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Data Storage (DTST) - 2024 Q2 - Earnings Call Transcript
DTSTData Storage (DTST)2024-08-14 20:09
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Financial Data and Key Metrics Changes - The company generated 4.9millioninrevenueforQ22024,adeclineofapproximately4.9 million in revenue for Q2 2024, a decline of approximately 1 million or 17% compared to 5.9millioninQ22023,primarilyduetolowerone−timeequipmentsales[14]−Grossprofitmarginincreasedto495.9 million in Q2 2023, primarily due to lower one-time equipment sales [14] - Gross profit margin increased to 49% in Q2 2024, up from 43.7% in the same period last year, reflecting improved profitability and operational efficiency [7] - Adjusted EBITDA for Q2 2024 was 164,000, down from 350,000inQ22023,indicatingadecreaseinoperationalprofitability[16]−NetlossattributabletocommonshareholdersforQ22024was350,000 in Q2 2023, indicating a decrease in operational profitability [16] - Net loss attributable to common shareholders for Q2 2024 was 244,000, compared to net income of 226,000inQ22023[16]BusinessLineDataandKeyMetricsChanges−CloudFirstdivisionachieved226,000 in Q2 2023 [16] Business Line Data and Key Metrics Changes - Cloud First division achieved 4.6 million in revenue for Q2 2024 and was profitable on a standalone basis, indicating strong performance in cloud services [9] - Infrastructure and disaster recovery cloud services increased by 29% for the first six months of 2024, contributing to overall revenue growth [14] Market Data and Key Metrics Changes - The company opened a new office in London to expand its market presence in the UK, targeting over 50,000 companies that conduct business between the USA and the UK [10] - The company is witnessing increased demand for its solutions, with over 45,000 visitors to its Cloud First website in the first half of 2024 [11] Company Strategy and Development Direction - The company is focusing on recurring revenue contracts and has strategically relocated its headquarters to accommodate growth in technical, sales, and marketing teams [7][8] - Plans for international expansion include establishing a presence in the UK and Canada, aiming to become a single-source, multi-country provider of cloud services [11][13] - The company is exploring acquisitions to further enhance growth and improve operations [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth potential and the effectiveness of their strategic initiatives, emphasizing the importance of recurring revenue and client retention [6][39] - The company is committed to maintaining a strong balance sheet with approximately 12millionincashandnolong−termdebt,providingflexibilityforfutureinvestments[13]OtherImportantInformation−Selling,general,andadministrativeexpensesincreasedby1312 million in cash and no long-term debt, providing flexibility for future investments [13] Other Important Information - Selling, general, and administrative expenses increased by 13% in Q2 2024 compared to Q2 2023, primarily due to higher advertising and professional fees related to international expansion [15] - The company is actively nurturing a list of over 1,000 organizations interested in its services, aiming to secure new contracts [12] Q&A Session Summary Question: Annual recurring revenue comparison with the first quarter - Management indicated that the company is close to break-even on a recurring revenue basis, with a dependency on equipment sales gradually decreasing [22] Question: Update on new business pipeline and backlog - The remaining contract value as of June 30 was approximately 31.5 million, with a renewal rate of 82 clients since January [25][26] Question: Status of UK expansion - Management confirmed the establishment of a branch office in the UK and plans to deploy equipment in Q4, with services going live in January [33] Question: Growing the distribution network - The company is focusing on expanding both direct sales and channel partners, targeting experienced sales representatives and IT automation [35][37]