Financial

posted on 25 July 2008 09:01

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Data protection software supplier FalconStor Software recorded Q2 08 revenues of $22.2 million, a satisfying 25 percent increase on the £17.8 million reported in Q2 07. However net income fell, from Q2 07's $1.4 million ($0.03/share) to this quarter's $1 million ($0.02/share).

That was ascribed to two things: a higher tax charge in Q2 08 compared to Q2 07; and a slowdown in revenues from a large OEM customer during a product transition.

ReiJane Huai, chairman and CEO of FalconStor, said: “We are very pleased with the growth of our non-OEM revenue during the second quarter of 2008, which increased 42% compared with the prior year. While our OEM revenue as a whole increased during the second quarter, we did experience a year-over-year decrease in revenue from one of our large OEM customers as a result of their product transition. We expect the revenue from this customer to rebound in the third and fourth quarters.”

On a pro-rate basis and based on the Q2 07 net income as a percentage of revenues, we might have expected net income of $1.73 million in Q2 08, indicating a shortfall of $0.73 million. However this effect is lessened when we find that there was a $0.3 million tax credit in Q2 07 and a half million dollar tax charge in Q2 08. Equalising those out gives us a very rough $0.23 million shortfall in net income for Q2 08, most of which, presumably, comes from the OEM customer above.

For the half year ended June 30, 2008, revenues increased 29 percent to $44.0 million, compared with $34.1 million for the same period a year ago. GAAP income from operations for the six-month period increased to $2.9 million, compared with a loss of $0.4 million in 2007. GAAP net income was $2.3 million ($0.05/share) compared with net income of $0.8 million ($0.02/share) in the year-ago half year. For the first six months of 2008, the Company recorded a GAAP tax provision of $1.5 million compared with a benefit of $0.1 million in the prior year period.

For the full 2008 fiscal (and calendar) year FalconStor sticks to its previous expectation of $100 million - $104 million revenues.

^{[Chris Mellor.]}