By Lisa Thompson
NYSE:DSS
READ THE FULL DSS RESEARCH REPORT
DSS (NYSE:DSS) continues its march to higher revenues and profits by moving out of unprofitable businesses and opportunistically moving into new ones. 2020 revenues reached $17.4 million, growing 12% while gross margin on a continuing operations basis increased 19%. However the operating loss increased to $10.7 million from $2.6 million. Fully diluted GAAP EPS on a continuing basis was $0.59 compared to a loss of $3.05 a year ago.
Since the quarter ended, DSS increased its position in Sharing Services Global to 48.8% and at any point it may pull the trigger to go over 50% at which point it will be consolidated with DSS. In its latest quarter ending January 31, 2021 it generated $14.3 million in sales. Since sales have been declining at SSG, it is difficult to estimate what is inclusion could contribute to DSS going forward, but with its $57 million dollar run rate it could easily be more than DSS’s current revenues.
Q4 2020 Earnings Results
Total revenues for the quarter were $5.9 million versus a restated $5.7 million a year ago, up 3.5%.
Printed product sales were $4.6 million versus a restated $4.8 million in Q4 2019. Walgreens’ business continued weak but is back to about 80% of what it was. Despite the decline at Walgreens, the company made up for its decline by sales to its new higher margin customers. Commercial and security printing grew $98,000 year over year and was also up sequentially.
Technology sales, services, and licensing grew 5.8% to $765,000. AuthentiGuard was $555,000 of that, and flat with last year. AuthentiGuard’s major customer resumed some production, but it still below former levels. It is difficult to get any new customers to start implementation due to lockdowns across the globe.
RBC Life Sciences reported revenues of $533,000 up from $172,000 a year ago, but down from Q3, as Q3 had a lot of backlog fulfillment from Q2 orders. It is expected to show sequential improvement throughout the year.
Gross margins were 29.9% down from last year’s restated 56.5%, and down from Q3’s 36.7% due to product mix; gross margin dollars were also down to $1.8 million from $2.1 million.
Operating expenses were a huge $8.0 million up sequentially from $3.9 million in Q3 and compared to a restated $2.4 million in 2019. SG&A contained a bonus accrual of $4.3 million for the company’s Chairman. With out that expenses still almost doubled to $4.1 million. This increase was from adding the direct marketing business. We expect that Q1 should show expenses closer to that of Q3 2020.
This fourth quarter DSS’s 32.6% of Sharing Services Global’s net income in its October quarter, reported as a new line item in other income, was $604,000. DSS reports its share of net income on a two-month lag basis. It had no Services income in its September quarter. SSG has already reported its quarter ending January 31, 2021. It had net income $2.4 million in the quarter meaning DSS would report 32.6% or $778,254 as its share in Q1 2021 that goes up to 48.8% in Q2 with the incremental stock purchase. Sharing has stated it will be changing its fiscal year to a calendar year going forward and its quarter’s will be aligned with DSS.
Other expenses contained a one-time unrealized gain on marketable securities of $2.2 million from Alset and REIT stock price changes as well as the rest of its stock portfolio.
Minority interest was a reversal of $788,000 that was caused by a gain from purchase price accounting from Impact BioMedical offset somewhat from expenses at the REIT.
The company again reported its net loss broken down by continuing operations and discontinued operations. The loss from continuing operations was $3.4 million versus a $209,000 loss last year and discontinued operations added $34,000 this quarter versus $51,000 in 2019.
Loss to common shareholders was $2.6 million versus a loss of $209,000 last year. The fully diluted GAAP Loss per share was $0.44 versus a loss of $0.18 a year ago. Non-GAAP it was a loss per share of $0.98 versus a loss of $0.14 last year. The shares outstanding increased 419% to 6.0 million primary shares. Primary shares outstanding as of March 16, 2021 were 27,670,125.
Balance Sheet
On December 31, 2020 the company had $5.2 million in cash, working capital of $3.6 million and debt of $2.3 million. It owns 64,207,378 shares (32.6%) of Sharing Services Global (OTC: SHRG) on the December balance sheet for $12.2 million. DSS owns 127,179,311 ordinary shares of Alset International Limited (formerly Singapore eDevelopment) (Ticker: 40V.SI) a publicly listed company on the Singapore Exchange. In October, the company purchased 200,000 shares of Presidio Property Trust (NASDAQ:SQFT) at the IPO price of $5.00 per share. On December 31, it was worth $4.24 per share and on March 31, $3.66. Because of these prices changes at Alset and Presidio, we believe the company could report a loss on marketable securities in Q1 of $1 million.
Since the quarter ended, the company did two capital raises. On Jan. 19, 2021 DSS sold 7,666,666 shares at $3.60 per share for gross proceeds of approximately $27.6 million and on February 8, 2021, it sold another 14,167,247 shares at $2.80 p with gross proceeds of approximately $39.7 million. It now has approximately $50 million in cash and 27.7 million shares outstanding.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.