New Threads Only:  Add to Google Reader or Homepage
New Threads & Replies:  Add to Google Reader or Homepage
Forums are for serious investors only. GuruFocus Forum Rules.

Forum List » Business News and Headlines
SEC Filings, Earing Reports, Press Releases
New Topic Search
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicSearchLog In
FalconStor Software Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 6, 2010 02:32PM

FalconStor Software Inc. (FALC) filed Quarterly Report for the period ended 2010-06-30. Falconstor Software Inc. has a market cap of $141 million; its shares were traded at around $3.1 with and P/S ratio of 1.6.



Highlight of Business Operations:

Revenues for the three months ended June 30, 2010 decreased 17% to $20.3 million, compared with $24.5 million for the three months ended June 30, 2009. Our cost of revenues increased 47% from $4.0 million for the three months ended June 30, 2009 to $5.9 million for the three months ended June 30, 2010. Included in our cost of revenues for the three months ended June 30, 2010 and 2009 was $0.3 million and $0.4 million, respectively, of share-based compensation expense. Our operating expenses decreased 3% from $20.2 million for the three months ended June 30, 2009, to $19.5 million for the three months ended June 30, 2010. Included in our operating expenses for the three months ended June 30, 2010 and 2009 was $2.0 million and $1.9 million, respectively, of share-based compensation expense. Net loss for the three months ended June 30, 2010 was $3.4 million, compared with net income of $1.3 million for the three months ended June 30, 2009. Included in our net loss for the three months ended June 30, 2010 was an income tax benefit of $1.7 million, compared with an income tax benefit of $0.8 million for the three months ended June 30, 2009. The income tax benefit of $1.7 million was primarily attributable to the impact of our estimated full year effective tax rate on our pre-tax losses for the three months ended June 30, 2010. The income tax benefit of $0.8 million was primarily attributable to a discrete benefit of $0.9 million related to research and development credits we recognized during the three months ended June 30, 2009.

Cost of product revenue consists primarily of industry standard hardware we purchase and integrate with our software for a turn-key integrated solution, personnel costs, amortization of purchased and capitalized software, shipping and logistics costs, and share-based compensation expense. Cost of support and service consists primarily of personnel and other costs associated with providing software implementations, technical support under maintenance contracts, training, and share-based compensation expense. Cost of product revenue for the three months ended June 30, 2010 increased $1.9 million, or 300%, to $2.6 million compared with $0.6 million for the same period in 2009. The increase in cost of product revenue was primarily due to the increased hardware costs associated with our new focus in 2010 of selling FalconStor-branded integrated turn-key solutions. Our cost of support and service revenues remained consistent at approximately $3.3 million for both the three months ended June 30, 2010 and 2009.

Selling and marketing expenses consist primarily of sales and marketing personnel and related costs, share-based compensation expense, travel, public relations expense, marketing literature and promotions, commissions, trade show expenses, and the costs associated with our foreign sales offices. Selling and marketing expenses decreased $0.7 million, or 6%, to $10.4 million for the three months ended June 30, 2010 from $11.1 million for the same period in 2009. The decrease in selling and marketing expenses was primarily due to (i) lower commissions paid as a result of our 17% decline in total revenue, and (ii) cost savings controls and a hiring freeze that was implemented during the second quarter of 2010. Share-based compensation expense included in selling and marketing increased to $0.9 million from $0.8 million for the three months ended June 30, 2010 and 2009, respectively. Share-based compensation expense included in selling and marketing expenses was equal to 4% of revenue for the three months ended June 30, 2010 and 3% for the same period in 2009.

We invest our cash primarily in money market funds, government securities, and corporate bonds. As of June 30, 2010, our cash, cash equivalents, and marketable securities totaled $39.3 million, compared with $38.1 million as of June 30, 2009. Interest and other income decreased $0.2 million to $7,500 for the three months ended June 30, 2010, compared with $0.2 million for the same period in 2009. The decrease in interest and other income was due to foreign currency losses of $0.1 million incurred during the three months ended June 30, 2010, compared with foreign currency gains of $0.1 million for the same period in 2009.

Our provision for income taxes consists of U.S., state and local, and foreign taxes in amounts necessary to align our year-to-date tax provision with the effective rate that we expect to achieve for the full year. For the three months ended June 30, 2010, we recorded an income tax benefit of $1.7 million, compared with an income tax benefit of $0.8 million for the same period in 2009. The increase in the benefit for income taxes was primarily attributable to our pre-tax loss of $5.1 million for the three months ended June 30, 2010, compared with pre-tax income of $0.5 million for the same period in 2009. During the three months ended June 30, 2009, we recorded a discrete benefit of $0.9 million as a result of previously unrecognized tax benefits in connection with our completion of a research and development study.

Revenues for the six months ended June 30, 2010 decreased 18% to $37.4 million compared with $45.5 million for the six months ended June 30, 2009. Our cost of revenues increased 40% from $7.8 million for the six months ended June 30, 2009 to $11.0 million for the six months ended June 30, 2010. Included in our cost of revenues for the six months ended June 30, 2010 and 2009 was $0.6 million and $0.8 million, respectively, of share-based compensation expense. Our operating expenses increased 5% from $38.2 million for the six months ended June 30, 2009 to $40.0 million for the six months ended June 30, 2010. Included in our operating expenses for the six months ended June 30, 2010 and 2009 was $4.3 million and $3.7 million, respectively, of share-based compensation expense. Net loss for the six months ended June 30, 2010 was $8.9 million, compared with net income of $0.4 million for the six months ended June 30, 2009. Included in our net loss for the six months ended June 30, 2010 was an income tax benefit of $4.8 million compared with an income tax benefit of $1.2 million for the six months ended June 30, 2009. The income tax benefit of $4.8 million, was primarily attributable to the impact of our estimated full year effective tax rate on our pre-tax losses for the six months ended June 30, 2010. The income tax benefit of $1.2 million was primarily attributable to a discrete benefit of $0.9 million related to research and development credits we recognized during the six months ended June 30, 2009.

Read the The complete Report



Stocks Discussed: FALC,
Rate this post:




Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't




Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial