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Q2 Revenue Up 20% Sequentially, With Continued Gross Margin Expansion Driving Positive Operational Profit

Thu, 08/12/2010 - 2:13pm
The Associated Press

http://www.decisionpt.com () —

DecisionPoint Systems, Inc. (OTCBB: DNPI), a leading enterprise mobility and RFID systems integrator, reported financial results for the second quarter and six months ended June 30, 2010.

Revenues in the second quarter of 2010 increased 10% to $13.3 million from $12.0 million in the same period a year-ago. The increase was primarily attributable to general economic improvement and significant growth in field mobility. Revenues in the second quarter 2010 increased 20% over the prior quarter, notwithstanding continued component shortages experienced across the wireless industry affecting DecisionPoint and all its competitors. For the six months ended June 30, revenues increased 3% to $24.4 million from $23.7 million in 2009.

Gross profit in the second quarter of 2010 increased 2.8% to $2.53 million from $2.46 million in the same period a year-ago. Gross profit margin decreased to 19.0% from 20.4% in the same period a year-ago. For the six months ended June 30, 2010, gross profit increased 1.5% to $4.6 million from $4.5 million in the same period in 2009. The increase was a result of greater revenues in the current period. Gross profit margin for the six months 2010 was 18.7% compared to 19.0% in the same period in 2009.

Selling, general and administrative expenses in the second quarter of 2010 totaled $2.5 million compared to $2.0 million in the same period a year-ago. For the six months ended June 30, 2010, selling, general and administrative expenses totaled $4.9 million compared to $4.2 million in the same period a year-ago. The increase was due to additional costs associated with being a public company which were not significant in the same period of 2009, as well as $0.4 million of investor relations and other non-cash compensation costs for services provided to the company.

Net loss for the second quarter was $850,000 or $(0.04) per share, as compared to a net loss of $35,000 or $(0.00) per share in the same period a year-ago. Net loss in the first half of 2010 was $2.1 million or $(0.09) per share, compared to a net loss of $442,000 or $(0.03) per share, in the same period a year-ago.

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization, as adjusted for other non-cash expenses) was a loss of $28,000 in the second quarter of 2010, compared to an EBITDA of $438,000 in the same period a year-ago. For the six months ended EBITDA loss was $268,000 compared to a positive $353,000 in the same period in 2009 (see discussion about the presentation of EBITDA, a non-GAAP term, below).

Management Commentary

"Despite continued component shortages that resulted in approximately $3 million in unfilled orders, we achieved solid revenue growth, both year-over-year and sequentially, with sequential margin expansion in the second quarter," said Nic Toms, DecisionPoint Systems' CEO.

"While we expect component shortages to be a continued challenge for the remainder of the year, we anticipate a strong second half of 2010," said Toms. "For the second half of 2010, we expect revenues of approximately $32 million to $34 million, with income from operations of $1.7 million to $2.0 million, and earnings per share of $0.03 to $0.04. We are also continuing to evaluate potential acquisition opportunities which could establish better economies of scale and build upon our strong growth."

Use of Non-GAAP Financial Information

EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of the company's liquidity. DecisionPoint Systems defines EBITDA as net income/(loss) before interest expense; taxes; depreciation; amortization; and non-cash stock-based compensation. Other companies (including the Company's competitors) may define EBITDA differently. The Company presents EBITDA because it believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in a similar industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of DecisionPoint Systems nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of results as reported under GAAP. See "Reconciliation of GAAP Income (Loss) to EBITDA (Loss)" below for further information on this non-GAAP measure and reconciliation of GAAP Income (Loss) to EBITDA (Loss) for the periods indicated.

Three months ended June 30, Six months ended June 30, ------------------------ ------------------------ 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Net income/(loss) $ (850,048) $ (34,518) $(2,081,089) $ (441,873) Interest 493,588 203,808 963,398 472,921 Taxes 11,091 77,541 52,567 78,541 Depreciation 8,466 9,872 16,897 19,613 Amortization of deferred costs 174,886 67,709 379,251 69,063 ----------- ----------- ----------- ----------- EBITDA - unadjusted (162,017) 324,412 (668,976) 198,265 Adjustments: Employee stock-based compensation 12,741 12,729 35,652 25,229 Non-employee stock-based compensation 173,934 - 273,134 - ESOP compensation expense 29,634 28,155 59,269 56,312 Loss on change in fair value of warrant liability (81,800) - 7,790 - Deferred tax assets - 73,000 25,000 73,000 ----------- ----------- ----------- ----------- EBITDA - adjusted (27,508) 438,296 (268,131) 352,806

Forward-Looking Statements

Under The Private Securities Litigation Reform Act of 1995: Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause a company's actual results, performance and achievement in the future to differ materially from forecasted results, performance, and achievement. These risks and uncertainties are described in the Company's periodic filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events or changes in the Company's plans or expectation.

About DecisionPoint Systems, Inc.

DecisionPoint Systems (OTCBB: DNPI) delivers improved productivity and operational advantages to its clients by helping them move their business decision points closer to their customers. They do this by making enterprise software applications accessible to the front-line worker anytime, anywhere. DecisionPoint utilizes the latest in wireless, mobility, and RFID technologies. For more information on DecisionPoint Systems, go to www.decisionpt.com (http://www.decisionpt.com) .

DecisionPoint Systems, Inc. Condensed Consolidated Balance Sheets June 30, December 31, 2010 2009 ------------ ------------ (unaudited) ASSETS Current assets Cash and cash equivalents $ 488,278 $ 140,740 Accounts receivable, net 9,014,819 8,877,527 Inventory, net 1,750,157 1,247,944 Deferred costs 4,496,921 4,301,727 Deferred tax assets 360,000 385,000 Prepaid expenses 377,181 90,531 ------------ ------------ Total current assets 16,487,356 15,043,469 Property and equipment, net 49,284 52,721 Other assets, net 244,263 377,280 Goodwill 4,860,663 4,860,663 ------------ ------------ Total assets $ 21,641,566 $ 20,334,133 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable $ 10,085,003 $ 7,363,059 Accrued expenses and other current liabilities 3,122,265 3,523,725 Line of credit 3,863,377 2,575,326 Current portion of debt 2,050,994 731,793 Warrant liability - 72,710 Unearned revenue 7,464,228 7,611,241 Holding share liability 20,505 249,986 ------------ ------------ Total current liabilities 26,606,372 22,127,840 Long term liabilities Debt, net of current portion - 1,751,898 ------------ ------------ Total liabilities 26,606,372 23,879,738 Commitments and contingencies STOCKHOLDERS' DEFICIT Preferred stock, $0.001 par value, 10,000,000 shares authorized, 10,000 designated Convertible Series A, 975 shares Series A issued and outstanding with a liquidation value of $975,000 1 1 Common stock, $0.001 par value, 100,000,000 shares authorized, 30,277,792 and 28,700,000 shares issued and outstanding, respectively, 24,000 of which are subject to vesting restrictions as of June 30, 2010 30,254 28,700 Additional paid-in capital 7,406,099 6,805,034 Accumulated deficit (11,318,328) (9,237,239) Unearned ESOP shares (1,082,832) (1,142,101) ------------ ------------ Total stockholders' deficit (4,964,806) (3,545,605) ------------ ------------ Total liabilities and stockholders' deficit $ 21,641,566 $ 20,334,133 DecisionPoint Systems, Inc. Condensed Consolidated Statements of Operations (unaudited) Three months ended June 30, Six months ended June 30, ------------------------ ------------------------ 2010 2009 2010 2009 ----------- ----------- ----------- ----------- Net sales $13,288,041 $12,033,956 $24,360,304 $23,698,382 Cost of sales 10,760,615 9,575,576 19,796,583 19,200,024 ----------- ----------- ----------- ----------- Gross profit 2,527,426 2,458,380 4,563,721 4,498,358 Selling, general and administrative expense 2,484,501 1,962,874 4,919,866 4,166,618 ----------- ----------- ----------- ----------- Operating income (loss) 42,925 495,506 (356,145) 331,740 ----------- ----------- ----------- ----------- Other expense Interest expense (493,588) (203,808) (963,398) (472,921) Other expense, net (388,294) (248,675) (708,979) (222,151) ----------- ----------- ----------- ----------- Total other expense (881,882) (452,483) (1,672,377) (695,072) ----------- ----------- ----------- ----------- Net (loss) income before income taxes (838,957) 43,023 (2,028,522) (363,332) Provision for income taxes 11,091 77,541 52,567 78,541 ----------- ----------- ----------- ----------- Net loss $ (850,048) $ (34,518) $(2,081,089) $ (441,873) Net loss per share - Basic and diluted $ (0.04) $ (0.00) $ (0.09) $ (0.03) Weighted average shares outstanding - Basic and diluted 23,242,356 16,909,891 23,030,581 14,576,557 ----------- ----------- ----------- -----------

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