Good Wednesday afternoon folks. Did everybody get to listen in on the Staffing 360 Solutions (STAF) earnings call? We hope so. Like we said, it was time well spent. The rest of the Q2 numbers we didn't know yet were just as impressive as the numbers we did know before today.
What we already knew: Revenue of $47.1 million was up 14%, and gross profits of $8.1 million were higher by 8.4% on a year-over-year basis.
What we learned today: The net loss of $1.5 million was a marked improvement on the year-ago loss of $3.5 million, and the EBITDA of $1.4 million was about the same. We still don't have the operational cash flow yet; that number can only be calculated using the official SEC-filed numbers, which weren't available as of the time we were writing this. We suspect, though, that figure will show progress too.
What can we say? The plan is working. Staffing 360 Solutions is growing the business, and unlike too many other small cap stocks, STAF isn't booking ever-bigger losses to do it. We're seeing measured progress to the end zone of profitability, as our updated chart above indicates.
What I found even more interesting than the ongoing fiscal growth is how much of this growth is organic... meaning it's not solely attributable to the fact that Staffing 360 Solutions is on an acquisition spree. The company said it achieved organic growth of 7% last quarter, successfully leveraging its size and talent brought into the fold by all of its recent deals.
Even better than that is the fact that operating expenses as a percent of revenue continued to fall, from 22% in Q2 of a year earlier to 17% last quarter.
As Matthew Briar perfectly explained:
"While its roll-up (or acquisition) strategy is intended to combine several similar staffing agencies within the IT world to create a bigger force that can leverage its size, one of the key benefits of melding several outfits together is the elimination of redundancies and pooling of talent and resources that may otherwise not be available. Very often these benefits are just collectively called synergies. Regardless of their name, they indicate a greater overall efficiency for Staffing 360 Solutions.
It's a critical component for current and would-be STAF investors to understand. That is, while sales have been getting measurably better thanks to acquisitions and organic growth, profitability has been improving at faster pace. It's difficult to see, but it's there. Moreover, with just a little more revenue scale, we're apt to see an outright explosion of profitability from Staffing 360 Solutions as the company works its way past the proverbial hump."
In other words, Staffing 360 Solutions is sneaking up on profitability at a pace most people may not realize.
We still contend STAF is one of the market's best hidden gems. The company is now driving revenue at a pace of $190 million per year and is nearing real net income, yet is priced at a market cap of only $6.7 million with only about $5.1 million in debt. One of these days, something's going to click.
A recording of the conference call will be available until February 11th. To listen to the playback, dial (877) 481-4010 within the United States or (919) 882-2331 internationally. All callers should use replay ID number 10198. Or, I think the web-based version of the call can be accessed at http://www.investorcalendar.com/event/175547
Staffing 360 Solutions wasn't the only featured stock to give us news today. Nexus Gold (NXXGF, CVE:NXS) gave us an early look at some of the sampling that was done at the Niangouela concession in Burkina Faso, Africa. In short, it looks great.. As the press release noted:
"The highlights of the program include sample NG005 taken from the primary quartz vein at 46 metres below surface which returned a value of 2,950 g/t gold. In addition, sample NG006 was collected from the artisanal dumps of the sheared intrusive which returned a value of 23.9 g/t gold. These results indicate the presence of high-grade gold occurring within the primary quartz vein and the sheared intrusive envelope. These samples were selected and may not be representative of the mineralization hosted on the concession."
It's a very small sample size, but so far, it's an impressive outcome.
I don't know how much you know about gold mining, but a high-grade gold content of 2,950 g/t is pretty rich. It looks like Nexus chose well when it opted to acquire those mining rights back in November. To that end....
Yes, it was only in November Nexus Gold decided to acquire the Niangouela concession, and that deal wasn't signed until early December. It only took a matter of days, though, for Nexus Gold to start the next round of sampling work. It only took another few days to finish it. We're already getting results from that sampling. It's the fastest we've seen a junior gold miner move in a while. In fact, it's the fastest we've ever seen a junior gold mining company make progress. If that's the way the organization operates, NXXGF is s very compelling investment prospect.
And the market is coming around to that reality. NXS shares were up 16% today in response to the news [remember, this company is listed on U.S. and Canadian exchanges, and the Canadian ticker 'NXS' is the more meaningful barometer], extending and firming up what's turning into a very solid advance.
We know the chart of NXS looks intimidating; hopefully you were already in a trade. Like we said a couple of months ago, it was only a matter of time until the budding rebound in the price of gold swept Nexus higher with it. This is what's happening now, with a little help from the news.
If you didn't buy NXS/NXXGF then but are interested now, we don't think it's too late in the bigger picture to do so, though it might be wise to see how (or if) shares are going to cool off a bit before heating up again.
No market chart today - there's not much to discuss anyway. Hopefully we'll have something to actually talk about in tomorrow's edition.