Acquisition Will Expand Market Share in North Carolina, Florida and
the Mid-Atlantic
EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Oct. 4, 2012--
Datalink
(NASDAQ: DTLK), a leading provider of data center infrastructure and
services, today announced the closing of the transaction to acquire
substantially all of the assets and liabilities, of Cary, North
Carolina-based Strategic Technologies, Inc. (“StraTech”), which was
announced on October 2, 2012. StraTech is an IT services and solutions
firm that shares Datalink’s focus on optimizing enterprise data centers
and IT infrastructure through a common product and services portfolio
designed to help customers increase business agility.
The acquisition increases Datalink’s market share and physical presence
across the Eastern seaboard, including North Carolina, Florida and the
Mid-Atlantic; adds an estimated $65 million in annualized product and
services revenues; and contributes more than 400 additional businesses
to the customer base. It will also advance Datalink’s strategic
initiatives by delivering:
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Expanded sales, engineering, managed services, customer support,
consulting and marketing teams to support ongoing growth.
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A continued focus on both the storage and unified computing aspects of
its data center integration business, including significant increases
in Symantec, NetApp and HDS revenues.
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More than $20 million in additional annual recurring OneCall technical
support revenues, along with a second call center providing increased
capacity and enhanced failover and redundancy.
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Larger professional and managed services organizations to handle
consulting projects as well as managed archiving, backup, security and
monitoring services.
Datalink purchased StraTech for approximately $13.2 million in cash and
the issuance of 269,802 shares of Datalink common stock, assumed
approximately $20.8 million of StraTech’s liabilities and acquired
approximately $16.0 million of assets, subject to a final audit expected
to be performed within 90-120 days after the closing.
With the addition of StraTech, Datalink will be positioned to close 2012
with an anticipated annualized run rate of more than $500 million and a
workforce of over 450 employees.
“This is a strategic acquisition that will expand our East Coast
footprint, increase our technical support staff, bolster our
professional and managed services capabilities, and maintain our core
business focus on products and services related to data center
infrastructure in general and newer virtualized data center technology
in particular,” said Paul Lidsky, President and CEO, Datalink. “With
StraTech’s similar business model, nearly identical product mix, strong
customer base and team of 100-plus field personnel, this is an ideal
match that we believe will be a tremendous opportunity for our
customers, partners, employees, and stockholders.”
Datalink anticipates that, based on its internal projections, the
transaction will become accretive to net income within one quarter.
Datalink will record a charge associated with the acquisition in the
fourth quarter of 2012 of approximately $300,000, or $0.01 per fully
diluted share. Datalink expects the full effect of cost synergies to
take effect in the first quarter of 2013.
The acquisition will be Datalink’s second in the last 12 months
following the purchase of Minneapolis-based data center IT services firm
Midwave Corporation in October, 2011. Both transactions are part of
Datalink’s ongoing objective to accelerate business growth through both
organic and acquired strategies.
3Q 2012 Guidance
Today Datalink also lowered its guidance
for the third quarter of 2012. Datalink expects third quarter 2012
revenues to be in the range of $105 million to $106 million. This
compares to revenues of $90.1 million in the third quarter of 2011.
Datalink expects earnings per share to be in the range of $0.10 per
share to $0.11 per share on a GAAP basis; and in the range of $0.14 per
share to $0.15 per share on a non-GAAP basis. This compares to GAAP
earnings of $0.16 per share and non-GAAP earnings of $0.20 per share in
the third quarter of 2011.
“We continue to see strong demand and a growing pipeline for our data
center solutions, especially virtualized data center solutions and big
data, as well as all aspects of storage. However, we also continue to
see our customers remain cautious regarding large capital expenditures,
especially with the uncertainty surrounding the current economic
environment,” Lidsky said. “As a result, we saw expected contracts push
out as much as 90 days or more. This customer behavior has caused us to
miss our previous guidance”
Datalink will report its third quarter financial results and hold an
investor conference call after the market closes on October 25, 2012.
Conference Call and Webcast Today
Datalink will hold a
conference call today at 4:30 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 the acquisition, the revised third quarter guidance and provide
a business overview. Participants can access the conference call by
dialing (866) 700-6067. Participants will be asked to identify the
Datalink conference call and provide the designated identification
number (81357453). A live Webcast of the conference call can be viewed
via Datalink’s website at www.datalink.com.
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 guidance 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.
Non-GAAP earnings per share exclude the effect of acquisition accounting
adjustments from the Incentra 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. Datalink estimates this total effect will be
approximately $0.04 per diluted share for the third quarter of 2012,
meaning that estimated GAAP earnings per share will be $0.04 less per
share than non-GAAP earnings per share.
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 www.datalink.com.
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 regarding a pending
acquisition, the financial impact of that 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; 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
possible 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.
Source: Datalink
Datalink
Media & Alliances:
Suzanne Gallagher, 720-259-1365
SVP
of Marketing
sgallagher@datalink.com
or
Investors
& Analysts:
Greg Barnum, 952-279-4816
Vice President and
CFO
gbarnum@datalink.com
einvestor@datalink.com
