Data Domain, Inc. Reports Third Quarter Financial Results
Press Release
Revenue Increases 23% Compared to the Second Quarter of 2008, 134% Compared to the Third Quarter of 2007
SANTA CLARA, Calif. — October 23, 2008 —Data Domain, Inc. (Nasdaq: DDUP) today announced results for its third quarter ended September 30, 2008. Net revenue for the third quarter of 2008 was $75.0 million, an increase of 23% from the second quarter of 2008 and an increase of 134% from the third quarter of 2007.
Under U.S. generally accepted accounting principles (“GAAP”), Data Domain posted net income of $3.2 million for the third quarter of 2008, or $0.05 per diluted share. This compares to GAAP net income of $1.7 million, or $0.03 per diluted share, in the second quarter of 2008, and a GAAP net loss of $0.9 million, or $0.02 per diluted share, in the third quarter of 2007.
Excluding the impact of stock-based compensation and related taxes in all periods, non-GAAP net income for the third quarter of 2008 was $8.1 million, or $0.12 per diluted share, compared to non-GAAP net income of $6.5 million, or $0.10 per diluted share, in the second quarter of 2008, and non-GAAP net income of $2.6 million, or $0.05 per diluted share, in the third quarter of 2007.
"Our results for the third quarter of 2008 included record revenues, strong gross margins and significant growth in our customer base," said Frank Slootman, president and chief executive officer of Data Domain. “A record 355 new customers were added during this past quarter, bringing Data Domain’s cumulative customer count to over 2,500 worldwide that have purchased our products since 2004. Demand continued to accelerate for the DD690, which we announced in May as the industry’s highest performance inline deduplication storage system for backup and other nearline applications. In addition, we noted expanded use of our systems for mixed storage applications such as archiving.”
“Data Domain has again exceeded its plan, beating its revenue targets for the quarter, while continuing to invest in its infrastructure for growth,” added Michael Scarpelli, chief financial officer for Data Domain. “GAAP net income was $3.2 million and gross margins were strong at 72%. In addition, we achieved operating profit while hiring an additional 91 employees, bringing total headcount to 705, and we added approximately $22 million to operating cash flow in the quarter.”
Financial Outlook
- We estimate revenues for the fourth quarter of 2008 to be between $80 million and $84 million.
- We estimate that for the fourth quarter of 2008 GAAP earnings per diluted share will be approximately $0.01 to $0.03 and non-GAAP earnings per share will range from $0.09 to $0.11. The non-GAAP earnings per share projections exclude stock-based compensation expense that we estimate will be in the range of $6.4 million to $6.6 million as well as tax benefits that we estimate will be in the range of $900,000 to $1.0 million related to stock based compensation.
- We estimate revenues for the full year of 2008 will be between $269 million and $273 million, up from our previous estimate of $250 million to $255 million.
Third Quarter Highlights
- During the quarter, we announced multiple new technology partnerships with leading eDiscovery, archiving and file virtualization vendors. The new partnerships underscore the flexibility of Data Domain systems to be applied broadly in mixed storage environments.
- We also announced new managed services partner agreements with companies that offer outsourced disaster recovery services, reflecting another market that can benefit from the cost efficiencies that can be achieved with Data Domain systems. These service providers leverage our network-efficient replication to reduce the delivery costs of the disaster recovery services.
- During the quarter, we noted strong penetration of the financial and government vertical markets. These customers are typically large enterprise data centers that require the high performance characteristics of systems like the DD690 and the platform stability that Data Domain delivers.
Conference Call Information
Data Domain will host a conference call for analysts and investors to discuss its third quarter results today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The dial-in number for this conference call is 866.510.0710 (617.597.5378 international) and the participant passcode is 50992752#. A live webcast of the conference call will be accessible from the Investor Relations section of our website at www.datadomain.com.
Following the webcast, an archived version will be available on our website for 30 days. To hear the replay, parties in the United States and Canada should call 1-888-286-8010 and enter passcode 72345707#. International parties can access the replay at 617-801-6888 and should enter passcode 72345707#.
Use of Non-GAAP Financial Information
Data Domain has supplemented the financial measures contained in this press release that are provided in accordance with U.S. generally accepted accounting principles (“GAAP”) with non-GAAP financial measures. Data Domain believes that these non-GAAP financial measures better reflect its core operating results and thus are appropriate to enhance the overall understanding of its past financial performance and its prospects for the future. These adjustments to Data Domain’s GAAP results are made with the intent of providing both management and investors a more complete understanding of Data Domain’s underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate Data Domain’s financial results, develop budgets and manage expenditures. The method Data Domain uses to produce non-GAAP financial results may differ from the methods used by other companies. Data Domain’s reference to these non-GAAP financial results should be considered in addition to results that are prepared under current accounting standards but should not be considered as a substitute for, or superior to, the financial results that are presented as consistent with GAAP. Reconciliation of the non-GAAP financial measures to the nearest GAAP financial measures is included in the financial measures attached hereto.
About Data Domain
Data Domain® is the leading provider of deduplication storage systems. Over 2,500 companies worldwide have purchased Data Domain systems to reduce storage costs and simplify data management. Data Domain delivers the performance, reliability and scalability to address the data protection and nearline storage needs of enterprises of all sizes. Data Domain products integrate into existing customer infrastructures and are compatible with leading enterprise backup and archive software products. To find out more about Data Domain, visit www.datadomain.com.
Data Domain is headquartered at 2421 Mission College Blvd., Santa Clara, CA 95054 and can be contacted by phone at 1-866-933-3873 or by e-mail at sales@datadomain.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act, including statements regarding accelerating demand for Data Domain’s DD 690 deduplication storage system, all of the information set forth under the heading “Financial Outlook,” and other statements identified by forward-looking words such as "anticipated," "believed," "could," "estimate," "expect," "intend," "may," "should," "will" and "would" or similar words. These forward-looking statements involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties include any weakening of general economic and market conditions and customer budgets for information technology spending, our ability to react to trends and challenges in our business and the markets in which we operate; our ability to anticipate market needs or develop new or enhanced products to meet those needs; market acceptance of our products; our ability to scale our distribution channels; our ability to recruit and retain personnel; our ability to compete in our industry; our ability to maintain and expand relationships with technology partners; our ability to protect our intellectual property; shortages or price fluctuations in our supply chain and the performance of our contract manufacturer; and other risks and uncertainties described more fully in our documents filed with or furnished to the Securities and Exchange Commission. More information about these and other risks that may impact our business are set forth in the “Risk Factors” sections in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 filed with the SEC. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we assume no obligation to update these forward-looking statements.
Data Domain and the Data Domain logo are trademarks or registered trademarks of Data Domain, Inc. All other trademarks used or mentioned herein belong to their respective owners.
A copy of this press release can be found on the Investor Relations page of Data Domain’s website at www.datadomain.com
Consolidated Statements of Operations
GAAP to Non-GAAP Reconciliation Q3-08 vs. Q2-08
GAAP to Non-GAAP Reconciliation Q3-08 vs. Q3-07
GAAP to Non-GAAP Reconciliation 9 Months
Consolidated Statements of Cash Flows
Contact Information
Data Domain
Michael P. Scarpelli
Chief Financial Officer
408.980.4800
ir@datadomain.com
