DecisionPoint Systems, Inc.

in the long term. On the product and services side, in addition to product and services we already offered by Decision Point, we added Mobile Conductor, a software subscription platform that offers predictable revenue streams during the subscription period. We will continue to maintain and invest in the SaaS platform. And over time, we plan to offer Mobile Conductor to new and existing Decision Point customers. Our main goal is to expand our geographic presence and build momentum with our combined product and service offerings for significant revenue synergies. We've only been a combined company for just eight months, and we receive positive feedback from our customers at both Decision Point and at Xtendata. They're incredibly excited about the breadth of mobility-first use cases we offer. That energy and enthusiasm is also resonating inside our organizations, and the cultures are very much aligned. Since the acquisition, we've been able to do more detailed analysis on both our existing customer base, as it became evident that there is even more opportunity to cross-sell and up-sell all of them. Decision point and extend data create a greater efficiency of scale and broaden our geographic reach and capabilities. We've strengthened our position as a valued partner for our customers by preparing them to meet the mobility first demands as businesses evolve and especially during this pandemic times. The trends I mentioned earlier to shift the sales mix to professional services and integration of Xtend data that have been driving our business will continue to drive business for the foreseeable future. In terms of the remainder of 2021 priorities, we've identified several opportunities that we believe will improve our business over time. Number one is targeting new and existing customers that have been impacted by the pandemic and partnering with them on newly required mobile solutions that enable them to fully reopen their business. We believe that our mobile solutions will create efficiencies for frontline workers to fulfill new business process needs as a result of the pandemic. Number two is a need to increase mobility-first enterprise solution and services sales and improve gross margins. Additional investments were made in the first half of 2021 for new managed service offerings requiring additional headcount to grow our professional services business, which we expect to increase overall gross margins in the future. Number three is revenue synergies. We will continue to target companies that will broaden our product and service offerings that allow for cross-selling and up-selling to consolidated customer bases and expand on our presence in new regions. Number four is to integrate Xtend data for cost synergies. We will reduce SG&A costs and streamline processes for efficiency and cost savings. And number five, as mentioned earlier, M&A acquisitions. is a critical element of our growth strategy. To further expand on M&A targets, we plan to acquire one or two businesses during the second half of 2021. We will only acquire companies that we deem to be appropriate. Geographic presence, customer base, expand into existing markets to achieve greater market penetration, and overall critical mass to build brand awareness. In closing, any comparison to the first half of 2021, the best first half in the company's history would be a challenging one. That said, I'm proud of the fact that we made significant progress in fully integrating XtendData and grew the professional services business year over year. We look forward to sharing our progress with you later in the second half of 2021. Now, I will turn it over to Carol to review our second quarter results.

Thank you, Steve. Details of our 2021 second quarter operating performance compared to 2020 second quarter were as follows. Sales decreased 3.1% or 0.5 million during Q2. As Steve had mentioned, the decrease was primarily driven by a decrease in hardware and software sales in the retail sector due to a significant equipment upgrade that occurred in the prior year Q2 from one of our largest customers. Supply chain issues also impacted product availability and impacted sales in Q2, and we expect this trend to continue to provide cost headwinds in the back half of 2021. The sales decrease was partially offset by a 2.9 million increase in overall sales associated with Xtend data that we acquired in December 2020, and the increase in sales across all categories associated with new customer wins and an increase in hardware and software sales in retail, healthcare, and car rental agencies as a result of resumed operations for our customers that were impacted by COVID-19 restrictions. Also, as Steve mentioned, we are particularly pleased with a 20% year-over-year growth in professional services. We have been successful in our growth strategy and shifting mix to professional services, which we expect to increase overall growth margins going forward. In result of this initiative, we made strategic staffing investments in our managed services business to expand on our professional service offerings. to drive top line growth and margin contribution in the back half of 2021 and 2022 as volume increases. These investments along with supply chain related hardware cost increases contributed to a short term decrease in gross margins of 200 basis points. Sales and marketing expenses increased 0.6 million or 43% and general and administrative expenses increased 0.4 million or 36% during Q2 as compared to the prior year period, primarily due to increased expenses for extend data operations. As a percentage of sales, sales and marketing expenses increased 410 basis points and G&A costs increased 280 basis points primarily due to the higher fixed compensation, legal and compliance costs in connection with the extend data acquisition, public company compliance and executive compensation and benefits. We are currently executing on cost reduction plans as we continue to integrate extend data operations and identify cost synergies. We expect to realize cost optimization in the back half of 2021 and into 2022 and result of these initiatives. EBITDA decreased 54.4% to 0.5 million for the second quarter of 2021 versus the second quarter of 2020. Now, turning to our balance sheet, we ended the quarter with cash and accounts receivable totaling 14.2 million. at June 30, 2021, compared to $18.4 million at December 31, 2020. We nearly doubled our cash generated from operations to $2.5 million as compared to the first half of 2020 and further strengthened our financial position using our cash to pay off legacy debt with higher interest rates and secured a new line of credit of $9 million in July to reduce our interest rate to 2.75%. and decrease our interest expense by 242%. To recap, despite the great work the team has done in managing the instability of the supply chain, we expect hardware sales and cost of sales to be impacted into the back half of 2021. We expect sequential growth in professional services resulting in improved margins as volume increases. We expect the full integration of Xtend data to be completed in the second half of 2021 and leverage POS energies. We will continue to target acquisitions to scale the company and expand our presence in new and existing regions. Our focus is on executing on our growth plans and driving shareholder value in the long term while solidifying our position as a leader and mobility-first managed service and integration solution. With that, I'll turn the call back over to Steve for closing comments.

Thank you, Carol, and thanks again for joining us today. We look forward to discussing our third quarter results with you in November. I want to wish everybody a good evening. Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.