Business Overview

DSS, Inc. (NYSE: DSS) is a diversified conglomerate operating in various business segments, including Product Packaging, Commercial Lending, Biotechnology, Securities and Investment Management, and Direct Marketing. The company has faced significant headwinds in recent years, with annual net income of -$80,606,000, annual revenue of $30,258,000, annual operating cash flow of -$19,194,000, and annual free cash flow of -$20,012,000 as of the latest fiscal year.

DSS, Inc. operates nine distinct business lines with operations and locations around the globe. The company's Product Packaging division, led by Premier Packaging Corporation, serves clients in the pharmaceutical, nutraceutical, consumer goods, beverage, specialty foods, confections, photo packaging, and direct marketing industries. The Commercial Lending division, through its subsidiary American Pacific Bancorp, Inc. (APB), focuses on providing commercial loans and acquiring equity positions in undervalued financial institutions and related businesses.

The Biotechnology segment, under Impact BioMedical, Inc., targets unmet medical needs and drives research and development of solutions for medical advances in human wellness and healthcare. The Securities and Investment Management division includes the company's real estate investment trust (REIT) and other investment management activities. The Direct Marketing segment, previously led by the now-deconsolidated Sharing Services Global Corporation (SHRG), provided services to assist companies in the emerging "gig" business model of peer-to-peer decentralized sharing marketplaces.

Quarterly Performance

For the first quarter of 2024, DSS reported total revenue of $3,871,000, a significant decrease of 68% compared to the same period in 2023. This decline was primarily driven by a 50% decrease in Printed Products revenue, a 76% decrease in Rental Income, and the deconsolidation of the Direct Marketing segment following the distribution of SHRG shares.

The company's net loss for the first quarter of 2024 was $5,109,000, an improvement from the $8,633,000 net loss reported in the same period of 2023. This reduction in net loss was largely due to the deconsolidation of SHRG, which had historically contributed significant losses to the company's overall financial performance.

Segmental Performance

The Product Packaging division reported revenue of $3,073,000 in the first quarter of 2024, down 50% from the same period in 2023. This decrease was primarily due to orders expected to ship during the fourth quarter of 2022 being pushed to the first quarter of 2023.

The Commercial Lending segment reported revenue of $104,000 in the first quarter of 2024, a decrease from $117,000 in the same period of 2023. This decline was driven by a number of loans going on non-accrual as borrowers struggled to make expected payments.

The Biotechnology division, represented by Impact BioMedical, did not generate any revenue in the first quarter of 2024 or 2023, as the segment continues to focus on research and development efforts.

The Securities and Investment Management segment reported revenue of $687,000 in the first quarter of 2024, a decrease from $1,685,000 in the same period of 2023. This decline was primarily due to the deconsolidation of the REIT operations.

The Direct Marketing segment, which was deconsolidated in the second quarter of 2023, reported revenue of $3,994,000 in the first quarter of 2023.

Liquidity

As of March 31, 2024, DSS had cash and cash equivalents of approximately $9.3 million. The company believes it has sufficient cash to meet its cash requirements for at least the next 12 months, aided by the deconsolidation of SHRG and the sale of HWH Holdings, Inc., which are expected to improve future cash flows.

Net cash used in operating activities was $2,150,000 for the first quarter of 2024, compared to $14,199,000 for the same period in 2023. This improvement was driven by a decrease in net loss of approximately $3,524,000. Net cash provided by investing activities was $5,097,000 in the first quarter of 2024, compared to $11,537,000 in the same period of 2023, primarily due to lower proceeds from the sale of marketable securities.

Risks and Challenges

DSS, Inc. faces several risks and challenges, including: - Continued losses and negative cash flows from operations - Reliance on a limited number of large customers, particularly in the Product Packaging and Commercial Lending segments - Ongoing integration and restructuring efforts across its diverse business lines - Potential impairment of goodwill and other intangible assets - Regulatory and compliance risks in its financial services and healthcare-related businesses

Outlook

The company has not provided any specific financial guidance for the upcoming fiscal year. However, management has indicated that it is focused on streamlining operations, reducing expenses, and improving the company's overall financial performance through the ongoing restructuring and divestment of underperforming business units.

Conclusion

DSS, Inc. is a diversified conglomerate navigating a challenging period as it works to restructure its operations and address the financial and operational headwinds impacting its various business segments. While the company has made progress in reducing losses and improving liquidity, it continues to face significant risks and uncertainties. Investors should closely monitor the company's progress in executing its turnaround strategy and the impact of its restructuring efforts on the company's long-term financial performance.