Data Storage Corporation ((DTST)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Data Storage Corporation presented a balanced outlook, highlighting significant growth in core services and a strategic shift towards transformative initiatives. Despite these positive developments, the company faces challenges such as increased net loss, rising operating expenses, and a heavy reliance on CloudFirst. The proposed sale of CloudFirst offers a potential reset for the company, aiming to unlock shareholder value and reinvest in future growth.
Increase in Total Sales and Core Services
Data Storage Corporation reported total sales of $5.1 million for the three months ending June 30, 2025, marking a 4.8% increase. This growth was primarily fueled by a 6.1% rise in cloud infrastructure and disaster recovery revenue, along with a notable 17.3% increase in Nexxis services.
Proposed Sale of CloudFirst Technologies
The company announced a proposed sale of CloudFirst Technologies for $40 million, representing a substantial premium to its market cap. The net proceeds, estimated at $24 million, are expected to be returned to shareholders and reinvested in growth opportunities.
Strategic Growth Initiatives
Data Storage Corporation is planning to reshape and rebrand itself with a focus on AI, cybersecurity, and SaaS. The company is committed to continued growth and value creation, irrespective of the outcome of the CloudFirst sale.
Expansion in the U.K.
The company is investing in the U.K., establishing operations and training partner sales forces, which indicates promising growth opportunities in the European market.
Decrease in Equipment and Software Sales
There was a 12.1% decrease in equipment and software sales for the three-month period, attributed to nonrecurring sales and a strategic shift towards subscription services.
Increased Net Loss
The net loss attributable to common shareholders for the three months ended June 30, 2025, was $733,000, compared to a net loss of $244,000 for the same period in 2024, reflecting financial challenges.
Increased Operating Expenses
Operating expenses rose by approximately $536,000 or 19.2% for the three-month period, driven by higher salaries, director fees, and stock-based compensation.
Dependency on CloudFirst Revenue
CloudFirst currently accounts for approximately 95% of the company’s revenue, highlighting a dependency and potential risk if the sale does not proceed as planned.
Forward-Looking Guidance
For the fiscal year 2025, Data Storage Corporation reported a 4.8% increase in total sales for the quarter, driven by cloud infrastructure and disaster recovery revenue. For the six-month period, sales rose modestly by 0.6%, with a 9.8% increase in core cloud services. However, equipment and software sales declined as the company shifted focus to subscription services. The proposed sale of CloudFirst Technologies is expected to yield net proceeds of $24 million, with plans to return a significant portion to shareholders.
In conclusion, Data Storage Corporation’s earnings call highlighted a balanced sentiment with growth in core services and strategic initiatives aimed at future transformation. Despite challenges such as increased net loss and operating expenses, the proposed sale of CloudFirst presents an opportunity to unlock shareholder value and reinvest in growth. The company’s focus on AI, cybersecurity, and SaaS, along with its expansion in the U.K., positions it for potential success in the evolving market landscape.