Staffing 360 Solutions Reports Second Quarter and Six-Month 2023 Financial Results

Published

NEW YORK, Nov. 14, 2023 (GLOBE NEWSWIRE) -- 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 FacebookLinkedIn 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.

 

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Source: Staffing 360 Solutions, Inc.

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