Q1 2024 Data Storage Corp Earnings Call
Ladies and gentlemen, good morning, and welcome to the data storage Corporation first quarter 'twenty 'twenty four earnings conference call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation if.
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 does now my pleasure to introduce your host Alexandra shelf Investor Relations. Please go ahead.
Thank you.
Morning, everyone and welcome to data storage Corporation's 2024 first quarter business update conference call on the call. This morning are Chuck <unk>, Chairman and Chief Executive Officer, and Chris How did your tacos Chief Financial Officer. The company issued a press release this morning containing a 'twenty 'twenty four first 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 2126711020.
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.
When did that are intended to be covered by the safe Harbor created thereby.
The 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 beliefs expects anticipates intends.
Tax estimates plans or similar expressions or future or conditional verbs, such as well showed wood may and could.
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 hunting correct important factors that could cause actual results to differ materially from the company's expectations include but not are but are not limited to attempt.
<unk> ability to benefit from the IBM cloud migration underway, the company's ability to position itself for future profitability and the companys ability to maintain its Nasdaq listing.
These risks should not be construed as exhaustive exhaustive and should be read together with other cautionary statements included in the company's quarterly report on Form 10-Q for the quarter.
And in March 31, 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 to so please go ahead Chuck.
Thank you Allie and good morning, everyone.
We continue to execute on our business growth strategy, including securing new contracts with high profile clients as well as streamlining our operations for efficiency.
As a result of our efforts we witnessed a 20% increase in revenue to $8 2 million for.
For the first quarter of 2024.
Additionally, our gross profit increased 42% with the gross profit margin increasing to 36% from 30% demonstrating the success and scalability of our business model.
Importantly, we achieved profitability for the first quarter and believe as we continue to execute our strategic initiatives, we will continue to grow revenue and increased profitability.
We began the year by consolidating our flagship subsidiary inter cloud first.
This strategic decision combines the unique strengths and expertise of the respective business units positioning us to optimize operations leverage technical teams realize greater efficiencies and improve internal resource allocation.
As a result, we expect to enhance our cross selling and up selling opportunities.
Our customer networks, ensuring continued delivery of outstanding value with.
With the experienced leadership teams and combined organizations at both cloud first and flagship we are confident in our ability to establish a scalable organization prime for accelerated growth.
Let's discuss these contracts that occurred in the first quarter first we expanded our contract with an existing multinational telecommunications company.
This is a six figure contract we're very proud of our successful collaboration with this multinational corporation spanning over 12 years.
Our existing equipment and services, we developed a custom solution. We are now implementing an innovative disaster recovery backup solution boasting advanced technology.
This solution enhances their storage capacity, while reducing tape usage and ensuring compliance across multiple countries.
With installation moving smoothly, we eagerly anticipate the continued expansion of our collaboration with this organization.
Furthermore, one of the largest insurance companies in the United States has chosen to migrate its data center to the cloud for one of its divisions alongside the cloud migration, we were delivering hosting and managed services and incorporating a comprehensive suite of advanced security solutions to uphold the utmost stay.
And it's of data protection and compliance.
Following an assessment of numerous providers the insurance company opted for our services for its critical undertaking the decision was influenced by our company's exceptional reliable data circuits and proven track record in delivering data management and cloud services to fortune 500 companies.
And top tier financial firms.
We believe this contract underscores our ability to address the requirements of prominent enterprises and our commitment to advancing technology that fosters our clients growth.
Being selected illustrates the significance of our offering and the importance of robust security measures in todays digitally driven and risk latent business landscape.
We are confident that our solutions will deliver exceptional results and paved the way for expanding our solutions across additional divisions and geographic geographies in the future.
As I discussed in our last call part of our strategy is international expansion.
There is demand for our solutions globally, and we are proud to report the opening of cloud first London office and.
The second quarter of this year.
This strategic expansion marks a significant milestone in our strategy to serve our global clientele and further cloud first presence in key global markets, while increasing our international footprint and further supporting our current.
Multinational clients.
In addition, we recently moved to new and expanded headquarters in Melville New York.
We're excited about our new space, which we increased square footage by nearly 40% without a substantial rise in expenses.
These new offices are designed to bolster our growth encompassing accounting.
Technical teams sales and marketing initiatives.
Further validation of the demand for our solutions is to continue increase in visitors to our website, which was over 43000 in the first quarter of this year.
We also continue to support our nurture list, which contains thousands of organizations interested in potential implementation and education of our services.
We intend to take advantage of these avenues to secure new contracts and increase our footprint within the market.
Currently we served more than 450 companies and strive to expand this impressive client base.
Data center firms specializing in window based infrastructure platforms rely on us for expertise in the IBM platform.
Partnering with these infrastructure firms offer a chance to broaden our distribution channels leverage our talented staff and optimize our deployed assets.
And before I turn this over to Chris for a review of our financials I'd like to discuss our new board members.
Clint Stein returned to our board of directors Cliff is a seasoned entrepreneur the depth executive with over 30 years experience in establishing and managing a thriving real estate advisory firm his background as a skilled attorney further enriches. His expertise we are confident the cliffs skill set.
A large and valuable guidance to the company as we pursue growth whether through organic means or strategic acquisitions, having previously served on our board and contributes enormous numerous strategic growth initiatives. We're excited about is renewed engagement.
In addition, we appointed Nancy Stallone and you Wayne Mitchell.
Net is impressive background in corporate finance orbiting accounting will be instrumental as we pursue strategic growth initiatives, including international expanding expansion and exploring potential acquisitions.
Do you wait Mitchell's legal proficiency combined with his expertise in data privacy cyber security and technology will greatly enhance our board and support our growth.
We remain committed to upholding the highest standards of corporate governance and look forward to their contributions as we advance our business model.
Overall with continued execution of our strategic plan, we achieved profitability for the first quarter secured new and expanded contracts increased our penetration with the domestic market and actively expanded into international markets.
We are also exploring potential acquisitions that would assist and support our growth and more importantly complement and improve our current operations.
We believe that our company has reached a pivotal moment.
We are exceptionally well positioned to enter key international markets leverage Upselling and cross selling potentials for our offerings and secure additional subscription based contracts.
These strategic initiatives set the stage for long term profitability.
At the same time, we've carefully managed our expenses and that preserves a strong balance sheet with over $11.9 million in cash and marketable securities.
No long term debt as of 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 this over to Chris penetrated Taco sauce, CFO will discuss our financials. Please go ahead, Chris. Thank you Chuck Good morning, everyone total revenue for the three months ended March 31, 2024 was $8 $2 million, an increase of 20% compared to $6 $9 million for the three months ended March.
31 2023.
The increase is primarily attributed to an increase in it infrastructure and disaster recovery cloud services and equipment and software sales cost of sales for the three months ended March 31, 2024 was $5 $3 million, an increase of 10% compared to $4 $8 million for the three months ended.
March 31, 2023, an increase of 10% was mostly related to the increase in infrastructure and disaster recovery cloud services and equipment and software sales.
Selling general and administrative expenses for the three months ended March 31, 2024, or $2 $8 million, an increase of approximately 620000 or.
Or 29% as compared to $2 $1 million for the three months ended March 31 2023.
The increase was primarily due to an increase in advertising expense commission expense salaries and head count growth.
Adjusted EBITDA for the three months ended March 31, 2024 was $680000 compared to adjusted EBITDA of $336000 for the same period last year.
Net income attributable to common shareholders for the three months ended March 31, 2024 was $357000 compared to $50000 for the three months ended March 31 2023.
We ended the year with cash and marketable securities of approximately $11 $9 million at March 31, 2024, compared to $12 $7 million at December 31, 2023.
I will now turn the call back to Chuck.
Thanks, Chris.
I'd like to open it up for questions. If we have any.
Thank you, ladies and gentlemen, even now be conducting a question and answer session.
If you'd like to ask a question. Please press star and one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press star and two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
Speaker Change: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Our first question is from the line of Matthew <unk> with Maxim Group. Please go ahead.
Hey, Thanks for taking my questions and congratulations on the strong.
The first quarter.
Firstly can you touch on maybe the pipeline of.
Speaker Change: Fortune 500.
Customer opportunities and kind of scope expansion opportunities within your existing customer base.
Yeah.
Well.
Speaker Change: I cant segment that fortune 500 companies.
First of all good morning, Matt and thank you for the question.
I can't separate with Fortune 500, and what's not within the base, but I can tell you that our pipeline today is around a total contract value for around 10 $8 million I believe.
If you average that out you'd see that.
31 months, probably the average term when we look at the term.
Speaker Change: The nonrecurring on that you know on that is around $220000, approximately and I believe that the monthly <unk>.
The amount that's sitting there is approximately $340000. So you know it's it's it's a very solid its very solid pipeline for recurring that's only recurring we're not talking about nonrecurring I always get concerned with the non <unk>.
Recurring it's lumpy.
Sometimes postpone it based on budgets or they're not ready yet. So that's just the recurring piece of it in the past we've always combine the nonrecurring with the recurring but this is the focus on the on the recurring subscription base stuff.
We also have the work in process that's being.
Being installed as we speak so we have no numbers on that along with our remaining contract value, but I think you're asking more about the pipeline correct.
Correct Yep.
Yes, I mean the work in process is also pretty pretty good as well that number well, we'll increase it because with work in process with not having to increase your technical teams and with subscription gross profit margins at 50%, it's a full contribution essentially.
To to profit so I'll work in process numbers are pretty good I haven't given you that I don't know if youre interested in that.
Yes, if you have it and left out here.
It's approximately executed contracts that are being installed are approximately I believe a $100000 of which we'll see some of that in the in the us.
Second quarter, and we will see some of that in the third quarter and.
Hopefully the sooner it goes up the more months of revenue, we get and the more profit, but with a 50% margin.
Typically and we don't believe we have to add technical technicians for that so it's a nice contribution to profit.
Thank you and I wanted to maybe touch on one of the large deals you reference this quarter I think you mentioned you develop to custom.
Sastre Capri solution.
You mentioned reducing tape.
And.
Maybe in here.
Multinational compliance, but I did I understand the scope of that project correctly and was that a lot of custom work or there is that applicable that you could bring to other other potential customers.
You know on the IBM systems. According to the size of the client.
If it's a very large clients. So when we say basically that the marketplace for infrastructure as a service on the IBM platform. This 36 billion and then we believe that.
40% of that 36 billion will actually migrate over the next book.
Say between three and eight years, you are talking about $400 million in annual recurring revenue. So when we think about that other 60%.
The very large.
Companies were saying lets say, 50% because we believe that 10% will migrate offer the platform and we take that 50% the very large they're larger than than any of the companies. So they have their own equipment. They have to buy the equipment. They have to buy tape libraries, they have to maintain software renewal on hardware maintenance.
And Thats deployed internationally. So when we look at these very large accounts there could be using virtual tape libraries are actual tape libraries, and so with that we need to develop custom systems to be able to support.
Support them and come up with unique ways of having them accelerate their recovery to have their file transfers moving fast into their faster into their systems. So that mainly there mainly custom type builds that we do when we get invited in on.
That 50% that we believe will continue to maintain their own equipment and we're there to support that and Thats why youll see our equipment sales you know and software renewal one hardware maintenance and it creates that lumpy situation for us, but we love it and what ends up happening is we support them with our.
Other types of managed services, so, but it you know.
The SaaS to recovery in storage application on these.
On this tape libraries.
So you know that's you have to make that separation between the people that are going to migrate and the people that are so large they have extremely large staff fits you know that youre not going to get Deutsche Bank, Citibank and those folks, they're just bigger than the bigger than anyone but you know for the large customers that we support were there too.
Seldom sell them equipment, which we are in IBM high level partner and and we have the expertise within our technical teams to support sell in increased saw revenue in those areas, but its not recurring typically other than the software renewal and hardware maintenance.
Got it okay, and I'm, sorry, one last follow up and I'll jump back in the queue. So for something like that where you're working on their disaster recovery, but it is not not recurring how do you how do you flow that through your.
The kind of line item buckets that that you'd normally breakout on Q would that hit the disaster recovery and infrastructure line or put that at the software and equipment line or still next to cross border.
It's tricky on that we maintain classes or each of the products that are sold so when you look at subscription recurring revenue. It's typically annual recurring revenue, which is software renewable hardware maintenance subscription services disaster recovery and hosting and then on the <unk>.
<unk> and software line on the financial statements, that's where you'll see equipment.
Equipment.
Speaker Change: Equipment that is sold with the software.
We also keep that software.
Equipment and software.
Anything that is software that that's annual recurring in the equipment and software.
Chart of accounts. So it is it is a bifurcated it is in the financials and it is separated but you know if you wanted to for the breakdown, we were able to break down equipment and the different types as well as the software and whether that's new software or recurring annual recurring software.
So we do break it down, but you would be looking at equipment and software as all of those things that you know our.
Our one time typically.
Got it that's helpful. Thanks.
Thank you. Our next question is from the line of Adam Waldo Lismore Partners. Please go ahead.
Good day, everyone. Thanks for taking my questions. Chuck I Hope you can hear me okay.
Sure Adam Hi, how are you.
Well I hope you're well also.
Doing fine doing well.
So I wanted to explore a few different topics. If we may annual recurring revenue new business development activities.
And then sort of what we think the ongoing incremental margin structures of the business will look like now that you've consolidated cloud person flagship during the first quarter on.
On the AOR side can you give us the dollar value of AOR as you exited the March quarter.
Yeah, Chris.
Don't have it handy, we're going to have to get back to you on that okay.
Fair enough I'll follow up on Oh I'm sorry.
Yes.
If I could so in our annual recurring revenue we have subscription based business and then the software renewal in hardware maintenance is typically in our annual recurring revenue and we.
We keep track of that from a forecasting point of view because it continues to add to the baseline for the next year I think Chris It was somewhere between 17 and $18 million.
Yeah, so yeah, so you're right about that yeah.
Yeah, you're right what you were targeting okay.
Speaker Change: That's great and then.
Speaker Change: Excuse me on the new business development side, obviously, the number of inbound inquiries continues to mushroom through your websites.
What what are you all doing.
Sort of corporate business development standpoint to try to.
Increase the level of those indications of interest into.
Entering the top of your sales funnel with an actual RFP are there are there new initiatives actually redesign the web sites or new initiatives. You are taking on the business development side give us a sense for that as to what you'll be pursuing this year to try to improve convergence there into rfps.
Sure you know it.
It's very very challenging.
What happens is first to make the overall what goes on I'll use the term.
Organizational behavior is.
Is that the folks that are watching this equipment and maintaining this equipment are aging out and investment has been made in the applications that are running so you can graduate from school from computer or whatever software or whatever it is and you can then go work and work on these applications, but managing the equipment.
These folks are aging out so as that happens in retirement happens or whatever it was off to a bad whatever you know in this case of people dying you know the cfos to see I OS.
A concern that these applications have to continue to run so with that this migration is taking place they were ready move maybe a lot of their Intel type stuff over to Amazon and Google and you know the whole cast of thousands that are in that place and so now what are they going to do with this with the <unk>.
B M equipment.
So long story long.
Robley.
More than 10 years ago, I would say more than 10 years ago, I was calling with the sales rep on the international banks in Manhattan. These international banks, all have IBM systems.
Yesterday in my office I'm listening to one of our business development team Jill. She is excellent. She has been with us for a while and I hear of speaking to this international bank and what ends up happening. She got she comes in this is Chuck you, bringing me look look at this lead I. Just told you you know I I didn't get a lead in a little while and all of a sudden you're here you're bringing luck then she goes.
Speaker Change: The sales force and finds out my name is there because I had visited with that international Bank 12 years ago.
So this migration is underway they knew us they knew us because there was a visit there. So when we talk about business development, how Schwartz who is the president of cloud first you know outstanding job on search engine optimization, working with our marketing companies, Google AD words and to get the lead flow going in.
And what ends up happening a phone call happens conversations happening and meet someone who the show and it goes into a nurture list and then we have folks that called this nurture list to see if they're interested in our proposal see what stage they're at it.
It's very hard to say, we're going to go higher 30 people, we're going to go spend all this money on a direct sales force.
And frankly believe.
I believe it might be a failure.
You can have a very strong team, but you cant build what was existing 30 years ago with direct sales force. So a lot has to depend on inbound leads networking tradeshows folks to that you've dealt with it.
<unk> reached out to over 15 years, and you know now that they've moved the platforms off on the Intel side. Many of them. They are calling on us and there are only a few competitors and we are frankly, one of the leaders. We're not you know we do have been tell infrastructure in all of our data centers, we have both but when we advertise.
How has this programs going on it's always geared towards the niche platform that we have which is the IBM platform, but we do both so when we get one for IBM and they haven't migrated yet there. There are eight there are Intel systems, we get that too, but so business development has to do a lot with inbound marketing.
Grams I know it was a long answer Adam, but there's a lot to it but it gives you the idea that you need to be around for a while do you need to be credible you'll have to have these inbound programs. So your high in the rankings, which we are and then you have to have a very strong team that's backed by a strong business development team thats backed by strong.
Nickel team to be able to bring the business in and we're pretty efficient with it.
Very helpful. And then as we go forward, obviously, you haven't consolidated cloud first and flagship now what do we think the sort of steady state approximate range John.
Services gross margin is going to be and what do you think the incremental or variable EBITDA margin on new revenue looks like as you consolidate those operations.
Well you know, we're not really reporting telling anybody would on nonrecurring proposals that are outstanding because some of them are very large and some of them are with existing customers. So when we say well Gee we have.
$10 million proposals outstanding for existing client, we don't know what quarter or what you might even happen in although planning goes on so its concerns us. So when you do see the margins at 38% to 35% or.
Under that 50% you know that its equipment type sales that are happening or a renewal of a large software renewal of hardware maintenance.
So it's very very hard to predict so we have to really separated into two looks flagship in the past was primarily managed services, which also cloud first used to do much more of that and now its slightly different business and selling equipment to.
Large group of.
Of clients.
That's kind of slowed to a degree because we try to move them over so it ends up happening is if you have someone that wants to buy $2 million in equipment. The business development people are in there, saying why are you buying the equipment. We gave you a proposal for that but let's catch on hosting you want to experience and where it's like what puts you up on the trial.
Proof of concept and you can see so what happens is you lose that equipment sale, one time lumpy and you move them over to a could be a 60 month contract for subscription hosting and disaster recovery. So it's very hard to predict what the margins would be but when you do see a margin greater than 45%.
You know that recurring revenue has been high for that quarter.
We'd like to maintain 80% subscription.
<unk> revenue and 20%.
No one time equipment professional services things like that so we like 80 20, but when you start seeing something that 60 40.
The large account came in margins are going to be lighter, but we put more cash from the balance sheet and we still do get from that every year software renewable in hardware maintenance on that equipment. So there is a recurring piece to that.
Okay. Thank you for that color last last one if you'll permit me you opened the new London office in the quarter.
How does that play into your previous initiatives on the value added reseller or distribution partner side in the UK is that going to that London office can be part of that initiative or have you decided to build your own.
Sort of captive sale.
Sales and distribution effort in the U K.
But our plan is to build a distribution channel. So the folks that are working there right now the individual's the.
Their objective is to get distributors and those distributors hopefully have clients that have IBM platforms. Once that's up to a certain level that Hal Schwartz and myself, we're we're comfortable with and.
Where we'll deploy equipment in two data centers. So you know.
These folks are working with.
Data centers today, and the folks that were ready sel and Intel side.
Platform. So we're pretty confident we spent a little time over there.
It's going well early on and.
The company is being registered there.
Were not registered yet we signed the lease and all we've hired a firm that so working on the registration of the company, but there's some very good activity.
We're happy about it at this particular point, but I'll continue to update everybody as it moves along.
Great. Thank you very much.
Hey, Adam this is Chris the <unk> for the quarter was approximately $3 1 billion.
$3 1 million booked in the quarter.
In the quarter correct.
Okay and so.
Is that it's just a straight line <unk>.
And then Chris or Theres no change so yeah. It is.
Timing, it's not Australia line.
Okay. So what does that a is that still annualize out to the $17 million to $18 million that Chuck can you spoke about earlier.
Yes.
Okay. Thank you very much.
Yeah.
Thank you.
Our next question is from the line of Matthew <unk> with Maxim Group. Please go ahead.
Hello, again, just a follow up.
I guess given your comments on.
The.
Go to market.
And then how you sort of go after that that pipeline of.
You know I B M customers that are transitioning or could transition to cloud.
How does that inform your M&A strategy and what sorts of assets would you look at.
Today, if sort of throwing dollars that are building.
Bigger and bigger sales force isn't necessarily the.
<unk>.
The strategy, you're looking for to grow that business.
Matt It's a very interesting question, because you're really as I mentioned you can't go out and find you know 50, $50 30, or 100 sales reps all of a sudden you know and no one wants to meet with people. Typically so you have to have this robust inbound program, but at the same time, having a good reputation and having reached out.
Part of that nurture list. So when we think about pipeline had that pipeline come about well we have distributors, we call channel partners and they have a customer base of folks that are ready to migrate. So those proposals are in there. There's some folks that came in through the Google AD words or up in there.
Our rankings organically on that need to come in that way.
And then we have folks that are out there actively.
That are talking to clients that have purchased equipment you know over the years with flagship with cloud first but when we talk about M&A you know what we look for is folks that will expand our distribution channel. They might have a high level of distributors, maybe you know I talk to accompany a few.
Once ago that they said they had a thousand distributors, but it was under a software product you know and we're still talking to them, but you know it wasn't the type of distributor that I think would align with us. So we've looked at many deals but you know the technical teams distribution, maybe a unique product you know we're looking for certain folks in the cyber.
Space that are there that have a 24 24 hour operations, but not the software itself.
And their partners with the top you know cyber companies, but it's difficult to find companies that we look for between 10 and $15 million that may be when some sort of a covenant default and we can come in and save it but a solid company someone thats looking to retire, but it's a very very difficult. So.
We've decided to do is to continue to look and we even have a call. This afternoon, Hal and I decided.
Decided to continue to look for these M&A opportunities, but the spend the money organically now when we spend the money organically, we're going to get beaten up on our P&L, because that's going to be an expense versus the acquisition, which would be on the balance sheet side, so, but we're going to try to do both so we are spending organically and <unk>.
K was one of those one of those efforts along with the expansion in the U S.
And.
Speaker Change: In the case of M&A, we continue to look for these $10 million to $15 million companies, but a lot of them. It's a it's a tough segment to look at and with the 11 $12 million from the balance sheet, we don't want to wipe that out we want to keep cash on the balance sheet. The company is very stable very solid great margins, a great customer base fans.
Tastic renewal rate.
We don't want to go jump in and have a situation where someone's going to make us bleed because they are burning.
That burned $2 million, a year and they've been in business for five years. So we're looking at everything in answer to your question Matt.
I appreciate that.
Speaker Change: Thank you.
Ladies and gentlemen, a reminder, if you wish to ask a question. Please press star and one.
Our next question is from the line of Bobby Cohan with module Monday capital. Please go ahead.
Hi, Chop God. This is Bobby Cohen I had a one broad brush question.
When do you project download one from international.
Well today, Hi, Bobby the today, we have international customers today, So we generate revenue internationally from folks that we serve and I think in like.
Speaker Change: The estimate around eight countries.
That we already have it we have equipment with a partner in France.
Were there. So you know we were serving.
The tankage Haiti, so we have that I would say, though to answer the question directly I would expect that over the next 90 days we would have.
Have enough information to be able to decide.
Decide to deploy equipment I think we spoke about it.
As a company strategically that we should know within 90 days on the distribution and then I would look at the September timeframe, we've been talking about how on myself and Chuck pillow or our CTO.
And we think that that would be around the September timeframe on that unless they wanna be hub like the other clients are out of the U S. Because we serve right now international clients that are hooked out of the U S. But there was some European regulations at all so if we can help build out of the U S that gets started initially and then.
Great them over but we're looking at September timeframe to deploy equipment. So you're looking at the fourth quarter I would say for international revenue that originates.
Originates from equipment, that's in the U K.
Okay terrific and one other question.
Touched upon it but maybe you could shed a little bit more like how like how robust.
Appetite for M&A.
I know youre going to be you know youre going to be you're going to use a measured approach but.
And many opportunities out there.
Well, we've been working with Maxim and their team has been very busy to fine.
Companies for Us plus we have.
Relations with with around three other firms that are looking for us I would tell you Bobby we probably put out.
Don't know over the last six months, probably five term sheets letters of intent on it and after further due diligence we decided not to do it we probably had over.
Five additional calls with companies that we didn't get as far as as a letter of intent to return sheet. So we're very very active with it.
We continue to look for the right the right.
The right partner to bring in you know.
This is my fourth company and I will tell you I was trained by two fortune 10 companies. Some of the folks that are in these businesses started from scratch when they got out of college and you know, it's like they invented white bread and it's.
It's a very very difficult personality when they never worked for anyone and it becomes difficult to bring them into and assimilate I believe we did a pretty good job with with.
With a number of companies that we did purchase through the through the years, but it's very very difficult in that $10 million to $15 million space and we can't move higher than that at least that we see unless they have some bank debt that we can take over and we know where the interest rates are sitting right now and as a company. We're really we're not there.
Christopher: On that because we're really growing at a pretty good rate and were pretty stable and where where our ribbon and numbers cloud first EBITDA Christopher was cloud first of all the first quarter.
Would you have on cloud first I mean, it's a big number remember we look at <unk> consolidated with headquarters. So the EBITDA number I think the margin is in that 30% EBITDA margin on cloud first so it gives you a little feel for it. So we're doing fine. So we all looking for it we have we have the appetite for M&A, we want to do M&A, but it's just.
Needs to be the right thing everything starts outright as we all know.
It's the question of how it ends.
Yes.
Q1, $1 $2 million inhibitor for cloud first.
Pretty good.
But we do have the appetite in answer to the question. So if you have any deal send them our way.
Okay. Thank you very much Jeff.
Okay. Thank you Bobby.
Thank you.
As there are no further questions I now hand, the conference over to Chuck <unk> for his closing comments Chuck.
Thank you and thank you for the questions.
Chuck: We have formulated a robust business strategy that we believe will drive our growth and ensure a sustained and increased profitability over the long term.
Chuck: While delivering some maximum value to our shareholders. We are optimistic about our prospects and our efforts and eagerly anticipate realizing the full benefits overtime.
Chuck: And we look forward to providing meaningful updates to our shareholders.
And further I'd like to thank everyone, who joined the call today. Thank you and have a great day.
Thank you.
<unk> of data storage Corporation has now concluded. Thank you for your participation you may now disconnect your lines.
Okay.
[music].