Record Revenue Surging Margins at DecisionPoint Systems
By Ken Nagy, CFA
On November 14, 2012, DecisionPoint Systems, Inc. (DPSI), the enterprise mobility and RFID systems integrator, reported financial results for its fiscal 2012 third quarter and nine months, ended September 30, 2012.
The solid third quarter performance resulted in record revenue, with sales jumping $2.120 million or nearly 13 percent year over year to $18.567 million from $16.446 million for the three months ended September 30, 2011.
Sequentially, third quarter revenues improved by 4.5 percent over the $17.767 million from the second quarter fiscal 2011. The upturn in revenues for the three months ended March 31, 2012 was driven by increased field mobility solution sales and increased professional services revenue.
Gross margin surged 250 basis points year over year from 20.9 percent in the third quarter of 2011, up to 23.4 percent for the three months ended September 30, 2012. Sequentially, third quarter gross margin improved 210 basis points from 21.3 percent for the three months ended June 30, 2012.
The increase in gross margins was primarily a result of the higher gross margin from professional services revenue and improved utilization of professional services resources.
It should be noted that the higher margin professional software and services revenue has now grown to over 35% of total revenue. Additionally, the Company has continued to emphasize cost control and improved efficiencies throughout its operations.
Selling, general and administrative expenses in the third quarter increased year over year by $1.676 million and sequentially by $102,000 to $4.951 million. The year over year increase in selling, general and administrative expenses was primarily the result of 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.
Adjusted EBITDA for the third quarter of 2012 improved year over year by $300,000 to $1.1 million compared to a $0.8 million for the same quarter of fiscal 2011.
Net loss attributable to common shareholders was $1.262 million for the fiscal 2012 third quarter compared to net income attributable to common shareholders of $54,489 for three months ended September 30, 2011. Based on a weighted average number of diluted shares of 8.182 million, diluted net loss per share resulted in a net loss of $0.15 per share for the third quarter of fiscal 2012. This compared to diluted net income per share of $0.01 based on a weighted average number of diluted shares of 7.417 million during the three months ended September 30, 2011.
The Company ended the quarter with $392,424 in cash and a working capital deficit of $9.220 million. This compares to $498,357 in cash and a working capital deficit of $6.005 million as of June 30, 2011. Still, cash flow from operating activities for the first nine months of 2012 was $0.7 million compared to $(1.4) million for the same period in 2011.
Recently DecisionPoint made three acquisitions (CMAC, Apex and Illume Mobile) which have broadened the Company’s software products and professional services capabilities, opened new markets and deepened relationships with customers.
Furthermore, the Company’s record revenue and gross margin expansion in the third quarter reflects the growing success of the strategic shift that DecisionPoint has made over the past two years to develop its field mobility solutions and professional services and software divisions.
Likewise, management stated that it continues to see its field mobility solutions gaining traction with wireless carrier partners and customers as well as the continued expansion of its pipeline of opportunities in its retail and warehouse and distribution segments.
As a result of this positive momentum in its field mobility and retail systems divisions, management believes the Company remains well positioned for continued revenue and adjusted EBITDA growth.
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