Staffing 360 Solutions Reports Second Quarter and Six-Month 2023 Financial Results
November 14 2023 - 8:30AM
Staffing 360 Solutions, Inc. (Nasdaq:
STAF) (“Staffing 360 Solutions” or the
“Company”), a company executing an international
buy-integrate-build strategy through the acquisition of staffing
organizations in the United States and the United Kingdom, today
reported its second quarter 2023 financial results for the period
ended July 1, 2023.
Second Quarter 2023 Overview
- Revenue grew by 5.1% (5.9% in constant currency) to $62.1
million, compared with $59.1 million for the prior year period,
resulting primarily from the Company’s Headway Workforce Solutions
acquisition.
- Gross profit was $8.8 million, compared with $10.5 million for
the prior year period.
- Operating loss was $1.6 million, compared with an operating
loss of $643,000 for the prior year period.
- Net loss totaled $2.9 million, compared with a net loss of $2.3
million for the prior year period.
- Diluted loss per share loss was $0.77, compared with a diluted
loss per share loss of $1.29 in the prior year period.
- EBITDA loss was $767,000, compared with an EBITDA loss of
$432,000 for the prior year period.
- Adjusted EBITDA, a non-GAAP measure, was $603,000, compared
with $1.4 million in the prior year period.
Six-Month 2023 Overview
- Revenue increased by 14.9% (16.3% in constant currency) to
$125.2 million, compared with $108.9 million for the prior year
period, resulting primarily from the Company’s Headway Workforce
Solutions acquisition.
- Gross profit was $18.3 million, compared with $19.0 million for
the prior year period.
- Operating loss was $3.0 million, compared with an operating
loss of $1.7 million for the prior year period.
- Net loss totaled $5.7 million, compared with a net loss of $4.6
million for the prior year period.
- Diluted loss per share loss was $1.66, compared with a diluted
loss per share loss of $2.61 in the prior year period.
- EBITDA loss was $1.4 million, compared with an EBITDA loss of
$1.3 million for the prior year period.
- Adjusted EBITDA, a non-GAAP measure, was $1.9 million, compared
with $2.2 million in the prior year period.
Non-GAAP financial measures are meant to supplement, and be
viewed in conjunction with, GAAP financial results. The
presentation of these non-GAAP financial measures should not be
considered in isolation or as a substitute for comparable GAAP
financial measures and should be read only in conjunction with the
Company’s financial statements prepared in accordance with GAAP.
Reconciliations of the Company’s non-GAAP measures are included in
the tables below.
“The second quarter was one of heightened uncertainty in the
employment sector, with clients remaining extremely cautious about
their headcount needs and expenditures. As a result, we are facing
many of the same challenges as other staffing firms, especially in
the area of light industrial. At the same time, workers
compensation costs and a weaker permanent placement/direct hire
market have contributed to softer margins,” said Brendan Flood,
Chairman, CEO and President.
“We are continuing to carefully monitor the markets in which we
operate so that we are well prepared as the economy recovers,”
concluded Flood.
OutlookAlthough industry conditions remain
uncertain and are subject to change, the Company currently
estimates revenues for the 2023 fiscal year in the range of $250
million to $265 million.
About Staffing 360 Solutions, Inc.Staffing 360
Solutions, Inc. is engaged in the execution of an international
buy-integrate-build strategy through the acquisition of domestic
and international staffing organizations in the United States and
United Kingdom. The Company believes that the staffing industry
offers opportunities for accretive acquisitions and as part of its
targeted consolidation model, is pursuing acquisition targets in
the finance and accounting, administrative, engineering, IT, and
light industrial staffing space.
For more information,
visit http://www.staffing360solutions.com. Follow Staffing 360
Solutions
on Facebook, LinkedIn and Twitter.
Forward-Looking StatementsThis press release
contains forward-looking statements, which may be identified by
words such as “expect,” “look forward to,” “anticipate,” “intend,”
“plan,” “believe,” “seek,” “estimate,” “will,” “project,” or words
of similar meaning. Forward-looking statements are not guarantees
of future performance, are based on certain assumptions and are
subject to various known and unknown risks and uncertainties, many
of which are beyond the Company's control, and cannot be predicted
or quantified; consequently, actual results may differ materially
from those expressed or implied by such forward-looking statements.
Such risks and uncertainties include, without limitation, our
ability to retain our listing on the Nasdaq Capital Market and to
regain and maintain compliance with the rules of the Nasdaq Capital
Market; market and other conditions; the geographic, social and
economic impact of COVID-19 endemic and its ongoing effects on the
Company’s ability to conduct its business and raise capital in the
future when needed; weakness in general economic conditions and
levels of capital spending by customers in the industries the
Company serves; weakness or volatility in the financial and capital
markets, which may result in the postponement or cancellation of
customer capital projects or the inability of the Company’s
customers to pay the Company’s fees; the termination of a major
customer contract or project; delays or reductions in U.S.
government spending; credit risks associated with the Company’s
customers; competitive market pressures; the availability and cost
of qualified labor; the Company’s level of success in attracting,
training and retaining qualified management personnel and other
staff employees; changes in tax laws and other government
regulations, including the impact of health care reform laws and
regulations; the possibility of incurring liability for the
Company’s business activities, including, but not limited to, the
activities of the Company’s temporary employees; the Company’s
performance on customer contracts; negative outcome of pending and
future claims and litigation; government policies, legislation or
judicial decisions adverse to the Company’s businesses; the
Company’s ability to access the capital markets by pursuing
additional debt and equity financing to fund its business plan and
expenses on terms acceptable to the Company or at all; and the
Company’s ability to comply with its contractual covenants,
including in respect of its debt agreements, as well as various
additional risks, many of which are now unknown and generally out
of the Company’s control, and which are detailed from time to time
in reports filed by the Company with the Securities and Exchange
Commission, including its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. Staffing 360
Solutions does not undertake any duty to update any statements
contained herein (including any forward-looking statements), except
as required by law.
Investor Relations Contact:Roger Pondel or
Laurie BermanPondelWilkinson
Inc.310-279-5980pwinvestor@pondel.com
(financial tables follow)
STAFFING 360
SOLUTIONS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(All amounts in
thousands, except share, per share and par values) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As ofJuly 1, 2023 |
|
As ofDecember 31, 2022 |
|
ASSETS |
|
(Unaudited) |
|
|
|
Current Assets: |
|
|
|
|
|
Cash |
|
$ |
75 |
|
|
$ |
1,992 |
|
|
Accounts receivable, net |
|
|
26,776 |
|
|
|
23,628 |
|
|
Prepaid expenses and other current assets |
|
|
2,146 |
|
|
|
1,762 |
|
|
Total Current Assets |
|
|
28,997 |
|
|
|
27,382 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
1,450 |
|
|
|
1,230 |
|
|
Goodwill |
|
|
19,891 |
|
|
|
19,891 |
|
|
Intangible assets, net |
|
|
16,228 |
|
|
|
17,385 |
|
|
Other assets |
|
|
7,553 |
|
|
|
6,701 |
|
|
Right of use asset |
|
|
8,717 |
|
|
|
9,070 |
|
|
Total Assets |
|
$ |
82,836 |
|
|
$ |
81,659 |
|
|
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
19,239 |
|
|
$ |
16,526 |
|
|
Accrued expenses - related party |
|
|
215 |
|
|
|
218 |
|
|
Current portion of debt |
|
|
- |
|
|
|
249 |
|
|
Accounts receivable financing |
|
|
17,516 |
|
|
|
18,268 |
|
|
Leases - current liabilities |
|
|
1,291 |
|
|
|
1,188 |
|
|
Earnout liabilites |
|
|
8,344 |
|
|
|
8,344 |
|
|
Other current liabilities |
|
|
2,668 |
|
|
|
2,639 |
|
|
Total Current Liabilities |
|
|
49,273 |
|
|
|
47,432 |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
8,751 |
|
|
|
8,661 |
|
|
Redeemable Series H preferred stock, net |
|
|
8,505 |
|
|
|
8,393 |
|
|
Leases - non current |
|
|
8,270 |
|
|
|
8,640 |
|
|
Other long-term liabilities |
|
|
226 |
|
|
|
180 |
|
|
Total Liabilities |
|
|
75,025 |
|
|
|
73,306 |
|
|
|
|
|
|
|
|
Commitments
and contingencies |
|
— |
|
— |
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
Preferred stock, $0.00001 par value, 20,000,000 shares
authorized; |
|
|
|
|
|
Series J Preferred Stock, 40,000 designated, $0.00001 par value, 0
and 0 shares issued and outstanding as of July 1, 2023 and January
1, 2022, respectively |
|
|
|
|
|
Common stock, $0.00001 par value, 200,000,000 shares authorized;
4,811,020 and 2,629,199 shares issued and outstanding, as of July
1, 2023 and December 31, 2022, respectively |
|
|
1 |
|
|
|
1 |
|
|
Additional paid in capital |
|
|
116,639 |
|
|
|
111,586 |
|
|
Accumulated other comprehensive loss |
|
|
(2,080 |
) |
|
|
(2,219 |
) |
|
Accumulated deficit |
|
|
(106,749 |
) |
|
|
(101,015 |
) |
|
Total Stockholders' Equity |
|
|
7,811 |
|
|
|
8,353 |
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
82,836 |
|
|
$ |
81,659 |
|
|
|
|
|
|
|
|
STAFFING 360
SOLUTIONS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(All amounts
in thousands, except share, per share and per share
values)(UNAUDITED) |
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
SIX MONTHS ENDED |
|
|
|
July 1, 2023 |
|
July 2, 2022 |
|
July 1, 2023 |
|
July 2, 2022 |
|
Revenue |
|
$ |
62,078 |
|
|
$ |
59,053 |
|
|
$ |
125,183 |
|
|
$ |
108,946 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenue, excluding depreciation and amortization stated
below |
|
|
53,317 |
|
|
|
48,534 |
|
|
|
106,834 |
|
|
|
89,914 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
8,761 |
|
|
|
10,519 |
|
|
|
18,349 |
|
|
|
19,032 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
9,716 |
|
|
|
10,465 |
|
|
|
19,883 |
|
|
|
19,373 |
|
|
Depreciation and amortization |
|
|
651 |
|
|
|
698 |
|
|
|
1,426 |
|
|
|
1,353 |
|
|
Total Operating Expenses |
|
|
10,367 |
|
|
|
11,162 |
|
|
|
21,309 |
|
|
|
20,726 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations |
|
|
(1,606 |
) |
|
|
(643 |
) |
|
|
(2,960 |
) |
|
|
(1,694 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other Expenses: |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(1,350 |
) |
|
|
(1,041 |
) |
|
|
(2,699 |
) |
|
|
(1,621 |
) |
|
Amortization of debt discount and deferred financing costs |
|
|
(104 |
) |
|
|
(96 |
) |
|
|
(202 |
) |
|
|
(282 |
) |
|
Re-measurement loss on intercompany note |
|
|
— |
|
|
|
(566 |
) |
|
|
— |
|
|
|
(1,009 |
) |
|
Other loss, net |
|
|
188 |
|
|
|
79 |
|
|
|
174 |
|
|
|
21 |
|
|
Total Other Expenses, net |
|
|
(1,266 |
) |
|
|
(1,624 |
) |
|
|
(2,727 |
) |
|
|
(2,891 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss
Before Benefit from Income Tax |
|
|
(2,872 |
) |
|
|
(2,267 |
) |
|
|
(5,687 |
) |
|
|
(4,585 |
) |
|
|
|
|
|
|
|
|
|
|
|
Provision from Income taxes |
|
|
(6 |
) |
|
|
3 |
|
|
|
(47 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
|
(2,878 |
) |
|
|
(2,264 |
) |
|
|
(5,734 |
) |
|
|
(4,588 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Loss - Basic and Diluted |
|
$ |
(0.77 |
) |
|
$ |
(1.29 |
) |
|
$ |
(1.66 |
) |
|
$ |
(2.61 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding � Basic and
Diluted |
|
|
3,727,524 |
|
|
|
1,759,252 |
|
|
|
3,453,841 |
|
|
|
1,759,298 |
|
|
|
|
|
|
|
|
|
|
|
|
STAFFING 360
SOLUTIONS, INC. AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(All amounts
in thousands)(UNAUDITED) |
|
|
|
|
|
|
|
|
July 1, 2023 |
|
July 2, 2022 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net (Loss) Income |
|
$ |
(5,734 |
) |
|
$ |
(4,588 |
) |
|
Adjustments to reconcile net loss income to net cash used
in operating activities: |
|
|
|
Depreciation and amortization |
|
|
1,426 |
|
|
|
1,353 |
|
|
Amortization of debt discount and deferred financing costs |
|
|
202 |
|
|
|
282 |
|
|
Bad debt expense |
|
|
21 |
|
|
|
(15 |
) |
|
Right of use assets depreciation |
|
|
598 |
|
|
|
884 |
|
|
Shares issued for services |
|
|
941 |
|
|
|
83 |
|
|
Re-measurement loss on intercompany note |
|
|
— |
|
|
|
1,009 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Accounts receivable |
|
|
(6,285 |
) |
|
|
(7,818 |
) |
|
Prepaid expenses and other current assets |
|
|
(369 |
) |
|
|
(1,657 |
) |
|
Other assets |
|
|
(976 |
) |
|
|
(2,770 |
) |
|
Accounts payable and accrued expenses |
|
|
2,251 |
|
|
|
4,660 |
|
|
Other current liabilities |
|
|
131 |
|
|
|
583 |
|
|
Other long-term liabilities and other |
|
|
(491 |
) |
|
|
3,195 |
|
|
NET
CASH USED IN OPERATING ACTIVITIES |
|
|
(8,285 |
) |
|
|
(4,799 |
) |
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of property and equipment |
|
|
(223 |
) |
|
|
(313 |
) |
|
Acquisition of business, net of cash acquired |
|
|
— |
|
|
|
1,395 |
|
|
Collection of UK factoring facility deferred purchase price |
|
|
3,357 |
|
|
|
3,705 |
|
|
NET
CASH PROVIDED BY INVESTING ACTIVITIES |
|
|
3,134 |
|
|
|
4,787 |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
Third party financing costs |
|
|
(320 |
) |
|
|
— |
|
|
Proceeds from term loan - Related party |
|
|
— |
|
|
|
— |
|
|
Repayment of term loan |
|
|
(252 |
) |
|
|
(244 |
) |
|
Proceeds from term loan |
|
|
— |
|
|
|
67 |
|
|
Repayments on accounts receivable financing, net |
|
|
(661 |
) |
|
|
(2,351 |
) |
|
Payments made on earnouts |
|
|
— |
|
|
|
(160 |
) |
|
Payments made on Redeemable Series H Preferred stock |
|
|
— |
|
|
|
(14 |
) |
|
Proceeds from sale of common stock |
|
|
4,433 |
|
|
|
— |
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
|
3,200 |
|
|
|
(2,702 |
) |
|
|
|
|
|
|
|
NET
DECREASE IN CASH |
|
|
(1,951 |
) |
|
|
(2,714 |
) |
|
|
|
|
|
|
|
Effect of exchange rates on cash |
|
|
34 |
|
|
|
(64 |
) |
|
|
|
|
|
|
|
Cash
- Beginning of period |
|
|
1,992 |
|
|
|
4,558 |
|
|
|
|
|
|
|
|
Cash
- End of period |
|
$ |
75 |
|
|
$ |
1,780 |
|
|
|
|
|
|
|
|
Use of Non-GAAP Financial
MeasuresStaffing 360 Solutions provides Adjusted EBITDA, a
non-generally accepted accounting principal (“GAAP”) financial
measure, because it believes it offers to investors additional
information for monitoring its profit and cash flow generation.
Adjusted EBITDA is a non-GAAP financial measure and is defined as
net income (loss) attributable to common stock before interest
expense, benefit from income taxes, depreciation and amortization,
acquisition, capital raising and other non-recurring expenses,
other non-cash charges, impairment of goodwill, re-measurement gain
on intercompany note, restructuring charges, other income, and
charges the Company considers to be non-recurring in nature such as
legal expenses associated with litigation, professional fees
associated potential and completed acquisition. Adjusted EBITDA is
not intended to replace EBITDA other measures of financial
performance reported in accordance with GAAP.
|
|
Three Months Ended |
|
Six Months Ended |
|
Trailing Twelve Months |
|
|
July 1, 2023 |
|
July 2, 2022 |
|
July 1, 2023 |
|
July 2, 2022 |
|
July 1, 2023 |
|
July 2, 2022 |
Net (loss) income |
|
$ |
(2,878 |
) |
|
$ |
(2,264 |
) |
|
$ |
(5,734 |
) |
|
$ |
(4,588 |
) |
|
$ |
(18,140 |
) |
|
$ |
(2,590 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
1,350 |
|
|
|
1,041 |
|
|
|
2,699 |
|
|
|
1,621 |
|
|
|
4,959 |
|
|
|
3,224 |
|
Expense
(benefit) from income taxes |
|
|
6 |
|
|
|
(3 |
) |
|
|
47 |
|
|
|
3 |
|
|
|
(178 |
) |
|
|
(324 |
) |
Depreciation
and amortization |
|
|
755 |
|
|
|
794 |
|
|
|
1,628 |
|
|
|
1,635 |
|
|
|
3,587 |
|
|
|
3,146 |
|
EBITDA |
|
$ |
(767 |
) |
|
$ |
(432 |
) |
|
$ |
(1,360 |
) |
|
$ |
(1,329 |
) |
|
$ |
(9,772 |
) |
|
$ |
3,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition,
capital raising and other non-recurring expenses (1) |
|
|
1,513 |
|
|
|
1,399 |
|
|
|
3,323 |
|
|
|
2,587 |
|
|
|
7,782 |
|
|
|
3,591 |
|
Other
non-cash charges (2) |
|
|
39 |
|
|
|
(16 |
) |
|
|
74 |
|
|
|
- |
|
|
|
922 |
|
|
|
51 |
|
Impairment
of Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
3,104 |
|
Re-measurement gain on intercompany note |
|
|
- |
|
|
|
566 |
|
|
|
- |
|
|
|
1,009 |
|
|
|
(1,009 |
) |
|
|
1,365 |
|
Other loss
(income) |
|
|
(182 |
) |
|
|
(79 |
) |
|
|
(166 |
) |
|
|
(21 |
) |
|
|
(871 |
) |
|
|
(9,387 |
) |
Adjusted
EBITDA |
|
$ |
603 |
|
|
$ |
1,438 |
|
|
$ |
1,871 |
|
|
$ |
2,246 |
|
|
$ |
7,052 |
|
|
$ |
2,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Gross Profit |
|
|
|
|
|
|
|
|
|
$ |
42,086 |
|
|
$ |
35,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA as percentage of Adjusted Gross Profit |
|
|
|
|
|
|
|
|
|
|
16.8 |
% |
|
|
6.1 |
% |
|
(1 |
) |
Acquisition, capital raising, and other non-recurring expenses
primarily relate to capital raising expenses, acquisition and
integration expenses, and legal expenses incurred in relation to
matters outside the ordinary course of business. |
|
|
|
|
(2 |
) |
Other non-cash charges primarily relate to staff option and share
compensation expense, expense for shares issued to directors for
board services, and consideration paid for consulting
services. |
Staffing 360 Solutions (NASDAQ:STAF)
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