Filing summary
Issuer discrepancy: The supplied filing is SilverSun Technologies, Inc. (ticker SSNT), not QXO, Inc. It is a Form 10-Q for the quarter ended March 31, 2020, filed May 13, 2020. The financial statements are unaudited.
Business context and reporting period
SilverSun provides business application software, ERP-related consulting and professional services, and managed IT, cloud, and cybersecurity services. Results reflect continuing operations; its MAPADOC/EDI practice was sold in August 2019 and is reported as discontinued operations.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $10.08 million | $9.31 million |
| Gross profit / gross margin | $3.85 million / 38.2% | $3.76 million / 40.4% |
| Loss from continuing operations | $292,115 | $232,024 |
| Net income (loss) | $(292,115) | $96,036 |
| Operating cash flow, continuing operations | $(296,665) | $(1.18) million |
- Software revenue rose 10.1% to $1.77 million; service revenue increased 7.9% to $8.31 million. Gross profit grew 2.4%, slower than revenue.
- Cash was $6.48 million at March 31, down $2.18 million from year-end. Current assets were $10.84 million and current liabilities $7.24 million (current ratio approximately 1.50).
- Acquisition notes outstanding totaled $1.08 million; balance-sheet current and long-term debt and convertible debt together were approximately $1.08 million. Finance and operating lease liabilities were approximately $300,000 and $1.49 million, respectively.
- Cash used in financing was $2.41 million, primarily reflecting payment of the $2.25 million special dividend. Investing activities provided $528,000, including release of $575,000 from escrow.
Material changes and management commentary
- Revenue increased 8.3%, attributed to software sales and consulting services. Management linked higher consulting revenue to projects generated by fourth-quarter 2019 sales.
- Software gross profit declined by $70,048, which management attributed to a greater mix of lower-margin third-party software. Service gross profit rose by $159,634, including growth in hosting.
- Selling and marketing expense increased 11.4% to $1.94 million; general and administrative expense increased 3.5% to $2.13 million. Management attributed the larger continuing-operations loss mainly to increased sales and marketing expense.
- Q1 2019 included $328,060 of after-tax income from discontinued operations; Q1 2020 had none. This accounts for the change from prior-year net income to a net loss.
Outlook, risks, and unusual items
- Management said it believed available liquidity, including proceeds from the MAPADOC sale, would fund operations for at least 12 months, but warned that COVID-19 could undermine that assessment. It cited risks to customer demand and collections, on-site consulting, staffing, and supply availability.
- On April 9, 2020, a subsidiary obtained a $3.15 million Paycheck Protection Program loan at 0.98% interest, with payments deferred for six months. Forgiveness was uncertain. After SBA guidance raised questions about public-company eligibility, SilverSun said it would review further guidance and reassess eligibility.
- The company had no line of credit or other credit facility and said alternative financing was not available at the time. Management planned to monitor conditions and consider cost reductions and other funding sources.
- No numerical operating guidance was provided. The filing reported no material litigation, debt defaults, or material off-balance-sheet arrangements. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Confirm the intended issuer: this filing identifies SilverSun Technologies (SSNT), not QXO, Inc.
- Check subsequent disclosures on PPP loan eligibility, repayment or forgiveness, and any financing or liquidity developments.
- Monitor COVID-19 effects on customer spending, collections, consulting delivery, and the company’s 12-month liquidity assessment.
- Assess whether revenue growth can translate into improved gross margins and operating profitability given higher sales and marketing costs.
- Review the remaining MAPADOC escrow and any related claims or adjustments; the filing reports the first $575,000 release and an additional $162,868 working-capital adjustment paid in February 2020.