Filing summary
Important identity mismatch: The request identifies QXO, Inc., but the supplied 10-Q is for SilverSun Technologies, Inc. (Nasdaq: SSNT), for the quarter ended June 30, 2022. This summary reflects the supplied filing, not QXO.
Business context and reporting period
SilverSun provides business software, technology, cybersecurity, managed IT and consulting services, primarily to small and midsize businesses. The unaudited filing reports second-quarter and six-month results through June 30, 2022, compared with the same 2021 periods.
Financial and operating performance
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue, 2022 | $10.64 million | $21.66 million |
| Revenue, 2021 | $10.23 million | $21.11 million |
| Gross profit, 2022 | $4.13 million; 38.8% margin | $8.83 million; 40.8% margin |
| Operating income (loss), 2022 | $(79,246) | $(98,962) |
| Net income (loss), 2022 | $(87,766) | $(128,422) |
| Net income (loss), 2021 | $130,289 | $484,968 |
| Basic and diluted EPS, 2022 | $(0.02) | $(0.03) |
Revenue rose 4.0% in the quarter and 2.6% year to date. Software revenue increased 57.9% and 43.2%, respectively, while service revenue declined 7.2% and 6.2%. Gross margin fell from 41.7% to 38.8% in the quarter and from 42.7% to 40.8% year to date.
For the six months, operating cash flow was $(485,308), investing cash flow was $(180,549), and financing cash flow was $(274,586). Cash decreased $940,443 to $5.87 million. Cash and cash equivalents were $5.87 million at June 30, 2022, versus $6.81 million at year-end 2021. Working capital was $2.75 million; current assets were $9.95 million and current liabilities $7.20 million.
Long-term and related-party debt totaled $1.72 million, including $633,436 classified as current. Finance lease obligations totaled $733,784 and operating lease liabilities $511,981. The company reported no credit facility or line of credit.
Material changes versus the prior period
- Despite revenue growth, SilverSun moved from operating and net income in 2021 to operating and net losses in both the 2022 quarter and first half.
- Service gross profit declined 13.3% in the quarter and 10.0% year to date. Management attributed pressure to higher compensation and benefits, inflation, and training costs for new hires who were not yet as billable.
- Software sales growth partly offset lower service revenue, which management linked mainly to reduced maintenance and consulting activity, customer project delays, and economic and staffing challenges at customers.
- Debt increased from $968,940 at December 31, 2021 to $1.72 million at June 30, 2022, including financing for acquisitions. Cash was lower than at year-end; the prior-year first half also included $4.10 million of net equity proceeds.
Outlook, risks and unusual items
- No quantified revenue or earnings guidance was provided. Management said it believed available cash and business growth would fund operating plans for at least 12 months, while cautioning that COVID-19-related uncertainty could undermine that assessment.
- Management’s strategy emphasizes cloud products, recurring revenue, customer retention, cross-selling and acquisitions. It said work-from-home needs, e-commerce, security and compliance could support future revenue.
- Inflation and the return to pre-pandemic marketing and trade-show activity were expected to raise personnel, travel and meal costs and pressure profitability. The company said it had no credit facility and might need to rely on limited resources during an economic downturn.
- The January 2022 Dynamic Tech Services asset acquisition had a $1.335 million purchase price, funded with $500,000 cash and an $835,000 note at 3.25%. The note may be reduced by up to $150,000 if specified customer subscription-renewal thresholds are not met. The first payment is due January 1, 2023, after the adjustment is determined.
- Management did not expect significant direct effects from COVID-19 or the Russia-Ukraine conflict, but disclosed possible adverse effects on customers, revenue, collections, supply availability and financial results. Sanctions could also affect business indirectly.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no litigation believed likely to materially affect the company and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is SilverSun Technologies, Inc. (SSNT), not QXO, Inc.
- Review service revenue trends, gross-margin deterioration and the extent to which software growth can offset weaker consulting and maintenance activity.
- Track operating cash use, cash balances, debt maturities and management’s stated 12-month liquidity assessment, particularly given the absence of a credit facility.
- Check the DTS customer-renewal performance and any resulting adjustment to its $835,000 note, as well as the accounting allocation of acquired intangible assets.
- Assess whether inflation, hiring and retention costs, customer project delays, and economic or geopolitical risks continue to affect profitability and collections.