DecisionPoint Systems Announces Third Quarter 2023 Results

By: DecisionPoint™ Systems, Inc. via Business Wire

November 14, 2023 at 07:00 AM EST

Record third quarter revenue of $27.1 million (+5%)

Record gross margin of 27.6% (+520 bps) and software/services mix of 45%

Provides 2023 guidance of 14-16% revenue growth and 13-17% adjusted EBITDA growth

DecisionPoint™ Systems, Inc. (NYSE American: DPSI), the leading mobility-first enterprise services and solutions company, today announced third quarter 2023 financial results ended September 30, 2023.

Steve Smith, chief executive officer of DecisionPoint Systems, commented: “Our services-oriented strategy is fueling our growth model and clearly differentiates us from our peers in the industry. We continued to show year-over-year growth in the third quarter, driven by a record mix of software and services at 45% of revenue. This differentiation has allowed us to buck industry trends and drive profitable growth.

“We also continued to see synergies from our acquisition of Macro Integration Services (MIS) and are already creating growth opportunities due to the cross-selling activities across the Company. For example, we’re conducting broader, CIO-level meetings around our combined mobile and services portfolio at several MIS customers.

“Finally, strong cash flow from operations enabled us to pay down another $1.5 million in debt related to the Macro Integration Services acquisition.”

Third Quarter Highlights (2023 versus 2022)

Revenue increased 5.4% to $27.1 million;
Gross Profit increased 30.3% to $7.5 million; Gross Margin increased 520 basis points to 27.6%;
GAAP Operating Income was flat at $1.5 million;
GAAP Net Income and diluted EPS decreased 1.0% and 11.2% to $1.0 million and $0.13, respectively;
Non-GAAP Net Income¹ and non-GAAP diluted EPS decreased 8.4% and 16.6% to $1.1 million and $0.13, respectively;
Adjusted EBITDA¹ increased 1.3% to $2.3 million;
Paid down $1.5 million of debt related to the April 1, 2023 acquisition of MIS.

¹See GAAP to non-GAAP explanations and reconciliations at the end of this release

Third Quarter Select Financial Metrics: 2023 versus 2022

(in $M except for EPS)

3Q23

3Q22

Change

YTD 2023

YTD 2022

Change

Total Revenue

27.1

25.7

5.4

85.1

73.0

16.5

Hardware Solutions Revenue

14.0

19.2

-27.1

52.8

54.1

-2.4

Software and Services Revenue

11.7

4.7

147.6

27.7

13.7

102.5

Consumables Revenue

1.4

1.8

-21.5

4.5

5.2

-13.5

Gross Profit

7.5

5.8

30.3

21.3

16.8

26.8

Operating Income

1.5

-0.7

4.1

3.8

6.6

GAAP Net Income

1.1

-1.0

2.8

2.7

3.7

GAAP Diluted Earnings Per Share

0.13

0.15

-11.2

0.36

0.0

Non-GAAP Net Income

1.1

1.2

-8.4

3.5

3.3

4.6

Non-GAAP Diluted EPS

0.13

0.16

-16.6

0.45

0.43

4.8

Adjusted EBITDA

2.3

1.5

6.8

6.1

11.5

*numbers may not add due to rounding

Balance Sheet and Liquidity as of September 30, 2023

Cash and cash equivalents were $3.6 million, compared to $7.6 million on December 31, 2022. Short-term and long-term debt were $1.0 million and $5.7 million, respectively.

2023 Commentary and Guidance (ending 12/31/23)

	2023 Guidance	2022 Actual	2023 vs 2022
Revenue	$111.0 million - $113.0 million	$97.1 million	+14% - 16%
Adjusted EBITDA	$8.9 - $9.2 million	$7.8 Million	+13% - 17%

“For the full year 2023, we now expect revenue in the range of $111.0 to $113.0 million with $8.9 to $9.2 million in adjusted EBITDA. Note this increase in adjusted EBITDA is coming despite investing $1 million in expanding our managed services capabilities in 2023, which we expect to begin generating positive returns in 2024. Additionally, to drive further growth, especially in our managed services offerings, we recently shifted resources internally while further increasing our investment in business development by adding several high-level, quota-carrying key account managers who are well-regarded within the industry. We expect these additions to contribute nominally to revenue in our fourth quarter and, more significantly, in 2024,” concluded Smith.

Trended Financial Information*

(in $M except for EPS)

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

FY 2022

YTD FY2023

Total Revenue

19.7

27.5

25.7

24.5

27.0

30.9

27.1

97.4

85.1

Hardware Solutions Revenue

14.3

20.6

19.2

17.7

20.5

18.3

14.0

71.8

52.8

Software and Services Revenue

4.1

4.8

4.7

4.9

11.2

11.7

18.3

27.7

Consumables Revenue

1.3

2.1

1.8

2.1

1.6

1.5

1.4

7.3

4.5

Gross Profit

4.7

6.3

5.8

6.3

6.1

7.7

7.5

23.1

21.3

Operating (loss) Income

0.2

2.0

1.5

0.7

1.2

1.3

1.5

4.4

4.1

Net (loss) Income

0.9

0.7

1.1

0.4

0.9

0.8

1.1

3.1

2.8

Diluted EPS

0.11

0.09

0.15

0.07

0.11

0.13

0.41

0.35

Non-GAAP Net Income

1.3

0.8

1.2

0.7

1.3

1.0

1.1

4.1

3.5

Non-GAAP Diluted EPS

0.16

0.11

0.16

0.11

0.16

0.13

0.54

0.45

Adjusted EBITDA

1.1

2.7

2.3

1.8

2.1

2.5

2.3

7.8

6.9

nm = not measurable/meaningful

*numbers may not add due to rounding

Earnings Conference Call and Webcast Information

Date: November 14, 2023

Time: 1:00 p.m. Eastern Time

Toll-Free: 1-877-407-3982

Toll/International: 1-201-493-6780

Call me™: Click Call me Link for instant telephone access to the event (Call me™ link will be made active 15 minutes before the scheduled start time).

Webcast: https://viavid.webcasts.com/starthere.jsp?ei=1628170&tp_key=86d6b02517

Replay Information:

Toll-Free: 1-844-512-2921

Toll/International: 1-412-317-6671

Replay Pin Number: 13742540

Replay Start: Tuesday, November 14, 2023, 2:00 p.m. ET

Replay Expiry: Tuesday, November 21, 2023 at 11:59 p.m. ET

About DecisionPoint Systems

DecisionPoint Systems Inc. delivers mobility-first managed service and integration solutions to healthcare, supply chain, and retail customers, enabling them to make better and faster decisions in the moments that matter—the decision points. Our mission is to help businesses consistently deliver on those moments—accelerating growth, improving worker productivity, and lowering risks and costs. For more information about DecisionPoint Systems, Inc., visit https://www.decisionpt.com.

Forward-Looking Statements

In this press release, all statements that are not purely about historical facts, including, but not limited to, those in which we use the words "believe," "anticipate," "expect," "plan," "intend," "estimate, "target" and similar expressions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. While these forward-looking statements represent our current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to numerous important factors, including, but not limited to, those described in our most recent report on SEC Form 10-K (under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"), which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. We are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements in this press release, whether as a result of new information, future events or otherwise.

DecisionPoint Systems, Inc. Condensed Consolidated Balance Sheets (in thousands, except par value) (Unaudited)
	September 30,			December 31,
	2023			2022
ASSETS
Current assets:
Cash	$	3,645		$	7,642
Accounts receivable, net		18,939			17,085
Inventory, net		3,002			4,417
Deferred costs		3,443			2,729
Prepaid expenses and other current assets		259			399
Total current assets		29,288			32,272
Operating lease assets		3,586			2,681
Property and equipment, net		2,980			1,817
Deferred costs, net of current portion		3,365			2,868
Deferred tax assets		-			848
Intangible assets, net		8,404			4,531
Goodwill		24,555			10,499
Other assets		140			41
Total assets	$	72,318		$	55,557
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,848		$	19,755
Accrued expenses and other current liabilities		5,826			5,357
Deferred revenue		6,886			6,021
Current portion of earnout consideration		5,520			-
Current portion of long-term debt		1,003			3
Current portion of operating lease liabilities		870			529
Total current liabilities		32,953			31,665
Deferred revenue, net of current portion		4,845			4,331
Long-term debt		5,693			143
Noncurrent portion of operating lease liabilities		3,315			2,706
Long-term portion of earnout consideration		4,316			-
Deferred tax liabilities		1,451			-
Other liabilities		6			130
Total liabilities		52,579			38,975
Commitments and contingencies (Notes 6 and 10)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued or outstanding		-			-
Common stock, $0.001 par value; 50,000 shares authorized; 7,654 and 7,416 shares issued and outstanding, respectively		8			7
Additional paid-in capital		38,831			38,429
Accumulated deficit		(19,100	)		(21,854	)
Total stockholders’ equity		19,739			16,582
Total liabilities and stockholders’ equity	$	72,318		$	55,557

DecisionPoint Systems, Inc. Condensed Consolidated Statements of Income and Comprehensive Income (in thousands, except per share data) (Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net sales:
Product	$	15,436		$	20,988		$	57,348		$	59,259
Service		11,704			4,725			27,743			13,681
Net sales		27,140			25,713			85,091			72,940
Cost of sales:
Product		12,340			16,923			46,205			47,213
Service		7,317			3,036			17,604			8,971
Cost of sales		19,657			19,959			63,809			56,184
Gross profit		7,483			5,754			21,282			16,756
Operating expenses:
Sales and marketing expense		2,129			2,291			6,988			6,850
General and administrative expenses		3,838			1,936			10,242			6,155
Total operating expenses		5,967			4,227			17,230			13,005
Operating income		1,516			1,527			4,052			3,751
Interest expense		(162	)		(7	)		(385	)		(42	)
Other income (expense)		15			-			23			(17	)
Income before income taxes		1,369			1,520			3,690			3,692
Income tax expense		(316	)		(409	)		(935	)		(1,008	)
Net income and comprehensive income attributable to common stockholders	$	1,053		$	1,111		$	2,755		$	2,684
Earnings per share attributable to stockholders:
Basic	$	0.14		$	0.15		$	0.37		$	0.37
Diluted	$	0.13		$	0.15		$	0.36		$	0.36
Weighted average common shares outstanding
Basic		7,640			7,290			7,514			7,210
Diluted		7,812			7,593			7,659			7,510

DecisionPoint Systems, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
	Nine Months Ended
	September 30,
	2023			2022
Cash flows from operating activities
Net income	$	2,755		$	2,684
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,028			1,750
Amortization of inventory valuation adjustment		120			-
Loss on fixed asset disposal		-			22
Share-based compensation expense		261			325
Provision for inventory obsolescense		7			-
Deferred income taxes, net		(958	)		460
Provision for doubtful accounts		77			32
Changes in operating assets and liabilities:
Accounts receivable		8,193			(811	)
Inventory, net		3,918			825
Deferred costs		(1,211	)		(1,155	)
Prepaid expenses and other current assets		196			186
Accounts payable		(9,716	)		7,213
Accrued expenses and other current liabilities		(3,054	)		(139	)
Operating lease liabilities		(68	)		265
Deferred revenue		235			2,279
Net cash provided by operating activities		2,783			13,936
Cash flows from investing activities
Purchases of property and equipment		(546	)		(1,299	)
Cash paid for acquisitions, net of cash acquired		(12,917	)		(4,525	)
Net cash used in investing activities		(13,463	)		(5,824	)
Cash flows from financing activities
Repayment of term debt		(253	)		(3	)
Line of credit, net		1,803			-
Proceeds from term loan		5,000			-
Cash paid for taxes on the cashless exercises of stock options		(67	)		(1,403	)
Proceeds from exercise of warrants		187			-
Proceeds from exercise of stock options		13			154
Net cash provided by (used in) financing activities		6,683			(1,252	)
Change in cash		(3,997	)		6,860
Cash, beginning of period		7,642			2,587
Cash, end of period	$	3,645		$	9,447
Supplemental disclosures of cash flow information
Cash paid for interest	$	333		$	38
Cash paid for income taxes	$	1,060		$	497
Supplemental disclosure of non-cash activities
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-		$	3,211
Cashless exercise of warrants	$	12		$	3,508
Cashless exercise of stock options	$	25		$	-

Trended Financial Information

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements presented on a GAAP basis, we have provided non-GAAP financial information, namely non-GAAP Net Income, non-GAAP diluted EPS and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization adjusted for transaction-related and non-recurring items). We believe that these non-GAAP measures provide investors with a better understanding of how the results relate to our historical performance as well as when comparing our results to other publicly-traded companies. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. Management believes that these adjusted measures reflect the essential operating activities of the Company. A reconciliation of non-GAAP financial information appears below:

Supplemental Financial Information Reconciliation of Select GAAP Financial Measures to Non-GAAP Financial Measures (in thousands, except per share data) (unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income, as reported	$	1,053	$	1,111	$	2,755	$	2,684
Share-based compensation		45		50		261		325
Business acquisition costs		26		65		436		242
NYSE American uplisting costs		-		1		-		1
Non-GAAP net income	$	1,124	$	1,227	$	3,452	$	3,252
Depreciation and amortization		731		622		2,028		1,750
Income taxes		316		409		935		1,008
Interest expense		162		7		385		42
Adjusted EBITDA	$	2,333	$	2,265	$	6,800	$	6,052

Diluted EPS, as reported	$	0.13	$	0.15	$	0.36	$	0.36
Adjusted Diluted EPS	$	0.14	$	0.16	$	0.45	$	0.43

Weighted average diluted common shares outstanding		7,812		7,593		7,659		7,510