Data Storage Corporation

Greetings and welcome to the Data Storage Corporation 2023 Fiscal Third Quarter Business Update Conference Call. At this time, all participants are in a listen-only mode. A brief 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 your host, Alexandra Schilt. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to Data Storage Corporation's third quarter business update conference call. On the call with us this morning are Chuck Peluso, Chairman and Chief Executive Officer, and Chris Panagiotakos, Chief Financial Officer. The company issued a press release this morning containing its third quarter 2023 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at Before we begin, I'd like to remind listeners that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are intended to be covered by the safe harbor created thereby. Forward-looking statements are subject to risks and uncertainties that could cause actual results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or that otherwise include the words believes, expects, anticipates, intends, projects, estimates, plans, and similar expressions or future or conditional verbs such as will, should, would, may, and could are generally forward-looking in nature and not historical facts. Although not all forward-looking statements include the foregoing. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the company's expectations include, but are not limited to, the company's ability to leverage the scalability and performance of flagship solutions, the company's ability to benefit from the IBM cloud migration underway, the company's ability to position itself for future profitability, and the company's ability to maintain its NASDAQ listing. These risks should not be construed as exhaustive and should be read together with other questionnaire statements included in the company's quarterly report on Form 10-Q for the quarter ended September 30, 2023, annual reports on Form 10-K, and current reports on Form 8-K, filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements, whether a result of new information, future events, changed circumstances, or otherwise. I'd now like to turn the call over to Chuck Peluso. Please go ahead, Chuck.

Thanks, Helen, Janity. Good morning, everyone. I'm proud to report we generated a 35% increase in revenue to approximately $6 million for the third quarter of 2023. Importantly, we achieved another quarter of profitability with approximately $158,000 in net income for the third quarter. We believe this is a direct result of our ongoing business growth initiatives, which we have implemented to assist in accelerating our revenue growth and increase profitability. Notably, Cloud First, as a standalone business, achieved $3.7 million in revenue for the third quarter, with a net income of over $800,000 and $1.1 million in EBITDA. In addition, on the equipment and software side, we generated approximately $2 million of revenue in the third quarter, compared to approximately $1 million for the third quarter of 2022, an increase of nearly 100%. While the increase in equipment sales had a slight impact on our overall gross profit margin, we'll continue to work to assimilate Flagship Business Unit and have actively implemented strategies to enhance our gross profit margin by increasing subscription revenues within Flagship and move closer to the 50% margin that we generated cloud first. We have begun the process of bringing together these two excellent companies and their team members to leverage the talent, client bases, assets, and management. Across the organization, with the continued execution and further implementation of our growth initiatives, including ongoing expansion of our distribution channels, increased utilization of our digital and direct marketing programs, optimizing our lead generation program, Hosting additional revenue-driven sales events and exploring strategic M&A opportunities, we can continue to increase revenue while maximizing long-term profitability. Furthermore, we plan to expand internationally, as there is a significant need for innovative solutions around the world, and we intend to penetrate these large underserved markets Today, a program is underway to reach out to over 1,000 managed service providers in the UK to build partnerships and create a distribution channel. We'll provide updates on our progress as developments unfold. Validating the demand for our solutions, we have continued to witness an increase in visitors to our website. We also have our nurture list. which I have spoken about in the last quarter that contains over 25,000 organizations who are interested in the potential implementation of our services. We intend to take advantage of these avenues to secure new contracts and increase exposure within the market. In addition, we recently launched a strategic sales and marketing initiative designed to capitalize on the growing demand for our products and services. We are already witnessing the benefits of these initiatives. This includes onboarding new sales representatives who are dedicated to driving and securing new customers, which supports and works hand-in-hand with our ongoing lead generation programs. Our new sales representatives are responsible for attending to our nurture list with the goal of progressing discussions to contract. Concurrently, we launched a new major accounts program. This program is solely focused on increasing our penetration with an existing enterprise and middle market accounts to take advantage of upselling and cross-selling opportunities. Today, DSC receives a small segment of the ITC spend for these enterprise-level clients. In fact, our ongoing strategy has been to land new customers and expand our relationships over time as their needs grow. Land to expand enables endless cross-selling opportunities. However, with a dedicated team ensuring these opportunities aren't overlooked, we can truly capitalize on significant opportunities within the market. Demonstrating this effective strategy, is our recent contract announcement with one of the nation's leading sports and entertainment companies. We have been working with this customer for a number of years and continue to expand our relationship. We are working to implement our cybersecurity solutions into their security systems to assist with protecting their large infrastructure as well as aid and response times to certain threats. We believe This expanded contract validates how we grow with our clients and continually address their needs. I'd also like to highlight that this contract follows previously announced contracts as discussed in our last conference call, including a subscription-based contract with the leading promotional company. We're providing fully monitored and managed cloud solutions today. Unfortunately, an unexpected natural disaster happened, and following this, they realized they were unable to recover and resume operations. That was within their required timeframe. And as a result, we have implemented cloud-based disaster recovery and cloud-based infrastructure, allowing the client to run its critical applications on a fully managed, highly secure enterprise cloud 24 by 7 dedicated support, ensuring seamless, rapid recovery of data during unexpected downtimes. We also announced a multimillion-dollar project with the same sports and entertainment organization we touched on. This previous contract was for a custom solution to provide response time to files, file recovery, and increased storage capacity to support their critical aspects of the security infrastructure. and we secured a subscription-based contract with one of the largest food distributors in the U.S. We're providing managed disaster recovery solutions to reduce the recovery time of critical data. As you can see, we are witnessing strong contract momentum, and I continue to maintain a 94% renewal rate with an average term of 24 months, demonstrating our ability to support clients while meeting or exceeding their needs. We currently serve over 450 companies and intend to continue to grow this impressive list. Today, data center companies that provide infrastructure on Windows-based type platforms come to Data Storage Corporation for their client for our IBM platforms. These infrastructure partners are a great way to expand our distribution with their expertise, excellent staff, while leveraging our assets deployed. Overall, we are executing on a strategic growth plan, which has resulted in profitability for the third quarter of 2023, as well as new and expanded contracts, while increasing our penetration within the market. We are also actively exploring potential strategic acquisitions that would assist and support our growth, and more importantly, complement and improve our current operations. As a result, I believe we're at a pivotal point in the company where we are extremely well positioned to enter large international markets, upsell and cross-sell our products and services, and secure additional meaningful subscription-based contracts, all leading to sustainable profitability and revenue growth. At the same time, we have carefully managed expenses and have preserved a strong balance sheet with over $11.5 million in cash and marketable securities, enabling us to deploy capital efficiently and effectively to support our long-term growth and drive value to our shareholders. With that, I'd like to turn the call over to Chris Panagiotakos, our CFO, to discuss the third quarter financials. Please go ahead, Chris. Thank you, Chuck.