Launched Hybrid Cloud Data Protection Sales with IBM and Continued Managed Service Provider (“MSP”) Adoption

• Secured first group of customers for new joint IBM/FalconStor solutions, enabling hybrid cloud data migration, backup, and restoration services for IBM Power Virtual Server Cloud (“IBM Power VS Cloud”)
• Added three new MSP partners for the StorSafe secure backup-as-a-service solution while existing MSP partners expanded their business to protect new customers and systems, aligning with the FalconStor hybrid cloud focus
• Continued shift to subscription- and monthly-consumption based annual recurring revenue (“ARR”) model

FalconStor Software, Inc. (OTCQB: FALC), a trusted data protection leader modernizing disaster recovery and backup for the hybrid cloud world, today announced financial results for its second quarter 2022, which ended on June 30, 2022.

“Our shift to recurring revenue-based hybrid cloud data protection solutions continued to progress in the quarter as we secured our first several hybrid cloud customers under the IBM reseller relationship we announced on May 11, 2022,” said Todd Brooks, FalconStor CEO. “IBM’s hybrid cloud push has been a centerpiece of its corporate strategy, as highlighted in its first and second quarter 2022 results. Through our expanding relationship with IBM, enterprises can now leverage new joint hybrid cloud solutions from FalconStor and IBM. These solutions are especially important to the tens of thousands of companies around the globe that leverage IBM i and AIX environments, as they now have the ability to securely backup and restore to the cloud, as well as migrate their IBM i and AIX workloads to IBM Power VS Cloud with secure backup and recovery on an on-going basis.”

“Our aggressive focus on advancing critical hybrid cloud relationships and our efforts to realign to a subscription- and monthly consumption-based recurring revenue model continue to challenge our year-over-year revenue growth as second quarter revenue was $2.4 million, compared to $3.3 million in the second quarter of 2021. However, from a sequential quarter perspective, total revenue increased to $2.4 million, compared to $2.0 million in the first quarter of 2022,” stated Brooks. “To more closely align with our current quarterly revenue level, we decreased operating expenses quarter-over-quarter by 8.8% in second quarter, and are making additional expense adjustments this quarter. Our sales pipeline for the second half of 2022 is growing, especially as it relates to our hybrid cloud initiatives. As a result, we expect sequential quarter-over-quarter revenue to continue growing over the next two quarters.”

Second Quarter 2022 Financial Results

• Annual Recurring Revenue: 4% year-over-year growth
• Ending Cash: $1.8 million, compared to $3.4 million in the previous quarter, and $3.7 million in the second quarter of fiscal year 2021
• Total Revenue: $2.4 million, compared to $2.0 million in the previous quarter, and $3.3 million in the second quarter of fiscal year 2021
• Total Cost of Revenue: $0.4 million, compared to $0.4 million in the previous quarter, and $0.4 million in the second quarter of fiscal year 2021
• Total Operating Expenses: $2.5 million, compared to $2.7 million in the previous quarter, and $3.0 million in the second quarter of fiscal year 2021
• GAAP Net Income (Loss): $(0.9) million, compared to $(1.1) million in the previous quarter, and $(0.4) million in the second quarter of fiscal year 2021

Guidance

Given Q1 and Q2 2022 results, we are reducing full-year 2022 guidance as follows. Revised guidance reflects continued sequential quarterly GAAP total revenue growth, and GAAP Net Income positive results in Q3 and Q4 2022:

*Adjusted EBITDA adds back Depreciation, Amortization, Restructuring, Severance, Board expenses, Stock Based Compensation as well as Non-Operating Expenses including Income Taxes and Interest & Other Income Expenses

Please click this link to see the accompanying financial charts.

Conference Call and Webcast Information

WHO: Todd Brooks, Chief Executive Officer, FalconStor and Vincent Sita, Chief Financial Officer, FalconStor

WHEN: Wednesday, August 3, 2022, 4:00 PM Central; 5:00 PM Eastern

To register for our earnings call, please click the following link:

FALCONSTOR SECOND QUARTER 2022 FINANCIAL TELECONFERENCE AND PRESENTATION

As an alternative, you can copy and paste the following link into your web browser to register:

https://register.gotowebinar.com/register/5419515227960883215

Conference Call:

Please dial the following if you would like to interact with and ask questions to FalconStor hosts:

Toll Free: 866-901-6455

Access Code: 859-295-195

Non-GAAP Financial Measures

The non-GAAP financial measures used in this press release are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The Company’s management refers to these non-GAAP financial measures in making operating decisions because they provide meaningful supplemental information regarding the Company’s operating performance. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results. We include these non-GAAP financial measures (which should be viewed as a supplement to, and not a substitute for, their comparable GAAP measures) in this press release because we believe they are useful to investors in allowing for greater transparency into the supplemental information used by management in its financial and operational decision-making. The non-GAAP financial measures exclude (i) depreciation, (ii) amortization, (iii) restructuring expenses, (iv) severance expenses, (v) board expenses, (vi) stock based compensation, (vii) non-operating expenses (income) including income taxes and interest & other expenses (income). For a reconciliation of our GAAP and non-GAAP financial results, please refer to our Reconciliation of Net income (Loss) to Adjusted EBITDA presented in this release.

About FalconStor Software

FalconStor is the trusted data protection software leader modernizing disaster recovery and backup operations for the hybrid cloud world. The Company enables enterprise customers and managed service providers to secure, migrate, and protect their data while reducing data storage and long-term retention costs by up to 95%. More than 1,000 organizations and managed service providers worldwide standardize on FalconStor as the foundation for their cloud first data protection future. Our products are offered through and supported by a worldwide network of leading managed service providers, systems integrators, resellers, and original equipment manufacturers.

FalconStor and FalconStor Software are trademarks or registered trademarks of FalconStor Software, Inc., in the U.S. and other countries. All other company and product names contained herein may be trademarks of their respective holders.

Links to websites or pages controlled by parties other than FalconStor are provided for the reader's convenience and information only. FalconStor does not incorporate into this release the information found at those links nor does FalconStor represent or warrant that any information found at those links is complete or accurate. Use of information obtained by following these links is at the reader's own risk.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005283/en/