DecisionPoint Systems, Inc.

Good day and welcome to the Decision Point Systems, Inc. Second Quarter 2022 Earnings Call and Webcast. Today's conference call is being recorded. At this time, I'd like to turn the conference over to Brian Siegel. Please go ahead, sir.

Good afternoon and welcome to Decision Point Systems' Second Quarter 2022 Earnings Call. Joining me today are Steve Smith, Chief Executive Officer, and Melinda Wohl, Vice President of Finance. For those of you that have not seen today's release, it is available on the investor section of our website at www.decisionpt.com. Before beginning, I would like to remind everyone that except for historical information, the matters discussed in this presentation are forward-looking statements that involve several risks and uncertainties. Words like believe, expect, and anticipate mean that these are our best estimates as of this writing. but that there can be no assurances that expected or anticipated results or events will actually take place. So our actual future results could differ significantly from those statements. Also, during this call, we will discuss non-GAAP measures, including non-GAAP net income, non-GAAP EPS, and adjusted EBITDA. These non-GAAP financial measures adjust our GAAP net income and EPS for stock-based compensation and gains on extinguishing debt, M&A, and other financial transaction costs, and other non-recurring, non-operating income and expense items. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the U.S. SEC. With that, I'll turn the call over to Steve.

Thank you, Brian, and good afternoon, everyone, and thank you for joining us today. I am very excited. to say that we continue to see significant strength in our business during the second quarter, once again reporting record results today. However, before I discuss these results, I'm going to start the call by discussing who is Decision Point Systems, our market opportunity, and our growth strategy to capture and expand this opportunity. I will then briefly review our second quarter and then turn it over to Melinda to discuss our financial results. Decision Point is a mobility-first enterprise services and solutions company. So what does that mean exactly? It means that we aim to be at the center of several emerging secular trends, including enterprise mobility, which encompasses work from home and field mobility, cloud and managed services, SaaS, 5G, and IoT. Now these markets represent hundreds of billions of TAM. So we identified a handful of industries where we either already have, can acquire, or develop expertise and therefore the ability to become significant players. Currently, these industries are retail, logistics, hospitality, and healthcare. where we have established customers, industry-specific solutions, the right technology partners, and several under-penetrated sub-segments for us to go after. Our value proposition to customers is clear. We enable frontline employees to make better, faster, more accurate business decisions inside and outside the four walls. create operational efficiency effectiveness to drive better customer experiences and business outcomes. Traditionally, companies like us have been classified as Valuated Resellers, or VAR, of handheld devices such as scanners, printers, point of sale, and other mobile devices. Our OEM partners include Zebra, HP, Apple, Honeywell, Verifone, DataLogic, CradlePoint, and distributors, Bluestar, ScanSource, and Ingram. This business has historically grown at a run rate of about 5% to 6%, with project orders being incremental to those numbers, but also introducing some lumpiness at times. We also have an excellent annuity type business, replenishing consumables for these devices. So think of it as the razor and the razor blade model here. That said, over the past three years, we've transformed the company to both organically and inorganically increase these growth rates and margins significantly by aggressively moving up market to include various high margin services, especially ones that generate reoccurring revenue. Managed services, where companies outsource certain IT functions, are a key investment area for our services led strategy. We offer a comprehensive product portfolio of managed services designed to simplify the complexity of designing, deploying, and managing a mobile solution. These managed services include provisioning, monitoring, and help desk services to improve on the visibility and status of their device landscape. In addition to managed services, we offer professional services, including consulting, staging, deployment, installation, repair, and customer-specific software customization and hardware and software maintenance support. We're also opportunistically building on higher margin, reoccurring revenue SaaS solutions in our portfolio, which today includes both packaged and custom developed software, such as Mobile Conductor and Route Manager for the direct store delivery or DSD industry, and VisiTrace, which helps manage an RFID implementation. Moving to our four pillar growth strategy, the first is to increase share in our current verticals. Specifically, grocery and specialty retail, supply chain, healthcare, warehouse, distribution, and transportation. The second pillar is to leverage our experience in these verticals into adjacencies. Examples here would include big box retail, hospitality, and supply chain logistics. The third pillar is to drive growth and margin expansion by increasing service and software attach rates. These include professional services, managed services, ISV and SAS services, software from partners, and repair and maintenance services. And the fourth pillar is geographic expansion, where we can pick up new customers, expand field sales, and increase our coverage. Our M&A strategy supports these four pillars, and we expect to remain active in this field to complement our organic growth. With respect to M&A, we are going to make acquisitions to achieve – we're not just going to make acquisitions to achieve more scale. We have specific requirements of companies we target. These include a track record of positive revenue growth and EBITDA, integration-ready solutions and operations, and a cultural fit and compatibility. By focusing on these areas, we have developed a successful integration strategy that allows us to move quickly to reduce SG&A costs, streamline operations, and drive revenue synergies by expanding their offerings nationwide through our system. In fact, after acquiring two companies in the first quarter, we have progressively and quickly I integrated those to the point where we are ready to look at potential targets for the second half of this year and in 2023. Now, moving to our second quarter highlights, we once again had record quarterly revenue growing 85% to $28 million. This strength was mostly driven by two large project orders that came in during the quarter. Note that these orders were not completely filled in Q2. and we're expecting to be filled in the second half of 22. While this goodness was welcome, I'm particularly excited that our services revenue exceeded our internal targets during the quarter, growing 16% to $5 million. Adjusted EBITDA increased a whopping 393% to 2.7 million in the quarter. This means in the first half of the year, We reported adjusted EBITDA of 3.8 million versus, you may recall, our previous full-year guidance of 3.5 to 3.9 million. We also saw continued evidence that our M&A strategy is working. In fact, the sales teams continue to grow our active cross-selling campaigns and deals in the progress with existing customers during the quarter. As we look to the remainder of the year, we are well positioned to continue our growth trajectory. We now expect to generate between $87 million and $90 million in revenue, or approximately 33% to 36% growth. And in terms of mix, we currently expect approximately $20 million of that to come from services. From an adjusted EBITDA perspective, I would expect that we would deliver between $4.6 and $5 million within those revenue ranges that I just provided. Please note, these numbers do not include any potential acquisitions we may make during the second half of the year. In closing, we had a great first half of the year, and we expect that this is just the beginning as we continue to execute on our growth strategy. I also want to thank our dedicated employees for their continued hard work And finally, I will be presenting at the Sedoti MicroCAP conference next week and available for one-on-ones. So if you're interested in a meeting, please either submit a request through the Sedoti conference portal or reach out to Brian Siegel. Otherwise, I look forward to speaking with you again on our second quarter call. Now, I will turn it over to Melinda to review our financial results in more detail.