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PIXY: ShiftPixy Doubles Revenues in Q3

07/17/2018
By Lisa Thompson

NASDAQ:PIXY

READ THE FULL PIXY REPORT HERE

ShiftPixy (NASDAQ:PIXY) reported for its FY 2018 Q3 quarter ending May 31, 2018. Q3 gross billings came in at $60.2 million versus $27.5 million a year ago, up 119%, in the middle of the company’s guidance.

Revenues beat our estimates at $9.4 million versus $4.6 million last year, up 103%. Revenue was again 16% of gross billings as it was in Q2, but down a percentage point from a year ago. In the quarter 92% of revenues came from California. The two biggest areas of this 8% were Texas and Arizona. Pennsylvania will grow as a percent of revenues as the company just onboarded a customer with 27 franchise locations of one of the country’s largest pizza brands. 

Gross margin came in at 2.5%, higher than last year. Last year’s margin was restated from 3.2% to 2.3% as costs were spread ratably across the year. Gross margin was also up sequentially from the 1.8% in February. 

Operating expenses were $3.4 million versus 3.6 million with the decline coming from product development, which the company now capitalizes. 

The operating loss was $1.8 million versus $3.0 million a year ago.

With no interest expense and no taxes, this loss resulted in an EPS loss of $0.06. This compares with a restated loss of $0.11 a year ago. Primary shares outstanding increased only 8%.

During the quarter the company continued to expand beyond restaurants adding Zion Delivery Service who provides deliveries as a contractor to Amazon and others. It also added an office in Chicago. Since the May quarter ended the company added 14 new customers with 337 employees and generating an expected $12.3 million of gross billings per year. That makes total of 7,979 shifters in the workforce now.

ShiftPixy continues to make progress with its app’s capabilities and expects to be able to provide customers with scheduling functionality, as well as letting onboarded employees look at shift opportunities, by this summer. In the fall, people outside the customer base will be able to seek opportunities in the network. 

The company’s new metered product that insures restaurant employees making deliveries continues to attract interest. Many restaurants, which have outsourced delivery, have reported examples of brand destruction, as these third parties do not provide the level of customer care restaurants desire. The ShiftPixy solution allows these establishments to send their own employees economically as they only pay for insurance while the employee is out on a delivery. 

Forecasts

We are raising our forecasts due to this better than expected quarter as well as the fact that the company raised needed capital with debt rather than equity keeping the share count steady. In the conference call management also reported that June sales were up 14% sequentially from May, leading us to believe business continues to grow as expected. We are raising FY 2018 to $215 million in gross billings, $34 million in revenues, and an EPS loss of $0.33. 

For FY 2019 we are raising gross billings to a conservative $310 million, revenues to $50 million and EPS loss of $0.20. Given the capital raise of $8.4 million plus potential for the exercise of 3.3 million warrants that are in the money, we believe the company has the ability to raise sufficient cash to see it through to cash breakeven.

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