STAF - Earnings call transcript Q4 2018 | Staffing 360 Solutions, Inc.

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Operator

Greetings, ladies and gentlemen, and welcome to the Staffing 360 Solutions Fiscal Fourth Quarter and Year-End 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. This conference call will contain forward-looking statements within the meaning of the U.S. Federal Securities Law, concerning Staffing 360 Solutions Inc. subject our number materially. actual are and significant statements and uncertainties, results forward-looking to of a risks The may differ refer our and filings and company's results to cause to SEC, those actual Please contain contained from which in Staffing with XXX's identify statements. factors other the risks differ that forward-looking may important the after obligation forward-looking the any XXX Solutions Staffing statements XXXX, XX, and update conference this are All of to disclaims date made to any call. March forward-looking or as statement of today, revise expressly

During such XXX Chairman these is these It directly comments, Chief and Mr. provided applicable, non-GAAP we most may make of measure. Flood, may you Flood, of reference as we now Executive Officer to my certain now non-GAAP reconciliations Solutions. Where the begin. GAAP measurements, measures pleasure to adjusted Staffing to EBITDA. comparable Brendan have introduce

Brendan Flood

million, operator. quarter and the over financial XXXX Thank joined before the recent on remarks David our going performance. full Chief for net Fiscal the I reduction principally, an Then of my year. a year-on-year of and charges XXX showed of operational income with Solutions And Net an income strategy call we high an Adjusted the XX%. to fourth joined prior XXXX comprised Earnings will $X.X I XX.X% improvement financial our was quarter noncash prior on of Financial debts. has million. year an Call. for detail. of the in line I'll forward $XXX,XXX, of a $X.X $X.X and noncash statements million, you opening fourth you to us however, after and quarter hand XXXX us loss discuss you, had to Faiman, our $X.X with After $X.X Therefore, everyone more start The of our the update an when increase year of to in Staffing for of that revenue by fourth flat give the operational set charges Year million EBITDA will David at business loss questions. basis, was for doubtful developments million, a Conference Quarter over thank Fourth new Officer. who was gain This overview Full $XX.X at like-for-like today million. I'm

Across of our XXXX at improved XXXX, Over a moved and This income in charges. from have to to $XXX,XXX we more before course would has QX, items million QX noncash $X.X this the $XXX,XXX pronounced. in We and is continue noncash loss market the net improvement even in has improvement breakeven across excluding year, been loss expect rate. an QX.

year, profit to we XX.X% million. $X prior on an EBITDA XX.X% year the or had of was million million increase Adjusted $XXX with up full excluding the of of benefit in For gross the increase bad-debt year-on-year XXXX. revenue, an $XX.X XX% XX% of

now view Financial our hand of over to continued David the the in the I'll is very businesses financials. maintain targets Officer, have market available M&A the that our Faiman, we talk We possible for quality Dave? Chief high. and to call to

David Faiman

you, Thank good morning, and Brendan, everyone.

$XX.X partially This XXXX, $X.X divestiture Limited, September Inc, the May Resources closed $XX.X revenue included XXXX. increased of of million million during million of with decline business $X less $XX Key million offset XXXX, million to core Butler closed in the Revenue firstPRO the XXXX. contractor of fourth comprised in in million is from $X,XXX September compared Clement and which permanent-placement contractor attributable per temporary revenue a by the the and million increase than The acquisitions the was million that year business. in prior year week of organic June the in which closed revenue decline quarter. is in and PeopleSERVE of temporary in For temporary CBS The of of from remaining of million XXXX, X.X%. XX.X% quarter QX fourth revenue per respectively. in revenue, fourth XXXX $XX.X of of of QX up now of and over up June quarter prior $X,XXX and week, of $X.X the sequentially at $XX.X quarter and of $X.X an revenue permanent-placement XXXX from and was

with quarter margin PeopleSERVE of X.X%, driven lower of noncash quarter debt profit with as charge value versus third QX of positive expenses driven over in income. credit we million. quarter, comparative consecutive coupled for operations an primarily contract prior from quarter year X,XXX savings $X.X quarter ended of of of and positive approximately it the the million divested the was its which $X.X by third by temporary the expenses The four $X.X of partially variable or year mix fourth prior the XXXX. of the professional the both of May of prior partially costs a in decrease incremental $XXX,XXX, The in driven Operating than year loss and impairment loss up Other XXXX. with gross businesses. June decrease, fourth associated of Key million subsequently versus This the $XXX,XXX relating and of of the in to or fiscal addition the fourth was was in prior in a lower XXXX. by our corresponding in with operating last by This fourth quarter a a the million subsidiaries. lower the million, no is $XX.X from in XXXX. the fourth $XX million quarter our is X,XXX acquisitions gain acquisition Gross the operates the for increased $X.X quarter the of X billing versus for the decrease XX% which XXXX was and in an a million XXXX year. of X.X% was mainly the $X.X of XXXX. of associated increase gain was Additionally, in Income driven offset And lower expenses XXXX. streams, from note. warrants margins by quarter workers remaining the with quarter operating staffing company's from the industrial quarter. restructuring bad $X.X on year quarter fourth organic of from into a XXXX the the We is current business of Gross Of versus prior the the revenue space, the reflecting lower XX.X% were Inc, of XXXX from the RPO versus lower light Clement reorganizing year. Resources attributable items, year within prior goodwill in associated with The XXXX, in million intercompany synergies to business and non-recurring fair fourth company's remeasuring December with company

in income Finally, an our provision for over we had reduction taxes. $XXX,XXX

of EBITDA quarter, from loss into and this a an loss in year EBITDA improvement. $X of million year of the a of comparative million marking net prior a a to performance loss net All compared million or quarter $X.X positive $X.X to adjusted $X.X translated $X.X million fourth million in consecutive grew prior EBITDA $X.X our of the million.

increase savings representing savings year million, attributed an firstPRO, margin to $XX.X lower Organic the and a million, our of for revenue of decline XXXX. XX.X% than PeopleSERVE that million decline divestiture of revenue for and and XXXX respectively. first million is insurance partially from of each $XX.X profit acquisitions from for the -- increased was temporary growth and currency an with by May of the and and remaining acquisitions, Clement of over can XX.X% over $XX.X compensation CBS gross of profit million fiscal $XXX.X foreign $XXX,XXX, almost the be half was acquisitions $XXX.X Butler, divestiture in partially lower-margin business, the This $XX.X $X.X of revenue versus of the year, occurred XX.X% full was revenue firstPRO, the XX.X% workers' was decline Inc, translation. $XX.X attributable Butler, impact of fiscal million XXXX. for XXXX, increase Clement Key PeopleSERVE million Resources $XX and Gross respectively. period, growth, was May $XX.X organic XXXX from contractor realized of Gross for was core to year, offset $X which million fiscal compared during by to Key favorable million, the $XXX.X or was million million $XXX.X and that the For prior business. million to the a Of compared period, XXXX. permanent-placement the growth, offset prior CBS XX% the Operating from million with $X.X of from an revenue, Resources. Fiscal XX.X% of Of XXXX attributable fiscal comprised by of quarter. more million fiscal expenses for

this, XX.X%. Excluding operating expenses declined underlying by

variable earlier, that lowered XXXX. charge and decrease million $XX.X As non-recurring impairment charges, fourth costs the mentioned expenses quarter restructuring savings Other remaining million. $X.X was and decreased XX.X% XXXX. driven synergies of XXXX by in in from the in cost The in PeopleSERVE's noncash we results lowered realized

year these million, interest deferred and of from included of to the increased also of costs $X.X $X.X expense Although loss extinguishment acquisitions, decreased attributable financing amortization prior of million. by The $X.X debt million discount financing debt a on refinancings.

of CBS a loss EBITDA gain million the XXXX this in to higher out. collateral XXXX. $X.X on the cash Adding adjustments million the from and warrants, fourth valuing other of quarter non-recurring remeasuring positive $XXX,XXX from a to in year grew of company's and of $X.X to costs, note. $XXX,XXX of EBITDA the -- adjusted represents Butler workers' These for Fiscal in partially income $X.X earn offset an from a were EBITDA intercompany in $X of back PeopleSERVE, a from includes $X.X million positive every a loss year the current the compared $X.X EBITDA was sale XXXX. in the million million the the prior and the by gain noncash investment While adjustment fair compensation true-up of from million XXXX

Turning now sheet. balance to the

similar completed the both fourth and Series into firstPRO equity raised $X.X of XX, E settled consideration the a of dividend preferred year-end, an cash fixed XXXX. loan which deferred E exchange December of million term X% as Series dividend reflected million, million loan the of of face value. a through are of Subsequent of quarter, the to not share. carries a we $XX During we and to XX% term $X.X The

fiscal to mentioned respect preferred earlier, flow. from $X cash from million operations debt had over has $X cash versus a with E of That Finally, I flow, flow in exchange, million cash operations on realized no of to positive company XXXX. cash the outflow Series effect

Now going I'm hand to the call back to Brendan.

Brendan Flood

three were dividend very U.S. PeopleSERVE busy both centers non-adjusted with continuing be allow product Solutions. We February compliance across in We a We was business four in U.K. positive greater in at use first first mentioned, offerings. XXXX. a Northeastern on Part we British was American a on million positive at three XXXX point balance outstanding basis focus into year staffed U.S. with and year on all geographies which industrial these for streams in of and the large commercial a have our $X.XX Dave. we flow client, operating $X.XX development million, EBITDA reorganized the of of Tobacco, finance the We to from per to More a of our number. and Clement in million into divested U.S. $XX sheet. sheet. client to forward. business to strengthen in funds quality two and January service largest $X.XX to May in dividend cash the NASDAQ the fostered our quality fully full geographic of improved final effectively per continued gross consideration to million deferred We entered started in We as Staffing year of contract version pay We where our you, rebranded million U.K. $XX the the completed also discuss collaboration of activities brands. Thank offerings the a be the XXX by reorganized between light maintained share Key contract And our stock quarters to quarter, sum specific States $X.X the in the January, of in We the of entered happened, mid-summer. guidance to is at of of and recently, our in extension a acquisitions, and Dave our of our ever rolled Resources of each firstPRO and going full was which which balance raise out. with the sense makes that share common We With our the $X.X are greater $X.X XXXX. the anticipated in down it degree headline with function of improving shared all per the acquisition an a settlement our a U.S. paid declared raised of year. payment

of we the are fiscal impact acquisitions, will minimum for million. year, any further the our be Excluding anticipating XXXX that a calendar revenues $XXX

over would Our $XX please. point, will million-plus Q&A, be a call positive will the to the income whole. I And non-adjusted to at we this as for EBITDA be in net that Operator, the year range. hand like

Operator

Instructions]. [Operator

Our first comes from with question Kumar Ashok ThinkEquity.

Ashok Kumar

this firstPRO I operating an It settlement annualized revenue XXXs And basis. obligations improved should income reduced And to able -- single-digit margins then, low improving, and flow to the $X about tempting Could the you on upcoming the the actually of mean, performance million has number you talked of $X million a line cash you improving flush and be operating highlighted cash top discount. obligations. in also dollars. at low generate operating millions dynamics, they XX% please out

David Faiman

about take I'll revenue. on Faiman. David will -- Brendan address the point is flow this the then cash first question Sure, the projected your and operation part and

were each remainder to So was of a was to of per $X.X a each of still over most of payment firstPRO's under total first the was pay of and the the large amount to XXXX. XXXX schedule that quarter, We quarter, that at just be in coming settlement, and $XX,XXX remaining the going $XXX,XXX year. million paid September

this with million savings So, being that's won't year of business. the out about cash of cash residual $X about million year going the $X.X that next

positive $X we're prior I operating and, In as terms the growth, to operating get earlier and scale that speaks overall cash million that to spoke continued in closer savings to the the generation. flow, and negative the realizing certainly, we're cash to company's flow cash versus the year positive of income the continue we that getting, net closer

Brendan Flood

okay, is This Ashok. Brendan. ahead. go So, Yes,

Ashok Kumar

on think, to services. a backed accomplishment extension No, engagement I Because renewal, extend there were some for comments and multi-year right? staffing significant, to of that's the RPO this -- that

Brendan Flood

their IT a Tobacco, incredibly is we in with but with particular XXXX, team his also in acquisition achievement with up generate Longbridge in provide You're Clement is from and -- a opportunity gone of other great and of of London, we're British has American And provide And recently, we've what engineers to looking to May has absolutely Rowbotham of phenomenal some in from And that hire More the right. May they their at further this an acquired members been significantly. an therefore, international so, in brand. job our our Clement operation negotiating to the support. with brand further Tobacco operations Since Butler for client. an extension our that acquisition CBS also that we're amount staff revenue have British we Clement also had us historically opportunity XXX Chris brand came with May and that provided Lumpur. accountants recruitment happy that Kuala have client from June American done

it. team. happy phenomenal achievement been a it's Chris his with we're very And for and So

Ashok Kumar

right, opportunity contract and, a North to an U.S. then, Monroe similar And Resources. right. on in All -- the side, being Key Carolina,

Brendan Flood

word, we So wherever Tobacco for a exploring opportunities to lack may its And can of they exploit, look all them. at we've continued American and better with be. British we're that operations

North Poland about we're they and with Tobacco discussions they Mexico, American also have of have Carolina, operations British they in have operations So those. in operations in in all for sure

Ashok Kumar

it. I we right, the inexpensive $XXX at Got be a and last this dividend, implement continued that outlook roughly to question year one And signaling, $XX,XXX you and positive could there's given -- quarterly it's quarter. million per that adjusted EBITDA, exiting given on rate? run going in got And and that's be potential revenue a your improvement for to

Brendan Flood

would wonderful Well, lot million Principally, money. cost about to a ears, the lips doesn't absolutely God's the right. of quarter a thing. from you're $XXX dividend, per It be Ashok, your message

issue We have $XX,XXX. us version maybe next the will now, right about of X cost million that shares so in dividend

it huge. So isn't

message the to wanted growing. we is internally performance So our issue that confidence a in

X of services performance expectation of within XXXX. across our our business centers other also also the with some lot robust costs that. support a our Our of particular shared-service significantly setting than but during terms XXXX XXXX realigning into is business more We team in incurred finance integration in streams,

of much the vast of There's as therefore, in those So the the of all bit XXXX. little is but still did pretty we incurring a majority be cost won't -- we done. and same exceptional that done. are work occurring level States in work United And, things

ability than So was XXXX was that strong. a in we to in much the send we significant felt the XXXX in dividend want our feeling we're in better in history. to And message year any issuing pretty message company's that that generate the cash

Operator

question next with Global. Greenridge Gregozeski comes Our William from

William Gregozeski

I of questions. have got couple a

Your third adjusted talk from adjusted about down year-over-year, that was your Could million trailing the was flat what $X was was? EBITDA proforma why but you EBITDA quarter. it in XX-month

David Faiman

decline of Alicia end -- portion the beginning the quarter. in had also the who costs right Barker, did the Operating the So Officer, U.K. of in business. right of We the with of some had our we the or at some came Chief third at addition

decline. overall contributing the factors sequential were to the those So

William Gregozeski

And XX-month can do forma number a Okay. give? revenue you pro you guys trailing have

David Faiman

know here I of in it right don't me. I front have if

that got handy you see ask I me. question, front to want in I've If your of can if next

William Gregozeski

of that was to used money much raised, back Jackson? of guys the much -- recently you or pay to Okay. How the how

David Faiman

it. of None

Brendan Flood

it. of None

to with raise us making that to been use he's to said, significantly some to allowed firstPRO a million better to phenomenal and sellers Investment moved of million, the of million hey, a that And how of million with $X shares. fund. to would and for for right $X firstPRO, But Jackson was money it? $X to the give -- you we're you order it that's opportunity his reached above otherwise spending a have on use we $X in agreements way So debt. recovery we of that out preference better it any million for has support do Group that he us request me, give Anything to he take back us the of to the payment the without $X of

So -- supporter there's of another the Group incidence Jackson great being of and the Investment organization. a

David Faiman

Bill, pro Bill, question, is revenue the to XXXX for your forma million. answer $XXX

William Gregozeski

Okay. And of the engaging talked in you there still are market? in reasonable -- interest then, still in a about -- discussions. Are you seeing lot M&A is you're valuations the

Brendan Flood

it that where certainly So, upon they XX I reasonable. was the definition higher -- a depends guess, people multiples There are requesting are were ago. at of that your bit than point months now

have about businesses and interested of are cautious sale that we little there bit a businesses in that up to for sold. are conversations being there lot a enter, still are be what out more we So but seeing are still the we and quality

William Gregozeski

last out And Will today? the be question. Okay. XX-K

David Faiman

it do at literally Not trying the aftermarket today. We're tomorrow. stretches, to We're starting just Ts Is, last . the admin, crossing final working by

it'll then not it's on night be Monday. if tomorrow So

Brendan Flood

is confirm this say we on case any -- that anything call. different the what just uncertainty, going are, Bill, anticipate this to you've we XX-K heard to to this for So, don't

Operator

question comes Tucker All Our Andersen Advisors. next Above with from

Tucker Andersen

questions. I a few have

I'll sorts do first The with of revenues, have all to together. them lump ones

for to the bit and operations about continuing available on have personnel you your, business, Brexit U.S. revenue you U.K. on cause a market revenue labor the affect very your and Second, ability staffing tight reference And, trends how is? has that the to comparable that the had could thoughts -- might very third, the the the have if previous any from the on slightly? you would category, down demands be little factors it both, in what calls? do affecting turmoil First, in be talk

Brendan Flood

things. the It's question on one is wonderful I So U.K. live Brexit. the of in first those

of news on like thing kind the is it appears that So first the everyday.

to around uncertainty, terms mind affects extended with on Brussels to Brexit going it In gets happen happen of Friday, our into it still for terms discussions of extended even impact and years amount it are to the And a business, terms the little it. couldn't goes now a cautiousness in a It's there revenue of certainly, gets point where not extended about number in say, waiting away. for next degree and, two relates got there two going its for to whether see supposed But gets gets in a been But, permeating is clients' and, in has and obviously for what's or bit month, the the huge uncertainty And to that's doing entirety. Brexit. that we or what Tucker, unhelpful. can't us. that's a is number, point is is industry helpful say, that U.K. to Brexit market for I it's the in a months,

improved got first year. into quarter a the with I that did last of tight labor And had our temporary on markets. a mentioned few of that course We've we of terms the number year tight has quite that ended permanent the it of call out this the X,XXX reference contractors market in But during contractors as Dave conversions we both geographies. and employees. labor In

converted us. this impacting a start was it's So And Service we by Placement permanent with Monday. employee. our into week, a Wednesday, contractor he temporary Lighthouse had on Even business

So market But have keep it we professional going, people pretty a unemployment business for much Atlantan staffing is we an markets. firstPRO professional is X impact. the candidates, our having or just where

me, the the on going helps to remember not because side, forgive of in And what was. have So pretty desperate rate eligible can't lot the for maintain question us and, to a of to there's clients are it staff margins third find But therefore, harder our negotiation recruiters but positive forward. work order Tucker, candidates. I

Tucker Andersen

the operations a were specific for was things was the wondering very any and there? continuing what I if discussed, just down I comparable causes? of, just trend fact, there correctly were terms Yes, on sort marginally tight labor offsets basis, in was, market? of your just it the And of part revenues If in if heard you've

David Faiman

Tucker, professional some professional And that's to with as fourth in amount conversions, say, U.S. in that Bill but I the thing are amount other conversions will about had we the quarter we're generally, Those a we mentioned, while business as conversion a our did nominal revenue client. not going the temp stream macro Back Brendan well. sequential contractor placed there's a the would the market. to it's do has Those the get more forward. how revenue eat in sometimes on driving question unfortunately, one little factors, than conversions, long of decline. Dave. earlier for seeing a a that sizable provide we depending up see bit asked been

Tucker Andersen

I Yes, the guess, picked two perfect that day the for a slot. portions is you advantage of conversion

much. too help you didn't that So

area other of questions... The

David Faiman

yes. Yes. Certainly,

Tucker Andersen

I you is just either are which The questions other regard any future to now predict know -- What impact ex of talk and your in financing about, the equity until or debt? with they happen. uncertain you're can't can't area of acquisitions, financing plans you

David Faiman

our to us see. we receivables almost And are acquisition, deal. x borrowing company's we've type of target's consideration, we upfront would a of or with shareholders. it a a we be to at negotiating We're the as the term deferred on get to like as at just that finance. point bit are day. our balance just the on will that out passed We've an and Oftentimes, closing the $X But amount the lot If get past not prices. past, case picky first using fund but of so in probably with to I, firstPRO, of very, in take in we've or the the that that's to payment turn form say portion. we And XX a actually dilutive are of little week. used the acquire us, some cover of there's it in opposed a whether it's earn-out very not we the then, a -- always about said that I stock, over stock how sheet, the times but too was the least out down acquisitions. X that receivables it'd Brendan by the $X.XX and We'll between we remaining these X are So debt stream. I

Tucker Andersen

dividend the was very that congratulations. meaningful, for I Thanks thought and signaling.

Operator

This marks anyone the the any have today. Does of end our remarks? QA closing session team on

Brendan Flood

Thank Sure. you, Operator.

through audience, we to So to story and to to stock as normal our in peers. our to to greater will to our a we industry drive operational level continue and performance an we acceptable look expand to continue continue our improvements price move relation

with you all, the Operator, to earnings As look to growth and remain forward again. committed revenue, growth you a management growth our is that to speaking team, in we Thank call. in end and to in of we value. shareholder

Operator

This Thank you. conference call. today's concludes

your for a may lines. pleasant day. you Thank You disconnect and have participating,

Staffing 360 Solutions (STAF) 21 Mar 192018 Q4 Earnings call transcript