Double-digit Revenue Growth and Product Line Expansion

• 27% increase in Total Revenue year-over-year
• 91% increase in Hybrid Cloud ARR Run-Rate year-over-year
• Launched Cloud Clean Room offering powered by new data security technology

AUSTIN, Texas--(BUSINESS WIRE)--FalconStor Software, Inc. (OTCMarkets.com: FALC), a trusted data protection leader modernizing data protection and intelligence for the hybrid cloud world, today announced financial results for its second quarter of 2026, which ended on June 30, 2026.

“FalconStor delivered strong growth in the second quarter, with total revenue up 27% year-over-year, our third consecutive quarter of double-digit growth,” said Todd Brooks, CEO of FalconStor Software. "In addition, Hybrid Cloud ARR run-rate increased 91% year-over-year, up from 89% in the first quarter and 61% at the end of 2025.

Just as significant, profitability improved year-over-year in Q2, and our first half of 2026 net income improved to $798,828, compared to a net loss of $466,135 in the first half of last year, demonstrating that our shift to a recurring, subscription-based model is translating into durable profitability alongside our growth.

This quarter we also launched Cloud Clean Room, built on our new patent-pending Zero Trust Secure Enclave (“ZTSE”) technology, extending our Habanero platform into secure, audit-ready recovery validation for IBM Power customers, the kind of innovation that continues to differentiate FalconStor in the hybrid cloud data protection market.

We remain focused on converting this momentum into sustained, profitable growth for our customers, partners, and shareholders.”

Second Quarter 2026 Financial Results

• Hybrid Cloud ARR Run-Rate: 91% increase trailing twelve months
• Ending Cash: $1.9 million, compared to $2.9 million in the second quarter of fiscal year 2025
• Total Revenue: $2.6 million, compared to $2.1 million in the second quarter of fiscal year 2025
• Total Operating Expenses: $2.4 million, compared to $2.2 million in the second quarter of fiscal year 2025
• Non-GAAP EBITDA: $(0.2) million, compared to $(0.5) million in the second quarter of fiscal year 2025
• GAAP Net Income (Loss): $(0.3) million, compared to $(0.5) million in the second quarter of fiscal year 2025

“As we continue to grow revenue, we remain focused on disciplined financial execution and driving operating leverage,” said Vincent Sita, FalconStor CFO. “Over the past several years, we have streamlined operations, including rationalizing certain foreign subsidiaries and aligning resources with our highest-priority growth initiatives. We continue to identify additional efficiency opportunities while maintaining a disciplined approach to liquidity and prudent balance sheet management. This quarter marked our third consecutive quarter of preferred stock dividend payments, underscoring our disciplined financial management while preserving the financial flexibility to support our long-term strategic objectives.”

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.

Please click this link for accompanying financial charts.

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 60% or more, even when necessary additional infrastructure costs are included. 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, system 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.

CONTACT US AROUND THE GLOBE

View source version on businesswire.com: https://www.businesswire.com/news/home/20260805107114/en/

For more information, contact:
Vincent Sita
Chief Financial Officer
FalconStor Software Inc.
investorrelations@falconstor.com

Source: FalconStor Software, Inc.