SilverSun Technologies, Inc. — Q2 2020 Form 10-Q
Entity note: The supplied filing is for SilverSun Technologies, Inc. (NASDAQ: SSNT), not QXO, Inc. It covers the quarter and six months ended June 30, 2020; the financial statements are unaudited.
Business context and reporting period
SilverSun provides business software, consulting, and IT and managed services through its subsidiaries. The 2019 comparative results include the EDI practice, which was sold in August 2019 and is presented as discontinued operations.
Financial results and liquidity
- Q2 revenue: $9.67 million, up 6.1% from $9.12 million. Software product revenue rose 35.2% to $1.93 million; service revenue increased 0.7% to $7.75 million.
- Q2 gross profit and margin: $3.94 million and 40.72%, versus $3.48 million and 38.13% a year earlier.
- Q2 earnings: Continuing-operations net income was $33,514, compared with a $300,802 loss. Total net income was also $33,514; the 2019 total-period loss of $2,890 included $297,912 of after-tax income from discontinued operations.
- First-half revenue: $19.75 million, up 7.2% from $18.43 million. Gross profit was $7.79 million, with a 39.44% margin versus 39.29%.
- First-half earnings: Continuing-operations and total net loss was $258,601, improved from a $484,101 continuing-operations loss in 2019. The 2019 total included $577,247 of income from discontinued operations, resulting in total net income of $93,146.
- Cash flow: Continuing-operations operating cash flow was positive $270,375, versus negative $1.36 million in first-half 2019. Investing activities provided $496,142; financing activities used $2.57 million, primarily due to the $2.25 million dividend. Cash declined $1.80 million to $6.86 million.
- Balance sheet at June 30: Current assets were $10.36 million and current liabilities $6.67 million; working capital was approximately $3.68 million. Total assets were $16.99 million and total liabilities $8.35 million.
- Debt and leases: Acquisition-related notes totaled $960,483, including convertible notes. Finance lease obligations were $258,321 and operating lease liabilities were $1.38 million. The company reported no credit facility.
Material changes, outlook, and risks
- Management attributed revenue growth to increased software sales, consulting, and subscription revenue. Higher selling and marketing expenses reflected increased variable compensation; lower general and administrative expenses primarily reflected reduced travel during the pandemic.
- SilverSun received $3.15 million under the PPP in April, then returned the full amount on May 18, 2020 amid uncertainty about public-company eligibility. The loan was not outstanding at quarter-end.
- The company received $575,000 of escrow proceeds in February from its 2019 EDI-practice sale; $575,000 remained in escrow at June 30, subject to the agreement’s terms.
- Management said it believed available cash and sale proceeds could fund operations for at least 12 months, but cautioned that COVID-19’s effects could undermine that assessment. It cited potential customer disruption, reduced technology spending, delayed on-site services, collection risks, and competitive disadvantages after returning the PPP funds. No quantified forecast or specific earnings guidance was provided.
- On July 31, 2020, after quarter-end, the company acquired assets of Prairie Technology Solutions Group for $185,000 cash and three promissory notes totaling approximately $310,000, bearing 4% interest.
- Management reported effective disclosure controls and no material change in internal control during the quarter. It reported no litigation believed likely to have a material adverse effect and no debt-payment defaults.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for SilverSun Technologies, not QXO, Inc.
- Track COVID-19 effects on customer demand, collections, service delivery, and management’s 12-month liquidity assessment.
- Review the remaining EDI-sale escrow release and any related indemnity claims.
- Assess the cash impact and milestone-adjustment terms of the Prairie Tech acquisition notes.
- Distinguish continuing results from 2019 discontinued EDI results when comparing earnings and cash flow.