Document Security Systems Announces Second Quarter 2018 Financial Results

Document Security Systems (NYSEA:DSS), leader in anti-counterfeit, authentication and diversion protection technologies announced its financial results for the second quarter ended June 30, 2018.

The company reported net income of US2.7 million in the second quarter as compared to a net loss of $265,000.

As quoted in the press release:

“During the second quarter, our Printed Products sales rebounded after a slow start to the year while technology division revenues slipped after a very strong first quarter of 2018.   For the year thus far, revenues are off slightly, and costs have increased primarily due to higher legal costs related to some of our patent litigation matters and our international expansion that we originated at the beginning of the year.  Supported by several new marketing and technology initiatives, both domestically and internationally, we believe that the investments currently being made to strengthen our value propositions, leadership team, and expand our reach will provide long-term benefits to the Company and our shareholders,” states Jeff Ronaldi, CEO of DSS.

“Also, during the quarter, we were very pleased to bring to completion an agreement entered into in 2014 with one of our third-party funding partners relating to our intellectual property (‘IP’) monetization business that resulted in a net gain to the Company of approximately $3.5 million.   The agreement covered a four-year financing arrangement that terminated in February of 2018, which supported our IP monetization efforts relating to a portfolio of semiconductor patents owned by one of our subsidiaries, DSS Technology Management.  The resolution of this agreement favorably impacted our net income for the quarter and significantly improves our working capital position,” added Ronaldi.

Second Quarter 2018 Financial Highlights

• Net income during the second quarter of 2018 was approximately $2.7 million, or $0.16 per share, as compared to a net loss of $265,000 ($0.02 per share) during the second quarter of 2017, primarily due to the impact of net gain from extinguishment of liabilities of approximately $3.5 million, which occurred during the second quarter of 2018, offset by operating losses incurred during the quarter.
• Revenue for the three months ended June 30, 2018 increased 6% to $4.1 million from $3.9 million from the three months ended June 30, 2017.  Printed Products revenue increased 10%, while Technology sales, servicing and licensing revenues decreased by 24%.  Revenue for the six months ended June 30, 2018 declined 2% compared to the same period in 2017.  Printed products revenue decreased by 2%, while technology, sales and licensing services revenue declined by 3%.
• Costs and expenses for the six months ended June 30, 2018 totaled $9.6 million, an increase of 8% from $8.9 million during the same period of 2017, primarily due to an increase in outside services used by our packaging division, a general increase in material costs as a percentage of the printed products groups’ total direct costs, increased professional fees, and additional costs associated with the Company’s expansion into Asia.
• Adjusted EBITDA¹ for the second quarter of 2018 was approximately $3.1 million as compared to $238,000 for the second quarter of 2017. The significant increase in Adjusted EBITDA was driven by the impact of the net gain recognized on the extinguishment of the liabilities, which occurred during the second quarter of 2018.

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