DecisionPoint Systems, Inc.

Greetings and welcome to Decision Point Systems Inc. fourth quarter and full year 2023 results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Brian Siegel with Hayden IR. Thank you. You may begin.

Good morning, and welcome to the Decision Point Systems Earnings Call. Joining me today are Steve Smith, Chief Executive Officer, and Melinda Wohl, Chief Financial Officer. 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 could 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 comp, any gains on extinguishment of 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 SEC. With that, I'll now turn the call over to Steve.

Good morning, everyone, and thank you for joining us today. In addition to reporting record fourth quarter and full-year revenue and record full-year adjusted EBITDA, 2023 was a transformational year for DecisionPoint as we evolved our business model towards a higher margin services strategy to position us for continued long-term growth and margin expansion, adding one more time to increasing our enterprise value for our shareholders. More on this to follow. First, I will update our overview of who Decision Point Systems is, what is our market opportunity, and what is our growth strategy to capture and expand this opportunity. I will then turn it over to Melinda to discuss our financial results in more detail. Over the past several years, Decision Point transformed itself into the leading mobility-first enterprise services and solutions company. This means we aim to position ourselves 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, AI, and IoT. Now, these markets represent hundreds of billions of TAMs. So we've identified a subset of those industries within these markets where we either already have, can acquire, or develop expertise, and therefore the ability to become more significant players. During 2023, through acquiring Macro Integration Services, or MIS, we expanded our opportunity to become a leading provider of in-store solutions and services in retail, centered on but not limited to, point-of-sale systems. Prior to the acquisition, retail was already our largest vertical, where we had established customers, industry-specific solutions, the right technology partners, and several under or unpenetrated subsegments for us to go after. Now with MIS, We have the opportunity to go further in retail industry by adding new services and technologies to our offerings. Our value proposition to customers is clear. We enable our customers to be their best at moments that matter. We enable frontline employees, those task workers who work at the edge of the network, to make better, faster, more accurate business decisions inside and outside the four walls, and create operational efficiency and effectiveness to drive better customer experiences and business outcomes at their moments that matter. Or we like to say, the decision points. Moving to our growth strategy, the first pillar is to drive growth and margin expansion by increasing services and software attach rates. Over the past four years, We've transformed the company to drive higher growth rates while increasing margins significantly by aggressively moving upmarket to include various high margin services, especially ones that generate recurring revenue. For example, we offer professional services including consulting, staging, deployment, installation, repair, and customer specific software customization and hardware and software maintenance support. The gross margins for these services tend to be significantly higher than when we resell technology hardware. And part of our strategy is to shift service and software mix over the next few years to 50% of revenue consistently, which will drive more recurring revenue and higher gross margins. Our acquisition of MIS was the next step in our transformation. When combined with the strengths of our existing software and service offerings, this acquisition was key to improving our services and software mix. Now, 40 plus percent of our business is services. Strategically, MIS couldn't have been a better fit. They brought us five new top 10 customers, new service offerings, filled the geographic gap with 100,000 square foot warehouse facility in the Southeast, 30,000 of which to support our staging and integration capabilities, and significantly expanded and strengthened our presence in the retail industry, especially in grocery, quick serve restaurants, C-stores, and hospitality verticals. The last point is critical as it sets us up to becoming a more complete retail, point of sale, and technology solutions company. In 2023, we also reinvested a higher portion of our profits into building our managed services business, including product development and hiring of experienced team of business development professionals who can bring our offerings to market. Our Vision Portal was the first significant product introduction on the enterprise mobility side. Vision offers our customers a customizable solution for monitoring actions on everything in their IT infrastructure. DecisionPoint can now manage the entire mobility and IT infrastructure lifecycle from one view. Vision provides real-time visibility to manage the health, location, and status of a customer's mission-critical IT assets, regardless of their enterprise location. Vision also enables customers to monitor the progress of major rollouts, which enables our customers to minimize downtime and simplify the overall management of a large distributed enterprise. More recently, we introduced PointCast services Our suite of managed and deployment services is built to address all aspects of selecting, deploying, and managing customers' enterprise technology. PointCare integrates all of our services into one offering, including Vision, and enables customers to address every aspect needed to design, deploy, and manage the entire ecosystem around the technologies we already provide. This enables us to leverage our existing enterprise in mobility and point of sale and RFID deployments to create an end-to-end service program that's simply to incorporate into our customers' processes. We are also opportunistically building our higher margin recurring revenue. SaaS solutions portfolio, which today includes both packaged and custom-developed software solutions, such as Mobile Conductor and Route Manager for direct store delivery, or the DSD industry, and VigiTrace, which helps manage an RFID implementation. The second pillar is to take these new products and services deeper into current verticals while expanding into adjacencies. For example, Within retail, there are specialty stores, big-box stores, grocery stores, C-stores, quick-serve restaurants, and more areas where our previous presence is now strengthened with a stronger product and services portfolio and new relationships coming from MIS. This provides potential revenue synergies where we are actively pursuing through the opportunity to cross-sell between enterprise mobile and retail point of sale solutions. The third pillar is geographic expansion, where we can pick up new customers, expand field sales, and increase our coverage. Our M&A strategy supports these pillars and complements our organic growth. Note, We aren't going to make acquisitions just to achieve more scale. We have very specific criteria for the companies we target. These include a track record of positive revenue growth and EBITDA, integration-ready solutions and operations, and cultural compatibility. By focusing on these areas, we have developed a successful integration strategy that allows us to quickly reduce SG&A costs, streamline operations, and drive revenue synergies by expanding their offerings nationwide through our system. Macro integration systems, or MIS, was a perfect example. It hit three of our four strategic growth areas and met our M&A criteria. It was a little bigger than our previous acquisitions, but we are quickly integrating them into Decision Point, paying down the acquisition debt, and looking presently at new targets. Moving to our fourth quarter results, revenue grew 25% to $31 million, driven by a record 47% mix of software and services, mainly from the acquisition of MIS. Full-year revenue was a record, $116 million, up 19%, with software and services making up 36% of the mix. This mix improvement drove 25% gross margin for the year and led to adjusted EBITDA of $8.9 million, up 13%, despite the significant incremental SG&A and investments I previously mentioned that we believe will start to show returns in 24 and beyond. We also continue to pay down our acquisition-related debt during the quarter with another $750,000 reduction, bringing the total paid down to $6.2 million of the $12 million we borrowed to acquire MIS on April 1st last year. Given this quick pay down and our strong financial position, We are in a position to look for new M&A opportunities with the hopes of executing on one or more during 24. In closing, we executed on our strategy and delivered a solid quarter. I want to thank each and every member of our dedicated employee team for their continued hard work. I look forward to speaking with you again on our first quarter call. Now I will turn it over to Melinda to review our financial results in more detail.