Earnings call transcript Q1 2023

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Operator

Greetings and welcome to the Data Storage Corporation Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Waldman, Investor Relations. Please, you may begin.

David Waldman

Thank you and good morning, everyone and welcome to Data Storage Corporation’s first quarter business update conference call.

us Chris are Panagiotakos, with and Piluso, call and CEO; Chief the this Chuck morning Chairman On Financial Officer.

a results, posted issued quarter company press morning this The containing XXXX financial the which on also is company’s website. release first

the questions additional the contact have please would at Communications about or after you like call, If (XXX) company, Crescendo any any information XXX-XXXX.

of like within XXXX this conference Litigation forward-looking statements the Before intended of covered that Reform amended to we call by harbor as listeners Act begin, that are the to remind I created Securities meaning would Private be contains thereby. safe

statements forward-looking achievements expects, or uncertainties expressions the and although to should, statements. generally a words historical thought Statements and and Forward-looking projects, or as future foregoing. include may not or intends, performance that or forward-looking from risks and materially expressed performance results, believes, plans preceded will, future statements by results, subject verbs include are otherwise could differ all or that or to such cause the forward-looking by such nature would, and estimates achievements actual similar anticipates, in not conditional implied facts,

solutions, performance IBM and Flagship and ability construed Form X-K Securities on not the quarter with the company’s filed statements on for to, assurance XX-K underway, to the These limited company’s NASDAQ ability March benefit with the and itself be believes prove factors it in are as Form annual reflected risks for the report other the can are the cause read company actual differ in expectations but from the ability company’s leverage scalability company’s could to Exchange should that include, such reports to the ended migration current on such future materially statements provide its profitability forward-looking the Although XX, quarterly and be XXXX, have position listing. expectations expectations cautionary company’s ability cloud been XX-Q Important and no Commission. reports to that included from will the reasonable, to correct. together exhaustive, the not to maintain company’s Form to results to the

of was Except Any by no on obligation forward-looking events, a the result information, the initially update date whether any otherwise. future or made. as company changed as law, forward-looking which as only speaks to required or new revise of statement circumstances statements, assumes

over Now I’d Chuck. to call like to go turn Please the ahead, Piluso. Chuck

Chuck Piluso

and everyone. good you, Thank morning, David,

that generate These implementation our make We business continue highly initiatives growth the highlighted annual our can sustainable accelerate these targeted long-term assist it that our the we initiatives, to and goal to I Historically, last on rate we should strong relates impressive growth since an going forward. but we’ve stronger of growth progress in of XX% call. through had achieving as initiatives profitability. believe are to compounded XXXX, even

get organic In of $XX in strategic years growth fact, rate is run combination in and acquisitions. revenue high-margin near-term a through goal our coming both million to the strong to

gross profit profit to XX%, and exploring to closer including like services expanding are subscription finally, Nexus underway, dedicated channel CloudFirst, on partnerships, revenue-driven well For ways increase increasing our events, Flagship services. gross strategic through this we sales our Flagship as and growing as international at footprint recurring activities actively number program of our in team, on a end, much sales have Nexus specific our we margins hosting CloudFirst partner

with realignment to of Flagship, including like Flagship’s management the we still recent that note are new Kempster, Tom President. assimilating I’d

returns, marketplace. penetration of based efforts efficiently into while our All on capital are multibillion-dollar the this measurable our focused deploying goal of primary on increasing

are XX,XXX over process with our the in being proven to in on and over this, ability revenue increasing in and million to by contract our In services execute. products, sought Validating websites $X.X fact, contracts for visitation total visitors supported work we increasingly first out this alone. the are executed value, our further subscription quarter

Additionally, from large customer XXXX Global customers. we customers, This company needs from from announced Forbes. is further believe and an on will meet have our existing ability a relationship, of of received demonstrate a which order receiving listed X-figure whom we established enterprise order any and we we to the our and all specifically

revenue To by on first is reporting we performance which period and of subsidiary, the out break provide to clarity each for decided quarter the business this. have our shareholders second additional have segment, we done our

quarter XXXX to decrease an revenue first I’d we the XXXX, in of million NFL like to compared quarter that While in to $X.X sale note the XXXX, team. of reported a we when equipment did a first report during

our Excluding this XX% over year. increased same the period revenues sale, last

mentioned our in I the we are on As efforts revenue. past, focusing recurring

benefit to not continue we from experience, We’re we away and of turning and sales, from these injection. cash equipment have the explore and and opportunities advantage since we software take

which steady goal sustained long-term subscription-based revenue However, high-margin which our profitability, only is can long-term contracts, be recurring provide with streams.

million in Concurrently, from of quarter expenses first by in the we’re $X.X our SG&A of quarter first expenses. XXXX, is and which XXXX redundant reallocating to result able to the of eliminating XX% a decrease resources $X.X million

profitability subsidiaries for and $X.X achieved a $XXX,XXX of on XXXX. income, million quarter As long-term With revenue first are team, solid very in contracts. adjusted the and the to result, of on $XX,XXX secure an importantly, focused a experienced recurring we first for net with EBITDA leadership of revenue we’ve quarter

same, Nexus having profitability. the ability profitability mark, achieve are Flagship While a CloudFirst we the hitting on sustain we to overall dedicated stand-alone increasing basis, is given believe and thereby its extremely to

also expanding the alone through our social programs. drive marketing our well distribution which increasing of by and direct digital programs, the given while visitors to the have to been website April. strategy lead performing XX,XXX this channels, has generation from digital beginning and over year our continue We CloudFirst

scale technology gross profit trends companies or acquisitions to in complement of Additionally, that to net leading current we and staff continue our and that technical explore our operations, add improve enhance important margins synergistic create economies income. and including

continue on We with software partners our initiatives are our and venture, drive managing use their and to embark collaborative vendors, multi-cloud consultants handle. which a global is believe IBM, others. solutions we IT very service solutions, growth for distribution will are our well growth Furthermore, increasing markets on as need providers, are managed resellers, developing solutions internationally scale, joint established significant also these there marketing providers, by and positioned pursuing as we well a support to opportunities application as joint of we like

annual XXX,XXX a is $XX,XXX equates have maintained an total, at To recurring virtualized, impressive unique give you a about year, roughly million per estimated rate. an systems the to noting term market with revenue. of the Once which are better addressable It typically worth the price market, X partitions. these there In we partitions. average $XX in also of there sense multiple is renewal is about and contract billion XX% market in the of XX we global months, partitions

can you these with our maintained hopefully, believe and rollout effective we profitability be accelerate see, initiatives, of long can the So term.

have unlike business. competition base. industry. deploy effectively, debt, approximately throughout record as we additional $XX We on first-class the an initiatives forward the million Overall, And track we and ourselves can year. the are our cash today. limited customer market leader There accomplishments execute announcing in investments we established no with and XX-year look capital proven a is in grow very With positioning others, business and a strategic short-term to our substantially within

that, over Please quarter first I’d go to call our with Chris. financials. Panagiotakos, like the to ahead, And turn CFO, Chris to discuss our

Chris Panagiotakos

months for related of XX, million, X XX% sales a was during months equipment was a million ended the X the for XXXX. to for The revenue decrease to is X period. decrease Total to decrease ended compared The the cost a XX, of March $X in the million, ended XX, $X.X XXXX, XX% March a ended months current million Chuck. of $X.X or equipment you, sales. in sales $X.X Cost months $X.X for X attributed Thank March decrease million mostly related XXXX, million was the decrease XX% or compared $X.X to XX, decrease XXXX. of of March

of Selling, XX, and XX, primarily XXXX, the X The X March a same a XXXX. administrative March period EBITDA $X.X ended million in in XXXX to to force, expenses million, March reduction ended the compared adjusted $X.X months of the general or $XXX,XXX to decrease expense reduction commissions. a compared is Adjusted Software-as-a-Service attributed as was a XX, months ended EBITDA months last for X $XXX,XXX for $XXX,XXX year. and for decrease decrease the were XX% for

million at with income attributable XXXX. $XX.X ended XX, $XX,XXX X ended was compared XX, the ended compared million for March investments XXXX, to the cash net $XXX,XXX at Net the short-term March months of months We XX, quarter X $XX for to approximately XXXX, of and income XXXX. common to XX, March shareholders December

you. the will to call turn back I Thank now Chuck.

Chuck Piluso

call questions. for Thanks, Chris. open I’d the like up to

Operator

comes Instructions] with [Operator question Our Matt Max Group. first from Galinko

Matt Galinko

Hey, that Was that we my future how that with recurring? you I thanks could XXXX to last start equipment? announced into fall we for deal Anything guess, add the software you taking Fortune Was could can week. to results? that questions. your late expect

Chuck Piluso

wait particular around this go like these through press don’t Hi, from our companies software. to to their have was The deal for we organization. company, approvals Matt. We releases all

was services actually particular So the But managed provide we through and client client, go a don’t sale. that is. this software we actually client, this to

but we it hopefully, does go number it. you it annual But We bid, previous like we’ve expect things for customer recurring but every provide and of managed year, to a services, to year, different we the patch after it management, it that because consider it had compete software-related that for recur a but win is revenue that. need

Matt Galinko

size? I relatively the And as Or the it of year? there year, it. contract or expansion the prior scope guess, Got an of same is was the this

Chuck Piluso

believe it was I expanded.

Matt Galinko

guess the team. one I at, expansion a drivers to was looking maybe of sales I you’re the of growth think, mentioned Terrific. it. you that Got the couple going first

generally, heads of So new anything or you Or of add the could any Did to is this a number qualified notable hires? process that quarter? reps? new you adding how point

Chuck Piluso

Verizon’s cover hired mid-market organization also metro on the Southeast example us. brought U.S. One in one area. the Sure. of is benefited We’ve and individuals, their layoff Nexus to two for the sales of New Nexus, has York someone

examples as are – that other up. candidates good and that. well was have that we so as two lined And those are of But

us, helped recruiting layoffs, but to has So degree, is some ongoing. the these

Matt Galinko

one Got it. me. for last And Terrific.

called you opportunity. the or You a as least M&A called at M&A out out pipeline growth again,

pipeline? And of on How you about targets? So can think Are you range right lot that today? you possible of a sort days? the seeing are these do valuations the the acquisition touch in

Chuck Piluso

are last typically sales to have of these They didn’t really were have year And somewhere force, I companies or term and companies, five net we recurring alone. $XX income, but folks call, to up had the decided that they move in last on small look four side on so stated to I doing put revenue. the between out believe going Well, million the business, growing, million, that very are larger contracts on. we try north the sheets growing $XX

looking we business. they years we’re So time, the find nothing to managed are handicap, this really at to with in the looking that business are that’s a and someone that. XX have service are been really trying At that, year, the that’s grow XX, business, and growing providers, they not internationally but [indiscernible] folks the wrong not for same

is $XX we are do to this we that investment opportunities, M&A under million look folks and for mark. bank with an as exactly that’s north continue engagement we but to do. There well, that of do what So internationally not looking have

focused it’s IBM have [indiscernible] and assets data we that not a six on CloudFirst in of and centers, $X.X the IBMi. we’re in million it’s where So deployed

are AI growing business. looking the that on element cybersecurity. an of We’re focused it. Cyber are service for They has managed providers in

we’re looking. So

on but We are continue jumping we’re we look, M&A into not we’re – selective, internationally side. things. pretty the we’re to just But and just looking

Matt Galinko

slightly solved Got could that if you more guess, acquisition. expansion a follow-up type to just international would add guess I it. you MSP larger making And by that, comment be the international made I one I earlier,

is Or kind have of partner So that? the Can mind expansion? you what touch expansion you that organic international market? for also just on is there in international in

Chuck Piluso

Sure.

XXXX us racks really us. go it’s and UK, for For to to big the two We set for for UK, know as looking some deal us it. looking that providing cities such and do did software up What into, in services same MSPs those in a how that a center not with in to are do the in similar marketplace. we’re to for example, we’re data us is equipment to ABC with focused

that. all now, can sudden, we can those companies, And so if we one of of acquire deploy a

that folks own that are board have running and own their part of We their our on organization subsidiary. unit,

that still get looking in in, still two be, do bit a we million for and under has. to do for MSP cities So our move us. MSPs in that, We time at $X.X acquiring that and whatever spend based of can because can that, but UK might speaking, multi-tenant we CloudFirst a can area same first it we are little started design the in easier bit for

We enough now think are into we large to the parts is Asia, but are oh, not – of don’t Europe, go I the let’s multilingual say, other UK target.

Matt Galinko

Thank you. it. Got

Chuck Piluso

Matt. Thanks

Operator

next Lismore LLC. Partners, Our from question with comes Waldo Adam

Adam Waldo

Good to bit for start flush enterprise a beyond the I questions out wonder much ago. taking if little more Chuck very can few just day, thanks just questions. everyone. Matt’s my minutes recent a win we

deal. seven-figure a as obviously it released press You

have as margins to sort more into for is? for to scope sale seven-figure opportunity on You based of on far what it based the deal you a we how like. extent have as disclosed look sale? sense give Can so that for services a any software increased the deal, is new what there color now And call of

Chuck Piluso

Sure. $X.X Chris, million. million, Hi it was $X.X believe Adam. I

Chris Panagiotakos

Correct.

Chuck Piluso

last year, to me it. think I hold don’t

it was $X.X I think million.

a side. rapidly, on continues that company. is very a have we this we at to organization, same very, managers time, And it on XXXX – project But it’s that’s Global Forbes the expand growing an project provide and So, this. company

a on technicians what’s of to management called services and is have with Fix Big we them. other This and We provide patch flagship, through this. number

the of Tom that sales with Flagship. along the one on team technicians, and at to this So, try account. continue Kempster accounts that, it to team, of larger the is more works penetrate

more could if proposals relationship there So, that, the but it’s a I say if working is don’t is good. relationship. I know constant than pending,

our week phone, meets example, a on with meetings as twice believe that the I project Just an manager set them.

with account very the very, now. are account what deep So, and with them significant than are we to we doing larger the opportunity has grow right

Adam Waldo

of Stepping helpful. the quarter, the of some also gave in the from I was am remembering quarter, step-up very unsolicited properly biggest in terms X,XXX then if CloudFirst, last quantification in the first bit in than that in back new pipeline and fourth coming website, you of business quite and your a value range higher inquiries a helpful dollar level, That’s quantification your the quarter. some in segment the

you and of us for principal dollar about bit don’t of ones quarter. know any each earlier in are three the the business new seeing I XX,XXX the Can year-to-date you said that’s backlog, close so segments, stands in you think I size XXXX little the far. a today’s call pipeline XX,XXX your and recently Thank as for if that now or more second it rates? new in quantify in value business then you. changes of now the the right

Chuck Piluso

lot a answer. is of multi information. a That’s That

Let it me bit. a try to little break out

we have we websites, overall, Nexus, have on Flagship all, first and three of all So CloudFirst.

I the confusion aligned the Storage last company does, to to XX,XXX it to Data believe CloudFirst the it and first the it It the through was also call or website. increased moving IBM, let’s just we away, not not started on doing the AIX. it moving but quarter with Corporation which changed year was avoid that So be to we what name but operating visitors away I more CloudFirst, allow original had because – April.

a generation increased great that, programs job So, – is really with significant. How it’s it what on significantly. lead should does the

with only The the beginning. X,XXX other combined. had two additional visitors the companies difference It’s

to Kates, closer generation to the are to machine management their with is, realigned also website that Flagship has with lead working but does a the on that be CloudFirst refreshing time. she Marketing, the able who’s be we of get take to lead-generating and working Tom, website Christie since that. on Director Now, that they been is that, Nexus for

things able with that, all are through but So, inbound it of that time, of call increase company that been and to be visitor significant. it the that the that let’s for the on gen on that, the build just April we and But websites. with is, on we to long SEO a the up time working to other fairly go so lead have both CloudFirst, takes to

is On the companies, sort subsidiaries. at it’s – a very And CloudFirst which XX% sense the sophisticated two uses the pipeline, probability XX% probability. of through other Salesforce.com rated of in a

– is value, we what we So, the over proposal believe pipeline? XX%. more, it’s anything remember Chris, XX% use million is with you we in total final the use contract I or terms it’s that is over the $XX negotiating are something But

Chris Panagiotakos

so. I believe

Chuck Piluso

Yes.

contract think total over I value. on that $XX in pipeline it’s million

question. So, answers that if that

the had team is me process delivery Adam, in now we the the website, executed we But installing. million of the service ask line. question, the $X.X top that didn’t about at So, the CloudFirst in you had contracts right

significant. I think that’s fairly

Adam Waldo

No, was backlog, at Is I – majority but hinting $X.X I the that’s million big point, at right? side? of and – that clear. absolutely. the vast this the the Maybe the wasn’t backlog that’s on sort of in CloudFirst the

Chuck Piluso

you that’s if And Yes. out... break that

Adam Waldo

Yes, that’s uptick. a big

Chuck Piluso

average X fairly the sales it’s out, – accounts calculations, months to term we you it’s term. might $X,XXX with And that’s number that a are in force be Yes. billing it XX But through call what occurring more, the on term, when a average. will calculate the month months have most XX significant. months $X,XXX is the a month, And it’s I our,

is contracts executed, it’s take XX taken, of a the really installed. in contracts. but months. typically being process Now, are it were at we month I many don’t that on that put are in $X.X But that $XX,XXX that average annual too $XX,XXX annually, million

Adam Waldo

give you please? Can they into in the you they some of Right. the first here in Are around close rate stable? that, quantify or second. close And color improving? and pretty changes Are can finally, quantification quarter rates, then terms

Chuck Piluso

of on is smaller close estimate it they When is, rate or those population is extremely it, whatever like happens Nexus of what very a sure high. population hold have that. CloudFirst the much with [ph] with very I rate said they accounts Nexus. XX%. I than dealing But one running go smaller, that, XX%, and accounts, four on counts, going The these I rate, that’s CloudFirst. sample Miami whether it’s take but am how the am exactly don’t you accounts side, around And like to the volume, not am relationship the it’s close close XX, out Camillo around the that’s their believe would of rarely, let’s to call that the probably with, lose deal. a rate the John the probably but typically, probably I Very I Flagship, with XX%. Heat is Well, for number Houzz me Flagship, Falcons, small, to his it accounts, high. just at other is a higher estimate going it’s with large the on

it’s be budget on by Sometimes And XX%. someone’s someone those it to same a and things off-premise said, move Disaster loss, What’s sometimes quick. deal the I will in of kind just thing and on-premise if up. big infrastructure think pipeline, it’s delay gets Houzz the a for because out pushes someone recovery, pushed the CloudFirst. average, whole is to can delayed But around the easily had just way, move that.

Adam Waldo

Thanks Tremendously very much. Right. helpful.

Operator

Excuse me.

session. question-and-answer our closing are We

for to would back turn over comments. the like closing Chuck floor I go Please Now, Piluso ahead. to

Chuck Piluso

all as business this solid expenses, reducing a the and to committed position revenue it. aggressive actively assist sustainable we our leader growth Appreciate a within to profitability. you effectively you, remain operations believe We and for sheet Thank strategies questions. implemented in industry. And wrap will drive streamlining to balance that you. And ourselves maintaining and we redundant Passila. initiatives are up, have Thank pursuing thank

they We as are and our reporting forward look we proud to unfold. you for of Thank progress, all additional today. developments joining

Operator

This concludes call. today’s conference

great disconnect have you now your You day. this your and participation time. may Thank for a lines at

Data Storage (DTST) 15 May 232023 Q1 Earnings call transcript