DecisionPoint Systems Reports Results For Second Quarter, Six Months Ended June 30, 2015
IRVINE, Calif., Aug. 28, 2015 /PRNewswire/ -- DecisionPoint™ Systems, Inc. (OTCQB: DPSI and DPSIP), a leading provider and integrator of Enterprise Mobility and Wireless Application solutions, today reported financial results for the second quarter and six months ended June 30, 2015. During the quarter the Company completed the sale of its CMAC subsidiary, and is treating the CMAC results as a discontinued operation. CMAC results have been eliminated from both the current periods being reported, and from the previous-year periods shown for comparison purposes, except as otherwise specified.
Sales for the second quarter of 2015 were $9.4 million, down 27.9% from sales of $13.0 million in the second quarter of 2014. The net loss, including a noncash write-down totaling $3.0 million of goodwill and intangible assets related to the Company's Apex operations in Canada, was $3.3 million from continuing operations, or $3.9 million attributable to common shareholders including both continuing and discontinued operations. This compares to a net loss of $132,000 for the second quarter of 2014 from continuing operations, or $354,000 attributable to common shareholders including both continuing and discontinued operations. This represents a $0.30 loss per share from continuing operations in the second quarter of 2015, compared to a $0.04 loss per share from continuing operations in the second quarter of 2014.
Sales for the six months ended June 30, 2015 – again adjusted to eliminate discontinued operations at CMAC – were $19.2 million, down 27.2% from the sales of $26.4 million in the first half of 2014. The net loss for the six months ended June 30, 2015 was $4.0 million from continuing operations, or $4.8 million attributable to common shareholders including both continuing and discontinued operations. This loss includes the $3.0 million write-off of goodwill and intangible assets relating to the Apex operations. That compares to a net loss in the first half of 2014 of $359,000 from continuing operations, or $795,000 attributable to common shareholders including both continuing and discontinued operations. This represents a $0.38 loss per share in the first half of 2015 compared to a $0.08 loss per share in the first half of 2014. Gross profit margin for the first half decreased to 20.3% from last year's 21.6%. Adjusted EBITDA (a non-GAAP measurement that management uses to measure progress) was $183,000 for the first half of this year compared to $638,000 for the same period in 2014, a decrease of $455,000.1
CEO Greg Henry commented, "The first half of 2015 has been a difficult time for DecisionPoint, beginning with the sudden departure of several employees from our sales force; those individuals showed up immediately in the employment of a direct competitor. We have been working hard to replace the sales that those former employees took with them. As we have said before, we have filed lawsuits for breaches of confidentiality, and breach of fiduciary duty. In addition, we decided to divest our Georgia-based CMAC subsidiary after the recent loss of a significant customer of the business unit. Thereafter, the opportunity arose to sell the business to its former owner, our former Senior Vice President, as we continue to focus solely on providing our customers with world class mobile computing services and software. We took a loss of $89,000 on that transaction, but it was largely responsible for the continued drop in our SG&A expense. That said, hardware is still our largest revenue category, and hardware sales were down by 30% for the second quarter. Professional services revenue, which brings higher margins, was down less at 23.2%.
"We are keeping our eyes on the horizon, knowing that the second half has always tended to be our stronger part of each year. Clearly with the divestiture of CMAC and the decline to date in sales that resulted from the actions of some previous sales employees, we can't expect to beat last year, which we had hoped to do. Last year was our first year of profitability in quite a while, and we hoped to perform a repeat. However, we are committed to strengthening our position as a mobile computing services and software provider and are continuing to invest in the people and services that are required to support our customers and the mobile computing market at large."
CFO Michael Roe said, "Cash provided by operations in the first half of 2015 was $2.3 million, as compared to $1.1 million in the first half of 2014. Overall bank debt including revolving credit facilities as of June 30, 2015 was $4.5 million, significantly lower than the December 31, 2014 balance of $8.2 million. SG&A from continuing operations was $4.4 million for the first half of 2015, down by 24%, from $5.8 million in the first half of 2014, in part due to our continued emphasis on streamlining our operations and controlling expenses. Our aggressive cost cutting has helped us in the difficult time represented by the first half of 2015.
"Interest expense was also lower, due to lower borrowings. Our cash was $297,000 at June 30, 2015, compared to $1.6 million at December 31, 2014. We expect to pay preferred dividends in kind, with the next such PIK payment before the end of August. We continue to aggressively press our legal actions against Tolt Solutions Inc, a direct competitor and the current employer of the sales group that left DecisionPoint."
| 1 Adjusted EBITDA is a non-GAAP measurement that is commonly used in our industry to gauge performance. A reconciliation to GAAP is provided in the tables that follow this report. |
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About DecisionPoint™ Systems, Inc.
DecisionPoint Systems, Inc. delivers improved productivity and operational advantages to its clients by helping them move their business decision points closer to their customers. They do this by making enterprise software applications accessible to the front-line worker anytime, anywhere. DecisionPoint utilizes all the latest wireless, mobility, and RFID technologies.
For more information about DecisionPoint Systems, Inc., visit www.decisionpt.com.
Forward-Looking Statements
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 achievements in the future to differ materially from forecasted results, performance, and achievements. Known 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 its forward-looking statements to reflect events or circumstances after the date hereof, including without limitation unanticipated events or changes in the Company's plans or expectations.
Contacts:
DecisionPoint™ Systems, Inc.
Michael Roe
Chief Financial Officer
(949) 465-0065
DresnerAllenCaron
Rudy Barrio (investors)
[email protected]
(212) 691-8087
-FINANCIAL TABLES FOLLOW-
| DECISIONPOINT SYSTEMS, INC. |
||||||||
| Unaudited Condensed Consolidated Balance Sheets |
||||||||
| (In thousands, except share and per share data) |
||||||||
| June 30, |
December 31, |
|||||||
| 2015 |
2014 |
|||||||
| (Restated) |
||||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash |
$ |
297 |
$ |
1,616 |
||||
| Accounts receivable, net |
4,801 |
10,354 |
||||||
| Inventory, net |
244 |
1,998 |
||||||
| Deferred costs |
2,679 |
2,532 |
||||||
| Deferred tax assets |
13 |
19 |
||||||
| Prepaid expenses and other current assets |
206 |
79 |
||||||
| Assets of discontinued operations |
- |
1,829 |
||||||
| Total current assets |
8,240 |
18,427 |
||||||
| Property and equipment, net |
192 |
145 |
||||||
| Other assets, net |
34 |
109 |
||||||
| Deferred costs, net of current portion |
1,037 |
1,004 |
||||||
| Goodwill |
5,304 |
7,524 |
||||||
| Intangible assets, net |
- |
1,414 |
||||||
| Assets of discontinued operations |
- |
1,634 |
||||||
| Total assets |
$ |
14,807 |
$ |
30,257 |
||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ |
7,205 |
$ |
9,736 |
||||
| Accrued expenses and other current liabilities |
2,083 |
2,028 |
||||||
| Lines of credit |
2,697 |
5,811 |
||||||
| Current portion of debt |
1,833 |
813 |
||||||
| Due to related parties |
142 |
73 |
||||||
| Unearned revenue |
4,254 |
5,915 |
||||||
| Liabilities related to discontinued operations |
- |
1,993 |
||||||
| Total current liabilities |
18,214 |
26,369 |
||||||
| Long term liabilities |
||||||||
| Unearned revenue, net of current portion |
1,516 |
1,560 |
||||||
| Debt, net of current portion and discount |
- |
1,580 |
||||||
| Deferred tax liabilities |
185 |
461 |
||||||
| Warrant liability |
287 |
519 |
||||||
| Other long term liabilities |
181 |
194 |
||||||
| Liabilities related to discontinued operations |
- |
487 |
||||||
| Total liabilities |
20,383 |
31,170 |
||||||
| Commitments and contingencies |
- |
- |
||||||
| STOCKHOLDERS' DEFICIT |
||||||||
| Cumulative Convertible Preferred stock, $0.001 par value, 10,000,000 shares authorized, 1,547,845 shares issued and outstanding, including cumulative and imputed preferred dividends of $2,349 and $2,295, and with a liquidation preference of $14,181 and $13,640 at June 30, 2015 and December 31, 2014, respectively |
12,876 |
12,822 |
||||||
| Common stock, $0.001 par value, 100,000,000 shares authorized, 12,883,446 issued and 12,729,563 outstanding as of June 30, 2015, and as of December 31, 2014 |
13 |
13 |
||||||
| Additional paid-in capital |
17,261 |
17,252 |
||||||
| Treasury stock, 153,883 shares of common stock |
(205) |
(205) |
||||||
| Accumulated deficit |
(35,114) |
(30,292) |
||||||
| Unearned ESOP shares |
(407) |
(484) |
||||||
| Accumulated other comprehensive income |
- |
(19) |
||||||
| Total stockholders' deficit |
(5,576) |
(913) |
||||||
| Total liabilities and stockholders' deficit |
$ |
14,807 |
$ |
30,257 |
||||
| DECISIONPOINT SYSTEMS, INC. |
||||||||||||||||
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss |
||||||||||||||||
| (In thousands, except share and per share data) |
||||||||||||||||
| Three Months Ended |
Six Months Ended |
|||||||||||||||
| 2015 |
2014 |
2015 |
2014 |
|||||||||||||
| (Restated) |
(Restated) |
|||||||||||||||
| Net sales |
$ |
9,370 |
$ |
12,990 |
$ |
19,171 |
$ |
26,350 |
||||||||
| Cost of sales |
7,607 |
10,185 |
15,286 |
20,669 |
||||||||||||
| Gross profit |
1,763 |
2,805 |
3,885 |
5,681 |
||||||||||||
| Selling, general and administrative expense |
2,070 |
2,703 |
4,430 |
5,827 |
||||||||||||
| Goodwill and intangible asset impairment |
3,047 |
- |
3,047 |
- |
||||||||||||
| Operating (loss) income |
(3,354) |
102 |
(3,592) |
(146) |
||||||||||||
| Other expense: |
||||||||||||||||
| Interest expense |
219 |
222 |
401 |
429 |
||||||||||||
| Fair market value adjustment of warrant liabilities |
(311) |
84 |
(232) |
(166) |
||||||||||||
| Other (income) expense, net |
(14) |
(21) |
49 |
(30) |
||||||||||||
| Total other (income) expense |
(106) |
285 |
218 |
233 |
||||||||||||
| Net loss from continuing operations, before income taxes |
(3,248) |
(183) |
(3,810) |
(379) |
||||||||||||
| Provision (benefit) for income taxes from continuing operations |
63 |
(51) |
35 |
(20) |
||||||||||||
| Net loss from continuing operations |
(3,311) |
(132) |
(3,845) |
(359) |
||||||||||||
| Discontinued operations: |
||||||||||||||||
| Loss on sale of discontinued operations, net of tax |
(89) |
- |
(89) |
- |
||||||||||||
| (Loss) income from discontinued operations, net of tax |
(48) |
112 |
(94) |
227 |
||||||||||||
| Net loss |
(3,448) |
(20) |
(4,028) |
(132) |
||||||||||||
| Cumulative and imputed dividends on Series A and B preferred stock |
(27) |
(27) |
(54) |
(54) |
||||||||||||
| Cash and imputed dividends on Series D and E preferred stock |
- |
(307) |
- |
(609) |
||||||||||||
| Accrued paid in-kind dividends on Series D and Series E preferred stock |
(380) |
- |
(740) |
- |
||||||||||||
| Net loss attributable to common shareholders |
$ |
(3,855) |
$ |
(354) |
$ |
(4,822) |
$ |
(795) |
||||||||
| Basic and diluted net (loss) income per common share: |
||||||||||||||||
| Continuing operations |
$ |
(0.30) |
$ |
(0.04) |
$ |
(0.38) |
$ |
(0.08) |
||||||||
| Discontinued operations |
(0.01) |
0.01 |
(0.01) |
0.02 |
||||||||||||
| Net loss per share |
$ |
(0.31) |
$ |
(0.03) |
$ |
(0.39) |
$ |
(0.06) |
||||||||
| Weighted average shares outstanding -Basic and diluted |
12,452,853 |
12,342,169 |
12,439,094 |
12,328,410 |
||||||||||||
| Other comprehensive loss, net of tax |
||||||||||||||||
| Net loss |
$ |
(3,448) |
$ |
(20) |
$ |
(4,028) |
$ |
(132) |
||||||||
| Foreign currency translation adjustment |
1 |
- |
19 |
(24) |
||||||||||||
| Comprehensive loss |
$ |
(3,447) |
$ |
(20) |
$ |
(4,009) |
$ |
(156) |
||||||||
| DECISIONPOINT SYSTEMS, INC. |
||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows |
||||||||
| (In thousands) |
||||||||
| Six Months ended |
||||||||
| 2015 |
2014 |
|||||||
| (Restated) |
||||||||
| Cash flows from operating activities: |
||||||||
| Net loss from continuing operations |
$ |
(3,845) |
$ |
(359) |
||||
| Net (loss) income from discontinued operations |
(183) |
227 |
||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Loss on sale of discontinued operations, net of tax |
89 |
- |
||||||
| Depreciation and amortization |
390 |
688 |
||||||
| Amortization of deferred financing costs and note discount |
43 |
79 |
||||||
| Employee and Director stock-based compensation |
70 |
50 |
||||||
| Change in fair value of warrants |
(232) |
(166) |
||||||
| ESOP compensation expense |
17 |
26 |
||||||
| Goodwill and intangible asset impairment charges |
3,047 |
- |
||||||
| Allowance for doubtful accounts |
1 |
(25) |
||||||
| Deferred taxes. net |
(249) |
(152) |
||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
5,534 |
1,048 |
||||||
| Due from related party |
- |
188 |
||||||
| Inventory, net |
1,754 |
445 |
||||||
| Deferred costs |
(181) |
249 |
||||||
| Prepaid expenses and other current assets |
(53) |
136 |
||||||
| Other assets, net |
62 |
10 |
||||||
| Accounts payable |
(2,527) |
(932) |
||||||
| Accrued expenses and other current liabilities |
(422) |
(395) |
||||||
| Due to related parties |
69 |
37 |
||||||
| Unearned revenue |
(1,674) |
(667) |
||||||
| Operating activities from discontinued operations |
616 |
582 |
||||||
| Net cash provided by operating activities |
2,326 |
1,069 |
||||||
| Cash flows from investing activities |
||||||||
| Purchases of property and equipment |
(68) |
(37) |
||||||
| Proceeds from the sale of CMAC |
302 |
- |
||||||
| Net cash provided by (used in) investing activities |
234 |
(37) |
||||||
| Cash flows from financing activities |
||||||||
| (Repayments) borrowings from lines of credit, net |
(3,109) |
758 |
||||||
| Repayment of debt |
(446) |
(546) |
||||||
| Paid financing costs |
(100) |
(100) |
||||||
| Dividends paid |
(252) |
(247) |
||||||
| Payments for contingent acquisition liability |
- |
(84) |
||||||
| Net cash used in by financing activities |
(3,907) |
(219) |
||||||
| Effect on cash of foreign currency translation |
28 |
(34) |
||||||
| Net (decrease) increase in cash |
(1,319) |
779 |
||||||
| Cash at beginning of period |
1,616 |
641 |
||||||
| Cash at end of period |
$ |
297 |
$ |
1,420 |
||||
| Supplemental disclosures of cash flow information: |
||||||||
| Interest paid |
$ |
388 |
$ |
456 |
||||
| Income taxes paid |
73 |
31 |
||||||
| Supplemental disclosure of non-cash financing activities: |
||||||||
| Accrued and imputed dividends on preferred stock |
$ |
54 |
$ |
663 |
||||
| Accrued PIK dividends on Series D and Series E preferred stock |
740 |
- |
||||||
| Liabilities forgiven by CMAC purchaser |
348 |
- |
||||||
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) and adjusted EBITDA. The Company's management believes adjusted EBITDA provides investors with a better understanding of how the Company's current results relate to the Company's historical performance. Management also believes that adjusted EBITDA reflects the essential operating activities of the Company. The non-GAAP financial measures provided are not meant to be considered in isolation or as a substitute for GAAP financials. A reconciliation of non-GAAP financial measures to GAAP measures appears below:
All amounts included in the table below are derived from continuing operations and do not include activity from discontinued operations.
| Three months ended June 30, |
Six months ended June 30, |
||||||||
| 2015 |
2014 |
2015 |
2014 |
||||||
| EBITDA Calculation: |
|||||||||
| Net loss from continuing operations |
$ (3,311) |
$ (132) |
$ (3,845) |
$ (359) |
|||||
| Depreciation and amortization |
193 |
335 |
390 |
688 |
|||||
| Interest expense |
219 |
222 |
401 |
429 |
|||||
| Income tax provision(benefit) |
63 |
(51) |
35 |
(20) |
|||||
| EBITDA |
$ (2,836) |
$ 374 |
$ (3,019) |
$ 738 |
|||||
| Adjusted EBITDA Calculation: |
|||||||||
| EBITDA |
(2,836) |
374 |
(3,019) |
738 |
|||||
| Goodwill and intangible asset impairment charges |
3,047 |
- |
3,047 |
- |
|||||
| Stock compensation |
37 |
40 |
70 |
50 |
|||||
| ESOP compensation |
7 |
12 |
17 |
26 |
|||||
| Deferred taxes |
(256) |
(152) |
(249) |
(152) |
|||||
| Fair market value adjustment of warrant liability |
(311) |
84 |
(232) |
(166) |
|||||
| Restructuring costs |
21 |
142 |
21 |
142 |
|||||
| Non-recurring legal |
188 |
- |
528 |
- |
|||||
| Adjusted EBITDA |
$ (103) |
$ 500 |
$ 183 |
$ 638 |
|||||
SOURCE DecisionPoint Systems, Inc.
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