FalconStor Software Inc. (FALC) filed Quarterly Report for the period ended 2009-09-30.
FalconStor Software Inc. is a company founded with the mission to help enterprises rise above ever-expanding storage complexities and costs by providing the first software-only storage networking solution that simplifies storage management while drastically reducing total cost of ownership. With an unprecedented combination of manageability performance security and flexibility FalconStors flagship product IPStor transcends the limitations that have historically confined SANs to local data centers. Falconstor Software Inc. has a market cap of $154.8 million; its shares were traded at around $3.46 with and P/S ratio of 1.8.
Highlight of Business Operations:
Net loss decreased on a year-over-year basis. We had a net loss of $2.0 million for the three months ended September 30, 2009, compared with net loss of $1.6 million for the third quarter of 2008. This loss includes $2.2 million of stock-based compensation expense for the quarter. For the third quarter of 2008, stock-based compensation expense totaled $1.6 million.
Revenues for the three months ended September 30, 2009 increased 10% to $21.5 million compared with $19.6 million for the three months ended September 30, 2008. Our operating expenses increased 15% from $21.0 million for the three months ended September 30, 2008 to $24.0 million for the three months ended September 30, 2009. Included in our operating expenses for the three months ended September 30, 2009 and 2008 was $2.2 million and $1.6 million, respectively, of share-based compensation expense. Net loss for the three months ended September 30, 2009 was $2.0 million compared with a net loss of $1.6 million for the three months ended September 30, 2008. Included in our net loss for the three months ended September 30, 2009 was an income tax benefit of $0.2 million compared with an income tax provision of $0.5 million for the three months ended September 30, 2008. The overall growth in revenues was due to increases in all components of our revenue sources. The primary growth in revenues was driven by increases in (i) software licenses for our network storage solution software from our installed customer base and (ii) maintenance revenue from new and existing customers. However, these increases were limited due to the continued difficult economic conditions, which commenced during the third quarter of 2008, as a result of the disruptions in the global financial markets. As a result of the current macroeconomic environment, we continue to experience slowed revenue growth, particularly in software license revenues, due to a downturn in information technology spending, and we expect this trend to continue throughout the remainder of 2009. Revenue contribution from our OEM partners increased in absolute dollars for the three months ended September 30, 2009 as compared with the same period in 2008. Revenue from non-OEM partners increased in both absolute dollars and as a percentage of total revenue for the three months ended September 30, 2009 compared with the same period in 2008. Expenses increased in all aspects of our business as we continue to invest in our future by increasing headcount both domestically and internationally. To support our growth, we increased our worldwide headcount to 533 employees as of September 30, 2009, as compared with 506 employees as of September 30, 2008. Although our continued investments in the future through additional headcounts may impact our operating profits and margins, we believe these investments are in line with our long-term outlook. Finally, we continue to invest in our infrastructure with continued capital expenditures, particularly with purchases of equipment for support of our existing and future product offerings.
Gross profit increased $1.1 million, or 7% from $16.2 million for the three months ended September 30, 2008 to $17.3 million for the three months ended September 30, 2009. Gross margins decreased to 80% for the three months ended September 30, 2009 from 82% for the same period in 2008. The increase in our gross profit for the three months ended September 30, 2009, compared with the same period in 2008, was primarily due to the 10% increase in our revenues, which was primarily offset by our continued investments in the future through increasing our headcount as well as the increased hardware costs associated with our bundles solutions. Generally, our gross margins may fluctuate based on several factors, including (i) revenue growth levels, (ii) changes in personnel headcount and related costs, and (iii) our product offerings and service mix of sales. Share-based compensation expense included in cost of maintenance, software services and other revenue increased in absolute dollars to $0.4 million from $0.3 million for the three months ended September 30, 2009 and September 30, 2008, respectively. Share-based compensation expense was equal to 2% of revenue for both the three months ended September 30, 2009 and September 30, 2008, respectively.
General and administrative expenses consist primarily of personnel costs of general and administrative functions, share-based compensation expense, public company related costs, directors and officers insurance, legal and professional fees, and other general corporate overhead costs. General and administrative expenses increased 14% to $2.4 million for the three months ended September 30, 2009 from $2.1 million for the same period in 2008. The overall increase within general and administrative expenses related to increases in various administrative costs including (i) personnel related costs and (ii) various professional fees. Share-based compensation expense included in general and administrative increased in absolute dollars to $0.3 million from $0.1 million for the three months ended September 30, 2009 and September 30, 2008, respectively. Share-based compensation expense included in general and administrative expenses was equal to 1% of revenue for the three months ended September 30, 2009 and September 30, 2008, respectively. Additionally, as we continue to increase our headcount as part of our investment in the Company s future infrastructure, as a result of this investment, our overall general corporate overhead costs have generally increased and are likely to continue to increase.
We invest our cash primarily in money market funds, commercial paper, government securities, and corporate bonds. As of September 30, 2009, our cash, cash equivalents, and marketable securities totaled $46.9 million, compared with $48.0 million as of September 30, 2008. Interest and other income decreased less than $0.1 million to $0.2 million for the three months ended September 30, 2009, compared with $0.3 million for the same period in 2008. The decrease in interest and other income was due to a decrease in our interest income. The decrease in interest income for the three months ended September 30, 2009 compared with the same period in 2008 was primarily related to the continued suppressed interest rates on average cash balances invested during the three months ended September 30, 2009, as a result of the U.S. banking liquidity crisis and difficult macroeconomic environment, which began to materially impact the financial markets during the second half of 2008. These decreases in interest income were offset by the increase in other income primarily related to foreign currency gains of $0.1 million for the three months ended September 30, 2009 as compared with a foreign currency loss of $50,000 for the same period in 2008.
Revenues for the nine months ended September 30, 2009 increased 5% to $67.0 million compared with $63.6 million for the nine months ended September 30, 2008. Our operating expenses increased 12% from $62.5 million for the nine months ended September 30, 2008 to $70.1 million for the nine months ended September 30, 2009. Included in our operating expenses for the nine months ended September 30, 2009 and 2008 was $6.7 million and $6.6 million, respectively, of share-based compensation expense. Net loss for the nine months ended September 30, 2009 was $1.6 million compared with net income of $0.6 million for the nine months ended September 30, 2008. Included in our net loss for the nine months ended September 30, 2009 was an income tax benefit of $1.4 million compared with an income tax provision of $1.8 million for the nine months ended September 30, 2008. The $1.4 million income tax benefit was primarily attributable to (i) a discrete benefit of $0.9 million related to research and development credits we recognized during the nine months ended September 30, 2009, and (ii) the impact of our estimated full year effective tax rate on our pre-tax losses for the nine months ended September 30, 2009. The growth in revenues was primarily due to increases in our (i) software licenses for our network storage solution software from our installed customer base and (ii) maintenance revenue from new and existing customers. However, these increases were limited due to the continued difficult economic conditions, which commenced during the third quarter of 2008, as a result of the disruptions in the global financial markets. As a result of the current macroeconomic environment, we continue to experience slowed revenue growth, particularly in software license revenues, due to a downturn in information technology spending, and we expect this trend to continue throughout the remainder of 2009. Revenue contribution from our OEM partners decreased in both absolute dollars and as a percentage of total revenues for the nine months ended September 30, 2009 as compared with the same period in 2008. Revenue from non-OEM partners increased in both absolute dollars and as a percentage of total revenue for the nine months ended September 30, 2009 as compared with the same period in 2008. Expenses increased in all aspects of our business as we continue to invest in our future by increasing headcount both domestically and internationally. To support our growth, we increased our worldwide headcount to 533 employees as of September 30, 2009, as compared with 506 employees as of September 30, 2008. Although our continued investments in the future through additional headcounts may impact our operating profits and margins, we believe these investments are in line with our long-term outlook. Finally, we continue to invest in our infrastructure by continued capital expenditures, particularly with purchases of equipment for support of our existing and future product offerings.
Rate This Article: |
  |