Q1 2026 Data Storage Corp Earnings Call & Business Update

May 15, 2026

Operator 2: Welcome to the Data Storage Corporation Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce David Waldman, Investor Relations. Thank you. You may begin.

Operator: Welcome to the Data Storage Corporation Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce David Waldman, Investor Relations. Thank you. You may begin.

Speaker #2: If anyone should require operator assistance, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce David Waldman, Investor Relations.

Speaker #2: Thank you. You may begin. Thank you and good morning, everyone. Welcome to Data Storage Corp 2026 first quarter business update conference call. On On the call with us this morning are Chuck Piluso, Chairman and Chief Executive Officer; and Chris Panagiotakos, Chief Financial Officer.

David Waldman: Thank you. Good morning, everyone. Welcome to Data Storage Corporation's 2026 Q1 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 2026 Q1 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before we begin, please note that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to various risks and uncertainties described in the company's filings with the SEC.

Speaker #2: The company issued a press release this morning containing its 2026 first quarter financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please let us know.

Speaker #2: Please contact Crescendo Communications at 212-671-1020. Before we begin, please note that today's call contains forward-looking statements within the meaning of the private securities litigation reform act of 1995.

Speaker #2: Actual results may differ materially due to various risks and uncertainties described in the company's filings with the SEC. Except as required by law, the company assumes no obligation to update or revise forward-looking statements.

David Waldman: Except as required by law, the company assumes no obligation to update or revise forward-looking statements. I'd now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Speaker #2: I'd now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Chuck Piluso: Thank you, David. Good morning, everyone. We appreciate everyone joining us today. The Q1 of 2026 marked another important milestone in the strategic transformation of Data Storage Corporation. Over the past year, we have repositioned the company following the successful sale of our cloud solution business in 2025. Today, we are operating from a position of financial strength, strategic flexibility, and operational focus. As many of you know, the sale of the CloudFirst business was transformational for Data Storage Corporation. That transaction not only validated the value we created over more than two decades but also provided us with the capital foundation necessary to reposition the company towards what we believe are significantly larger long-term market opportunities.

Speaker #3: Thank you, David. Good morning, everyone. We appreciate everyone joining us today. The first quarter of 2026 marked another important milestone in the strategic transformation of data storage corporation.

Speaker #3: Over the past year, we have repositioned the company following the successful sale of our cloud solution business in 2025. And today, we are operating from position of financial strength, strategic flexibility, and operational focus.

Speaker #3: As many of you know, the sale of the cloud-first business was transformational for data storage corporation. That transaction not only validated the value we created over more than two decades, but also provided us with the capital foundation necessary to reposition the company towards what we believe was significantly larger long-term market opportunities.

Speaker #3: Following the transaction, we completed a substantial tender offer that reduced our outstanding shares count by approximately 72%. While still maintaining debt-free balance sheet and substantial liquidity, importantly, the period following the sale was not a pause in activity.

Chuck Piluso: Following the transaction, we completed a substantial tender offer that reduced our outstanding shares count by approximately 72% while still maintaining debt-free balance sheet and substantial liquidity. Importantly, the period following the sale was not a pause in activity. It was a period of evaluation, of analysis, of strategic development. We spent considerable time assessing emerging infrastructure trends, regulatory developments, competitive positioning in areas where we believe meaningful structural market gap existed. What became increasingly clear, experimentation into mission-critical software deployment environments. Across industries such as healthcare, financial service, and insurance, organizations are beginning to deploy Sovereign AI and AI factory environments. On-site equipment designed to run proprietary AI models on highly sensitive data sets. These are not public AI cloud environments. These are private enterprise-grade AI infrastructures that organizations increasingly rely upon for core operating workflows, security, decision-making, compliance functions, and customer-facing processes.

Speaker #3: It was a period of evaluation of analysis of strategic development. We spent considerable time assessing emerging infrastructure trends, regulatory developments, competitive positioning, and areas where we believe meaningful structural market gap existed.

Speaker #3: What became increasingly clear was the experimentation into mission-critical software deployment environments. Across industries such as healthcare, financial services, and insurance, organizations are beginning to deploy sovereign AI and AI factory environments.

Speaker #3: On-site equipment designed to run proprietary AI models on highly sensitive data sets. These are not public AI cloud environments. These are private enterprise-grade AI infrastructures that organizations increasingly rely upon for core operating workflows: security, decision-making, compliance functions, and customer-facing processes.

Speaker #3: As we study this market, we identify what we believe is a critical infrastructure gap. As these systems are deployed, today we believe there are no widely adopted, purpose-built platforms designed specifically to address recovery, resilience, behavior validation, and regulatory compliance for these AI factory environments.

Chuck Piluso: As we study this market, we identify what we believe is a critical infrastructure gap. As these systems are deployed today, we believe there are no widely adopted purpose-built platforms designed specifically addressing recovery, resilience, behavior validation, and regulatory compliance to these AI factory environments. After two successful decades operating CloudFirst, we understand the client's requirements as it relates to meeting their expectations surrounding business continuity. Traditional data storage systems focus primarily on restoring hardware or infrastructure uptime, but AI introduces an entirely different challenge set. Enterprises will require a business continuity service and will increasingly need to validate those models are behaving correctly when a situation occurs. That output remains compliant, that inference consistency is maintained, and that recovery procedures themselves satisfy the client and regulatory standards. We believe this creates a significantly new category of infrastructure need.

Speaker #3: After two successful decades operating cloud-first, we understand the client's requirements as it relates to meeting their expectations surrounding business continuity. Traditional data storage systems focus primarily on restoring hardware or infrastructure uptime, but AI introduces an entirely different challenge set.

Speaker #3: Enterprises will require a business continuity service, and will increasingly need to validate those models of behaving correctly when a situation occurs, so that output remains compliant.

Speaker #3: That inference consistency is maintained, and that recovery procedures themselves satisfy the client and regulatory standards. We believe this creates a significantly new category of infrastructure need.

Speaker #3: To address this opportunity, we plan to establish Sovereign AI Solutions, a wholly owned subsidiary focused on developing what we describe as an AI continuity control plane for regulator and regulated enterprises.

Chuck Piluso: To address this opportunity, we plan to establish Sovereign AI Solutions, a wholly owned subsidiary focused on developing what we describe as an AI Continuity Control Plane for regulated enterprises. Our intention is to create a platform capable of serving as a resiliency, recovery, validation, and compliance layer for Sovereign AI infrastructure environments. The platform we envision is designed to detect behavioral anomalies, execute validated recovery sequences, and generated audit-ready documentation that regulated industries may increasingly require as AI becomes embedded into critical business operations. Importantly, we believe our approach is differentiated because it focuses not only on infrastructure restoration, but also on preserving operational integrity, compliance posture at the model and behavioral levels. We also believe the market timing is compelling.

Speaker #3: Our intention is to create a platform capable of serving as a resiliency, recovery, validation, and compliance layer for sovereign AI infrastructure environments. The platform we envision is designed to detect behavioral anomalies, execute validated recovery sequences, and generate audit-ready documentation that regulated industries may increasingly require as AI becomes embedded into critical business operations.

Speaker #3: Importantly, we believe our approach is differentiated because it focuses not only on infrastructure restoration, but also on preserving operational integrity compliance posture at the model and behavioral levels.

Speaker #3: We also believe the market timing is compelling. Earlier this month, several leading AI developers announced multibillion-dollar initiatives designed to integrate AI deeply into the enterprise-wide workflows, further validating large-scale AI deployment across mission-critical environments is accelerating rapidly.

Chuck Piluso: Earlier this month, several leading AI developers announced multi-billion-dollar initiatives designed to integrate AI deeply into the enterprise-wide workflows, further validating large-scale AI deployment across mission-critical environments is accelerating rapidly. While this market remains early-stage and rapidly evolving, we believe long-term opportunity could be substantial. Based on our preliminary analysis, regulatory-driven enterprise AI infrastructure spending could ultimately represent a multi-billion-dollar annual market opportunity. At the same time, we are not currently aware of any other purposely built platform targeting compliance-driven AI recovery for regulated enterprises in the manner we are pursuing. Our focus throughout 2026 will be advancing the platform architecture, redefining our go-to-market strategy, continuing industry engagement discussions, and progressing towards potential initial customer opportunities. We expect to provide additional commercial and operational updates as these initiatives advance throughout the year.

Speaker #3: While this market remains early stage and rapidly evolving, we believe long-term opportunity could be substantial. Based on our preliminary analysis, regulatory-driven enterprise AR infrastructure spending could ultimately represent a multibillion-dollar annual market opportunity.

Speaker #3: At the same time, we are not currently aware of any other purposely built platform targeting compliance-driven AI recovery for regulated enterprises in the manner we are pursuing.

Speaker #3: Our focus throughout 2026 will be advancing the platform architecture, redefining our go-to-market strategy, continuing industry engagement discussions, and progressing toward potential initial customer opportunities.

Speaker #3: We expect to provide additional commercial and operational updates as these initiatives advance throughout the year. At the same time, our Nexus business continues to provide an important operational and financial foundation for DTST.

Chuck Piluso: At the same time, our Nexxis business continues to provide an important operational and financial foundation for Data Storage Corp. Nexxis remains a stable, recurring revenue business, delivering VoIP, dedicated internet access, SD-WAN, and data transport services. During Q1 2026, Nexxis sales increased 10.9% year over year, while gross profit increased 32.1%, and gross margins expanded to 53.7% compared to 45% in the prior year-period. We believe these results demonstrate both the continued demand for our connectivity services and operational discipline within the business. Just as importantly, Nexxis provides us with a recurring revenue base and operating infrastructure that supports our broader strategic initiatives. Financially, we believe Data Storage Corp is well-positioned relative to many companies pursuing emerging technology opportunities.

Chuck Piluso: At the same time, our Nexxis business continues to provide an important operational and financial foundation for Data Storage Corp. Nexxis remains a stable, recurring revenue business, delivering VoIP, dedicated internet access, SD-WAN, and data transport services. During Q1 2026, Nexxis sales increased 10.9% year-over-year, while gross profit increased 32.1%, and gross margins expanded to 53.7% compared to 45% in the prior year-period. We believe these results demonstrate both the continued demand for our connectivity services and operational discipline within the business. Just as importantly, Nexxis provides us with a recurring revenue base and operating infrastructure that supports our broader strategic initiatives. Financially, we believe Data Storage Corp is well-positioned relative to many companies pursuing emerging technology opportunities.

Speaker #3: Nexus remains a stable, recurring revenue business, delivering VoIP, dedicated internet access, SD-WAN, and data transport services. During the first quarter of 2026, Nexus sales increased 10.9% year over year, while gross profit increased 32.1%, and gross margins expanded to 53.7% compared to 45% in the prior period.

Speaker #3: We believe these results demonstrate both the continued demand for our connectivity services and operational discipline within the business. Just as importantly, Nexus provides us with a recurring revenue base and operating infrastructure that supports our broader strategic initiatives.

Speaker #3: Financially, we believe DTST is well positioned relative to many companies pursuing emerging technology opportunities. We ended the year with no long-term debt, substantial working capital, significant marketable securities, and a highly flexible balance sheet. That strength gives us the ability to remain patient, strategic, and disciplined on how we allocate capital, while SAIS remains our primary strategic initiative.

Chuck Piluso: We ended the year with no long-term debt, substantial working capital, significant market securities, and a highly flexible balance sheet. That strength gives us the ability to remain patient, strategic, and disciplined on how we allocate capital while SAIS remains our primary strategic initiative. We are also continuing to evaluate complementary opportunities, including partnerships, strategic investments, mergers and acquisitions, and other transactions that could strengthen our competitive position and enhance long-term shareholder value. Ultimately, our goal is to position DTST at the intersection of enterprise AI infrastructure, resiliency, compliance, and mission-critical continuity areas where we believe demand will continue to expand significantly over the coming years. We appreciate the continued support and confidence of our shareholders. We look forward to updating everyone on our progress as we move throughout 2026.

Speaker #3: We are also continuing to evaluate complementary opportunities, including partnerships, strategic investments, mergers and acquisitions, and other transactions that could strengthen our competitive position and enhance long-term shareholder value.

Speaker #3: Ultimately, our goal is to position DTST at the intersection of enterprise AI infrastructure, resiliency, compliance, and mission-critical continuity areas where we believe demand will continue to expand significantly over the coming years.

Speaker #3: We appreciate the continued support and confidence of our shareholders, and we look forward to updating everyone on our progress as we move throughout 2026.

Speaker #3: I'd like to turn it over to Chris Panagiotakos for a review of the financial results. Chris?

Chuck Piluso: I'd like now to turn it over to Chris Panagiotakos for a review of the financial results. Chris.

Speaker #4: Thank you, Chuck. Good morning, everyone. As previously discussed, on September 11th, 2025, we closed the sale of our CloudFirst business for $40 million. As a result of the transaction and in accordance with auditing and reporting standards, our ongoing financial reporting now reflects only our continuing operations.

Chris Panagiotakos: Thank you, Chuck. Good morning, everyone. As previously discussed, on 11 September 2025, we closed the sale of our CloudFirst business for $40 million. As a result of the transaction and in accordance with auditing and reporting standards, our ongoing financial reporting now reflects only our continuing operations, specifically our Nexxis subsidiary. Sales from continuing operations were $347,000 for the 3 months ending 31 March 2026, an increase of $34,000, or 10.9%, compared to $313,000 in the prior year. The increase was primarily attributable to continued growth in our Nexxis Voice & Data business, driven by the addition of new customers and increased spending from existing customers. Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base.

Chris Panagiotakos: Thank you, Chuck. Good morning, everyone. As previously discussed, on 11 September 2025, we closed the sale of our CloudFirst business for $40 million. As a result of the transaction and in accordance with auditing and reporting standards, our ongoing financial reporting now reflects only our continuing operations, specifically our Nexxis subsidiary. Sales from continuing operations were $347,000 for the three months ending 31 March 2026, an increase of $34,000, or 10.9%, compared to $313,000 in the prior year. The increase was primarily attributable to continued growth in our Nexxis Voice & Data business, driven by the addition of new customers and increased spending from existing customers. Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base.

Speaker #4: Specifically, our Nexus subsidiary. Sales from continuing operations were $347,000 for the three months ending March 31, 2026, an increase of $34,000, or 10.9%, compared to $313,000 in the prior year.

Speaker #4: The increase was primarily attributable to continued growth in our nexus voice and data solutions business driven by the addition of new customers and increased spending from existing customers.

Speaker #4: Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base. Gross profit for the three months ending March 31st, 2026, was $186,000, an increase of 45,000 or 32.1% compared to $141,000 in the prior period.

Chris Panagiotakos: Gross profit for the 3 months ending 31 March 2026 was $186,000, an increase of $45,000 or 32.1%, compared to $141,000 in the prior period. Selling, general, and administrative expenses for the 3 months ending 31 March 2026 increased $615,000 or 71.8% to $1.5 million from $857,000 for the 3 months ending 31 March 2025. The increase was primarily driven by a $425,000 or 311% increase in non-cash stock-based compensation as a result of grants to certain employees during the 3 months ended 31 March 2026.

Chris Panagiotakos: Gross profit for the three months ending 31 March 2026 was $186,000, an increase of $45,000 or 32.1%, compared to $141,000 in the prior period. Selling, general, and administrative expenses for the three months ending 31 March 2026 increased $615,000 or 71.8% to $1.5 million from $857,000 for the three months ending 31 March 2025. The increase was primarily driven by a $425,000 or 311% increase in non-cash stock-based compensation as a result of grants to certain employees during the three months ended 31 March 2026.

Speaker #4: Selling, general, and administrative expenses for the three months ending March 31, 2026, increased $615,000, or 71.8%, to $1.5 million from $857,000 for the three months ending March 31, 2025.

Speaker #4: The increase was primarily driven by a $425,000, or 311%, increase in non-cash stock-based compensation, as a result of grants to certain employees during the three months ending March 31, 2026.

Speaker #4: Professional fees increased by $135,000, or 73.6%, attributable to higher fees paid relating to legal and consulting services during the period. Net loss attributable to common shareholders for the three months ending March 31, 2026, was $631,000, compared to net income of $24,000 for the three months ending March 31, 2025.

Chris Panagiotakos: Professional fees increased by $135,000 or 73.6%, attributable to higher fees paid relating to legal and consulting services during the period. Net loss attributable to common shareholders for Q1 2026 was $631,000 compared to net income of $24,000 for Q1 2025. We ended the quarter with cash equivalents, and marketable securities of approximately $9.7 million at 31 March 2026. We used $29.5 million of the proceeds from the sales of marketable securities to repurchase common stock from our shareholders in connection with the tender offer, which closed on 15 January 2026. Thank you. I will now turn the call back to Chuck.

Speaker #4: We ended the quarter with cash, cash equivalents, and marketable securities of approximately $9.7 million at March 31, 2026. We used $29.5 million of the proceeds from the sales of marketable securities to repurchase common stock from our shareholders, in connection with the tender offer which closed on January 15, 2026.

Speaker #4: Thank you. And I will now turn the call back to Chuck.

Speaker #1: Thanks, Chris. Let's open up the call for some questions.

Chuck Piluso: Thanks, Chris. Let's open up the call for some questions.

Speaker #5: Thank you. And at this time, we'll conduct the Q&A session. To ask a question, press star one on your telephone keypad. A confirmation tone will indicate that you're in the question queue.

Operator 2: Your first question comes from Matthew Galinko with Maxim Group. Please state your question.

Speaker #5: You may press star 2 if you would 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.

Speaker #5: One moment, please, while we pull for questions. And your first question comes from Matthew Galinko with Maxim Group. Please state your question.

Operator: Thank you. At this time, we'll conduct the Q&A session. To ask a question press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. Your first question comes from Matthew Galinko with Maxim Group. Please state your question.

Speaker #1: Hey, good morning. Thanks for taking my question. As you pursue the AI strategy, I'm curious how you'll pursue, I guess, developing technical solutions to support the go-to-market.

Matthew Galinko: Hey, good morning. Thanks for taking my question. As you pursue the AI strategy, I'm curious how you'll pursue, I guess, developing technical solutions to support, you know, the go-to-market. Do you expect to bring developers in-house to the current structure, or just curious how you'll approach that?

Speaker #1: Do you expect to bring developers in-house to the current structure, or just curious how you'll approach that?

Speaker #6: Good morning, Matt. Thank you for the question. What we're doing right now is that just to cover it across the board, essentially, is that we have a recruiter working on finding us someone to run the subsidiary.

Chuck Piluso: Good morning, Matt. Thank you for the question. What we're doing right now is that, just to cover it across the board, essentially, is that we have a recruiter working on finding us someone to run the subsidiary. We are hopefully lining up CTOs that we can interview that may want to start off as a consulting basis and handle the overall project. We're talking to 3, 4 other companies essentially that want to participate in everything from, you know, us subcontracting to them, to partnerships for them to, you know, do the installation. You know, we came across this because we put out a letter of intent to a company and found out a while ago about Sovereign AI and looking into this and seeing where the holes are.

Speaker #6: We are hopefully lining up CTOs that we can interview that may want to start off as a consulting basis and handle the overall project.

Speaker #6: We're talking to three or four other companies, essentially, that want to participate in everything from us subcontracting to them, to partnerships for them to do the installation.

Speaker #6: We came across this because we put out a letter of intent to a company and found out a while ago about Sovereign AI and looking into this and seeing where the holes are.

Speaker #6: So in doing that, we started finding out, okay, who are the folks that are installing the Sovereign AI, and then as we started looking at this, the very seriously, we said, well, okay, these are companies that we can use to sub out.

Chuck Piluso: In doing that, you know, we started finding out, okay, who are the folks that are installing this Sovereign AI? As we started looking at this very seriously, we said, Well, look, these are companies that we can use to sub out. From a US basis, Eastern Europe, and from Indian basis, companies are looking to develop this software that today does not exist. You know, you can do what we did at CloudFirst for over 20 years, protecting someone's information and having a run book to get the companies up and going, because regulated companies using the cloud with proprietary data, they're pretty much building it themselves.

Speaker #6: So, from a US basis, Eastern Europe, and from an Indian basis, companies are looking to develop this software that today does not exist. You can do what we did at CloudFirst for over 20 years—protecting someone's information and having a runbook to get the companies up and going. Because regulated companies using the cloud were proprietary data.

Speaker #6: They're pretty much building it themselves. So we're really on all fronts at this point. And so we hope to start building a statement of work probably over the next 30 days and that might involve probably three separate companies.

Chuck Piluso: We're really on all fronts at this point, we hope to start building a statement of work, probably over the next 30 days, and that might involve probably 3 separate companies, each one having a different discipline. Right now, a number of companies, as I've gone around talking about this, and I'm trying to be somewhat quiet to a degree because, you know, you turn them into competitors. For the most part, we would say there's probably gonna be 3 companies involved with putting this together in the 2 co-location centers is what our intention were to be. Overall, you know, we have to start with someone that's gonna be project management, and that's why we have the recruiter going on.

Speaker #6: Each one having a different discipline. But right now, a number of companies, as I've gone around talking about this—and I'm kind of somewhat quiet to a degree, because you turn them into competitors.

Speaker #6: But for the most part, we would say there's probably going to be three companies involved with putting this together. In the two co-location centers is what our intention was to be.

Speaker #6: But overall, we have to start with someone that's going to be project management, and that's why we have the recruiter going on, because there'll be a lot going on.

Chuck Piluso: There'll be a lot going on, but we've done it before with 10 data centers in 3 countries. It's very similar to that, but the software to flip it over when there's a disaster of some sort. Even though people can say, well, tier 3 data centers, everybody that's in tier 3 data centers today still has to be geographically diverse if they're gonna be compliant and a whole list of other things. That's where we're heading. Stage 1 will be to make it look like it was almost CloudFirst, but on the GPU side and everything that goes along with GPU and storage. The second stage of it will be building the software, you know, all along to be able to have it flip over and act behaviorally the same way. You know, Recovery Point Objective, Recovery Time Objective.

Chuck Piluso: There'll be a lot going on, but we've done it before with 10 data centers in three countries. It's very similar to that, but the software to flip it over when there's a disaster of some sort. Even though people can say, well, tier 3 data centers, everybody that's in tier 3 data centers today still has to be geographically diverse if they're gonna be compliant and a whole list of other things. That's where we're heading. Stage 1 will be to make it look like it was almost CloudFirst, but on the GPU side and everything that goes along with GPU and storage. The second stage of it will be building the software, you know, all along to be able to have it flip over and act behaviorally the same way. You know, Recovery Point Objective, Recovery Time Objective.

Speaker #6: But we've done it before with 10 data centers in three countries. It's very similar to that, but the software to flip it over when there's a disaster of some sort—and even though people can say, well, tier three data centers—but everybody that's in tier three data centers today still has to be geographically diverse.

Speaker #6: If they're going to be compliant, and a whole list of other things. And that's where we're heading. Stage one will be to make it look like it was almost CloudFirst, but on the GPU side.

Speaker #6: And everything that goes along with GPU and storage, and the second stage of it will be building the software all along to be able to have it flip over and act behaviorally the same way.

Speaker #6: Behavioral Point of Objective, Behavioral Time Objective. So this is very, very much similar to what we did with CloudFirst, but it's GPUs and they are different.

Chuck Piluso: This is very, very much similar to what we did with CloudFirst, but it's GPUs, and they are different. There'll be multiple companies involved. I'm sorry. Well, you know, a short question, a very long answer, but there'll be multiple companies that we're talking to today.

Speaker #6: But there'll be multiple companies involved. I'm sorry, a short question, a very long answer, but there'll be multiple companies that we're talking to today.

Speaker #5: Sure. No, I appreciate all the color. It's helpful to kind of conceptualize what you're doing. Maybe just as a follow-up—obviously, I think you have a better sense of timing than we do—but will we start to see expenses ramp up maybe in the second quarter, or more in the third quarter around the initiative?

Matthew Galinko: Sure. No, I appreciate all the color. It's helpful to kinda, you know, conceptualize what you're doing. Maybe just as a follow-up, you know, obviously, I think you have a better sense of timing than we do. Will we start to see expenses ramp up maybe in Q2 or more in Q3 around the initiative? Will we see that starting to hit the P&L, or would investments be capitalized, and we won't necessarily see it on the P&L? Just curious how the participation might look or as it's looking today, and if that's the right timeline to think about.

Speaker #5: And so, will we see that starting to hit the P&L, or would investments be capitalized and we won't necessarily see it on the P&L?

Speaker #5: Just curious how the participation might look or as it's looking today and if that's the right timeline to think about.

Speaker #1: Sure. Well, rounding our money, we have, let's say, $10 million in the bank. We have some escrows going on still from the Renova sale.

Chuck Piluso: Sure. We'll rounding our money, we have, let's say, $10 million in the bank. You know, we have some escrows going on still from the Renovus sale. We just settled one on the networking capital with them and have, you know, $700,000 that, you know, we have come in or coming in over the last week or so. We do have some cash. The board approved at a recent board meeting for us to go out and explore this and line it completely up with all the pieces that are needed. I think that it will hit the cash, but, you know, it won't be I don't wanna use the word significant.

Speaker #1: We just settled one on the networking capital with them and have $700,000 that we have come in or coming in over the last week or so.

Speaker #1: So, we do have some cash. The board approved at a recent board meeting for us to go out and explore this and line it completely up with all the pieces that are needed.

Speaker #1: But I think that it will hit the cash, but it won't be—I don't want to use the word 'significant.' I can't imagine us spending more than $250,000 to $300,000 on being able to get it to the point of our statement of work part before we say go.

Chuck Piluso: I can't imagine us spending more than $250,000 to $300,000 on being able to get it to the point of our statement of work part before we say, "Go." When we say go, it's gonna be capital expenses. Those capital expenses will be depreciated over 5 years for the most part. The big hit on the cash, you know, I think most of it would be capital. The software development and all of that, we'll see how we can make arrangements, but that'll probably be the part that'll be just unknown at this particular point, frankly, on the software side. This, you know, there'll be capital expenditures going on.

Chuck Piluso: I can't imagine us spending more than $250,000 to $300,000 on being able to get it to the point of our statement of work part before we say, "Go." When we say go, it's gonna be capital expenses. Those capital expenses will be depreciated over five years for the most part. The big hit on the cash, you know, I think most of it would be capital. The software development and all of that, we'll see how we can make arrangements, but that'll probably be the part that'll be just unknown at this particular point, frankly, on the software side. This, you know, there'll be capital expenditures going on.

Speaker #1: When we say go, it's going to—they're going to be capital expenses. Those capital expenses will be depreciated over five years, for the most part.

Speaker #1: So the big hit on the cash, I think most of it would be capital. The software development and all of that, we'll see how we can make arrangements but that'll probably be the part that will be just unknown at this particular point, frankly.

Speaker #1: On the software side. But there'll be capital expenditures going on. But I think we have enough money to implement this and still have a couple of years' run if revenue wasn't generated.

Chuck Piluso: I think we have enough money, you know, to implement this and still have a couple of year run if revenue wasn't generated. We're hoping to take, you know, hopefully taking agreements in Q1 of 2027, maybe earlier, of which I'll call reservations versus subscription, but they'll all be recurring revenue.

Speaker #1: But we're hoping to take, hopefully, agreements in the first quarter of '27, maybe earlier, of which I'll call reservations versus subscription. But they'll all be recurring revenue.

Speaker #5: Yep, that makes sense. And maybe last question, then I'll jump back in the queue—but I guess referring to that, not a subscription, I guess that kind of speaks towards figuring out what capacity you need.

Matthew Galinko: Yeah. That makes sense. Maybe, last question then I'll jump back in the queue, but with, you know, I guess referring to that, you know, not a subscription, I guess that kinda speaks towards, you know, figuring out what capacity you need, and, you know, relative to how many customers you have, but what their demands are. Can you talk a little bit how you're thinking about, you know, how far ahead of, you know, demand that you need to build out capacity and how access to GPUs and data center space might look as you know, progress over the next few quarters?

Speaker #5: And relative to how many customers you have, but what their demands are. But can you talk a little bit about how you're thinking about how far ahead of demand you need to build out capacity, and how access to GPUs and data center space might look as you progress over the next few quarters?

Speaker #1: Well, I'm going to say the next one or two quarters, we'll just be setting everything all up. Hopefully, having it all in place by the end of the year.

Chuck Piluso: Well, I'm going to say the next 1 or 2 quarters, we'll just be setting everything all up, hopefully having it in, you know, all in place, you know, by the end of the year. What's interesting about it is that we wouldn't be into this, let's keep buying more and more GPUs, spending $50 billion that you're seeing, you know, that's going on. That's not the play here. The play here is essentially to use just an example. Take a mid-size hospital. A mid-size hospital, let's say they're going to spend $1 million and set up their environment. They're gonna run logistics for an operating room where their pharmaceutical and their building is critical. They might have subscribed to software. They didn't build it. You know, they install it, and it keeps learning and becoming more intelligent.

Chuck Piluso: Well, I'm going to say the next one or two quarters, we'll just be setting everything all up, hopefully having it in, you know, all in place, you know, by the end of the year. What's interesting about it is that we wouldn't be into this, let's keep buying more and more GPUs, spending $50 billion that you're seeing, you know, that's going on. That's not the play here. The play here is essentially to use just an example. Take a mid-size hospital. A mid-size hospital, let's say they're going to spend $1 million and set up their environment. They're gonna run logistics for an operating room where their pharmaceutical and their building is critical. They might have subscribed to software. They didn't build it. You know, they install it, and it keeps learning and becoming more intelligent.

Speaker #1: What's interesting about it is that we wouldn't be into this 'let's keep buying more and more GPUs, spending $50 billion' that you're seeing that's going on.

Speaker #1: That's not the play here. The play is essentially to use just a hospital—a mid-sized hospital. Let's say they're going to spend a million dollars and set up their environment.

Speaker #1: They're going to run logistics for an operating room where their pharmaceutical and they're building this critical. They might have subscribed to software. They didn't build it.

Speaker #1: They install it, and it keeps learning and becoming more intelligent. Well, now what are they going to spend to get to the other side—to have the compliance and all these things that no one's talking about yet?

Chuck Piluso: Well, now what are they gonna spend to get to the other side to have the compliance in Sarbanes-Oxley? All these things that no one's talking about yet. Now are you gonna double that CapEx, or do you wanna go to a service bureau? We don't believe NVIDIA is gonna build a service bureau, by the way. You know, CoreWeave and people like that, they could do it. They're not really focused on it. For the most part, they now need to have the ability to be able to recover. When we talk about this recovery piece, the return on investment seems significant for them. I would say that when we're looking at this, a mid-size hospital is gonna need to be able to be compliant.

Speaker #1: So now you're going to double that CapEx, or do you want to go to a service bureau? And we don't believe NVIDIA is going to build a service bureau, by the way.

Speaker #1: CoreWeave and people like that—they could do it. They're not really focused on it. But for the most part, they now need to have the ability to be able to recover.

Speaker #1: And so, when we talk about this recovery piece, the return on investment seems significant for them. So I would say that, when we're looking at this, a mid-sized hospital is going to need to be able to be compliant.

Speaker #1: There’s confidential information sitting on their storage remotely. And we have runbooks. But at some point, it needs to flip over and act the exact same way.

Chuck Piluso: Their confidential information is sitting, you know, on their storage remotely, and we have run books. At some point, it needs to flip over and act the exact same way and recover. You know, it's I don't know if I'm answering that question completely, but that's kind of the model that you're looking at. That could be insurance companies as well, financial institutions. Does that answer your question, Matt? I'm not sure.

Speaker #1: And recover. So, I don't know if I'm answering that question completely, but that's kind of the model that you're looking at. That could be insurance companies as well.

Speaker #1: Financial institutions. Does that answer your question, Matt? I'm not sure.

Matthew Galinko: It, it helps. I guess to clarify, you know, I guess when you were hosting, you know, CloudFirst and disaster recovery there, you had an idea of how much capacity you needed. You know, taking the million-dollar environment in a mid-sized hospital, You know, I assume you'll have enough capacity. You know, are you spending 1 to 5, so your environment would support 5? You know, how do you, how do you balance the investment of, you know, customer needs to fail over in the GPU environment versus how much, you know, over capacity you want to build?

Speaker #3: It helps. I guess to clarify, I guess when you were hosting Cloud First and disaster recovery there, you had an idea of how much capacity you needed, but taking the million-dollar environment in a mid-sized hospital, what would be the I assume you'll have enough capacity?

Speaker #3: Are you spending one to five? So, your environment would support five, and how do you balance the investment of customer needs to fail over in the GPU environment versus how much overcapacity you want to build?

Speaker #1: Well, the first thing I think we know by now after all these years providing business continuity is that a hospital is going to run this application or multiple applications to approve efficiency and all of that.

Chuck Piluso: Well, the first thing I think we know by now after all these years, providing business continuity is that a hospital is going to run this application or multiple applications to improve efficiency and all of that, and they're going to depreciate this equipment over three to five years. That hospital's not going to be in the race to add more and more GPUs. We don't see the growth there. When you don't we don't see them continue to build upon that at the rates that we're seeing, you know, folks spending $50 billion. We can match their equipment on our side. Let's just say, for example, that they want to recover within 15 minutes. Well, that's going to be a higher-level service, and that's not going to run a ratio.

Speaker #1: And they're going to depreciate this equipment over three to five years. That hospital is not going to be able to add more and more GPUs and more and more GPUs.

Speaker #1: So we don't see the growth there. So when we don't see them continue to build upon that at the rates that we're seeing folks spending $50 billion.

Speaker #1: So we can match their equipment on our side. So let's just say, for example, that they want to recover within 15 minutes. Well, that's going to be a higher-level service.

Speaker #1: And that's not going to run a ratio. That's going to be one-to-one for them. And that's going to be what we would call high availability in a regular sense.

Chuck Piluso: That's going to be 1-to-1 for them, and that's going to be, you know, what we would call high availability in a regular sense. There's another layer underneath there, like you are mentioning, Matt, whether you're going to run a 5-to-1 ratio, an 8-to-1 ratio. The one things we learned during 9/11 with the CloudFirst and, you know, then other disasters and storms that all happen is that things can happen geographically within a particular region. If you run too high of a ratio, you can't support it. It needs to be coming from different geographies on that. I would assume that a 5-to-1 ratio would be successful, as long as you could probably run a 10-to-1 ratio as long as the 10 are in all different parts of the United States.

Speaker #1: Then there's another layer underneath there, like you were mentioning, Matt, where you're going to run a 5-to-1 ratio and 8-to-1 ratio. The one thing we learned during 9/11 with Cloud First, and then other disasters and storms that all happened, is that things can happen geographically within a particular region.

Speaker #1: So if you run too high of a ratio, you can't support it. So it needs to be coming from different geographies on that. But I would assume that a five-to-one ratio would be successful, as long as—you could probably run a ten-to-one ratio, as long as the ten are in all different parts of the United States.

Speaker #1: But I would say, on standby-type servers, where you have runbooks and all of that, I would say that probably five-to-one would be a good ratio.

Chuck Piluso: I would say if on standby type servers where you have run books and all of that, I would say that probably 5 to 1 would be a good ratio.

Speaker #5: Very helpful. Thank you.

Matthew Galinko: Very helpful. Thank you.

Speaker #4: Your next question comes from Ellen Lidsack with Fourth Capital. Please state your question.

Operator 2: Your next question comes from Ellen Litzaw with Fourth Capital. Please state your question.

Operator: Your next question comes from Ellen Litzaw with Fourth Capital. Please state your question.

Speaker #3: Yes, hi. And thank you so much for taking my question. Can you elaborate on the market opportunity you see for the Silver AI solutions and why you think now is the right time to enter the space?

Ellen Litzaw: Yes. Hi, thank you so much for taking my question. Can you elaborate on the market opportunity you see for the Sovereign AI Solutions and, you know, why you think now is the right time to enter the space?

Ellen Lidsack: Yes. Hi, thank you so much for taking my question. Can you elaborate on the market opportunity you see for the Sovereign AI Solutions and, you know, why you think now is the right time to enter the space?

Speaker #1: Sure. Thanks, Ellen. The right time. It could be early on it, but if it takes six months, when all of a sudden we believe that—when everyone starts—everyone looks at AI as a general population of the world now, as they go into ChatGPT and they ask a question, or Claude and say, "Design this," and design that.

Chuck Piluso: Sure. Thanks, Ellen. The right time. It could be early on it, but if it takes like 6 months when all of a sudden we believe that when everyone starts, everyone looks at AI as a general population of the world now as they go into ChatGPT, and they ask a question or Claude and say, design this and design that. The 5th layer of this AI is the business process, and that's the software being developed. These 150 executives that OpenAI is putting in place that was in a press release, you know, is going out to actually build this software. As this software gets deployed, they're going to need to be compliant the same way all the CPUs have to be compliant in, you know, in industry, that they're using best practices.

Chuck Piluso: Sure. Thanks, Ellen. The right time. It could be early on it, but if it takes like six months when all of a sudden we believe that when everyone starts, everyone looks at AI as a general population of the world now as they go into ChatGPT, and they ask a question or Claude and say, design this and design that. The 5th layer of this AI is the business process, and that's the software being developed. These 150 executives that OpenAI is putting in place that was in a press release, you know, is going out to actually build this software. As this software gets deployed, they're going to need to be compliant the same way all the CPUs have to be compliant in, you know, in industry, that they're using best practices.

Speaker #1: The fifth layer of this AI is the business process, and that's the software being developed. And so, these 150 executives that OpenAI is putting in place—that was in a press release—are going out to actually build this software.

Speaker #1: As this software gets deployed, they're going to need to be compliant the same way all the CPUs have to be compliant in industry. That they're using best practices.

Speaker #1: Today, that's not an existence. It might be all happening in one data center. So I think it's a matter of time before compliance and regulation start surrounding as more and more organizations regulated organizations are deploying these types of software.

Chuck Piluso: Today, that's not in existence. It might be all happening in one data center. I think it's a matter of time before compliance and regulations start surrounding as more and more organizations, regulated organizations are deploying these types of software and services to make them more efficient, to learn better, reduce staff, whatever they're thinking. That's why these 150 people are being hired because, you know, companies are interested. The talent is lacking on it, you know. You know, we're there to be able to go up to Sovereign AI to say, Well, you put this in place, you know, how compliant are you? No one, I don't believe anyone's asking that question, and we've been talking to a lot of people, you know.

Speaker #1: And services to make them more efficient, to learn better, reduce staff—whatever they’re thinking. But that’s why these 150 people are being hired, because companies are interested.

Speaker #1: The talent is lacking on it. And we're there to be able to go up to Sovereign AI to say, "Will you put this in place?" How compliant are you?

Speaker #1: No one, I don't believe anyone's asking that question. And we've been talking to a lot of people. So everyone's focused on learning, the training, the models, installing equipment, testing it.

Chuck Piluso: Everyone's focused on, you know, learning the training the models, installing equipment, testing it, but they're not there on compliance and all the regulations that went on over the previous years. That's why I believe it's a very solid business model.

Speaker #1: But they’re not there on compliance. And all the regulations that went on over the previous years, and that’s why I believe it’s a very solid business model.

Ellen Litzaw: Well, that makes sense. That kind of leads into my next question. What do you think really differentiates the, you know, Sovereign AI Solutions from traditional disaster recovery, cybersecurity, or, you know, any enterprise infrastructure providers currently in the market?

Ellen Lidsack: Well, that makes sense. That kind of leads into my next question. What do you think really differentiates the, you know, Sovereign AI Solutions from traditional disaster recovery, cybersecurity, or, you know, any enterprise infrastructure providers currently in the market?

Speaker #3: I love that. That makes sense. That kind of leads into my next question. What do you think really differentiates the Sovereign AI solutions from traditional disaster recovery, cybersecurity, or any enterprise infrastructure providers currently in the market?

Speaker #1: Well, I think it's the same thing. Essentially, you could say it's the same thing, but none of the folks that are today in disaster recovery that we know, that our research came up with, are doing anything like this.

Chuck Piluso: I think it's the same thing. You know, essentially you could say it's the same thing, but none of the folks that are today in disaster recovery that we know that our research came up with are doing anything like this. Whether they're planning that, I'm not exactly sure, but there's enough room in it. You know, some of the ratios I've seen is that, you know, this is going to be somewhere around 5% to 10% of anyone that's putting Sovereign AI in place.

Chuck Piluso: I think it's the same thing. You know, essentially, you could say it's the same thing, but none of the folks that are today in disaster recovery that we know that our research came up with are doing anything like this. Whether they're planning that, I'm not exactly sure, but there's enough room in it. You know, some of the ratios I've seen is that, you know, this is going to be somewhere around 5% to 10% of anyone that's putting Sovereign AI in place.

Speaker #1: Whether they're planning that, I'm not exactly sure. But there's enough room in it. Some of the ratios I've seen are that this is going to be somewhere around 5 to 10 percent of anyone that's putting Sovereign AI in place.

Speaker #1: So some numbers I’ve seen—and it is very tough when you start looking at market numbers—is that Sovereign AI is right around a $50 billion total addressable marketplace.

Chuck Piluso: Some numbers I've seen, and it is very tough when you start looking at market numbers, is that it's, you know, Sovereign AI is right around a $50 billion total addressable marketplace and 10% is what some of the numbers that I've seen for this type of thing, but they're rough calculations, and I wouldn't hold me to it. I know, you know, I have a solid feeling that this is coming. I do believe that the folks that are in this business that CloudFirst competed with will eventually move into this. I think we might have a head start on it, and I think that that's important, but there's enough room with, you know, 5 or 6 competitors.

Speaker #1: And 10% is what some of the numbers that I've seen for this type of thing. But they're rough calculations, and I wouldn't hold me to it.

Speaker #1: But I know this is—I have a solid feeling that this is coming. And I do believe that the folks that are in this business, that Cloud First competed with, will eventually move into this.

Speaker #1: I think we might have a head start on it, and I think that's important. But there's enough room with five or six competitors.

Speaker #1: But right now, if we get this up by the end of the year, and we start talking to people in the fourth quarter, I think we'll have a little bit of a lead.

Chuck Piluso: Right now, if we get this up by the end of the year and we start talking to people in Q4, I think we'll have a little bit of a lead. Because of our background, we know about escalation lists. We know how to do that. We were doing that. We know how to have run books and all the things that went on with that. We do understand, you know, all of that, and I think it fits in really, really well with this. We saw the hole, you know, and we saw that come up because we see what's going on with Sovereign AI and AI factories. I heard some numbers from Dell of proposals outstanding. They were just some large numbers. I'm pretty excited about it.

Speaker #1: Because of our background, we know about escalation risks. We know how to do that. We were doing that. We know how to have runbooks and all the things that went on with that.

Speaker #1: So we do understand all of that, and I think it fits in really, really well with this. But we saw the hole, and we saw that come up because we see what's going on with Sovereign AI and AI factories.

Speaker #1: I heard some outstanding. They were just some large numbers. So I'm pretty excited about it.

Speaker #3: Oh, definitely very exciting. And I guess in terms of the development timeline and then the potential commercialization path for Sovereign AI, what does that look like over the next 12 to 24 months?

Ellen Litzaw: Oh, definitely very exciting. I guess in terms of the development timeline and then the potential commercialization path, for Sovereign AI, what does that look like over the next 12 to 24 months?

Ellen Lidsack: Oh, definitely very exciting. I guess in terms of the development timeline and then the potential commercialization path, for Sovereign AI, what does that look like over the next 12 to 24 months?

Speaker #1: Everything's about execution. We all know that. So initially, we were going to try to do everything, and then launch. And then, studying it some more, we felt maybe the thing to do was to do a two-stage approach.

Chuck Piluso: Everything's about execution. We all know that. Initially, we were going to try to do everything, you know, and then launch. Studying it some more, we felt maybe the thing to do is to do a 2-stage approach. Let's get this up and going without the behavioral side of it so that, you know, these regulated organizations, they can be protected, but it's gonna be different. It might not move over the exact same way right away behaviorally. You have the run book and all of these things, but the first stage will be to stand it up, start taking reservations, if I wanna call it reservations instead of subscription, and get it moving so they can start testing and coming over to us. From the very beginning, let's just say within 60 days, software starts to get developed.

Speaker #1: Let's get this up and going without the behavioral side of it, so that these regulated organizations—they can be protected. But it's going to be different.

Speaker #1: It might not move over the exact same way right away, behaviorally. You have the runbook and all of these things. But the first stage will be to stand it up, start taking reservations—which I want to call 'reservations' instead of 'subscription'—and get it moving so they can start testing.

Speaker #1: And coming over to us. And then from the very beginning, let's just say within 60 days, software starts to get developed. So by the time everything gets deployed on the hardware, on the hardware side, staffing's in place, hopefully, there's not going to take more than nine months.

Chuck Piluso: By the time everything gets deployed on the hardware, on the hardware side, staffing is in place, you know, hopefully, it's not gonna take more than 9 months. There's some software out there that you can work with, but, you know, a lot has to be developed, so it just doesn't exist. You know, we dealt with this with our IBM systems with Precisely, that did a roll-up of all the software companies we used for 15 plus years. We think there'll be very, very good value in owning the software as well. But that's kind of the timeline, I think.

Chuck Piluso: By the time everything gets deployed on the hardware, on the hardware side, staffing is in place, you know, hopefully, it's not gonna take more than nine months. There's some software out there that you can work with, but, you know, a lot has to be developed, so it just doesn't exist. You know, we dealt with this with our IBM systems with Precisely, that did a roll-up of all the software companies we used for 15+ years. We think there'll be very, very good value in owning the software as well. But that's kind of the timeline, I think.

Speaker #1: There's some software out there that you can work with, but a lot has to be developed. So it just doesn't exist. We dealt with this with our IBM systems with precisely that did a roll-up of all the software companies we used for the 15-plus years.

Speaker #1: And so we think there'll be very, very good value in owning the software as well. But that's kind of the timeline, I think.

Ellen Litzaw: Got it. Okay. Well, that's great. Are you currently evaluating any, like, strategic partnerships, acquisitions, or maybe even, like, investments that could potentially accelerate this AI infrastructure strategy?

Ellen Lidsack: Got it. Okay. Well, that's great. Are you currently evaluating any, like, strategic partnerships, acquisitions, or maybe even, like, investments that could potentially accelerate this AI infrastructure strategy?

Speaker #3: Got it. Okay. Well, that's great. And are you currently evaluating any strategic partnerships, acquisitions, or maybe even investments that could potentially accelerate this AI infrastructure strategy?

Chuck Piluso: I originally wanted to do, and I still may, we still may, a joint venture. Folks that are already set up, that are installing Sovereign AI today, and to do a joint venture because they have the staff already in place and they have the knowledge of it. It's great for them, and that becomes an automatic partner because, you know, they're installing AI factories and Sovereign AI. We are talking to folks to be partners. One of the problems, you know, Ellen, is that when you're small, a lot of times you're not gonna be able to get larger organizations to go with you because, you know, that credibility is not there. They wanna see a billion-dollar company.

Speaker #1: I originally—originally wanted to do, and I still may—we still may—a joint venture. Folks that are already set up, that are installing Sovereign AI today.

Speaker #1: And to do a joint venture, because they have the staff already in place and they have the knowledge of it. And it's great for them.

Speaker #1: And that becomes an automatic partner because they're installing AI factories and Sovereign AI. But we aren't talking to folks to be partners. One of the problems is that when you're small, a lot of times you're not going to be able to get larger organizations to go with you because that credibility is not there.

Speaker #1: They want to see a billion-dollar company. Even though the billion-dollar company can be insolvent, it's just, for the most part, they want to see the very large scope, so typically working through partners.

Chuck Piluso: Even though the billion-dollar company can be insolvent, you know, just for the most part, they wanna see a very large scope. Typically working through partners, and that's how we did it at CloudFirst as well. You know, when you get that very large deal, you know, you bring in a partner on it. We are looking at joint ventures. We're looking at partnerships. We're not really looking at investments at this time. We don't feel that that's necessary, frankly. I think we can do this with money in our bank and still leave a 2-year run rate, because, you know, the public company is expensive. It runs probably around, you know, I'd say $1.8 to 2 million a year. I think we have enough.

Chuck Piluso: Even though the billion-dollar company can be insolvent, you know, just for the most part, they wanna see a very large scope. Typically working through partners, and that's how we did it at CloudFirst as well. You know, when you get that very large deal, you know, you bring in a partner on it. We are looking at joint ventures. We're looking at partnerships. We're not really looking at investments at this time. We don't feel that that's necessary, frankly. I think we can do this with money in our bank and still leave a two-year run rate, because, you know, the public company is expensive. It runs probably around, you know, I'd say $1.8 to 2 million a year. I think we have enough.

Speaker #1: And that's how we did it at Cloud First as well. When you get that very large deal, you bring in a partner on it.

Speaker #1: But we are looking at joint ventures. We're looking at partnerships. We're not really looking at investments at this time. We don't feel that that's necessary, frankly.

Speaker #1: I think we can do this with the money in our bank and still leave a two-year run rate, because the public company is expensive. It runs probably around, I'll say, $1.8 to $2 million a year.

Speaker #1: But I think we have enough. I think we have enough to pull this off. But I'll know more over the next 90 days. We're trying to move pretty fast with it.

Chuck Piluso: I think we have enough to pull this off, but I'll know more over the next 90 days. We're trying to move pretty fast with it.

Speaker #3: Oh, no. This is super helpful. Thank you so much for taking my questions. I really appreciate it, Chuck. And if I have any other questions, I'll jump back in the queue.

Ellen Litzaw: Oh, no, this is super helpful. Thank you so much for taking my questions. I really appreciate it, Chuck, and if I have any other questions, I'll jump back in the queue.

Ellen Lidsack: Oh, no, this is super helpful. Thank you so much for taking my questions. I really appreciate it, Chuck, and if I have any other questions, I'll jump back in the queue.

Speaker #1: That's great. Thank you, Ellen.

Chuck Piluso: That's great. Thank you, Ellen.

Speaker #2: Thank you, Anne. Our next question comes from Matthew Galinko with Maxim Group. Please state your question.

Operator 2: Thank you. Our next question comes from Matthew Galinko with Maxim Group. Please state your question.

Operator: Thank you. Our next question comes from Matthew Galinko with Maxim Group. Please state your question.

Speaker #4: Hey, appreciate you taking another one for me. Just wanted to check in on Nexus and kind of the current revenue generator for the business.

Matthew Galinko: Hey, appreciate you taking another one for me. Just wanted to check in on Nexxis and kind of the current revenue generator for the business. I think you had decent annual growth in Q1 here. Any opportunities to or, you know, how do you see that business trending over the rest of this year? Do you have an opportunity to, you know, accelerate that in any capacity? You know, do you see it continuing to add to, you know, kinda cut into the burn rate, I guess, as it grows? Thanks.

Speaker #4: I think you had decent annual growth in the first quarter here. Any opportunities to—or how do you see that business trending over the rest of this year?

Speaker #4: Do you have an opportunity to accelerate that in any capacity? And do you see it continuing to add to, kind of, cut into the burn rate, I guess, as it grows?

Speaker #4: Thanks.

Chuck Piluso: You know, Matt, their gross margins are great. We have put some money into Nexxis. They're not a large staff. John Camillo, who's the President of that, he owns 20% of that company. John and his staff do an excellent job. John continues to look for business development types to accelerate it. I know that he's trying to recruit, you know, as we speak right now, he's trying to recruit business development folks. It's very, very difficult, the organic growth, they're doing a great job with it. We looked at one or two acquisitions to roll it into that company, we're still looking at that. I think if John is successful with getting the right people on to grow that.

Speaker #1: You know, Matt, the gross margins are great. We have put some money into Nexus. They're not a large staff. John Camello, who's the president of that, owns 20% of that company.

Speaker #1: John and his staff do an excellent job. John continues to look for business development types to accelerate it. And I know that he's trying to recruit as we speak right now.

Speaker #1: He's trying to recruit business development folks to go. It's very, very difficult—the organic growth. But they're doing a great job with it. We looked at one or two acquisitions to roll it into that company.

Speaker #1: And we're still looking at that. But I think if John gets successful with getting the right—he is successful with getting the right people on to grow that.

Speaker #1: I also believe, Matt, that because they're very limited with manpower, getting a digital agency to start getting inbound leads going is one of the things that we've been talking about.

Chuck Piluso: I also believe, Matt, that, you know, because they're very limited with manpower, is that getting a digital agency to start getting inbound leads going is one of the things that we've been talking about. CloudFirst had a great flow of leads. Hal Schwartz did a great job with the digital agency and everything that he did on that to get significant leads coming in. We need that to happen and then these business development folks to work on that because no one's answering the phone, no one's letting you in the building. John does a great job and his staff with association meetings and organizations and sponsorships, things like that.

Speaker #1: Cloud First had a great flow of leads. Hal Schwartz did a great job with the digital agency and everything that he did on that to get significant leads coming in.

Speaker #1: And so we need that to happen and then these business development folks to work on that. Because no one's answering the phone. No one's letting you in the building.

Speaker #1: So John does a great job and his staff with association meetings and organizations and sponsorships, things like that. But that next step, I think, is the Christopher of some money for him to get the website going where he can get an inflow of the way that Cloud First does.

Chuck Piluso: It, you know, that next step, I think, is for Chris to free up some money for him to get, you know, the website going where he can get an inflow of the way that CloudFirst done. I think that's the next stage. He is trying to recruit, you know, the folks in the business development area. He needs the help there. 'Cause he's got great growth margins and, you know, does a good job, has a great product is great.

Speaker #1: And I think that's the next stage. But he is trying to recruit the folks in the business development area. He needs the help there.

Speaker #1: But because he's got great growth margins and does a good job, has a great the product is great.

Speaker #2: Great. Thank you.

Matthew Galinko: Great. Thank you.

Operator 2: Thank you. There are no further questions at this time. I'll hand it back to Chuck Piluso for closing remarks.

Operator: Thank you. There are no further questions at this time. I'll hand it back to Chuck Piluso for closing remarks.

Speaker #3: Thank you. There are no further questions at this time, so I'll hand it back to Chuck Piluso for closing remarks.

Speaker #1: Okay, thank you. Thank you for the questions—they were very deep questions, some of them. And Ellen, they were great. Hopefully, shortly, we'll be back to everyone.

Chuck Piluso: Okay. Thank you. Thank you for the questions. They were very deep questions, some of them. You know, Ellen, they were great. Well, hopefully with shortly we'll be back to everyone. Thank you for the questions. In closing, we believe the foundation we've established over the decades of execution and value creation has positioned DTST to pursue a unique opportunity at the intersection of enterprise AI, resiliency, and regulated infrastructure. Our strategy is supported by financial strength, operational stability, and what we believe is a differentiation of a long-term vision to AI continuity infrastructure. As the market continues to evolve, our focus remains on a disciplined execution, strategic flexibility, and creating substantial long-term value for our shareholders. We really do appreciate everyone's continued support and our shareholders and look forward to sharing additional updates as we progress. Thank you.

Speaker #1: But thank you for the questions. In closing, we believe the foundation we've established over the decades of execution and value creation has positioned DTST to pursue a unique opportunity at the intersection of enterprise AI, resiliency, and regulated infrastructure.

Speaker #1: Our strategy is supported by financial strength, operational stability, and what we believe is a differentiation of long-term vision for AI continuity infrastructure. As the market continues to evolve, our focus remains on disciplined execution, strategic flexibility, and creating substantial long-term value for our shareholders.

Chuck Piluso: Our strategy is supported by financial strength, operational stability, and what we believe is a differentiation of a long-term vision to AI continuity infrastructure. As the market continues to evolve, our focus remains on a disciplined execution, strategic flexibility, and creating substantial long-term value for our shareholders. We really do appreciate everyone's continued support and our shareholders and look forward to sharing additional updates as we progress. Thank you.

Speaker #1: We really do appreciate everyone's continued support as shareholders and look forward to sharing additional updates as we progress. Thank you.

Operator 2: Thank you. With that, we conclude today's call. All parties may disconnect. Have a good day.

Operator: Thank you. With that, we conclude today's call. All parties may disconnect. Have a good day.