Staffing 360 Solutions confirms its Q3 YoY revenue has doubled
"We continue to achieve new milestones every quarter," stated Brendan Flood, Executive Chairman of Staffing 360 Solutions, a public company executing a global buy-and-build strategy through the acquisition of staffing organizations with operations in the US and Europe.
"First and foremost, our acquisition strategy has fueled our expansion from around $15.8 million in revenue in fiscal Q3 2014 to approximately $31.0 million in Q3 2015. In addition, we have now achieved positive Adjusted EBITDA for two quarters in a row, which has been a strategic objective within our Pathway to Profitability. Lastly, we are closer than ever to reaching our longer term goal of positive net income. With all of these developments at Staffing 360, it is clear our growth story and long term journey are beginning to take shape."
Summary of Fiscal Q3 2015 (Three Months Ended February 28, 2015)
Net revenues increased to $31.0 million, compared to $15.8 million in the quarter ended February 28, 2014.
Gross profit increased to $5.5 million, compared to approximately $3.2 million in the quarter ended February 28, 2014.
Net loss decreased to approximately $81,000*, compared to a net loss of approximately $1.8 million in the quarter ended February 28, 2014.
Adjusted EBITDA was approximately $148,000* in the quarter ended February 28, 2015.
* A table has been included in this press release with Non-GAAP adjustments to the Company's net loss of approximately $229,000 resulting in Adjusted EBITDA of $148,000.
"As our management team has stated in the past, our revenue typically shows a seasonal dip in Q3 due to the impact of winter weather," stated Mr. Flood. "In fact, this year's winter was especially harsh due to the numerous snow storms that disrupted business throughout the Northeast, and especially Boston, where several of our divisions are located. However, despite these extenuating circumstances, we still posted strong organic year-over-year growth, as well as positive Adjusted EBITDA of $148,000 for the quarter ended February 28, 2015. In addition, we improved our net loss to within $81,000 of break-even, one of our last remaining milestones on our Pathway to Profitability."
Analysis of Financial Results
As part of its targeted acquisition strategy, Staffing 360 Solutions has completed five acquisitions to-date, including The Revolution Group (renamed Cyber 360 and subsequently sold), Control Solutions International, Initio International Holdings Limited (renamed Staffing 360 Solutions Limited), certain business assets of Poolia UK, and PeopleSERVE (acquired as two separate entities: PeopleSERVE, Inc. and PeopleSERVE PRS, Inc.). As noted previously, the operations of Cyber 360 were discontinued and sold, resulting in the restatement of Staffing 360 Solutions' historical results to exclude Cyber 360's balance sheet and operations from the comparative periods.
As a result of these acquisitions and very strong organic growth, revenue increased to approximately $31.0 million in the quarter ended February 28, 2015, compared to approximately $15.8 million for the same period in 2014. Gross profit increased to over $5.5 million, compared to approximately $3.2 million for the same period in 2014.
The Company's net loss for the quarter ended February 28, 2015 was approximately $81,000 (or positive Adjusted EBITDA of approximately $148,000 on a Non-GAAP basis*), compared to a net loss of approximately $1.8 million for the same period in 2014. The decrease in net loss was primarily attributable to the Company's increased gross profit due to its acquisitions made throughout the year, its sale of Cyber 360, its gain on the CSI earn-out liability, as well as its Pathway to Profitability, which has helped streamline expenses.
"Despite experiencing a significant number of snow days in the Northeast, we still out performed the prior year as a result of our strong organic growth," stated Jeff Mitchell, Chief Financial Officer. "Since the Pathway to Profitability was first announced, we have successfully reduced Company debt, while increasing stockholder's equity. Our existing business is now producing and forecasted to generate positive cash flow from operations for the balance of fiscal year 2015 and onward. Our current mission is to continue to raise capital as we acquire additional staffing companies as part of our selective M&A strategy."
Highlights of Fiscal Q3 2015 and Subsequent Events
Realized positive Adjusted EBITDA two quarters ahead of schedule. Successfully achieved this objective with the Company's financial results for the fiscal quarter ended November 30, 2014 and then repeated it for the quarter ended February 28, 2015.
Reduced corporate overheads by approximately $3 million per annum. Management believes overall costs of corporate are now in line with industry levels.
Demonstrated management's deep faith in the Company with the above-market conversion of $3.3 million of principal and interest relating to the promissory notes of the Initio acquisition. Both Executive Chairman Brendan Flood, and CEO Matt Briand, were among the note holders that converted into equity at $1.00 per share, plus warrants.
Strengthened the Company's balance sheet through the discontinuation and sale of Cyber 360. This was done as part of Company's Pathway to Profitability and resulted in the elimination of $1.6 million of liabilities.
Engaged a New York-based investment bank with particular expertise in emerging small-cap companies. Staffing 360's first raise has now been accomplished (see details below), with additional financings expected in the future to support its M&A strategy.
Raised a $25 million revolving credit facility and $3 million term loan from MidCap Financial. The transaction was managed by Alexander Capital L.P. as the financial advisor. The $3 million loan has a term of 4 years and is being used to pay down short term debt and provide working capital to support organic growth and improve the Company's balance sheet. The $25 million revolving credit facility replaces the Company's existing $15 million facility with Wells Fargo, providing additional room for expansion.
"Although the $25 million facility and $3 million term loan are now under our belt, our capital raising objectives are far from over," said Matt Briand, President and CEO. "Each of us at Staffing 360 Solutions is fully committed to reaching our stated goal of $300 million in annualized revenues. Our path to achieving this milestone is through highly targeted acquisitions that are fueled by additional capital raises and our robust M&A pipeline. With many exciting developments on the horizon, we encourage investors to join us during our earnings conference call for more details on how we plan to achieve our objectives over the next year."