Exhibit 99.1
Workstream Inc. Announces Fiscal First Quarter 2006 Results
Ottawa, ON, September 29, 2005 - Workstream Inc. (NASDAQ - WSTM), a provider of
On-Demand Enterprise Workforce Management software, today announced its fiscal
first quarter financial results for the period ended August 31, 2005. All
figures are in U.S. dollars.
Workstream reported first quarter 2006 revenue of $6,342,100 compared to
$5,719,100 for the same period last year, an increase of 11% or $623,000. The
increase in the Company's revenue compared to the first quarter 2005 related to
a $1,415,000 or 45% increase in the Enterprise Workforce (EWF) segment offset by
a 30% or $792,400 decline in the legacy Career Networks (CN) business. The
growth in the EWF segment, which comprises software, services and awards, was
fueled by acquisitions made in the latter half of 2005 and strong organic growth
in certain key products such as Compensation. The outplacement business in the
CN segment has been in a steady decline since last summer and accounts for
$695,600 of the overall decrease in revenue for that segment.
Gross profit was $4,401,300, or 69% of revenues for the first quarter 2006
compared to $4,647,300 or 81% of revenues for the first quarter 2005. The
decrease in the gross profit margin was primarily the result of the change in
product and service mix due to the various acquisitions in fiscal 2005.
The Company's EBITDA loss was $(1,944,600) or $(0.04) per share for the first
quarter 2006 compared to EBITDA loss of $(972,500) or $(0.03) per share for the
first quarter 2005. (GAAP Reconciliation shown below.) The net loss for the
first quarter 2006 was $(3,838,200) or $(0.08) per share compared to a net loss
of $(2,508,300) or $(0.07) per share for the same period last year. The increase
in the EBITDA loss and net loss compared to prior year's first quarter was due
to an increase in operating expenses in excess of the margin improvement from
new revenue. Additionally, last year's net loss was further reduced by the
recovery of deferred income taxes.
Commenting on the results, Michael Mullarkey, Chairman and Chief Executive
Officer said, "Our team successfully achieved three major objectives in the
first quarter of 2006. We continued to invest and build out our TalentCenter
suite, the hallmark of our long term strategy to provide an end-to-end
Enterprise Workforce Management software solution. We reinvigorated our sales
pipeline through both our direct sales channel and by cross selling products and
services to our existing customers which resulted in an increase in bookings.
Finally, we moved forward on our mission to simplify our business, rationalize
our product lines and complete the integration that we began in fiscal 2005."
Stephen Lerch, Chief Operating and Financial Officer further noted, "I am
extremely pleased with our team's response to the financial controls that we
have put in place to allow us to continue our plans for growth in a disciplined
manner. In this last period, we prudently adjusted our spending to what we
anticipated would be a transition quarter. Cash used in operations was $1.35
million which was below our targeted range of $1.5 to $1.8 million."
"This was an important quarter for us," added Lerch. "As we look ahead into the
second quarter, we are committed to sales execution and conversion of our
expanding sales pipeline and we are increasingly focused on disciplined organic
growth in our core businesses. We believe that we are well positioned to take
advantage of the growing market for on-demand software in the Human Capital
marketplace."
Management will host a conference call today at 5:00 p.m. EST. The dial in
number to participate in the call is 866-898-9626 for North American
participants and 800-8989-6323 for those outside of North America. The instant
replay number for the call will be available until October 6, 2005 by calling
800-408-3053 access code 3162448#.
EBITDA and EBITDA per share, are non-GAAP financial measures within the meaning
of Regulation G promulgated by the Securities and Exchange Commission. EBITDA is
commonly defined as earnings before interest, taxes, depreciation and
amortization. We believe that EBITDA provides useful information to investors as
it excludes transactions not related to the core cash operating business
activities. We believe that excluding these transactions allows investors to
meaningfully trend and analyze the performance of our core cash operations. All
companies do not calculate EBITDA in the same manner, and EBITDA as presented by
Workstream may not be comparable to EBITDA presented by other companies.
Workstream defines EBITDA as earnings or loss before interest, taxes,
depreciation amortization and non recurring goodwill impairment. Included,
following the financial statements, is a reconciliation of net loss to EBITDA
loss and EBITDA per share that should be read in conjunction with the financial
statements.
About Workstream Inc.
Workstream provides On-Demand Enterprise Workforce Management solutions and
services that help companies manage the entire employee lifecycle - from
recruitment to retirement. Workstream's TalentCenter provides a unified view of
all Workstream products and services including Recruitment, Benefits,
Performance, Compensation, Rewards and Transition. Access to TalentCenter is
offered on a monthly subscription basis under an On-Demand software delivery
model to help companies build high performing workforces, while controlling
costs. With nine offices across North America, Workstream services over 400
customers including Chevron, The Gap, Home Depot, Kaiser Permanente, Motorola,
Nordstrom, Samsung, Sony Music Canada, VISA, and Wells Fargo. For more
information visit www.workstreaminc.com or call toll free 1-866-470-WORK.
This press release contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on the current expectations or beliefs of
Workstream's management and are subject to a number of factors and uncertainties
that could cause actual results to differ materially from those described in the
forward-looking statements. The following factors, among others, could cause
actual results to differ materially from those described in the forward-looking
statements: inability to grow our client base and revenue because of the number
of competitors and the variety of sources of competition we face; client
attrition; inability to offer services that are superior and cost effective when
compared to the services being offered by our competitors; inability to further
identify, develop and achieve success for new products, services and
technologies; increased competition and its effect on pricing, spending,
third-party relationships and revenues; as well as the inability to enter into
successful strategic relationships and other risks detailed from time to time in
filings with the Securities and Exchange Commission.
For more information contact:
Investor Relations:
Tammie Brown
Workstream Inc.
Tel: 877-327-8483 ext. 263
Email: tammie.brown@workstreaminc.com
WORKSTREAM INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
August 31, 2005 May 31, 2005
--------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,828,790 $ 11,811,611
Restricted cash 2,966,709 3,063,368
Short-term investments 291,813 312,322
Accounts receivable, net 3,046,906 3,388,501
Prepaid expenses and other assets 670,751 669,692
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Total current assets 15,804,969 19,245,494
Property and equipment, net 1,264,196 1,224,332
Other assets 103,052 89,570
Acquired intangible assets, net 11,105,600 12,814,525
Goodwill 42,284,766 42,283,442
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TOTAL ASSETS $ 70,562,583 $ 75,657,363
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,262,513 $ 2,520,038
Accrued liabilities 1,960,074 1,658,155
Line of credit 2,261,029 2,326,612
Accrued compensation 965,521 916,101
Current portion of long-term obligations 247,924 1,738,966
Deferred revenue 3,557,050 3,366,120
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Total current liabilities 11,254,111 12,525,992
Long-term obligations 159,398 192,258
-------------
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Total liabilities 11,413,509 12,718,250
Commitments and contingencies -- --
STOCKHOLDERS' EQUITY
Common stock, no par value: 49,194,178 and 49,182,772
shares issued and outstanding, respectively 109,030,194 109,019,358
Additional paid-in capital 7,506,376 7,506,376
Accumulated other comprehensive loss (891,027) (928,303)
Accumulated deficit (56,496,469) (52,658,318)
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Total stockholders' equity 59,149,074 62,939,113
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,562,583 $ 75,657,363
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WORKSTREAM INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended August 31,
2005 2004
------------ ------------
Enterprise Workforce Solutions $ 4,530,983 $ 3,115,588
Career Networks 1,811,143 2,603,541
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Revenues, net 6,342,126 5,719,129
Cost of revenues (exclusive of
depreciation expense as shown below) 1,940,832 1,071,827
------------ ------------
Gross profit 4,401,294 4,647,302
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Operating expenses:
Selling and marketing 1,466,826 1,727,105
General and administrative 3,919,674 3,488,015
Research and development 959,413 404,693
Amortization and depreciation 1,891,324 1,863,604
------------ ------------
Total operating expenses 8,237,237 7,483,417
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(3,835,943) (2,836,115)
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Interest and other income 73,143 8,595
Interest and other expense (30,691) (91,526)
------------ ------------
Other income (expense), net 42,452 (82,931)
------------ ------------
Loss before income tax (3,793,491) (2,919,046)
Recovery of deferred income taxes -- 418,285
Current income tax expense (44,660) (7,565)
------------ ------------
NET LOSS FOR THE PERIOD $ (3,838,151) $ (2,508,326)
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Weighted average number of common shares outstanding 49,193,310 37,140,857
============ ============
Basic and diluted net loss per share $ (0.08) $ (0.07)
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WORKSTREAM INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended August 31,
2005 2004
------------ ------------
Cash provided by (used in) operating activities:
Net loss for the period $ (3,838,151) $ (2,508,326)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization and depreciation 1,900,123 1,851,115
Non-cash interest on convertible notes and notes payable -- 51,636
Provision for bad debt 72,432 39,262
Recovery of deferred income taxes -- (418,285)
Non-cash payment to consultants 40,779 --
Net change in operating components of working capital 469,744 (1,525,217)
------------ ------------
Net cash used in operating activities (1,355,073) (2,509,815)
------------ ------------
Cash provided by (used in) investing activities:
Purchase of property and equipment (230,833) (47,093)
Cash paid for business combinations -- (2,146,679)
(Increase)/decrease in restricted cash 239,646 (158,414)
Sale (purchase) of short-term investments 39,966 158,414
------------ ------------
Net cash provided by (used in) investing activities 48,779 (2,193,772)
------------ ------------
Cash provided by (used in) financing activities:
Proceeds from exercise of options and warrants 10,836 51,455
Proceeds from share and warrants issuance -- 9,999,988
Cost related to the registration and issuance of common stock -- (64,834)
Repayment of long-term obligations (1,519,698) (757,592)
Line of credit, net activity (195,802) 185,703
------------ ------------
Net cash (used in) provided by financing activities (1,704,664) 9,414,720
------------ ------------
Effect of exchange rate changes on cash and cash equivalents 28,137 40,010
------------ ------------
Net (decrease) increase in cash and cash equivalents (2,982,821) 4,751,143
Cash and cash equivalents, beginning of period 11,811,611 4,338,466
------------ ------------
Cash and cash equivalents, end of period $ 8,828,790 $ 9,089,609
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WORKSTREAM INC.
UNAUDITED RECONCILIATION OF EARNINGS OR LOSS BEFORE INTEREST, TAXES,
DEPRECIATION, AMORTIZATION (EBITDA)
Three Months Ended August 31,
2005 2004
------------ ------------
Net loss, per GAAP $ (3,838,151) $ (2,508,326)
Recovery of deferred income taxes -- (418,285)
Other income tax recovery 44,660 7,565
Interest and other expense 30,691 91,526
Interest and other income (73,143) (8,595)
Amortization and depreciation 1,891,324 1,863,604
------------ ------------
EBITDA (loss) $ (1,944,619) $ (972,511)
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Weighted average number of common shares
outstanding 49,193,310 37,140,857
============ ============
Basic and diluted loss per share, per GAAP $ (0.08) $ (0.07)
============ ============
Basic and diluted EBITDA loss per share $ (0.04) $ (0.03)
============ ============