SOURCE: DecisionPoint Systems, Inc.

DecisionPoint Systems, Inc.

March 17, 2011 09:59 ET

DecisionPoint Systems Reports Record Fourth Quarter 2010 Results

Q4 Gross Profit Margin of 21.6% Drives 26% Year-Over-Year Increase in EBITDA; Q4 Revenue Up 18% Year-Over-Year to $15.5 Million; Full Year 2010 Revenue Increased 16% to Record $56.2 Million

FOOTHILL RANCH, CA--(Marketwire - March 17, 2011) - DecisionPoint Systems, Inc. (OTCBB: DNPI), a leading enterprise mobility and RFID systems integrator, reported financial results for the fourth quarter and twelve months ended December 31, 2010.

Revenue in the fourth quarter of 2010 increased 18% to $15.5 million from $13.1 million in the same period a year ago and $16.4 million in the third quarter of 2010. The year-over-year increase was primarily attributable to improved economic conditions in the U.S., coupled with increased customer demand for mobile solutions.

Gross profit in the fourth quarter of 2010 increased 16% to $3.3 million from $2.9 million in the same period of 2009. Gross profit margin was 21.6% compared to 21.9% in the same period a year ago and 18.0% in the third quarter of 2010. The sequential increase from the third quarter to the current quarter was due to improved availability of higher margin mobility products. Income from operations in the fourth quarter increased to $1.2 million or 7.8% of revenues from $957,000 or 7.3% of revenues for the same period a year ago and compares to $481,000 or 2.9% of revenue in the third quarter of 2010.

Selling, general and administrative expenses in the fourth quarter of 2010 increased 11% year-over-year to $2.1 million from $1.9 million in the same period a year ago and declined 16.0% sequentially from the $2.5 million recorded in the third quarter of 2010. Interest expense of $0.8 million in the fourth quarter of 2010 was significantly higher than the $0.3 million in the same year ago period due to prepayment expense related to the early repayment of our subordinated debt. Non-recurring expenses primarily related to a potential reverse merger and the CMAC acquisition were $0.3 million in the fourth quarter compared to fourth quarter 2009 of $0.1 million.

Net loss for the fourth quarter was $25,000 or $(0.00) per share compared to net income of $621,000 or $0.03 per share in the same period a year ago and a net loss of $102,000 or $(0.00) per share in the third quarter of 2010.

Adjusted EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization, as adjusted for other non-cash expenses) in the fourth quarter of 2010 increased 15% to $1.5 million from $1.3 million in the same period a year ago and compared to $1.4 million in the third quarter of 2010. (See important discussion about the presentation of adjusted EBITDA, a non-GAAP term, below). Non-GAAP earnings per share for the fourth quarter of 2010 (based on adjusted EBITDA) were $0.05 versus $0.06 in the same period a year ago and $0.06 in the third quarter of 2010.

For the twelve months ended December 31, 2010, revenue increased 16% to $56.2 million from $48.3 million for the full year of 2009. Gross profit increased 12% to $10.9 million compared to $9.7 million for the full year of 2009. Gross profit margin for the twelve months of 2010 was 19.3% compared to 20.2% in the same period in 2009. Selling, general and administrative expenses increased 20% to $9.5 million from $7.9 million in 2009. Net loss for the twelve months of 2010 was $2.2 million or $(0.09) per share compared to net income of $344,000 or $(0.02) per share in 2009. For the twelve months ended December 31, 2010, adjusted EBITDA decreased 10% to $1.8 million from $2.0 million in the same period a year ago. For the twelve months ended December 31, 2010, non-GAAP earnings per share was $0.07 compared to $0.10 in 2009.

Management Commentary

"DecisionPoint ended the year with record revenue of $56 million," said Nic Toms, CEO of DecisionPoint Systems. "We achieved these record results despite component shortages that impacted the sales of our higher-margin mobility solutions, especially during the first half of the year. As the backlog related to these shortages winds down and we fully integrate the recent acquisition of CMAC, we expect our revenue mix to continue to shift toward higher-margin mobility solutions and professional services and software.

"During 2010 we advanced our position as the leading enterprise mobility and RFID systems integrator. We added new marquee customers such as Tiffany's, J. Crew, The Vitamin Shoppe and Christie's among others, as well as deepened relationships with our existing blue chip customer base," added Mr. Toms. "We were proud to be named as a select member of the Motorola Solutions 2010 Pinnacle Club for outstanding sales and partner performance. We also announced products such as MobileCare Up and Running and Keep it Running Bundled Support Service Offerings and MobileArc for Couriers. Other highlights include the delivery of an in-store price management and inventory management solution to Orscheln Farms, and the delivery of an RFID inventory tracking system to American Apparel.

"In addition we took steps to streamline and improve our capital structure including paying off higher cost debt and expanding our credit availability. As a result, interest expense is expected to decline significantly in 2011. Our balance sheet will be further strengthened when we complete the pending reverse merger. Looking ahead, we expect increasing revenue contributions from our higher margin professional services and software group. The introduction of new products and services such as Grapevine Push-to-Talk, a cloud-based SaaS product that keeps workforces connected no matter how widely dispersed, will further shift our mix toward recurring revenues. With the momentum we have going into 2011, our goal to reach $100 million in revenue for fiscal 2012 remains within reach given the growing adoption of mobile solutions in the marketplace," concluded Mr. Toms.

Use of Non-GAAP Financial Information

Adjusted 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 adjusted 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 adjusted EBITDA differently. The Company presents adjusted 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 adjusted EBITDA in isolation or as a substitute for analysis of results as reported under GAAP. See "Reconciliation of GAAP Income (Loss) to adjusted EBITDA (Loss)" below for further information on this non-GAAP measure and reconciliation of GAAP Income (Loss) to adjusted EBITDA (Loss) for the periods indicated.

                                                    For the Years Ended
                                                       December 31,
                                                --------------------------
                                                    2010          2009
                                                ------------  ------------
Net income/(loss)                               $ (2,208,799) $    343,970

   Interest                                        2,273,192     1,078,140
   Taxes                                              78,794        71,176
   Depreciation                                       31,702        35,493
   Amortization of deferred costs                    896,918       234,067

                                                ------------  ------------

EBITDA - unadjusted                                1,071,807     1,762,846

Adjustments:
   Employee stock-based compensation                 183,082        50,961
   Non-employee stock-based compensation             428,227       154,500
   ESOP compensation expense                         118,538       112,625
   Loss (gain) on change in fair value of
    warrant liability                                  7,790       (55,929)

                                                ------------  ------------
EBITDA - adjusted                               $  1,809,444  $  2,025,003
                                                ============  ============

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, Inc. (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 wireless, mobility, and RFID technologies. For more information on DecisionPoint Systems visit www.decisionpt.com/news.php.



DECISIONPOINT SYSTEMS, INC.
Consolidated Statements of Operations

                                                  Year ended December 31,
                                                --------------------------
                                                    2010          2009
                                                ------------  -------------
Net sales                                       $ 56,244,198  $  48,309,168

Cost of sales                                     45,391,485     38,565,420
                                                ------------  -------------

Gross profit                                      10,852,713      9,743,748

Selling, general and administrative expense        9,610,381      7,969,630
                                                ------------  -------------

Operating income                                   1,242,332      1,774,118

Other expense:
  Interest expense                                 2,273,192      1,078,140
  Other expense, net                               1,099,145        280,832
                                                ------------  -------------
    Total other expense                            3,372,337      1,358,972
                                                ------------  -------------

Net (loss) income before income taxes             (2,130,005)       415,146

Provision for income taxes                            78,794         71,176

                                                ------------  -------------
Net (loss) income                               $ (2,208,799) $     343,970
                                                ============  =============

Net (loss) earnings  per share -
Basic                                           $      (0.09) $        0.02
                                                ============  =============
Diluted                                         $      (0.09) $        0.02
                                                ============  =============

Weighted average shares outstanding -
Basic                                             25,041,304     14,353,837
                                                ============  =============
Diluted                                           25,041,304     19,564,203
                                                ============  =============




DECISIONPOINT SYSTEMS, INC.
Consolidated Balance Sheets
                                                       December 31,
                                                --------------------------
                                                    2010          2009
                                                ------------  ------------
ASSETS
Current assets
  Cash and cash equivalents                     $    315,169  $    140,740
  Accounts receivable, net                        12,575,597     8,877,527
  Inventory, net                                     898,465     1,247,944
  Deferred costs                                   4,977,505     4,301,727
  Deferred tax assets                                 55,000       385,000
  Prepaid expenses and other current assets          457,863        90,531
                                                ------------  ------------
Total current assets                              19,279,599    15,043,469

Property and equipment, net                          100,070        52,721
Other assets, net                                    173,465       377,280
Intangible assets                                  2,729,000             -
Goodwill                                           5,508,864     4,860,663
                                                ------------  ------------
         Total assets                           $ 27,790,998  $ 20,334,133
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Accounts payable                              $ 10,364,368  $  7,363,059
  Accrued expenses and other current
   liabilities                                     5,347,555     3,523,725
  Line of credit                                   4,364,221     2,575,326
  Current portion of debt                          1,000,000       731,793
  Warrant liability                                        -        72,710
  Unearned revenue                                 7,564,874     7,611,241
  Holding share liability                             20,505       249,986
                                                ------------  ------------
         Total current liabilities                28,661,523    22,127,840

Long-term liabilities
  Debt, net of current portion                     1,940,000     1,751,898
  Interest payable                                    60,000             -
                                                ------------  ------------
         Total liabilities                        30,661,523    23,879,738

Commitments and contingencies

STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 10,000,000
 shares authorized, 10,000 designated Series A
 Cumulative Convertible Preferred, and 10,000
 designated Series B Cumulative Convertible
 Preferred, 1,355 and 975 shares issued and
 outstanding, respectively, liquidation value of
 $1,375,000 and $975,000, respectively                     1             1
Common stock, $0.001 par value, 100,000,000
 shares authorized, 36,749,286 and 28,700,000
 shares issued and outstanding, respectively          36,749        28,700
    Additional paid-in capital                     9,562,326     6,805,034
    Accumulated deficit                          (11,446,038)   (9,237,239)
    Unearned ESOP shares                          (1,023,563)   (1,142,101)
                                                ------------  ------------
         Total stockholders' deficit              (2,870,525)   (3,545,605)

                                                ------------  ------------
Total liabilities and stockholders' deficit     $ 27,790,998  $ 20,334,133
                                                ============  ============

Contact Information

  • Company Contact:
    Donald W. Rowley
    Chief Financial Officer
    DecisionPoint Systems, Inc.
    Tel 949-465-0065 x105

    Investor Relations Contacts:
    Stephanie Prince/Jody Burfening
    Lippert/Heilshorn & Associates
    T: 212-838-3777
    sprince@lhai.com