Mr. Chris Bursey reports

DIRECT COMMUNICATION SOLUTIONS ANNOUNCES INTERIM FINANCIAL STATEMENTS FOR Q2 2024

Direct Communication Solutions Inc. has released its interim financial statements for the second quarter ended June 30, 2024, along with the corresponding management discussion and analysis on SEDAR+.

Significant highlights

• Continuing transition to SaaS (software-as-a-service) solutions: Continued executing on the company's strategy to transition to a SaaS-focused model with an emphasis on high-margin, recurring revenue. Record recurring SaaS revenues of $727,080 delivering 60.1-per-cent gross margins for the second quarter ended June 30, 2024. ARR (annual recurring revenue) increased 12 per cent to $2,835,892 for the period ended June 30, 2024, from June 30, 2023.
• Backlog of customer purchase orders: Current backlog of customer purchase orders is $1,395,000 for the second quarter ended June 30, 2024.
• Cost reduction and efficiency: Further advancements in the company's cost-cutting initiatives, with general and administrative expenses reduced by 62 per cent to $1,004,998 for the second quarter ended June, 2024, compared with $2,650,928 for the same period in 2023. This significant reduction of $1,645,930 aligns with the company's focus on high-margin SaaS revenue.
• Strategic partnerships: Announced a significant strategic licensing and reseller agreement with SystemLOCO Ltd. for enhanced IoT (Internet of Things) solutions and expanded the company's partnership with CATrack Technologies for advanced catalytic converter theft prevention. These agreements are expected to contribute to its recurring SaaS revenue and strengthen the company's IoT solutions portfolio.
• Debt restructure: Subsequent to June 30, 2024, the company has successfully restructured $6.1-million in debt with one of its key supplier. The supplier has forgiven $2.9-million in payables and $3.2-million has been restructured to a five-year term loan, principal to be repaid at the end of the five-year term and 10-per-cent interest to be paid annually.

Financial performance

Direct Communication Solutions reported second quarter 2024 revenues of $1.45-million (U.S.), compared with $4.58-million (U.S.) in Q2 2023, representing a 68-per-cent year-over-year decrease. The six-month ended June, 2024, period reported revenues of $3.34-million (U.S.) compared with $7.78-million (U.S.), representing a 57-per-cent year-over-year decrease. This decrease is attributed to the company's continuing restructuring to prioritize high-margin recurring SaaS revenue over lower-margin, one-time hardware sales.

The second-quarter 2024 gross profit was $615,037 (U.S.), compared with $1.61-million (U.S.) Q2 2023, reflecting a 62-per-cent decrease. The six-month period-end June, 2024, gross profit was $1.27-million (U.S.) compared with $2.57-million (U.S.) for the same period last year, reflecting a 50-per-cent decrease. However, the gross margin for second quarter of 2024 improved to 42 per cent from 35 per cent in Q2 2023 and 38 per cent from 33 per cent for the six-month ended period, reflecting an increase of 7 per cent for the second quarter and an increase of 5 per cent for the six-month period. The net loss for quarter-end Q2 2024 was $625,904 (U.S.), a reduction from a net loss of $1.10-million (U.S.) in Q2 2023. The net loss for the six-month period ended June, 2024, was $1.13-million (U.S.), a reduction from a net loss of $2.35-million (U.S.). Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for quarter ended Q2 2024 was ($469,085) (U.S.), compared with ($601,805) in Q2 2023, marking a 22-per-cent improvement. Adjusted EBITDA for six-month period ended June, 2024, was ($950,000) (U.S.), compared with ($1,279,790) for the same period in 2023, marking a 26-per-cent improvement.

CEO commentary

"In Q2 2024, we continued to execute our strategic transition towards high-margin, recurring SaaS revenues," said Chris Bursey, chief executive officer of Direct Communication Solutions. "Our efforts are reflected in the increased SaaS revenues and improved gross margins. We are making significant strides in reducing operating costs while growing our SaaS subscriber base. The strategic partnerships we have forged are set to enhance our IoT solutions and contribute to our ongoing growth."

Board announcement

The company also announces the resignation of John Hubler, director, effective Sept. 3, 2024. We thank Mr. Hubler for his contributions and wish him the best in his future endeavours.

About Direct Communication Services Inc.

Direct Communication Solutions is a technology solutions integrator focusing on connecting the Internet of things. The company provides real solutions that solve real problems. Direct Communication Solutions' software applications and scalable cloud services collect and assess business-critical data from all types of assets. Direct Communication Solutions is headquartered in San Diego, Calif.

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