Professional Diversity Network, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The company operates the PDN diversity recruitment network, NAPW professional women’s network, and RemoteMore software-development marketplace. China operations are reported as discontinued operations.
Financial performance
| Metric | Q2 2022 | Six months 2022 | Comparable period 2021 |
|---|---|---|---|
| Revenue | $2.196 million | $4.248 million | $1.460 million Q2; $2.945 million six months |
| Loss from continuing operations, net of tax | $53,000 | $942,000 | $590,000 Q2; $1.345 million six months |
| Net income (loss) attributable to PDN, Inc. | $91,000 income | $612,000 loss | $636,000 loss Q2; $1.406 million loss six months |
| Net cash used in operating activities | Not separately presented | $570,000 | $663,000 |
| Cash and cash equivalents | $2.439 million at June 30 | $3.403 million at December 31, 2021 | |
| Working capital | $553,000 at June 30 | $418,000 at December 31, 2021 |
Q2 consolidated net loss, including discontinued operations and noncontrolling interests, was $64,000; the $91,000 attributable income reflects $155,000 of net income attributed to noncontrolling interests. Six-month consolidated net loss was $971,000, of which $612,000 was attributable to PDN, Inc.
- Q2 revenue increased 50.2%; six-month revenue increased 44.2%. RemoteMore contributed $648,000 in Q2 and $1.125 million for the half year, with no comparable 2021 revenue. Recruitment services rose 16.4% in Q2 and 14.9% for the half year; membership revenue fell 38.1% and 31.9%, respectively.
- Cost of revenue rose faster than sales, largely due to RemoteMore contractor costs. Gross margin was approximately 57.5% in Q2 and 57.8% for the half year, versus approximately 82% in each 2021 comparable period.
- Q2 and six-month results benefited from a one-time, noncash $908,564 gain arising from settlement of a prior NAPW landlord lawsuit. The settlement required a $70,000 cash payment.
- Six-month cash decreased $963,000. Operating cash use was $570,000, investing cash use $7,000, and financing cash use $387,000, primarily for share repurchases. In 2021, financing provided $1.167 million from stock sales.
- No interest expense or conventional borrowings were reported. Lease liabilities totaled $482,000, including $60,000 current and $422,000 non-current.
Changes, outlook, and risks
- Management said cash on hand and operating cash flow should meet working-capital needs through December 31, 2022. It also identified substantial doubt about the company’s ability to continue as a going concern, citing recurring losses and operating cash use. Longer-term liquidity depends on cost reductions, revenue growth, and potentially raising capital or pursuing a strategic transaction; success and availability of financing are not assured.
- Management reported continued cost-control measures, including workforce and vendor reductions and increased automation. Offices reopened April 4, 2022, on a hybrid schedule. COVID-19 effects on NAPW enrollment and events, and broader economic uncertainty, remain risks.
- The company repurchased 417,995 shares for approximately $387,000 during the six months, at an average price of about $0.92 per share. Approximately $1.617 million remained under its $2 million authorization at June 30.
- RemoteMore generated $1.125 million of first-half revenue but incurred approximately $1.779 million of operating costs, including about $461,000 of acquired-intangible amortization; its reported pretax loss was approximately $668,000. PDN owns 45.62% and consolidates its results.
- A separate employment-law case remains pending. The company disputes liability; a $450,000 reserve was recorded in 2020. China-related assets also remain uncertain: approximately $195,000 in a bank account was frozen, and about $2.9 million seized in 2021 is being pursued for return. The filing gives no assurance of recovery.
- There was no formal revenue or earnings guidance. Other material risks disclosed include competition, privacy regulation, dependence on key personnel, ability to raise funds, acquisition integration, and potential litigation.
Investor verification points
- Assess the going-concern disclosure against the $2.439 million cash balance, $553,000 working-capital surplus, operating cash burn, and management’s year-end liquidity expectation.
- Separate recurring operating performance from the $908,564 litigation-settlement gain; evaluate RemoteMore’s path to profitability and the effect of acquired-intangible amortization.
- Track NAPW membership retention and enrollment, recruitment-services growth, and the sustainability of RemoteMore revenue.
- Monitor the pending employment litigation and the status and recoverability of China-related assets.
- Consider the cash and capital-allocation implications of continued share repurchases while management identifies potential future financing needs.