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DSS: Revenues Grew 24% in Q3 and the REIT Generated its First Revenues


By Lisa Thompson



In Q3 2021 revenues at DSS (NYSE:DSS) grew 24% fueled by newer ventures. Direct marketing grew 35% while the REIT, with its recent purchase of a health facility in Connecticut, generated its very first revenues.

Packaging, printing and fabrication grew 31% year over year and is now operating at full capacity given its own capabilities, combined with its ability to source components. It is sold out for the rest of 2021 and through the beginning of 2022. Once its new press is installed in January, it will have double its current capacity. Given capacity constraints, Walgreens and Shutterfly, its two major customers, are getting priority and other orders are being limited or turned away. Once the press is installed in Q1, that capacity will begin to fill and by Q3 the company should have it filled. If it can generate $6 million in revenues with current capacity, we may see $12 million from printed products by Q4 2022. Construction of the new plant and installation of the press is on schedule. In January both locations will be run in parallel until the switch over.

Direct marketing grew 35% to almost a million dollars this quarter. It is moving away from direct sales and multilevel marketing to selling through affiliates and influencers which DSS believes will result in higher margins and a simplified structure.

Impact Biomedical continues to test its products and seek out customers. DSS is on track to dividend out this entity and is waiting for SEC approval before its holds a board of directors meeting to pick a record date. Now, the plan is to wait until the entity has some revenues to show before it pursues an IPO as a separate public company. The S-1 is under review at the SEC and an IPO could happen in Q1. Revenues could start as soon as Q1 for some of its products. Near term, the company hopes to license its Laetose technology to food producers and it is in talks with a number of large companies. This technology combines sugar and inositol to lower sugar consumption and may even be able to avoid tariffs supported by big sugar. We expect a deal to be announced with at least one of these companies perhaps by year-end.

Q3 revenues for the REIT were all from the Connecticut building. On Nov 4, 2021 it bought three hospitals for a total of $62 million located in Fort Worth, Texas, Plano, Texas, and Pittsburgh. They are rented to and operated by LifeCare Hospitals, a specialty hospital operator with a focus on long-term acute and critical care. LifeCare has eleven years remaining on its lease and has an option to renew for an additional five years. The hospitals have a total capacity of 195 hospital beds spanning a gross floor area of approximately 320,000 square feet. They are accredited by The Joint Commission and are Medicare-certified. To help facilitate the acquisition, DSS Securities, loaned AMRE $0.8 million and American Pacific Bancorp loaned AMRE $13.9 million. Other than that, DSS did not use any cash in the acquisition. We do not know what these three hospitals will generate in revenues to DSS. DSS has plans to spin off the REIT as a public once it gets to a suitable size which it judges to be about $100 million to $150 million in real estate value. This could happen as soon as the end of next year, depending on how the company decides to allocate available capital. We expect the company to buy another hospital by year end.

DSS trades at an enterprise value of approximately $227,000. Incremental value includes its $25.3 million in securities, $6.5 million in real estate, as well as the $50 million purchase price of Impact BioMedical. If we use sum of the parts valuation, we believe DSS common stock is worth at least $2.18 per share.

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