STAF - Earnings call transcript Q3 2017 | Staffing 360 Solutions, Inc.

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Operator

Greetings, ladies and gentlemen, and welcome to the Staffing 360 Solutions Fiscal Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Brendan Flood, Executive Chairman of Staffing 360 solutions. Mr. you, Thank begin. may Flood, you

Brendan Flood

President Thank to you, joined call. XXXX everyone has Financial Matt you conference by Officer; David Faiman, And for Staffing thank Chief Briand, on by conference available by us this following today bring to webcast quarter I that I’m to Chief a XXX’s release Executive is that call. And of and and a press want link also call on who contained Officer. joined the Operator. and will your attention fiscal replay bottom earnings the third of www.staffingXXXsolutions.com. be this XXX’s Staffing this the announcing available website,

the which All SEC, made of actual from or contain XXX Staffing results any today, call. to contained update XX, call. started, Before Staffing disclaims differ materially. contain read risks obligation a will identify forward-looking and other to statements and uncertainties Safe meaning This forward-looking may important the number I’ll statements revise to are conference of to our to refer factors within Staffing conference that results Inc. significant U.S. Solutions, to moment are with filings forward-looking those concerning conference Company’s our take XXXX differ laws the and we subject in federal Please securities a actual XXX’s the forward-looking call date Harbor risks after statements get may statements. forward-looking cause the The of and XXX November today’s statement and regarding statement as Solutions expressly this of any

adjusted where directly non-GAAP to certain provided we comments, non-GAAP applicable, measures. prepared we most reference reconciliations these may of measures such GAAP the to as EBITDA, During these comparable measures have make

to bit for introductory to to finished the before David Now, financial Faiman the I our progress of I’d about I’ll aims performance. When a operations have remarks, some Q&A. After on over Matt to take with that, discuss talk Briand, my performance the and will I opening statements. our our time hand like call to to that, strategic detail additional of explain our on call

of of the The company. has most transformative history short quarter XXXX important, been in the and positive third the

transformation happened the is company have than increased and Butler underlying we the that million. materially has by million Matt. been a its we balance quarter, capital in through the in hoped real in note the more and through of that you indications of removed that relation the CBS are this from revenue sheet U.K, acquisitions in company During performing the over of doubled this for these two uncertainty Early structure on debt hanging three-year, in refinancing $XX EBITDA businesses all non-amortizing us to better our the debt U.S., the September, are we of will Georgia $XX than completed the with allowed had to more its rate firstPRO a to the of $XX on of This that million Investment working stronger up issues capital much footing. Jackson place to and short-term Group. which all Where has hear we run the clean had and to even

we to help the the non-cash the satisfied, can confusing, When positive particularly can. of cleanup, a of as debt of be and you income. net are are will some accounting all through cash While we base generating this Dave guide best items, to related

record events quarter. partly In of have addition because we to had these transformative another and them,

million delivered increase at year-on-year. revenue $XX.X a X.X% Our

will hear. profit continued Our million as $X.X gross a margins XX.X% was strengthen to uplift, of and our you

up $X was quarter million for last million, EBITDA on which $X.X XX.X% adjusted year. same was the in Our quarter the the

was stated, acquisitions new months trailing XX period, forma million. a healthy adjusted for $XX EBITDA, including two pro our the months, as Our entire

pathway in not the company's at a on a While providing pivotal we its now of history are progress point in past, profitability. the to we've had guidance,

for our point, the our hand to will time. is quarters over it At our and first expectation President update So that Matt? we over the I'll for net income the transition call being this an on Matt two operational next performance. to Briand, CEO, positive

Matt Briand

Thank Brendan, and you, day, everyone. good

actions Dave continued of our strengthen organic mid-September, our provide taken including I'll growth results. quest jumps margins, overview Before highlights to completed operations, brief of into improve few our acquisitions the a financials, two our our a and to

have both has and Georgia Butler announcement, to and huge CBS close family. eight integration the now I'd First, organizations weeks the integration proud engaged welcome a staff supportive not our like process been client have attrition. to to both the light we process, report, process. We're into in staff firstPRO I'm through to Staffing Leadership any and entire throughout XXX success. and seen been And or

Georgia roughly in FirstPRO Atlanta, XX employees. with is based

its information Our and engineering first base, one Their local U.S. support acquisition the with outside Northeast of technology markets. primarily fastest-growing services the of client technology in professionals.

team an of is outside a management professionals. global over miles CBS management Redhill, tenure XX the primarily information staff FirstPRO's London. XX years. just based few engineering average which of its supporting CBS' client base, impressive CBS and an with years. has team also XX average is in technology firm over with tenure of bodes Butler employees

as XX.X% consolidated yet few work the months our first we an to gone integration is to XXXX, this over improvement still Through Margin plenty period margin year. again. last do, exactly of almost of have I'm QX, XX% quarter report planned. same While have of happy improved

As mentioned on XXXX. workers' had compensation calls, a significant prior we in improvement

we that in for identify upcoming our policy just further safety Having completed this goals brokers, year year. the savings annual our in would upcoming with committee can and review result insurance One savings additional of fiscal to additional premium improvements year. internal our confirm was the

to the unemployment we've Our levels of of under U.S. the especially at our markets. perform of rates some some divisions the permanent continue placement seen, strain highest lowest in

and was very as have September's specialized London well. Prior of Segment light revenue mature and continue XX% to which industrial. fees. the as was global primarily client our market, business XX% CBS now base, both Butler more a and permanent staff and to placement professional teams drive margins mix Our perm will improved includes fee generating acquisitions, shift firstPRO reach

early North QX an Carolina new launch running With are partnership fully the third and partnership completed one agreements two workforce today, addition anticipate Tow or for and of we firstPRO anticipate the and agreement, market. light group, revenue three which industrial. In to to in in and of management third late Staffing's large QX, and CBS, two in professional we other thirds our up Monroe completed programs closer the of additional running as forces mix the XXXX. some specializes contingent labor news, QX

which we are South at far that location support multiple have later addition, the some its growing cycle, be Carolina this are In our sales opening stage. presence our To will the month. first in currently prospects in Carolinas, Staffing along decision Monroe of

Charlotte country. Fort the Carolina, south just fastest of Mills, South areas is in of one the job growth

off are rapidly intentions towards market and southeast branches to Our our additional to moving and growth, expanding Greenville, build Atlanta. opening this Carolina, eventually, on South

our These proved better leadership by domestically have of or enhanced To sister we providing levels share. client successfully a and new experience to relationships successful market adding date, Additionally, well drive both as profits introducing expanding opportunities. service client as staff the subsidiaries, number Officer, continues cross-selling executive would internationally. the call objectives. David Chief to who And now like financials. the our finally, towards dedicated achieving I tirelessly on thank Dave? Faiman, hand team, Financial our over XXX work corporate we behalf to Staffing of the will for

David Faiman

everyone. and good morning, you, Thank Matt,

from million. million acquisitions of the was the organic revenue but quarter $X.X For previous from $XX.X the declines of quarter XXXX. while year mainly included prior in Revenue exiting against of the revenue two declined prior increased an of of for the as from $XX second XXXX, $X.X million quarter calls. quarter, included base third stem from million year, of X.X% a the portion $X.X increase outlined business low-margin million The third

as workers' point the X.X% XX.X% acquisitions Foreign compensation revenue were light the two significant. factors. XX.X% gross year. year, as increase $X.X well of quarter versus profit the a million the This impact of margins basis contributing the was the from margin over costs had million in prior currency industrial lower or impact an sector, driving not Stronger Gross prior improvement. higher of margin was $X.X XXX all for over

of expenses current The was million. million higher includes be $XXX,XXX $X.X capitalized year expenses acquisitions. million of quarter operating year by the $X.X Our prior acquisition-related $X.X offering and of of against that two approximately can't the the the costs deal

prior profit. were charge $X.X fees overhead which approximate current in both deferred Other noncash versus of and the $XXX,XXX balance the versus of charge debt sheet prior extinguishment related to to of loss Including the optimize debt, year. refinancing are million and million the year, $X.X loss performance old for a costs, our expenses of write-off it's noncash approximately compensation. financing $XXX,XXX fees noncash for We stock company's from financing million translates closely expenses, expense year quarter. and to of operations on of $X.X the and on $XXX,XXX into This for interest professional primarily continue manage our $XXX,XXX

$XXX.X last due this of those of of a increase out currency $X.X quarter business. by transactions, to All first and contributed partially two for $XXX.X year-to-date versus quarter days the This XX.X% quarter the other with million down due add noncash of year the million $X profit one-off versus year. foreign the exiting that or million as third from in of remainder million as the nonrecurring of gain debt for and margin deal million transactions both insurance, $XX.X quarter $XX.X of in the by $X.X loss the million million, adjusted X.X% million. on inclusion compensation despite Year-to-date, into translated Gross of low-margin million translation, was of balance was our $X.X million despite X.X% well $XXX,XXX. prior expenses fewer XX.X% year. revenue acquisitions. million prior expenses of Other of backs acquisition-related revenue stoppages, EBITDA expenses against working was Taking with to from efforts million and higher by Operating conversion from nonorganic first in in lower both prior workers the sheet accumulative $X.X a was Of standard $X.X prior a $X.X driven some other coupled due warrants year increased on of and million XXXX. the net $XXX,XXX prior loss weather-related to revenue quarter, up decline, margin X.X% XX.X% was offset was by extinguishment lower million resulting $XX.X gross lower the of refinancing the revenue, by approximately organic of year of versus third of the $XXX,XXX $X.X which and the $XXX,XXX the driven of quarters, the operating by and of are year acquisitions. $X.X two or cost over

write-offs the $X.X earlier. had year. spoke charges also translated I year-to-date loss other million We and into million prior noncash of for that net about against This $X.X performance

items, However, all noncash $XX or once increases versus into backs X.X% an these our nonrecurring $X.X noncash of million adjusted $X.X trailing excluding That months when costs, traditional account the now and EBITDA increase. million is one-off XX two performance taking acquisitions. trailing million add to the other number

during had and Turning about significant sheet It XXXX. $X.X our grown million. spoke hand the have deficit our provide December on now MidCap at significantly $XX million, that capacity facility to cash the we close our now Trust $X.X to balance has process $X.X facilities in Not debt from million the Financial quarter. on to balance end expect million current should $XX.X new the our UK We're to capital sheet. the reduced fourth million additional credit also with revolving of obligations, impact. only to have working quarter, of within The be noted evaluating fiscal and we facility we the transactions borrowing reduced of of amended also a

With transactions pro XX now trailing stands EBITDA, ratio our leverage at and adjusted financing these forma months X.Xx. our

The cash cleanup well current $X.X statement year year-to-date the capital period the as to used $X.X provided same flows. cash of same as $XXX,XXX the versus arbitration. CSI was activities settlement $X.X year operating of working of the includes last turning for million million approximately historical of – for in Finally, million year. Net cash

cash back paid cash Our acquisitions investing transactions flows the net multitude steps and cash and reflect for balance in of financing up I'll we structure our open of and through this At the Q&A. we and result reflect the upfront two call have this the went cash to before today. cash the for we point, year required Brendan sheet hand flows to it

Brendan Flood

the is stock on board a XXX our I stock of I'm that we a everyone into affected that we're Dave. bit that NASDAQ. in Thank be that you, outlined The imperative. to time. timetable listing will our determined retaining On price compliance should split compliance to to sale to last agree of Solutions Staffing return you will back our call, an has get reverse sure NASDAQ requirements

last M&A proposal. over as compliance entitled have this vote regain our to portfolio as existing to the said group and the positive to as call to on record be stock in I for the board X date positive In the quarters. parties on over Should we stronger. In without the as discussions company transition are need we to said, two January stockholders no we work the reverse then right whole have this program, the the to special the to November materially the integrating like X income expect transformed would conclusion, and several We in relation stock-split quarter, continue reserve this the business point, we in the vote Q&A Operator, for shareholders but making not next session. the and the immediate retain hand the rush proposal, for the meeting affect businesses the date the will are to net on our in to for add at the split, brands with split.

Operator

Midtown question-and-answer Thank from be first conducting Relyea Ladies Our we you. [Operator Partners. gentlemen, will line comes now Instructions] of Bill and a with the question session.

Bill Relyea

growth a over base Good the firstPRO? acquisitions Butler past couple progress. company, organic bit the to talk and you nice two years Could new of the about your of relative morning, CBS

Brendan Flood

grown and has X% morning because remarks. from to couple below started Good to probably mid-teens. Bill. has CBS smaller number grown, a kind across of the Sure, compound a thanks years, the X% for probably and Butler last base, average, on each it of about at of firstPRO,

grown broadly faster. seen, has bit and So with firstPRO CBS Butler a is in the progress XXX has line Solutions that Staffing little

Bill Relyea

performed Okay. you – And what happened have certainly bit terms the but professional of the comment weak period. the well, the a on of – could industrial to in seemed a light

Matt Briand

development, finding We as Hi, Matt to we're – process and businesses. in make low relatively opportunities lot pipeline placements been of a a accurate. Briand. statement are What Bill, and And on we out is certainly the and tremendous full is, the have working a professional as ability have keep that we is unemployment this we – there. far the candidate impacted yes, has side those available now. that amount we've grow certainly spending are the client But that through the

Bill Relyea

light industrial really the well. doing And

Matt Briand

Yes, well, Bill. perform the to continues industrial light

to And it of some due new markets. is

a workforce well. as it But the of do contingent large they fast rate. that to to due Some group is put together at churn continue we've

Bill Relyea

the Northeast? mostly in that Is

Matt Briand

It is primarily Northeast. in the

our up Although, office and southern be capture as I that the well. are as call, so on share so – much our we'll more mentioned opening continuing South first to in more the markets, we Carolina market

Bill Relyea

do And the question. actually percentage stock last Jackson, own? common they one Okay. of what

Brendan Flood

it warrants XX% So approximately owns has that about potentially bring Bill, more. XX% to right be it it and would exercised now

Bill Relyea

Okay, good. you. Thank

Operator

from next our And comes Shaw Michael Wells with question Fargo.

Michael Shaw

quarter. Good clearly, well kind running a balance guys. morning. of Hey, the there's progress of on lot business. sheet Great And as been the as

guys basis, going-forward cleaning doing acquisition is, on any doing guys share start starting given have instead these question acquisitions? as integrating pipeline, new to more in my a acquisitions, So the of up repurchases everything you and consideration terms of you

Brendan Flood

million annualized in that M&A going that not last That's of from or relation I of is mentioned a on say so. a rate. we run revised this current – mentioned question. great target I our organically first would We're program, revenue instance to $XXX Michael. have $XXX call deliver Thanks, our our the Brendan. I to million

there which over to therefore, more will of the XX is a purchases, So months. next requirement make some do we course

moneys, businesses, kick buying evaluate buying will, it's money get way that or We stock where is off for back that in point best faster. we obviously, drive spending our more which excess shareholders as starts operating stock to flow whether cash our of a own some value to will whether of in the our

don't you given at I do can great We And think a really our look but a I that that's radar. So clear you tell is it I've it. question. on answer,

Michael Shaw

kind reason mean, is ask why I acquisitions, the very consider the mean, be these I right, the I expensive, when seem of because I of like numbers is, debt of that extensive. mean, they they'll I kind

can ways buy so currently have it's two you debt right, so you or something, an it's And equity.

the is to and cheap, seem very going costly. very it acquisitions debt expensive the me is if be are to So the stock would becoming very

something becomes being that then damaging covenants the certain make have shareholders. might that's it debt it's if cheap is mean, if I and very stock. the and So very to has dilutive Jackson you extremely resort especially stock where difficult, to to

So it the it some would buyback more the to of that seem of stock take very seriously program or share attractive. or to by might that signaling sort tender that currency to repurchase starting market, me a to the by dilution shareholders the make offer

Brendan Flood

I Yes. think it a valid is point. And

I think answer. several one parse my of the to that points

made stock acquisitions Firstly two in the of amount is used almost that that we was minimal. the

undervalued. negligible yet, the flow a debt-based we'll a is share the decide that over cash approach without us point tipping and resorting for we'll but in more shareholders. go there fact evolution which the simply refinance the debt that believe, dilution that believe, we balance be will by to therefore, next I certain down course did to Staffing almost driven partly that that will which not because the base. The we acquisitions, at price, dilution allow few to more effectively the And with of bring exponentially. manner debt point, We is of to EBITDA a point materially is couple partly with in at generate that, grows by of tipping shareholder So driven companies, years, the at operating the we're a

Michael Shaw

guess, that say, the stock I the or higher. – we I my undervalued, that as then let's the is really turn like, prices let's say, offer, be guess worth, might take stocks mean, for more if think I $X.XX you you down question open are example, $X.XX

actually let's dollar let's $X So stock, saying $X case get then, you're a something let's say, dollar in $X. for if instead, spend worth it, on that But you're you see the buying that's you every spending, right? on $X.XX every And thing buy fine. right revenue, company back whole because say, that essentially it's you say, spend debt that's you're the you debt-fueled, for – So and right? let's or fuel

no the there's out going cash So door.

it's So for what sounds an we're operating right, X% interest right, of get to XX% like because on that And margin that the $X because $X.XX every then expenses, back revenue, it $X.XX, other another – go operating on XX%. operating expenses. that's you the margins spending probably is.

the left So year, sounds of over. about end it like you $X.XX that at every have

that, came you only that making factor kind of totally an $X.XX you're at growth that me you I while with for important on confuses clearly it that worth is every dollar So purchases agree acquisitions. a of year

wondering walk back, $X through kind First better. the is so stock me terms when can of upfront you of buy that's in having it why if you I'm

Brendan Flood

a for the for it's today between act, balancing what great years. is Michael, three and So next is what great

reduce cash total buy tomorrow to and the the shares of were day the away our if share and great would take buy availability hopefully, and would protect number price would today. something take today we after. outstanding, market, that it to look shares proportionately, and available drive cash that So the our average But up, therefore, in

a truly balancing act. So it is

$XXX kicking EBITDA, $XXX strategy the somewhere is And of million, us that call a gain we between on believe our XX% buying materially and shares… and million. will X% We will be to off it, greater price back X.X%. that share give to Our get

Michael Shaw

seems isn't cost XX%, that's It not like – debtholder. and very relating that Buy it's I mean, is interest to necessarily to X.X% if you're the accretive accretive EBITDA shareholders. your

Brendan Flood

for is company valid. for and Again, three balancing as a and two or weeks the act It will great I'll the two time what in today's look your years repeat dollar company future what opposed of what is weeks absolutely point to the between time. is answer. three But or like great is years the

be that you purely for if great So shares. have were every the is what the available dollar in market out repurchasing on today, working shareholder spending we will our we

Michael Shaw

not using I mean, be you that's don't Then think I is I not back, obviously, back realistic. shares. to Right. what – my I point necessarily single – you're don't dollar buying every that buyback that, should

the And company We're able the grossly talking hedged two- very too a finance is, purchases that's the that the of signal be we're think financing with that economical it'll that, much and the the long-term on to probably However, in future. as today. for basis what's that's is you on here. company in useful right, more for market type avenues order by be problem that point. even recognizes to raising trying management price way about a provide equity signal and of It's the I share future more by the company well to of low, to than value or is to the enterprise the a yourself you undervalued, being doing it's in that talking not three-week about

Brendan Flood

got the to a for repurchase we way answer our to of have right growth money. company than out with I at determined It many which that So our to sure same you've going Board balancing is, look program. different a ways best future now, is the answer of I'm is spend very not The question. a point. think Directors is do a how I can the Michael, act valid share And going that act. balancing better

Operator

Thank you.

is caller [ph]. Riyad Durrani next Our

Unidentified Analyst

and the questions. a couple quarter. Good have great of morning, again congratulations gentlemen, just on I

expand a you one them is, can that. press you releases you base had mentioned, firm second reaching was the back where is, to investor you've going spring, that. I that contracts, anything out Are of heard just given in your you the progress around to exiting that some those. And increase exiting efforts of investor sense made question are, I specifically almost to the One mentioned the what I we in done you've wondering of of haven't were that since be then to your help base. are kind about in a underway? you speak to et in the know doing if Is that you company? where you Thank And my think I XX% you. us of don't you kind you been done, gave of cetera? low-margin are

Brendan Flood

In investor relation York Chicago. program, XX have, at of in region XX to across we institutional the to held our meetings somewhere and this stage, New

in So it is progress.

a We have stock. these facing been lot of have a challenge institutional is we're doing a buy Part the to $X that buy They holders $X, it. cannot stock. of that $X.XX

so again, approach it's continue message invest can get continued investors that to performance these the hammer to they of the to an to the So they in performance the it's company, so. institutional point when that intuitive to we do it's drive But us, – the out continued drive of where stock. to can

in there. investor have some six sure description our meetings last relation months to of and meetings in probably months out the XX% is So we've of lot and spent of months of some it. a those other quite Dave over make to that been both last we also six working have closely Allen the doing and Dresner the course engage five FleishmanHillard, We did of message description. of financing with been I

to terms it business, of I'll pass over low-margin Matt. In the

Matt Briand

you, thank Flood. Yes,

two it quickly, segments. I'll So into break real

would that the last as primarily of to a identified exit, the low-margin over we the been out So the that that, of business I low-margin light agreements. industrial on side, are we've acting say And of those XX we've business months. wanted out that we course business of

professional XX will services low-margin in our portion our not what decided subsidiary out. up the the that the We It's business the course are months, of we side, out was over we We the renew And exit location of of business also – consider renew their contractors primarily sector. the will that we to a one did phase I next did that have On not big contract. in business. Massachusetts government contract. off

And over the we're course So about the probably the XX XX% XX% in to XX months that other there. regard, of months. we'll achieve next

Unidentified Analyst

Thank right. All you.

Operator

reached like would end comments. we looks for turn session. Brendan of floor to Flood It Q&A like over now to our back have the I the closing

Brendan Flood

sheet. you, materially Danielle. And set we run our continue rate. in of towards new annualized to Thank we in In our our We'll Okay. internal $XXX summary, operations. will drive revenue balance improvements have million strengthened now plans our target

As shareholder value. is committed team, and have all, Thank our always, a earnings pleasant as growth in Operator, end growth a we remain very to to growth again, revenue, and the in to that in of management call. you day.

Staffing 360 Solutions (STAF) 15 Nov 172017 Q3 Earnings call transcript