Business Overview and History
DSS, Inc. (DSS) is a multifaceted conglomerate with a diverse portfolio of business operations spanning various industries. Founded in 1984 and headquartered in West Henrietta, New York, the company has transformed over the years, evolving from its roots in document security systems to a dynamic enterprise with nine distinct business lines.
DSS’s journey began in 1984 when it was incorporated in the state of New York as Document Security Systems, Inc. In 2021, the company underwent a name change to DSS, Inc., reflecting its expanded scope and diversified business interests. Today, the company operates nine distinct business lines, each at various stages of development, growth, and income generation.
The company’s Product Packaging division, led by Premier Packaging Corporation, operates in the paperboard and fiber-based folding carton, consumer product packaging, and document security printing markets. Premier Packaging specializes in custom folding cartons, mailers, photo sleeves, and complex 3D direct mail solutions, serving clients in various industries.
The Biotechnology business line, spearheaded by Impact BioMedical, Inc., was established in 2020 when DSS entered the biotechnology sector. This division focuses on investing in or acquiring companies dedicated to advancements in drug discovery, prevention, and treatment of various diseases. Additionally, the company has developed open-air defense initiatives to curb the transmission of airborne infectious diseases.
DSS’s Securities and Investment Management division, which includes the company’s real estate investment trust (REIT), focuses on developing and acquiring assets in the securities trading or management arena. This segment also pursues broker-dealer and mutual fund management opportunities.
The Direct Marketing segment, led by Decentralized Sharing Systems, Inc., provides services to assist companies in the emerging gig business model of peer-to-peer decentralized sharing marketplaces. In 2023, DSS deconsolidated its Direct Marketing segment, Sharing Services Global Corporation, after distributing approximately 280 million shares as a dividend to DSS shareholders. This allowed the company to focus on its other business lines.
The Commercial Lending business, operated by American Pacific Financial, Inc. (APF), is organized as a financial network holding company. APF acquires equity positions in undervalued commercial banks, bank holding companies, and nonbanking licensed financial companies, as well as in companies engaged in nonbanking activities closely related to banking.
The Alternative Trading division was established to develop and acquire assets and investments in the securities trading and funds management arena. This segment, in partnership with global leaders in alternative trading systems, aims to own and operate digital asset exchanges for securities, tokenized assets, utility tokens, and cryptocurrency.
It’s worth noting that DSS discontinued three business lines in 2023: Digital Transformation, Secure Living, and Alternative Energy. These changes reflect the company’s ongoing efforts to adapt its strategy and focus on its most promising ventures.
Key Financial Highlights
As of the latest quarterly report filed on November 13, 2024, DSS reported total revenue of $13.68 million for the nine months ended September 30, 2024. This represents a 28% decrease compared to the same period in the previous year, which was $18.92 million. The decline in revenue was primarily driven by decreases in the company’s Printed Products, Rental Income, and Direct Marketing segments.
The company’s net loss for the nine-month period ended September 30, 2024, was $15.76 million, a significant improvement compared to the net loss of $33.06 million reported in the same period of 2023. This improvement was largely due to decreases in the Provision for Loan Losses, Impairment of Assets upon Deconsolidation, and better performance of the company’s investment portfolio.
For the most recent quarter, DSS reported revenue of $5.599 million and a net loss of $5.283 million. The decrease in revenue and net income compared to the prior year quarter was due to lower customer demand and increased costs. The company has taken steps to reduce expenses, which are expected to improve margins going forward.
Financials and Liquidity
As of September 30, 2024, DSS had cash and cash equivalents of $11.63 million, a decrease from the $6.62 million reported as of December 31, 2023. The company’s total assets stood at $142.66 million, while total liabilities amounted to $72.98 million, resulting in a net debt position of $48.61 million.
DSS’s liquidity position is characterized by a debt-to-equity ratio of 1.11, a current ratio of 1.16, and a quick ratio of 1.11. The company has a $10 million revolving credit facility with Bank of America, of which $5 million was drawn as of September 30, 2024.
For the most recent quarter, DSS reported operating cash flow (OCF) and free cash flow (FCF) of negative $3.607 million.
Segment Performance
Product Packaging: For the nine months ended September 30, 2024, this segment reported revenue of $11.43 million, a 12% decrease compared to the same period in 2023. Cost of revenue for this segment was $10.71 million, a 2% decrease year-over-year.
Commercial Lending: For the nine months ended September 30, 2024, this segment reported revenue of $192,000 and cost of revenue of $719,000.
Biotechnology: For the nine months ended September 30, 2024, this segment reported revenue of $2,000 and cost of revenue of $30,000.
Securities and Investment Management: For the nine months ended September 30, 2024, this segment reported revenue of $2.02 million and cost of revenue of $5.80 million.
Direct Marketing: For the nine months ended September 30, 2024, this segment reported revenue of $3,000 and cost of revenue of $2,000.
Challenges and Opportunities
DSS has faced various challenges in recent years, including the deconsolidation of its Sharing Services Global Corporation (SHRG) subsidiary, which represented a significant portion of the Direct Marketing segment. The company has also dealt with credit weaknesses and borrower repayment issues in its loan portfolio, leading to increased loan loss provisions.
However, the company has taken steps to mitigate these challenges, such as selling real estate holdings and implementing measures to reduce expenses and cash burn at all corporate and business line levels. Additionally, the successful initial public offering (IPO) of its Impact BioMedical subsidiary in September 2024 has provided the company with additional capital to support its growth initiatives.
Looking ahead, DSS sees opportunities in its diverse business lines, particularly in the Biotechnology and Securities and Investment Management segments. The company’s focus on developing innovative medical solutions and expanding its digital asset exchange offerings position it to capitalize on emerging trends in the healthcare and financial technology industries.
Conclusion
DSS, Inc. is a dynamic conglomerate that has navigated a period of transformation and diversification. While the company has faced some challenges, its multi-pronged business strategy and efforts to streamline operations and strengthen its financial position suggest that DSS is well-positioned to continue its evolution and pursue new growth opportunities in the years to come. The recent leadership change in November 2024, with Jason Grady being named Interim Chief Executive Officer, further demonstrates the company’s commitment to adapting to the evolving business landscape and driving shareholder value.
Despite the recent decline in revenue, DSS continues to focus on reducing expenses and improving operational efficiency across its diverse business lines. The company’s strong liquidity position, with $11.63 million in cash and a $10 million revolving credit facility, provides financial flexibility as it navigates the challenges in its various markets. As DSS works to capitalize on opportunities in its biotechnology and investment management segments, investors will be closely watching for signs of improved financial performance and a return to growth in the coming quarters.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.