Data Storage Corporation

Greetings, and welcome to the Data Storage Corporation 2024 Fiscal Third Quarter Business Update. 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, Investor Relations. Thank you. You may begin. Thank you.

Good morning, everyone, and welcome to Data Storage Corporation's 2024 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 2024 Third 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 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 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 believe, expect, anticipate, intend, project, estimate, plan, 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 be 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 other cautionary statements included in the company's quarterly report on Form 10-Q for the quarter ended September 30, 2024, annual reports on Form 10-K, and current reports on Form 8-K, filed with the Securities and Exchange Commission. Any forward-looking statements speak 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 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.

Thank you, Eileen. Good morning, everyone. We have made important progress during the recent months, including penetrating strategic markets, forging important partnerships, and establishing new regional data centers. Before we get into the detail on those achievements, I'd like to report that we generated $5.8 million in revenue for the third quarter. While this reflects a decline of 3% from the previous year, it does align with our strategic focus on building recurring subscription revenue, rather than relying on one-time non-recurring sales. Equipment sales are not our primary strategy, but as I've mentioned in the past, we will continue to support our clients and sell equipment and software. Our primary objective remains the same, securing ongoing service contracts with our enterprise infrastructure platform, which creates a stable revenue foundation and supports our long-term growth and profitability. When we look at a 3 percent decline in revenue, consider the recurring subscription agreements, their length of agreement, and then our excellent renewal rate. While there is a 3 percent decline for the quarter, what's not stated is the increase in baseline revenue for 2025 in monthly subscription billing. We achieved profitability for the three months and a gross profit margin of 43.2% in the third quarter of 2024, up from 38.9% in the same period last year. This improvement is an increase in our infrastructure cloud-based solutions on our enterprise platform. For the nine-month period, we generated $19 million in revenue and achieved profitability. I'd like to get into some of the developments during the quarter. This quarter, we expanded our presence into high-growth, highly regulated sectors where data security, compliance, and reliability are paramount. We expanded our partnerships with a billion-dollar insurance firm that selected us to enhance its cloud infrastructure and cybersecurity framework. This reflects the client's confidence in our reliable security services that we've been providing for years. Additionally, it underscores the strength of our enterprise infrastructure cloud-based platform in supporting large organizations that handle sensitive, compliance-heavy data. Working with such a prominent player validates our focus on the insurance sector. where demand for secure and scalable cloud solutions is increasing, and our services are recognized as above industry standard. In healthcare, another highly regulated industry, we signed a contract with a leading medical center that required robust, compliant cloud hosting service. This agreement highlights our capacity to meet stringent industry requirements for data protection and HIPAA compliance. Healthcare organizations are seeking trusted cloud partners to ensure that data is always accessible, secure, and protected from cyber threats, and this agreement strengthens our position in this sector. We also secured a significant contract in the education sector. partnering with a music publishing organization. This six-figure agreement emphasizes our flexibility in addressing diverse client needs and our adaptability to data-intensive sectors. With the rise of digital learning and content, education and publishing sectors are now required They require secure cloud infrastructure for data storage, content delivery, making this an excellent growth avenue for our solutions. Collectively, we believe that these agreements showcase our growing reputation as a trusted provider in industries with stringent data requirements where reliability, security, and regulatory adherence are critical. We are confident that our expanding footprint in these fields will drive long-term value as we continue to innovate and tailor our offerings to meet the needs of our clients. To accommodate our growing client base in the United States, we expanded our infrastructure platform to Chicago. This facility enhances our national coverage. It reduces latency and straightens our capacity to provide reliable, enterprise-level, high-availability cloud services, especially across the Midwest. With this strategic expansion, we are well-equipped to meet rising demand while ensuring an exceptional client experience. Recently, we provided a letter to our shareholders highlighting achievements within our Cloud First subsidiary, which achieved $5.5 million in revenue for the third quarter and positive net income. This is a direct result of our progress at Cloud First as we continue to be a leader in cloud hosting, disaster recovery, and cybersecurity. Currently serving over 425 companies, across diverse industries, Cloud First is on track to reach over $20 million in projected recurring revenue for 2025, given our 12-month term agreements renew. Not only is our renewal rate excellent at over 90%, our clients continue to add and expand their services with us, an excellent vote of confidence. Our recent expansion into the UK market and the successful integration of flagship solutions further strengthens our global footprint and operational efficiency, setting the stage for accelerated growth and global reach. Recently announced was the appointment of Colin Friedman as Managing Director of Cloud First Europe, an important step of our strategy to expand across the European market and deliver our solutions to this key market. With Colin's leadership experience, we are confident he will be instrumental in accelerating our growth in the region. In addition to his appointment, we are establishing infrastructure deployment in data centers in the UK, positioning us to make a strong entry and enhance our footprint in this key market. These milestones are key steps in our organic growth to capture new opportunities and expand our impact. We're excited to build on this momentum as we continue delivering innovative, reliable solutions and creating lasting value to our shareholders. Over the past nine months, our Cloud First website attracted more than 65,000 visitors, underscoring the growing interest and engagement we are seeing around the IBM power server migration. To support this rising demand, we are strategically expanding our technical and business development teams, readying ourselves to sustain both client acquisition and maintain impressive client renewal rates. Additionally, we are focused on nurturing a significant pipeline of potential clients globally. Our nurture list includes thousands of organizations interested in the potential implementation of our services across various industries and regions. By cultivating these relationships and providing tailored support, our aim is to convert this interest into new contracts. Our new expanded addressable market in Europe and companies doing business cross-border exceeds over 50,000 companies. we have increased our addressable market, positioning ourselves with enterprise-level infrastructure with assets deployed in 11 data centers by January 2025. We are positioned to capture the migration. These initiatives allow us to engage with future clients while capitalizing on opportunities to expand our reach and solidify our reputation as a leading provider in the space. Overall, we are proud of our execution, including expanding contracts, international reach, and rising industry prominence. This foundation allows us to consider targeted acquisitions that complement and enhance our operations, positioning us for the greatest success as new shareholders see our value and our share price becomes reflective of the value of the company. At the same time, we are in strong financial position with a solid balance sheet, holding $11.9 million in cash and marketable securities and no long-term debt. This stability provides flexibility to invest efficiently, ensuring we are ready to seize growth opportunities that create value for our shareholders. With that, I'd like to turn the call over to Chris Panagiotakos, our CFO, to discuss our financials. Chris? Thank you, Chuck.