Data Storage Corporation (DTST) Q1 2024 Earnings Report, Transcript and Summary

Ladies and gentlemen, good morning, and welcome to the Data Storage Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alexandra Schilt, Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Data Storage Corporation's 2024 First Quarter Business Update Conference Call. On the call with us this morning are Charles Piluso, Chairman and Chief Executive Officer; and Chris Panagiotakos, Chief Financial Officer. The company issued a press release this morning containing its 2024 1st quarter financial results which is also posted on the company's website. If you have any questions after the call or would like any additional information about the Company, please contact Crescendo Communications at 212-671-100-20. Before we begin, I'd like to remind listeners that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended that are intended to be covered by the Safe Harbor created thereby. Forward looking statements are subject to risks and uncertainties that could cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by, or otherwise include the words, believes, expects, anticipates, intends, projects, estimates, plans or similar expressions or future or conditional verbs such as will, should, would, may, and could, are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can provide no assurance that such expectations will prove to be have been correct. Important factors that could cause actual results to differ materially from the company's expectations include, but are not limited to, the company's ability to benefit from the IBM cloud migration underway, the company's ability to position itself for future profitability and the company's ability to maintain its NASDAQ listing. These risks should not be construed as exhaustive and should be read together with other cautionary statements included in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2024. Annual reports on Form 10-K and current reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statements speak only as of the date on which it was initially made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events, changed circumstances or otherwise. I'd now like to turn the call over to Chuck Piluso. Please go ahead, Chuck.

Thank you, Ale, and good morning, everyone. We continue to execute on our business growth strategy, including securing new contracts with high-profile clients as well as streamlining our operations for efficiency. As a result of our efforts, we witnessed a 20% increase in revenue to $8.2 million for the first quarter of 2024. Additionally, our gross profit increased 42% with a gross profit margin increasing to 36% from 30%, demonstrating the success and scalability of our business model. Importantly, we achieved profitability for the first quarter and believe as we continue to execute our strategic initiatives, we will continue to grow revenue and increase profitability. We began the year by consolidating our flagship subsidiary into CloudFirst. This strategic decision combines the unique strengths and expertise of the respective business units, positioning us to optimize operations, leverage technical teams, realize greater efficiencies and improve internal resource allocation. As a result, we expect to enhance our cross-selling and upselling opportunities among our customer networks, ensuring continued delivery of outstanding value. With the experienced leadership teams and combined organizations of both CloudFirst and flagship, we are confident in our ability to establish a scalable organization primed for accelerated growth. Let's discuss these contracts, that occurred in the first quarter. First, we expanded our contract with an existing multi-national telecommunications company. This is a 6-figure contract. We are very proud of our successful collaboration with this multinational corporation, spanning over 12 years. Beyond our existing equipment and services, we developed a custom solution. We are now implementing an innovative disaster recovery backup solution boasting advanced technology. This solution enhances their storage capacity, while reducing tape usage and ensuring compliance across multiple countries. With installation moving smoothly, we eagerly anticipate the continued expansion of our collaboration with this organization. Furthermore, one of the largest insurance companies in the United States has chosen to migrate its data center to the Cloud for one of its divisions. Alongside the cloud migration, we will be delivering hosting and managed services, incorporating a comprehensive suite of advanced security solutions to uphold the utmost standards of data protection and compliance. Following an assessment of numerous providers, the insurance company opted for our services for its critical undertaking. The decision was influenced by our company's exceptional reliable data circuits and proven track record in delivering data management and cloud services to Fortune 500 companies and top-tier financial firms. We believe this contract underscores our ability to address the requirements of prominent enterprises and our commitment to advancing technology that fosters our clients' growth. Being selected illustrates the significance of our offering and the importance of robust security measures in today's digitally driven and risk-laden business landscape. We are confident that our solutions will deliver exceptional results and paved the way for expanding our solutions across additional divisions and geographies in the future. As I discussed in the last call, part of our strategy is international expansion. There is demand for our solutions globally, and we are proud to report the opening of CloudFirst London office in the second quarter of this year. This strategic expansion marked a significant milestone in our strategy to serve a global clientele and further CloudFirst presence in key global markets while increasing our international footprint and further supporting our current multinational clients. In addition, we recently moved to new and expanded headquarters in Melville, New York. We're excited about our new space, which we increased square footage by nearly 40% without a substantial rise in expenses. These new offices are designed to bolster our growth encompassing accounting, technical teams, sales and marketing initiatives. Further validation of the demand for our solutions is the continued increase in visitors to our website, which was over 43,000 in the first quarter of this year. We also continue to support our nurture list, which contains thousands of organizations interested in potential implementation and education of our services. We intend to take advantage of these avenues to secure new contracts and increase our footprint within the market. Currently, we serve more than 450 companies and strive to expand this impressive client base. Data center firms specializing in window-based infrastructure platforms rely on us for our expertise in the IBM platform. Partnering with these infrastructure firms offer a chance to broaden our distribution channels, leverage our talented staff and optimize our deployed assets. And before I turn this over to Chris for a review of our financials, I'd like to discuss our new Board members. First, Cliff Stein returned to our Board of Directors. Cliff is a seasoned entrepreneur, adept executive with over 30 years' experience in establishing and managing a thriving real estate advisory firm. His background as a skilled attorney further enriches his expertise. We are confident that Cliff's skillset will provide invaluable guidance to the company as we pursue growth, whether through organic means or strategic acquisitions. Having previously served on the Board and contributed to numerous strategic growth initiatives, we're excited about his renewed engagement. In addition, we appointed Nancy Stallone and Uwayne Mitchell. Nancy's impressive background in corporate finance, auditing, accounting will be instrumental as we pursue strategic growth initiatives, including international expansion and exploring potential acquisitions. Uwayne Mitchell's league efficiency, combined with his expertise in data privacy, cybersecurity and technology will greatly enhance our board and support our growth. We remain committed to upholding the highest standards of corporate governance and look forward to their contributions as we advance our business model. Overall, with continued execution of our strategic plan, we achieved profitability for the first quarter, secured new and expanded contracts, increased our penetration in the domestic market and actively expanded into international markets. We are also exploring potential acquisitions that would assist and support our growth and more importantly, complement and improve our current operations. We believe that our company has reached a pivotal moment. We are exceptionally well positioned to enter key international markets, leverage upselling and cross-selling potentials for our offerings and secure additional subscription-based contracts. These strategic initiatives set the stage for long-term profitability. At the same time, we've carefully managed our expenses and have preserved a strong balance sheet with over $11.9 million in cash and marketable securities. No long-term debt as of the end of the quarter, which provides us the flexibility to deploy capital efficiently and effectively to support our long-term growth and drive value to our shareholders. With that, I'd like to turn this over to Chris Panagiotakos, our CFO, to discuss our financials. Please go ahead, Chris.

Thank you, Chuck. Good morning, everyone. Total revenue for the 3 months ended March 31, 2024, was $8.2 million, an increase of 20% compared to $6.9 million for the 3 months ended March 31, 2023. The increase is primarily attributed to an increase in infrastructure and disaster recovery cloud services and equipment and software sales. Cost of sales for the 3 months ended March 31, 2024, was $5.3 million, an increase of 10%, compared to $4.8 million for the 3 months ended March 31, 2023. The increase of 10% was mostly related to the increase in infrastructure and disaster recovery, cloud services and equipment and software sales. Selling, general and administrative expenses for the 3 months ended March 31, 2024, were $2.8 million, an increase of approximately $620,000 or 29%, as compared to $2.1 million for the 3 months ended March 31, 2023. The increase was primarily due to an increase in advertising expense, commission expense, salaries and head count growth. Adjusted EBITDA for the 3 months ended March 31, 2024, was $680,000, compared to adjusted EBITDA of $336,000 for the same period last year. Net income attributable to common shareholders for the 3 months ended March 31, 2024, and was $357,000, compared to $50,000 for the 3 months ended March 31, 2023. We ended the year with cash and marketable securities of approximately $11.9 million at March 31, 2024, compared to $12.7 million at December 31, 2023. Thank you, I will now turn the call back to Chuck.

Thanks, Chris. I'd like to open it up for questions, if we have any.

[Operator Instructions] Our first question is from the line of Matthew Galinko with Maxim Group.

Congratulations on the strong first quarter. I guess, firstly, can you touch on maybe the pipeline of Fortune 500 customer opportunities and kind of scope expansion opportunities within your existing customer base?

Well, I can't segment the Fortune 500 companies that -- first of all, good morning Matt and thank you for the question. The -- I can't separate with Fortune 500, what's not within the base. But I can tell you that our pipeline today is around the total contract value for around $10.8 million, I believe. And if you average that out, you'd see that the 31 months or probably the average term when we look at the term, the nonrecurring on that is around $220,000 approximately. And I believe that the monthly amount that's sitting there is approximately $340,000. So it's a very solid pipeline for recurring. That's only recurring; we're not talking about nonrecurring. I always get confused with the nonrecurring, it's lumpy. They sometimes postpone it based on budgets or they're not ready yet. So that's just the recurring piece of it. In the past, we've always combined the nonrecurring with the recurring, but this is the focus on the recurring subscription-based stuff. We also have the work in process that's being installed as we speak. So we have numbers on that, along with our remaining contract value. But I think you're asking more about the pipeline, correct?

Correct. Yes.

Yes. I mean the work in process is also pretty good as well. That number will increase it because with work in process with not having to increase your technical teams and with subscription gross profit margins at 50%, it's a full contribution essentially to profit. So our work in process numbers are pretty good. I haven't given you that. I don't know if you're interested in that.

Yes. If you have it, I'd love to have it here.

Yes. It's approximately executed contracts that are being installed of approximately, I believe, $100,000 of which we'll see some of that in the second quarter, and we'll see some of that in the third quarter. And that's -- hopefully, the sooner it goes up, the more months of revenue we get and the more profit. But with a 50% margin, typically, and we don't believe we have to add technicians for that. So it's a nice contribution to profit.

And I wanted to maybe touch on one of the large deals you referenced this quarter. I think you mentioned you developed a custom disaster recovery solution, think you mentioned producing tape and maybe adherence to your multinational compliance. Did I understand the scope of that project correctly? And was that a lot of custom work? Or is there -- is that applicable that you could bring to other potential customers?

On the IBM systems according to the size of the client, if it's a very large client, so when we say basically that the marketplace for infrastructure to service on the IBM platform is $36 billion. And then we believe that 40% of that $36 billion will actually migrate over the next book, say, between 3 and 8 years. You're talking about $400 million in annual recurring revenue. So when we think about that other 60%, the very large companies, and we're saying, let's say, 50% because we believe that 10% will migrate off of the platform. When we take that 50%, they're very large. They are larger than any of the companies. So they have their own equipment, they have to buy the equipment. They have to buy tape libraries. They have to maintain software renewal and hardware maintenance, and that's deployed internationally. So when we look at these very large accounts, they could be using virtual tape libraries or actual tape libraries. And so with that, we need to develop custom systems to be able to support them and come up with unique ways of having them accelerate the recovery to have their file transfers moving faster into their systems. So they're mainly custom-type builds that we do when we get invited in on that 50% that we believe will continue to maintain their own equipment and we're there to support that. And that's why you'll see equipment sales and software renewal and hardware maintenance and it creates that lumpy situation for us. But we love it and what ends up happening is we support them with other types of managed services. So -- but it's a disaster recovery in storage application on these tape libraries. So that's -- you have to make that separation between the people that are going to migrate and the people that are so large, they have extremely large staff, it is -- that you're not going to get Deutsche Bank, Citibank, and those folks there, just bigger than anyone. But for the large customers that we support, we're there to sell them equipment, which we are an IBM high-level partner. And we have the expertise within our technical teams to support, sell and increase our revenue in those areas, but it's not recurring, typically other than the software renewal and hardware maintenance.

Sorry, last follow-up and I'll jump back in the queue. So for something like that, where you're working on a disaster recovery, but it's not recurring. How do you flow that through your the kind of line item buckets that you normally break out on the queue? Would that hit the disaster recovery and infrastructure line? Or would that hit the software and equipment line or still mix across both?

It's tricky on that. We maintain classes of each of the products that are sold. So when you look at subscription recurring revenue, it's typically annual recurring revenue which is software renewable, hardware maintenance, subscription services, disaster recovery and hosting. And then on the equipment and software line on the financial statements, that's where you'll see equipment and equipment that's sold with the software. We also keep that software equipment and software, anything that is software, that's annually recovering in the equipment and software chart of accounts. So it is bifurcated. It is in the financials and it is separated. But if you want to further break down, we were able to break down equipment and the different types as well as the software and whether that's new software or recurring annual recurring software. So we do break it down. But you would be looking at equipment and software as all those things that are onetime typically.

Our next question is from the line of Adam Waldo with Lismore Partners.

So I want to explore a few different topics, if we may, annual recurring revenue, new business development activities and then sort of what we think the ongoing incremental margin structures of the business will look like, now that you've consolidated CloudFirst and Flagship during the first quarter. On the ARR side, can you give us the dollar value of ARR as you exited the March quarter?

You have that, Chris?

I don't have it handy. We're going to have to get back to you on that.

Yes, just if I could. So in our annual recurring revenue where we have subscription-based business and then software renewal and hardware maintenance is typically in our annual recurring revenue. And we keep track of that from a forecasting point of view because it continues to add to the baseline for the next year. I think, Chris, it was somewhere between $17 million and $18 million, something like that?

$18 million.

You're right about -- What you were targeting. Okay. No, that's great. And then on the new business development side, obviously, the number of inbound inquiries continues to mushroom through your websites. What are you all doing from a sort of corporate business development standpoint to try to increase the level of those indications of interest into entering the top of your sales funnel with an actual RFP? Are there new initiatives as you redesigned the websites or new initiatives you're taking on the business development side? So give us a sense for that as to what you'll be pursuing that you are -- to try to improve conversions there into RFPs?

Sure. It's very, very challenging. What happens is, first, to make the overall what goes on, I'll use the term organizational behavior is that the folks that are watching this equipment and maintaining this equipment are aging out. An investment has been made in the applications that are running. So you can graduate from school, from computer, whatever software, whatever it is, and you can then go work and work on these applications. But managing the equipment, these folks are aging out. So as that happens and retirement happens or whatever after [indiscernible] -- whatever -- in the case of people dying, the CFOs, the CIOs, they are concerned that these applications have to continue to run. So with that, this migration is taking place. They've already moved maybe a lot of their intel type stuff over to Amazon, Google and the whole cast of thousands that are in that place. And so now what are they going to do with this -- with the IBM equipment? So long story long, probably more than 10 years ago, I would say, more than 10 years ago, I was calling with the sales rep on the international banks in Manhattan. These international banks all have IBM systems. Yesterday, I'm in my office, I'm listening to one of our business development team, Jill, she's excellent. She's been with us for a while, and I hear her speaking to this international bank. And what ends up happening, she go -- she comes in and says, "Chuck you're bringing me luck. Look at this lead. I just told you, I didn't get a lead in a little while and all of a sudden, you're here, you're bringing luck." Then she goes into salesforce and finds out my name is there because I had visited with that international bank 12 years ago. So this migration is underway. They knew us. They knew us because there was a visit there. So when we talk about business development. Hal Schwartz is the President of CloudFirst, outstanding job on search engine optimization, working with our marketing companies, Google AdWords and to get the lead flow going in. And what ends up happening, a phone call happens, conversations is happening, you meet someone on the show and it goes into our nurture list. And then we have folks that call this nurture list to see if they're interested in the proposal, see which stage they're at. It's very hard to say we're going to go hire 30 people, we're going to go spend all this money on a direct sales force and frankly, believe it might be a failure. I think you can have a very strong team, but you can't build what was existing 30 years ago with direct sales force. So a lot has to depend on inbound leads networking trade shows, folks that you've dealt with or reached out to over 15 years. And now that they've moved the platforms off on the Intel side, many of them they're calling on us, and there are only a few competitors, and we are, frankly, one of the leaders. We're not -- we do have Intel infrastructure in all of our data centers. We have both -- but when we advertise, when Hal has this programs going on, it's always geared towards the niche platform that we have, which is the IBM platform. But we do both. So when we get one for IBM, and they haven't migrated yet their intel systems, we get that, too. But -- so business development has to do a lot with inbound marketing programs. I know it was a long answer, Adam, but there's a lot to it. But it gives you the idea that you need to be around for a while. You need to be credible. You have to have these inbound programs. So you're high in the rankings, which we are. And then you have to have a very strong team that's backed by a strong -- business development team that's backed by a strong technical team to be able to bring the business in. And we're pretty efficient with it.

Very helpful. And then as we go forward, obviously, having consolidated CloudFirst and Flagship now, what do we think the sort of steady state approximate range on services gross margin is going to be? And what do you think the incremental or variable EBITDA margin on new revenue looks like as you consolidated those operations?

Well, we're not really reporting telling anybody what our nonrecurring proposals are outstanding because some of them are very large and some of them are with existing customers. So when we say, we have a $10 million proposal outstanding for existing clients. We don't know what quarter or what year might it even happen in, although planning goes on. So it concerns us. So when you do see the margins at 38% or a 35% or under that 50%, you know that it's equipment-type sales that are happening or a renewal of a large software renewal or hardware maintenance. So it's very, very hard to predict. So we have to really separate it into 2 looks. Flagship in the past was primarily managed services, which also CloudFirst used to do much more of that. Now it's a slightly different business and selling equipment to a large group of clients. That's kind of slow to a degree because we try to move them over. So what ends up happening is if you have someone that wants to buy $2 million in equipment, the business development people are in there saying, -- why are you buying the equipment? We gave you a proposal for that, but let's get you on hosting. You want to experience and what it's like will put you up on a trial, a proof-of-concept and you can see. So what happens is you lose that equipment sale onetime, lumpy and you move them over to a -- it could be a 60-month subscription, hosting and disaster recovery. So it's very hard to predict what the margins would be. But when you do see a margin greater than 45%, you know that recurring revenue has been high for that quarter. We'd like to maintain 80% of subscription revenue and 20% onetime equipment professional services, things like that. So we like 80-20. But when you start seeing something that 60-40, a large account came in, margins are going to be lighter, but we put more cash on the balance sheet. And we still do get from that every year software renewal and hardware maintenance on that equipment. So there is a recurring piece to that.

Okay. Last one, if you'll permit me. You opened the new London office in the quarter. How does that play into your previous initiatives on the value-added reseller or distribution partner side in the U.K.? Is that going to -- that London office going to be part of an initiative? Or have you decided to build your own sort of captive sales and distribution effort in the U.K.?

What our plan is, is to build a distribution channel. So the folks that are working there right now, the individuals the -- their objective is to get distributors. And those distributors hopefully have clients that have IBM platforms. Once that's up to a certain level that how Schwartz and myself were comfortable with, and we'll deploy equipment in 2 data centers. So these folks are working with data centers today and folks that already sell an intel side platform. So we're pretty confident. We spent a little time over there. It's going well early on. And the company is being registered there. We're not registered yet. We signed the lease in all. We've hired a firm that's working on registration of the company, but there's some very good activity. We're happy about it at this particular point, but I'll continue to update everybody as it moves along.

Adam, this is Chris. The ARR for the quarter was approximately $3.1 million.

$3.1 million booked in the quarter?

In the quarter, correct.

Okay. And so -- and is that just a straight line annualization then, Chris? Or are there some timing things?

It's timing. It's not a straight line.

Okay. So what is that -- is that still annualized out to the $17 million to $18 million that Chuck and you spoke about earlier?

Yes.

Our next question is from the line of Matthew Galinko with Maxim Group.

Just a follow-up. I guess given your comments on the go-to-market and then how you sort of go after that pipeline of IBM customers that are transitioning or could transition to cloud. How does that inform your M&A strategy? And what sort of assets would you look at today sort of throwing dollars at a building, a bigger and bigger sales force isn't necessarily the strategy you're looking for to grow that business?

Matt, it's a very interesting question because you really, as I mentioned, you can't go out and find 50 or 30 or 100 sales reps, all of a sudden, you know and no one wants to meet with people typically so you have to have this robust inbound program, at the same time, having a good reputation and having reached out as part of that nurture list. So when we think about pipeline, had that pipeline come about, where we have distributors, we call channel partners, and they have a customer base of folks that are ready to migrate, so those proposals are in there. There's some folks that came in through either Google AdWords or up in the rankings organically on that and it's coming that way. So -- and then we have folks that are out there actively that are talking to clients that have purchased equipment over the years with Flagship and with CloudFirst. But when we talk about M&A, what we look for is folks that will expand our distribution channel. They might have a high level of distributors. Maybe, I talked to a company a few months ago that they said they had 1,000 distributors, but it was under a software product and we're still talking to them, but it wasn't the type of distributor that I think would align with us. So we've looked at many deals, but their technical teams, distribution may be a unique product, we're looking for certain folks in the cyber space that are there that have a 24-hour operations, but not the software itself. And their partners with the top cyber companies. But it is difficult to find companies that what we look for between $10 million and $15 million that may be in some sort of covenant default and we can come in and save it, but a solid company, someone that's looking to retire but it's very, very difficult. So what we've decided to do is to continue to look, and we even have a call this afternoon, Harold and I, decided to continue to look for these M&A opportunities, but to spend the money organically. Now when we spend the money organically, we're going to get beaten up on our P&L because that's going to be an expense versus the acquisition, which will be on the balance sheet side. So -- but we're going to try to do both. So we are spending organically and U.K. was one of those assets, along with the expansion in the U.S. And in the case of M&A, we continue to look for these $10 million to $15 million companies. But a lot of them, it's a tough segment to look at. And with the $11 million to $12 million on the balance sheet, we don't want to wipe that out. We want to keep cash on the balance sheet. The company is very stable, very solid, great margins, a great customer base, a fantastic renewal rate. But we don't want to go jump in and have a situation where someone is going to make us bleed because they're burning $2 million a year, and they've been in business for 5 years. So we're looking at everything, in answer to your question, Matt.

[Operator Instructions] Our next question is from the line of Bobby Cohen with Merger Monday Capital.

Chuck, this is Bobby Cohen. I had one broad-brush question. When do you project $1 from international?

Well, today -- Hi Bobby, the -- today, we have international customers today. So we generate revenue internationally from folks that we serve in, I think, like I'm going to estimate around 8 countries, that we already have. We have equipment with a partner in France, we have there. So we're serving the [ banks at [indiscernible] Haiti ]. So we have that. I would say, though, to answer the question directly, I would expect that over the next 90 days, we would have enough information to be able to decide to deploy equipment. I think we spoke about it, as a company strategically that we should know within 90 days on the distribution. And then I would look at the September timeframe we've been talking about, Hal and myself, and Chuck Paolillo, our CTO. And we think that, that would be around the September timeframe on that. Unless they want to be a hub like the other clients are out of the U.S. because we serve right now international clients that are hubbed out of the U.S. but there are some European regulations and all. So if we can hub it out of the U.S. to get started initially and then migrate them over. But we're looking at September timeframe to deploy equipment. So you're looking at the fourth quarter, I would say, for international revenue that originates from equipment that's in the U.K.

Okay. Terrific. And one other question. You touched upon it, but maybe you could shed a little bit more light, how robust is your appetite for M&A? I know you're going to be -- you're going to use a measured approach but are there many opportunities out there?

Well, we've been working with Maxim and their team has been very busy to find companies for us, plus we have relations with around 3 other firms that are looking for us. I will tell you, Bobby, we probably put out, I don't know, over the last 6 months, probably 5 term sheets, letters of intent on it. And after further due diligence, we decided not to do it. We probably had over 5 additional calls with companies that we didn't get as far as a letter of intent or a term sheet. So we're very, very active with it. We continue to look for the right partner to bring in. This is my fourth company. And I will tell you, I was trained by 2 Fortune 10 companies. Some of the folks that are in these businesses started from scratch when they got out of college and it's like they invented white bread. And it's a very, very difficult personality when they never work for anyone. And if it becomes difficult to bring them into and assimilate, I believe we did a pretty good job with a number of companies that we did purchase through the years, but it's very, very difficult in that $10 million to $15 million space. And we can't move higher than that, at least that we see unless they have some bank debt that we can take over and we know where the interest rates are sitting right now. And as a company, we're really -- we're not big on debt. because we're really growing at a pretty good rate, and we're pretty stable and our EBITDA numbers CloudFirst EBITDA -- Chris. What was CloudFirst EBITDA first quarter? What do you have on CloudFirst? I mean it's a big number. Remember, we look at EBITDA, consolidated with headquarters. So the EBITDA number, I think the margin is in 30% EBITDA margin on CloudFirst. So that gives you a little feel for it. So we're doing fine. So we are looking for it. We have the appetite for M&A. We want to do M&A, but it just needs to be the right thing. Everything starts out right, as we all know. And it's the question of how it ends. Q1, $1.2 million inhibitor for CloudFirst. So pretty good. But we do have the appetite and answer to the question. So if you have any deal, send them our way.

As there are no further questions, I now hand the conference over to Chuck Piluso for his closing comments. Chuck?

Thank you, and thank you for the questions. We have formulated a robust business strategy that we believe will drive our growth and ensure a sustained and increased profitability over the long term. While delivering some maximum value to our shareholders, we're optimistic about our prospects and our efforts and eagerly anticipate realizing the full benefits over time. And we look forward to providing meaningful updates to our shareholders. And further, I'd like to thank everyone who joined the call today. Thank you, and have a great day.

Thank you. The conference of Data Storage Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.