DecisionPoint Techniques, Inc. (NYSE:DPSI) This fall 2023 Earnings Convention Name April 1, 2024 11:00 AM ET
Firm Individuals
Brian Siegel – Hayden IRSteve Smith – CEOMelinda Wohl – CFO
Convention Name Individuals
Howard Halpern – Taglich BrothersDamian Krauze – UBS
Operator
Greetings, and welcome to DecisionPoint Techniques, Inc. Fourth Quarter and Full Yr 2023 Outcomes. [Operator Instructions] As a reminder, this convention is being recorded.
It’s now my pleasure to introduce Brian Siegel with Hayden IR. Thanks. Chances are you’ll start.
Brian Siegel
Good morning, and welcome to the DecisionPoint Techniques earnings name. Becoming a member of me at the moment are Steve Smith, Chief Govt Officer; and Melinda Wohl, Chief Monetary Officer.
For these of you that haven’t seen at the moment’s launch, it’s obtainable on the Buyers part of our web site at www.decisionpt.com. Earlier than starting, I want to remind everybody that aside from historic info, the issues mentioned on this presentation are forward-looking statements that contain a number of dangers and uncertainties. Phrases, I imagine, count on, anticipate, imply that these are our greatest estimates as of this writing, however that there might be no assurances and anticipated or anticipated outcomes or occasions will truly happen.
So our precise future outcomes might differ considerably from these statements. Additionally, throughout this name, we are going to focus on non-GAAP measures, together with non-GAAP web revenue, non-GAAP EPS and adjusted EBITDA. These non-GAAP monetary measures regulate our GAAP web revenue and EPS for stock-based comp, any positive factors on extinguishment of debt M&A and different monetary transaction prices and different nonrecurring nonoperating revenue and expense gadgets. Additional info on the corporate’s danger elements is contained within the firm’s quarterly and annual experiences filed with the SEC.
With that, I will now flip the decision over to Steve.
Steve Smith
Good morning, everybody, and thanks for becoming a member of us at the moment.
Along with reporting file fourth quarter and full yr income and file full yr adjusted EBITDA, 2023 was a transformational yr for DecisionPoint. As we advanced our enterprise mannequin in direction of a higher-margin providers technique to place us for continued long-term progress and margin growth. Including another time to growing our enterprise worth for our shareholders. Extra on this to comply with.
First, I’ll replace our overview of who DecisionPoint methods is, what’s our market alternative and what’s our progress technique to seize and increase this chance. I’ll then flip it over to Melinda to debate our monetary ends in extra element.
Over the previous a number of years, DecisionPoint remodeled itself into the main mobility first, Enterprise Companies and options firm. This implies we intention to place ourselves on the middle of a number of rising secular tendencies, together with enterprise mobility, which encompasses work at home and discipline mobility, cloud and managed providers, SaaS, 5G, AI and IoT. Now these markets symbolize a whole bunch of billions of TAM.
So we have recognized a subset of these industries inside these markets the place we both have already got, can purchase or develop experience and due to this fact, the power to develop into extra important gamers. Throughout 2023, by buying macro integration providers or MIS, we expanded our alternative to develop into a number one supplier of in-store options and providers and retail centered on, however not restricted to point-of-sale methods.
Previous to the acquisition, retail was already our largest vertical, the place we had established clients, industry-specific options, the correct expertise companions and a number of other underneath or unpenetrated subsegments for us to go after. Now with MIS, now we have the chance to go additional in retail {industry} by including new providers and applied sciences to our choices. Our worth proposition to clients is obvious.
We allow our clients to be their finest at moments that matter. We allow frontline workers these activity employees who work on the fringe of the community to make higher, quicker, extra correct enterprise selections inside and out of doors the 4 partitions and create operational effectivity and effectiveness to drive higher buyer experiences and enterprise outcomes at their moments that matter or we might wish to say the DecisionPoint’s.
Transferring to our progress technique. The primary pillar is to drive progress and margin growth by growing providers and software program connect charges. Over the previous 4 years, we have remodeled the corporate to drive increased progress charges whereas growing margins considerably by aggressively shifting upmarket to incorporate varied high-margin providers, particularly ones that generate recurring income.
For instance, we provide skilled providers together with consulting, staging, deployment, set up, restore and customer-specific software program customization and {hardware} and software program upkeep help.
The gross margins for these providers are typically considerably increased than once we resell expertise {hardware}. And a part of our technique is to shift service and software program combine over the following few years to 50% of income constantly, which can drive extra recurring income and better gross margins. Our acquisition of MIS was the following step in our transformation. When mixed with the power of our present software program and repair choices, this acquisition was key to enhancing our providers and software program combine.
Now 40-plus % of our enterprise is providers. Strategically, MIS could not have been a greater match. They introduced us 5 new high 10 clients, new service choices, stuffed the geographic hole with 100,000 sq. foot warehouse facility within the Southeast 30,000 of which to help our staging and integration capabilities and considerably expanded and strengthened our presence within the retail {industry}, particularly in grocery, quick-serve eating places, C-stores and hospitality verticals.
The final level is vital because it units us as much as turning into a extra full retail point-of-sale and expertise options firm. In 2023, we additionally reinvested the next portion of our revenue into constructing our managed providers enterprise, together with product growth and hiring of skilled group of enterprise growth professionals who can carry our choices to market.
Our imaginative and prescient portal was the primary important product introduction on the enterprise mobility facet. Imaginative and prescient affords our clients a customizable answer for monitoring actions on every little thing of their IT infrastructure. DecisionPoint can now handle all the mobility and IT infrastructure lifecycle from one view.
Imaginative and prescient offers real-time visibility to handle the well being, location and standing of a buyer’s mission-critical IT property no matter their enterprise location. Imaginative and prescient additionally permits clients to observe the progress of main rollouts, which permits our clients to attenuate downtime and simplify the general administration of a giant distributed enterprise.
Extra just lately, we launched PointCare providers, our suite of managed and deployment providers constructed to deal with all features of choosing, deploying and managing clients’ enterprise expertise. PointCare integrates all of our providers into one providing, together with Imaginative and prescient, and permits clients to deal with each side wanted to design, deploy and handle all the ecosystem across the applied sciences we already present. This allows us to leverage our present enterprise in mobility and point-of-sale and RFID deployments to create an end-to-end service program that is merely to include into our clients’ processes.
We’re additionally opportunistically constructing our higher-margin recurring income. SaaS options portfolio, which at the moment contains each packaged and custom-developed software program options similar to Cellular Conductor and Route Supervisor for direct retailer supply or the DSD {industry} and ViziTrace which helps handle an RFID implementation.
The second pillar is to take these new services and products deeper into present verticals whereas increasing into adjacencies. For instance, inside retail, there are specialty shops, large field shops, grocery shops, C-stores, quick-serve eating places and extra areas the place our earlier presence is now strengthened with a stronger product and providers portfolio and new relationships coming from MIS.
This offers potential income synergies, the place we’re actively pursuing by the chance to cross-sell between enterprise cellular and retail point-of-sale options. The third pillar is geographic growth, the place we are able to decide up new clients increase discipline gross sales and enhance our protection. Our M&A technique helps these pillars and enhances our natural progress.
Word, we aren’t going to make acquisitions simply to realize extra scale. Now we have very particular standards for the businesses we goal. These embody a monitor file of constructive income progress and EBITDA, integration prepared options and operations and cultural compatibility.
By specializing in these areas, now we have developed a profitable integration technique that permits us to rapidly scale back SG&A prices, streamline operations, and drive income synergies by increasing their choices nationwide by our system. Macro integration Techniques or MIS, was an ideal instance.
It hit three of our 4 strategic progress areas and met our M&A standards. It was a little bit larger than our earlier acquisitions, however we’re rapidly integrating them into DecisionPoint, paying down the acquisition debt and searching presently at new targets. Transferring to our fourth quarter outcomes. Income grew 25% to $31 million, pushed by a file 47% mixture of software program and providers, primarily from the acquisition of MIS. Full yr income was a file $116 million, up 19% with software program and providers making up 36% of the combo.
This combine enchancment drove 25% gross margin for the yr and led to adjusted EBITDA of $8.9 million, up 13%. Regardless of the numerous incremental SG&A and investments I beforehand talked about, that we imagine will begin to present returns in ’24 and past.
We additionally proceed to pay down our acquisition-related debt in the course of the quarter with one other $750,000 discount bringing the full paid right down to $6.2 million of the $12 million we borrowed to amass MIS on April 1 final yr. Given this fast paydown and our sturdy monetary place, we’re ready to search for new M&A alternatives with the hopes of executing on a number of throughout ’24. In closing, we executed on our technique and delivered a strong quarter.
I need to thank every member of our devoted worker group for his or her continued exhausting work. I stay up for talking with you once more on our first quarter name.
Now I’ll flip it over to Melinda to evaluation our monetary ends in extra element.
Melinda Wohl
Thanks, Steve.
Particulars of our fourth quarter working efficiency in comparison with 2022’s fourth quarter had been as follows: we noticed continued sturdy demand in This fall with complete income up 24.8% to $30.5 million. Throughout the quarter, we labored by a portion of our $13 million {hardware} backlog from final quarter ending the yr at $9 million. Transferring to gross revenue. We noticed an 18.7% enhance from the prior yr.
This blended shift led to a quarterly gross margin of 24.6%. The slight lower in gross margin from earlier yr was because of a considerable {hardware} order from a key buyer. GAAP working bills had been up $1.2 million from final yr.
This enhance was primarily as a result of acquisition of MIS and thus, no corresponding bills for the comparable interval final yr in addition to our strategic investments in constructing our managed providers portfolio and gross sales and biz did head depend. As we proceed to combine MIS, we count on to appreciate value synergies and improved efficiencies in operations.
GAAP web loss and diluted loss per share had been detrimental $0.3 million and detrimental $0.03 versus web revenue and EPS of $0.4 million and $0.07 final yr. Weighted common shares excellent had been roughly flat from final yr at $7.8 million. Our non-GAAP web revenue and diluted EPS or zero for the quarter. The non-GAAP web revenue and EPS numbers excluded about $256,000 this yr, primarily associated to the MIS acquisition versus $378,000 final yr, which was largely associated to inventory comp and uplift charges. Adjusted EBITDA was $1.9 million, a rise of 8.4% in comparison with final yr.
Once more, our working leverage was impacted by the gross sales and biz dev investments we’re making this yr in our software program and managed providers to speed up progress in these higher-margin choices in 2024 and past. Turning to our stability sheet. We ended the quarter with money and money equivalents totaling $4.3 million versus $7.6 million on December 31, 2022. Deferred income elevated 29% to $13.3 million, of which roughly $8 million is predicted to do acknowledged over the following 12 months. Whole debt on the finish of the quarter was about $5.9 million.
Throughout the quarter, we paid down $750,000 in debt associated to the acquisition of MIS. We’ll proceed to pay down $250,000 quarterly for our time period mortgage, and our plans are to proceed to pay the rest down as swiftly as potential. Internet money offered by working actions was $4.5 million versus $12.3 million final yr. The lower was primarily the results of funds for stock purchases that had been fulfilled this yr.
With that, operator, we are able to transfer to questions.
Query-and-Reply Session
Operator
[Operator Instructions] Our first query comes from the road of Howard Halpern with Taglich Brothers. Please proceed together with your query.
Howard Halpern
Congratulations on the yr, lots achieved. Loads achieved. And will you speak, I suppose, a little bit bit concerning the well being professionals that you simply employed? And what your purpose is for them all through the following couple of years?
Steve Smith
Positive, Howard. Good to speak to you once more. Sure. We have invested, as we spoke about right here lots on lots of our earnings calls in infrastructure build-out, proper? So the Imaginative and prescient portal the continuing growth of it, the performance of it.
So we have been investing closely in methods and course of. And it was time to — now that now we have all these prolonged capabilities, to place the perfect professionals potential in place to go and begin to promote and promote this — these capabilities. And so we very particularly employed a pacesetter within the house that may be a acknowledged chief.
We put out a press launch on him, his title is Brian Bukowski you may search for his LinkedIn profile and even simply name down on the press launch, a really achieved person who has expertise each in information seize and out of doors information seize in discipline mobility. So he had the correct pedigree and stability and background that we thought he might add quite a lot of worth and positive sufficient, we had been proper.
We introduced him in This fall. And we additionally employed a person that will work immediately alongside Brian and actually, had beforehand labored alongside Brian, to essentially be the options architect, if you’ll. So take into consideration you’ve all these capabilities, and you have to go to market group they usually must be fed, what are the brand new product choices, how can we simplify the worth prop round these choices, cellular managed service choices now, I am speaking about and managed providers choices.
And that particular person has labored alongside Brian and has performed [indiscernible] work to this point on giving form and specificity to the answer stack that we now have and solutioning it in order that the gross sales group, the go-to-market group, can place it for his or her clients. And he is engaged with end-user exercise in addition to Brian.
In order that’s little run-on sentence to your query, Howard. Sorry for the lengthiness however that is who we employed and what they do.
Howard Halpern
Okay. May you describe a little bit bit about what you are seeing out of your clients by way of willingness to maneuver ahead with initiatives? Are they extra keen now than they had been perhaps six months in the past? What’s the panorama on the market?
Steve Smith
Okay. You are now speaking extra normal concerning the enterprise than you had been about Cellular managed providers, appropriate?
Howard Halpern
Simply the entire enterprise typically, new clients, are these clients keen to spend now? Or are they nonetheless a little bit hesitant? What are you seeing?
Steve Smith
Sure. So I imply know that I am not an economist, however I feel there’s some superb tailwinds beginning to construct behind us and for all within the {industry}, proper? The provision chain problems with ’22 and ’23 are form of behind us. I feel the macroeconomic tendencies are favorable. Rates of interest are coming down.
I feel that may release some CapEx spending. So typically phrases, I imagine there’s some — the worst of occasions behind us, however once more, I am not an economist. However we’re seeing clients establish funds for the funding of initiatives. We’re seeing it in choose circumstances and I feel we’ll — I anticipate seeing it in additional circumstances on a go-forward foundation this yr and subsequent.
Howard Halpern
Okay. And are you seeing new clients coming — are new clients gravitating to you and your choices?
Steve Smith
Sure. Sure. In reality, in 2023, we added 107 new logos. Now that did not quantity to quite a lot of income as a pair, $3 million, however these are little seeds that get planted, which can be on the market. And now we commercially have interaction with them, and there will likely be extra enterprise to comply with. So we see it occurring there. In fact, the large hitter is that if you may get some large logos with some large offers, proper?
And we’re seeing that. We have energetic gross sales campaigns. I discussed in my introduction that cross-selling campaigns are alive and effectively and occurring real-time between us macro and actually all clients and salespeople. I had a gross sales assembly simply 4 weeks in the past, bringing the group collectively. We had 97 folks in Greensboro, North Carolina in our new facility.
And that is the place we had the gross sales assembly as a result of I needed all people to know our new acquired capabilities. So we just like the exercise that now we have in place. We’re selling it in a really aggressive method, and I count on good issues to come back from it.
Howard Halpern
Okay. And only one final one. Do you anticipate the service margin to keep up that 35%, 36% gross margin stage going ahead? Or might there be a little bit enchancment there?
Steve Smith
I might set your expectations, perhaps depart this to Melinda to touch upon, however I’ve set your expectations to be on or about the place they’re proper now, give or take a degree. However Melinda, do you’ve something to remark there?
Melinda Wohl
I conform to, Howard. It will most likely be proper round that 35%.
Howard Halpern
Okay. Thanks, and sustain the nice work, guys.
Steve Smith
Thanks, Howard.
Operator
Our subsequent query comes from the road of Damian Krauze with UBS. Please proceed together with your query. Damian, your line is dwell.
Damian Krauze
Hello. Good morning, everybody. I apologize. I used to be on mute. And thanks for taking my questions this morning.
Steve Smith
You are welcome. Good to satisfy you.
Damian Krauze
So now we have been seeing the retail gross sales information trending positively year-to-date, the final a number of months. I used to be curious for those who may be capable to elaborate a little bit bit on the form of tendencies you have been observing in your enterprise to date year-to-date. And I suppose for those who had been to form of strip out the constructive impression out of your acquisition, might you perhaps give us a way on like the place underlying gross sales are trending by March?
Steve Smith
Sure. So good to satisfy you, and thanks for becoming a member of the decision. Sure, I might name our exercise kind of stage, if you’ll, with This fall, which means that the exercise hasn’t exploded, I feel, I might simply name it considerably constant in stage, the curiosity stage from our retail clients. I, too, I am bullish that retail is within the early stage of come again. There’s much less and fewer articles on the market about retailer closings with some main retail names than there may be about retailer openings at this level.
We love the acquisition that we made with macro as a result of it will get us into meals. And meals and retail is a extremely good place to be. I identical to — I just like the probabilities of all people proceed and eat. So grocery, quick-serve eating places, tea shops and the like, we expect, are going to bode very effectively for us on a go-forward foundation. And by the best way, by buying macro, we did not simply begin to get into grocery.
Grocery has been a longstanding vertical for DecisionPoint return 20 years to our roots. So now we have different clients within the grocery and vertical typically, and that augmented and complemented specialty retail and style retail, for instance, different segments of the retail {industry} we’re in. However I might set your expectations that — issues are stabilized. I feel the second half might be sturdy. We have an election arising. So the macro tendencies ought to be favorable.
Damian Krauze
Okay. That is very useful. Thanks. I suppose a follow-on to that. When you’ve conversations together with your clients, what’s it that they let you know it might form of take to drive that inflection that resumption of CapEx. Is there something that form of stands out that you simply sense is form of the limiting issue or what it might take to form of drive that reacceleration, if you’ll.
Steve Smith
Sure. The very first thing they level to is rates of interest, proper, which have been favorably coming down within the final three, 4, 5, six months or so. I imply so with rates of interest coming down, spending on the client stage picks up, proper? Folks get a little bit bit extra bullish, they get much less conservative, they usually exit and begin spending. So typically, I feel the very first thing that they level to could be rates of interest.
And I feel that is been favorable. I do not know even know what I might put second, however that is a heavyweight one. And simply actually is chargeable for the general sentiment, I imagine, of {the marketplace} and the economic system typically, which helps spending.
Damian Krauze
Honest sufficient. Properly, hopefully, Chairman Powell and the squad can begin pushing issues within the extra favorable course for you. One last query I’ve. I do not know to what extent you are taking part or view RFID as a chance. However whether it is related, might you tell us the way you’re viewing RFID? UPS has been on the market just lately speaking about deploying RFID. I might recognize any of your ideas on that expertise.
Steve Smith
Sure. So I have been on this {industry} for 29 years and had been — was round in the course of the preliminary hype round RFID, which could return 20 years now. However RFID has had a resurgence right here within the final couple three years, First, the applying and use case areas. Some retailers are literally utilizing RFID a checkout. However extra so, the frequent utility areas and use circumstances exist within the warehouse distribution middle and the like the place packaged within the case of UPS, packages will be tracked extra effectively and successfully, relying on the use case.
Once more, there’s nonetheless a price for the label with an RFID tag in it. However the utility and use circumstances are displaying themselves. I attended an {industry} occasion in Atlanta, MODEX only a month in the past. And I used to be flabbergasted floored on the — initially, the exhibitors and their cubicles, I imply, and their choices, which included RFID, that was a giant time present that actually spoke to what’s occurring in industrial automation and provide chain typically. So — and there is quite a lot of RFID converse and together with us, we had featured ViziTrace which is an providing of ours that allows somebody to handle all kinds of RFID applied sciences.
And we had been busy as to be. So we see a person pickup, however I do not assume that is the place your query is rooted. I feel typically, at a macro stage inside this {industry}, RFID has had a resurgence within the final couple or three years. And I might anticipate it is beginning to dwell as much as its hype of yesteryear.
Damian Krauze
Terrific. Glad to listen to that. Properly, thanks very a lot on your time, and better of luck.
Operator
Thanks very a lot. Thanks for attending. There are not any additional questions within the queue. I would like at hand it again to Steve Smith for closing remarks.
Steve Smith
Sure. Thanks, Doug. Hear, we’re actually happy with our outcomes. I am tickled. I actually am. I’m lucky to work with an infinite variety of what I might name A gamers. These are {industry} consultants, {industry} legends in some circumstances, however {industry} consultants that actually know how you can fulfill buyer wants and fulfill buyer necessities. And that group is the most important it is ever been, and I’m actually bullish on our potential going ahead. However greater than something, I simply need to look again, say, thanks to every affiliate on the market that had a hand in serving to this firm get to the place it’s at the moment. We by no means might have performed it with out you.
I need to thanks for that. And I need to simply talk to our shareholders. There’s extra excellent news to comply with. Keep tuned, and we’ll see you and converse to you on our subsequent name, which is, I need to say, center of Might.
Operator
Women and gents, this does conclude at the moment’s teleconference. Thanks on your participation. Chances are you’ll disconnect your traces presently, and have a beautiful day.
