DTST — Data Storage Corporation

Summary of Data Storage Corporation (DTST) Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Sale of CloudFirst: Completed on September 11, 2025, for $40 million. CloudFirst was projected to generate $25 million in annual revenue and $5.5 million in EBITDA.
• Sales from Continuing Operations:
  • Q3 2025: $417,000, up 28.2% from $325,000 in Q3 2024.
  • Year-to-Date (YTD) 2025: $1.1 million, up 17.6% from $900,000 in YTD 2024.
• Net Income:
  • Q3 2025: $16.8 million, significantly up from $122,000 in Q3 2024, primarily due to gains from discontinued operations.
  • YTD 2025: $16.1 million, compared to $235,000 in YTD 2024.
• Cash Position: Ended Q3 2025 with approximately $45.8 million in cash, cash equivalents, and marketable securities, up from $12.3 million at the end of 2024.

2. Strategic Updates and Business Highlights

• Transition to DSC 2.0: The company is repositioning for disciplined growth following the CloudFirst sale, focusing on long-term shareholder value.
• Tender Offer and Buyback: A special committee has been established to oversee the tender offer and buyback process, aiming for transparency and alignment with shareholder interests.
• Exploration of Acquisitions: The company is looking into strategic acquisitions in high-value markets such as GPU-based computing, AI infrastructure, and cybersecurity, while maintaining a cautious approach.
• Nexxis Performance: The Nexxis subsidiary continues to perform well, providing a stable revenue base with ongoing opportunities for organic growth and acquisitions.

3. Forward Guidance and Outlook

• Future Cash Position: The final cash position post-tender offer is uncertain but is estimated to range between $5 million and $15 million.
• Acquisition Strategy: The company is targeting acquisitions that will enhance recurring revenue, particularly in the VoIP and data services sectors, with an aim to close a deal by the end of March 2026.
• Operational Focus: Priorities include completing the tender offer, launching a new corporate website, and strengthening the Nexxis platform.

4. Bad News, Challenges, or Points of Concern

• Increased SG&A Expenses: Selling, general, and administrative expenses rose by 31.8% in Q3 2025 compared to Q3 2024, primarily due to noncash stock-based compensation and salary adjustments.
• Uncertainty in Tender Offer Outcomes: The variability in the cash position post-tender offer presents a risk, as the exact amount available for future investments remains unclear.
• Market Volatility: The company is cautious about entering the AI and infrastructure space due to high valuations and market fluctuations.

5. Notable Q&A Insights

• Tender Offer Clarification: CEO Chuck Piluso indicated that estimating the cash position post-tender is challenging, with a range of $5 million to $15 million being speculative.
• SG&A Run Rate: CFO Chris Panagiotakos confirmed that the Q3 SG&A figure is expected to be a good run rate going forward, with no nonrecurring charges impacting this quarter.
• Acquisition Focus: Piluso emphasized the potential for acquiring smaller VoIP companies to bolster Nexxis, indicating a strategic focus on enhancing the existing platform rather than pursuing larger, riskier investments in volatile markets.

This earnings call reflects a pivotal moment for Data Storage Corporation as it transitions post-divestiture, with a clear focus on disciplined growth and strategic acquisitions while navigating operational challenges.