Datalink Reports 2012 Fourth Quarter and Year-End Operating Results

Datalink Reports 2012 Fourth Quarter and Year-End Operating Results

Record Fourth Quarter and Annual Revenue Up 28% and 29% Year-Over-Year, Respectively

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)-- Datalink (NAS: DTLK) , a leading provider of data center infrastructure and services, today reported results for its fourth quarter and year that ended December 31, 2012. Revenues for the quarter ended December 31, 2012, increased 28% to $147.3 million compared to $114.7 million for the prior-year period. Revenues for year ended December 31, 2012, increased 29% to $491.2 million compared to $380.0 million for the year ended December 31, 2011.

GAAP Results
On a GAAP basis, the company reported net earnings of $3.2 million or $0.18 per diluted share for the fourth quarter ended December 31, 2012. This compares to net earnings of $2.6 million or $0.15 per diluted share in the fourth quarter of 2011. For the year ended December 31, 2012, the company reported net earnings of $10.5 million or $0.60 per diluted share, compared to net earnings of $9.8 million, or $0.61 per diluted share, for the year ended December 31, 2011.

Non-GAAP Results
Non-GAAP net earnings for the fourth quarter of 2012 were $5.6 million, or $0.31 per diluted share, compared to non-GAAP net earnings of $4.1 million, or $0.24 per diluted share, in the fourth quarter of 2011. For the year ended December 31, 2012, the company reported non-GAAP net earnings of $15.3 million, or $0.88 per diluted share, compared to net earnings of $13.0 million, or $0.80 per diluted share, for the year ended December 31, 2011. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

The company's results for the quarter and year ended December 31, 2012, include the results of operations from the acquisition of StraTech, which was completed on October 4, 2012. Excluding StraTech, revenues for the fourth quarter and year ended December 31, 2012, would have increased approximately 17% and 26%, respectively, compared to the prior year periods.

Paul Lidsky, Datalink's president and CEO, commented, "2012 was another record year for Datalink. We reported record revenues and earnings for the fourth quarter and fiscal year in large part due to our continued focus on our expanded data center product and services offerings."

Other significant accomplishments for 2012 and the fourth quarter include:

  • A record $97.5 million in product revenues for the quarter, representing a 52% increase from the previous quarter and a 25% increase over the same period in 2011. In addition, service revenues were a record $49.8 million in the fourth quarter, up 22% over the previous quarter and 36% over the same period in 2011. These increases include incremental revenues from our StraTech acquisition, the contribution from 27 customers that purchased over one million dollars in product and services in the fourth quarter, and strong organic growth throughout the year.
  • Continued growth in the customer base as well as multi-million dollar accounts among Global 1000 companies. The number of new customers jumped from 290 to 452 between 2011 and 2012, while the number of customers purchasing over $1 million worth of product and services rose from 77 to 102 in the same period.
  • Acquisition of the assets of StraTech on October 4, 2012, which significantly increased the company's footprint along the East Coast adding 400 new accounts, a second customer support center, and expanded managed services offerings and expertise. In addition, on a non-GAAP basis, the acquisition was accretive in its first quarter of operations, adding approximately $13.4 million of revenues during the quarter and $0.03 per share.
  • Accelerating momentum for the company's virtualized data center (VDC) solutions, with 20 solution projects sold in the fourth quarter compared to 7 in the comparable period in 2011, and 82 deals for the fiscal year compared to 35 in 2011.
  • Major new services offerings, including unified monitoring and managed infrastructure services for the entire multi-vendor VDC stack and new managed services for backup, monitoring, archiving, cloud backup and cloud enablement services to help companies analyze the impact of cloud deployments on their business before full-scale cloud initiatives.
  • Significant investments in customer support, information technology, human resources and field engineering to prepare the company for continued growth.

"Datalink's collective accomplishments during 2012 reflect the successful execution on our acquisition and data center strategies. In addition, our strong fourth quarter 2012 performance left us with a record backlog going into the first quarter and accelerated activity that has carried over with strong sales in the first months of first quarter," Lidsky added. "As we exited the year, we continued to see increasing demand for unified data center solutions with flexible architectures. Our investments in our expanded data center portfolio support these market conditions, and our ability to deliver unified platforms to our customers should fuel continued growth in 2013."

Based on the company's current backlog, sales pipeline, historical seasonal trends and the addition of StraTech revenues, Datalink projects revenues of in the range of $127.0 million to $137.0 million for the first quarter of 2013 compared to $119.1 million for the first quarter of 2012. First quarter 2013 net earnings results are expected to be between $0.03 and $0.08 per diluted share on a GAAP basis, and between $0.15 and $0.20 per diluted share on a non-GAAP basis. This compares to net earnings of $0.12 per diluted share and $0.17 per diluted share on a GAAP and non-GAAP basis, respectively, for the same period in 2012.

Non-GAAP earnings per share exclude the effect of acquisition accounting adjustments from the StraTech acquisition to deferred revenue and costs, integration and transaction costs related to acquisitions, stock-based compensation expense, amortization of intangible assets, and the related effects on income taxes. The company estimates this total effect will be approximately $0.12 per diluted share for the first quarter of 2013.

Conference Call and Webcast Today
Datalink will hold a conference call at 4:00 p.m. Central Standard Time, during which Datalink's president and chief executive officer, Paul Lidsky, and vice president of finance and chief financial officer, Greg Barnum, will discuss company results and provide a business overview. Participants can access the conference call by dialing (866-700-6979). Participants will be asked to identify the Datalink conference call and provide the designated identification number (14986898). A live Webcast of the conference call can be heard via Datalink's website at

About Datalink
A complete data center solutions and services provider for Fortune 500 and mid-tier enterprises, Datalink transforms data centers so they become more efficient, manageable and responsive to changing business needs. Datalink helps leverage and protect storage, server, and network investments with a focus on long-term value, offering a full lifecycle of services, from consulting and design to implementation, management and support. Datalink solutions span virtualization and consolidation, data storage and protection, advanced networks, and business continuity. Each delivers measurable performance gains and maximizes the business value of IT. For more information, call 800.448.6314 or visit

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. This press release contains forward-looking statements, including the financial impact of the StraTech acquisition and our internal projections of anticipated 2012 results, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words "aim," "believe," "expect," "anticipate," "intend," "estimate," "should" and other expressions which indicate future events and trends identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, many of which are included under "Risk Factors" in our annual report on Form 10-K for our year ended December 31, 2011, including, but not limited to: the level of continuing demand for storage, including the effects of current economic and credit conditions; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; the length of our sales cycle; fixed employment costs that may impact profitability if we suffer revenue shortfalls; revenue recognition policies that may unpredictably defer reporting of our revenues; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; risks associated with integrating completed and future acquisitions; fluctuations in our quarterly operating results; future changes in applicable accounting rules; and volatility in our stock price. Furthermore, our revenues for any particular quarter are not necessarily reflected by our backlog of contracted orders, which also may fluctuate unpredictably. We cannot assure you that we can grow or maintain our revenue and backlog from current levels. Additional factors that may cause actual results to differ from our assumptions and expectations include those set forth in our most recent filing on Form 10-K filed with the Securities and Exchange Commission. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Non-GAAP Details
Non-GAAP financial measures exclude the impact from acquisition accounting adjustments to deferred revenue and costs, stock-based compensation expense, amortization of acquisition intangible assets, integration and transaction costs related to acquisitions and the related effects on income taxes. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

These non-GAAP financial measures facilitate management's internal comparisons to our historical operating results and comparisons to competitors' operating results. We include these non-GAAP financial measures in our earnings announcement because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making, such as employee compensation planning. We believe that the presentation of these non-GAAP measures when shown in conjunction with the corresponding GAAP measures provides useful information to investors and management regarding financial and business trends relating to our financial condition and results of operations.

(In thousands, except per share data)
Three Months EndedTwelve Months Ended
December 31,December 31,





Net sales:
Services 49,843    36,780  172,161    134,284 
Total net sales 147,298    114,712  491,202    380,027 
Cost of sales:
Cost of products76,10260,228248,286188,384
Cost of services38,54127,493130,890100,978
Amortization of intangibles -    1,053  -    1,053 
Total cost of sales 114,643    88,774  379,176    290,415 
Gross profit 32,655    25,938  112,026    89,612 
Operating expenses:
Sales and marketing13,72411,40248,55338,723
General and administrative4,6474,14218,22715,468
Other income-(553)-(1,127)
Integration and transaction costs236329359454
Amortization of intangibles 




Total operating expenses 




Earnings from operations




Interest income19285950
Interest expense (17)   (14) (56)   (40)
Earnings before income taxes




Income tax expense 




Net earnings$


   $2,607 $


Earnings per common share:








Weighted average common shares outstanding:
(In thousands, except share data)
  December 31,  December 31,



Current assets
Cash and cash equivalents$10,315$18,947
Short term investments-3,486
Accounts receivable, net143,958102,289
Receivable due from seller of StraTech acquisition4,243-
Deferred customer support contract costs86,60462,901
Inventories shipped but not installed8,7849,779
Income tax receivable2,430405
Other current assets 852 1,169
Total current assets 259,740 200,712
Property and equipment, net6,0823,453
Finite life intangibles, net


Deferred customer support contract costs non-current40,72328,785
Deferred tax asset


Other assets 455 361
Total assets$


Liabilities and Stockholders' Equity
Current liabilities
Line of credit$6,000$-
Accounts payable83,88063,292
Accrued commissions8,7305,069
Accrued sales and use tax3,4892,574
Accrued expenses, other6,0275,209
Deferred tax liability9,0347,459
Customer deposits3,6452,145
Deferred revenue from customer support contracts106,51076,998
Other current liabilities 157 85
Total current liabilities


Deferred revenue from customer support contracts non-current46,32834,740
Other liabilities non-current 828 195
Total liabilities 


Stockholders' equity

Common stock, $.001 par value, 50,000,000 shares authorized, 18,726,723 and 17,899,171 shares issued and outstanding as of December 31, 2012 and December 31, 2011, respectively

Additional paid-in capital70,87566,213
Retained earnings 


Total stockholders' equity 


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