Filing identity and reporting period
Important metadata discrepancy: The supplied filing is SilverSun Technologies, Inc. (Nasdaq: SSNT), not QXO, Inc. It is an unaudited Form 10-Q for the quarter ended June 30, 2023, filed August 8, 2023. The results below summarize SilverSun’s filing and should not be attributed to QXO.
SilverSun provides business software, IT, cybersecurity, hosting, and consulting services. Its stated strategy emphasizes recurring revenue, customer retention, cross-selling, and growth through acquisitions.
Financial performance
Amounts are in U.S. dollars. Comparisons are with the corresponding 2022 period.
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 | Comparison |
|---|---|---|---|
| Revenue | $13.26 million | $26.39 million | Up 24.6% and 21.8% |
| Gross profit / margin | $5.19 million / 39.1% | $10.54 million / 40.0% | Prior-year margins: 38.8% and 40.8% |
| Operating income (loss) | $456,264 | $825,801 | Prior-year losses of $79,246 and $98,962 |
| Net income (loss) | $343,361 | $620,852 | Prior-year losses of $87,766 and $128,422 |
| Diluted earnings (loss) per share | $0.07 | $0.12 | Prior-year losses of $0.02 and $0.03 |
Quarterly revenue growth reflected higher software sales and services, especially professional consulting and hosting. For the six-month period, software revenue rose 22.8% and service revenue rose 21.5%. Management cited growth in Acumatica, Sage 100, and Sage Intacct-related work. Six-month gross margin eased 0.8 percentage points, while quarterly gross margin improved 0.3 points.
Cash flow, liquidity, and debt
- Cash was $7.13 million at June 30, 2023, down $878,851 from year-end 2022.
- For the first six months, operating cash flow was negative $323,786, investing cash flow negative $23,860, and financing cash flow negative $531,205. Operating cash use improved from $485,308 in the prior-year period, but cash use from financing increased as debt payments rose.
- Working capital was $3.96 million, versus $2.95 million at December 31, 2022. Current assets were $13.43 million and current liabilities $9.47 million.
- Long-term and related-party debt totaled $1.03 million, including $580,402 classified as current. Finance lease obligations were $507,655; operating lease liabilities were $465,042.
- The company said it had no line of credit or other credit facility. Management believed available funds and business growth would provide adequate liquidity for at least 12 months, while noting uncertainty about economic conditions.
Outlook, transactions, and risks
- No quantified earnings or revenue guidance was provided. Management expects to continue investing in people, product development, sales, and marketing, and to pursue acquisitions, product additions, partnerships, or investments.
- The proposed Rhodium merger remained subject to shareholder and regulatory approvals and other closing conditions. A July 11, 2023 amendment extended the deadline for closing to September 30, 2023 and removed a $5 million termination fee provision. The transaction remained uncertain.
- Under the proposed transaction terms described in the filing, SilverSun would receive $10 million in cash and retain 3.2% equity; SilverSun shareholders were to receive a $1.50-per-share cash dividend and shares in a newly formed holding company, subject to the transaction closing and its conditions.
- Separately, after quarter-end, the board approved a $0.20-per-share special cash dividend, payable August 25, 2023 to shareholders of record August 18, 2023.
- Management cited inflation-related pressure on hiring and retention costs and anticipated higher travel and meal costs as trade-show activity resumed. It identified general economic uncertainty and possible effects on customer spending and collections as risks. It did not expect significant future operating effects from COVID-19 or the Russia-Ukraine conflict, but acknowledged potential adverse impacts.
- Cash deposits exceeded FDIC-insured limits by approximately $6.03 million. One supplier represented about 22% of accounts payable at quarter-end; one supplier accounted for about 14% of cost of revenues in the first half.
Most important facts for investors to verify
- Confirm the filing issuer: the supplied 10-Q is for SilverSun Technologies (SSNT), not QXO.
- Check the subsequent status and final terms of the Rhodium merger, including required approvals, closing deadline, and any later amendments or termination.
- Verify whether the $0.20-per-share special dividend was paid as announced and assess its effect on cash and liquidity.
- Monitor conversion of reported earnings into cash, given negative operating cash flow for the first half, and the company’s ability to meet debt and lease payments without a credit facility.
- Assess sustainability of revenue growth and margins, particularly the contribution of consulting and hosting services and the modest decline in first-half gross margin.