Staffing 360 Solutions (STAF) Announces Improved Anticipated Q2 Financial Results
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Staffing 360 Solutions, Inc. (Nasdaq: STAF), a company executing an international buy-integrate-build strategy through the acquisition of staffing organizations in the United States and the United Kingdom, today announced improved anticipated Q2 financial results.
Estimated 20% Growth in Q2Based on the strength of increasing business flow in all three of its Business Streams for the eleven weeks through the middle of June, the Company anticipates reporting for the second quarter ending July 3, 2021:
- Approximately 20% year-over-year growth in revenue (27% growth excluding the business disposed of in September), and
- Approximately 20% growth in gross profit in Q2 (about 38% growth excluding the business disposed of in September), which is in line with the growth in revenue and gross profit for Q2 discussed last month during its Q1 Results Conference Call.
- Revenues in excess of $52 million and operating profit of $457,000, as compared with a loss in Q2 2020 of $1.5 million.
- The anticipated operating profit growth was driven by both the Company’s gross profit recovery and the cost saving initiatives undertaken during the pandemic which is anticipated to show a reduction in operating expenses from $9 million in Q2 2020 to $8.2 million in Q2 2021.
Materially Reduced Interest ExpenseAs previously reported, the Company also completed a series of capital raises in December 2020, February 2021, and April 2021 as part of our continued program that helped materially reduce the interest burden on our income statement. Specifically, in Q1 2020 and Q2 2020, the Company reported interest charges of $2.4 million and $2.1 million, respectively. This amount was reduced to $1.2 million in Q1 of 2021 and is expected to be below $1.1 million in Q2 2021, a reduction in the first six months of $2.2 million, year-over-year, or almost 50%.
- As a consequence of the above, the Company expects positive net income for the quarter ending July 3, 2021, prior to the recognition of any additional Paycheck Protection Program (PPP) loan forgiveness.
Please note that the above anticipated financial results are preliminary. Actual results may differ materially from the foregoing estimates due to developments or other information that may arise between now and the time the financial results for the second quarter of 2021 are reported in the Form 10-Q. These preliminary results should not be viewed as a substitute for the Company’s second quarter reviewed consolidated financial statements prepared in accordance with GAAP.
$10 million PPP Loan ForgivenessAs recently reported, the Company received notification from the Small Business Administration of the full forgiveness of the $10 million PPP loan made to Monroe Staffing Services, LLC, an indirect wholly owned subsidiary of the Company.
The Company has applied for forgiveness of a further $9.4 million of PPP loans. While there is no guarantee of forgiveness, the Company is optimistic that these remaining PPP loans (made with direct or indirect subsidiaries) will be similarly forgiven.
Brendan Flood, Chairman and Chief Executive Officer said, “I’m pleased to report that we are experiencing the deep and wide-spread business opportunities that we expected we would see. Each of our Business Streams is showing material recoveries from the difficult period of the COVID-19 pandemic. The cost control initiatives that we executed during 2020, allied to a strong internal communication, wellness program and solid financial control and management, have allowed us to come through to the recovery phase of the pandemic stronger than when we went into it.
“The full forgiveness of our largest PPP loan was an important step in our continuing fiscal recovery from the pandemic. Over the trailing 12 months we’ve made considerable progress in improving our balance sheet. Including the $10 million loan forgiveness, to date our Company has achieved a cumulative debt reduction of 55% in the past twelve months.”
Flood continued, “We are encouraged by the continued building of business momentum as the US and UK economies progress with their respective economic recoveries. In addition to our signing more than 70 new client contracts in our Commercial Staffing business, one of our largest clients, headquartered in the UK, has begun paperwork for a new two-year extension to our framework agreement; a large existing IT client in the UK has awarded us a material contract across continental Europe; and our largest Professional Staffing client in the US has asked us to extend our reach into three additional states and to look at how we can support them in Asia.
“We’ll continue improving upon our enhanced financial foundation as we progress on our path toward our goal to build a profitable $500 million revenue company,” concluded Flood.
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