SOURCE: Staffing 360 Solutions

Staffing 360 Solutions

September 15, 2014 19:01 ET

Staffing 360 Solutions Announces Financial Results for Fiscal Year 2014

Company Reports Revenues of $45.8 Million for the Fiscal Year Ended May 31, 2014

NEW YORK, NY--(Marketwired - Sep 15, 2014) - Staffing 360 Solutions, Inc. (OTCQB: STAF), a public company executing a global buy-and-build strategy through the acquisition of domestic and international staffing organizations with operations in the U.S. and Europe, today released its financial results for its fiscal year ended May 31, 2014.

"Quite clearly, the Company has grown dramatically over the last year," stated Brendan Flood, Executive Chairman of Staffing 360 Solutions. "As a perfect illustration of our significant growth to-date, our net revenues increased to $45.8 million in fiscal 2014, up from less than $1 million in the prior year."

Summary of the Fiscal Year Ended May 31, 2014

  • Net revenues increased to $45.8 million in fiscal 2014, compared to $648,000 in the fiscal year ended May 31, 2013.
  • Gross profit increased to $9.1 million in fiscal 2014, compared to $199,000 in the fiscal year ended May 31, 2013.  
  • Net loss increased to $12.7 million* in fiscal 2014, compared to a net loss of $3.4 million in the fiscal year ended May 31, 2013.
  • Adjusted EBITDA loss was approximately $2.7 million* in fiscal 2014.

* A table has been included in this press release with Non-GAAP adjustments to the Company's net loss by approximately $10 million in fiscal 2014 due to the significant amount of M&A activity relating to its four acquisitions (including: non-cash expenses, acquisition expenses, capital raising expenses and non-recurring expenses of $2.5 million, impairment of goodwill of $3.5 million, depreciation and amortization of $3.4 million and approximately $670,000 of other expenses), resulting in a Pro Forma Adjusted EBITDA loss of $2.7 million.

Summary of the Unaudited Fiscal Fourth Quarter Ended May 31, 2014

  • Net revenues increased to $25.6 million, compared to $557,000 in the fourth quarter ended May 31, 2013.
  • Gross profit increased to $4.6 million, compared to $159,000 in the fourth quarter ended May 31, 2013.

Mr. Flood continued, "Although our bottom line still shows a net loss, these results include a significant amount of M&A activity relating to our four acquisitions during the fiscal year. Many of these expenses are either non-cash in nature, acquisition-related or are non-recurring. In addition, these consolidated results only include a portion of the revenues from our acquisitions due to the timing of the closings throughout the year. Therefore our future quarterly results will more fully reflect income and expenses for all of our operating companies going forward. We are pleased to report that our acquisition strategy has fueled our growth from less than $1 million of revenue in fiscal 2013 to over $45 million in fiscal 2014."

Analysis of Financial Results

During the recent fiscal year, Staffing 360 Solutions completed four acquisitions, including Control Solutions International Inc., Initio International Holdings Limited (renamed Staffing 360 Solutions Limited), Poolia UK, and PeopleSERVE. These four acquisitions are in addition to the Company's first acquisition of The Revolution Group (renamed Cyber 360 Solutions) which was completed in the fourth quarter of fiscal 2013, resulting in a total of five acquisitions to-date.

As a result of these acquisitions, net revenues increased to $45.8 million in the fiscal year ended May 31, 2014, compared to approximately $648,000 for the same period in 2013. Gross profit increased to over $9.1 million in the 2014 fiscal year, compared to approximately $199,000 for the same period in 2013. Again, this significant increase in revenue and gross profit was principally a result of the Company's four new acquisitions, as compared to the revenue and gross profit of its lone subsidiary in 2013.

It is important to note, however, that these consolidated fiscal year results only include five months -- or approximately 40% -- of Initio's full year financial results due to the fact that Staffing 360 Solutions acquired Initio on January 3, 2014. Initio was an $80 million business (according to previously announced pre-acquisition calendar 2013 revenues). In addition, these results only reflect three months of the Company's Poolia UK acquisition and less than 15 days of the Company's most recent PeopleSERVE acquisition which closed on May 17, 2014. The timing of these acquisitions explains the difference between the Company's $45 million in revenues in fiscal 2014 versus the Company's current run-rate of $120 million in revenues on an annualized basis. The Company's future quarterly results will more fully reflect these acquisitions.

The Company's net loss for fiscal 2014 increased to $12.7 million (or a Pro Forma Adjusted EBITDA loss of $2.7 million on a Non-GAAP basis*), compared to a net loss of approximately $3.4 million for the same period in 2013. The increase in net loss was primarily attributable to increased operating expenses including an increased workforce due to the acquisitions made throughout the year as well as office expenses related to the Company's subsidiaries, four of which did not exist in 2013. In addition, the Company fully impaired its goodwill assets related to the acquisition of Cyber 360 Solutions for a total of $1.4 million and $1.3 million associated with the acquisition of Control Solutions International. In addition, the Company incurred substantial one-time costs that were attributable to its four acquisitions in fiscal 2014.

"We have grown significantly over the past year," stated Jeff Mitchell, Chief Financial Officer. "Our first two acquisitions allowed us to make our transformative acquisition of Initio, which in turn enabled us to complete our next two acquisitions and grow past the key threshold of $100 million in annualized revenues. Although the impairment charges relating to our first two acquisitions are correct from an accounting GAAP perspective, they must be viewed in the totality of our M&A program. Considering the fact that our first two acquisitions only contribute approximately 6% of our consolidated revenue on a current run-rate basis, these are largely immaterial to our long term plans, especially as we add additional acquisitions."

Matt Briand, Chief Executive Officer, added, "As we continue to implement our acquisition strategy, Staffing 360 Solutions is fully committed to reaching our stated goal of $300 million in annualized revenues. We believe our consolidation strategy is ideally suited for the highly fragmented temporary staffing industry, especially considering our highly experienced management team. As our reach is extended around the world, we look forward to relaying our exciting developments and important milestones with our loyal shareholders."

Highlights of the 2014 Fiscal Year and Subsequent Events

  • Completed the acquisition of Initio International Holdings Limited (renamed Staffing 360 Solutions Limited) on January 3, 2014, which included the Monroe Staffing division in the US and Longbridge Recruitment division in the UK. Initio generated approximately $80 million in revenues during calendar 2013.
  • Appointed staffing industry veterans Brendan Flood as Executive Chairman and Matt Briand as Chief Executive Officer. Included in Mr. Flood's significant industry experience was his role as the former CFO of the Americas for Monster Worldwide, Inc., which generated $1.8 billion of annualized revenue in 2002.
  • Completed the acquisition of Poolia UK Ltd. on February 28, 2014, a subsidiary of Poolia AB, a publicly listed company on NASDAQ OMX Stockholm. 
  • Completed the acquisition of PeopleSERVE on May 17, 2014, a fast-growing IT staffing firm with an emphasis on security, development and project management. 
  • Completed a $1.7 million convertible note financing, a $10 million equity private placement and a $4.1 million Series A Convertible Bond offering to continue to fund the Company's acquisition strategy.
  • Hired seasoned accounting executive Jeff R. Mitchell as the Company's new Chief Financial Officer. Mr. Mitchell was the former CFO of Select Staffing, where he led over 40 acquisitions in the staffing industry as part of their M&A strategy, which contributed $1.3 billion in revenue.

Mr. Flood concluded, "While our current highly experienced management team was only in place for less than five months during this reporting period, based on the acquisitions we have completed to-date, we are already in the top 30 public staffing companies in the United States. As we continue to explore and evaluate further acquisitions, we will be moving ever closer towards our publicly stated mission of being a $300 million revenue business. This growth will result in many more significant announcements throughout the remainder of 2014 as we leverage our operational and capital markets expertise, while maintaining a steadfast commitment to growth in revenues, growth in earnings and growth in long term shareholder value."

Earnings Conference Call

Staffing 360 Solutions will host its earnings conference call on Tuesday, September 16, 2014, at 11:00 am Eastern to discuss its financial results for the fiscal year and fiscal fourth quarter ended May 31, 2014. The conference call will include a Q&A session where investors will have the opportunity to ask questions of management.

The teleconference can be accessed by dialing 877.407.0778 within the United States or 201.689.8565 internationally. Please dial in 10 minutes prior to the beginning of the call. There will be a playback of the teleconference available until September 30, 2014. To listen to the playback dial 877.660.6853 within the United States or 201.612.7415 internationally and use replay ID number: 13591239.

The conference call will be simultaneously webcast and available at:

About Staffing 360 Solutions, Inc.

Staffing 360 Solutions, Inc. (OTCQB: STAF) is a public company in the staffing sector engaged in the execution of a global consolidation strategy through the acquisition of domestic and international staffing organizations with operations in the US and Europe. As part of its targeted consolidation model, Staffing 360 Solutions is pursuing broad spectrum staffing companies in the finance and accounting, administrative, engineering, IT and cybersecurity industries. The Company believes the staffing industry offers opportunities to create a successful public company with a longer term objective of accretive acquisitions that will drive annual revenues to $300 million. For more information, please visit:

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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. We refer you to the reconciliations above.

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 the goodwill impairment charges. The Company excludes stock-based compensation because it is non-cash in nature.

Forward-Looking Statements

Certain matters discussed within this press release are forward-looking statements including, but not limited to, new agreements, the ability to enter into any additional acquisitions, or 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. 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.

Staffing 360 Solutions, Inc. and Subsidiaries  
Consolidated Statements of Operations  
  For the Years Ended May 31,  
  2014     2013  
Net Sales $ 45,778,493     $ 647,731  
Cost of Sales   36,694,123       448,507  
Gross Profit   9,084,370       199,224  
Operating Expenses:   18,945,032       2,632,924  
  Salaries and wages   7,620,509       368,547  
  Professional fees   3,305,826       1,922,550  
  Director and related party consulting   458,968       -  
  Goodwill impairment   2,700,255       -  
  Intangibles impairment   833,592       -  
  Depreciation and amortization   1,198,788       22,752  
  General and administrative expenses   2,827,094       319,075  
Total Operating Expenses   18,945,032       2,632,924  
Loss From Operations   (9,860,662 )     (2,433,700 )
Other Income (Expenses):              
  Interest expense   (481,072 )     (80,216 )
  Amortization of deferred financing   (1,006,383 )     -  
  Amortization of beneficial conversion feature   (673,568 )     -  
  Amortization of debt discount   (566,086 )     (931,266 )
  Gain on debt settlement   -       40,000  
Loss Before Provision For Income Tax   (12,587,771 )     (3,405,182 )
Income tax expense   (69,968 )     -  
Net Loss $ (12,657,739 )   $ (3,405,182 )
  Net income attributable to non-controlling interest   9,637       -  
Net Loss Attributable To Staffing 360 Solutions $ (12,667,376 )   $ (3,405,182 )
Other Comprehensive Loss              
  Foreign exchange translation   (37,549 )     -  
Comprehensive Loss $ (12,695,288 )   $ (3,405,182 )
Non-GAAP Pro Forma Adjusted EBITDA Calculations  
For the Year Ended May 31, 2014  
Net Sales $ 45,778,493  
Cost of Sales   36,694,123  
Gross Profit   9,084,370  
Total Operating Expenses   18,945,032  
Loss From Operations   (9,860,662 )
Net Loss   (12,657,739 )
Comprehensive Loss $ (12,695,288 )
  Interest $ 561,897  
  Depreciation & Amortization   3,364,000  
  Tax   69,968  
  Foreign Exchange   37,549  
  Impairment of Goodwill   3,533,847  
  Non-Cash, Acquisition, Capital Raising & IR, Non-Recurring and Other Expenses   2,456,755  
Total Adjustments $ 10,024,016  
Adjusted EBITDA $ (2,671,272 )

Contact Information

  • Company Contact:

    Staffing 360 Solutions, Inc.
    Alfonso J. Cervantes
    Vice Chairman and President
    Email Contact

    Financial Communications:

    Trilogy Capital Partners, Inc.
    Darren Minton
    Email Contact