Core Insights - Data Storage Corporation reported strong growth in its core business, particularly in higher-margin, recurring subscription sales, with total sales of $5.1 million in Q2 2025, up 4.8% year-over-year [2][3] - The company proposed a $40 million sale of CloudFirst Technologies Corporation, which would yield approximately $24 million in net proceeds, subject to shareholder approval [2][3] - A tender offer to repurchase up to 85% of outstanding common stock has been authorized, aimed at returning capital to shareholders while retaining funds for future growth initiatives [2][3] Financial Performance - For the second quarter of 2025, total sales reached $5.1 million, reflecting a 4.8% increase from $4.9 million in Q2 2024 [3][15] - Gross profit for the quarter was $2.5 million, maintaining consistent margin levels [3][15] - The company ended the quarter with $11.1 million in cash and marketable securities, indicating a solid liquidity position [3][15] Strategic Initiatives - The proposed sale of CloudFirst is intended to unlock value and allow the company to focus on high-growth sectors such as artificial intelligence and cybersecurity [2][3] - Regardless of the sale's outcome, the company plans to evolve into a technology-driven enterprise and may pursue a corporate rebranding [2][3] - The annual meeting for shareholder approval of the proposed transaction is scheduled for September 10, 2025 [2][3]

Core Points - Data Storage Corporation (DSC) plans to host a conference call on August 14, 2025, at 11:00 a.m. Eastern Time to discuss its progress and financial results for Q2 2025, which ended on June 30, 2025 [1] - The conference call will be accessible via telephone and webcast, with specific dialing instructions provided for both U.S. and international callers [2] - A replay of the conference call will be available on the company's website until February 14, 2026, and a telephone replay will be accessible for a limited time following the call [3] Company Overview - Data Storage Corporation, listed on Nasdaq as DTST, focuses on providing solutions that ensure business continuity, improve business processes, and enhance efficiency while aiming to build shareholder value [4]

Core Viewpoint - Data Storage Corporation has entered into a definitive agreement to sell its subsidiary, CloudFirst Technologies Corporation, to Performive, aiming to enhance CloudFirst's growth and explore strategic opportunities for shareholder value [1][2][4]. Group 1: Transaction Details - The sale of CloudFirst is subject to customary closing conditions and requires approval from Data Storage Corporation's shareholders at the annual meeting scheduled for September 10, 2025 [1][3]. - CloudFirst will continue to operate under its established brand, with its leadership team and support staff remaining unchanged [2][4]. - The transaction is expected to provide CloudFirst with strategic backing for continued growth in a private setting [4][7]. Group 2: Financial Implications - If approved, Data Storage Corporation plans to use the proceeds from the sale, along with existing cash, to repurchase up to 85% of its outstanding shares through a tender offer [3][7]. - Remaining funds after the tender offer will be allocated towards strategic growth through acquisitions in high-growth sectors such as AI-enabled SaaS, cybersecurity, and healthcare automation [3][7]. Group 3: Management Commentary - The CEO of Data Storage Corporation emphasized the long-term value created by CloudFirst and expressed confidence in the future, highlighting that operations at CloudFirst will remain unchanged during the approval process [4][7]. - The CEO also noted that the public markets have not adequately reflected CloudFirst's value, and the transaction is seen as a way to return value to shareholders while pursuing growth opportunities [4][7].

Financial Performance - Sales for the three months ended March 31, 2025, decreased by approximately 2% to $8,083,756 compared to $8,235,747 for the same period in 2024[109] - For the three months ended March 31, 2025, the total net income was $26,388, with CloudFirst Technologies reporting a net income of $1,077,591[134] - Adjusted EBITDA for the same period was $497,135, with CloudFirst Technologies contributing $1,502,880[134] - For the three months ended March 31, 2024, the total net income was $345,904, with CloudFirst Technologies reporting a net income of $914,372[136] - Adjusted EBITDA for the same period was $680,318, with CloudFirst Technologies contributing $1,273,394[136] Revenue Breakdown - Revenue breakdown for Q1 2025: 44% from equipment and software sales, 42% from cloud infrastructure & disaster recovery services, 10% from managed services, and 4% from Nexxis VoIP services[109] Expenses - Cost of sales for Q1 2025 was $5,223,860, a decrease of $45,415 or 1% compared to $5,269,275 in Q1 2024[112] - Selling, general and administrative expenses increased by $199,728 or 2% to $2,952,405 in Q1 2025, primarily due to higher salaries and professional fees[113] Cash Flow - Cash used in operating activities for Q1 2025 was $1,099,807, compared to $318,624 in Q1 2024, primarily due to a decrease in net income[127] - Net cash provided by investing activities totaled $786,575 in Q1 2025, compared to net cash used of $302,006 in Q1 2024, reflecting a significant increase[128] Working Capital - The Company's working capital increased to $12,440,644 on March 31, 2025, up by $570,730 from $11,869,914 at December 31, 2024[125] Non-GAAP Measures - Non-GAAP adjustments for the three months ended March 31, 2025, included $363,379 for depreciation and amortization and $226,265 for stock-based compensation[134] - Non-GAAP adjustments for the three months ended March 31, 2024, included $295,198 for depreciation and amortization and $171,235 for stock-based compensation[136] - The company emphasizes that Adjusted EBITDA should not be considered in isolation from GAAP results, as it may differ from other companies' measures[132] - The company plans to disclose different non-GAAP financial measures in the future to help investors evaluate its results more meaningfully[132] Strategic Initiatives - The integration of Flagship Solutions into CloudFirst was completed in January 2024, enhancing operational synergies and cross-selling opportunities[107] - Data Storage Corporation expanded into the UK and European markets in October 2024, investing in regional operations and partner recruitment[108] Interest Income - Interest income for the three months ended March 31, 2025, was $(120,906), while for the same period in 2024, it was $(143,369)[134][136] Off-Balance Sheet Arrangements - The company does not have any off-balance sheet arrangements or relationships with unconsolidated entities[131] Recurring Revenue Potential - The Company believes its total contract value of subscription contracts exceeds $10 million, indicating strong recurring revenue potential[123]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $8.1 million, a decrease of approximately 2% compared to $8.2 million in Q1 2024, primarily due to a decrease in one-time equipment sales [16][17] - Gross profit was $2.86 million, maintaining margin stability, while adjusted EBITDA was $497,000, down from $680,000 in the previous year [6][18] - Net income attributable to common shareholders was $24,000, compared to $357,000 in Q1 2024 [18] - Cash and marketable securities at the end of Q1 2025 were approximately $11.1 million, down from $12.3 million at the end of 2024 [18] Business Line Data and Key Metrics Changes - Core cloud infrastructure and disaster recovery services grew by 14% year-over-year, indicating strong performance in these segments [5] Market Data and Key Metrics Changes - The company is expanding its infrastructure footprint and partner ecosystem in the UK, which is expected to enhance its market position [10][12] Company Strategy and Development Direction - The company aims to become a global leader in cloud infrastructure services, focusing on high-margin recurring revenue and expanding its global infrastructure [13][14] - The strategy includes forming strategic partnerships to enhance service delivery and meet client needs in regulated industries [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a disconnect between operating fundamentals and current equity valuation, emphasizing the need to unlock shareholder value [12][60] - The company is actively evaluating strategic alternatives to enhance long-term shareholder value [60] Other Important Information - The company remains debt-free, which is viewed as critical for exploring future growth opportunities [7] - The ongoing migration to cloud services is seen as a significant opportunity, with IBM estimating $90 million in annual revenue migration [26] Q&A Session Summary Question: Status of European Expansion - The company has established approximately 10 partnerships in the UK and is training local sales teams to promote their services, with revenue expected to start in Q4 2025 [21][22][24] Question: European Market Shift to Cloud Services - Management noted that security concerns are being overcome, and there is a significant migration to cloud services, positioning the company well in the market [27][28] Question: Financial Reporting and Guidance - The company plans to file its Form 10-Q today, with annual recurring revenue estimated to be over $22 million for the year [36] - The total contract value is over $41 million, with a high renewal rate expected [37][41] Question: Strategic Alternatives and Shareholder Value - Management is considering various strategic alternatives to address the valuation disconnect, including potential share buybacks and other measures to enhance shareholder value [51][60]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $8.1 million, a decrease of approximately 2% compared to $8.2 million in Q1 2024, primarily due to a decrease in one-time equipment sales [17][18] - Gross profit was $2.86 million, maintaining margin stability, while adjusted EBITDA was $497,000, down from $680,000 in Q1 2024 [5][19] - Net income attributable to common shareholders was $24,000, compared to $357,000 in Q1 2024 [19] - Cash and marketable securities at the end of Q1 2025 were approximately $11.1 million, down from $12.3 million at the end of Q4 2024 [19] Business Line Data and Key Metrics Changes - Core cloud infrastructure and disaster recovery services grew 14% year over year, indicating strong performance in these segments [5] Market Data and Key Metrics Changes - The company is expanding its infrastructure footprint and partner ecosystem in the UK, which is expected to enhance its market position [10][12] Company Strategy and Development Direction - The company aims to become a global leader in cloud infrastructure services, focusing on high-margin recurring revenue and expanding its global infrastructure [13][14] - The strategy includes forming strategic partnerships to enhance service delivery and meet client needs in regulated industries [10][12] - The company is not pursuing commodity cloud workloads but is focused on delivering enterprise-grade solutions [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a disconnect between operating fundamentals and current equity valuation, emphasizing the need to unlock shareholder value [12][61] - The company is actively evaluating strategic alternatives to enhance long-term shareholder value [61] Other Important Information - The company remains debt-free, which is viewed as critical for exploring future growth opportunities [6] - The company has established approximately 10 partnerships in the UK and is training local sales teams to promote its services [22][23] Q&A Session Summary Question: Status of European Expansion - The company has invested in the UK and established a team, with expectations for revenue to start in Q4 2025 [22][24] Question: European Market Shift to Cloud Services - Management noted that there is significant migration to cloud services, with security concerns being addressed [26][28] Question: Financial Reporting and Guidance - The company plans to file its Form 10-Q today and expects annual recurring revenue to be slightly over $22 million for the year [37][38] Question: Strategic Alternatives and Valuation Disconnect - Management is considering various strategic alternatives to address the valuation disconnect and has been encouraged to provide financial guidance [50][56]

Financial Performance - Total revenue for Q1 2025 was $8.1 million, reflecting a 14% year-over-year growth in Cloud Infrastructure and Disaster Recovery services[4] - Adjusted EBITDA for the quarter reached $497,000, demonstrating the company's commitment to operational efficiency and margin discipline[4] - Gross profit totaled $2.86 million, maintaining consistent margin levels compared to previous periods[4] - Net income attributable to common stockholders for Q1 2025 was $24,078, compared to $357,102 in Q1 2024[18] - Net income for the three months ended March 31, 2025, was $26,388, a decrease of 92.4% compared to $345,904 in the same period of 2024[20] - Adjusted EBITDA for the total company was $497,135 for the three months ended March 31, 2025, compared to $680,318 for the same period in 2024, reflecting a decline of 26.9%[22][24] Cash Flow and Assets - Cash and marketable securities amounted to $11.1 million, with no long-term debt reported[4] - Cash used in operating activities was $(1,099,807) for Q1 2025, significantly higher than $(318,624) in Q1 2024, indicating increased cash outflow[20] - Total cash at the end of the period was $705,557, up from $640,742 at the end of Q1 2024, showing a year-over-year increase of 10.5%[20] - The company reported a total asset value of $26.93 million as of March 31, 2025, an increase from $25.28 million at the end of 2024[16] - The company experienced a net decrease in cash of $(364,540) in Q1 2025, compared to a net decrease of $(787,988) in Q1 2024, showing improved cash management[20] Expenditures and Liabilities - Capital expenditures for Q1 2025 were $(67,519), a decrease of 81.2% compared to $(358,637) in Q1 2024, indicating reduced investment in capital assets[20] - The company reported a significant increase in accounts payable and accrued expenses, totaling $1,373,552 in Q1 2025, compared to $2,226,932 in Q1 2024, reflecting a decrease of 38.3%[20] - Cash paid for interest in Q1 2025 was $489, a substantial decrease from $8,855 in Q1 2024, indicating lower interest expenses[20] Operational Highlights - The company experienced a modest decline in total revenue due to reduced equipment sales, aligning with its strategic focus on building a stable high-margin, recurring revenue client base[3] - CloudFirst Technologies continues to operate profitably on a standalone basis, serving as a scalable, recurring revenue engine[3] - The partnership with Pulsant enables the company to extend its IBM Power-based cloud offerings across the U.K. and Europe, enhancing its market presence[3] Depreciation and Credit Quality - The company recorded depreciation and amortization of $363,379 in Q1 2025, an increase of 22.9% from $295,198 in Q1 2024, reflecting higher asset depreciation[20] - The company reported a change in expected credit losses of $(6,995) in Q1 2025, indicating a potential improvement in credit quality compared to no losses reported in Q1 2024[20]

Core Insights - Data Storage Corporation (DSC) reported solid financial performance for Q1 2025, with a focus on strategic growth and international expansion [2][6][7] - The company achieved a 14% year-over-year revenue growth in its core cloud infrastructure and disaster recovery services, despite a slight decline in total revenue due to reduced equipment sales [2][7] - DSC's adjusted EBITDA for the quarter was $497,000, reflecting operational efficiency and a commitment to margin discipline [2][7] Financial Performance - Total revenue for Q1 2025 was $8.1 million, with a gross profit of $2.86 million, maintaining consistent margin levels [7][17] - The company reported a net income of $26,388 for the quarter, a decrease from $345,904 in the same period last year [17][18] - Cash and marketable securities stood at $11.1 million, with no long-term debt, indicating a strong balance sheet [7][19] Strategic Developments - DSC's subsidiary, CloudFirst Technologies, continues to operate profitably and serves as a scalable, recurring revenue engine [2][6] - A strategic partnership with Pulsant, a U.K. edge data center provider, aims to enhance DSC's service offerings across the U.K. and Europe [2][6] - The company completed a major infrastructure upgrade for a client in the food distribution sector, migrating to high-performance IBM processors [2][6] Market Position - DSC is recognized as a leader in the multi-billion-dollar cloud hosting and business continuity market, providing comprehensive migration services to facilitate transitions to cloud infrastructure [8][11] - The company serves a diverse clientele, including Fortune 500 companies, government agencies, and healthcare organizations, highlighting its broad market reach [10][11]

Core Viewpoint - Data Storage Corporation (DSC) is set to host a conference call on May 15, 2025, to discuss its financial results for Q1 2025, which ended on March 31, 2025 [1] Company Overview - Data Storage Corporation is a leading provider of multi-cloud hosting, managed cloud services, disaster recovery, cybersecurity, and IT automation, integrating with major cloud platforms like AWS, Microsoft Azure, and Google Cloud [1][4] - The company offers comprehensive migration services to facilitate secure and efficient data transfer from on-premises systems to the cloud, minimizing downtime and optimizing performance [4] Service and Infrastructure - DSC operates a cloud platform built on IBM Power Cloud infrastructure, delivering high-performance, scalable, and secure cloud solutions with interoperability across its partners [5] - The company utilizes Tier 3 data centers to support its CloudFirst platform deployments across the United States, Canada, and the United Kingdom, serving a diverse clientele including Fortune 500 companies, government agencies, educational institutions, and healthcare organizations [6] Market Position - As a leader in the multi-billion-dollar managed cloud hosting and business continuity market, DSC is recognized for its expertise in cloud infrastructure, IT modernization, and data migration, enabling clients to transition to the cloud with confidence [7]

Revenue and Financial Performance - In 2024, the Company reported total revenue of $25.4 million, with over 80% derived from recurring sources such as cloud-based hosting and disaster recovery solutions[36]. - Revenue for the year ended December 31, 2024, increased by approximately 2% to $25,371,303 compared to $24,959,576 for the year ended December 31, 2023[166]. - The Company derived approximately 51% of revenue from infrastructure & disaster recovery/cloud services, 31% from equipment and software sales, 12% from managed services, and 5% from Nexxis VoIP services for the year ended December 31, 2024[166]. - The Company reported net income attributable to common shareholders of $523,214 for the year ended December 31, 2024, compared to $381,575 for 2023, indicating a year-over-year increase of approximately 37%[52]. - Adjusted EBITDA for the year ended December 31, 2024, was $2,365,238, compared to $1,639,388 for 2023, reflecting an increase in operational performance[191]. - Cash provided by operating activities for the year ended December 31, 2024, was $1,740,089, a decrease from $3,873,047 in 2023, primarily due to an increase in accounts receivable of $1,010,880[185]. - The company's working capital increased to $11,869,914 on December 31, 2024, up by $858,507 from $11,011,407 at the end of 2023[182]. Customer Base and Retention - The Company has a contract renewal rate exceeding 90%, positioning it to maintain and expand its customer base[36]. - The Company ended the year with a $21.5 million Annual Recurring Revenue (ARR) run rate[36]. - The Company has historically maintained over 90% annual subscription renewal rates, reflecting strong customer retention[164]. - For the year ended December 31, 2024, two customers each accounted for 12% of the Company's revenue, while in 2023, two customers accounted for 12% and 10% respectively, highlighting dependency on a limited customer base[69]. - The Company’s client base exceeds 425 organizations across diverse sectors, indicating broad market demand for its services[164]. Operational and Strategic Developments - The integration of Flagship Solutions into CloudFirst was completed in January 2024, enhancing operational synergies and cross-selling opportunities[23]. - The Company is focused on expanding its cloud footprint and cross-selling its full suite of solutions to meet evolving client needs[34]. - The Company plans to continue acquiring complementary solutions and services, which may divert management's attention and increase operating costs[58]. - The Company anticipates ongoing international expansion, which will require substantial investment in marketing and localized services[106]. Risks and Challenges - The competitive landscape for cloud solutions is intense, with significant competition from established players like IBM, Microsoft, Google, and AWS, which may impact the Company's market position[70]. - The Company is exposed to risks related to cybersecurity, as breaches could disrupt its data protection services and harm its reputation[76]. - The Company faces challenges in retaining existing customers, and a significant decrease in retention rates could necessitate higher marketing expenses to maintain revenue[89]. - The Company must maintain effective advertising and marketing strategies to attract new customers, as failure to do so could lead to increased expenses and reduced operating results[55]. - The Company is subject to evolving privacy regulations, and any failure to comply could result in legal actions and loss of customer trust[97]. - The Company faces risks associated with international operations, including economic and political instability, currency fluctuations, and differing legal environments[107]. - The Company is exposed to risks from fluctuations in foreign currency exchange rates, which could adversely affect reported earnings[109]. Financial Position and Capital Management - As of December 31, 2024, the Company had cash of $1,070,097 and marketable securities totaling $11,261,006, with working capital amounting to $11,869,914[52]. - The Company does not expect to declare any cash dividends in the foreseeable future, meaning shareholders may need to rely on share price appreciation for returns[138]. - The Company may face challenges in raising additional capital due to market conditions and the potential dilution from outstanding securities[136]. - The Company has received a Notification Letter from Nasdaq confirming compliance with audit committee requirements, thus maintaining its listing on The Nasdaq Capital Market[134]. Compliance and Regulatory Matters - The Company must comply with HIPAA and HITECH regulations, which include privacy standards that protect individual health information[99]. - The Company may face penalties for non-compliance with federal and state standards regarding patient privacy, which could adversely affect its business[100]. - The Company maintains a cyber risk management program that includes annual risk assessments to identify and mitigate cybersecurity threats[142]. Market and Economic Conditions - The Company's revenue is heavily concentrated in the U.S., making it vulnerable to fluctuations in demand within this market[91]. - The Company's operations could be negatively impacted by changes in trade policies and economic conditions, affecting its financial results[119].