DSS: DSS Starts to Generate Revenues From New Ventures and Hits Cash Flow Breakeven in Q4
NYSE:DSS
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After considerable investment, DSS (NYSE:DSS) is beginning to see revenues ramp from new ventures. For the first time, this quarter the company generated revenue from its lending bank as well as its investment management business. Also, revenues at the REIT began to ramp with additional real estate purchased. These high margin revenues resulted in the first cash flow positive quarter for the company in years, although free cash flow suffered as it spent $11.5 million in cap ex for a new press and new plant. The bad news is, the consolidation of Sharing, to be evidenced in Q1 2022, will put it back in a negative cash flow territory.
We expect the addition of Sharing and growth in all of its other businesses, could put revenues for 2022 at $70 million although we expect the company to continue to be in a loss and cash flow negative position throughout the year. Premier Packaging now has double the capacity to fill and if it didn’t have to deal with a shortage of paper, would have been able to fill it quickly. Sourcing paper is its biggest problem now and we will have to see how that affects revenues until resolved. We do know, that if it had more paper in Q4, it would have been able to book higher revenues.
In 2022 DSS has to prove itself and execute. With a current enterprise value of $56 million or 0.8 times EV/2022 Estimated sales, it should not take much to move the stock higher if the company stops the dilution and shows solid revenue growth and success in its new businesses. The plan is still to spin-off of the biomedical business, the REIT and the bank--- all three of which could possibly happen this year, and those would only enhance returns for investors. Impact BioMedical is furthest along and we expected an updated S-1 with December financials in April.
Revenues Grew 37% in Q4 Aided by Revenue from the REIT and the Bank
In Q4 2021 revenues at DSS grew to $7.1 million, up 37% from a restated $5.2 million in Q1 2020. Packaging, printing and fabrication grew 5.9% year over year. It was sold out for the rest of 2021 and through the beginning of 2022. Since its new press was installed in Q1 2022, it has double its 2021 capacity. Given capacity constraints, Walgreens and Shutterfly, its two major customers, got priority in Q4 and other orders were being limited or turned away. New capacity is now being will begin to fill and by Q3 the company should have it filled if it can get enough paper. If it could generate $5 million in revenues per quarter before expansion, we could see $10 million in from printed products by Q4 2022. Direct marketing grew 65% to $876,000, while the REIT, with its purchase of a hospitals in Texas and Pennsylvania, increased to $1 million in revenues in the quarter. Q4 revenues for the REIT were all from the Connecticut building plus two months of the hospitals. On Nov 4, 2021 it bought three hospitals for a total of $62 million located in Fort Worth, Texas, Plano, Texas, and Pittsburgh. 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 the year, depending on how the company decides to allocate available capital. Even the bank kicked in $250,000 in revenue from lending.
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