Filing identity and reporting period
Important: The supplied filing is SilverSun Technologies, Inc. (Nasdaq: SSNT), not QXO, Inc. It is an unaudited Form 10-Q for the quarter ended September 30, 2023, with comparisons to 2022.
Business context
SilverSun provides business software, IT and cloud services, cybersecurity, and consulting, primarily to small and midsize businesses. Management describes a growth strategy focused on recurring revenue, customer retention, cross-selling, and acquisitions.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $13.42 million | $10.92 million | $39.81 million | $32.58 million |
| Gross profit | $5.35 million | $4.43 million | $15.89 million | $13.26 million |
| Gross margin | 39.9% | 40.6% | 39.9% | 40.7% |
| Operating income (loss) | $427,455 | ($117,610) | $1.25 million | ($216,572) |
| Net income (loss) | ($2.11 million) | ($134,237) | ($1.49 million) | ($262,659) |
| Operating cash flow | Not presented quarterly | Not presented quarterly | $817,723 | $1.13 million |
Revenue grew 23.0% in Q3 and 22.2% year to date, driven mainly by consulting and other service revenue, as well as software sales. Service revenue growth was particularly strong, while service gross margin declined year over year. The company reported a Q3 diluted loss of $0.40 per share and a nine-month diluted loss of $0.28 per share.
At September 30, 2023, cash was $6.88 million, working capital was $487,090, and total current liabilities were $10.55 million. Long-term debt was $795,209; finance lease obligations totaled $455,054 and operating lease liabilities totaled $374,727. Cash declined $1.13 million in the first nine months, including a $1.05 million special dividend. No credit facility was in place.
Material changes and unusual items
- Operating results improved to operating income, but a $2,986,107 charge for abandoned merger-related costs contributed to net losses. SilverSun terminated its merger agreement with Rhodium on October 13, 2023, after the September 30 reporting date.
- The August 2023 special dividend was $0.20 per share, or $1,051,256 in total.
- After quarter-end, on November 13, 2023, the company entered an agreement to acquire certain JCS Computer Resource Corporation assets for $1.325 million, including a $1.025 million, three-year note bearing 4.25% interest.
- Accounts payable included amounts concentrated with a legal firm (54%) and one supplier (11%) at quarter-end. Cash exceeding FDIC insurance limits was approximately $5.71 million.
Outlook, commentary, and risks
Management said it believed available cash and business growth would support operating plans for at least 12 months, while noting uncertainty about economic conditions. It cited continued customer growth, ERP product demand, and increased consulting capacity as growth drivers; recruitment and retention costs, travel, and marketing expenses pressured profitability. The filing provides no quantified revenue or earnings guidance.
Management said COVID-19, the Russia-Ukraine war, and the Israel-Hamas war were not expected to have a significant effect, but acknowledged potential indirect impacts on customers, revenue, and operations. Other disclosed considerations include dependence on a channel partner representing about 14% of cost of revenues, acquisition funding needs, and the absence of a credit facility. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer: this filing is for SilverSun Technologies (SSNT), not QXO, Inc.
- Review the Rhodium merger termination and the timing and accounting for the $2.986 million deal-cost write-off.
- Reconcile the MD&A narrative, which refers to $2,936,107 of merger-related expense, with the statements and notes reporting $2,986,107.
- Assess liquidity after the special dividend, debt and lease payments, and the subsequent JCS acquisition note.
- Monitor service margins, customer growth, personnel costs, and the company’s ability to fund acquisitions without a credit facility.