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New Reg A+ IPO ShiftPixy (PIXY) Reports Quarter

07/20/2017
By Lisa Thompson

NASDAQ:PIXY

On June 27, 2017, ShiftPixy (NASDAQ:PIXY) completed its initial public offering of two million shares priced at $6.00 per share and netting the company $11.3 million dollars. It now has 28.5 million shares outstanding. Since then, it has reported financials for the quarter ending May 31, 2017. 

May Quarter Reflects Old Customer Purge and New Customer Ramp

Gross billings for the quarter ending May 31, 2017 were reported at $27.5 million versus $13.3 million a year ago, and increase of 106%. Net revenues (which excludes the payroll cost of website employees), was $4.6 million versus $2.2 million a year ago, up 111%. Billings and revenues were down sequentially due to the purge of unprofitable customers that was undertaken starting in Q2. Despite revenue growth, gross margins were down both on a percentage and revenue basis year over year. Gross margin was down due to additional investments in workers compensation programs needed to on-board new clients beginning in June 2017. The company had been waiting for a cash infusion needed to acquire insurance for new customers.   

Operating expenses for the quarter were $3.6 million. Included in that amount is $328,000 in a one-time stock based compensation charge that was related to the IPO. Excluding that charge, operating expenses would have been $3.3 million. Last year the company spent $926,000 on operating expense. This quarter the company did not break out expenses but plans to in future quarters. 

The net loss for the quarter was $2.7 million versus operating income of $50,000 a year ago. Excluding one-time expenses the loss would have been $2.4 million. This loss resulted in EPS of $0.10 per share versus breakeven last year. The average share count in the 2017-quarter was 26.6 million versus 25.6 million a year ago. 

Since the Quarter Ended

In June 2017, the company sold 50,000 units for $200,000 to accredited investors at $4.00 per unit, with each unit including one share of common stock and one warrant to purchase one share of common at $4.00 per share with expiration on March 1, 2019. 

On June 29, 2017, the Company completed an initial public offering of 2 million shares at $6.00 per share, receiving $11,276,000 in net proceeds. 

On July 11, 2017, the Board of Directors authorized the issuance, effective on July 17, 2017, of 95,000 options to eight new employees. 

Q4 Forecast

For Q4 2017 ending August 31, 2017 we are looking for gross billings of $34 million flat with last year. Net revenue is expected to be $6.1 million, an increase of 4%, and gross profit of $1.3 million. While revenues are expected to be flat, they are also expected to be from more profitable accounts. Revenues for this quarter had been very difficult to forecast because new customers could not be on-boarded until insurance could be acquired and that could not be done until cash from the IPO was received. Since its successful public offering, the company is no longer cash constrained. It was able to get the worker’s compensation insurance it needed to on-board a large backlog of customers, which it is now in the process of doing. However the IPO was delayed by 45 to 60 days from original expectations. This delay has basically shifted the backlogged revenue ramp from Q4 to Q1 2018. 

Spending on on-boarding and product development should be heavy this quarter as the backlog is brought on and the App is finished and launched. We expect the company to have a net loss of $3.5 million or $0.12 per share versus a loss of $1.2 million and $0.05 per share last year. We expect profitability to improve as the year progresses. 

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