FalconStor Software, Inc.
Q4 2020 Earnings Call Transcript
Published:
- Operator:
- Good afternoon, everyone. Thank you for joining us to discuss FalconStor Software’s Q4 2020 and Fiscal Year 2020 Earnings. Todd Brooks, FalconStor’s Chief Executive Officer; and Brad Wolfe, Chief Financial Officer, will discuss the company’s results and activities and we will then open the call to your questions. The company would like to advise all participants that today’s discussion may contain what some consider, forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties are discussed in FalconStor’s reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission and in the company’s press release issued today.
- Todd Brooks:
- All right. Thanks, Clark. We appreciate it, and thank you very much to everyone who have taken your time today to participate in our call. We appreciate that. We are excited about the results that we’ve been able to generate in 2020 about the market that we serve about the value that our solutions deliver to our enterprise customers every day. We are a trusted data protection innovator. We’re over an exabyte of data under management. We enable the world’s most demanding enterprises to modernize their data backup and archival operations across data centers and public cloud environments. Our solutions that deliver increased data security and provide for quick data recovery, including recovery from ransomware attacks. And our solutions accomplish these while driving down the cost of data storage by up to 95%. Our solutions are utilized by enterprises and managed service providers across the globe and address two key areas of enterprise data protection, long-term data retention and recovery and then this is continuity driven data replication. Long-term data retention and recovery is key and crucial to our enterprise customers, because up to 80% of an enterprise’s data is archived and retained for more than 90 days, that’s 80% of their data. In this area, data storage optimization, security and portability are key. Our customers use our solutions to dramatically improve data import or processing speeds to significantly reduce the amount of data that they need to store that’s reducing storage cost and take advantage of a wide array of storage options, including those public cloud options now provided by AWS, Microsoft Azure and IBM. This is continuity driven data replication and recovery are also important as this data is typically stored for less than 90 days. And our customers need this data to be available for quick recovery disasters or ransomware or other unplanned situations, and they needed to intelligently manage the cost to store this data. So our solutions excel and these crucial enterprise data protection segments.
- Brad Wolfe:
- Thank you, Todd. We closed the three months ended December 31, 2020 with $3.7 million GAAP revenue compared to $4.1 million for the same period of the previous year, a decrease of 10%. GAAP total gross profit for the quarter was $3.2 million and GAAP total operating expenses were $3.2 million. As a result, we generated operating loss of $47,000 and a GAAP net loss of $94,000 during the quarter. Comparisons to Q4 2019 are provided, but a direct comparison between Q4 2020 and Q4 2019 is less informative due to a one-time $112,000 GAAP gross profit accounting adjustment we made during Q4 2019. Our results for Q4 2020 are not as positive as our Q3 2020 results. We are pleased by the overall progress made in 2020. In fiscal 2020, our GAAP revenue decreased year-over-year by 10.7% to $14.8 million compared to just over $16.5 million in fiscal year 2019. This increase of $1.8 million was primarily driven 73% by our strategic decisions to exit non-core markets and to stop selling hardware with $0.4 million of a decrease in non-core market revenue and $0.9 million decrease in hardware revenue year-over-year.
- Todd Brooks:
- All right. Well, thank you Brad very much. And I’ll just reiterate that the team has worked very hard, not only over 2020, but also since the very end of 2017 to just completely reinvent FalconStor. And we couldn’t be more excited to be here and we couldn’t be more excited about our future. So with that, let me pause and open up – and Clark, if you want to open up the floor for questions, we’ll be more than happy to take any questions that anyone has.
- Operator:
- Yes, please. If anyone has any questions, just enter them in the question pane, you’d have a spot in the GoToMeeting panel, where you can enter questions and we’ll watch that area for a few minutes.
- Todd Brooks:
- Yes. We’ll give everybody a couple of minutes to do that in case you’re not familiar with that functionality.
- Operator:
- Okay. We got one from Bill Dawkins.
- Todd Brooks:
- You’re just going to – Bill’s mic might be easier.
- Operator:
- Oh, geez. Well, I’m not sure it’s not going to do that.
- Todd Brooks:
- If you can go and read the question, I’ll be back in answer.
- Operator:
- Yes, sir. Who do you primarily compete with?
- Todd Brooks:
- Good question, Bill. Good to talk to you again. So within – that’s a great question. Because you remember back to the two primary segments that we address those long-term archive and then the business continuity driven data replication. One of the big reasons that we have focused so much attention on the long-term data retention side is because the competition in that space is dramatically less than it is over on the business continuity side. This continuity is much closer related to production data. And there’s just so many people that have been companies that have launched in that area and competition in that area is just years. But on the long-term side, it’s probably a bit less spectacular or glamorous and so the competition is less. Our primary competition is data domain from DellEMC. Some people think that competition comes in the form of backup competitors like Commvault or Veritas or others. And some people think that competition comes from the cloud storage providers. But in reality, those are both very complimentary partners for us. Our long-term data retention products are not backup solutions. Instead, they are backup data storage optimization solutions. And so we everyday get data that is fed into our solutions from Commvault, from Veritas, from IBM’s products, from a whole array of legacy backup vendors. And then we take that data and we’d be duplicate it. And then we store it in whatever storage medium that the customer wants. And so that’s where we don’t compete with an AWS or an Azure, because they are storage medium. And so we sit in the middle and we help our customers consolidate their backup and archive. We help them to modernize that, we help them to get a much better dedupe rate and then store the data wherever they see fit for the most optimal location. So the more storage options that come available or that come online the better, right. That gives us better – even a broader set of options that we can help our customers optimize against. So great question, Bill. I hope that answered it.
- Operator:
- Okay. I’m not seeing any other questions. If anyone else has one, please type away. Okay. Todd, I think maybe – I think we’re good for the day, maybe.
- Todd Brooks:
- Great. Well, folks, once again, thank you so much for taking your time. Everyone on this call is very important to this company and we’re very excited, like I said before, about our future, about the progress we’ve made. No doubt about it. We’ve got work to go, right. I mean, we’ve got to draw consistency in our revenue growth. We’ve got some good beginning signals, but we’ve got to drive consistency there. And we’ve just got to keep diligent about our strategy and we will continue to make progress down this road. But thank you very much and we appreciate your time and look forward to chatting again. Thank you.