Falconstor Software, Inc. (OTC:FALC)

Falconstor Software (OTC BB:FALC), a trusted data protection leader modernizing disaster recovery and backup for the hybrid cloud world, entered our radar as shares hit new highs. In our March 6, 2023 research note, we mentioned we wanted to track the stock as it heads into its Q4 2022 report to see if the company is nearing profitability and monitor the growth of its new recurring revenue business.

The company reported its Q4 2022 results on March 15, 2023:

• Total sales were $2.5 million vs $3.7 million in the prior year

• EPS of $0.00 vs loss of $0.03

While total revenue was down, the company’s hybrid cloud revenue run-rate increased 20% for Q4 versus the previous quarter and represented a 222% increase versus Q4 of 2021, as sales from its IBM relationship formally launched in the second half of 2022. The company does not break out the actual amount of the recurring revenue, which is likely a small percent of total revenue at the moment.  

As the company makes the shift from legacy perpetual revenue to annual recurring revenue, we will need to see more segmented reporting before we dive in too much further.