Data Storage Q4 2024 Earnings Report

Data Storage EPS Results

• Actual EPS: $0.04
• Consensus EPS: $0.03
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Data Storage Revenue Results

• Actual Revenue: $6.41 million
• Expected Revenue: $6.20 million
• Beat/Miss: Beat by +$211.00 thousand
• YoY Revenue Growth: N/A

Data Storage Announcement Details

• Quarter: Q4 2024
• Date: 3/31/2025
• Time: Before Market Opens
• Conference Call Date: Monday, March 31, 2025
• Conference Call Time: 11:00AM ET

Data Storage (NASDAQ:DTST), Inc. (NASDAQ: DTST) is a provider of carrier-neutral data center and cloud hosting solutions designed to support enterprises, service providers and government agencies. Headquartered in West Palm Beach, Florida, the company operates a network of interconnected data centers across key markets in the Southeastern United States. Through its fiber-rich infrastructure, Data Storage delivers secure, high-availability environments that cater to businesses requiring scalable IT resources and robust connectivity.

The company’s core offerings include colocation services, managed hosting, private and hybrid cloud solutions, and disaster recovery. Its data centers feature redundant power systems, advanced cooling technologies and multi-layered security protocols to ensure continuous uptime and data integrity. In addition, Data Storage provides a suite of network services—such as IP transit, metro connectivity and dark fiber—enabling customers to optimize their digital workloads and maintain seamless communications across geographically dispersed facilities.

Founded in 1986, Data Storage has built a reputation as one of the first independent data center operators in Florida. Over the decades, it has expanded its footprint through strategic facility upgrades and selective acquisitions, broadening its service portfolio to address evolving market demands in sectors like healthcare, finance and retail. The company’s compliance with industry standards and certifications underscores its commitment to meeting rigorous regulatory and security requirements on behalf of its clients.

Guided by a seasoned management team with deep expertise in data center operations, cloud technologies and network engineering, Data Storage emphasizes operational excellence and customer-centric support. The leadership’s focus on innovation and sustainability initiatives aims to reduce environmental impact while delivering reliable, cost-effective IT infrastructure solutions to businesses across the region.

Data Storage Q4 2024 Earnings Call Transcript

Key Takeaways

• Fiscal 2024 revenue rose 2% to $25.4 million, net income increased 71% to $513,000, and adjusted EBITDA grew 45% to $2.37 million on margin expansion.
• Annual recurring revenue run rate reached $21.5 million, with cloud infrastructure and disaster recovery services up 27% to $12.3 million, representing over half of total revenue.
• The company launched Cloud First Europe, deploying three UK Tier III data centers via partnerships and integrating the Flagship merger to boost international go-to-market capabilities.
• SG&A expenses climbed 13% year-over-year to $11 million, driven by higher professional fees, stock-based compensation and travel costs tied to expansion.
• One-time hardware sales declined as part of the strategic shift toward subscription‐based revenue, reducing non-recurring revenue sources.

Presentation

[Operator]

Greetings and welcome to the Data Storage Corporation Fiscal Year twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to your host, Alexandra Schilt, Vice President of Crescendo Communications, the company's Investor Relations firm. Thank you. Ms. Schilt, you may begin.

[Alexandra Schilt, Vice President at Crescendo Communications]

Thank you. Good morning, everyone, and welcome to Data Storage Corporation's twenty twenty four fiscal year business update conference call. On the call with us this morning are Chuck Palusto, Chairman and Chief Executive Officer and Chris Panagiotakos, Chief Financial Officer. Officer. The company issued a press release this morning containing its twenty twenty four fiscal year financial results, which is also posted on the company's website.

[Alexandra Schilt, Vice President at Crescendo Communications]

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, I'd like to remind listeners that this conference call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended that are intended to be covered by the safe harbor created thereby. Forward looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward looking statements. Statements preceded by, followed by or that otherwise include the words believes, expects, anticipates, intends, projects, estimates, plans or similar expressions are future or conditional verbs such as will, should, would, may and could are generally forward looking in nature and not historical facts, although not all forward looking statements include the foregoing. Although the company believes that these expectations reflected in such forward looking statements are reasonable, it can provide no assurance that such expectations will prove to have been correct.

[Alexandra Schilt, Vice President at Crescendo Communications]

Important factors that could cause the actual results to differ materially from the company's expectations include, but are not limited to, the company's ability to benefit from the IBM cloud migration underway, the company's ability to position itself for future profitability and the company's ability to maintain its NASDAQ listing. These risks should not be construed as exhaustive and should be read together with other cautionary statements included in the company's annual report for the year ended 12/31/2024, quarterly reports on Form 10 Q and current reports on Form 10 ks filed with the Securities and Exchange Commission. Any forward looking statement speaks only as of the date on which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward looking statements, whether as a result of new information, future events, changed circumstances or otherwise. I'd now like to turn the call over to Chuck Peluso. Please go ahead, Chuck.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Thank you, Ali. Good morning, everyone. We have made considerable progress throughout 2024, both in terms of financial performance and strategic execution. Through a combination of targeted geographic expansion and a clear focus on our cost strengths, we have laid the groundwork to become a global leader in cloud infrastructure services. Today, we're one of the few global single source providers of disaster recovery and cloud hosting with multi cloud solutions.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

This is especially true in our IBM Power Platform, where our specialization continues to offer valuable marketing and a competitive edge. Before we discuss the developments that we believe are building shareholder value, as well as Cloud First long term direction, I'd like to begin with a brief overview of our financial performance for 2024 fiscal year. Total revenue for the year grew to $25,400,000 up 2% from $25,000,000 in 2023. While this top line growth is modest, it reflects deliberate transition away from low margin one time projects towards more predictable subscription based recurring revenue under long term agreements. Our Cloud Infrastructure and Disaster Recovery Service business segment delivered strong momentum with revenue climbing 27% year over year to $12,300,000 These services made up 51% of total revenue, demonstrating the growing importance of our recurring cloud offering to our overall business.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

We ended the year with annual recurring revenue run rate of $21,500,000 a clear indicator that our business is becoming more subscription based, stable and scalable. Net income improved significantly to $513,000 up nearly 71% from $299,000 in 2023. This reflects both margin expansion and more efficient cost structure. Adjusted EBITDA also showed strong growth reaching 2,370,000 compared to $1,640,000 last year. This captures our ability to scale the business while maintaining profitability, a key component in our long term strategy.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

And our balance sheet remains healthy with $12,300,000 in cash and marketable securities and no debt. This provides both operational flexibility and the capacity to invest in future growth. As expected, we experienced a decline in one time hardware and a slight decrease in managed service revenue, a shift that is aligned with our strategy to prioritize sustainable recurring revenue streams. Looking beyond 2024, our five year organic growth further illustrates the strength and resilience of our cloud business. Between the first quarter of twenty twenty and the first quarter of twenty twenty five, Cloud First achieved revenue expansion, driven primarily by our subscription based cloud disaster recovery and hosting services.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Over this period, the total quarterly nearly doubled increasing from $1,860,000 in Q1 twenty twenty to $3,540,000 in Q1 of twenty twenty five, representing a compounded annual growth rate of 18% for Cloud First organic growth. If we include the merger of flagship with Cloud First, it is a compounded annual growth rate of 30%. In parallel, we also observed steady growth across all services. Cybersecurity subscription and management expanded, enterprise clients responded to evolving risk, software renewals and Office '3 '60 '5 contributed incremental recurring revenue, efforts to cross sell and up sell our clients are underway. This performance reinforces the durability of our recurring model and our ability to expand client value through a broader portfolio of integrated solutions.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

It also speaks to customer retention, long term contracts and increasing reliance on our infrastructure, all of which lay the groundwork for continued organic growth and client acquisition. Now, I'd like to turn over to the developments that are setting the foundation for our future growth. One of the most significant milestones of the year was our international expansion into The UK. We officially launched Cloud First Europe Limited. This move established a regional presence and a long term growth platform to serve a broader European market.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

We supported this expansion through key partnerships with BrightSolid in Scotland and Polstead in England. We enabled the successful deployment of three Tier three data centers in The UK. These facilities allow us to deliver our cloud platform and disaster recovery solutions within The UK borders in full compliance with strict regulatory requirements. This capability represents a powerful differentiator. Very few companies can provide an IBM Power Cloud platform with migration services and support across The U.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

S, Canada and The U. K. With consistent enterprise grade level service levels and regional compliance. To lead this new market, we appointed Colin Friedman as Managing Director of Cloud First Europe. Colin brings deep industry knowledge and leadership experience and under his guidance, we are expecting some great things.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

In addition to our geographic expansion, we also executed structural milestone, the merger of Flagship and Cloud First in January of twenty twenty four. This integration enhances our internal efficiency, consolidates technical capabilities and creates a stronger go to market engine. While unifying our teams and solutions, we are now better positioned to cross sell cloud and managed services across both legacy and new client accounts. Today, we serve over 500 clients across a wide range of industries and the operational synergies already evident. Translating into measurable improvements in client engagement and service delivery as well as revenue growth.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

2024 also a year in which the market increasingly recognized our value proposition, particularly sectors with complex compliance and security requirements. Some examples of client engagements include a 6 figure cloud infrastructure deal with the Canadian division of a leading Japanese motorsport manufacturer addressing complex hosting and security needs, an expanded engagement with a $1,000,000,000 insurance company adding new cybersecurity infrastructure services to an existing relationship, a strong voter confidence in both our capabilities and partnership model a contract with a major U. S. Medical center provider, a HIPAA compliant cloud solution further strengthening our presence in the healthcare sector. These contracts are more than just revenue wins.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

They reflect our ability to deliver mission critical solutions to organizations with stringent compliance and performance requirements. To support our growing client base, we continue to invest in platform expansion. In The U. S, we added a new Tier three data center in Chicago, boosting performance for clients in the Midwest and adding redundancy to our North American network. With this addition, our global infrastructure footprint now spends 10 data centers.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

This provides the high availability, geographic diversity and performance optimization required by enterprises, particularly those with multi site cross border operations. We also observed strong growth in market awareness. In 2024, our cloud first website attracted over 84,000 unique visitors signaling rising interest in IBM Power Cloud migration, continuity services and hybrid infrastructure solutions. We have also built a sales lead funnel and our nurture list includes thousands of organizations, many with multi location operations and complex compliance needs. With an estimated total addressable market in Europe and cross border, IBM organizations exceeds 50,000 companies.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Overall, in 2024, was a year of execution as the results speak for themselves. We grew our recurring cloud business, improved our bottom line, expanded internationally and integrated our operations to better serve a global market. As we enter 2025, a strong financial foundation, a high retention recurring revenue model, an international cloud platform and a clear strategy to capitalize on the growing demand, particularly in regulated and global enterprise markets. Selling, general and administrative expenses for the year ended 12/31/2024 were $11,000,000 an increase of $1,400,000 or 13% as compared to $9,700,000 for the year December 31. The increase is primarily due to an increase in professional fees, stock based salaries and travel.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

The adjusted EBITDA for the year for 12/31/2024, was $2,400,000 compared to the adjusted EBITDA of $1,600,000 for the year ended December 31. Chris, I'm going to send it back to you, okay?

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Thank you, Chuck.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Good morning, everyone. Total revenue for the year ended 12/31/2024, was $25,400,000 an increase of approximately 2% compared to $25,000,000 for the year ended 12/31/2023. The increase is primarily attributed to an increase in our cloud infrastructure and disaster recovery services as well as our VoIP services during the year. Cost of sales for the year ended 12/31/2024, was 14,300,000 a decrease of $1,100,000 or 7% compared to $15,400,000 for the year ended 12/31/2023. The decrease was mostly related to the decrease in one time equipment and managed services related cost of sales.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Selling, general and administrative expenses for the year ended 12/31/2024 were $11,000,000 an increase of $1,300,000 or 13% as compared to $9,700,000 for the year ended 12/31/2023. The increases were primarily due to an increase in professional fees, stock based compensation, salaries and travel as a result of our international expansion efforts. Adjusted EBITDA for the year ended 12/31/2024 was $2,400,000 compared to adjusted EBITDA of $1,600,000 for the year ended 12/31/2023. Net income attributable to common shareholders for the year ended 12/31/2024 was $523,000 compared to net income of $382,000 for the year ended 12/31/2023. We ended the year with cash and marketable securities of approximately $12,300,000 at 12/31/2024 compared to $12,750,000 at 12/31/2023.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Thank you. And I will now turn the call back to Chuck.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Thanks, Chris. With all that said and personally speaking, we remained undervalued. We continue to investigate how we can uncover shareholder value, communicating the value in what we have built to talent and our employees, our partners and our solid financial position. With that all said, I'd like to turn this over to Q and A if we have any questions.

[Operator]

Thank you. Our first question comes from Matthew Galinko with Maxim. Please state your question.

[Matthew Galinko, SVP & Senior Research Analyst at Maxim Group]

Hey, good morning. Thanks for taking my question and congrats on the strong year. Maybe can we start off with kind of what you're kind of how we should be thinking about spending plans for 2025? Should we expect OpEx to trend upward on the SG and A side of things? Do we expect CapEx? Just kind of some sense of how you guys are looking at this year.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Thanks, Matt. I'll cover some of that. I can turn it over to Chris just for what went on with CapEx for 2024. But right now, we've invested how much money, Chris, into The UK on CapEx?

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

It was approximately $575,000 in 2024.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So what we're expecting is that we expect The UK to be fine right now with what's installed with the CapEx and we're expecting some billing going on in the fourth quarter and then a January breakeven for January 2026. So when we look at it, there'll be some CapEx spending. We don't expect much. How much should we spend in 2024 for the overall U. S, Chris? Top of your head? What is that number?

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

The CapEx for 2024?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Yes.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

It was $1,200,000

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So we're in a good position now and Matt, I think we've covered it before that when we hit 80%, we keep it at 80% because we have to start depreciating the minute that we put it in place. So we're in pretty good shape right now. And as we start seeing the sales funnel move to a 90% on probability of close, Chuck Perillo, our CTO, does a great job at managing that. And so with that, we add equipment to where it's required for the services that they are. So I think we're in a good spot right now.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

The U. K. And the Colony, you added two additional two folks, one in partner side of things and the other on sales engineering. So I think we're really okay for this year. So I wouldn't expect that much really to increase. We're pretty much in place.

[Matthew Galinko, SVP & Senior Research Analyst at Maxim Group]

Got it. Thank you. And then maybe a common question from me, but how comprehensively do you feel with the expansion into The UK and Europe? Are you covering the migration to cloud on the IBM Power side? Do you feel like you're touching most of the opportunities on that migration or is there still more work to do to touch every opportunity that's coming to market?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Well, you know, Matt, since we spent some time together over the last few years, there's nothing that I'm satisfied with. It's just a personality thing. So can we do more? Yes. How Schwartz doing a great job working, I mean, as President, but actively involved in the marketing as well as running Cloud First, which is our 95% of our revenue working with the digital marketing companies and uncovering ways for us to be able to increase the lead generation.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

It has slowed down slightly because a lot of folks are moving over to more of a chat GPT search to see who's the best provider of this or that. So how has been working and uncovered that by the way with the digital market agency to improve the lead flow. So we had a slight dip, but it's still coming in on marketing leads and then converting them to sales leads. So the team does a great job at closing them. The partner on the partner side, we're trying to grow that as well.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So I think we're okay with it, but just never satisfied.

[Matthew Galinko, SVP & Senior Research Analyst at Maxim Group]

Got it. And maybe one last question before I jump back in the queue, if possible. You touched a couple of times on regulated markets and having maybe increasing success there. So maybe can you go a little bit deeper into maybe what do you think is driving those wins and what kind of pipeline is there to continue expanding into heavily regulated opportunities?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Well, we spent some money on the certifications. All of the exact certifications, I don't know that's a conversation between you can cover with Hal Schwartz and Chuck Pulillo on that. But we have all the certifications, we have all that's required in The UK on it. And so when you start looking at moving from on premise to we'll call it cloud, a very general term, but let's call it cloud hosting and disaster recovery. Cybersecurity is a key point.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

That's what everybody is worried about with the cloud. When I move it to the cloud, how secure is it? And we are very secure. We do all of the things required to ensure and make the prospect comfortable that this is a better environment in many cases that they can create. So regulatory, compliance, cybersecurity is one of the important things and we have a very good reputation in migrating the data from on premise to off premise.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I would say it's one of the leading things that folks come to us. IBM is one of our competitors, but we do a better job at migration in my opinion and we are easier to deal with. So when we look at regulations, we have to start thinking about cybersecurity and all that goes along with it. But we do, we spend some time and some money on our compliance area. So that's how you end up bringing in the mid size and hopefully the enterprise accounts.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

We've sold some very large accounts this in 2024. But regulations, compliance, cybersecurity is key.

[Matthew Galinko, SVP & Senior Research Analyst at Maxim Group]

Thank you.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Thank you.

[Operator]

Our next question comes from Adam Waldo with Lismore Partners. Please state your question.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

Yes. Good day, Chuck and Chris. I hope you can hear me okay.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Sure. Hi, Adam.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

One quick financial reporting question for Chris and then some strategic and capital allocation questions for Chuck, if I may. Chris, on the financial reporting side, if you strip out the often lumpy and pretty large hardware sales from each of 2023 and twenty twenty four's consolidated results, At what organic growth rate did the rest of the business grow its revenue?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I got that. I have that because I've done some of the calculations, Adam, with Chris. So we were asked that question a bunch of times during investor meetings and we had 16 of them last Tuesday and Wednesday.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

Right.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

When you just take forget about the software renewal and hardware maintenance that occurs and you see that lumpiness that goes on especially in our investor presentation, when we look at organic growth on subscription cloud disaster recovery and cloud hosting, that organic piece, because the rest of it's kind of stable.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Just looking at that, it's a 17.8% compounded annual growth rate. And when we roll flagship in there, it's 30%. But forget flagship, everybody always wants to know about what's your organic growth, but then they ask the question about what does an acquisition mean to you. Well, the acquisition meant to us was 30% compounded annual growth rate. But if you just take subscription, cloud, what we call true subscription, which is a subset of annual recurring revenue, it's It's slightly under 18%, it's like 17.8%.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

Okay. And that's a CAGR. So would it have been meaningfully different just in 2024 relative to 2023, Chuck? Or was 2024 pretty similar growth rate on that metric?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I have to calculate that, Adam. I would have to do that. And I can do that very quickly. So if you want, send me an email and I'll get it right back to you or Ali can get it in stuff. But yes, I can certainly do that.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

But it's been kind of steady in growing. That's why I pulled that flagship on that because 30% is a large number. But I do like the 18%. I'd like it to see the 20%, but it's 18%. And when you look at the industry benchmarks, 18% is pretty good.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

Okay. Now switching to the strategic and capital allocation side, look, you've been very clear for last quarter's conference call, the conference at which you were in attendance about a week or so ago and obviously on today's call that you're frustrated with the stock price. It trades at about 0.6 times when you strip out your cash, it trades at about 0.6 times your run rate annual recurring revenue of $22,000,000 that you reported today. I guess two questions on that. One, at that $22,000,000 annual recurring revenue run rate, are you comfortable that you can be free cash flow neutral or better in 2025 without needing equipment sales? Or would you need a small amount of equipment sales to be comfortable that you'd be free cash flow positive in 2025 after you're about free cash flow neutral in 2024?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I'll turn it over to Chris. Chris? So I mean, we didn't have much equipment sales this year.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Right.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So we just didn't if you look at, Chris, what was the percentage of ARR to total revenue in the year? It was over 80%?

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

Correct.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

And what was the third quarter? Do you remember that was a bigger number, I think? I think it was about You clipped on me there. I don't know.

[Chris Panagiotakos, Chief Financial Officer at Data Storage]

80% or 82% for the Q3?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Yes.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So we didn't have budget in equipment sales at all. And when we do the budgeting, Adam, what happens is we put a number on equipment and we just straight line it. So we look actual to budget. You can make your whole year with December, a December 2024 sale, which didn't happen, which might roll over to future quarters. But I think we're fine without equipment sales, which has not been the case previous years.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

So I think we're fine because Cloud First alone has a amount of when you strip it out just on cloud services, around a 30% EBITDA margin. So I think without equipment, we're fine. And as to the other elements of annual recurring revenue, if you take the $5,000,000 in software renewal and hardware maintenance, it's around a 15% margin. So the real valuable things that really go on, I'm going to say is subscription, disaster recovery and hosting and managed I'm sorry. I'm sorry.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I was going to say and we do between let's say $180,000 and $220,000 a month on those managed services and those are fairly large accounts.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

So it sounds as if you're feeling quite good that you set up to be free cash flow neutral or positive in 2025 given your growth and investment plans. You're sitting with over $12,000,000 of cash on the balance sheet, which is approximately half of the market cap of the stock. Increasingly, the public equity markets are dominated by algorithmic and quant traders, particularly in the micro cap and small cap areas of the market. So companies are increasingly basically disciplining the public market like the fundamental valuation of their shares through stock buybacks. To what extent has that been discussed at the Board level here? And obviously, you have it seems like significant financial flexibility to discipline the public market's fair valuation of your stock through LiveX?

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I've thought about it. I brought it up to the Board. I will say that because the share price where it is, we really can't use our equity for acquisition. And when we look at the cash that we have in the bank, we really don't want to do a $10,000,000 revenue acquisition for many reasons.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

I would need a therapist to do any more in that level. Frankly, we need to look at $20,000,000 revenue acquisitions. And so we're preserving that cash for organic growth primarily. And as to the buyback of the shares, I think maybe a focus might be better to focus on warrants. We have warrants outstanding, public warrants as well as private warrants.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

And I think maybe we should be using some of those shares to get rid of that overhang that's there. But actually buying back the common shares, I really rather save the money for organic growth, because I think we can do it better ourselves than to go to a $10,000,000 revenue acquisition. And when we start looking at those managed service providers, which we have, usually around 50% of their revenue is recurring and 50% is non recurring. At that point, we rather be in a country in Europe, bringing us into Europe and looking at that, increasing our marketing capability, increasing our sales force and partnership programs. So I'm not going to say that we're discounting it to 100%, but I think our focus on relating to buyback should be in the warrant area.

[Adam Waldo, Chairman & Managing Member at Lismore Partners]

Super helpful. Thank you, Chuck, and good luck for us during 2025.

[Operator]

Thank you. And there are no further questions at this time. I'll hand the floor back to Chuck Paluso for closing remarks.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

Thank you. As I discussed on the call, twenty twenty four was a year of focus and follow through. We delivered on key financial goals, advanced our shift towards recurring revenue and expanded our international footprint. These efforts have strengthened both our operations and our market position. And as we move into 2025, we're building on that momentum with a clear direction, a very disciplined approach and the foundation needed to support continued growth.

[Charles Piluso, Chairman, CEO & Treasurer at Data Storage]

We remain committed to providing our shareholders with meaningful updates. I would like to thank everyone who joined our call today. We appreciate it. Thank you. Have a great day.

[Operator]

Thank you. This concludes today's call. All parties may disconnect. Have a good day.

Participants

Executives

• Charles Piluso, Chairman, CEO & Treasurer
• Chris Panagiotakos, Chief Financial Officer

Analysts

• Alexandra Schilt, Vice President at Crescendo Communications
• Matthew Galinko, SVP & Senior Research Analyst at Maxim Group
• Adam Waldo, Chairman & Managing Member at Lismore Partners