Data Storage Corporation

Greetings and welcome to the Data Storage Corporation 2024 Fiscal Second Quarter Business Update Conference Call. At this time, all participants are on 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. It is now my pleasure to introduce your host, Alexandria Schultz of Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 Second 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 2024 Second Quarter 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 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 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 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 questionary statements included in the company's quarterly report on Form 10-Q for the quarter ended June 30, 2024, annual reports on Form 10-K, and current reports on Form 8-K, filed with the Security and Exchange Commission. Any forward-looking statements speak only as of the date to which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statement, whether as 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, Sally, and good morning, everyone. During the quarter, we made important advancements and we believe will accelerate our growth and increase our penetration within the market. Before I touch on those achievements, I would like to note that we generated $4.9 million in revenue for the second quarter of 2024. While this represents a decline from our previous year's second quarter, it's important to note that the reduction is attributable to large one-time equipment sales recorded during the second quarter of 2023. As I have previously discussed in our conference calls, our strategic focus is on recurring revenue contracts. The client equipment purchase cycle typically runs in a three to five year cycle. Once we sell equipment each year, typically we provide software renewal licenses and hardware support. This continues until the client refreshes their equipment and then the cycle continues. I am pleased to report that our gross profit margin increased to 49 percent during the second quarter of 2024, up from 43.7 percent in the same period last year. This improvement highlights the effectiveness and scalability of our business model. It also reflects the successful integration of our operations. The increased margin is a testament to our disciplined execution and strategic efforts to optimize profitability by building a more sustainable revenue base. In fact, we achieved $13.1 million in revenue and profitability for the first six months of 2024. To effectively advance our growth initiatives, we have recently relocated our new headquarters in Melville, New York. This move has expanded our square footage by nearly 40%. while maintaining a minimal impact on expenses. We are strategically utilizing this increased space to accommodate the expanding technical, sales, and marketing teams, positioning us to capitalize on the significant opportunities within the market. And as a result of our strategic consolidation of Flagship and Cloud First, we are witnessing an increase in upselling opportunities. Validating this are multiple expanded contracts we announced during the quarter. First, we entered into an expanded contract with a prominent provider of end-to-end business processes. Initially engaged for infrastructure solutions, we are now, through this six-figure contract, delivering managed encrypted backup and recovery services. This expansion underscores our capabilities to meet the evolving needs of our customers and exceed their expectations. More recently, we expanded services as one of the nation's largest suppliers of promotional products, securing a new seven-figure agreement highlighting our continued success. In 2023, we were selected to implement a comprehensive disaster recovery solution for this client. ensuring rapid recovery and enhanced security within a cloud-based environment. This solution included optimization of their network for high-speed, secure switching during disasters or interruptions. Following this successful implementation, the clients selected us to migrate their critical production systems to our new state-of-the-art data center in Chicago. where we will establish a fully monitored and managed private cloud infrastructure solution. Both of these contracts came through Cloud First Division. In fact, Cloud First achieved $4.6 million in revenue for the second quarter and was profitable on a standalone basis. To support the traction and growth of Cloud First, we recently expanded to the United Kingdom with the opening of our London office. We will also be deploying our unique infrastructure platform in two UK data centers, increasing our addressable market. We estimate that the UK marketplace consists of over 50,000 companies that conduct business between the USA and the UK, with over 1.6 million Americans working in the UK. This strategic move represents a significant milestone in our plan to serve our global clientele. and strengthen Cloud First presence in key international marketplaces. Our first step several years ago outside the United States was establishing a footprint in Canada. Cloud First has two power platforms in Canada. In the UK and Canada are the largest trading partners between those two countries. We consider the addressable markets of the USA, UK and Canada to be a significant opportunity. Our cloud infrastructure offerings of cloud hosting, disaster recovery, and cybersecurity solutions will establish data storage, we believe, as one of the few single source, multi-country providers. We are witnessing an increased demand for our solutions, and as a result, we deployed assets to the seventh data center in Chicago. Chicago was strategically selected as it allows us to capitalize on the growing demand within the region, as well as diversify our geographic footprint within the United States. Demonstrating this growing demand and evidence that the IBM Power Service migration is underway is the continued increase in visitors to our Cloud First website, which is over 45,000 in the first six months of 2024. Furthermore, we are expanding our technical and business development teams to provide the support required for our anticipated client growth while maintaining an excellent client renewal rate. We are also continuing to support our nurture list, which contains over 1,000 organizations interested in potential implementation of our services. And we intend to take advantage of these avenues to secure new contracts and increase our footprint within the United States. We are currently serving over 480 companies and are committed to expanding this impressive client base. Data center firms that specialize in window-based infrastructure platforms rely on our expertise in the IBM platform. Collaborating with these infrastructure firms presents an opportunity to broaden our distribution channels, leverage our talented workforce, and optimize our deployed assets. Overall, we are executing on a strategic growth plan, which has resulted in expanded contracts, international expansion, and increased recognition within the industry. We also intend to explore acquisitions that would further our growth while complementing and improving our established operations. Moreover, we believe we have positioned ourselves to success and growth given our reliable solutions, exceptional service, and now international footprint. In addition, we are leveraging the various upselling opportunities as a result of the consolidation of subsidiaries. These strategic initiatives set the stage for long-term profitability. At the same time, we have carefully managed expenses and have preserved a strong balance sheet with approximately $12 million in cash and marketable securities, and no long-term debt at the end of the quarter, which provides us the flexibility 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 our financials. Please go ahead, Chris. Thank you, Chuck.