ShiftPixy(PIXY) - 2023 Q2 - Quarterly Report

Revenue and Financial Performance - Revenues for the three months ended February 28, 2023, were $4.579 million, a decrease of approximately $5.9 million from $10.437 million for the same period in 2022, representing a 56.1% decline [207]. - Total net revenues for HCM services were $1.558 million for the three months ended February 28, 2023, compared to $1.588 million for the same period in 2022, showing a slight decrease [208]. - Net revenues for the six months ended February 28, 2023, decreased by $4.6 million from $14.4 million to $9.8 million compared to the same period in 2022 [220]. - Gross billings from HCM and staffing services totaled approximately $15.5 million, with HCM services representing 75% of gross revenue [244]. - Gross billings for the six months ended February 28, 2023, were $30.5 million, with revenues of $9.8 million after adjustments [246]. Operating Expenses and Profitability - Operating expenses for the three months ended February 28, 2023, totaled $5.509 million, compared to $8.915 million for the same period in 2022, indicating a reduction in costs [207]. - Total operating expenses for the three months ended February 28, 2023, decreased by $3.6 million to $5.5 million from $8.9 million for the same period in 2022 [213]. - Gross profit for the three months ended February 28, 2023, was $484,000, compared to a loss of $61,000 for the same period in 2022, reflecting a significant improvement [207]. - Gross profit for the three months ended February 28, 2023, was 10.6%, compared to a gross profit of -0.06% for the same period in 2022 [212]. - Administrative fees for the three months ended February 28, 2023, were $343,000, reflecting a 27.9% decrease quarter over quarter [249]. Workforce and Employment Metrics - The average number of worksite employees (WSEs) decreased by approximately 700 employees for the three months ending February 28, 2023, compared to the same period in 2022, impacting future net revenues [210]. - Average active WSEs totaled approximately 2,100 for the three months ended February 28, 2023, down from 2,900 in the same period last year [249]. Strategic Initiatives and Growth Plans - The company aims to leverage its technology solution to achieve significant future revenue growth in human capital management services, emphasizing sales growth in the staffing division [189]. - The company’s transformative sales growth strategy targets the $123 billion U.S. temporary and contract employment staffing market, focusing on diverse service offerings [191]. - The company has identified various growth strategies that, if successful, will yield significant customer growth driven by widespread adoption of its technology offerings [182]. - ShiftPixy Labs aims to develop ghost kitchens to provide a comprehensive food preparation and delivery solution, leveraging trends accelerated by the COVID-19 pandemic [194]. - The company plans to replicate successful initiatives from ShiftPixy Labs in other locations, potentially contributing significant future revenue [200]. Technology and Infrastructure Investments - The company has completed its HRIS platform, which is expected to stabilize IT development costs and focus on maintenance and minor functionality improvements [182]. - The company has invested heavily in a cloud-based HRIS platform to provide clients with cost savings and improved HR compliance, which is expected to enhance client onboarding and reduce turnover costs [184]. - The company believes that its technology platform provides a competitive advantage that will allow it to expand beyond low-wage employees and healthcare workers [185]. - The company expects to continue investing in its HRIS platform and other growth initiatives, which will require significant cash expenditures [238]. Financial Position and Capital Needs - As of February 28, 2023, the company had cash of $0.8 million and a working capital deficit of $35.3 million [233]. - The company incurred an accumulated deficit of $203.9 million as of February 28, 2023 [233]. - The company plans to raise additional capital to fund operations and strengthen its sales force strategy focusing on staffing services [238]. - The company plans to raise capital through additional sales of securities, with no assurance of meeting terms for such sales [240]. - The company’s current cash position and anticipated revenue growth are expected to alleviate doubts about its ability to continue operations for at least one year [240]. Losses and Financial Challenges - The company’s losses were primarily due to substantial investments in technology, SPAC sponsorships, and necessary upgrades to back-office operations [179]. - The company reported a net loss of $5.769 million for the three months ended February 28, 2023, compared to a net loss of $9.497 million for the same period in 2022 [207]. - Net cash used in operations for the six months ended February 28, 2023, was $5.3 million, a decrease from $10.3 million for the same period in 2022 [229][230]. - General and administrative expenses for the six months ended February 28, 2023, decreased by $0.8 million compared to the same period in 2022 [225]. Future Outlook - The company anticipates that a sustained surge in e-commerce and a focus on domestic manufacturing will drive demand for its contingent and flexible skilled labor pool [192]. - ShiftPixy Labs growth initiative is expected to generate cash flow by collaborating with local chefs, potentially contributing significant revenue in the future [239]. - The company does not have any contractual obligations for ongoing capital expenditures at this time [250]. - ShiftPixy, Inc. is the largest creditor of IHC, having advanced approximately $2 million, with a partial recovery of $0.6 million expected [241].