Q2 2024 Data Storage Corp Earnings & Business Update Call

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Operator: Greetings and welcome to the Data Storage Corporation 2024 fiscal second quarter business of the conference call.

Operator: Greetings and welcome to the Data Storage Corporation 2024 Fiscal Second Quarter Business Update Conference. 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. It is now my pleasure to introduce your host, Alexandra Schilt, of Interest Relations. Thank you. You may begin.

Speaker Change: Greetings and welcome to the Data Storage Corporation 2024 fiscal second quarter business update conference call. At this time all participants are on a listen-only mode. A question and answer session will follow the formal presentation.

Operator: If anyone wants to require operator assistance during the conference, please press star zero on your telephone key bag.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Alexandra Schilt: It is not my pleasure to introduce your host, Alexander Schult, of Interest Relations. Thank you. You may begin.

Speaker Change: It is now my pleasure to introduce your host, Alexandra Schilt, of Interest Relations. Thank you. You may begin.

Alexandra Schilt: Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 second quarter business update conference call. On the call of us this morning are Chuck Paloso, chairman and chief executive officer, and Chris Panagio Tacos, chief financial officer. The company issued a press release this morning containing its 2024 second quarter financial results, which is also posted on the company's website.

Alexandra Schilt: Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 Second Quarter Business Update Conference Call. On the call with us this morning are Chuck Piluso, Chairman and Chief Executive Officer, and Chris Panagiotakos, Chief Financial Officer. The company issued a press release this morning containing its 2024 second 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.

Speaker Change: Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 Second Quarter Business Update Conference Call. On the call with us this morning are Chuck Piluso, Chairman and Chief Executive Officer, and Chris Panagiotakos, Chief Financial Officer.

Speaker Change: The company issued a press release this morning containing its 2024 second 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.

Alexandra Schilt: If you have any questions after the call or like any additional information about the company, please contact Crescendo Communications at 212-671-1020.

Alexandra Schilt: 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 anticipate intends projects estimates plans 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.

Alexandra Schilt: 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, and similar expressions where 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 have been correct.

Speaker Change: 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.

Alexandra Schilt: 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 or future profitability, and the company's ability to maintain its no-sec listing. These risks should not be construed as exhaustive and should be right together with the other questionary statements included in the company's quarterly report on Form 10Q for the quarter-ended June 30th, 2024, annual reports on Form 10K, and current reports on Form 8K, filed with the Security and Exchange Commission.

Speaker Change: 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.

Speaker Change: Statements preceded by, followed by, or that otherwise include the words believes, expects, anticipates, intends, projects, estimates, plans, and similar expressions or future or conditional verbs such as will, should, would, may, and could.

Speaker Change: are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing.

Alexandra Schilt: 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 have been 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 no-sec listing. These risks should not be construed as exhaustive and should be written together with the other questionnaire statements included in the company's quarterly report on Form 10-Q for the quarter ended June 30th, 2024.

Speaker Change: 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 have been correct.

Speaker Change: Importance 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.

Speaker Change: the company's ability to position itself for future profitability, and the company's ability to maintain its NASDAQ listing.

Speaker Change: These risks should not be construed as exhaustive and should be read together with the other questionary statements included in the company's quarterly report on Form 10-Q for the quarter ended June 30, 2024, annual reports on Form 10-K , and current reports on Form 8-K filed with the Security and Exchange Commission.

Alexandra Schilt: Annual reports on Form 10-K and current reports on Form 8-K filed with the Securities and Exchange Commission.

Alexandra Schilt: Any forward-looking statements speak only as of the date to which it was initially made. Acceptance required by law; the company assumes no obligation to update or revise any forward-looking statement, whether it's a result of new information, future events, change circumstances, or otherwise.

Alexandra Schilt: Any forward-looking statements speak only as of the date to which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, change circumstances, or otherwise. I'd now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Speaker Change: Any forward-looking statements speak only as of the date to which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances, or otherwise.

Alexandra Schilt: I now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Speaker Change: I'd now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Charles Piluso: Thanks, Ali, and good morning everyone. During the quarter, we made important advancements, and we believe will accelerate our growth and increase our penetration within the market. Before I touch on those achievements, I would like to note that we generated 4.9 million in revenue for the second quarter of 2024. While this represents a decline from our previous year's second quarter, it's important to note that the reduction is attributable to large, one-time equipment sales recorded during the second quarter of 2023. As they have previously discussed in our conference calls, our strategic focus is on recurring revenue contracts.

Chuck Piluso: Thanks, Sally, and good morning, everyone. During the quarter, we made important advancements and we believe will accelerate our growth and increase our penetration within the market. Before I touch on those achievements, I would like to note that we generated $4.9 million in revenue for the second quarter of 2024. While this represents a decline from our previous year's second quarter, it's important to note that the reduction is attributable to large one-time equipment sales recorded during the second quarter of 2023. As I have previously discussed in our conference calls, our strategic focus is on recurring revenue contracts. The client equipment purchase cycle typically runs in a three to five year cycle.

Chuck Piluso: Thanks, Sally, and good morning, everyone.

Speaker Change: During the quarter we made important advancements and we believe will accelerate our growth and increase our penetration within the market.

Chuck Piluso: Before I touch on those achievements, I would like to note that we generated $4.9 million in revenue for the second quarter of 2024.

Speaker Change: While this represents a decline from our previous year's second quarter, it's important to note that the reduction is attributable to large one-time equipment sales recorded during the second quarter of 2023.

Speaker Change: As I have previously discussed in our conference calls, our strategic focus is on recurring revenue contracts.

Charles Piluso: The client equipment purchase cycle typically runs on a three-to-five-year cycle. Once you sell equipment, each year, typically we provide softwarely newer licenses and hardware support. This continues until the client refreshes their equipment, and then the cycle continues. I am pleased to report that our gross profit margin increased to 49 percent during the second quarter of 2024, up from 43.7 percent in the same period last year. This improvement highlights the effect of this and scalability of our business model. It also reflects the successful integration of our operations. The increased margin is a testament to our disciplined execution and strategic efforts to optimize profitability by building a more sustainable revenue base.

Speaker Change: The client-equipment-purchase cycle typically runs in a three- to five-year cycle.

Chuck Piluso: Once we sell equipment each year, typically we provide software renewal licenses and hardware support. This continues until the client refreshes their equipment and then the cycle continues. I am pleased to report that our gross profit margin increased to 49% during the second quarter of 2024 up from 43.7% in the same period last year. This improvement highlights the effectiveness and scalability of our business model. It also reflects the successful integration of our operations.

Speaker Change: Once you sell equipment, each year, typically we provide softwarely newer licenses and hardware support. This continues until the client refreshes their equipment and then the cycle continues.

Speaker Change: I am pleased to report that our gross profit margin increased to 49% during the second quarter of 2024, up from 43.7% in the same period last year.

Speaker Change: This improvement highlights the effectiveness and scalability of our business model. It also reflects the successful integration of our operations.

Speaker Change: The increased margin is a testament to our discipline execution and strategic efforts to optimize profitability by building a more sustainable revenue base.

Charles Piluso: In fact, we achieved 13.1 million in revenue and profitability for the first six months of 2024.

Chuck Piluso: The increased margin is a testament to our disciplined execution and strategic efforts to optimize profitability by building a more sustainable revenue base. In fact, we achieved $13.1 million in revenue and profitability for the first six months of 2024. To effectively advance our growth initiatives, we have recently relocated our new headquarters in Melbourne, New York. This move has expanded our square footage by nearly 40% while maintaining a minimal impact on expense.

Speaker Change: In fact, we achieved $13.1 million in revenue and profitability for the first six months of 2024.

Charles Piluso: To effectively advance our growth initiatives, we have recently relocated our new headquarters in Melbourne, New York. This move has expanded our square footage by nearly 40 percent while maintaining a minimal impact on expenses. We are strategically utilizing this increased space to accommodate the expanding technical, sales, and marketing teams, positioning us to capitalize on the significant opportunities within the month. and as a result of our strategic consolidation of flagship and cloud first, we are witnessing an increase in upselling opportunities. Validating this on multiple expanded contracts we announced during the quarter.

Speaker Change: To effectively advance our growth initiatives, we have recently relocated our new headquarters in Melville, New York.

Speaker Change: This move has expanded our square footage by nearly 40% while maintaining a minimal impact on expenses.

Chuck Piluso: We are strategically utilizing this increased space to accommodate the expanding technical, sales, and marketing teams, positioning us to capitalize on the significant opportunities within the market. And as a result of our strategic consolidation of flagship and cloud-first, we are witnessing an increase in upselling opportunities. Validating this are multiple expanded contracts we announced during the quarter. First, we entered into an expanded contract with a prominent provider of end-to-end business processes, initially engaged for infrastructure solutions.

Speaker Change: We are strategically utilizing this increased space to accommodate the expanding technical, sales, and marketing teams, positioning us to capitalize on the significant opportunities within the market.

Speaker Change: And, as a result of our strategic consolidation of flagship and cloud-first, we are witnessing an increase in upselling opportunities.

Speaker Change: Validating this are multiple expanded contracts we announced during the quarter.

Charles Piluso: First, we entered into an expanded contract with a prominent provider of end-to-end business processes. Initially engaged for infrastructure solutions. We are now through the six-figure contract delivering managed encrypted backup and recovery services. This expansion underscores our capabilities to meet the evolving needs of our customers and exceed their expectations.

Speaker Change: First, we entered into an expanded contract with a prominent provider of end-to-end business processes.

Chuck Piluso: We are now through the six-figure contract delivering managed encrypted backup and recovery service. This expansion underscores our capabilities to meet the evolving needs of our customers and exceed their expectations. More recently, we expanded services at one of the nation's largest suppliers of promotional products, securing a new seven-figure agreement highlighting our continued success. In 2023, we were selected to implement a comprehensive disaster recovery solution to this client, ensuring rapid recovery and enhanced security within a cloud-based environment. This solution included optimization of their network for high-speed, secure switching during disasters or interruptions.

Speaker Change: initially engaged for infrastructure solutions.

Speaker Change: We are now, through this six-figure contract, delivering managed, encrypted backup and recovery services.

Speaker Change: This expansion underscores our capabilities to meet the evolving needs of our customers and exceed their expectations.

Charles Piluso: More recently, we expanded services as one of the nation's largest suppliers of promotional products, securing a new seven-figure agreement highlighting our continued success. In 2023, we were selected to implement a comprehensive disaster recovery solution to this client, ensuring rapid recovery and enhanced security within a cloud-based environment. This solution included optimization of end-network for high-speed, secure switching during disasters or interruptions. Following the successful implementation, the clients selected us to migrate their critical production systems to a new state-of-the-art data center in Chicago, where we will establish a fully monitored and managed private cloud infrastructure solution. Both of these contracts came through Cloud First division.

Speaker Change: More recently, we expanded services as one of the nation's largest suppliers of promotional products.

Speaker Change: procuring a new seven-figure agreement

Speaker Change: In 2023, we was selected to implement a comprehensive disaster recovery solution to this client, ensuring rapid recovery and enhanced security within a cloud-based environment. This solution included optimization of end-network for high-speed, secure switching during disasters or interruptions.

Chuck Piluso: Following this successful implementation, the client selected us to migrate their critical production systems to our new state-of-the-art data center in Chicago, where we will establish a fully monitored and managed private cloud infrastructure solution. Both of these contracts came through Clouds First Division. In fact, Cloud First achieved $4.6 million in revenue for the second quarter and was profitable on a standalone basis.

Speaker Change: Following this successful implementation, the clients selected us to migrate their critical production systems to our new state-of-the-art data center in Chicago, where we will establish a fully monitored and managed private cloud infrastructure solution.

Speaker Change: Both of these contracts came through Cloud First division. In fact, Cloud First achieved $4.6 million in revenue for the second quarter and was profitable on a standalone basis.

Charles Piluso: In fact, Cloud first achieved 4.6 million in revenue for the second quarter and was profitable on a standalone basis.

Charles Piluso: To support the traction and growth of cloud first, we recently expanded to the United Kingdom with the opening of our London office. We will also be deploying a unique infrastructure platform in two UK data centers, increasing our addressable market. We estimate that the UK marketplace consists of the 50,000 companies that conduct business between the USA and the UK, with over 1.6 million Americans working in the UK. This strategic move represents a significant milestone in our plan to serve a global clientele and strengthen cloud-first presence in key international marketplaces.

Chuck Piluso: To support the traction and growth of Cloud First, we recently expanded to the United Kingdom with the opening of our London office. We will also be deploying our unique infrastructure platform in two UK data centers. Increasing our addressable market. We estimate that the UK marketplace consists of the 50,000 companies that conduct business between the USA and the UK, with over 1.6 million Americans working in the UK.

Speaker Change: To support the traction and growth of Cloud First, we recently expanded to the United Kingdom with the opening of our London office.

Speaker Change: We will also be deploying our unique infrastructure platform in two UK data centers, increasing our addressable market.

Speaker Change: We estimate that the UK marketplace consists of over 50,000 companies that conduct business between the USA and the UK, with over 1.6 million Americans working in the UK.

Chuck Piluso: The strategic move represents a significant milestone in our plan to serve a global clientele and strengthen our cloud-first presence in key international markets. Our first steps several years ago, outside the United States, were establishing a foot-print. Cloud First has two power platforms in Canada, and the UK and Canada are the largest trading partners between those two countries. We consider the addressable markets of the USA, the UK, and Canada to be a significant opportunity.

Speaker Change: This strategic move represents a significant milestone in our plan to serve a global clientele and strengthen cloud-first presence in key international marketplaces.

Charles Piluso: Our first steps several years ago outside the United States was establishing a footprint in Canada. Cloud First has two power platforms in Canada. In the UK and Canada, are the largest trading partners between those two countries. We consider the addressable markets of the USA, UK, and Canada to be a significant opportunity. Our cloud infrastructure offerings of cloud hosting, disaster recovery, and cybersecurity solutions will establish data stores, we believe, as one of the few single source multi-country providers. We are witnessing an increased demand for our solutions, and as a result, we deployed assets to the seven data centers in Chicago.

Speaker Change: Our first step several years ago outside the United States was establishing a footprint in Canada.

Speaker Change: Cloud First has two power platforms in Canada.

Speaker Change: In the UK and Canada are the largest trading partners between those two countries.

Speaker Change: We consider the addressable markets of the USA, UK, and Canada to be a significant opportunity.

Chuck Piluso: Our cloud infrastructure offerings of cloud hosting, disaster recovery, and cybersecurity solutions will establish Data Storage, we believe, as one of the few single-source, multi-country providers. We are witnessing an increased demand for our solutions. And as a result, we deployed assets to the Seventh Data Center in Chicago. Chicago was strategically selected as it allows us to capitalize on the growing demand within the region, as well as diversify our geographic footprint within the United States.

Speaker Change: Our cloud infrastructure offerings of cloud hosting, disaster recovery, and cyber security solutions will establish data storage, we believe, as one of the few single-source, multi-country providers.

Speaker Change: We are witnessing an increased demand for our solutions, and as a result, we deployed assets to the Seventh Data Center in Chicago.

Charles Piluso: Chicago was strategically selected as it allows us to capitalize on the growing demand within the region, as well as diversify our geographic footprint within the United States. is. Demonstrating this growing demand and evidence that the IBM Powerless Service migration is underway is the continued increase in visitors to our cloud first website, which is over 45,000 in the first six months of 2024. Furthermore, we are expanding our technical and business development teams to provide the support required for our anticipated client growth while maintaining an excellent client renewal rate. We are also continuing to support our nurturers, which contains over a thousand organizations interested in potential implementation of our services.

Speaker Change: Chicago was strategically selected as it allows us to capitalize on the growing demand within the region, as well as diversify our geographic footprint within the United States.

Chuck Piluso: Demonstrating this growing demand and evidence that the IBM Power Service migration is underway is the continued increase in visitors to our cloud-first website, which is over 45,000 in the first six months of 2024. Furthermore, we are expanding our technical and business development teams to provide the support required for our anticipated client growth, for maintaining an excellent client renewal rate. We are also continuing to support our Nurture List, which contains over 1,000 organizations interested in potential implementation of our services, and we intend to take advantage of these avenues to secure new contracts and increase our footprint within the United States. We are currently serving over 480 companies and are committed to expanding this impressive client base. Data center firms that specialize in window-based infrastructure platforms rely on our expertise in the IBM platform.

Speaker Change: Demonstrating this growing demand and evidence that the IBM PowerService migration is underway is the continued increase in visitors to our cloud-first website which is over 45,000 in the first six months of 2024.

Speaker Change: Furthermore, we are expanding our technical and business development teams to provide the support required for anticipated client growth.

Speaker Change: by maintaining an excellent client renewal rate.

Speaker Change: We are also continuing to support our Nurture List, which contains over 1,000 organizations interested in potential implementation of our services.

Charles Piluso: And we intend to take advantage of these avenues to secure new contracts and increase our footprint within the United States. We are currently serving over 480 companies and are committed to expanding this impressive client base. Data center firms that specialize in window-based infrastructure platforms rely on our expertise in the IBM platform. Collaborating with these infrastructure firms presents an opportunity to broaden our distribution channels, leverage our talents and workforce, and optimize our deploy assets.

Speaker Change: and we intend to take advantage of these avenues to secure new contracts and increase our footprint within the United States.

Speaker Change: We are currently serving over 480 companies and are committed to expanding this impressive client base.

Speaker Change: Data center firms that specialize in window-based infrastructure platforms rely on our expertise in the IBM platform.

Chuck Piluso: Collaborating with these infrastructure firms presents an opportunity to broaden our distribution channels, leverage our talented workforce, and optimize our deployed assets. Overall, we are executing on a strategic growth plan, which has resulted in expanded contracts, international expansion, and increased recognition within the industry. We also intend to explore acquisitions that would further our growth while complementing and improving our established operations.

Speaker Change: Collaborating with these infrastructure firms presents an opportunity to broaden our distribution channels, leverage our talented workforce, and optimize our deployed assets.

Charles Piluso: Overall, we are executing on a strategic growth plan, which has resulted in expanding contracts, international expansion, and increased recognition within the industry. We also intend to explore acquisitions that would further our growth while complementing and improving our established operations. Moreover, we believe we have positioned ourselves for success and growth, given our reliable solutions, exceptional service, and now international footprint. In addition, we are leveraging the various upselling opportunities as a result of the consolidation of subsidiaries. These strategic initiatives set the stage for long-term profitability. At the same time, we have carefully managed expenses and have preserved this strong balance sheet with approximately 12 million cash and marketable securities, and no one-term debt at the end of the corner, which provides us the flexibility to deploy capital, efficiently and effectively, to support our long-term growth, and drive value to our shareholders.

Speaker Change: Overall, we are executing on a strategic growth plan which has resulted in expanded contracts, international expansion, and increased recognition within the industry.

Speaker Change: We also intend to explore acquisitions that would further our growth while complementing and improving our established operations.

Chuck Piluso: Moreover, we believe we have positioned ourselves to success and growth given our reliable solutions, exceptional service, and now international footprint. In addition, we are leveraging the various upselling opportunities as a result of the consolidation of subsidiaries. These strategic initiatives set the stage for long-term profitability.

Speaker Change: Moreover, we believe we have positioned ourselves to success and growth given our reliable solutions, exceptional service, and now international footprint.

Speaker Change: In addition, we are leveraging the various upselling opportunities as a result of the consolidation of subsidiaries.

Speaker Change: These strategic initiatives set the stage for long-term profitability.

Chuck Piluso: At the same time, we have carefully managed expenses and have preserved this strong balance sheet with approximately 12 million cash and marketable security, and no long-term debt at 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 the call over to Chris Panagiotakos, our CFO, to discuss our financial... Please go ahead. Thank you Chuck. Good morning everyone.

Speaker Change: At the same time, we have carefully managed expenses and have preserved a strong balance sheet with approximately $12 million in cash and marketable securities, and no long-term debt at the end of the quarter.

Speaker Change: which provides us the flexibility to deploy capital efficiently and effectively to support our long-term growth and drive value to our shareholders.

Chris Panagiotakos: With that, I'd like to turn the call over to Chris Panagiotakis, CFO, to discuss our financials. Please go ahead, Chris.

Chris Panagiotakos: With that, I'd like to turn the call over to Chris Panagiotakos, our CFO , to discuss our financials.

Chris Panagiotakos: Total revenue for the three months ended June 30, 2024 was $4.9 million. A decrease of approximately $1 million or 17% compared to $5.9 million for the three months ended June 30, 2023. The decrease is primarily attributed to a lower one-time equipment and software sales during the current period and a decrease in managed services partially offset by increases in all other revenue sources.

Chris Panagiotakos: Thank you, Chuck.

Chris Panagiotakos: Good morning, everyone. Total revenue for the three months ended June 30th, 2024 was $4.9 million, a decrease of approximately $1 million for 17 percent, compared to $5.9 million for the three months ended June 30th, 2023. The decrease is primarily attributed to a lower one-time equipment and software sales during the current period and a decrease in managed services, partially offset by increases in all other revenue sources. Total revenue for the six months ended June 30th, 2024, was $13.1 million, an increase of approximately $362,000 or 3 percent, compared to $12.8 million for the six months ended June 30th, 2023.

Chris Panagiotakos: Please go ahead, Chris.

Chris Panagiotakos: Thank you Chuck, good morning everyone. Total revenue for the three months ended June 30, 2024 was $4.9 million, a decrease of approximately $1 million, or 17%, compared to $5.9 million for the three months ended June 30, 2023.

Speaker Change: The decrease is primarily attributed to a lower one-time equipment and software sales during the current period and a decrease in managed services, partially all set by increases in all other revenue sources.

Chris Panagiotakos: Total revenue for the six months ended June 30, 2024, was $13.1 million, an increase of approximately $362,000 or 3% compared to $12.8 million for the six months ended June 30, 2023. The increase is primarily attributed to the increase of 29% in infrastructure and disaster recovery cloud services, all set partially by a decrease in one-time equipment sales and managed services during the current period. Cost of sales for the three months ended June 30, 2024 was $2.5 million, a decrease of approximately $823,000, or 25%, compared to $3.3 million for the three months ended June 30, 2023.

Speaker Change: Total revenue for the six months ended June 30, 2024 was $13.1 million, an increase of approximately $362,000 or 3% compared to $12.8 million for the six months ended June 30, 2023.

Chris Panagiotakos: The increase is primarily attributed to the increase of 29 percent in infrastructure and disaster recovery cloud services, offset partially by a decrease in one-time equipment sales and managed services during the current period.

Speaker Change: The increase is primarily attributed to the increase of 29% in infrastructure and disaster recovery cloud services offset partially by a decrease in one-time equipment sales and managed services during the current period.

Chris Panagiotakos: of 2020. Both the sales for the three months ended June 30, 2024, was $2.5 million, a decrease of approximately $823,000, or 25%, compared to $3.3 million for the three months ended June 30, 2023. The decrease of 25% was mostly related to a decrease in equipping related costs. Both the sales for the six months ended June 30, 2024, was $7.8 million, a decrease of approximately $344,000, or 4%, compared to $8.1 million for the six months ended June 30, 2023. The decrease of 4% was mostly related to a decrease in one-time equipping sales. Sally general and administrative expenses for the three months ended June 30, 2024, were $2.8 million, an increase of approximately $325,000, or 13%, as compared to $2.5 million for the three months ended June 30, 2023.

Paul: Cost of sales for the three months ended June 30, 2024 was $2.5 million, a decrease of approximately $823,000, or 25%, compared to $3.3 million for the three months ended June 30, 2023.

Paul: The decrease of 25% was mostly related to a decrease in equipment related costs.

Chris Panagiotakos: The decrease of 25% was mostly related to a decrease in equipment-related costs. Both the sales for the six months ended June 30, 2024, with $7.8 million, a decrease of approximately $344,000, or 4% compared to $8.1 million for the six months ended June 30, 2023. The decrease of 4% was mostly related to a decrease in one-time equipment sales.

Paul: The cost of sales for the six months ended June 30, 2024 was $7.8 million, a decrease of approximately $344,000, or 4%, compared to $8.1 million for the six months ended June 30, 2023.

Paul: The decrease of 4% was mostly related to a decrease in one-time equipment sales.

Chris Panagiotakos: Selling general and administrative expenses for the three months ended June 30, 2024, were $2.8 million, an increase of approximately $325,000, or 13%, as compared to $2.5 million for the three months ended June 30, 2023. Dowling General and Administrative Expenses for the six months ended June 30, 2024 for $5.5 million an increase of approximately $947,000 or 21% as compared to $4.6 million for the six months ended June 30, 2023. The increases were primarily due to an increase in advertising expense, professional fees associated with our international expansion apps.

Paul: Selling general and administrative expenses for the three months ended June 30, 2024 were $2.8 million, an increase of approximately $325,000, or 13%, as compared to $2.5 million for the three months ended June 30, 2023.

Chris Panagiotakos: Sally general and administrative expenses for the six months ended June 30, 2024, were $5.5 million, an increase of approximately $947,000, or 21%, as compared to $4.6 million for the six months ended June 30, 2023. The increases were primarily due to an increase in advertising expense, professional fees associated with our international expansion efforts. Dalleries, stock-based compensation, and travel adjusted EBITDA for the three months ended June 30, 2024, was $164,000, compared to adjusted EBITDA of $350,000 for the same period last year. Adjusted EBITDA for the six months ended June 30, 2024, was $837,000, compared to an adjusted EBITDA of $865,000 for the same period last year.

Paul: Selling General and Administrative Expenses for the 6 months ended June 30, 2024 were $5.5 million, an increase of approximately $947,000, or 21%, as compared to $4.6 million for the 6 months ended June 30, 2023.

Paul: The increases were primarily due to an increase in advertising expense, professional fees associated with our international expansion efforts.

Chris Panagiotakos: Salaries, Stockbase Compensation, and Travel, Adjusted EBITDA for the three months ended June 30, 2024 was $164,000 compared to adjusted EBITDA of $350,000 for the same period last year. Adjusted EBITDA for the six months ended June 30, 2024 was $837,000 compared to an adjusted EBITDA of $865,000 for the same period last year. Net loss attributable to common shareholders for the three months ended June 30, 2024, was $244,000 compared to net income of $226,000 for the three months ended June 30, 2023.

Paul: salaries, stock-based compensation, and travel.

Paul: Adjusted EBITDA for the three months ended June 30, 2024 was $164,000 compared to adjusted EBITDA of $350,000 for the same period last year.

Paul: Adjusted EBITDA for the six months ended June 30, 2024 was $837,000 compared to an adjusted EBITDA of $865,000 for the same period last year.

Chris Panagiotakos: Net laws attributable to common shareholders for the three months ended June 30, 2024, was $244,000, compared to net income of $226,000 for the three months ended June 30, 2023. Net income attributable to common shareholders for the six months ended June 30, 2024, was $113,000, compared to $277,000 for the six months ended June 30, 2023. We ended the quarter with cash and marketable securities of approximately $12 million at June 30, 2024, compared to $12.7 million at December 31, 2023.

Paul: Net loss attributable to common shareholders for the three months ended June 30, 2024 was $244,000 compared to net income of $226,000 for the three months ended June 30, 2023.

Chris Panagiotakos: Net income attributable to current shareholders for the six months ended June 30, 2024 was $113,000 compared to $277,000 for the six months ended June 30, 2023. We ended the quarter with cash and marketable securities of approximately $12 million at June 3, 2024, compared to $12.7 million at December 31, 2023. Thank you. I will now turn the call back to Chuck. Thanks, Chris.

Paul: Net income attributable to common shareholders for the six months ended June 30, 2024 was $113,000 compared to $277,000 for the six months ended June 30, 2023.

Paul: We ended the quarter with cash and marketable securities of approximately $12 million at June 3, 2024, compared to $12.7 million at December 31, 2023. Thank you. I will now turn the call back to Chuck.

Chris Panagiotakos: Thank you.

Charles Piluso: I will now turn the call back to Chuck. Thanks, Chris.

Charles Piluso: Let's open up the call for some questions. I've heard them. Thank you.

Operator: Let's open up the call for some questions, Operator. Thank you. We will now be conducting a question and answer. If you'd like to ask a question, please press star 1, Magnetol [inaudible] A confirmation tone will indicate a line is in the question queue. You may press star 2, if you'd like to remove your question from the queue. The participants use the speaker equipment. It may be necessary to pick up your handset before pressing the start.

Chuck Piluso: Thank you.

Chuck Piluso: Let's open up the call for some questions. Operator?

Operator: We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one. I guess I won't keep that. A confirmation tone will indicate a line in the question queue. You may press star 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 these start keys. One moment, please, while we pull for questions.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate alignment in the question queue. You may press star 2 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 keys.

Operator: One moment, please, while we pull for questions. And our first question comes from the line of Adam Waldo with more partners. Please, Yes, good. Thanks, Chuck. I hope you can hear me okay.

Speaker Change: One moment, please, while we poll for questions.

Adam Waldo: And our first question comes from the line of Adam Waldo with More Partners. Please for seeing the true question. Yes, thank you. So, I want to start with sort of where are we going to see your terms of random recurring revenue and how that compare with the first quarter. Adam, you're breaking up a little bit. Can you keep that? Yeah, is this better? Let's see. Say something to me. Sing a song, Adam. Is this better? It's a little better. Yeah. Okay, I apologize for that. I hope you can hear me now. I apologize. Yeah, it's better.

Speaker Change: [inaudible]

Speaker Change: And our first question comes from the line of Adam Waldo with Liz Moore Partners. Please proceed with your question.

Adam Waldo: Yes, good. Thanks, Chuck. I hope you can hear me okay.

Adam Waldo: Bye, Adam. So, I want to start with sort of where we are here in terms of our annual recruiting revenue and how that compares with the first quarter.

Speaker Change: Bye, Adam.

Speaker Change: So, I want to start with sort of where are we?

Speaker Change: that works here in terms of our annual recruiting revenue and how that compares with the first quarter.

Speaker Change: Adam, you're breaking up a little bit. Can you repeat that?

Speaker Change: Thank you very much.

Adam Waldo: Thank you. [inaudible] Let's see, say something to me, sing a song, Adam, say something.

Speaker Change: Let's see.

Speaker Change: [inaudible]

Adam Waldo: It's a group error, yeah. Okay, I apologize for that. I hope you can hear me now. Yeah, it's better.

Adam Waldo: It's a little better, yeah. Okay, I apologize for that. I hope you can hear me now, I apologize. Yeah, it's better. It's a little better, thank you. Oh, good, great. Sorry, Chuck. Good day, Chuck and Chris.

Adam Waldo: It's a little better, thank you. Oh, good, great. Sorry, Chuck.

Adam Waldo: It's a little better. Oh, great. Sorry, Chuck.

Adam Waldo: Good day, Chuck and Chris. I want to see if we can start with the annual recurring revenue at which the company exited second quarter relative to first quarter. And with the investments that you've made in the cost-neutral headquarters expansion in Melville, the new London office, and the Chicago data center, what's a reasonable range for breakeven revenue that you need to make? Support G.R.W.F.D.S. I just want to make sure I'm clear. It did break up a little bit.

Adam Waldo: Good day, Chuck and Chris. I want to see if we can start with the annual recurring revenue at which the company actually had second quarter, relative to first quarter. And with the investments that you've made in the cost-neutral headquarters expansion in Melville, the new London office, and the Chicago Data Center. What's a reasonable range of sort of breaking the record of the revenue that you need to support? Yeah, both of us. Okay, just want to make sure I'm clear. Did break up a little bit on the recurring revenue. You were asking about that and the expenses of Chicago and as well as London on the expansion side.

Adam Waldo: Thank youhere for your attention and I hope to see you soon next week.

Speaker Change: I want to see if we can start with the annual recurring revenue at which the company exited second quarter relative to first quarter and with the investments that you've made in

Speaker Change: The Cosneutral Headquarters Expansion in Melville, the New London Office and the Chicago Data Center. What's a reasonable range for breaking into the gravity that's needed to support the growth of the astronauts?

Adam Waldo: On the recurring revenue, you were asking about that and the expenses of Chicago and as well as London on the expansion side. The investment you made in growing the business on the infrastructure side, Chuck, what is a reasonable range of sort of quarterly break even, a revenue that would need to be generated to support those infrastructure ads? Adam Waldo.

Speaker Change: I just want to make sure I'm clear because it did break up a little bit on the recurring revenue you were asking about that and the expenses of Chicago and as well as London on the expansion side.

Charles Piluso: Sorry, I'm interested in the investment you made in growing the business on the infrastructure side, Chuck. What is a reasonable range of sort of quarterly break even revenue that we need to be generated to support those infrastructure ads? Well, the recurring revenue we have on a basically on a monthly basis when we look at cloud first. Are we speaking about just cloud first? We're talking about overall the consolidation with the data storage cooperation. No, the entire organization. You know, just to highlight that, it's somewhat still slightly dependent on equipment sales, which we typically have. But you know, it becomes lumpy as we spoke about before because of the cycling of refreshing of the equipment, so that we do have some dependency on the equipment sales.

Chuck Piluso: But the recurring revenue, the recurring revenue we have on a, basically on a monthly basis when we look at Cloud First, and we're speaking about just Cloud First, we're talking about overall the consolidation with the Data Storage Corporation. No, the entire company, right, the whole company. The entire organization.

Speaker Change: Thank you. Bye-bye.

Speaker Change: So the recurring revenue we have basically on a monthly basis when we look at Cloud First. And we're speaking about just Cloud First, we're talking about overall the consolidation with the Data Storage Corporation.

Speaker Change: No, the entire company, right? The whole company. The entire organization. You know, just to highlight that, it's somewhat...

Chuck Piluso: You know, just to highlight that, it's somewhat still slightly dependent on equipment sales, which we typically have, but, you know, it becomes lumpy, as we spoke about before, because of the cycling of refreshing of the equipment. So we do have some dependency on the equipment sales, less and less as time goes on, and we do have the ability to cut back on various marketing expenses. But what ends up happening, just to give an example, you know, of our customer base, just 28 customers have increased their services with us, you know, during, since January. So, you know, it's not necessarily all new ads, you know, on stuff.

Speaker Change: Still slightly dependent on equipment sales, which-

Speaker Change: We typically have, but you know, it becomes lumpy as we spoke about before because of the cycling of refreshing of the equipment, so that we do have some dependency on the equipment sales. Less and less, it time goes on, and we do have the ability to cut back on various equipment sales.

Charles Piluso: Less and less time goes on, and we do have the ability to cut back on various marketing expenses. But what ends up happening, just to give an example of a customer base, just 28 customers have increased their services with us since January. So, you know, it's not necessarily all new ads, you know, on stuff. And so, you know, you have renewed contracts; you have clients adding to it. So, as was an example that I read earlier, you know, you had the customer that was on one service and then added a significant amount on another. So, you're not sure when exactly that's going to be coming on, but we're very, very close, I would say, to a break even on just the recurring, on the becoming base.

John B.: John B.

Speaker Change: But what ends up happening, just to give an example, you know, of a customer base, just 28 customers.

Speaker Change: have increased their services with us since January .

Speaker Change: So, you know, it's not necessarily all new ads.

Chuck Piluso: And so, you know, you have renewed contracts, you have clients adding to it. So, as was an example that I read earlier, you know, you have a customer that was on one service and then added a significant amount on another. So you're not sure when exactly that's going to be coming on, but we're very, very close, I would say, to a break-even on just the recurring basis. What ends up happening, though, this lumpiness continues because if you have subscription agreement that's, let's say, on a 36-month contract, even though our average is 30 months across the board, a straight average, you'll end up getting software renewal and hardware maintenance contracts like we have that happens in the first quarter, and you have that lumpiness that continues. So if you were to smooth everything out, I would say that the company really, even with these efforts, are breakeven on the basis. I don't know, Chris, if you agree with that.

Speaker Change: You know, on stuff. And so, you know, you have renewed contracts, you have clients adding to it. So, as was an example that I read earlier, you know, you had the customer that was on one service and then added a significant amount on another.

Speaker Change: So you're not sure when exactly that's going to be coming on, but we're very, very close, I would say, to a break-even on just the recurring basis.

Operator: [inaudible] 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 have been 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 or future profitability and the company's ability to maintain its no-sec listing.

Charles Piluso: Justice. What ends up happening though, this lumpiness continues because if you have a subscription agreement that let's say on a 36 month contract, even though our average is 30 months across the board, a straight average, you'll end up getting software renewal and hardware maintenance contracts, like we have that happens in the first quarter and you have that lumpiness that continues. So if you would have smoothed everything out, I would say that the company really, even with these efforts, is break even on basis. I don't know if you agree with that, you know. So I think this break even when you start, you know, taking what we would consider annually current revenue was software renewal of hardware maintenance with the subscription revenue, both in disaster recovery, cloud infrastructure and cybersecurity.

Speaker Change: What ends up happening, though, this lumpiness continues because if you have subscription agreement that's, let's say, on a 36-month contract.

Speaker Change: even though our average is 30 months across the board, a straight average, you'll end up getting software renewal and hardware maintenance contracts like we have that happens in the first quarter, and you have that lumpiness that continues. So if you were to smooth everything out,

Speaker Change: I would say that the company really, even with these efforts, are break-even.

Chuck Piluso: So I think it's breakeven when you start taking what we would consider annual recurring revenue with software and hardware maintenance with the subscription revenue, both in disaster recovery, cloud infrastructure, and cybersecurity. So that profitability really kicks in high when you have an equipment sale, even though the margins are not great, they're 20%, 25% margins versus 52% margins on subscription. So I think we're really there with it. I will say, though, and I think you get to know me a little bit more and more as we talk, Adam, is that I'm kind of never happy.

Speaker Change: on basis. I don't know if you agree with that, you know.

Chris Panagiotakos: So, I think this breakeven when you start, you know, taking our, what we would consider annual recurring revenue with software and hardware maintenance with the subscription revenue both in disaster recovery, cloud infrastructure, and cyber security.

Charles Piluso: So that profitability really kicks in high when you have an equipment sale, even though the margins are not great; they're 20, 25 percent margins versus, you know, 52 percent margins on subscription. So I think we're really there with it.

Speaker Change: So, that profitability really kicks in high when you have an equipment sale, even though the margins are not great, the 20-25% margins versus 52% margins on subscription.

Charles Piluso: I will say though, you know, and I think you get to know me a little bit more and more as we talk, Adam, is that I'm kind of never happy. The thing is that I, you know, I wouldn't mind losing, you know, I wouldn't mind decreasing our EBITDA to a greater revenue growth on the subscription side. And, you know, that's why we're looking at and expanding and going into London, primarily into the UK, because we believe that between the UK, Canada, and the US, only the very big guys who are there, you know, like an IBM, for example.

Speaker Change: So I think we're really there with it.

Speaker Change: I will say, though,

Speaker Change: you know, and I think you get to know me a little bit more and more as we talk, Adam, is that I'm kind of never happy. The thing is, is that I, you know... Right.

Chuck Piluso: The thing is, is that I wouldn't mind losing, I wouldn't mind decreasing our EBITDA for greater revenue growth on the subscription side. And that's why we're looking at and expanding and going into London, primarily into the UK, because we believe between the UK, Canada, and the US, only the very big guys are there, like in IBM, for example. So you're not going to work, maybe one of three, and we want to be able to leverage that.

Speaker Change: I wouldn't mind losing...

Speaker Change: You know, I wouldn't mind decreasing our EBITDA.

Speaker Change: for greater revenue growth on the subscription side. And that's why we're looking at and expanding and going into London, primarily into the U.K. because we believe between the U.K., Canada, and the U.S.

Speaker Change: Only the very big guys who are there, you know, like an IBM, for example. But you're not going to work, maybe one of three, and we want to be able to leverage that. And that will take some money. We have two people identified that are working with us already on a consulting basis out of the U.K. That's costing some money, but we're still okay on the other side for Cloud First.

Charles Piluso: So you're not going to work, maybe one of three. And we want to be able to leverage that. And that will take some money. We've already, we have two people identified that are working with us already on a consulting basis out of the UK that's costing some money, but we're still okay on the EBITDA side for Cloud First. And we're going to be hopefully bringing them on full time with this. So, you know, we're signing, we're signing NDAs with companies, and that will mean if they're going to find up with us as distributors or end user clients, it will cost some money.

Chuck Piluso: And that will take some money. We've already, we have two people identified that are working with us already on a consulting basis out of the UK. That's costing some money, but we're still okay on the EBITDA side for cloud first. And we're going to be hopefully bringing them on full time with us. So, you know, we're signing. We're signing NDAs with companies, and that will mean if they're going to.., sign up with us as distributors or end-user clients, it will cost some money. Our depreciation will increase that overall expense because of the equipment being deployed there, which we expect that to happen in the fourth quarter and services going live in January.

Speaker Change: and we're going to be hopefully bringing them on full time with us. So, you know, we're signing.

Speaker Change: We're signing NDAs with companies and

Speaker Change: sign up with us as distributors or end-user clients, it will cost some money. Our depreciation will increase that overall expense because of the equipment being deployed there, which we expect that to happen in the fourth quarter and services going live in January.

Adam Waldo: Our depreciation will increase that overall expense because of the equipment being deployed there, which we expect that to happen in the fourth quarter and service is going live in January. So yeah, I'd like to see that revenue grow much higher without putting equipment sales on the side and let it hit the EBITDA a little bit to sacrifice that short term. So that answers your question. I'm not sure. Now, that's really helpful context in setting your thinking check.

Operator: These risks should not be construed as exhaustive and should be written together with the other questionary statements included in the company's quarterly report on form 10Q for the quarter ended June 30th, 2024. Annual reports on form 10K and current reports on form 8K filed with the Security and Exchange Commission. Any forward looking statements speak only as of the date to which it was initially made.

Adam Waldo: So, yeah, I would like to see that revenue growth much higher without putting equipment sales on the side and let it hit the editor a little bit to sacrifice that short term. So if that answers your question, I'm not sure. No, that's really helpful context and insight into your thinking, Chuck.

Speaker Change: So, yeah, I would like to see that that revenue growth much higher without putting equipment equipment sales on the side and let it hit the editor a little bit to sacrifice that short term. So if that answers your question, I'm not sure.

Operator: Acceptance required by law, the company assumes no obligation to update or revise any forward looking statement, whether it's a result of new information, future events, change circumstances or otherwise.

Speaker Change: That's really helpful context and insight into your thinking, Chuck. I wonder if we can then sort of switch gears a little bit, obviously, into the new business pipeline and backlog.

Adam Waldo: I wonder if we can then sort of switch years a little bit, obviously into the new business pipeline and backlog. You know, obviously you all have seen terrific progress over the last five or six quarters, and you've bound inquiries through the revamp website. And, you know, I think it's been a little bit slower in terms of translating RFPs than you've hoped, but you've still seen some pretty good traction there. So can you give us some metrics in terms of how, you know, that surge in inquiries has been translating into requests from Proposal and then where your backlog sits here at the end of the second quarter.

Adam Waldo: I wonder if we can then sort of switch gears a little bit, obviously, into the new business pipeline and backlog. You know, obviously, you all have seen terrific progress over the last five or six quarters in inbound inquiries through the revamp websites. And, you know, I think it's been a little bit slower in terms of translating RFPs than you've hoped, but you've still seen some pretty good traction there. So can you give us some metrics in terms of how, you know, that surge in inquiries has been translating into requests for a proposal and then where your backlog sits here at the end of the second quarter? Okay, I can do that.

Operator: I now like to turn the call over to Chuck Piluso. Please go ahead Chuck.

Speaker Change: You know, obviously you all have seen terrific progress over the last five or six quarters in inbound inquiries through the REVAMP website.

Chuck Piluso: Thanks, Ali, and good morning everyone. During the quarter, we made important advancements and we believe will accelerate our growth and increase our penetration within the market. Before I touch on those achievements, I would like to note that we generated 4.9 million in revenue for the second quarter of 2024. While this represents a decline from our previous year's second quarter, it's important to note that the reduction is attributable to large, one-time equipment sales recorded during the second quarter of 2023.

Speaker Change: and I think it's been a little bit slower in terms of translating RFPs than you've hoped, but you've still seen some pretty good traction there. Sir, can you give us some metrics in terms of how that surge in inquiries has been translating into

Speaker Change: and to request for a proposal and then where your backlog sits here at the end of the second quarter.

Charles Piluso: Director. Okay, I can do that. Chris, you checked me out at any point that I'm kind of awful a little bit. So I'll give you some numbers on this. We believe that our remaining contract value, okay, the remaining contract value as of June 30, I believe, is around $31.5 million. And with our renewal rate, it continues to grow because the number of points that have removed since January is 82, and of the 400 and plus 420 companies we serve. So using that $31 to $32 million, that kind of continues as you continue to grow. You know, also we've added six new partners since January.

Chuck Piluso: Chris, you check me out any point that I'm kind of off a little bit. So I'll give you some numbers on this. We believe that our remaining contract value, okay, the remaining contract value as of June 30th, I believe is around $31.5 million, and with our renewal rate it continues to grow because the number of clients that have renewed since January is 82, and of the 400 and plus 420 companies we serve.

Speaker Change: Okay, I can do that.

Speaker Change: Chris, you check me out any point that I'm kind of off a little bit. So I'll give you some numbers on this. We believe that our remaining contract value, okay, the remaining contract value as of June 30th I believe is around 31.5 million dollars.

Chuck Piluso: As they have previously discussed in our conference calls, our strategic focus is on recurring revenue contracts. The client equipment purchase cycle typically runs on a three-to-five-year cycle. Once you sell equipment, each year, typically we provide softwarely newer licenses and hardware support. This continues until the client refreshes their equipment and then the cycle continues. I am pleased to report that our gross profit margin increased to 49 percent during the second quarter of 2024, up from 43.7 percent in the same period last year.

Speaker Change: And with our renewal rate, it continues to grow because the number of clients that have renewed since January is 82.

Speaker Change: and of the 400 and plus 420 companies we serve. So using that 31 to $32 million, that kind of continues as you continue to grow. You know, also we've added six new partners since January.

Chuck Piluso: So using that $31 to $32 million, that kind of continues as you continue to grow. You know, also we've added six new partners since January. And so that's pretty good. Now, we do have around 100, channel partners. I don't know, I'm going to call 16 active, it's the old 80-20 theory. In this case, you know, 15 percent, 15-85 percent, you know.

Chuck Piluso: This improvement highlights the effect of this and scalability of our business model. It also reflects the successful integration of our operations. The increased margin is a testament to our discipline execution and strategic efforts to optimize profitability by building a more sustainable revenue base.

Charles Piluso: And so that's pretty good. Now, we do have around 100 channel partners; I don't know, I'm going to call 16 active at the old 80-20 theory. In this case, you know, 15%, 15, 85%. You know, and then when we talk about sales funnel, the sales funnel is around $15 million in total contract value. So, between the sales funnel that we have, the renewal rate, when you take the remaining contract value, you know, we're very stable. We just need to get, you know, we're on a quest right now; how short this is talking to recruiters. We believe some of the acquisitions that we're done in our space, usually the companies that acquire these companies, usually people leave.

Speaker Change: And so that's pretty good. Now, we do have around 100.

Speaker Change: channel partners.

Speaker Change: I don't know. I'm going to call 16 active. It's the old 80-20 theory. In this case, you know, 15%, 15.85%.

Chuck Piluso: And then when we talk about sales funnels, the sales funnels run 15 million dollars in contracts, total contract value. So between the sales funnel that we have, the renewal rate, when you take the remaining contract value, you know, we're very stable. We just need to get, you know, we're on a quest right now; Hal Schwartz is talking to recruiters. We believe some of the acquisitions that were done in our space, usually the companies that acquire these companies usually have people leave.

Chuck Piluso: In fact, we achieved 13.1 million in revenue and profitability for the first six months of 2024. To effectively advance our growth initiatives, we have recently relocated our new headquarters in Melbourne, New York. This move has expanded our square footage by nearly 40 percent while maintaining a minimal impact on expenses. We are strategically utilizing this increased space to accommodate the expanding technical, sales, and marketing teams, positioning us to capitalize on the significant opportunities within the month, and as a result of our strategic consolidation of flagship and cloud first, we are witnessing an increase in upselling opportunities.

Speaker Change: And then when we talk about sales funnels, the sales funnels run $15 million in total contract value.

Speaker Change: So, between the sales funnel that we have...

Hal Schwartz: the renewal rate, when you take the remaining contract value, you know, we're very stable. We just need to get, you know, we're on a quest right now, Hal Schwartz is, talking to recruiters. We believe some of the acquisitions that were done in our space

Speaker Change: Usually the companies that acquire these companies, usually people leave. We get a great opportunity to hire some very good sales talent.

Chuck Piluso: We think it's a great opportunity to hire some very good sales talent, and so we'll be expanding the sales team, you know, in the United States. So we're moving ahead with that and also trying to expand our channel partner management. However, the migration has taken place.

Charles Piluso: We did this a great opportunity to be hired some very good sales talent. And so we'll be expanding the sales team, you know, in the United States. So we're moving ahead with that and also trying to expand our channel partner management. But the migration has taken place. I mean, we, you know, frankly, on our, you know, I just stated the cloud-first website, but on all of our websites, we've had over 100,000 visitors since January. So the migration's underway. IBM has made a statement. I was in Milan at the IBM conference, user group, user group called Common.

Speaker Change: and so we'll be expanding the sales team in the United States. So we're moving ahead with that and also trying to expand our channel partner management.

Chuck Piluso: Validating this on multiple expanded contracts we announced during the quarter.

Chuck Piluso: I mean, we, you know, frankly, on our, you know, I just stated the cloud-first website, but on all of our websites, we've had over 100,000 visitors since January. So the migration is underway. IBM has made a statement. I was in Milan at the IBM conference user group called Common, and they estimated that 10% of the IBM systems are going to migrate to the cloud each year. Now, our estimation on that is around $90 million, per year is up for grabs. You know, that's on the global basis. But it's fairly significant when you start taking it apart and say, what's in the United States?

Speaker Change: But the migration has taken place. I mean, we, you know, frankly, on our, you know, I just stated the cloud-first website, but on all of our websites, we've had over 100,000 visitors.

Chuck Piluso: First, we entered into an expanded contract with a prominent provider of end-to-end business processes. Initially engaged for infrastructure solutions. We are now through the six-figure contract delivering managed encrypted backup and recovery services.

Speaker Change: since January. So the migration is underway.

Speaker Change: IBM has made a statement. I was in Milan at the IBM conference user group called Common, and they estimated that

Charles Piluso: And they estimated that 10% of the IBM systems are going to migrate to the cloud each year. Now our estimation on that is around $90 million per year is up to graphs. You know, that's on a global basis. But it's fairly significant when you start taking it apart and say, within the United States, what will IBM because if you're only about, you know, you don't get fired if you buy IBM. I don't know if that's true anymore. But you know, we do a fantastic job on migrating existing systems to our platform, which is a major hurdle.

Chuck Piluso: This expansion underscores our capabilities to meet the evolving needs of our customers and exceed their expectations. More recently, we expanded services as one of the nation's largest suppliers of promotional products, securing a new seven-figure agreement highlighting our continued success. In 2023, we were selected to implement a comprehensive disaster recovery solution to this client, ensuring rapid recovery and enhanced security within a cloud-based environment. This solution included optimization of end-network for high-speed, secure switching during disasters or interruptions.

Speaker Change: 10% of the IBM systems are going to migrate to the cloud each year. Now our estimation on that is around $90 million.

Chuck Piluso: What will IBM do? Because if you're only, you know, you don't get fired if you buy IBM. I don't know if that's true anymore. But, you know, we do a fantastic job of migrating existing systems to our platform, which is a major hurdle, and we do an excellent job with that. You know, I'm going to say I think we're one of the best.

Speaker Change: per year is up for grabs.

Speaker Change: You know, that's on a global basis.

Speaker Change: But it's fairly significant when you start taking it apart and say, what's in the United States?

Speaker Change: What will IBM because if you're only but you know

Speaker Change: You don't get fired if you buy IBM. I don't know if that's true anymore. But, you know, we do a fantastic job on migrating existing systems.

Charles Piluso: And we do an excellent job with that. You know, I'm going to say I think we're one of the best. We have good competitors on that. And I don't think IBM is one of them. So I think we're positioned well with a great sales funnel, good remaining contract value, and the number of customers that have renewed already. So it's pretty stable on it.

Speaker Change: to our platform, which is a major hurdle, and we do an excellent job with that.

Speaker Change: You know, I'm going to say I think we're one of the best. We have good competitors on that, and I don't think IBM is one of them.

Chuck Piluso: We have good competitors on that and I don't think IBM is one of them. So I think we're positioned well with a great sales funnel, good remaining contract value, the number of customers that have renewed already. So it's pretty stable on it.

Chuck Piluso: Following the successful implementation, the clients selected us to migrate their critical production systems to a new state-of-the-art data center in Chicago, where we will establish a fully monitored and managed private cloud infrastructure solution. Both of these contracts came through cloud first division. In fact, cloud first achieved 4.6 million in revenue for the second quarter and was profitable on a standalone basis.

Speaker Change: So, I think we're positioned well with a great sales funnel, good remaining contract value, the number of customers that have renewed already.

Charles Piluso: But we do need to add salespeople, and you know, we're on a search for that right now. I believe we'll be engaging a recruiter and going after some of these companies that have been acquired by two other firms. Of course.

Speaker Change: So it's pretty pretty stable on it, but we do need to add salespeople and And you know we're on a search for that right now I believe we'll be engaging a recruiter and going after some of these companies that have been acquired by by two other two other firms

Chuck Piluso: But we do need to add salespeople and you know, we're on a search for that right now. I believe we'll be engaging a recruiter and going after some of these companies that have been acquired by two other firms. Okay, last one of you. Oh, sorry, go ahead. No, no, go on, Adam, go on.

Speaker Change: Okay, last question if you'll permit me. So, you know, in terms of the dollar value of your backlog that's awaiting implementation, processing implementation, how did it be exited in quarter?

Chuck Piluso: To support the traction and growth of cloud first, we recently expanded to the United Kingdom with the opening of our London office. We will also be deploying a unique infrastructure platform in two UK data centers, increasing our addressable market. We estimate that the UK marketplace consists of the 50,000 companies that conduct business between the USA and the UK with over 1.6 million Americans working in the UK.

Adam Waldo: Last question, if you'll permit me. In terms of the dollar value of your backlog that's waiting implementation for process and implementation, how would it be exit the gene quarter, and just remind us how that comparable with where we were when we acted as the mark work? You're asking about the work and process today. I actually, Adam, I don't believe I have that number. I don't believe. Do you know that, Chris? Adam, I can get that number for you. You usually have that number. Let's follow up on the whip, because we always have that. I'm not sure why it's not on my sheet here, but just give me a second.

Adam Waldo: Last question, if you'll permit me. So, you know, in terms of the dollar value of your backlog, that's a waiting implementation for processing implementation, how did it be exit the gene quarter? And just remind us how that compared with where we were when we activated the MARF. Are you asking about the work and process today? I actually, Adam, I don't believe I have that number. I don't believe I have, do you know that, Chris? Adam, I can get that number for you. Usually we all have that.

Speaker Change: and just remind us how that compared with where we were when we acted at the MARC one.

Speaker Change: You're asking about the work in process today. I actually, Adam, I don't believe I have that number. Okay. I don't believe I have. Do you know that, Chris? No, I don't. Adam, I can get that number for you.

Chuck Piluso: This strategic move represents a significant milestone in our plan to serve a global clientele and strengthen cloud first presence in key international marketplaces. Our first steps several years ago outside the United States was establishing a footprint in Canada. Cloud first has two power platforms in Canada. In the UK and Canada are the largest trading partners between those two countries. We consider the addressable markets of the USA, UK and Canada to be a significant opportunity.

Chuck Piluso: You usually have that number. Let's follow up on the WIP, because we always have that. I'm not sure why it's not on my sheet here, but just give me a second.

Speaker Change: usually have that number let's follow up on the web because we always have that I'm not sure why it's not on my on my sheet here but just give me a second I want to see if

Adam Waldo: I don't know the answer to that, Adam. I apologize. I usually know that number. I will get that to you. No worries. We'll follow up. Thank you very much. Thank you, Adam. Thank you for the questions. Thank you.

Chuck Piluso: I want to see if... You know, I don't know the answer to that, Adam. I apologize. I will usually know that number. I will get that to you. Not worries, we'll follow up. Thank you very much. Thank you, Adam.

Adam Waldo: I don't know the answer to that, Adam. I apologize. I will usually know that number. I will get that to you. No worries. We'll follow up. Thank you very much.

Operator: Thank you for your question. Thank you. Our next question comes from the line of Ellen Litvak with Forest Capital. Please proceed with your question. Good morning and thank you for taking my question. Can you provide an update on the status of the UK expansion and share any additional details? Sure. I'm hanging there with our CTO Chuck Palillo and the House was the president about first on the 9th of September.

Adam Waldo: Thank you, Adam. Thank you for your questions.

Alino Allen: Our next question comes from Alino Allen. Redback with Forest Capital. Please proceed with your question.

Adam Waldo: Thank you. Our next question comes from the line of Ellen Litvak with Forest Capital. Please proceed with your question.

Chuck Piluso: Our cloud infrastructure offerings of cloud hosting disaster recovery and cybersecurity solutions will establish data stores, we believe, as one of the few single source multi-country providers. We are witnessing an increased demand for our solutions and as a result we deployed assets to the seven data center in Chicago. Chicago was strategically selected as it allows us to capitalize on the growing demand within the region as well as diversify our geographic footprint within the United States, is.

Charles Piluso: Good morning. I think you were thinking my question. Can you provide an update on the status of the UK expansion and share any additional details? Sure. I'm heading there with our CTO, Chuck Delillo, and the House was the president first on the 9th of September. We're visiting data centers. We're moving aggressively the person that we have identified, essentially, to be the president of that company. We do have the company established as a branch office. We do have an office established there as well, and we'll be going around visiting the data centers. We have the potential of a couple of clients already.

Ellen Litvak: Good morning and thank you for taking my question. Can you provide an update on the status of the UK expansion and share any additional details?

Ellen Litvak: Sure.

Speaker Change: I'm heading there with our CTO Chuck Pelillo and Hal Schwartz, the president of Cloud First. On the 9th of September we're visiting data centers.

Ellen Litvak: We're visiting data centers. We're moving aggressively the person that we have identified, essentially, to be the president of that company. We do have, The company is established as a branch office.

Speaker Change: We're moving aggressively. The person that we have identified, essentially, to be the president of that company, we do have the...

Chuck Piluso: Demonstrating this growing demand and evidence that the IBM Powerless Service migration is underway is the continued increase in visitors to our cloud first website, which is over 45,000 in the first six months of 2024. Furthermore, we are expanding our technical and business development teams to provide the support required for our anticipated client growth while maintaining an excellent client renewal rate. We are also continuing to support our nurturers, which contains over a thousand organizations interested in potential implementation of our services.

Chuck Piluso: We do have an office established there as well, and we'll be going around visiting the data centers. We have potential of a couple of clients already. We have some distributors lined up, and some of them are fairly large, and we're negotiating those distributor agreements today. Some of them are smaller that we do have a distributor agreement already with. We expect to deploy the equipment in the fourth quarter and going live, as I mentioned earlier, beginning of January, to be able to take advantage of a fairly large account, I believe, out of Europe.

Speaker Change: The company established as a branch office. We do have an office established there as well And we'll be going around visiting the data centers. We have potential of a couple of clients already

Charles Piluso: We have some distributors lined up, some of them are fairly large, and we're going to go sheeting those distributor agreements today. Some of them are smaller, that we do have distributor agreement already with. We expected to deploy the equipment in the fourth quarter and going live, as I mentioned earlier, beginning of January, to be able to take advantage of a fairly large account that they believe out of Europe. We're following all the guidelines on the data privacy and everything that that means. We're moving quickly on it. You know, we're working with the institute to be able to get to a higher level of networking, but I think we believe there's a significant opportunity between having this, I'll use the term, try add, between Canada, the UK, and the United States.

Speaker Change: We have some distributors lined up and some of them are fairly large.

Speaker Change: and we're negotiating those distributor agreements today. Some of them are smaller that we do have a distributor agreement already with.

Speaker Change: And we expect to deploy the equipment in the fourth quarter and going live, as I mentioned earlier, beginning of January, to be able to take advantage of a fairly large account, I believe, out of Europe.

Chuck Piluso: And we intend to take advantage of these avenues to secure new contracts and increase our footprint within the United States. We are currently serving over 480 companies and are committed to expanding this impressive client base. Data center firms that specialize in window-based infrastructure platforms rely on our expertise in the IBM platform. Collaborating with these infrastructure firms presents an opportunity to broaden our distribution channels, leverage our talents and workforce, and optimize our deploy assets.

Chuck Piluso: We're following all the guidelines on data privacy and everything that that means, and you know, we're moving quickly on it. You know, we're working with the Institute to be able to get to a higher level of networking, but I think there's, we believe, there's a significant opportunity between having this, I'll use the term triad between Canada, the UK and the United States. There are very few companies that have this and companies want to be able to deal with one, the port ticket system to be able to go to one place.

Speaker Change: And, you know, we're following all the guidelines on data privacy

Speaker Change: And, you know, we're moving quickly on it. You know, we're working with the institutes to be able to get to a higher level of networking.

Speaker Change: But I think there's, we believe there's a significant opportunity between having this, I'll use the term triad, between Canada, the UK, and the United States.

Charles Piluso: There are very few companies that have this, and companies want to be able to deal with one, the port ticket system to be able to go to one place. It also allows us to probably reduce our expenses on our 24 by 7 operations as well, because of the time frames and time differences. So we're excited about it.

Speaker Change: There are very few companies that have this and companies want to be able to deal with one support ticket system to be able to go to one place. It also allows us to probably reduce our expenses on a 24 by 7 operations as well because of the time frames and time differences.

Chuck Piluso: Overall, we are executing on a strategic growth plan, which has resulted in expanding contracts, international expansion, and increased recognition within the industry. We also intend to explore acquisitions that would further our growth while complementing and improving our established operations. Moreover, we believe we have positioned ourselves to success and growth, given our reliable solutions, exceptional service, and now international footprint. In addition, we are leveraging the various upselling opportunities as a result of the consolidation of subsidiaries.

Chuck Piluso: It also allows us to probably reduce our expenses on our 24 by 7 operations as well because of the time frame from time to time. So we're excited about it. That's great to hear. Thank you. Yes, it did.

Chuck Piluso: These strategic initiatives set the stage for long-term profitability.

Operator: Thank you. Yes, thanks.

Speaker Change: So we're excited about it.

Ellen Litvak: Thanks. My other question is, how are you planning on growing the distribution network from channel to direct sale? You know, what happens is, on direct sales, and you know, I've been in the game for a while, you know, I've managed a sales force for over 110 people and all, and it was very, very different, you know, not too many years ago. Today, what happens is, if you have a very experienced sales rep, all the companies have channel partner or agent agreements.

Speaker Change: That's great to hear, thank you. My other question is how are you planning on growing the distribution network from channel to direct sale?

Alino Allen: My other question is how are you planning on growing the distribution that works on channel to direct sales? You know what happens is on direct sales and you know I've been in the game for a while. You know I've managed a sales flush for over 110 people and all, and it was very, very different you know not too many years ago. Today, what happens is if you have a very experienced sales rep, all the companies have channel partner or agent agreements, so as soon as you get someone that's really excellent, they become a 10-99 agent, they form their own business, and they're often going.

Ellen Litvak: So as soon as you get someone that's really excellent, they become a 1099 agent, they form their own business, and they're off and going. So on the direct sales force, it's very difficult. Some people don't want to start their own businesses as we know.

Speaker Change: [inaudible]

Speaker Change: You know what happens is on direct sales and you know I've been in the game for a while you know I've managed a sales force for over 110 people and all and it was very very different you know not too many years ago.

Speaker Change: Today, what happens is if you have a very experienced sales rep, all of the companies have channel partner or agent agreements.

Chuck Piluso: At the same time, we have carefully managed expenses and have preserved this strong balance sheet with approximately 12 million cash and marketable securities, and no-one-term debt at the end of the corner, which provides us the flexibility to deploy capital, efficiently and effectively, to support our long-term growth, and drive value to our shareholders.

Speaker Change: So as soon as you get someone that's really excellent, they become a 1099 agent, they form their own business, and they're off and going.

Chuck Piluso: And so in this case, we believe with the recruiter, we have identified that how shorts has identified we will be going after some of these. We would say high level experience folks in the services that we sell will also have moved into, you know, IT automation. So with the IT automation, we're also trying to hire in that area because. Our existing coin base is looking for that. And so we've been doing that.

Charles Piluso: So, on the direct sales source, it's very difficult. Some people don't want to start their own businesses, as we know, and so in this case we believe with the recruiter we have identified that how towards, as identified, we will be going after some of these. We would say high level experienced folks in the services that we sell. We'll also have moved into, you know, IT automation, but with the IT automation, we're also trying to hire in that area because our existing coin base is looking for that, and so we've been doing that. We've been proposing that already, but we're trying to build the sales force in two areas: cloud hosting and disaster recovery that know our platforms, IBM, and all they've been selling it.

Speaker Change: So on the direct sales force, it's very difficult. Some people don't want to start their own businesses as we know And so in this case, we believe with the recruiter we have identified that how Schwartz has identified We will be going after some of these

Chris Panagiotakos: With that, I'd like to turn the call over to Chris Panagiotakis on CFO to discuss our financials. Please go ahead, Chris. Thank you, Chuck.

Speaker Change: We would say high-level, experienced folks in the services that we sell. We'll also have moved into, you know, IT automation. So with the IT automation, we're also trying to hire in that area because our existing client base is looking for that.

Chris Panagiotakos: Good morning, everyone. Total revenue for the three months ended June 30th, 2024 was $4.9 million, a decrease of approximately $1 million for 17 percent, compared to $5.9 million for the three months ended June 30th, 2023. The decrease is primarily attributed to a lower one-time equipment and software sales during the current period and a decrease in managed services, partially offset by increases in all other revenue sources. Total revenue for the six months ended June 30th, 2024 was $13.1 million, an increase of approximately $362,000 or 3 percent, compared to $12.8 million for the six months ended June 30th, 2023.

Chuck Piluso: We've been proposing that already, but we're trying to build the sales force in two areas. Cloud hosting and disaster recovery that know our platforms IDM and all they've been selling it. That's one target for the recruiter and the other is an IT automation on the channel partners. If you think about this a little bit, these are companies that have essentially sold the equipment to the end user. And they are the trusted advice.

Speaker Change: And so we've been doing that, we've been proposing that already, but we're trying to build a sales force in two areas. Cloud hosting and disaster recovery that know our platforms, IBM and all, they've been selling it. That's one target for the recruiter and the other is on IT automation.

Charles Piluso: That's one target for the recruiter, and the other is an IT automation. On the channel partners, if you think about this a little bit, these are companies that have essentially sold the equipment to the end user, and they are the trusted advisor. And we are going after them. We continue to go after them. A lot of them are small companies; they might have 50 customers, and as that customer is ready to recycle, as we mentioned, three to five years potentially, you know, they come to us. We give a proposal and say, you know what, you're making one time every five years on this; you can create an annuity for yourself with our renewal rate of over 90% and have this going on for 15, 20 years until technology changes. And we try to work with that channel partner on it.

Speaker Change: On the channel partners, if you think about this a little bit, these are companies that have essentially sold the equipment to the end user, and they are the trusted advisor.

Chuck Piluso: And we are going after them. We continue to go after them. A lot of them are small companies.

Speaker Change: and we are going after them, we continue to go after them.

Chuck Piluso: They might have 50 customers. And as that customer is ready to recycle, as we mentioned, three to five years potentially, you know, they come to us. We give a proposal and say, you know what? You're making one time every five years on this.

Chris Panagiotakos: The increase is primarily attributed to the increase of 29 percent in infrastructure and disaster recovery cloud services, offset partially by a decrease in one-time equipment sales and managed services during the current period, of 2020. Both the sales for the three months ended June 30, 2024 was $2.5 million, a decrease of approximately $823,000, or 25%, compared to $3.3 million for the three months ended June 30, 2023. The decrease of 25% was mostly related to a decrease in equipping related costs.

Speaker Change: A lot of them are small companies. They might have 50 customers and as that customer is ready to recycle, as we mentioned, three to five years potentially, they come to us, we give a proposal and say, you know what, you're making one time every five years on this. You can create an annuity for yourself.

Chuck Piluso: You can create an annuity for yourself with our renewal rate of over 90% and have this going on for 15, 20 years until technology changes. And so we try to work with that channel partner on it. But other areas are on the Oracle systems, you know, Oracle partners with Oracle also use the IBM platform as well.

Speaker Change: with our renewal rate of over 90% and had this going on for...

Speaker Change: 15-20 years until technology changes. And so we try to work with that channel partner on it. But other areas are on the Oracle systems, you know, Oracle partners with Oracle also use the IBM Power Platform as well.

Charles Piluso: But other areas are on the Oracle systems; you know Oracle partners with Oracle also use the IBM Cloud Platform as well. So we continue to expand on that and have our marketing programs, you know, try to reach out to them. We try to reach out by both SEO, organic advertising. So it's not an easy process, you know if we have our 100 channel partners today with 15, 16 active, I'm not excited about that. But we are now aggressively, I'll use that term, going you have to increase both our direct sales force, but we have a great sales force today.

Chuck Piluso: So we continue to expand on that and have our marketing programs, you know, try to reach out to them. We try to reach out through both SEO and organic advertising. So it's not an easy process, you know, if we have 100 channel partners today with 15, 16 active, I'm not excited about that. But we are now aggressively, I'll use that term, going after increased both our direct sales force, which we have a great sales force today, but we need more.

Chris Panagiotakos: Both the sales for the six months ended June 30, 2024 was $7.8 million, a decrease of approximately $344,000, or 4%, compared to $8.1 million for the six months ended June 30, 2023. The decrease of 4% was mostly related to a decrease in one time equipping sales. Sally General and administrative expenses for the three months ended June 30, 2024 were $2.8 million, an increase of approximately $325,000, or 13%, as compared to $2.5 million for the three months ended June 30, 2023.

Speaker Change: So, we continue to expand on that and have our marketing programs, you know, try to reach out to them. We try to reach out by both SEO, organic.

Speaker Change: advertising

Speaker Change: So it's not an easy process.

Speaker Change: You know, if we have 100 channel partners today with 15, 16 active, I'm not excited about that, but we are now aggressively, I'll use that term, going after increased both our direct sales force, which we have a great sales force today, but we need more. We have a good group.

Alino Allen: But we need more; we have a good group and, at the same time, increase our channel partners. These folks that are not only IT companies but there are also agents of several companies, but they need the IT power infrastructure, which is something that a lot of them are missing from their portfolio, referring to the folks that move from direct sales to 1099. So we are also going after that group. So that helps. Yes, thank you.

Chuck Piluso: We have a good group. And at the same time, increase our channel partners, these folks that are not only IT companies, but they're also agents of several companies, but they need the IT power infrastructure, which is something that a lot of them are missing from their portfolio. Referring to the folks that move from direct sales to 1099.

Speaker Change: and at the same time increase our channel partners. These folks that are not only IT companies, but they're also agents.

Chris Panagiotakos: Sally General and administrative expenses for the six months ended June 30, 2024 were $5.5 million, an increase of approximately $947,000, or 21%, as compared to $4.6 million, for the six months ended June 30, 2023. The increases were primarily due to an increase in advertising expense, professional fees associated with our international expansion efforts. Dalleries, stock-based compensation, and travel adjusted EBITDA for the three months ended June 30, 2024 was $164,000, compared to adjusted EBITDA of $350,000 for the same period last year.

Speaker Change: of several companies, but they need the IT power infrastructure, which is something that a lot of them are missing from their portfolio. I'm referring to the folks that moved from direct sales to 1099. So we're also going after that group.

Ellen Litvak: So we're also going after that group. That helps. Yes, thank you. That is very helpful. I'll hop back on the queue.

Operator: That is very helpful. I'll be back on the queue. Thanks. Thank you. Thanks for the questions. Thank you.

Speaker Change: If that helps.

Speaker Change: Yes, thank you. That is very helpful. I'll hop back over to you. Thanks.

Operator: Thanks. Thank you. Thanks for the questions.

al: Thank you. Thanks for the questions, Al.

Operator: And there are no further questions at this time.

Chuck Piluso: Thank you. And there are no further questions at this time. I would like to turn the floor back to the, Well, thank you for your questions. We have developed a robust business strategy and we are confident that we will drive our growth, ensure sustained and increased profitability over the long term and deliver maximum value to our shareholders. We're optimistic about our potential in our initiatives and we're looking forward to realizing the full benefits over time.

Speaker Change: Thank you and there are no further questions at this time. I would like to turn the floor back to Management for a closing remarks.

Charles Piluso: I would like to turn the floor back to the management floor.

Charles Piluso: Close remarks. Thank you. Well, thank you for your questions. We have developed a robust business strategy, and we are confident that we will drive our growth, ensure sustained and increased profitability over the long term, and deliver maximum value to our shareholders. We are optimistic about our potential in our initiatives, and we are looking forward to realizing the full benefits over time.

Chris Panagiotakos: Adjusted EBITDA for the six months ended June 30, 2024 was $837,000, compared to an adjusted EBITDA of $865,000 for the same period last year. Net laws attributable to common shareholders for the three months ended June 30, 2024 was $244,000, compared to net income of $226,000 for the three months ended June 30, 2023. Net income attributable to common shareholders for the six months ended June 30, 2024 was $113,000, compared to $277,000 for the six months ended June 30, 2023. We ended the quarter with cash and marketable securities of approximately $12 million at June 30, 2024, compared to $12.7 million at December 31, 2023.

Speaker Change: Well, thank you for your questions. We have developed a robust business strategy and we are confident that we will drive our growth, ensure sustained and increased profitability over the long term, and deliver maximum value to our shareholders.

Chris Panagiotakos: Thank you.

Speaker Change: We're optimistic about our potential and our initiatives, and we're looking forward to realizing the full benefits over time.

Charles Piluso: We are committed to keeping our shareholders informed with meaningful updates, and I would like to thank everyone who joined our call today. Thank you.

Operator: We are committed to keeping our shareholders informed with meaningful updates, and I'd like to thank everyone who joined our call today. Thank you. Have a great day. Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lives at this. Copyright © 2013 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent, starring David Cooper Katherine Michael [inaudible] with the same word. [inaudible] and more. I'm Chris Panagiotakos. Thanks for watching. I'll see you next time.

Speaker Change: We are committed to keeping our shareholders informed with meaningful updates and I'd like to thank everyone who joined our call today. Thank you.

Operator: Have a great day. Thank you.

Speaker Change: Have a great day.

Operator: This does conclude today's teleconference. We thank you for your participation. You may disconnect your mind at this time. Thank you.

Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Speaker Change: ["Spirited Away"]

Chuck Piluso: I will now turn the call back to Chuck. Thanks, Chris.

Operator: Let's open up the call for some questions. I've heard them. Thank you.

Operator: We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one. I guess I won't keep that. A confirmation tone will indicate a line in the question queue. You may press star 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 these start keys. One moment, please while we pull for questions.

Adam Waldo: And our first question comes from the line of Adam Waldo with more partners. Please for seeing the true question. Yes, thank you. So, I want to start with sort of where are we going to see your terms of random recurring revenue and how that compare with the first quarter. Adam, you're breaking up a little bit. Can you keep that? Yeah, is this better? Let's see. Say something to me. Sing a song Adam.

Adam Waldo: Is this better? It's a little better. Yeah. Okay, I apologize for that. I hope you can hear me now. I apologize. Yeah, it's better. It's a little better. Oh, great. Sorry, Chuck. Good day, Chuck and Chris. I want to see if we can start with the annual recurring revenue at which the company actually had second quarter, relative to first quarter. And with the investments that you've made in the cost-neutral headquarters expansion in Melville, the new London office and the Chicago Data Center.

Adam Waldo: What's a reasonable range of sort of breaking the record of the revenue that you need to support? Yeah, both of us. Okay, just want to make sure I'm clear to did break up a little bit on the recurring revenue. You were asking about that and the expenses of Chicago and as well as London on the expansion side. Sorry, I'm interested in the investment you made in growing the business on the infrastructure side, Chuck.

Adam Waldo: What is a reasonable range of sort of quarterly break even revenue that we need to be generated to support those infrastructure ads? Well, the recurring revenue we have on a basically on a monthly basis when we look at cloud first. Are we speaking about just cloud first? We're talking about overall the consolidation with the data storage cooperation. No, the entire organization. You know, just to highlight that, it's somewhat still slightly dependent on equipment sales, which we typically have.

Adam Waldo: But you know, it becomes lumpy as we spoke about before because of the cycling of refreshing of the equipment so that we do have some dependency on the equipment sales. Less and less time goes on and we do have the ability to cut back on various marketing expenses. But what ends up happening just to give an example of a customer base, just 28 customers have increased their services with us since January.

Adam Waldo: So, you know, it's not necessarily all new ads, you know, on stuff. And so, you know, you have renewed contracts, you have clients adding to it. So, as was an example that I read earlier, you know, you had the customer that was on one service and then added a significant amount on another. So, you're not sure when exactly that's going to be coming on, but we're very, very close, I would say, to a break even on just the recurring, on the becoming base.

Adam Waldo: Justice. What ends up happening though, this lumpiness continues because if you have subscription agreement that let's say on a 36 month contract, even though our average is 30 months across the board, a straight average, you'll end up getting software renewal and hardware maintenance contracts, like we have that happens in the first quarter and you have that lumpiness that continues. So if you would have smoothed everything out, I would say that the company really, even with these efforts, are break even on basis.

Adam Waldo: I don't know if you agree with that, you know. So I think this break even when you start, you know, taking what we would consider annually current revenue was software renewal of hardware maintenance with the subscription revenue, both in disaster recovery, cloud infrastructure and cybersecurity. So that profitability really kicks in high when you have an equipment sale, even though the margins are not great, they're 20, 25 percent margins versus, you know, 52 percent margins on subscription.

Adam Waldo: So I think we're really there with it. I will say though, you know, and I think you get to know me a little bit more and more as we talk Adam, is that I'm kind of never happy. The thing is that I, you know, I wouldn't mind losing, you know, I wouldn't mind decreasing our EBITDA to a greater revenue growth on the subscription side. And, you know, that's why we're looking at and expanding and going into London, primarily into the UK, because we believe between the UK, Canada and the US, only the very big guys who are there, you know, like an IBM, for example.

Adam Waldo: So you're not going to work maybe one of three. And we want to be able to leverage that. And that will take some money. We've already, we have two people identified that are working with us already on a consulting basis out of the UK that's costing some money, but we're still okay on the EBITDA side for cloud first. And we're going to be hopefully bringing them on full time with this. So, you know, we're signing, we're signing NDAs with companies and that will mean if they're going to find up with us as distributors or end user clients, it will cost some money.

Adam Waldo: Our depreciation will increase that overall expense because of the equipment being deployed there, which we expect that to happen in the fourth quarter and service is going live in January. So yeah, I'd like to see that revenue grow much higher without putting equipment sales on the side and let it hit the EBITDA a little bit to sacrifice that short term. So that answers your question. I'm not sure. Now, that's really helpful context in setting your thinking check.

Adam Waldo: I wonder if we can then sort of switch years a little bit, obviously into the new business pipeline and backlog. You know, obviously you all have seen terrific progress over the last five or six quarters and you've bound inquiries through the revamp website. And, you know, I think it's been a little bit slower in terms of translating RFPs than you've hoped, but you've still seen some pretty good traction there. So can you give us some metrics in terms of how, you know, that that surge in inquiries has been translating into requests from Proposal and then where your backlog sits here at the end of the second quarter.

Adam Waldo: Director. Okay, I can do that. Chris, you checked me out at any point that I'm kind of awful a little bit. So I'll give you some numbers on this. We believe that our remaining contract value, okay, the remaining contract value as of June 30, I believe, is around $31.5 million. And with our renewal rate, it continues to grow because the number of points that have removed since January is 82, and of the 400 and plus 420 companies we serve.

Adam Waldo: So using that $31 to $32 million, that kind of continues as you continue to grow. You know, also we've added six new partners since January. And so that's pretty good. Now, we do have around 100 channel partners, I don't know, I'm going to call 16 active at the old 80-20 theory. In this case, you know, 15%, 15, 85%. You know, and then when we talk about sales funnel, the sales funnel is around $15 million in contract total contract value.

Adam Waldo: So between the sales funnel that we have, the renewal rate, when you take the remaining contract value, you know, we're very stable. We just need to get, you know, we're on a quest right now, how short this is talking to recruiters. We believe some of the acquisitions that we're done in our space, usually the companies that acquire these companies, usually people leave. We did this a great opportunity to be hired some very good sales talent.

Adam Waldo: And so we'll be expanding the sales team, you know, in the United States. So we're moving ahead with that and also trying to expand our channel partner management. But the migration has taken place. I mean, we, you know, frankly, on our, you know, I just stated the cloud-first website, but on all of our websites, we've had over 100,000 visitors since January. So the migration's underway. IBM has made a statement. I was in Milan at the IBM conference, user group, user group called Common.

Adam Waldo: And they estimated that 10% of the IBM systems are going to migrate to the cloud each year. Now our estimation on that is around $90 million per year is up to graphs. You know, that's on a global basis. But it's fairly significant when you start taking it apart and say, within the United States, what will IBM because if you're only about, you know, you don't get fired if you buy IBM, I don't know if that's true anymore.

Adam Waldo: But you know, we do a fantastic job on migrating existing systems to our platform, which is a major hurdle. And we do an excellent job with that. You know, I'm going to say I think we're one of the best. We have good competitors on that. And I don't think IBM is one of them. So I think we're positioned well with a great sales funnel, good remaining contract value, the number of customers that have renewed already.

Adam Waldo: So it's pretty stable on it. But we do need to add salespeople and you know, we're on a search for that right now. I believe we'll be engaging a recruiter and going after some of these companies that have been acquired by two other firms. of course.

Adam Waldo: Last question, if you'll permit me. In terms of the dollar value of your backlog that's waiting implementation for process and implementation, how would it be exit the gene quarter, and just remind us how that comparable with where we were when we acted as the mark work? You're asking about the work and process today. I actually, Adam, I don't believe I have that number. I don't believe, do you know that, Chris? Adam, I can get that number for you.

Adam Waldo: You usually have that number. Let's follow up on the whip, because we always have that. I'm not sure why it's not on my sheet here, but just give me a second. I don't know the answer to that, Adam. I apologize. I usually know that number. I will get that to you. No worries. We'll follow up. Thank you very much. Thank you, Adam. Thank you for the questions. Thank you.

Alino Allen: Our next question comes from Alino Allen. Redback with Forest Capital. Please proceed with your question.

Chuck Piluso: Good morning. I think you were thinking my question. Can you provide an update on the status of the UK expansion and share any additional details? Sure. I'm heading there with our CTO, Chuck Delillo, and the House was the president first on the 9th of September. We're visiting data centers. We're moving aggressively the person that we have identified, essentially, to be the president of that company. We do have the company established as a branch office.

Chuck Piluso: We do have an office established there as well, and we'll be going around visiting the data centers. We have the potential of a couple of clients already. We have some distributors lined up, some of them are fairly large, and we're going to go sheeting those distributor agreements today. Some of them are smaller, that we do have distributor agreement already with. We expected to deploy the equipment in the fourth quarter and going live, as I mentioned earlier, beginning of January, to be able to take advantage of a fairly large account that they believe out of Europe.

Chuck Piluso: We're following all the guidelines on the data privacy and everything that that means. We're moving quickly on it. You know, we're working with the institute to be able to get to a higher level of networking, but I think we believe there's a significant opportunity between having this, I'll use the term, try add, between Canada, the UK, and the United States. There are very few companies that have this, and companies want to be able to deal with one, the port ticket system to be able to go to one place. It also allows us to probably reduce our expenses on our 24 by 7 operations as well, because of the time frames and time differences. So we're excited about it. Thank you. Yes, thanks.

Chuck Piluso: My other question is how are you planning on growing the distribution that works on channel to direct sales? You know what happens is on direct sales and you know I've been in the game for a while you know I've managed a sales flush for over 110 people and all and it was very very different you know not too many years ago. Today what happens is if you have a very experienced sales rep all the companies have channel partner or agent agreements so as soon as you get someone that's really excellent they become a 10-99 agent they form their own business and they're often going.

Chuck Piluso: So on the direct sales source it's very difficult. Some people don't want to start their own businesses as we know and so in this case we believe with the recruiter we have identified that how towards as identified we will be going after some of these. We would say high level experienced folks in the services that we sell. We'll also have moved into you know IT automation but with the IT automation we're also trying to hire in that area because our existing coin base is looking for that and so we've been doing that.

Chuck Piluso: We've been proposing that already but we're trying to build the sales force in two areas cloud hosting and disaster recovery that know our platforms, IBM and all they've been selling it. That's one target for the recruiter and the other is an IT automation. On the channel partners if you think about this a little bit these are companies that have essentially sold the equipment to the end user and they are the trusted advisor.

Chuck Piluso: And we are going after them we continue to go after them. A lot of them are small companies they might have 50 customers and as that customer is ready to recycle as we mentioned three to five years potentially you know they come to us we give a proposal and say you know what you're making one time every five years on this you can create an annuity for yourself with our renewal rate of over 90% and have this going on for 15, 20 years until technology changes and so we try to work with that channel partner on it.

Chuck Piluso: But other areas are on the Oracle systems, you know Oracle partners with Oracle also use the IBM Cloud Platform as well. So we continue to expand on that and have our marketing programs, you know try to reach out to them, we try to reach out by both SEO, organic advertising. So it's not an easy process, you know if we have our 100 channel partners today with 15, 16 active, I'm not excited about that but we are now aggressively, I'll use that term going you have to increase both our direct sales force but we have a great sales force today.

Chuck Piluso: But we need more, we have a good group and at the same time increase our channel partners. These folks that are not only IT companies but there are also agents of several companies but they need the IT power infrastructure which is something that a lot of them are missing from their portfolio referring to the folks that move from direct sales to 1099. So we are also going after that group. So that helps. Yes, thank you. That is very helpful. I'll have back on the queue. Thanks. Thank you. Thanks for the questions. Thank you.

Operator: And there are no further questions at this time.

Chuck Piluso: I would like to turn the floor back to the management floor. Close remarks. Thank you. Well, thank you for your questions. We have developed a robust business strategy and we are confident that we will drive our growth ensure sustained and increased profitability over the long term and deliver maximum value to our shareholders. We are optimistic about our potential in our initiatives and we are looking forward to realizing the full benefits over time. We are committed to keeping our shareholders informed with meaningful updates and I would like to thank everyone who joined our call today. Thank you. Have a great day. Thank you.

Operator: This does conclude today's teleconference. We thank you for your participation.

Operator: You may disconnect your mind at this time. Thank you.