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FalconStor Software Reports Second Quarter Results Revenues Increase 10% from Prior Year

MELVILLE, N.Y., July 28, 2009—FalconStor Software, Inc. (NASDAQ: FALC), the provider of TOTALLY Open™ data protection solutions, today announced financial results for its second quarter ended June 30, 2009.  

Revenues for the second quarter of 2009 increased 10% to $24.5 million, compared with $22.2 million for the same period a year ago.  GAAP income from operations for the quarter was $0.3 million, compared with $0.8 million in the second quarter of 2008.  GAAP net income for the quarter was $1.3 million, or $0.03 per diluted share, compared with $0.8 million, or $0.02 per diluted share, in the second quarter of 2008.  Stock-based compensation expense was $2.3 million in the second quarter of 2009 and $2.6 million in the second quarter of 2008. The income tax provision for the second quarter of 2009 included a benefit of $0.9 million related to research and development tax credits.

Non-GAAP income from operations was $2.6 million in the second quarter of 2009, compared with $3.4 million in the second quarter of 2008.  Non-GAAP net income was $2.9 million, or $0.06 per diluted share, in the second quarter of 2009, compared with $2.5 million, or $0.05 per diluted share, in the second quarter of 2008. Non-GAAP results exclude the effects of stock-based compensation expense net of the related income taxes.

For the six months ended June 30, 2009, revenues increased to $45.5 million, compared with $44.0 million for the same period a year ago.  GAAP loss from operations for the six month period was $0.6 million compared with income from operations of $2.5 million in 2008.  GAAP net income was $0.4 million, or $0.01 per diluted share for the six months ended June 30, 2009, compared with $2.1 million, or $0.04 per diluted share, in the same period a year ago.  For the first six months of 2009, the income tax provision included a benefit of $0.9 million related to research and development tax credits. Stock-based compensation expense was $4.5 million in 2009 and $5.0 million in 2008.  

Non-GAAP income from operations was $3.9 million for the six months ended June 30, 2009, compared with $7.5 million in 2008.  Non-GAAP net income was $3.5 million, or $0.08 per diluted share, compared with $5.4 million, or $0.11 per diluted share in the same period a year ago. Non-GAAP results exclude the effects of stock-based compensation expense net of the related income taxes.

The Company closed the quarter with $38.1 million in cash, cash equivalents and marketable securities.  Deferred revenue at the end of the quarter was $21.3 million.

For the year ending December 31, 2009, the Company still anticipates:
 

  • Revenues to be in the range of $96 million to $100 million
  • Non-GAAP net income to be between $0.18 and $0.21 per diluted share, which excludes stock-based compensation, net of income taxes.

"We are pleased with the performance of our business from operational, financial and strategic perspectives," said ReiJane Huai, chairman and CEO of FalconStor Software. "Our ongoing investment in R&D and our pro-active expansion of field sales and support capacity enable our channel partners to deliver TOTALLY Open storage virtualization, continuous data protection, and deduplication solutions with compelling business advantages. Our continued growth should encourage more industry partners to leverage our state-of-the-art software to enhance their network storage solutions supported by our global support infrastructure."

The Company will host a conference call on Tuesday, July 28, 2009, at 4:30 p.m. ET, to discuss the results. To participate in the conference call, please dial:

Toll Free: 1-877-941-1468
International: +1-480-629-9676

To view the presentation, please copy and paste the following link into your browser and register for this meeting. Once you have registered for the meeting, you will receive an email message confirming your registration.

https://falconstor.webex.com/falconstor/j.php?ED=124472822&RG=1&UID

Meeting: FalconStor Q2 2009 Earnings
Meeting password: q2numbers
Meeting Number: 480 986 146

If you are unable to register via the Internet, please contact Joanne Ferrara, Investor Relations at 631-773-5813 or joanne.ferrara@falconstor.com.

A conference call replay is scheduled to be available beginning June 28 at 6:30 p.m. ET through 11:59 p.m. ET on July 31.  To listen to the replay of the call, dial toll free: 1-800-406-7325 or International: +1-303-590-3030, passcode: 4116983, or visit our website at www.falconstor.com/company/investor-relations.

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.  For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Non-GAAP Operating Data GAAP Reconciliation, presented in this release.

About FalconStor Software

FalconStor Software, Inc. (NASDAQ: FALC) is the market leader in disk-based data protection. FalconStor delivers proven, comprehensive data protection solutions that facilitate the continuous availability of business-critical data with speed, integrity and simplicity. The Company’s TOTALLY Open™ technology solutions, built upon the award-winning IPStor® platform, include the industry leading Virtual Tape Library (VTL) with deduplication, Continuous Data Protector (CDP), File-interface Deduplication System (FDS), and Network Storage Server (NSS), each enabled with WAN-optimized replication for disaster recovery and remote office protection, and the HyperFS™ file system. FalconStor products are available as OEM or branded solutions from industry leaders, including Acer, Data Direct Networks, Dynamic Solutions International, EMC, Fujitsu, Hitachi Data Systems, Huawei, Pillar Data Systems, SGI, SeaChange and Spectra Logic and are deployed by thousands of customers worldwide, from small businesses to Fortune 1000 enterprises.

FalconStor is headquartered in Melville, N.Y., with offices throughout Europe and the Asia Pacific region. FalconStor is an active member of the Storage Networking Industry Association (SNIA). For more information, visit www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).

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FalconStor, FalconStor Software and IPStor are registered trademarks and TOTALLY Open and HyperFS are 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.


This press release includes forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include: delays in product development; market acceptance of FalconStor´s products and services; technological change in the storage and networking industries; competition in the network storage software market; the potential failure of FalconStor´s OEM partners to introduce or to market products incorporating FalconStor´s products; intellectual property issues; and other risk factors discussed in FalconStor´s reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.




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