QXO, Inc. quarterly report, Q1 FY2021

Full document

Filing summary

Issuer and period: The supplied filing is SilverSun Technologies, Inc. (NASDAQ: SSNT), not QXO, Inc. It is an unaudited Form 10-Q for the quarter ended March 31, 2021, comparing results with Q1 2020. The filing reports consolidated operations through SilverSun and its wholly owned subsidiaries.

Financial performance and position

  • Revenue: $10.88 million, up 7.9% from $10.08 million. Software revenue increased 13.3% to $2.00 million; service revenue increased 6.8% to $8.88 million.
  • Profit and margins: Gross profit was $4.75 million versus $3.85 million; gross margin expanded to 43.6% from 38.2%. Operating income was $493,273 versus an operating loss of $395,190. Net income was $354,679, or $0.07 per diluted share, versus a net loss of $292,115, or $0.06 per share. Net margin was approximately 3.3%, compared with approximately negative 2.9%.
  • Costs: Total SG&A was $4.25 million, broadly unchanged year over year. Selling and marketing expense fell, while general and administrative expense increased. The MD&A gives a different Q1 2021 G&A figure ($2.435 million) than the financial statement ($2.335 million); the statement amount reconciles to reported total SG&A.
  • Cash flow: Operating activities used $500,461, compared with $296,665 used in Q1 2020. Investing cash flow was zero. Financing provided $3.26 million, principally from a February stock offering. Cash increased $2.76 million to $9.36 million.
  • Liquidity: Current assets were $12.70 million and current liabilities $6.58 million (current ratio approximately 1.93). Working capital was approximately $6.13 million. Management said liquidity should fund operating plans for at least 12 months, while cautioning that COVID-19 effects remain uncertain.
  • Debt and leases: Acquisition-related long-term debt was $725,416 at quarter-end, down from $1.48 million at year-end, partly following conversion of two notes into shares. Finance lease obligations were $235,981; operating lease liabilities were $1.25 million. The company had no credit facility.
  • Balance sheet and equity: Total assets were $19.61 million; total liabilities $7.92 million; stockholders’ equity $11.69 million. Cash rose from $6.60 million at December 31, 2020. Common shares outstanding increased from 4.50 million to 5.06 million during the quarter.

Changes, outlook, and risks

  • Management attributed revenue growth to software sales, commission income, managed services, and application hosting. Higher-margin managed services and hosting, software mix, and maintenance revenue contributed to gross-margin expansion.
  • In February, the company sold 393,300 shares for net proceeds of $3.38 million. It also issued 166,606 shares when holders converted approximately $671,000 of convertible notes. These transactions improved cash or reduced debt but increased share count.
  • Management’s strategy emphasizes cloud-based and recurring services, customer retention, cross-selling, and growth through acquisitions. No quantified revenue or earnings guidance is provided.
  • Subsequent events: the company acquired CT-Solution assets on April 1, 2021 for a $130,000 note, and Peoplesense assets on May 1 for cash, a $450,000 note, and assumed customer-deposit liabilities. A new ATM equity program of up to $3.31 million was entered into in April; no shares had been sold under it as of the filing.
  • COVID-19 could affect customers, revenue, collections, workforce, supply availability, and asset values. The company noted that it had not been significantly affected to date but could not quantify future effects. It cited limited funding options, no credit facility, and potential competition disadvantages; acquisitions may require cash or equity.
  • Concentration and execution considerations include one customer representing 14% of receivables and unbilled services at quarter-end, one channel partner representing approximately 15% of cost of revenues, and cash deposits exceeding FDIC limits by approximately $8.46 million. Management reported no material litigation, no material off-balance-sheet arrangements, and effective disclosure controls.

Important facts to verify

  • Confirm the issuer identity: this filing is for SilverSun Technologies, Inc. (SSNT), not QXO, Inc.
  • Reconcile the conflicting G&A figure in MD&A with the $2.335 million financial-statement amount.
  • Assess whether operating cash use and working-capital movements are consistent with the reported earnings and deferred-revenue growth.
  • Review dilution from the February offering and debt conversions, and the potential impact of the new ATM program and subsequent acquisitions.
  • Evaluate COVID-19 exposure, customer and supplier concentrations, cash balances above insured limits, and management’s liquidity assumptions.