Filing identity and reporting period
The supplied filing is SilverSun Technologies, Inc.’s Form 10-K for the fiscal year ended December 31, 2018—not a QXO, Inc. filing or a standalone fourth-quarter report. The filing describes a provider of ERP and accounting software, consulting, EDI products, managed IT, cybersecurity, and hosting services, primarily to small and midsize businesses.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $41.00 million | $34.85 million |
| Gross profit / margin | $16.92 million / 41.3% | $13.87 million / 39.8% |
| Operating income | $412,760 | $939,258 |
| Income (loss) before taxes | $371,078 | $907,562 |
| Net income (loss) | $262,432 | $(486,469) |
| Operating cash flow | $1.29 million | $2.31 million |
| Cash at year-end | $1.90 million | $2.24 million |
- Services generated $34.80 million of 2018 revenue; software products generated $6.20 million. Recurring revenue was reported as 42.9% of total revenue, up from 40.7%.
- Operating margin was approximately 1.0% in 2018 versus 2.7% in 2017. The increase in gross profit was more than offset by higher selling, marketing, and general and administrative expenses.
- Net income improved despite lower pretax income, principally alongside a much smaller income-tax provision: $108,646 in 2018 versus $1.39 million in 2017. The 2017 provision included a tax-law change charge.
- Current assets were $4.89 million against current liabilities of $6.23 million. The company had no borrowings on its $2 million secured revolving credit line at year-end; management said available liquidity was adequate for at least the next 12 months.
- Year-end debt included $1.49 million of promissory notes and $195,867 of capital-lease obligations. Notes include acquisition-related obligations, some convertible into common shares at $4.03 per share. Operating cash flow fell year over year; investing activities used $1.06 million and financing activities used $566,000.
Material changes and notable items
- Revenue grew 17.6%; gross profit grew 22.0%. Operating income declined 56.1%, as selling and marketing expense rose 39.2% and general and administrative expense rose 22.1%.
- 2018 acquisitions of Info Sys Management and Nellnube added ERP-reseller and application-hosting businesses. The acquired operations contributed approximately $1.86 million of revenue and $174,264 of pretax income for the seven months included in the company’s results.
- Recurring revenue increased as a share of sales. Management highlighted MAPADOC’s addition to the Sage price list in November 2018 and described continued growth through customer expansion, cross-selling, managed services, and acquisitions. No numerical 2019 earnings or revenue guidance is provided.
- A $0.05-per-share special dividend, approximately $225,038, was declared in December 2018 and paid in January 2019. The company also adopted the new revenue standard in 2018 without a retained-earnings adjustment.
- The company expected adoption of the lease accounting standard in 2019 to add approximately $911,000 of operating lease liabilities and corresponding right-of-use assets.
- Management reported effective internal control over financial reporting and no material weaknesses. The independent auditor issued an unqualified opinion on the financial statements; it did not audit internal-control effectiveness.
Risks, contingencies, and governance
- Risks include acquisition integration and financing, competition and pricing pressure, reliance on skilled personnel and key vendors, software or cybersecurity failures, and the possibility of needing additional capital. The filing reports Sage purchases at 22% of total cost of revenue and one supplier at approximately 40% of accounts payable.
- A $2 million revolving line is secured by substantially all company assets and was due to expire August 31, 2019. The company also disclosed convertible acquisition notes and potential shareholder dilution.
- A stockholder derivative lawsuit filed in Delaware in March 2019 challenges the company’s capital structure and seeks equitable relief, possible damages, and legal fees. The company and board said they considered it without merit and intended to defend it; no specific damages amount was stated.
- The CEO owned approximately 44.6% of common shares and the sole Series B preferred share, which carries voting rights designed to give him significant influence over shareholder votes. The filing also notes limited trading volume and potential Nasdaq listing and share-price risks.
- The company reported an accumulated deficit of $7.43 million. Its approximately $6.53 million of federal net operating loss carryforwards are subject to statutory limitations; realization of deferred tax assets depends on future taxable income.
Important facts for investors to verify
- Confirm the issuer and period: the supplied document is SilverSun Technologies’ FY 2018 Form 10-K, not QXO’s filing or a standalone Q4 report.
- Review the full financial statements and notes for acquisition accounting, convertible-note terms, debt maturities, and the basis for management’s liquidity assessment.
- Track whether revenue growth and recurring-revenue gains translate into improved operating income and cash generation.
- Check developments in the Delaware lawsuit, the secured credit line’s renewal or replacement, and the potential dilution from convertible notes.
- Assess the effect of the 2019 lease-standard adoption and the company’s ability to realize deferred tax assets.