SOURCE: DecisionPoint Systems, Inc.

DecisionPoint Systems, Inc.

November 14, 2012 08:00 ET

DecisionPoint Systems Reports Record Third Quarter Revenue of $18.6 Million

Gross Margin Expands to Record 23.4%, 250 Basis Point Improvement Year-Over-Year

IRVINE, CA--(Marketwire - Nov 14, 2012) - DecisionPoint Systems, Inc. (OTCBB: DPSI), a leading enterprise mobility and RFID systems solutions provider, today reported its financial results for the third quarter ended September 30, 2012.

Highlights of Quarter Ended September 30, 2012

  • Revenue increased to $18.6 million, 12.9% above the $16.4 million for the quarter ended September 30, 2011.
  • Gross margin expanded to 23.4% from 20.9% in the third quarter of 2011, a 250 basis point improvement.
  • Adjusted EBITDA(1) for the third quarter of 2012 was $1.1 million compared to $0.8 million for the quarter ended September 30, 2011.
  • Operating loss was $0.6 million, including $0.5 million of acquisition related expenses, compared to operating income of $0.2 million for the quarter ended September 30, 2011.
  • Net loss attributable to common shareholders was $1.3 million, or $(0.15) per share, after deducting preferred dividends of approximately $249,000, compared to a net income attributable to common shareholders of approximately $55,000, or $0.01 per share, after deducting preferred dividends of approximately $214,000 for the third quarter of 2011.
  • Cash flow from operating activities for the nine months ended September 30, 2012 was $0.7 million compared to $(1.4) million for nine months ended September 30, 2011. 
  • The Company completed the acquisition of Illume Mobile Software, a division of MacroSolve, Inc., based in Tulsa, OK, for approximately $1.0 million in cash and stock. Illume Mobile has patent protected domain expertise in developing Enterprise mobile software for Android and Apple (iOS) mobile devices. Illume's operating results are included in the Company's results of operations beginning August 1, 2012.

Management Commentary
"Record revenue and gross margin expansion in the third quarter reflects the growing success of the strategic shift we have made over the past two years to develop our field mobility solutions and professional services and software divisions," said Nicholas Toms, CEO of DecisionPoint. "The three acquisitions that we have completed during that time -- CMAC, Apex and Illume Mobile -- have broadened our software products and professional services capabilities, opened new markets and deepened our relationships with our customers, including our carrier partners. We now offer the full range of mobile solutions to meet the requirements of any enterprise mobility strategy. In addition, higher margin professional software and services revenue has grown to over 35% of total revenue, leading to the improved corporate gross margins.

"An increasingly mobile workforce continues to drive demand for our field mobility solutions. The bundled solutions for enterprise and small business applications that we market together with our wireless carrier partners, Verizon, Sprint and T-Mobile, are gaining traction, adding to the installed user base and increasing recurring revenue to the Company," added Mr. Toms. "And as the retail industry embarks on an overdue technology upgrade of its outdated systems, it is creating opportunities for our tablet-based assisted shopping solution suite for in-store applications that increases productivity and reduces costs. Excluding one-time costs related to the two acquisitions that we completed earlier this year and other restructuring and one-time costs, our third quarter and year to date adjusted EBITDA was $1.1 million and $2.4 million, respectively. As we execute our strategy to build the capabilities of our Professional Services and Software Group and with positive momentum in our field mobility and retail systems divisions, we remain well positioned for continued revenue and adjusted EBITDA growth."

Third Quarter 2012 Results
Revenue was $18.6 million, compared to $16.4 million for quarter ended September 30, 2011 and $17.8 million for the quarter ended June 30, 2012. The 12.9% year-over-year increase was primarily due to increased field mobility solution sales and increased professional services revenue.

Gross profit was $4.3 million, compared to $3.4 million for quarter ended September 30, 2011 and $3.8 million for the second quarter of 2012. Gross profit margin was 23.4%, compared to 20.9% for the same period a year ago and 21.3% for the second quarter of 2012. The increases are due to the higher gross margin from professional services revenue and improved utilization of professional services resources. Additionally, the Company has continued to emphasize cost control and improved efficiencies throughout its operations.

Selling, general and administrative expenses were $5.0 million, compared to $3.3 million for the same period of 2011, and $4.8 million for the second quarter of 2012. The year-over-year increase was primarily due to increased personnel and operating expenses relating to the Illume and Apex acquisitions of $0.6 million as well as Illume and Apex acquisition related costs of $0.5 million.

The operating loss was $0.6 million, compared to operating income of $0.2 million for the quarter ended September 30, 2011, and an operating loss of $1.1 million in the second quarter of 2012.

Net loss attributable to common shareholders was approximately $1.3 million, or $(0.15) per share, after deducting preferred dividends of approximately $249,000, compared to net income attributable to common shareholders of approximately $55,000, or $0.01 per share, after deducting preferred dividends of approximately $214,000 in the quarter ended September 30, 2011. Net loss was approximately $1.5 million or $(0.20) per share, after deducting preferred dividends of approximately $238,000 in the second quarter of 2012.

Nine Month 2012 Year to Date Results
Revenue for the nine months ended September 30, 2012 was $54.1 million, compared to $42.5 million in the year ago period, an increase of 27.5%. Gross profit was $11.9 million for the nine months ended September 30, 2012, compared to $8.4 million for the nine months ended September 30, 2011. The gross profit margin was 21.9%, compared to 19.8% in the same period a year ago. Selling, general and administrative expenses were $13.6 million for the nine months ended September 30, 2012, compared to $10.3 million for the nine months ended September 30, 2011. Net loss attributable to common shareholders was approximately $3.2 million, or $(0.42) per share, after deducting preferred dividends of approximately $710,000, compared to a net loss attributable to common shareholders of approximately $5.5 million, or $(1.00) per share, after deducting preferred dividends of approximately $268,000 in the same period a year ago. Included in the net loss for the first nine months of 2011 was a one-time, non-cash expense for debt extinguishment of $2.7 million.

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: DPSI) delivers improved productivity and operational advantages to its clients by helping them move their business decision points closer to their customers. We 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.

Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, namely earnings before interest, taxes, depreciation and amortization (EBITDA). The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. 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:

1 See schedule attached and description of non-GAAP financial measures: Adjusted EBITDA

           
           
    Three Months Ended September 30,   Nine Months Ended September 30,  
EBITDA Calculation   2012     2011   2012     2011  
                               
Net (loss) income   $ (1,014,176 )   $ 268,387   $ (2,534,965 )   $ (5,233,377 )
Depreciation & amortization     574,567       137,573     991,939       411,248  
Interest expense     349,941       230,982     698,158       1,003,597  
Income taxes     63,690       13,450     131,653       21,173  
                               
EBITDA   $ (25,978 )   $ 650,392   $ (713,215 )   $ (3,797,359 )
                               
One time cash transaction expenses in connection with the acquisition of Apex     380,000       -     1,943,000       -  
One time cash expenses in connection with the acquisition and integration of Illume Mobile     363,000       -     363,000       -  
Stock-based and ESOP-based compensation expense     44,000       140,360     489,457       502,058  
Transition-related costs     317,000       -     317,000       -  
Loss on debt extinguishment     -       -     -       2,268,859  
                               
Adjusted EBITDA   $ 1,078,022     $ 790,752   $ 2,399,242     $ (1,026,442 )
                               
Adjusted EBITDA per share   $ 0.13     $ 0.11   $ 0.31     $ (0.19 )
                               
Weighted average shares outstanding - Basic     8,182,103       7,320,328     7,697,635       5,493,530  
                               
                               
   
   
DECISIONPOINT SYSTEMS, INC.  
Condensed Consolidated Balance Sheets  
   
    September 30,     December 31,  
    2012     2011  
ASSETS   (unaudited)        
Current assets                
  Cash   $ 392,424     $ 365,814  
  Accounts receivable, net     10,675,484       13,916,787  
  Other receivable     -       1,476,285  
  Due from related party     357,326       -  
  Inventory, net     897,401       705,757  
  Deferred costs     3,602,564       3,468,583  
  Prepaid expenses and other current assets     302,071       408,413  
    Total current assets     16,227,270       20,341,639  
                 
  Property and equipment, net     160,685       98,934  
  Intangible assets, net     6,626,416       2,214,000  
  Goodwill     8,616,767       5,538,466  
  Deferred costs, net of current portion     2,249,960       1,800,320  
  Other assets, net     344,323       175,329  
    Total assets   $ 34,225,421     $ 30,168,688  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
  Accounts payable   $ 8,502,486     $ 8,947,133  
  Accrued expenses and other current liabilities     2,704,787       2,504,870  
  Lines of credit     4,742,212       4,024,141  
  Current portion of debt     1,847,675       1,000,000  
  Due to related parties     80,721       871,508  
  Accrued earn out consideration     1,201,727       -  
  Unearned revenue     6,368,073       6,756,214  
    Total current liabilities     25,447,681       24,103,866  
                 
Long term liabilities                
  Unearned revenue, net of current portion     3,012,324       2,509,190  
  Debt, net of current portion and discount     3,452,031       970,160  
  Accrued earn out consideration     161,754       -  
  Deferred tax liabilities     1,290,621       18,000  
  Deferred rent     62,091       -  
  Interest payable     60,000       60,000  
    Total liabilities     33,486,502       27,661,216  
                 
Commitments and contingencies                
      -       -  
STOCKHOLDERS' EQUITY                
  Cumulative convertible preferred stock, $0.001 par value, 10,000,000 sharesauthorized, 1,816,289 shares issued and outstanding, includingcumulative and imputed preferred dividends of $696,880 and $435,563, andwith a liquidation preference of $11,109,994 and $10,652,275, respectively    


6,580,949
     


6,319,629
 
  Common stock, $0.001 par value, 100,000,000 shares authorized,9,125,075 issued and 8,971,192 outstanding as of September 30, 2012,and 8,182,791 issued and 8,028,908 outstanding as of December 31, 2011    

9,125
     

8,183
 
  Additional paid-in capital     15,601,481       14,513,918  
  Other comprehensive income     27,798       -  
  Treasury stock, 153,883 shares of common stock     (204,664 )     (204,664 )
  Accumulated deficit     (20,475,451 )     (17,230,792 )
  Unearned ESOP shares     (800,319 )     (898,802 )
    Total stockholders' equity     738,919       2,507,472  
      Total liabilities and stockholders' equity   $ 34,225,421     $ 30,168,688  
                 
                 
   
   
DECISIONPOINT SYSTEMS, INC.  
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss  
   
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2012     2011     2012     2011  
                                 
                                 
Net sales   $ 18,567,021     $ 16,446,541     $ 54,144,051     $ 42,471,307  
                                 
Cost of sales     14,222,782       13,007,116       42,269,043       34,042,818  
                                 
Gross profit     4,344,239       3,439,425       11,875,008       8,428,489  
                                 
Selling, general and administrative expense     4,951,913       3,274,994       13,622,674       10,267,641  
                                 
Operating (loss) income     (607,674 )     164,431       (1,747,666 )     (1,839,152 )
                                 
Other expense:                                
  Interest expense     349,941       230,982       698,158       1,003,597  
  Loss on debt extinguishment     -       24,098       -       2,665,157  
  Other expense (income), net     (7,129 )     (372,486 )     (42,512 )     (295,702 )
    Total other expense     342,812       (117,406 )     655,646       3,373,052  
                                 
Net (loss) income before income taxes     (950,486 )     281,837       (2,403,312 )     (5,212,204 )
                                 
Provision for income taxes     63,690       13,450       131,653       21,173  
                                 
Net (loss) income     (1,014,176 )     268,387       (2,534,965 )     (5,233,377 )
                                 
Cumulative preferred stock dividends     (248,750 )     (213,898 )     (709,699 )     (268,098 )
                                 
Net (loss) income attributable to common shareholders   $ (1,262,926 )   $ 54,489     $ (3,244,664 )   $ (5,501,475 )
                                 
Net (loss) income per share -                                
  Basic   $ (0.15 )   $ 0.01     $ (0.42 )   $ (1.00 )
  Diluted   $ (0.15 )   $ 0.01     $ (0.42 )   $ (1.00 )
                                 
Weighted average shares outstanding -                                
  Basic     8,182,103       7,320,328       7,697,635       5,493,530  
  Diluted     8,182,103       7,417,555       7,697,635       5,493,530  
                                 
Comprehensive loss   $ (1,240,576 )   $ -     $ (3,216,866 )   $ -  
                                 
                                 

Contact Information

  • Company Contact:
    DecisionPoint Systems, Inc.
    Nicholas R. Toms
    Chief Executive Officer
    973-489-1425
    ntoms@decisionpt.com

    Investor Relations Contact:
    LHA
    Stephanie Prince/Jody Burfening
    212-838-3777
    sprince@lhai.com