Google Finance
Filing
Jan. 27, 2017
Q3 2017 Data
Price: $4.1, Shares: 4.5m. Cap: $18.5m
1.Basic Information
(1) History
The company was a spin-off of iVoice Inc. in around 2003. It IPO'ed at 2004 on OTC. It upgraded to Nasdaq in early 2017. The company's main business is the resale of Sage ERP X3. Also, it provides its own inventory solutions and ERP-related services, etc. The company's customers are mostly small businesses. For the first several years before 2011, its revenue stayed at around $7m and lost money. Since 2011, it has been able to grow revenue very well and stay profitable. Its main strategy is acquiring other small ERP resalers. It seems worked pretty well. In 2016, its revenue grew to $34m. However, the first 3Q of 2017 revenue is flat compared to 2016 with no new acquisitions.
(2) Business-related:
A) By-Products:
Sage ERP X3: Resale of the software to small business. Also includes related services. Total ERP-related revenue is around 2/3 of total revenue.
MAPADOC: The company's own EDI( Electronic Data Interchange) system which is used by the suppliers of big supermarkets like Walmart etc. It reduces mistakes if the supplier uses manual transmission of documents. Around 15% of revenue is MAPADOC-related.
Network and Managed Services: IT-related services. Around 18% of revenue.
B) By Segments:
Software license revenue: around 15% of revenue. It includes Sage ERP X3 resale and MAPADOC revenue.
Services: around 85% of revenue. It also includes revenue for services of ERP which is around 1.5 to 2.5 times of license revenue.
(3) Management.
Mark Meller seems to have been with the company since 2003.
Jeff Roth: He was the CEO of SWK Technologies which is owned by SSNT. However, he left the company in 2016 and the company appointed a new COO instead.
(4) Debt and Credit Facility.
As of Q3 2017, the company has around $1.7m in cash and $600k in debt.
(5) Insider holding, options, Insider trading info, share buyback.
In 2012, Jeff Roth sold his remaining interest in SWK technology and acquired 32m shares. Mark Meller's share is still 60m shares.
In 2015, it did a reverse split of 1:30, and total shares were reduced to 4.4m. Mark Meller holds 2m shares and Jeff Roth holds 1m shares.
Jeff Roth left the company in May 2016 and he started to unload his shares at the end of 2017. By Jan. 2018, he still holds around 720k shares. While Mark Meller still holds 2m shares. Around 45%.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
(1) Currently, the company is actually paying some dividends from time to time. Kind of strange for a small company with high revenue growth.
(2) For the year 2016, the real income is around 1.2m. In 3Q of 2017, the real income is close to $1m. The current P/E is around 15 based on these numbers.
4. Risk
(1) Don't know whether Roth's quit is connected with the flat revenue in 2017. Seems profit wasn't affected by his leave. He is still unloading his shares through the market which creates pressure on share price because the volume is really thin.
(2) The company might not be able to grow revenue or maintain its current profit level.
(3) Jeff Roth might be the key person for the company that had left.
5. Conclusion
Based on a non-growing point, the current price is just fair. However, if it can grow again in the future or improve profitability. Then it could be a good one.
6.Links
2Q 2023 data
Price $3.3. Shares 5.3m. Cap 18m.
1. From 2018 to 2022, the company grew its revenue from around 35m to 45m levels despite it sold its MAPADOC business in 2019 for around $8m. However, ever since 2011, although its revenue grew 4 fold, its income grew very little and is still at around the $1m level in 2022.
2. For the first 2Q of 2023, it recorded record revenue while its expenses didn't grow as fast. As a result, it generated $1.2m in real income.
3. In Q2 2023, it had 7.1m in cash and $1m in debt. After paying a $0.2/share dividend in Q3, it should have around 6m cash left. In 2021, it issued around 400k shares for $3.4m. Dividend from 2017 to 2023: $0.08, $0.05, $0.50, $0.40, $0.60, $0.00, $0.20(Aug. 2023).
4. In Sept. 2022, it entered a reverse merger agreement with Crypto miner Rhodium Enterprises. The major terms were as follows:
(1) Rhodium will pay SSNT $10m, among which $8.5 will be paid as a one-time special dividend($1.5/share) to SSNT shareholders.
(2) All current SSNT's assets and business will be put into a new subsidiary which will be distributed to the current SSNT's shareholders. It will be looking to IPO it after the merger.
(3) Each current shareholder of SSNT will receive one share of the merged company as well.
(2) All current SSNT's assets and business will be put into a new subsidiary which will be distributed to the current SSNT's shareholders. It will be looking to IPO it after the merger.
(3) Each current shareholder of SSNT will receive one share of the merged company as well.
The term is very favorable to SSNT. However, the Merger has been postponed for a while now and it is less and less likely that the merger will be pursued. The current breakup fee for each party is $3.25m.
5. Mark Meller still holds around 2m shares after those years. Jeff Roth had reduced his position to less than 5% by March 2022. Beginning in 2003, the company paid Mark Meller a base salary that increased by 10% each year. In 2021, his salary stood at $940k.
Comments:
1. Historically, the company did grow well in the top line, however, it didn't control its expense well. Thus its profit stayed flat. It also paid its CEO very generously compared to the profit it made.
2. In the past 5 years, it totally paid out around $1.7/share dividend. However, the share price barely moved. In total, it is not a great return for the shareholders.
3. Based on the first 2 quarters of 2023, it had generated better than before profit. Remove the cash it had, it is traded around $13m vs. $1.2m income in the first 2Q. The price is very acceptable if it can somewhat maintain the profit level.
4. If the merger did go through, that would be a major catalyst for the company. If it doesn't, the company is still worth the current price. It might collect some breakup fees as well.
5. The major risk of this company is that the management is not focused on profitability. It might just be a temporary boost in profit. Should watch it closely.
