Staffing 360 Solutions Reports Third Quarter and Nine-Month 2023 Financial Results
Staffing 360 Solutions, Inc. (STAF) Reports Financial Results for Q3 2023 and Nine-Month Period Ended September 30, 2023
Positive
Revenue increased by 7.8% to $188.7 million for the nine-month period
International buy-integrate-build strategy through acquisitions in the US and UK
Adjusted EBITDA was $2.1 million for the nine-month period
Negative
Revenue declined by 4.0% to $63.5 million for Q3 2023
Operating loss of $5.3 million for the nine-month period
Net loss of $10.0 million for the nine-month period
The reported financial results from Staffing 360 Solutions indicate a mixed performance, with a noteworthy decline in quarterly revenue and profitability but an increase in nine-month revenue. The revenue dip in the third quarter, attributed to economic headwinds, is concerning for stakeholders as it suggests vulnerability to macroeconomic fluctuations. The stark contrast between the quarterly and nine-month performance could signal that the company's growth strategy, particularly the acquisition of Headway Workforce Solutions, has yet to fully materialize in terms of profitability.
Examining the non-GAAP measures, such as Adjusted EBITDA, we see a significant drop from the previous year. While these measures can provide insight into the company's operational efficiency, the substantial decrease raises questions about the company's cost management and the integration success of its acquisitions. Investors should monitor how the company plans to address these challenges and whether it can leverage its acquisitions to improve its bottom line in the long term.
The staffing industry is highly sensitive to economic cycles and the reported softening of the market is indicative of broader economic trends. Staffing 360 Solutions' decline in gross profit and shift from operating profit to loss reflects an industry-wide pressure on margins. The company's strategy of international expansion through acquisitions could be a double-edged sword; it offers potential for growth but also exposes the company to geopolitical risks and integration complexities.
For the industry, the report suggests a cautious approach from clients, likely due to uncertainty in the economic environment. This cautiousness can lead to reduced demand for staffing services, impacting the sector as a whole. Competitors with more diversified service offerings or those with stronger digital transformation strategies may be better positioned to weather such downturns. Stakeholders should evaluate the company's strategic initiatives in technology and innovation to enhance competitiveness.
The reported financial results from Staffing 360 Solutions serve as a microcosm of the current labor market dynamics. The decline in quarterly revenue and profitability could be symptomatic of a slowing economy, where businesses are hesitant to expand their workforce. The staffing industry is often one of the first to feel the effects of economic shifts, making these results an early indicator of potential broader labor market cooling.
Conversely, the increase in nine-month revenue suggests that while there may be short-term setbacks, the overall demand for staffing services has been on an upward trend. This could indicate a lag in the effect of economic policies or a delayed response to market conditions. The company's performance in the upcoming quarters will be crucial in determining whether this is a temporary setback or the start of a more prolonged downturn.
01/10/2024 - 08:05 AM
NEW YORK, Jan. 10, 2024 (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 financial results for the 2023 third quarter and nine-month period ended September 30, 2023.
Third Quarter 2023 Overview
Revenue declined by 4.0% (a decline of 5.5% in constant currency) to $63.5 million , compared with $66.1 million for the prior year period, resulting primarily from market softening in the current economic environment. Gross profit was $9.4 million , compared with $12.3 million for the prior-year period. Operating loss was $2.3 million , compared with an operating profit of $496,000 for the prior-year period. Net loss totaled $4.3 million , compared with a net profit of $1.0 million for the prior-year period. Diluted loss per share loss was $0.98 , compared with a diluted profit per share of $0.43 in the prior-year period. EBITDA loss was $1.7 million , compared with an EBITDA profit of $3.0 million for the prior-year period. Adjusted EBITDA, a non-GAAP measure, was $190,000 , compared with $4.9 million in the prior-year period. Nine-Month 2023 Overview
Revenue increased by 7.8% (an increase of 8.0% in constant currency) to $188.7 million , compared with $175.1 million for the prior-year period, resulting primarily from the Company’s acquisition of Headway Workforce Solutions in 2022. Gross profit was $27.7 million , compared with $31.4 million for the prior-year period. Operating loss was $5.3 million , compared with an operating loss of $1.2 million for the prior-year period. Net loss totaled $10.0 million , compared with a net loss of $3.6 million for the prior-year period. Diluted loss per share loss was $2.63 , compared with a diluted loss per share loss of $1.80 in the prior-year period. EBITDA loss was $3.1 million , compared with an EBITDA profit of $1.7 million for the prior-year period. Adjusted EBITDA, a non-GAAP measure, was $2.1 million , compared with $5.3 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.
“Our third quarter results reflect the continued uncertainty that has been characteristic of the employment sector, with clients remaining cautious about their hiring needs and the economy,” said Brendan Flood, Chairman, CEO and President. “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.”
Outlook Although industry conditions remain uncertain and are subject to change, the Company currently estimates revenues in excess of $250 million for the 2023 fiscal year.
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 Statements This 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 Berman PondelWilkinson Inc. 310-279-5980 pwinvestor@pondel.com
(financial tables follow)
STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share, per share and par values) As of As of September 30, 2023 December 31, 2022 ASSETS (Unaudited) Current Assets: Cash $ 681 $ 1,992 Accounts receivable, net 25,222 23,628 Prepaid expenses and other current assets 1,774 1,762 Total Current Assets 27,677 27,382 Property and equipment, net 1,296 1,230 Goodwill 19,891 19,891 Intangible assets, net 15,404 17,385 Other assets 8,018 6,701 Right of use asset 8,269 9,070 Total Assets $ 80,555 $ 81,659 LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current Liabilities: Accounts payable and accrued expenses $ 19,146 $ 16,526 Accrued expenses - related party 227 218 Current portion of debt — 249 Accounts receivable financing 15,937 18,268 Leases - current liabilities 1,297 1,188 Earnout liabilities 7,489 7,489 Other current liabilities 2,610 2,639 Total Current Liabilities 46,706 46,577 Long-term debt 9,740 8,661 Redeemable Series H preferred stock, net 7,520 8,393 Leases - non current 7,807 8,640 Other long-term liabilities 248 180 Total Liabilities 72,021 72,451 Commitments and contingencies — — Stockholders' Equity: Preferred stock, $0.00 001 par value, 20,000,000 shares authorized; Series J Preferred Stock, 40,000 designated, $0.00 001 par value, 0 and 0 shares issued and outstanding as of July 1, 2023 and January 1, 2022, respectively Common stock, $0.00 001 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 120,896 111,586 Accumulated other comprehensive loss (1,359 ) (2,219 ) Accumulated deficit (111,004 ) (101,015 ) Total Stockholders' Equity 8,534 8,353 Total Liabilities and Stockholders' Equity $ 80,555 $ 80,804
STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except share, per share and par values) (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Revenue $ 63,467 $ 66,120 $ 188,650 $ 175,066 Cost of Revenue, excluding depreciation and amortization stated below 54,095 53,795 160,929 143,709 Gross Profit 9,372 12,325 27,721 31,357 Operating Expenses: Selling, general and administrative expenses 10,837 11,043 30,720 30,416 Depreciation and amortization 882 787 2,308 2,140 Total Operating Expenses 11,719 11,829 33,028 32,556 Loss From Operations (2,347 ) 496 (5,307 ) (1,199 ) Other Expenses: Interest expense (1,530 ) (891 ) (4,229 ) (2,512 ) Amortization of debt discount and deferred financing costs (120 ) (236 ) (322 ) (518 ) Other loss, net (237 ) 717 (63 ) 738 Total Other Expenses, net (1,887 ) 599 (4,615 ) (2,292 ) Loss Before Benefit from Income Tax (4,234 ) 1,094 (9,922 ) (3,491 ) Provision from Income taxes (22 ) (62 ) (67 ) (65 ) Net Loss (4,256 ) 1,032 (9,989 ) (3,556 ) Net Loss - Basic and Diluted $ (0.98 ) $ 0.43 $ (2.63 ) $ (1.80 ) Weighted Average Shares Outstanding — Basic and Diluted 4,349,587 2,401,961 3,800,371 1,980,398
STAFFING 360 SOLUTIONS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (UNAUDITED) September 30, 2023 October 1, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net (Loss) Income $ (9,989 ) $ (3,556 ) Adjustments to reconcile net loss income to net cash used in operating activities: Depreciation and amortization 2,308 2,140 Amortization of debt discount and deferred financing costs 322 518 Bad debt expense 21 (302 ) Right of use assets depreciation 973 1,066 Stock based compensation 1,167 325 Changes in operating assets and liabilities: Accounts receivable (6,611 ) (6,114 ) Prepaid expenses and other current assets (12 ) (1,854 ) Other assets (2,167 ) (944 ) Accounts payable and accrued expenses 2,462 (1,083 ) Accounts payable, related party — 125 Other current liabilities 79 357 Other long-term liabilities and other 721 1,041 NET CASH USED IN OPERATING ACTIVITIES (10,726 ) (8,281 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (328 ) (719 ) Acquisition of business, net of cash acquired — 1,395 Collection of UK factoring facility deferred purchase price 5,046 5,282 NET CASH PROVIDED BY INVESTING ACTIVITIES 4,718 5,958 CASH FLOWS FROM FINANCING ACTIVITIES: Third party financing costs (653 ) (554 ) Proceeds from term loan - Related party 2,000 67 Repayment of term loan (1,156 ) (379 ) Repayments on accounts receivable financing, net (2,239 ) (3,345 ) Warrant Inducement, net 2,292 (160 ) Proceeds from sale of common stock 4,433 4,013 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,677 (358 ) NET DECREASE IN CASH (1,331 ) (2,681 ) Effect of exchange rates on cash 19 (123 ) Cash - Beginning of period 1,992 4,558 Cash - End of period $ 681 $ 1,754
Use of Non-GAAP Financial Measures Staffing 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 Nine Months Ended Trailing Twelve Months September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022 Net (loss) income $ (4,256 ) $ 1,032 $ (9,989 ) $ (3,556 ) $ (23,427 ) $ (10,200 ) Interest expense 1,530 891 4,229 2,512 5,598 3,301 Expense (benefit) from income taxes 22 62 67 65 (220 ) (392 ) Depreciation and amortization 1,002 1,023 2,630 2,658 3,566 3,289 EBITDA $ (1,702 ) $ 3,008 $ (3,062 ) $ 1,679 $ (14,482 ) $ (4,073 ) Acquisition, capital raising and other non-recurring expenses (1) 1,730 1,399 5,053 2,587 7,724 4,847 Other non-cash charges (2) 59 (16 ) 133 - 949 253 Impairment of Goodwill - - - - 10,000 3,104 Re-measurement gain on intercompany note - 566 - 1,009 - - Other loss (income) 103 (79 ) (63 ) (21 ) (51 ) (412 ) Adjusted EBITDA $ 190 $ 4,878 $ 2,061 $ 5,254 $ 4,140 $ 3,719 Adjusted Gross Profit $ 39,133 $ 35,866 Adjusted EBITDA as percentage of Adjusted Gross Profit 10.6 % 10.4 %
(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.
What are the financial results reported by Staffing 360 Solutions, Inc. for Q3 2023 and the nine-month period?
Revenue for Q3 2023 declined by 4.0% to $63.5 million, while for the nine-month period, revenue increased by 7.8% to $188.7 million.
What is the ticker symbol for Staffing 360 Solutions, Inc.?
The ticker symbol for Staffing 360 Solutions, Inc. is STAF.
What is the international strategy of Staffing 360 Solutions, Inc.?
Staffing 360 Solutions, Inc. is executing an international buy-integrate-build strategy through the acquisition of staffing organizations in the United States and the United Kingdom.
What was the adjusted EBITDA for the nine-month period?
The adjusted EBITDA for the nine-month period was $2.1 million.
What was the net loss for the nine-month period?
The net loss for the nine-month period was $10.0 million.