Shift Towards Services and Software Drives Margin Growth at DecisionPoint - Analyst Blog

By
A A A
Share |

Shift Towards Services and Software Drives Margin Growth at DecisionPoint

Ken Nagy, CFA

On September 4, 2012, DecisionPoint Systems, Inc. ( DPSI ), the Irvine, California based enterprise mobility and RFID systems integrator, reported financial results for its fiscal 2012 second quarter and six months, ended June 30, 2012.

A solid second quarter performance resulted in a year over year jump in sales of  $4.543 million or over 34 percent to $17.767 million from $13.223 million for the three months ended June 30, 2011.

Sequentially, second quarter revenues fell slightly from record revenues of $17.810 million during the first quarter fiscal 2012.

The year over year upturn in revenues was driven by increased field mobility solution sales, continued increases in demand from the retail sector and increased professional services revenue as well as continued strong execution and increasing traction of recent product introductions.

Gross margin improved year over year from 20.2 percent in the second quarter of 2011, up to 21.3 percent for the three months ended June 30, 2012. The increase in gross margin was primarily due to the higher gross margins from professional services revenue and improved utilization of professional services resources reflecting the Company's ongoing revenue mix shift towards services and software.

Likewise, the Company continues its focus on cost control and improved utilization and efficiency throughout its operations.

Sequentially, second quarter gross margin improved slightly over the 21.1 percent for the three months ended March 31, 2012.

Selling, general and administrative expenses in the second quarter increased year over year by $1.349 million and sequentially by $1.014 to $4.849 million.

The year over year and sequential increase in selling, general and administrative expenses was primarily the result of significantly higher professional fees and expenses relating to the acquisition of Apex which totaled approximately $1.2 million.

On June 4, 2012, DecisionPoint completed the acquisition of Apex Systems Integrators, Inc., a leading provider of wireless mobile work force software solutions.

It should be noted that Apex Systems operating results are included in the Company's results of operations beginning June 5, 2012.

Still, operating loss increased year over year by $237,311 to $1.071 million from $834,223 for the three months ended June 30, 2011.

Additionally, Adjusted EBITDA for the second quarter of 2012 was $0.5 million compared to $(0.7) million for the quarter ended June 30, 2011, which was a $1.2 million year over year improvement.

Net loss attributable to common shareholders was $1.522 million for the fiscal 2012 second quarter compared to a net loss attributable to common shareholders of $3.906 million for three months ended June 30, 2011.

The improvement in net loss attributable to common shareholders was primarily due to a one-time, non-cash expense for debt extinguishment of $2.641 million charged in the second quarter of 2011.
              
Based on a weighted average number of basic and diluted shares of 7.512 million, basic and diluted net loss per share resulted in a net loss of $0.20 per share for the second quarter of fiscal 2012. This compared to a basic and diluted net loss per share of $0.83 based on a weighted average number of basic and diluted shares of 4.698 million during the three months ended June 30, 2011.

For the six months ended June 30, 2012, year over year revenues improved $9.552 million or nearly 37 percent to $35.577 million from $26.024 million for the six months ended June 30, 2011.

Here again, the year over year upturn in revenues was driven by increased field mobility solution sales, continued increases in demand from the retail sector and increased professional services revenue.

Gross margin improved year over year from 19.2 percent in the first half of 2011, up to 21.2 percent for the six months ended June 30, 2012.

Again, the increase in gross margin was primarily due to the higher gross margins from professional services revenue and improved utilization of professional services resources reflecting the Company's ongoing revenue mix shift towards services and software.

Selling, general and administrative expenses in the first six months of 2012 increased year over year by $1.678 million to $8.670 million.

Operating loss for the six months improved year over year by $863,596 to $1.139 million from $2.003 million for the six months ended June 30, 2011.

For the six months, adjusted EBITDA improved year over year by $2.8 million to $1.0 million, allowing the Company to achieve total adjusted EBITDA of approximately $2 million for the last twelve months.

Net loss attributable to common shareholders was $1.981 million for the first half of fiscal 2012 compared to a net loss attributable to common shareholders of $5.555 million for six months ended June 30, 2011.

Here again, the improvement in net loss attributable to common shareholders was primarily due to a one-time, non-cash expense for debt extinguishment of $2.641 million charged in the first half of 2011.
              
Based on a weighted average number of basic and diluted shares of 7.452 million, basic and diluted net loss per share resulted in a net loss of $0.27 per share for the first half of fiscal 2012. This compared to a basic and diluted net loss per share of $1.23 based on a weighted average number of basic and diluted shares of 4.517 million during the six months ended June 30, 2011.

The Company ended the quarter with $498,357 in cash and a working capital deficit of $6.005 million. This compares to $492,665 in cash and a working capital deficit of $4.2 million as of March 31, 2012.

Still, cash flow from operating activities for the first half of 2012 was $1.6 million compared to $0.2 million for the same period of 2011.

Additionally, as of June 30, 2012, DicisionPoint had approximately $6.0 million available under its revolving credit facility with its lenders.

Similarly, the Company had term loans totaling $5.6 million related to its acquisitions on its balance sheet at June 30, 2012.

Moreover, management stated that it continues to see its field mobility solutions grow in importance both at DecisionPoint and in the broader economy.

Furthermore, the Company's bundled solutions for enterprise and small business applications that were developed and recently introduced in conjunction with its wireless carrier partners, Verizon, Sprint and T-Mobile, are gaining market recognition and increasing sales.

Additionally, the capabilities of the three acquisitions in its Professional Services and Software that DecisionPoint has completed over the last 19 months (CMAC, Apex and Illume Mobile) allow the Company to offer the full range of mobile solutions to meet the requirements of any enterprise mobility strategy as well as generate higher margins than other divisions in the Company, which in turn should lead to improved corporate gross margins.

Similarly, on July 31, 2012, DecisionPoint acquired 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.

Likewise, management further stated that its tablet-based assisted shopping solution suite for in-store applications continues to gain acceptance with existing and new retail customers.

Still, the Company continues to develop the many opportunities in its pipeline.

As a result of the above mentioned demands and trends, DecisionPoint continues to anticipate that it is well positioned for continued revenue growth during the second half of 2012 compared to the second half of 2011 and the first half of 2012.

Please visit scr.zacks.com to access a free copy of the full research report.


 
DECISIONPOINT (DPSI): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DPSI

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

89,970,926
  • $16.15 ▲ 0.12%
77,131,582
  • $58.94 ▼ 1.31%
67,336,935
  • $26.56 ▲ 1.68%
48,814,124
  • $86.20 ▲ 0.02%
47,526,126
  • $23.21 ▲ 0.78%
44,660,424
  • $23.91 ▲ 6.36%
38,799,699
  • $4.289 ▲ 4.36%
36,199,890
  • $40.01 ▼ 0.97%
As of 4/17/2014, 04:07 PM