Data Storage Corporation

Greetings and welcome to the Data Storage Corporation Fiscal Year 2024 Earnings Call. 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. Please note that this conference is being recorded. I will now turn the conference over to your host, Alexandra Schilt. Vice President of Crescendo Communications, the company's investor relations firm. Thank you, Ms. Schilt. You may begin.

Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 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 2024 fiscal year 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 believes, expects, anticipates, intends, projects, estimates, plans, or 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 these 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 the 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 annual report for the year ended December 31st, 2024, quarterly reports on Form 10Q, and current reports on Form 10K 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 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, Ally. Good morning, everyone. We have made considerable progress throughout 2024, both in terms of financial performance and strategic execution. Through a combination of targeted geographic expansion and a clear focus on our core strengths, we have laid the groundwork to become a global leader in cloud infrastructure services. Today, we wanted a few global, single-source providers of disaster recovery and cloud hosting with multi-cloud solutions. This is especially true in our IBM Power Platform, where our specialization continues to offer valuable marketing and a competitive edge. Before we discuss the developments that we believe are building shareholder value, as well as cloud-first long-term direction, I'd like to begin with a brief overview of our financial performance for 2024 fiscal year. Total revenue for the year grew to $25.4 million, up 2% from $25 million in 2023. While this top-line growth is modest, it reflects deliberate transition away from low-margin, one-time projects towards more predictable, subscription-based, recurring revenue under long-term agreements. Our cloud infrastructure and disaster recovery service business segment delivered strong momentum, with revenue climbing 27% year over year to $12.3 million. These services made up 51% of total revenue, demonstrating the growing importance of our recurring cloud offering to our overall business. We ended the year with annual recurring revenue run rate of 21.5 million, a clear indicator that our business is becoming more subscription-based, stable, and scalable. Net income improved significantly to 513,000, up nearly 71% from 299,000 in 2023. This reflects both margin expansion and more efficient cost structure. Adjusted EBITDA also showed strong growth, reaching $2.37 million compared to $1.64 million last year. This captures our ability to scale the business while maintaining profitability, a key component in our long-term strategy. And our balance sheet remains healthy with $12.3 million in cash and marketable securities and no debt. This provides both operational flexibility and the capacity to invest in future growth. As expected, we experienced a decline in one-time hardware and a slight decrease in managed service revenue, a shift that is aligned with our strategy to prioritize sustainable recurring revenue streams. Looking beyond 2024, our five-year organic growth further illustrates the strength and resilience of our cloud business. Between the first quarter of 2020 In the first quarter of 2025, Cloud First achieved revenue expansion, driven primarily by a subscription-based cloud disaster recovery and hosting services. Over this period, the total quarterly nearly doubled, increasing from 1.86 million in Q1 2020 to 3.54 million in Q1 of 2025, representing a compounded annual growth rate of 18% for cloud-first organic growth. If we include the merger, of Flagship with Cloud First, it is a compounded annual growth rate of 30%. In parallel, we also observed steady growth across all services. Cybersecurity subscription and management expanded. Enterprise clients responded to revolving risk. Software renewals and Office 365 contributed incremental recurring revenue. Efforts to cross-sell and up-sell our clients are underway. This performance reinforces the durability of our recurring model and our ability to expand client value through a broader portfolio of integrated solutions. It also speaks to customer retention, long-term contracts, and increasing reliance on our infrastructure, all of which lay the groundwork for continued organic growth and client acquisition. Now I'd like to turn over to the developments that are setting the foundation for our future growth. One of the most significant milestones of the year was our international expansion into the UK. We were officially launched Cloud First Europe Limited, This move established a regional presence and a long-term growth platform to serve a broader European market. We supported this expansion through key partnerships with BrightSolid in Scotland and Pulseit in England. We enabled the successful deployment of three Tier 3 data centers in the UK. These facilities allow us to deliver our cloud platform and disaster recovery solutions within the U.K. borders in full compliance with strict regulatory requirements. This capability represents a powerful differentiator. Very few companies can provide an IBM Power Cloud platform with migration services and support across the U.S., Canada, and the U.K. with consistent enterprise grade-level service levels and regional compliance. To lead this new market, we appointed Colin Friedman as Managing Director of Cloud First Europe. Colin brings deep industry knowledge and leadership experience, and under his guidance, we are expecting some great things. In addition to our geographic expansion, we also executed Structural Milestone, the merger of Flagship and Cloud First in January of 2024. This integration enhances our internal efficiency, consolidates technical capabilities, and creates a stronger go-to-market engine. By unifying our teams and solutions, we are now better positioned to cross-sell cloud and managed services across both legacy and new client accounts. Today, we serve over 500 clients across a wide range of industries, and the operational synergies are already evident. translating into measurable improvements in client engagement and service delivery, as well as revenue growth. In 2024, also a year in which the market increasingly recognized our value proposition, particularly sectors with complex compliance and security requirements. Some examples of client engagements include a six-figure cloud infrastructure deal with the Canadian division of a leading Japanese motorsport manufacturer, addressing complex hosting and security needs. An expanded engagement with a billion-dollar insurance company, adding new cybersecurity infrastructure services to an existing relationship, a strong voter confidence in both our capabilities and partnership model, a contract with a major U.S. medical center provider, a HIPAA-compliant cloud solution, further strengthening our presence in the healthcare sector. These contracts are more than just revenue wins. They reflect our ability to deliver mission-critical solutions to organizations with stringent compliance and performance requirements. To support our growing client base, we continue to invest in platform expansion. In the U.S., we added a new Tier 3 data center in Chicago, boosting performance for clients in the Midwest and adding redundancy to our North American network. With this addition, our global infrastructure footprint now spends 10 data centers. This provides the high availability, geographic diversity, and performance optimization required by enterprises, particularly those with multi-site cross-border operations. We also observed strong growth in market awareness. In 2024, our Cloud First website attracted over 84,000 unique visitors, signaling rising interest in IBM Power Cloud migration, continuity services, and hybrid infrastructure solutions. We have also built a sales lead funnel, and our nurture list includes thousands of organizations, many with multi-location operations and complex compliance needs. With an estimated total addressable market in Europe and cross-border, IBM organizations exceeds 50,000 companies. Overall in 2024 was a year of execution, as the results speak for themselves. We grew our recurring cloud business, improved our bottom line, expanded internationally, and integrated our operations to better serve a global market. As we enter 2025, a strong financial foundation, a high retention recurring revenue model, an international cloud platform, and a clear strategy to capitalize on the growing demand, particularly in regulated and global enterprise markets. Selling general and administrative expenses to the year end of December 31st, 2024 were $11 million, an increase of $1.5 $1.4 million, or 13%, as compared to $9.7 million for the year December 31st. The increase primarily due to increasing professional fees, stock-based salaries, and travel. The adjusted EBITDA for the year for December 31st, 2024, was $2.4 million compared to the adjusted EBITDA of $1.6 million for the year ended December 31st. Chris, I'm going to send it back to you, okay?