EX-99 2 falc-ex99_1.htm EX-99.1 EX-99

 

Exhibit 99.1

 

img100405939_0.jpg 

 

For more information, contact:

FalconStor Software, Inc.

Vincent Sita

Chief Financial Officer

vincent.sita@falconstor.com

 

FalconStor Software Announces Fourth Quarter and Full Year 2022 Results

 

Expanding Hybrid Cloud Momentum Fuels ARR Growth

 

•
Generated a 20% increase in total hybrid cloud ARR run-rate for Q4 versus the previous quarter and a 222% increase versus Q4 of 2021, as sales from IBM relationship formally launched in the second half of 2022
•
Extended hybrid cloud sales beyond IBM Cloud and MSPs in Q4 with first customer using Microsoft Azure IBM Power virtual server offering managed by Skytap for DRaaS
•
Generated 14% increase in MSP-driven hybrid cloud ARR run-rate for Q4 versus the previous quarter and a 104% increase versus Q4 2021

 

AUSTIN, TEXAS (March 15, 2023) - 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 fourth quarter and full year 2022, which ended on December 31, 2022.

 

“We are pleased with the progress we made in the 2022, especially in Q4 and the last half of the year, as our joint sales with IBM to deliver hybrid cloud data protection solutions to IBM customers formally launched in the second half and began to increase,” said Todd Brooks, FalconStor CEO. “IBM’s hybrid cloud focus is a key element of its growth strategy, as detailed in each of their earnings announcements in 2022. Our joint solutions enable IBM customers across the globe to optimize data protection within each of their operating environments, whether those environments run on-premises or in the cloud. In addition, our partnership with IBM is enabling MSPs to expand the backup-as-a-service offerings they provide to IBM and non-IBM customers alike, as more and more enterprises entrust MSPs to manage their IT environments.”

 

“While total revenue declined by 30% year over year in 2022, as we continued our shift from legacy perpetual revenue to annual recurring revenue, total revenue increased by 26% in the second half of 2022 compared to the first half of the year. This increase is a good early validation of our expanding partner sales since the formal launch of our IBM relationship at the beginning of the second half of 2022, stated Brooks. “In addition, we continued to maintain tight control of our operating expenses, resulting in positive net income in the second half of 2022. We are excited by the progress we made in 2022 and believe we have created a strong foundation from which to build in 2023 and beyond.”

1

 

 

Fourth Quarter 2022 Financial Results

•
Hybrid Cloud ARR Run-Rate: 20% increase compared to the previous quarter, and 222% increase year over year
•
Ending Cash: $2.0 million, compared to $1.7 million in the previous quarter, and $3.2 million in the fourth quarter of fiscal year 2021
•
Total Revenue: $2.5 million, compared to $3.1 million in the previous quarter, and $3.7 million in the fourth quarter of fiscal year 2021
•
Total Cost of Revenue: $0.4 million, compared to $0.4 million in the previous quarter, and $0.4 million in the fourth quarter of fiscal year 2021
•
Total Operating Expenses: $2.2 million, compared to $2.3 million in the previous quarter, and $3.0 million in the fourth quarter of fiscal year 2021
•
GAAP Net Income (Loss): $20 thousand, compared to $0.2 million in the previous quarter, and ($0.3) million in the fourth quarter of fiscal year 2021

 

 

Second Half 2022 Financial Results

•
Total Revenue: $5.6 million, compared to $4.4 million during the first half of year 2022
•
Total Cost of Revenue: $0.8 million, compared to $0.8 million during the first half of year 2022
•
Total Operating Expenses: $4.5 million, compared to $5.3 million during the first half of year 2022
•
GAAP Net Income (Loss): $0.2 million, compared to ($2.0) million during the first half of year 2022

 

 

Full Year 2022 Financial Results

•
Total Revenue: $10.1 million, compared to $13.9 million during the full year of 2021
•
Total Cost of Revenue: $1.6 million, compared to $2.0 million during the full year of 2021
•
Total Operating Expenses: $9.7 million, compared to $11.6 million during the full year of 2021
•
GAAP Net Income (Loss): ($1.8) million, compared to ($42) thousand during the full year of 2021

 

 

Conference Call and Webcast Information

 

WHO: Todd Brooks, Chief Executive Officer, FalconStor and Vincent Sita, Chief Financial Officer, FalconStor

 

WHEN: Wednesday, March 15, 2023, 4:00 PM Central; 5:00 PM Eastern

 

To register for our earnings call, please click the following link:

 

FALCONSTOR FOURTH 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/1800241812476581214

 

 

Conference Call:

Please dial the following if you would like to interact with and ask questions of FalconStor hosts:

Toll Free: 877-568-4108

Access Code: 796-227-449

 

2

 

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.

 

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

 

salesemea@falconstor.com

salesinfo@falconstor.com

 

 

 

3

 

FalconStor Software, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

December 31, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,011,062

 

 

$

3,181,209

 

Accounts receivable, net

 

 

2,278,802

 

 

 

2,855,135

 

Prepaid expenses and other current assets

 

 

897,493

 

 

 

1,074,972

 

Contract assets, net

 

 

181,933

 

 

 

209,936

 

Inventory

 

 

—

 

 

 

7,744

 

Total current assets

 

 

5,369,290

 

 

 

7,328,996

 

Property and equipment, net

 

 

86,263

 

 

 

153,904

 

Operating lease right-of-use assets

 

 

34,416

 

 

 

112,405

 

Deferred tax assets, net

 

 

—

 

 

 

30,190

 

Software development costs, net

 

 

53,057

 

 

 

42,695

 

Other assets, net

 

 

98,747

 

 

 

106,023

 

Goodwill

 

 

4,150,339

 

 

 

4,150,339

 

Other intangible assets, net

 

 

20,086

 

 

 

51,362

 

Contract assets

 

 

357,914

 

 

 

692,712

 

Total assets

 

$

10,170,112

 

 

$

12,668,626

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

387,379

 

 

$

297,033

 

Accrued expenses

 

 

1,427,979

 

 

 

1,099,257

 

Operating lease liabilities

 

 

34,416

 

 

 

76,940

 

Current portion of notes payable, net of debt issuance costs and discounts

 

 

177,149

 

 

 

—

 

Deferred revenue, net

 

 

3,684,742

 

 

 

4,617,422

 

Total current liabilities

 

 

5,711,665

 

 

 

6,090,652

 

Other long-term liabilities

 

 

956,023

 

 

 

950,843

 

Notes payable, net

 

 

2,163,090

 

 

 

2,154,098

 

Operating lease liabilities

 

 

—

 

 

 

35,465

 

Deferred tax liabilities, net

 

 

537,651

 

 

 

500,499

 

Deferred revenue, net

 

 

1,281,107

 

 

 

1,764,249

 

Total liabilities

 

$

10,649,536

 

 

$

11,495,806

 

Commitments and contingencies

 

 

 

 

 

 

Series A redeemable convertible preferred stock

 

 

15,928,018

 

 

 

14,384,388

 

Total stockholders' deficit

 

 

(16,407,442

)

 

 

(13,211,568

)

Total liabilities and stockholders' deficit

 

$

10,170,112

 

 

$

12,668,626

 

 

 

4

 

FalconStor Software, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three months ended December 31,

 

 

Twelve months ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

1,120,241

 

 

$

1,816,094

 

 

$

4,246,177

 

 

$

6,988,067

 

Support and services revenue

 

 

1,429,424

 

 

 

1,851,716

 

 

 

5,806,071

 

 

 

6,946,828

 

Total revenue

 

 

2,549,665

 

 

 

3,667,810

 

 

 

10,052,248

 

 

 

13,934,895

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

32,252

 

 

 

26,123

 

 

 

97,270

 

 

 

325,089

 

Support and service

 

 

338,847

 

 

 

394,120

 

 

 

1,467,611

 

 

 

1,627,187

 

Total cost of revenue

 

 

371,099

 

 

 

420,243

 

 

 

1,564,881

 

 

 

1,952,276

 

Gross profit

 

 

2,178,566

 

 

 

3,247,567

 

 

 

8,487,367

 

 

 

11,982,619

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development costs

 

 

618,379

 

 

 

801,283

 

 

 

2,561,825

 

 

 

2,833,643

 

Selling and marketing

 

 

801,453

 

 

 

1,405,013

 

 

 

4,003,764

 

 

 

5,672,023

 

General and administrative

 

 

778,043

 

 

 

758,036

 

 

 

3,178,604

 

 

 

2,887,957

 

Gain on litigation settlement

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(632,600

)

Restructuring costs

 

 

—

 

 

 

40,559

 

 

 

744

 

 

 

833,313

 

Total operating expenses

 

 

2,197,875

 

 

 

3,004,891

 

 

 

9,744,937

 

 

 

11,594,336

 

Operating income (loss)

 

 

(19,309

)

 

 

242,676

 

 

 

(1,257,570

)

 

 

388,283

 

Gain on debt extinguishment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

754,000

 

Interest and other income (expense)

 

 

99,703

 

 

 

(113,149

)

 

 

(330,927

)

 

 

(657,773

)

Income (loss) before income taxes

 

 

80,394

 

 

 

129,527

 

 

 

(1,588,497

)

 

 

484,510

 

Income tax expense (benefit)

 

 

60,089

 

 

 

462,959

 

 

 

210,458

 

 

 

526,763

 

Net income (loss)

 

$

20,305

 

 

$

(333,432

)

 

$

(1,798,955

)

 

$

(42,253

)

Less: Accrual of Series A redeemable convertible preferred stock dividends

 

 

463,692

 

 

 

294,799

 

 

 

1,494,057

 

 

 

1,143,697

 

Less: Accretion to redemption value of Series A redeemable convertible preferred stock

 

 

(40,847

)

 

 

14,155

 

 

 

49,573

 

 

 

299,969

 

Net income (loss) attributable to common stockholders

 

$

(402,540

)

 

$

(642,386

)

 

$

(3,342,585

)

 

$

(1,485,919

)

Basic net income (loss) per share attributable to common stockholders

 

$

(0.06

)

 

$

(0.09

)

 

$

(0.47

)

 

$

(0.23

)

Diluted net income (loss) per share attributable to common stockholders

 

$

(0.06

)

 

$

(0.09

)

 

$

(0.47

)

 

$

(0.23

)

Weighted average basic shares outstanding

 

 

7,118,239

 

 

 

7,081,760

 

 

 

7,100,929

 

 

 

6,515,274

 

Weighted average diluted shares outstanding

 

 

7,118,239

 

 

 

7,081,760

 

 

 

7,100,929

 

 

 

6,515,274

 

 

5

 

FalconStor Software, Inc. and Subsidiaries

Supplemental Information

Unaudited Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

 

Three months ended December 31,

 

 

Twelve months ended December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

20,305

 

 

$

(333,432

)

 

$

(1,798,955

)

 

$

(42,253

)

Income tax expense

 

 

60,089

 

 

 

462,959

 

 

 

210,458

 

 

 

526,763

 

Interest and other expense

 

 

(99,703

)

 

 

113,149

 

 

 

330,927

 

 

 

657,773

 

Depreciation and amortization

 

 

25,498

 

 

 

47,778

 

 

 

120,208

 

 

 

199,246

 

Restructuring costs

 

 

—

 

 

 

40,559

 

 

 

744

 

 

 

833,313

 

Severance costs

 

 

2,680

 

 

 

15,667

 

 

 

59,926

 

 

 

23,803

 

Other restructuring costs

 

 

—

 

 

 

30,460

 

 

 

6,070

 

 

 

463,950

 

Board costs

 

 

146,013

 

 

 

176,131

 

 

 

602,727

 

 

 

647,830

 

Stock based compensation

 

 

3,499

 

 

 

7,094

 

 

 

38,770

 

 

 

21,178

 

Adjusted EBITDA

 

$

158,381

 

 

$

560,365

 

 

$

(429,125

)

 

$

3,331,612

 

 

6

 

FalconStor Software, Inc. and Subsidiaries

Supplemental Information

Condensed Consolidated Statements of Operations Second Half vs. First Half 2022

 

 

 

Second Half

 

 

 

 

First Half

 

 

 

2022

 

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

Product revenue

 

$

2,688,351

 

 

 

$

1,557,826

 

Support and services revenue

 

 

2,920,455

 

 

 

 

2,885,616

 

Total revenue

 

 

5,608,806

 

 

 

 

4,443,442

 

Cost of revenue:

 

 

 

 

 

 

 

Product

 

 

51,963

 

 

 

 

45,307

 

Support and service

 

 

699,240

 

 

 

 

768,371

 

Total cost of revenue

 

 

751,203

 

 

 

 

813,678

 

Gross profit

 

 

4,857,603

 

 

 

 

3,629,764

 

Operating expenses:

 

 

 

 

 

 

 

Research and development costs

 

 

1,200,320

 

 

 

 

1,361,505

 

Selling and marketing

 

 

1,689,420

 

 

 

 

2,314,344

 

General and administrative

 

 

1,604,599

 

 

 

 

1,574,005

 

Restructuring costs

 

 

—

 

 

 

 

744

 

Total operating expenses

 

 

4,494,339

 

 

 

 

5,250,598

 

Operating income (loss)

 

 

363,264

 

 

 

 

(1,620,834

)

Interest and other income (expense)

 

 

(11,696

)

 

 

 

(319,231

)

Income (loss) before income taxes

 

 

351,568

 

 

 

 

(1,940,065

)

Income tax expense (benefit)

 

 

109,891

 

 

 

 

100,567

 

Net income (loss)

 

$

241,677

 

 

 

$

(2,040,632

)

Less: Accrual of Series A redeemable convertible preferred stock dividends

 

 

854,708

 

 

 

 

639,349

 

Less: Accretion to redemption value of Series A redeemable convertible preferred stock

 

 

(824

)

 

 

 

50,397

 

Net income (loss) attributable to common stockholders

 

$

(612,207

)

 

 

$

(2,730,378

)

 

7