Total current liabilities |
|
|
5,360,710 |
|
|
|
6,030,547 |
|
Other long-term liabilities |
|
|
954,213 |
|
|
|
950,843 |
|
Notes payable, net |
|
|
2,164,251 |
|
|
|
2,154,098 |
|
Operating lease liabilities |
|
|
- |
|
|
|
35,465 |
|
Deferred tax liabilities, net |
|
|
500,499 |
|
|
|
500,499 |
|
Deferred revenue, net |
|
|
1,281,279 |
|
|
|
1,578,769 |
|
Total liabilities |
|
|
10,260,952 |
|
|
|
11,250,221 |
|
Commitments and contingencies |
|
|
|
|
|
|
||
Series A redeemable convertible preferred stock |
|
|
15,505,173 |
|
|
|
14,384,388 |
|
Total stockholders' deficit |
|
|
(15,700,382 |
) |
|
|
(12,965,983 |
) |
Total liabilities and stockholders' deficit |
|
$ |
10,065,743 |
|
|
$ |
12,668,626 |
|
4
FalconStor Software, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue |
|
$ |
1,568,110 |
|
|
$ |
1,547,013 |
|
|
$ |
3,125,936 |
|
|
$ |
5,288,747 |
|
Support and services revenue |
|
|
1,491,031 |
|
|
|
1,736,456 |
|
|
|
4,376,647 |
|
|
|
5,081,795 |
|
Total revenue |
|
|
3,059,141 |
|
|
|
3,283,469 |
|
|
|
7,502,583 |
|
|
|
10,370,542 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product |
|
|
19,711 |
|
|
|
41,351 |
|
|
|
65,018 |
|
|
|
298,966 |
|
Support and service |
|
|
360,393 |
|
|
|
400,934 |
|
|
|
1,128,764 |
|
|
|
1,233,067 |
|
Total cost of revenue |
|
|
380,104 |
|
|
|
442,285 |
|
|
|
1,193,782 |
|
|
|
1,532,033 |
|
Gross profit |
|
|
2,679,037 |
|
|
|
2,841,184 |
|
|
|
6,308,801 |
|
|
|
8,838,509 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development costs |
|
|
581,941 |
|
|
|
711,273 |
|
|
|
1,943,446 |
|
|
|
2,032,360 |
|
Selling and marketing |
|
|
887,967 |
|
|
|
1,610,635 |
|
|
|
3,202,311 |
|
|
|
4,267,010 |
|
General and administrative |
|
|
826,556 |
|
|
|
633,954 |
|
|
|
2,400,561 |
|
|
|
2,129,921 |
|
Gain on litigation settlement |
|
|
— |
|
|
|
(632,600 |
) |
|
|
— |
|
|
|
(632,600 |
) |
Restructuring costs |
|
|
— |
|
|
|
68,704 |
|
|
|
744 |
|
|
|
792,754 |
|
Total operating expenses |
|
|
2,296,464 |
|
|
|
2,391,966 |
|
|
|
7,547,062 |
|
|
|
8,589,445 |
|
Operating income (loss) |
|
|
382,573 |
|
|
|
449,218 |
|
|
|
(1,238,261 |
) |
|
|
249,064 |
|
Gain on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
754,000 |
|
Interest and other expense |
|
|
(111,399 |
) |
|
|
(84,049 |
) |
|
|
(430,630 |
) |
|
|
(544,625 |
) |
Income (loss) before income taxes |
|
|
271,174 |
|
|
|
365,169 |
|
|
|
(1,668,891 |
) |
|
|
458,439 |
|
Income tax expense (benefit) |
|
|
49,802 |
|
|
|
16,529 |
|
|
|
150,369 |
|
|
|
63,804 |
|
Net income (loss) |
|
$ |
221,372 |
|
|
$ |
348,640 |
|
|
$ |
(1,819,260 |
) |
|
$ |
394,635 |
|
Less: Accrual of Series A redeemable convertible preferred stock dividends |
|
|
391,016 |
|
|
|
288,802 |
|
|
|
1,030,365 |
|
|
|
848,898 |
|
Less: Accretion to redemption value of Series A redeemable convertible preferred stock |
|
|
40,023 |
|
|
|
13,517 |
|
|
|
90,420 |
|
|
|
285,814 |
|
Net income (loss) attributable to common stockholders |
|
$ |
(209,667 |
) |
|
$ |
46,321 |
|
|
$ |
(2,940,045 |
) |
|
$ |
(740,077 |
) |
Basic net income (loss) per share attributable to common stockholders |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
(0.41 |
) |
|
$ |
(0.12 |
) |
Diluted net income (loss) per share attributable to common stockholders |
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
$ |
(0.41 |
) |
|
$ |
(0.12 |
) |
Weighted average basic shares outstanding |
|
|
7,111,801 |
|
|
|
6,990,723 |
|
|
|
7,095,096 |
|
|
|
6,324,370 |
|
Weighted average diluted shares outstanding |
|
|
7,111,801 |
|
|
|
7,039,421 |
|
|
|
7,095,096 |
|
|
|
6,324,370 |
|
5
FalconStor Software, Inc. and Subsidiaries
Supplemental Information
Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) |
|
$ |
221,372 |
|
|
$ |
348,640 |
|
|
$ |
(1,819,260 |
) |
|
$ |
394,635 |
|
Income tax expense |
|
|
49,802 |
|
|
|
16,529 |
|
|
|
150,369 |
|
|
|
63,804 |
|
Interest and other expense |
|
|
111,399 |
|
|
|
84,049 |
|
|
|
430,630 |
|
|
|
544,625 |
|
Depreciation and amortization |
|
|
26,182 |
|
|
|
45,486 |
|
|
|
94,710 |
|
|
|
151,468 |
|
Restructuring costs |
|
|
- |
|
|
|
68,704 |
|
|
|
744 |
|
|
|
792,754 |
|
Severance costs |
|
|
50,996 |
|
|
|
- |
|
|
|
50,996 |
|
|
|
8,136 |
|
Other restructuring costs |
|
|
- |
|
|
|
44,646 |
|
|
|
6,070 |
|
|
|
433,490 |
|
Board costs |
|
|
136,050 |
|
|
|
194,360 |
|
|
|
456,714 |
|
|
|
471,699 |
|
Stock based compensation |
|
|
7,985 |
|
|
|
4,916 |
|
|
|
35,271 |
|
|
|
14,084 |
|
Adjusted EBITDA |
|
$ |
603,786 |
|
|
$ |
807,330 |
|
|
$ |
(593,756 |
) |
|
$ |
2,874,695 |
|
6