Datalink Reports 2013 Second Quarter and Six Month Operating Results

Datalink Reports 2013 Second Quarter and Six Month Operating Results

Second Quarter and Six Month Revenues Up 23% and 18% 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 second quarter and six months that ended June 30, 2013. Revenues for the quarter ended June 30, 2013, increased 23% to $148.2 million compared to $120.0 million for the quarter ended June 30, 2012 and increased 11% over revenues of $133.6 million in the first quarter of 2013. Revenues for the six months ended June 30, 2013, increased 18% to $281.7 million compared to $239.1 million for the six months ended June 30, 2012.

The company's results for the quarter and six months ended June 30, 2013, include the results of operations from the acquisition of Strategic Technologies, Inc. ("StraTech"), which was completed on October 4, 2012.

GAAP Results
On a GAAP basis, the company reported net earnings of $2.9 million or $0.16 per diluted share for the second quarter ended June 30, 2013. This compares to net earnings of $3.2 million or $0.18 per diluted share in the second quarter of 2012. For the six months ended June 30, 2013, the company reported net earnings of $4.0 million or $0.22 per diluted share, compared to net earnings of $5.4 million, or $0.31 per diluted share, for the six months ended June 30, 2012. The decrease in net earnings is due to the amortization of intangible assets related to the acquisition of StraTech.

Non-GAAP Results
Non-GAAP net earnings for the second quarter of 2013 were $4.7 million, or $0.26 per diluted share, compared to non-GAAP net earnings of $4.0 million, or $0.23 per diluted share, in the second quarter of 2012. For the six months ended June 30, 2013, the company reported non-GAAP net earnings of $7.9 million, or $0.44 per diluted share, compared to non-GAAP net earnings of $6.9 million, or $0.40 per diluted share, for the six months ended June 30, 2012. A detailed reconciliation between GAAP and non-GAAP information is contained in the tables included herein.

Highlights of the quarter and six months ended June 30, 2013, include:

  • Record second quarter and first six month non-GAAP revenues and earnings.
  • Record $54.9 million combined customer support and professional services revenues in second quarter 2013, up 28% from second quarter 2012 and 12% from first quarter 2013. Second quarter professional services revenues alone were up 24% from the second quarter of 2012 and up 30% from first quarter 2013.
  • Continued growth in customers who did over $1 million of business with the company from 22 in second quarter 2012 to 26 in second quarter 2013.
  • Selection as the first Hitachi Data Systems partner authorized to provide OneCall support for Hitachi Unified Compute Platform Select for VMware vSphere with Cisco Unified Computing System, and for Hitachi Virtual Storage Platform, converged infrastructure solutions.
  • Authorized by Cisco to provide OneCall support on all Cisco products Datalink sells with an initial focus on data center products.
  • A major expansion of Datalink's professional services portfolio with the addition of application, data, and infrastructure migration services.
  • Ranked #52 on CRN's 2013 Solution Provider 500 list of North America's top technology integrators - up from 59th last year and 72nd and 195th previous to that - based on annual revenues.

"We turned in a solid revenue and earnings performance in the second quarter and first half of 2013. That performance was fueled by three factors: our continually expanding mix of data center products and services, our emphasis on selling more complex projects with higher wallet share, and rising market demand for modern data center infrastructures," said Paul Lidsky, Datalink's president and CEO. "Companies are increasingly aware of our ability to transform their data centers allowing them to drive business agility and facilitate advances such as private and hybrid cloud deployments. This continues to provide a strong foundation for our growth."

Based on the company's current backlog, sales pipeline and lengthening sales cycles, the company projects revenues of $140.0 million to $150.0 million for the third quarter of 2013 compared to $104.8 million for the third quarter of 2012. This represents an increase in expected revenues of between 34% and 43%. The company expects third quarter 2013 net earnings to be between $0.12 and $0.18 per diluted share on a GAAP basis, and net earnings of between $0.23 and $0.29 per diluted share on a non-GAAP basis. This compares to net earnings of $0.11 per diluted share and $0.16 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 $0.11 per diluted share for the third quarter of 2013.

Conference Call and Webcast Today
Datalink will hold a conference call today 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) 318-8611. Participants will be asked to identify the Datalink conference call and provide the designated identification number (27422046). 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 our internal projections of certain anticipated 2013 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, 2012, including, but not limited to: the level of continuing demand for data center solutions and services including the effects of current economic and credit conditions and the ability of organizations to outsource data center infrastructure-related services to service providers such as us; the migration of organizations to virtualized server environments, including using a private cloud computing infrastructure; the extent to which customers deploy disk-based backup recovery solutions; the realization of the expected trends identified for advanced network infrastructures; reliance by manufacturers on their data service partners to integrate their specialized products; continued preferred status with certain principal suppliers; competition and pricing pressures and timing of our installations that may adversely affect our revenues and profits; fixed employment costs that may impact profitability if we suffer revenue shortfalls; our ability to hire and retain key technical and sales personnel; continued productivity of our sales personnel; our dependence on key suppliers; our ability to adapt to rapid technological change; success of the implementation of our enterprise resource planning system; risks associated with integrating completed and future acquisitions; the ability to execute our acquisition strategy; 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 EndedSix Months Ended
June 30,June 30,





Net sales:
Services 54,860    42,748  104,043    81,596 
Total net sales 148,155    120,042  281,742    239,130 
Cost of sales:
Cost of products72,74759,805138,813122,389
Cost of services 41,804    32,204  79,476    61,382 
Total cost of sales 114,551    92,009  218,289    183,771 
Gross profit 33,604    28,033  63,453    55,359 
Operating expenses:
Sales and marketing15,57212,22028,77924,777
General and administrative5,0514,62810,6949,352
Integration and transaction costs25-7320
Amortization of intangibles 1,841    619  3,823    1,238 
Total operating expenses 28,625    22,622  56,493    46,336 
Earnings from operations4,9795,4116,9609,023
Interest expense, net (17)   (2) (116)   (12)
Earnings before income taxes4,9625,4096,8449,011
Income tax expense 2,032    2,190  2,806    3,631 
Net earnings$2,930   $3,219 $4,038   $5,380 
Earnings per common share:
Weighted average common shares outstanding:
(In thousands, except share data)
  June 30,  December 31,



Current assets
Cash and cash equivalents$23,102$10,315
Accounts receivable, net92,443143,958
Receivable due from seller of StraTech acquisition4,2434,243
Inventories, net1,4172,554
Current deferred customer support contract costs89,33587,052
Inventories shipped but not installed12,2578,784
Income tax receivable3182,430
Other current assets 818 852
Total current assets 223,933 260,188
Property and equipment, net6,7726,082
Finite-lived intangibles, net16,93720,760
Deferred customer support contract costs non-current43,86540,771
Deferred tax asset4,2974,471
Long term lease receivable803-
Other assets 455 455
Total assets$334,842$370,507
Liabilities and Stockholders' Equity
Current liabilities
Line of credit$-$6,000
Accounts payable43,49483,880
Accrued commissions5,2008,730
Accrued sales and use tax9053,489
Accrued expenses, other6,2116,027
Current deferred taxes9,0349,034
Customer deposits5,0773,645
Current deferred revenue from customer support contracts110,029105,167
Other current liabilities 162 157
Total current liabilities180,112226,129
Deferred revenue from customer support contracts non-current52,49448,167
Other liabilities non-current 751 828
Total liabilities 233,357 275,124
Stockholders' equity
Common stock, $.001 par value, 50,000,000 shares authorized, 18,919,304 and 18,726,723 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively1919
Additional paid-in capital72,93870,875
Retained earnings 28,528 24,489
Total stockholders' equity 101,485 95,383
Total liabilities and stockholders' equity$334,842$370,507
(In thousands, except per share data)
Three Months EndedSix Months Ended
June 30,June 30,
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