NEW YORK, NY –(Marketwired – April 19, 2016) – Staffing 360 Solutions, Inc. (STAF), a public company executing a global buy-and-build strategy through the acquisition of staffing organizations in the US and the UK, today released its quarterly letter from Brendan Flood, Executive Chairman, providing employees and shareholders with an update on current business initiatives and insight into management’s expectations for the remainder of 2016 and beyond.
Dear Employees and Shareholders:
As the Executive Chairman of Staffing 360 Solutions, it is my pleasure to provide this update as we highlight our recent performance, our corporate initiatives, and our plans for the future.
Last week we announced the end of another strong fiscal quarter. We are pleased with the progress we have made on all fronts, especially our record revenue of $44 million, S-3 Registration Statement effectiveness and $2.2 million of positive cash flow from operating activities.
For those of you that have been part of our journey over the past several years, you will certainly be aware that since our inception as a business we have made no secret of our strategic aim. We are a high growth buy-and-build staffing company with our publicly stated goal of reaching $300 million in revenue.
We are very pleased with where we are on our development plan and we commend each and every one of our employees for the positive improvements that they deliver on a daily basis.
Here are just a few of the milestones that have been achieved over the last quarter:
Financial Results and Organic Growth:
- We grew our revenues by 42%, from $31 million in fiscal Q3 2015 to $44 million in fiscal Q3 2016;
- Our run-rate is now in excess of $170 million, over half-way to our stated mission of reaching $300 million in revenue;
- We grew gross profit to $7.6 million in fiscal Q3 2016, a 38% increase on the $5.5 million in the same period of the prior year;
- We reported positive Adjusted EBITDA of $956,000 for fiscal Q3 2016, which was our sixth quarter in a row of delivering positive results;
- Our underlying operations demonstrated strong double digit 11% organic revenue growth in Q3 2016, year-over-year; and
- Cash flow from operating activities grew from a negative $1.1 million in the prior year period, to a record $2.2 million for the nine months ended February 29, 2016.
Other Major Milestones:
- We announced that the Company’s universal shelf registration statement on Form S-3 became effective on March 22, 2016;
- We recently tested the market with a $2 million raise through the issuance of equity. The Company is very pleased with the result and believes this represents a major step toward strengthening the Balance Sheet and improving leverage ratios;
- Hired distinguished finance executive David Faiman as the Company’s new Chief Financial Officer. Mr. Faiman is a PricewaterhouseCoopers LLP alumnus, and was the former Chief Accounting Officer and VP of Financial Planning & Analysis at Novitex Enterprise Solutions, Inc., and acting Chief Financial Officer during his tenure at Cengage Learning, Inc. — formerly Thomson Learning of Thomson Reuters;
- We combined our offices in London for all UK operations. This includes the Company’s divisions of Longbridge 360 and The JM Group. Both brands will remain separate and distinct going forward. However, the combined layout will add efficiency and is expected to result in over $360,000 in operating cost savings annually; and
- We received the Company’s first analyst coverage since becoming NASDAQ listed. Staffing 360 Solutions aims to pursue additional research coverage as the Company looks to increase its awareness in the capital markets.
Despite making 6 acquisitions in a little over two years, we have kept our eyes keenly on our strategic targets of $300 million in annualized revenues, a strong M&A program with Intelligent Integration and a keen handle on the financial drivers and seasonal issues within each of them.
As mentioned, our Form S-3 universal shelf registration was declared effective by the Securities and Exchange Commission in March. The S-3 is expected to bring positive momentum to us and it meets a promise that we made to our investors that we would register their shares so that they could freely trade. As a result of this we have registered approximately 4.6 million of previously unregistered shares. In addition, we initiated a Tender Offer to clean up our warrant overhang by offering warrant holders the option to convert to common stock on a 20:100 ratio.
We believe that events such as our first analyst coverage since becoming a NASDAQ-listed company will continue to help in our efforts to gain more institutional following and additional investors. We are very pleased with our progress, but we recognize that the journey has just begun, and we will continue to pursue additional research coverage, attend industry conferences and increase our circle of awareness in the capital markets.
From an operational perspective, there have been a number of milestones that have been achieved over the past quarter as we continue to grow organically and implement our acquisition strategy.
First and foremost, Monroe Staffing, our largest brand, has been undergoing some expansions recently as we look to develop our footprint outside of New England. We identified a new office location in Concord, North Carolina and it successfully opened in March 2016. As a result, Monroe now has over 15 offices across the East Coast and 6 on-site locations.
PeopleSERVE, our $20 million business in Massachusetts, has continued to expand, with several new contract wins and various bids that are out for review and approval. Revenue and gross profit are continuing to grow and have exceeded our internal forecasts, year over year.
Lighthouse Placement Services, which became part of our portfolio in July, has been another great addition to the team. Lighthouse enhances our engineering staffing offering in Eastern Massachusetts and New Hampshire. Although we have only had Lighthouse under our belt for two full quarters at this time, they bring $15 million in annualized revenue to the table and another growth story to the mix.
In addition to Lighthouse, The JM Group recently joined the Staffing 360 family in November 2015, just before the start of the fiscal third quarter. The JM Group has been one of the UK’s leading recruitment firms for over 3 decades, with over $25 million in revenue. As mentioned previously, we have achieved additional synergies from this acquisition with the combination of our offices in London.
Our Longbridge 360 business, which joined forces with The JM Group in London, has continued to expand its client base and to maintain and improve its margins. This business unit has the highest concentration of permanent placements as a share of its total revenue of all of our subsidiaries.
Last but not least, Control Solutions International has benefited from several new contract wins and its performance has been improving substantially over the past several months with the addition of a lead generation marketing partner in the Northeast region.
As we continue to grow, there are larger number of staffing companies in the United States and the United Kingdom that are reaching out to us due to our performance and how it has piqued their interest in joining our journey. We will continue to be highly disciplined in our M&A focus and execution, but are confident that our strategic aims can and will be met.
Going forward, we have four primary objectives:
- Firstly, we believe our business plan is working and our actions are delivering. That said, we recognize that there is still more work to be done and we are supplementing our organic growth, which has been in double-digit territory of 11% recently, by continuing to pursue our Intelligent Integration approach and driving cost savings and synergies where it makes sense, such as our recent combination of offices in the UK, saving over $360,000 per annum.
- Secondly, to drive the capital raising process and improve our EBITDA, leverage ratios and shareholder value in fiscal 2016. As part of this endeavor, the S-3 is playing a critical step as we are getting more shares in the float to reduce volatility and making Staffing 360 Solutions accessible to a broader segment of the investment community.
- Thirdly, as mentioned on our conference call, we will host our first Annual Shareholders Meeting as a NASDAQ-listed company, to give our investors an additional opportunity to meet with the Board and to formalize a number of positive items that the Board and Management have been working on and will be outlined in detail at this meeting. The current expectation is that this meeting will be held around the middle of August 2016 but the confirmation of the date will be released in the near term.
- Fourthly, Staffing 360 intends to continue our M&A strategy and acquire more companies as we put $300 million in revenue squarely in our sights. As mentioned previously, we have several major acquisitions in our pipeline, across various stages of development. We look forward to announcing more details when the time is right.
As one of our largest shareholders, I am particularly focused on Staffing 360’s execution, both operationally and in the public markets. As we mentioned on our earnings call, Staffing 360 Solutions is making progress on many fronts and by continuing to achieve and exceed our stated objectives, we believe the public markets will appropriately begin to take notice.
In summary, we have conviction that Staffing 360 Solutions represents a tremendous opportunity for rapid growth in both the United States and the United Kingdom. As we continue to implement Staffing 360’s high-growth acquisition model, we remain committed to growing revenues, to growing earnings and to growing shareholder value.
I thank you for your attention and continued support. We look forward to maintaining an open dialogue between management, our employees and our shareholders. For further information, please visit the “Investors” section of our website at: www.staffing360solutions.com/investors.html.
Staffing 360 Solutions, Inc.
About Staffing 360 Solutions, Inc.
Staffing 360 Solutions, Inc. (STAF) is a public company in the staffing sector engaged in the execution of a global buy-and-build strategy through the acquisition of domestic and international staffing organizations in the US and the UK. The Company believes the staffing industry offers opportunities for accretive acquisitions that will drive its annual revenues to $300 million. As part of its targeted consolidation model, the Company is pursuing acquisition targets in the finance and accounting, administrative, engineering and IT staffing space. For more information, please visit: www.staffing360solutions.com.
Non-GAAP Financial Measures
The Company uses financial measures which are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in evaluating its financial and operational decision making regarding potential acquisitions, as well as a means to evaluate period-to period comparison. The Company presents these non-GAAP financial measures because it believes them to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.
The Company defines Adjusted EBITDA as earnings (or loss) from continuing operations before interest expense, income taxes, depreciation and amortization, and amortization of non-cash stock-based compensation, non-recurring acquisition and restructuring expenses and goodwill impairment charges.
Certain matters discussed within this press release are forward-looking statements including, but not limited to the timing and ability to enter into any additional acquisitions, as well as the size of future revenue. Although Staffing 360 Solutions, Inc. believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Specifically, in order for the Company to achieve annualized revenues of $300 million, the Company will need to successfully raise sufficient capital, to consummate additional target acquisitions, successfully integrate any newly acquired companies, organically grow its business, successfully defend current and any potential future litigation, as well as various additional contingencies, many of which are unknown at this time and generally out of the Company’s control. The Company can give no assurance that it will be able to achieve these objectives. Staffing 360 Solutions does not undertake any duty to update any statements contained herein (including any forward-looking statements), except as required by law. Factors that could cause actual results to differ materially from expectations include general industry considerations, regulatory changes, changes in local or national economic conditions and other risks detailed from time to time in Staffing 360 Solutions’ reports filed with the SEC, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K.
PCG Advisory Group
Staffing 360 Solutions, Inc.
Executive Vice President
Staffing 360 Solutions, Inc.
Chief Financial Officer