DecisionPoint Systems, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 19, 2012

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8-K - DECISIONPOINT SYSTEMS, INC. FORM 8-K - DecisionPoint Systems, Inc.form8k.htm
Exhibit 99.1
 
 
Gaphic
 
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.
 
 
 
1
 
 
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.
 
 
2
 
 
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 http://ctt.marketwire.com/?release=820814&id=984163&type=1&url=http%3a%2f%2fwww.decisionpt.com%2fnews.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:
 
 
3
 
 
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  
   
 
 
 
4
 
 
 
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
  
                 
                 
 
 
 
 
5
 
 
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
)
  
$
-
  
                                 
 
 
 
6
 
 
 
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  
 
 
 
 
 
 
 
 
 
 
 
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