Data Storage (NASDAQ:DTST) held its fourth-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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View the webcast at https://event.choruscall.com/mediaframe/webcast.html?webcastid=MUnzWOrH
Summary
Data Storage reported a net income of $19.2 million for 2025, largely due to the sale of its Cloud First subsidiary, highlighting a significant increase from $500,000 in the previous year.
The company returned $29.3 million to shareholders through a tender offer, significantly reducing its outstanding share count by approximately 72%.
Operational focus is now on the Nexus subsidiary, which generated $1.4 million in revenue, marking a 13.4% year-over-year growth with improved gross margins of 44.4%.
The company entered 2026 debt-free with over $10 million in capital, planning to use its strong cash position to pursue acquisitions in high-growth areas such as AI, GPU infrastructure, and cybersecurity.
Management emphasized a strategic shift towards a NASDAQ-listed acquisition platform, aiming to scale high-quality businesses in large technology markets, with a disciplined capital allocation approach.
Full Transcript
OPERATOR
Greetings and welcome to the Data Storage Corporation Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Ms. Alexandra Schilt, Investor Relations. Thank you. You may begin.
Alexandra Schilt (Investor Relations)
Thank you. Good morning everyone and welcome to Data Storage Corporation’s 2025 fiscal year business Update conference call. On the call with us this morning are Chuck Peluso, Chairman and Chief Executive Officer, and Chris Panaggio, Chief Financial Officer. The Company issued a press release this morning containing its 2025 fiscal year financial results, which is also posted on the Company’s website. 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, please note that today’s call contains forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. Actual results may differ materially due to various risks and uncertainties described in the Company’s filings with the SEC. Except as required by law, the Company assumes no obligation to update or revise forward looking statements. I’d now like to turn the call over to Chuck Peluso. Please go ahead, Chuck.
Chuck Peluso (Chairman and Chief Executive Officer)
Thank you, Al. Good morning everyone and thank you for joining us. First, I would like to acknowledge the delay in reporting our fiscal year 2025 results, which was necessary to allow additional time to complete our year end audit. This was primarily driven by the complexity of several significant transactions during the year, including the sale of our Cloud first subsidiary, the classification and settlement of many of our outstanding warrants, and the completion of a tender offer. However, we are pleased to be here today to discuss our results in more detail. 2025 was the most consequential year for Data Storage Corporation’s 25 year history. It was a year defined not just by strong financial results, by decisive action. Action that fundamentally reshaped our company, strengthened our balance sheet and positioned us for a new phase. Over the past year, we made deliberate choice to unlock the value we had spent more than two decades building, and redirect that value towards what we believe is a significantly larger opportunity ahead. We executed on that strategy in three critical ways. First, we monetized Cloud first for a total transaction value of 40 million. That transaction generated approximately 31.6 million in net proceeds and a 20.1 million gain. We sold a strong asset at full value because we believe that capital could be deployed into opportunities with greater long term potential. At closing we had an estimated 41 million in the bank based on our cash balance of 10 million plus the sale of Cloud first. Second, we returned 29.3 million of that capital directly to shareholders through a tender offer at $5.20 per share, reducing our outstanding share count by approximately 72%. That level of capital return is rare for a company of our size and reflects a core principle of ours. Capital belongs to the shareholders and when we generate it, we allocate it responsibly, whether that means returning it or investing it for growth. Third, we reset the company. We entered 2026 debt free with over 10 million in capital, a clean balance sheet and at this point a simplified operating structure. From a financial standpoint, these actions resulted in record performance. We reported a net income of 19.2 million for the year compared to 500,000 for 2024. At the same time, I want to be very clear with investors this level of profitability reflects the Cloud first transaction and other non recurring events. It does not yet represent earnings power of DTST and we are being intentional and transparent. What it does demonstrate is our ability to create value and recognize when to realize that value and to act with discipline in how we allocate capital. Today our core operating business is Nexus and it’s performing. In 2025 Nexus generated 1.4 million in revenue representing a 13.4 year over year growth. Gross margins expanded to 44.4% and importantly we improved the quality of the business by reducing customer concentration with no single customer accounting for more than 10% of the revenue. Nexus is lean subscription based recurring revenue business with improving margins and real operating leverage. And that brings us to the most important part of our story. What comes next? We have deliberately positioned DTST as a NASDAQ listed acquisition platform with capital flexibility and a clear mandate to identify, acquire and scale high quality businesses in large and growing technology markets. We are actively evaluating opportunities in areas where we believe we have both a strategic alignment and the ability to add value, including AI enabled vertical SaaS, GPU infrastructure, cybersecurity and SOC related services as well as scalable technology businesses with recurring revenue models. These are not abstract targets. These are markets with significant tailwinds where disciplined capital deployment can drive meaningful long term returns. In fact, we’ve already identified and are active pursuing a number of strategic opportunities with an emerging GPU infrastructure segment in enterprise technology. These areas are being shaped by strong tailwinds including a rapid adoption of AI driven workloads, ongoing data architecture modernization and increasing demand for scalability. resilient digital infrastructure Our focus remains on large evolving markets where demand visibility is high, where we believe we can deploy capital in a disciplined, accretive manner with an emphasis on opportunities that are often compelling, risk adjusted returns and clear avenues for long term value creation. We are actively advancing these initiatives, positioning ourselves to stay agile and selective as they’re developed. We expect to provide meaningful updates in the near term as these opportunities evolve. Importantly, we are …
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