DSS Cuts Losses Significantly By Exiting Direct Marketing
NYSE:DSS
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Q2 2023 Results and DSS Exits the Direct Marketing Business
DSS (NYSE:DSS) reported Q2 revenues of $7.2 million, down 39% from the year ago’s $11.8 million. Most of the total revenue decline was driven by a $4.5 million decline in Direct Marketing revenues as the company divested Sharing Global Services on May 4th. Direct marketing was down 74% year over year. On April 5th, Sharing was dividended to shareholders with DSS retaining 7% of the shares (25 million shares). In Q2 Sharing was only consolidated with DSS except for the first month. On July 1st, after the quarter ended, DSS sold the remaining portion of Direct Marketing to Sharing for $711,000 representing the gross proceeds of the sale of HWH inventory less the cost of goods sold. So from Q3 on, there is no longer a direct marketing business at DSS.
Printed product sales were down 10% year over year and down 39% sequentially. In Q1 2023 $3.0 million of the $5.8 million of Packaging Printing and Fabrication revenues were from Walgreens’ photo business which slipped into Q1 from Q4. In Q2, Walgreens cut back orders but business to be back to normal there in Q3. With its new capabilities, Premier is expanding further into food packaging and recently landed a number of new customers in that area, one being Wegmans. Wegmans is moving to replace plastic-based containers with cardboard. It also landed a large food company as a new customer. It is a NY-based maker of syrups, sauces, fillings, and toppings with over $200 million in sales.
The REIT contributed $1.5 million in revenues almost the same as Q2 2022. The bank generated $197,000 in net investment income and the commodity broker revenues were $295,000. combined this quarter and had revenues of $117,000 compared with revenues of $129,000 in Q1 2022. The brokerage business is expected to have variable results due to its trading business.
The table below shows segment reporting. All of the businesses reported a loss. The majority of losses were caused by direct marketing which lost $28.1 million in the quarter. Impact Biomedical spent $3.9 million. Next quarter both Direct Marketing and Biotechnology will be off DSS’s income statement reducing operating expenses significantly.
Gross margin in the quarter was 33.2% versus a reclassified 34.8% last year, while gross margin dollars were $2.4 million.
Operating expenses were $8.9 million, a decrease from $15.2 million last year driven by the spin-off of Sharing. In other income, there was a one-time $3.4 million reserve for rent receivable to the REIT. Without that, operating expenses would have been $5.5 million. We expect that to go down further in Q3 with the elimination of the direct marketing business.
The operating loss was $6.5 million compared to $11.2 million last year. It would have been $3.1 million without the reserve.
Other expenses were $31.3 million, with $27.9 million being from unrealized losses on marketable securities. $29.2 million of the loss was from Sharing, meaning other securities increased. There was also a $3.8 million provision for loan losses from the bank.
Minority interest was a reversal of a $200,000 profit, versus a $748,000 loss last year. Loss to common shareholders was $37.9 million, compared to a $4.7 loss last year. The GAAP loss per share was $0.27 versus $0.05 per share a year ago. The average shares outstanding increased by 54% to 140 million shares.
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