ShiftPixy (PIXY) Continues to Add Customers At a Rapid Pace, Almost Doubling Its Run Rate
By Lisa Thompson
NASDAQ:PIXY
ShiftPixy (PIXY) certainly buried the lede on its conference call when reporting results for Q1 2018 ending November 31, 2017. Q1 gross billings were in line with guidance, and guidance for Q2 2018 of $60-65 million in gross billings seemed within expectations. But within the 10Q, we find “since November 30, 2017, the company has added, through executed service agreements, approximately 16 clients, servicing 2,100 worksite employees with approximately $130 million in additional gross billings per year.” This means once these customers are on boarded, the company will be at a $290 million run rate. This is an additional $32.5 million per quarter.
Also of concern has the company’s spending and drawing down cash. It burned $3.3 million in the quarter, but in the 10Q we see that $1.9 million was spend on development of the mobile app and another $300,000 was for a prepayment of workers’ compensation insurance. Excluding these costs, management claims it is burning about $300,000 a month. Given that the software development costs will decline significantly once the apps are finished, we are encouraged that the company could reach cash breakeven as it said by the end of 2018. If we assume the company chooses to raise $6 million in equity to mitigate cash burn, this equates to another 1.5 million shares at $4.00 per share. Keep in mind the company has no debt and it could possibly get a line of credit or some other loan instead. On the call the CEO said he was talking to bankers and evaluating all his options.
Q1 2018 Results
As ShiftPixy preannounced, gross billings were $40.2 million up 15% from a year ago. Net revenue was $6.5 million also up 15%. Gross margin rebounded from the negative 2.8% in Q4 2017, back to a more normal 3.1% but still down from the 5.6% reported last year. Total operating expenses were $4.6 million versus $1.6 million a year ago. The company did not break out expenses by category but indicated it spent $1.9 million on software development and $300,000 in prepayment of workers’ compensation insurance. We assume there were also some one-time costs for its audit and financial forensics. Expenses were up $482,000 sequentially. The company lost $3.3 million in the quarter, down sequentially from a loss of $5 million in Q4. The EPS loss was $0.12 per share versus a profit of $0.01 a year ago. Shares outstanding were 28.8 million up from 26.2 million a year ago.
Geographic Rollout
ShiftPixy continues to take steps to expand geographically and has set up a NYC office, which it plans to staff with two of sales people with experience in that market. The next office to open will be Orlando. After those two offices are operational, next up are Dallas and then Chicago. When those are up and running, then come Las Vegas followed by Atlanta.
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