THE CANADIAN SECURITIES EXCHANGE – The Exchange for Entrepreneurs | Quarterly Issue No. 2
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256 and 128 bit are touted by competitors, but we use 448 bit encryption.
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Stronger encryption standards seem like an obvious benefit for companies in the space to offer, but without the proprietary technology Data Deposit Box owns, it’s not that easy. “The reason a lot of groups don’t do this and rather use 256 bit encryption and only encrypt transmission is that it slows their product down too much,” Cheeseman continues. “We encrypt on the client’s device and we can do this because we own two patents allowing us to leverage the technology. Some of our competitors simply don’t have the means.” Better technology also equates to the potential for global reach. The Data Deposit Box system runs in 50 countries and is available in 39 languages. And whereas almost any region you consider worldwide will have a half dozen local companies providing data back-up service, Cheeseman claims there are only four or five companies with the capability to replicate what Data Deposit Box does on a global scale. “I find we are better able to match our services and reach across different regions,” he says in describing the Data Deposit Box advantage. “When you are playing in different regions you have to understand all the in-country rules and data regulations because they are different.” Cheeseman offers the example of rules for keeping data after someone signs up for trial service but decides not to stay on as a customer. In Canada, the company can delete that data after 30 days. But for a trial user in Japan they would have to keep it for 60 days, and for one from Luxembourg the regulations say 63. This is but one simple example of understanding nuances of foreign markets, and fortunately for Data Deposit Box the flexibility to adjust to varying standards is inherent in its system. This will become increasingly important over time, as the company sees most of its growth coming from outside North America in the years ahead.
“Right now, most of our business comes out of the United States, and a percentage of that is using our facility because they want their data stored outside of their country,” says Cheeseman, estimating that 80% of the Toronto-based company’s North American sales originate south of the border. “We have a facility in Canada and we also have Canadian clients who use it because they don’t want their data to leave the country. “Our international business is 10-15% at the moment, but we are seeing a lot of growth there and through our enabler strategy we forecast that the bulk of our growth will come internationally.” The “enabler” strategy relieves a lot of the marketing pressure from management by allowing third parties to incorporate Data Deposit Box services in the broader service packages they sell in their respective markets. These third parties are typically what are known as managed service providers (MSPs), which deliver computer networking equipment, applications and various related services to their clients. “We work with MSP’s who are looking to incorporate a backup and recovery service for their customers,” says Cheeseman. “This allows us to focus just on key partnerships without needing a direct business model that sees us go after small businesses ourselves. We can leverage their reseller channel base and reach all of their clients with our products.” The company achieved a very different sort of sales breakthrough in summer 2014 when it was chosen to be featured on an Original Equipment Manufacturer basis by a major computer manufacturer. “We now are the consumer cloud provider for one of the world’s largest laptop and server manufacturers,” Cheeseman says. “It is branded as their product and service but it is our product in the background providing the service and they have outsourced that to us.” Financial results for the year ended 2014 showed revenue of just over $5 million, with Adjusted EBITDA coming in at $886,000. The gross margin expanded to 50%, from 44% the previous year. It is a solid foundation upon which to base future growth, and management sees the MSP relationships and more product innovation as the keys to improving the numbers. “Shorter and longer term we are really focused on top line revenue growth,” explains Cheeseman. “Our enabler strategy is our long term view and this represents change, as the company used to have www.thecse.com | 15