STAF - Earnings call transcript Q4 2017 | Staffing 360 Solutions, Inc.

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Operator

Greetings, ladies and gentlemen. And welcome to the Staffing 360 Solutions Fiscal Fourth Quarter and Full Year 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. pleasure for Brendan Staffing my Chief Chairman now Officer Executive XXX is to Flood, introduce and It Solutions. Mr. Flood, you may begin.

Brendan Flood

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

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

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

geographic statements. explain to revenue towards and to opening have said, strategic discuss flow our through financials, time that by acquisitions, a to before like becoming solution the our call David point We company marked of both I’ll balance the my streamline with generate in allowed performance. profit over company. cash year. quarter I fourth company and presence will next adjusted introductory sheet, finished record After I’d us When our call new to I goal XXXX our initiatives report on the the hand gross about us for Q&A. million the record the Faiman turning expanded XXXX. and progress organically to full years. XXXX David and talk development in within advance bit our major financial More And of two revenue, the remarks, refinanced a take positive of these our Now immediately, and beginning to record brings $XXX to EBITDA positioned aims a

the same compared full Butler increased September, quarter The two and of which the in see For margin EBITDA $XX.X Gross year, quarter firstPRO the impact in the up to is in Gross last fourth XXX% of XXXX to adjusted profit by CBS first million. million. fourth we revenue the UK XX% to $X.X as our period of XXX $X million. XXXX to made grew and acquisitions US. of $XX.X million XX.X% to strengthened was by in

two did the months by $X.X $XX.X On acquisitions $XX.XX to strengthened Gross revenues EBITDA XX% including of trailing a adjusted EBITDA year, compared for by the [Indescernible] million. to basis entire grew million. increased fiscal their $X.X made we to million. the our margin Gross XX.X% profit For million and XX- delivered adjusted full XXXX, by XXXX to full as increased year year million. X% to $XXX.X

whole which certain for quarter year later. the profitability recorded and as will our for affected the one time also a We discuss charges which Dave

that quarter facility XXXX, facilities fourth in the and in and the you albeit cash $XX will and of our in additional US both early operational issue by UK strain usage. back availability asset completed and to and over this been These growth. which lending UK, financing closed we setting initiatives XXXX underway the an a renegotiating and on prior ones million XXXX, hear our have and considerable initiative call Just addressed important up investment beyond years for put pivotal we've during

in quarter They annualized trailing During transactions forward shareholders. -month earnings enhancing that to were in two all $XX required approach strategic accretive strong, approximately doubled have our our $XX over acquisitions we XXXX, completed the XX boxes revenue adjusted Both these of disciplined third EBITDA which added ensuring the fits for acquisition and million. ticked. of million were and

Georgia into we Carolina, January new XXXX North three we're which continue Rhode New footprint. location UK, location London. On operation Island, U.S., Connecticut, US also further in expand and By during UK in London. our five from geographic the headquarters of one operations Greater XXXX, South in City of our is XXXX, the Hampshire states we Xst, Carolina, the the and one the to and states. in Massachusetts, Additionally, our York end and expanded in New

I performance may bringing and the changes organic reflect of further the material from beyond/ have people. I from Furthermore, discuss locations approximately nine call clients XXX over for XXXX our size locations listing with hear need XXXX we to end now headcount structure, sites, you Financial and the four of to team XX of Chief growth Faiman, to on-site We management condition locations in to these to David XXXX, from and total end realigned expanded the and Dave, locations these XX will the at integration. After the further clients' on hand XXXX six and internal in at the people beginning drive initiatives Officer company's will the our increasing of at and XXX what about financial

David Faiman

good Brendan, and you, Thank morning, everyone.

our to filed point that out intention XX-Q to March amend I XXth. Form Before quarter, the period to our XXXX. we XX; and wanted restate indicating I into Form details the fourth ended September X-K of get on the a

on such if adjustments results the for discuss XX-Q adjustments. full-year have Form restate slide As and in shown XXth, on I'll the to are this The XXXX the results are included XXXX third quarter our restated. been September filed we quarter non-cash impact all have our XX-K numbers as the for no fourth Form and

$XX.X our the fourth September low-margin see experienced was didn't revenue in prior while segment. fourth declined we the Revenue $X.X For of million exited year base XXXX, the commercial business from $XX.X acquisitions against as XXXX, we XX% from and million million. quarter uplift quarter normally closed of in $XX.X increase the of revenue an included year prior the the million two of seasonal of

impairment costs million as unfavorable. a impact approximately$X.X the the segments, operating well a acquisitions, XX.X% higher margin $X.X higher loss was as $XX.X associated million. prior well currency $X.X the working of to fourth Operating This of Foreign loss and performance million million or million $X.X goodwill prior into including $X.X net business, year, an was was from profit compensation were increase XXX point driving reorganizing million over quarter to $X of year. the Stronger million PeopleSERVE lower of the thus the translated of XX% impact two as the of all for $XX.X contract. related from charge XX% our the This margins commercial prior Gross versus expenses $XXX,XXX operations against by the expenses restructuring two as factors. CEO's revenue acquisitions, company and into had and year, million of improvement. exiting over three former a segments with the contributing gross margin in of

XXX% That cash in against non-recurring grew and quarter gross EBITDA adjustments over our into to XX.X% $X.X non-cash prior the million costs an to profit year back fourth in underlying and million adding translates XX% from year. $X.X However, adjusted the prior or improvement.

revenue in of million workman's million. operating the revenue $X.X For $XX.X% lower costs higher restructuring and calendar million and came prior and million $XX the during acquisitions, Operating declined mentioned fiscal refinancing of of of base as was Gross $XX.X XX.X% while versus the increase for $X.X million an of the driven business, basis was compensation impairment revenue profit higher I point two full gross $XXX.X improvement. margin of related acquisitions. goodwill XXXX million The associated including insurance XX% year resulting by charge XXX versus by well Within the capitalizable transactions $XX.X as the $XXX.X in year, earlier, of margin acquisition XXXX, million expenses expenses increased with X% two business or a from million. XXXX's year. $XX non of the

of from debt, include consummated other during million operations interest $X.X resulted transactions Our in on a well net and $XX.X the loss a million. year. This the losses as higher million the loss we refinancing $X.X expenses higher from of of as

the While continued cash EBITDA was of $X.X year a underlying the performance for our adjusted versus basis to million million of pro our business of in number by fiscal for trailing XX-month charges, adjusted if statement income the in they as non improve, the of a burdened resulting forma was on entire XXXX. EBITDA million. $X.X been the two calendar year, had owned acquisitions accounting $XX.X Including

strengthened overall Turning now into successfully position. obligations has Subsequent $X.X on to current cash the we we significantly $XX to Not our XXXX, the our million sheet and borrowing reduced during only of HSBC debt have transactions UK at terms. the financial a balance million, hand. more favorable grown arrangement grown economic facilities with with year now year have factoring The and December ended to our balance sheet. refinanced

for an Finally cash Q&A. to recent with well capital of of principally arbitration non-recurring consummating company's the continued fund in cash used At the the financing our capital. an two on was call are acquisitions to to cost this two principally other $X.X and call acquisitions two million the to cash but hand in year, $X.X the and Brendan developments loss. acquisitions turning million improvement as for provides Investing and before working cash Net million, approximately who inflows point, flows of open structure. $X.X I'll update operating back refinance are we includes flows. the Costs settle the as completing statement activities the associated

Brendan Flood

Thank you, David.

US Mark's the Polito smallest enough and of to Staffing company on will the US presidents, justify three Staffing our The to two Paul Darby. the be to until of US we stream, appointed business a make delivery for UK As following will Each a realigned my during the of of December, of Commercial these UK. by cost we moment, in Staffing into businesses Staffing growth, mentioned business strategic integration our and our organic remarks, At Professional and acquisitions tomorrow. we led the the Professional large Staffing made. review Commercial from additional streams. acquisition report opening directly responsible leaders continue with me Staffing president Mark management I be first three US, day Professional Professional an operations will management.

we've we larger become acquisitions As the program couple specifically phase two years on program. our of now have following into on new the organic growth. focus delivering this driving in past intelligent need become on growth and and we it that over September, of our a of organic moved degree day-to-day And that greater a integration has clear

real positive and As sense hired employee, the new to the removes the benefit of of additional or businesses, in we duplicated impact based since that productivity the [power all before stronger of a XXXX, across certain greatest productivity are the group, first of set strong generating in designed exception of develop team, improved the gross on which of to the the without In for business a revenue client so have the and which beginning one] to group. generally year, revenue have the gain order relationships estate signed each of year. people, end new overheads a goals margins, XX is hiring the impact across initiatives clients half amounts Already new on revenue has per entire unity place established several our and headcount. we P&L a employees increase and levels share driving gross internal units drive Almost X% profit our agreements. takes can to

billing. in weeks staffing clients business the of Staffing As just the XX Services commercial clients Services a engaged of XX which the Placement Lighthouse already new of new And examples, first has new Monroe couple has year. signed are of eight XX

While XXXX in in successful businesses, gross drive in geographic the from organically we very via continue been the margins exiting of year to XX.X% have acquisitions, significantly also the course have on XXXX XXXX over steps footprint and XX.X%. to in taken our XX.X% moving this strong expand and while we to

low seeing unemployment. this are clients market We our very permanent the direct more are in placement that demanding of hire period or during

histories, us This placement at some have hire While be revenue UK contracting the firstPRO strong market of and now. our starting provides other of which visibility into do our have greater the are so with will not businesses units expense tapped to and not temporary stream. however permanent business business of or this

management EBITDA margin XXX some constantly in lower earlier of against locations a enhanced. client not if the exited moves locations. can lower. additional maintained Staffing mentioned and strategic we're Solutions gross opportunistic the that We're As or nine we And cost XX I looking is delivery contracts markets. and team, margin for into XXXX also be

have on-site We beginning to with already of and April programs year, two new begin a US in clients the two across further in added signed May. new our with the since the up

enter revenues the open a be will evaluated US one. a is geographic from will We at find of to current to the anchor we we our are expand locations so scenario even the the in that a at new worst from More from new day that tenant, will we two cover target of further which further. minimum an expect The are which in currently the location the markets serving we year. revenue breakeven manner markets client which market anchor in rather, and new footprint as three cost the additional

Our businesses at share X,XXX but had with US stage. now being this working started client practices. opportunities executives The little together a both than still best a senior closely have in together clients the Right and the over one more very and are working counterparts have beginning UK the some their and serviced more since than fruitful brands. more of handful our by sessions in have early of we a very January, is to

more related us London brands. cooperation opportunities and identified to several we Carolina requiring Currently, cross-border the the of also with between South Mill additional work we and to in positive is our that real in of our rush and The that whole discussions US we $XXX continue relation City gives add portfolio, the and locations. This to exploring. one on Fort have without no as get than are to two always program, gain businesses, in has That We but the we a M&A our more have we order estate the aim UK to for our in in brands revenues opportunity additional there. an geographical or will expansion require In costs. parties are so revenue. acquisitions this $XX expect annualized further million in acquisitions group making integrating in of to said the stronger. annualized million be order Typically, to the existing would are get to

future discuss this will further We on calls.

group. second-largest of this performance stock the as for is am on call our in shareholder the valuation, in as stock As nobody the as the disappointed I

our the management to over that In at to of IPO profitable, interest I addition XXXX materially on months be to remain and in XXXX. to out Group the Q&A the the been the has into York to and level execute investor point to to of update IR all to each And for story. New management these would and in relation expand so understood. Equity past and this go the the of rebalancing, fully in are the point we've In in conclusion, like City, this a engaged beyond. refinancing have enterprise-wide realignment. to Inc hand over message to on determining how in quarter. out institutional firm session. broadly Operator, changes beginning goal those call opened growth made our that the opportunities. This me market XX constant It's have our us calls we team will more optimism more get on XXXX achieving in transformed our opportunities committed have our generated to a business that how We sustainable,

Operator

[Operator you. Instructions] Thank

come of Global. Our Gregozeski your Please questions. ahead line with the first questions from William with Greenridge go

William Gregozeski

guys are will and serve business, left off people low-margin when much out that completely how regards the that that be of on In guys. you Hey, is getting books?

Brendan Flood

go don't detail of units. into that on we individual business Bill, typically level

last every But for want could probably reality, remains of there the walk years that renewal The in all in favor vast majority of bids it been have relatively to couple we up positive from. forever. except So stay for the our July. comes away

William Gregozeski

Okay.

I to to be rid what low those growth having of are business. we of much I margin So we to that'll when this coming organic mean lose we're talked end or the end. to about growth, days organic got getting had this but this you mean an we had

Brendan Flood

won't at might majority than contracts mean -- mean nothing we It find that constantly keep. that coming That's pretty to doesn't not margin we to or that evaluating close. their we're what that's what there what of would higher There's do signing And going we're pieces up in I come losing is anything it typically that any a the probably rather we natural vast as is end one material much it. with the two is that be size. lives. gotten that we've we're

So comments away forward going calls you about any expect from walking on business. low-margin conference any shouldn't

William Gregozeski

Okay, great. are on in of the sounds And have total? year organic guys in lot it seeing that then already growth growth What a you're expecting the XXXX. for front organic you you like

Brendan Flood

everybody said XX%. of a We target

would organic growth expect would there's XX%. of point order the will we a that an we in we So expect of average that rates always somewhere failure as but achieve

William Gregozeski

XX%? year? how you or Do gross they are and on the around grow you stay seeing the Okay think for can margins

Brendan Flood

So do And some margin as permanent to of the more hosting up. placement. moves mix it is we down

where There year. is gross the Our can of a improve year limit across to margins have last continued to this go. as contract it beginning into and

saw growth that think will we material we XXXX. the in XXXX in So I don't see

William Gregozeski

forward year? the we for as XX% do you look Okay. think could number to a But

Brendan Flood

so I would expect, yes.

William Gregozeski

that's great, Okay, all I right all have.

you guys the think doing. are some you great doing the at recognize guys point And are markets job. mean to I a I work going

Operator

comes of next Partners. Please go the ahead your with line with from question Midtown questions. Our Bill Relyea

Bill Relyea

other most Good questions. -- morning. ask of answered my Actually the Bill

you if wonder you the how increase And I how the year. organic growth see So do or during far thus this that? the it review quarterly to expect been you segments just of whether sort could has year business in three

Brendan Flood

expectation Bill So, order the across bit the in XX%. Bill, growth I so but business just we said just be that XXXXX is to our of issue point in reiterate other say. that a what to that guidance don't will I How our this will to dreams, organic through is too early splits

Bill Relyea

and North Okay from the would you've hit potential and an having question one that be to I guess see in that's Carolina Georgia? as of do Are expect in how the high prospects down to you and upon would you continue that -- going there pretty region additions. area something potential maybe

Brendan Flood

or two So calls incredibly Georgia mentioned we that we about Fort South area. probably Carolina is acquired around we growing three we office trying fast into or certainly firstPRO, recognize Mill do ago, after on an economic opened maybe soon time the the

fruitful that very expect us. will would we it for So be

Bill Relyea

there? going And be UK? Okay. have Do Brexit business in that impacting potential the see only about for other lot your question well? the Or a are would the things fears reasonably expressed people you of

Brendan Flood

recognized amount soon uncertainty. there was out point some or where it then came after where period way quite huge away. got the three And this that was There month to vote which two of most surprised people I a So think. clients was certainly the

So normal growing again. they and to went start back

next actual exit March year. just away less Now slow, than months because it's XX XXst the slightly just is

period that still we're exit going think are at several take is to point years. people where expecting still I a the of

into, you're services a not sector concern So of we're its which if financial stuff. you're not less heavily into if maybe banking in it's than the

Operator

next with your from with the line Please Our question. of come Wells saw Michael Fargo. questions ahead go

Michael Shaw

Hi, morning. good Brendan,

I a So question for had you.

indications first went. or anything how preliminary -- wondering So over. like you EBITDA now type sort, the so any quarter on performance on today is or I What the of guidance. had or profitability April Xnd and if quarter any the is of was

Brendan Flood

at rightly you as we So are Xnd. April say

the results or for of for month various are not another March days. for -- that Our to March subsidiaries expected X the X probably deliver

bit on Typically, So first little around this that probably out impact we us, know. there huge week the two don't And not look quarter, the downturn a Well what really of the snow. we certainly were the it's a seasonal is is will entire anybody year. weather. lives years was snow partly Massachusetts this ago --we call a in quite by way driven in for it Connecticut who year when an of really, pans or lost

is with that to line first is to in going have exactly order pretty but will that plan anything cause expectation quarter in that our well like, May. the you out our we Michael, it. what be for give Our you chapter verse that any that And on find and we haven't in suggest you internally, I middle would to call dial we into of But seen conference certainly we'll hold the alarm. looks

Michael Shaw

--some pleasantly what of mean improvements. you've the about necessarily that was was if of or some quarter that line the on ahead what you pretty not in wondering have expectations? in synergies, I operational been or of was surprised much some of in outside. want, the it's talking the that I because know been last this if last, Right, I the but about anything I

Brendan Flood

get the the new surprises So in script three first clients in new pleasant very XX added of the Lighthouse previous got there have examples in clients year. I like two my It some Placement Services together. didn't weeks the XX been mentioned of years eight

Schwartz and gained to did of XX next the there. XX phenomenal months. Xteam, new course up would two XX billing the three the of of in XX over are And And other or course be or business. staffing the already Paul billing to commercial we expect those clients XXweeks the Eric and So Polito's really Staffing first under really, we've the Joshua job Monroe with year of had

very relationships, client I positive developing there have upsides. new in developing been terms of some new prospects, So think

Michael Shaw

Got it, okay.

was call or clearly conference indication positive in And there next coming be two income also quarters. remember some necessarily quarter's to going last guidance wasn't was So the positive. quarter that last some I

you then guidance that anything So about coming I quarter are you this backing that didn't guys from I'm off hear at sorting all? mean because I

Brendan Flood

We're partly bashed keep getting we non-cash US GAAP of these because with. charges looking Yes. only that

ignore think as we income, but net charges, that you far probably is I If of seriously cash as guidance non-cash concerned are positive all positive quite the goes -- order. out it

Michael Shaw

Okay.

then saying the that are into then couple to quarters? what the So you're one is going offs continue next

Brendan Flood

yes. The non-cash will also one continue,

Michael Shaw

like acquisition example that Okay. time. something kind I zero was you and are to you example you I a like that mean you are so there is like PeopleSERVE this land suggesting mean you indicating you I where before or your for thing an take that mines down of kind other was mean of are a looming? that said good said went are

Brendan Flood

No.

With the the is remaining goodwill. of $X.X entirety and that of write-down million PeopleSERVE its the goodwill

So --

Michael Shaw

couple to cost that to and non-cash written months being mean or related but time come of places Right other that the type down of the from from? mean businesses were in aren't other can acquired what many there offs I I you're quarters, or businesses coming -- it guess. were there --some mean are about I being there mean it come though one were acquisitions acquisition that I --something over I has next like if write that other the there are businesses seems suggesting that

or haven't included looking the integration are there to that cost forward into And so I that written going mean companies guidance? incorporated or down fully-- been get acquisition haven't are then is other costs guess that been the that then completely this question does

Brendan Flood

we of So of don't any we we concerns have integration standard We paced that fast will intangibles have. various have costs nature. further do amortization in costs remove goodwill. about have duplicate the subsidiaries any as some that relatively write-downs between we are What

in if to or So us But and to intending so we -- quarters. those financing any see the of second has don't first to the expect anything any really much at continue second hitting were we we're the and buy costs anything quarter will second at in the now end terms we to made. acquisitions the moment Well not going between transaction quarter. still of make that of or see some for for not

Michael Shaw

Okay expecting? of one-off essentially just of depreciation that's or be but but any aren't be just terms charges new -- of to a terms standard non-cash particularly that going in non-cash, whatever we new amortization costs. in There write-down should right

Brendan Flood

correct. That's

Michael Shaw

it, a Then the last I company at do I is, that of like because and back okay. debt really then secret a has line the of look of questioning mean guess into doesn't I with all it this load one my Got where it adjusted debt this kind lot when seem to ties has on EBITDA.

So cash. mean be need the but company doesn't to seem definitely its distressed I careful with

prior $X So through of acquisition. you have the just where for out numbers another interest that's kind of going here million expenses, $X million going go to

$XX was to to for what higher, is you million, Is mostly do million is it adjusted a million. over towards So to say just go kind it's adjusted Jackson? going wanted $X you then I guess I this was going rough nice more million Or going wondering headed? fueling and unadjusted repayment EBITDA to essentially to of probably of go I if growth? least think left year going at it with idea it's to kind let's it? And get be total is principal of are question where last and $XX -- EBITDA $X another towards

Brendan Flood

took back I that and to the pitch part debt part over Dave. I'll So of in

we a not M&A, hurry. on not revenue that my new have. buy million of a we in positive that $XXX go and annualized great in We're already the go the and we're integrating in and I remarks order get said of part buy doing But we're good, from work need stuff that $XXX hurry still to business As while continue to to stuff. to we million,

will the second back of be $XXX we in racing stuff and the year, that is the in half our So expectation our buying market target. current towards million

Michael Shaw

call I flow free agree that really it going this of want have interest amount amount is question have some that. else? don't towards And not you from question just I likely cash that to guess maybe I towards the going is do I curious any cash if certain acquisitions. it mean but mean EBITDA is going going it's go towards isn't it free of more with it going towards is or your you though you or from payments isn't to towards David's going? this principal it or as you leftover Is it prior I'm something to foresee but repayment is, expenses, where

Brendan Flood

sit would the towards accounts. familiar more won't we That to probably familiar won't that it. with be around stuff. been certainly bank never We going dust buying And $X with. certainly become a in we've gather go It's situation watching million

will have every that for make us. do some We dollar work we

Michael Shaw

question mean I interest. half obviously it I on I I you spending the -- pretty to down are to debt left be my Jackson? guess the and be first its of it's two on down years Or and Because you're going high guess question to you loan paying have comes you a about down then are going comes to mean this? on to Right. runway be more this if though money this,

where to flow cash And a cash flows? understand --it operational So financial cash prioritizing versus in becomes flow of I you're I'm that, versus of mean question those terms or cash curious flows? is

Brendan Flood

money our We won't gathering around dust. to of of any all sit

rate We interest we will make rate. We us. every dollar that pretty do a expect the does high is work some XX% sure interest have

Dave do I and it probably what to going something about month look to that at figure and look out So we is we're it every at, try is it.

exactly it to can't allow cash free particularly Michael do is markets as number money. that sure advise $X you $XX want -- spare to we make eat into to our the this So calculated of million well, going with that that we million telling that Obviously we're what but will question on answer doesn't assessment we I call.

Operator

we at as Hey, like this you no any further have comments time. make? to Are additional questions there

Brendan Flood

you, Thank Okay. Brenda.

and acceptable start the to move in to So opportunities the to performance organic expectation deliver as markets to our about promises, to operational to messaging peers. to our on normal our relation we growth that in our we to level expand and drive the industry and stock price performance an adjustments capital continue our make will will

to you, first quarter to remain management And growth results. look in earnings our forward committed speaking growth report and Thank operator. revenue, you we As to with we shareholder again we you to Thank mid-May value. a team, XXXX when in in growth and all.

Operator

Thank teleconference. This concludes you. today's

disconnect may your your thank lines And this time. at for you You participation.

Staffing 360 Solutions (STAF) 2 Apr 182017 Q4 Earnings call transcript