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DATE
Tuesday, April 14, 2026 at 11 a.m. ET
CALL PARTICIPANTS
- Chairman and Chief Executive Officer — Charles M. Piluso
- Chief Financial Officer and Executive Vice President — Christos H. Panagiotakos
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TAKEAWAYS
- Cloud First Sale -- The Cloud First subsidiary was sold for $40 million, producing $31.6 million in net proceeds and a $20.1 million gain.
- Capital Return -- $29.3 million was returned to shareholders via a tender offer at $5.20 per share, reducing the outstanding share count by approximately 72%.
- Cash Balance -- Cash, cash equivalents, and marketable securities totaled approximately $41 million at year-end, up from $12.3 million at year-end 2024.
- Debt Status -- The company entered 2026 debt-free with over $10 million in capital and a simplified operating structure.
- Net Income -- Net income grew to $19.2 million, compared to $523 thousand in 2024, driven by nonrecurring items including the Cloud First sale.
- Nexus Operating Results -- Nexus generated $1.4 million in revenue, up 13.4%; gross margin improved to 44.4%; no customer accounted for more than 10% of revenue.
- Share Count -- Approximately 2.1 million shares remain outstanding after the tender offer.
- Expense Trends -- Selling, general, and administrative expenses rose 9.1% to $4.2 million, primarily from a 101.6% increase in non-cash stock-based compensation; professional fees declined by 22.8%.
- Burn Rate Outlook -- Annual cash burn rate is estimated at approximately $2 million for 2026.
- Acquisition Strategy -- Management is actively evaluating AI-enabled vertical SaaS, GPU infrastructure, cybersecurity/SOC, and MSP/VoIP opportunities, with a focus on disciplined capital deployment and accretive transactions.
- Valuation Environment -- CEO Piluso said, "valuations are all over the place. Some are hoping for $700 million; I was literally sitting next to someone coding on a laptop who was talking about that kind of valuation."
- Future Expense Reductions -- Management expects further expense decreases as the Cloud First transition completes and legal/accounting costs subside.
SUMMARY
Data Storage Corporation (DTST 4.26%) concluded a major corporate transformation highlighted by the monetization of its Cloud First business, significant capital return to shareholders, and the positioning of Nexus as its core operating asset. Management revealed an aggressive mandate to use its strengthened balance sheet for disciplined acquisitions in high-tailwind technology sectors, explicitly targeting recurring revenue businesses in AI, GPU, and cybersecurity verticals. Surveying 21 potential targets since September, the company signaled both a cautious approach to inflated valuations and imminent updates on deal progress. With concentration risk in Nexus reduced and cost reductions on the horizon, the company is now positioned to focus on operational earnings quality and scalable growth initiatives.
- CEO Piluso said, "We have approximately 2.1 million shares outstanding, give or take a bit more, and we want to be careful that if we raise capital, it is tied to an increase in value."
- Management highlighted a "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."
- Cost structure changes reflect "a significant number of employees are no longer working for us and instead are working for the buyer of the Cloud First business."
- Management emphasized a focus on "opportunities that offer compelling risk-adjusted returns and clear avenues for long-term value creation."
INDUSTRY GLOSSARY
- DRaaS: Disaster Recovery-as-a-Service; outsourced management and protection of data to ensure business continuity in the event of disruptions.
- SOC: Security Operations Center; a centralized team or facility responsible for monitoring and managing cybersecurity events.
- MSP: Managed Service Provider; a company that remotely manages a customer's IT infrastructure and end-user systems.
- VoIP: Voice over Internet Protocol; technology enabling voice communications over internet connections instead of traditional phone networks.
- Vertical SaaS: Software-as-a-Service solutions tailored for specific industries or vertical markets.
Full Conference Call Transcript
Charles M. Piluso: Thank you, Alexandra. 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, but 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 a 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 it reflects a core principle of ours: capital belongs to the shareholders. 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 a simplified operating structure. From a financial standpoint, these actions resulted in record performance. We reported net income of $19.2 million for the year, compared to $500 thousand 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 nonrecurring events. It does not yet represent the earnings power of Data Storage Corporation, and we are being intentional and transparent about that.
What it does demonstrate is our ability to create value, to 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 is performing. In 2025, Nexus generated $1.4 million in revenue, representing 13.4% year-over-year growth. Gross margins expanded to 44.4%. Importantly, we improved the quality of the business by reducing customer concentration, with no single customer accounting for more than 10% of revenue. Nexus is a lean, subscription-based, recurring revenue business with improving margins and real operating leverage.
We have deliberately positioned Data Storage Corporation 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 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 have already identified and are actively pursuing a number of strategic opportunities within an emerging GPU infrastructure segment in enterprise technology.
These areas are being shaped by strong tailwinds, including the rapid adoption of AI-driven workloads, ongoing data architecture modernization, and increasing demand for scalable, resilient digital infrastructure. Our focus remains on large, evolving markets where demand visibility is high and where we believe we can deploy capital in a disciplined, accretive manner, with an emphasis on opportunities that offer 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 develop. We expect to provide meaningful updates in the near term as these opportunities evolve.
Importantly, we are only pursuing opportunities where we understand the customer behavior and business deeply and where we see a clear and credible path to value creation. At the same time, we are focused internally on improving efficiency. As we move through 2026, expect corporate overhead to decline meaningfully as the Cloud First divestiture is completed. Our objective is to ensure that the earning power of this company is driven by operations, not one-time events. When you step back and look at Data Storage Corporation today, what you see is a company that has undergone a complete transformation. We have moved from a traditional cloud-based managed service model to a streamlined, well-capitalized platform with flexibility to pursue higher-growth, higher-margin opportunities.
We have demonstrated that we can build value and that we are willing to realize it when the timing is right. Now we are focused on the next phase: building a company defined by sustainable growth, disciplined execution, and long-term shareholder returns. 2025 was about realizing value. 2026 and beyond will be about seeking opportunities, bringing together synergistic companies, and creating shareholder value. I will now turn the call over to Christos H. Panagiotakos for a review of our financial results. Christos?
Christos H. Panagiotakos: Thank you, Charles. Good morning, everyone. As discussed on our last call, on 09/11/2025, we closed the sale of our Cloud First business for $40 million. As a result of the transaction and in accordance with auditing and reporting standards, our ongoing financial reporting now reflects only our continuing operations, specifically our Nexus subsidiary. Sales from continuing operations were $1.4 million for the year ended 12/31/2025, an increase of $164 thousand, or 13.4%, compared to $1.2 million in the prior year. The increase was primarily attributable to continued growth in our Nexus voice and data solutions business, driven by the addition of new customers and increased spending from existing customers.
Revenue growth during the period reflects continued demand for our voice and data connectivity solutions and expansion of services within our existing customer base. Selling, general, and administrative expenses for the year ended 12/31/2025 increased $348 thousand, or 9.1%, to $4.2 million from $3.8 million for the year ended 12/31/2024. The increase was primarily driven by a $507 thousand, or 101.6%, increase in non-cash stock-based compensation, primarily related to the accelerated vesting of equity awards in connection with the sale of the Cloud First business, which triggered a fundamental transaction clause in equity award agreements with employees. Salaries and directors’ fees increased $166 thousand, or 9.8%, attributable to annual merit-based salary adjustments and bonuses.
These increases were significantly offset by a $301 thousand, or 22.8%, decrease in professional fees, primarily related to lower legal and consulting expenses in the current year. We expect expenses to decrease for the year ended 12/31/2026 as compared to the year ended 12/31/2025, since a significant number of employees are no longer working for us and instead are working for the buyer of the Cloud First business, and we anticipate having lower legal and accounting costs. Net income attributable to common shareholders for the year ended 12/31/2025 was $19.2 million, compared to net income of $523 thousand for the year ended 12/31/2024.
The significant increase in net income for the 2025 fiscal year was primarily driven by the gain recognized on discontinued operations. We ended the quarter with cash, cash equivalents, and marketable securities of approximately $41 million at 12/31/2025, compared to $12.3 million at 12/31/2024. Thank you. I will now turn the call back to Charles.
Charles M. Piluso: Thanks, Christos. Before we open the call to questions, I want to reinforce that we believe we are entering an exciting new phase. We attended the NVIDIA conference a few weeks ago, which reinforced the magnitude of the opportunity emerging across both technology and business. The pace of innovation and the scale of investment underway are substantial, signaling a transformational shift across industries. At the same time, it sharpened our approach. Rather than competing directly in capital-intensive areas such as the billions being deployed into GPUs and core infrastructure, we are focused on disciplined participation.
We have identified several key areas to pursue, and we are advancing them deliberately, allocating capital thoughtfully, and concentrating on opportunities where we see clear differentiation and the potential to drive meaningful long-term value. Now I would like to open it up for questions. Operator?
Operator: We will now open the call for questions. Our first question comes from the line of Matthew Evan Galinko with Maxim Group. Please proceed with your question.
Matthew Evan Galinko: Hey, good morning. Thanks for taking my questions, and congratulations on getting to this point in the transition. Maybe can you give us some sense of what valuations look like as you look toward some of the AI and HPC opportunities? Is it within reason, or is it overheated at all?
Charles M. Piluso: Thanks, Matthew, and it is good to hear your voice. What is going on—especially after attending that conference—is that this is like nuclear energy. Some people are frightened, but most people are very excited. On the equipment side, it is tangible; you can put your hands on it. On the software side, everyone says they are “training” their platforms and software. In terms of valuations, you hear things like teams not even at a beta stage hoping to get $700 million while pre-revenue. For the most part, NVIDIA has paid for everyone at that conference—it was huge in San Jose and amazing.
After spending 25 years in disaster recovery and business continuity, I went there with Matt, one of our board members, and we think we have an idea for a potential opportunity in an area we know pretty well. We are still testing the waters and have a lot of research to do over time, but there are parts you can play in so you do not get crushed competing with someone spending $50 billion on GPUs. So there are opportunities, based on our past experience, that we see. Valuations are all over the place.
Since September when we closed, we have spoken to 21 companies we either have passed on or are evaluating—everything from SaaS AI offerings to MSPs to VoIP companies. On the MSP side, for the most part, nonrecurring revenue—unless it is software renewals—is trading at about 1.0x revenue, though some are trying to get 2.0x depending on size. On some of the AI stuff, I would say 95% of everyone we spoke to—at the conference and elsewhere—seems to be waiting to go buy their 120-foot yacht. It is not there yet. The excitement is incredible. We potentially have ideas on where we can play that separate us a little bit. But to your question, valuations are all over the place.
Some are hoping for $700 million; I was literally sitting next to someone coding on a laptop who was talking about that kind of valuation. Everybody is trying to create water. It is an incredible moment.
Matthew Evan Galinko: I appreciate the color. Maybe does having cash in the bank as you look to deploy get counterparties more interested? Is that helping move things along in some of these conversations?
Charles M. Piluso: Two of the things we are looking at—well, three things we always laid out. There is the reverse merger path that could create great shareholder value. We are not rushing to that, but people are approaching us, and we ask, why can they build something with a $100 million market cap or more and we cannot? We are not focused on that right now, but we will look at opportunities as they approach us. There is also what I will call “medium tech”—the stuff that is not on fire, where you could get burned. There are some really good MSPs out there, and some have developed AI software.
We have been talking to them about separating the “meat and potatoes” MSP from the early-stage software. We could look at doing something there, and on the software side—where everyone is still training and working on it—we might structure a joint venture or an option where we have the opportunity to buy it if it is actually deployed. You need to get creative because most MSPs and VoIP companies are trying to develop software to roll out to their existing customer base. I think that is good, but I do not think we have to give any value yet to that software. It might be a good avenue because organic growth is tough, and there could be meaningful cross-selling.
So that is some of what we are looking at: go after medium tech while still evaluating an opportunity we feel could be good in the AI infrastructure/GPU space.
Matthew Evan Galinko: Got it. Thank you. And then last one for the existing business: is it possible to give us a sense of what the quarterly run rate or burn would look like operating without a transaction currently? And generally, what are your expectations for Nexus over the next year operating independently?
Charles M. Piluso: Sure. I will handle Nexus, and I will turn burn over to Christos.
Christos H. Panagiotakos: I think the burn rate for 2026 will be approximately $2 million for the year, being a public company.
Charles M. Piluso: We think we can reduce some of that, Matthew, in certain areas. Legal fees were pretty high, and we are still incurring some as we go through items, so consider that a range and an estimate. On Nexus, they are growing. We own 80% of Nexus. John Camilla runs it and does a great job. He has a small staff and is adding some folks. We need to allocate a little more money—not much—to improve inbound leads. He does a great job with agents, shows, and associations. We need to spend a bit to improve SEO. He is profitable and turned a profit. We have not really allocated a lot to growth historically.
We have funded as needed but have not said, “Here is $100,000, get a digital marketing agency, get the lead flow going.” We are trying to be disciplined with the cash for the first acquisition. We have approximately 2.1 million shares outstanding, give or take a bit more, and we want to be careful that if we raise capital, it is tied to an increase in value.
Matthew Evan Galinko: Got it. Very good. I appreciate the color and look forward to seeing what you do.
Charles M. Piluso: Thanks very much, Matthew. Thanks for spending the time. Hope to see you soon.
Operator: Thank you. There are no further questions at this time. I will now turn the floor back to Charles M. Piluso for final comments.
Charles M. Piluso: Thank you. As we enter this next phase from a position of real strength—with capital on the balance sheet, a clean and simplified structure, and a clear strategic mandate—that combination gives us the ability to be selective, disciplined, and focused only on opportunities that we believe can create meaningful, long-term value for our shareholders. At the same time, we remain grounded in execution. Our priorities are clear: continue improving the performance of Nexus and deploy capital thoughtfully into areas that enhance our scale, expand our margins, and strengthen the overall quality of our earnings. We are building with intention, and we are building for durability. We appreciate the trust and support of our shareholders.
We look forward to updating you on our progress as we move through 2026 and execute on the opportunities ahead.
Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
