Filing summary
Entity mismatch: The supplied filing is SilverSun Technologies, Inc. (NASDAQ: SSNT), not QXO, Inc. It is a Form 10-Q for the quarter ended September 30, 2021, filed November 9, 2021. Figures below are for SilverSun and its subsidiaries and are unaudited.
Business context and reporting period
SilverSun provides business software, technology, managed services, cybersecurity, cloud hosting and consulting, primarily to small and mid-sized businesses. Management’s strategy emphasizes cloud-based and recurring services, customer expansion, and growth through acquisitions. Results cover the three and nine months ended September 30, 2021, compared with the same 2020 periods.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $10.11 million | $10.16 million | $31.22 million | $29.91 million |
| Gross profit / margin | $3.94 million / 39.0% | $4.05 million / 39.9% | $12.96 million / 41.5% | $11.84 million / 39.6% |
| Operating income (loss) | ($290,298) | $90,742 | $406,879 | ($257,006) |
| Net income (loss) | ($240,029) | $55,205 | $244,939 | ($203,396) |
| Operating cash flow | Not presented separately | Not presented separately | $276,644 | $247,135 |
Q3 revenue was down 0.5% year over year; nine-month revenue increased 4.4%. Nine-month service revenue grew 5.4%, while software revenue was nearly flat. Nine-month net income per diluted share was $0.05, versus a loss of $0.05 in 2020; Q3 diluted loss per share was $0.05, compared with income of $0.01.
At September 30, 2021, cash was $7.25 million and current assets were $9.80 million, against current liabilities of $6.43 million (working capital approximately $3.37 million). Total assets were $17.25 million and total liabilities $7.85 million. Long-term debt, including its current portion, totaled $1.06 million; finance lease obligations totaled $344,790 and operating lease liabilities totaled $1.10 million. No convertible debt remained outstanding. Nine-month cash increased $656,820 to $7.25 million.
Material changes versus the prior comparable period
- Q3 gross margin declined 0.9 percentage points, and the company moved from Q3 operating and net income to losses. Management cited lower software sales, service delivery costs including new-employee learning curves and higher compensation, and increased general and administrative costs.
- For the first nine months, higher service revenue and improved gross margin accompanied a return to operating and net profitability. Managed services and application hosting contributed to service growth.
- General and administrative expense rose 10.5% year over year for the nine-month period, while selling and marketing expense declined 7.2%. Depreciation and amortization also increased, partly reflecting acquisitions.
- The company acquired assets of CT-Solution and PeopleSense in 2021. It also issued shares through at-the-market offerings, raising $4.18 million net during the nine months, and paid a $3.08 million special cash dividend.
- Convertible notes of approximately $671,000 were converted into common shares in February 2021. Common shares outstanding increased from 4.50 million at December 31, 2020 to 5.14 million at September 30, 2021.
Outlook, risks and notable items
The filing provides no quantified revenue, earnings or cash-flow guidance. Management said it expected available cash and business growth to support operating plans for at least the next 12 months, while warning that the forecast could prove incorrect as COVID-19 effects evolve. The company had no line of credit or other credit facility and said it would explore cost reductions and other funding sources.
Management sees remote work, e-commerce, cybersecurity and compliance needs as potential demand drivers. It also intends to pursue acquisitions and investments, which could consume cash or require additional funding or equity. COVID-19, customer financial distress, supply-chain disruption and reduced technology spending were identified as risks. Management reported no material litigation, debt payment defaults, or material changes to previously disclosed risk factors. No material off-balance-sheet arrangements were reported.
Other notable items include an October 2021 grant of 71,630 options to directors and officers and a November 2021 five-year extension of the CEO’s employment agreement. Management concluded disclosure controls were effective; no material change in internal control was reported.
Important facts for investors to verify
- Confirm the issuer: this document is SilverSun Technologies’ filing, not a QXO filing.
- Review Q3 margin pressure and the causes of the operating loss, including service labor costs and higher general and administrative expense.
- Assess the sustainability of operating cash flow and liquidity, given the lack of a credit facility, acquisition plans and the special dividend.
- Verify the terms, remaining availability and dilution effects of the at-the-market offerings, alongside the increase in shares outstanding.
- Review acquisition purchase-price allocations, acquired customer retention and the repayment schedule for debt and lease obligations.
- Monitor COVID-19, customer payment, supply-chain and technology-spending risks that could affect management’s stated liquidity outlook.