Data Storage Corporation

Greetings. Welcome to Data Storage Corporation 2023 Fiscal Year Business Update 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. Please note this conference is being recorded. I will now turn the conference over to David Wallman, Investor Relations. Thank you. You may begin.

Thank you, Sherry, and good morning to everyone. Welcome to Data Storage Corporation's 2023 Fiscal Year 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 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 212-671-1020. 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 performance or achievements to differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. Statements preceded by statements 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 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 cause actual results to differ materially from the company's expectations include but are not limited to 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 the other cautionary statements included in this company's annual report on Form 10-K for the year ended December 31st, 2023, quarterly reports on Form 10-Q, and current reports on Form 8-K, followed with the Securities and Exchange Commission. Any forward-looking statements speak only as 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 it is 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.

Thank you, David, and good morning, everyone. We have made a meaningful process throughout 2023, resulting in record revenue of approximately $25 million as we continue to increase subscription solutions and leverage our technical assets deployed in six data centers. As a result, our gross profit increased 18.5%. with gross profit margin increasing to 38.4 percent from 33.9 percent in 2022. This is a major achievement and validates that our strategy is working. As a result of these initiatives, we achieve profitability for the year and anticipate that as our revenue continues to grow, we anticipate continued improvement in both our margins and overall profitability in 2024 and beyond. Notably, Cloud First as a standalone business achieved $13.5 million in revenue for the 23 fiscal year with a net income of approximately $2.6 million and $3.8 million in adjusted EBITDA. The EBITDA margin, 28%. Furthermore, Flagship as a standalone business in 2023 achieved $10.4 million in revenue with a net income of approximately $28,000. and over $400,000 in adjusted EBITDA, a swing from the previous year of over $1.8 million from the 22 loss of $1.3 million. We believe the positive results within Flagship are a direct result of our efforts to fully integrate Flagship's business within the company, and we recently announced that Flagship has merged internally with Cloud First, which we believe will further assist improving our gross profit margins and result in increased revenue and profitability. Throughout the organization, we are confident that by executing and advancing our growth strategies, including the cloud-first and flagship merger, as well as expanding distribution channels, enhancing digital and direct marketing efforts, refining our lead generation process, organizing revenue-centric sales events, and investigating strategic M&A prospects, we can potentially further boost revenue and optimize long-term profitability. And as I previously mentioned, we aim to venture into international markets due to the substantial demand for our groundbreaking solutions globally. Our focus lies in tapping into these expansive yet underserved markets with our niche cloud infrastructure solutions. Presently, an initiative is in process to engage managed service providers in the UK and establish partnerships and establish a distribution network. We will keep you informed with our advancements. Validating the demand for our solutions, we have continued to witness an increase in visitors to our website, which was over 135,000 visitors in 23. We also have a nurture list, which I spoke about on our last call, that contains over 25,000 organizations who are interested in potential implementation of our services. We intend to take advantage of these avenues to secure new contracts and increase our footprint within the market. Furthermore, we initiated a strategic sales and marketing campaign during the fourth quarter. aimed at leveraging and increasing demand for our solutions. We are already observing a positive outcome of these endeavors, which included the recruitment of new sales representatives committed to acquiring and retaining new clients by synergizing effectively with our ongoing lead generation efforts. Additionally, these sales representatives are tasked with nurturing our prospect list, aiming to advance conversations towards contractual agreements. At the same time, we introduced a major account program with the exclusive aim of enhancing our presence within established enterprise and middle market accounts, aiming to capitalize on the opportunities for upselling and cross-selling. Currently, we capture only a modest portion of the related IT expense for these enterprise and mid-market companies. In fact, our ongoing strategy has revolved around acquiring new customers and nurturing these relationships as their requirements evolve. By deploying a dedicated team to oversee these opportunities, we can effectively seize the substantial potential within the market. Validating our efforts on the various contract announcements made throughout this year, first we secured a multimillion dollar expanded contract with the Forbes Global 2000 listed company. Considering the expansive reach of this client, We view this agreement as additional confirmation of our capacity to deliver products and services tailored to the requirements of major enterprise accounts. Our central objective remains the expansion of our recurring revenue streams. We persist in strengthening our foothold within the client base and providing supplementary recurring managed services. We also successfully obtained a multi-million dollar contract with a prominent global provider of end-to-end business processes. Under this agreement, we are providing cloud-based infrastructure to accommodate the client's extensive data sets, along with round-the-clock dedicated support. Additionally, we are offering data recovery solutions to ensure uninterrupted business operations for the client, whether during scheduled maintenance or unforeseen downtime. Subsequently, we secured a large subscription-based contract with the leading promotional company. Following an unfortunate and unexpected natural disaster, we were contracted to provide fully monitored and managed cloud solutions for the client. 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 with 24x7 dedicated support. ensuring seamless and rapid recovery of data during unexpected downtimes. We were also selected by one of the nation's leading sports and entertainment companies to provide cloud storage infrastructure. The multimillion-dollar project required us to develop a customized solution that improves response time to their files, file recovery, and storage capacity to support a critical component of their security infrastructure. Later, we were selected again to provide a variety of services and solutions to address the cybersecurity requirements, further demonstrating our ability to meet evolving needs of our customers. And lastly, we secured a multimillion-dollar subscription-based contract, one of the largest food distributors in the United States, where we are providing managed disaster recovery solutions to reduce the recovery time of critical data. In addition, we had a strong start in 24, evidenced by the expanding contract with the global telecommunications company, as well as securing contract with the leading U.S. insurance company for cloud migration. As you can see, we are experiencing robust contract momentum, and it sustained our renewal rate with an average initial term contract duration of 29 months, showcasing our capacity to meet or surpass client expectations by offering unwavering support. Presently, we serve over 450 companies and aim to further augment this remarkable clientele. Data center firms specializing in window-based infrastructure platforms rely on Data Storage Corporation subsidiary CloudFirst for expertise in IBM platforms. Collaborating with these infrastructure partners presents an excellent opportunity to expand our distribution channels, utilizing our skilled staff and maximizing our deployed assets. It's also important to note that we have over $100,000 in new monthly billing currently being installed, totaling $3.5 million in total contract value. Our overall remaining contract value today is $26.7 million. We are not counting what we'll renew since we do have an excellent renewal rate. The client experience is excellent. Further, we have limited competition. Our solutions are sticky. Migration to a competitor's platform is difficult. Additionally, we have over 60 proposals outstanding with a total contract value of over $8 million. We believe as these prospects decide to migrate their systems or just their disaster recovery programs to our cloud-based solutions, this should serve as an increase in our current annual recurring baseline revenue that we entered 2024 with, which is already over $18 million. Overall, We continue execution of our strategic growth plan. We achieve profitability in 23 fiscal year, as well as secured 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, compliment and improve our current operations. I'm convinced that we have reached a critical junction within the company where we are exceptionally well-prepared to venture into international markets, capitalize on upselling and cross-selling opportunities for our products and service, and acquire further substantial subscription-based contracts. These endeavors collectively paved the way for sustained profitability and potential revenue expansion. At the same time, we have carefully managed expenses. We have preserved a strong balance sheet with over $12.7 million in cash and marketable securities, over $11 million of working capital, and no long-term debt as of December 31st, 2023, which provides us the flexibility to deploy capital efficiently and effectively to support our long-term growth and drive value for our shareholders. With that, I'd like to turn the call over to Chris Panagiotakos, a CFO, to discuss financials. Chris?