Scott Absher, the chief executive of tech-based temp agency ShiftPixy Inc., admits the firm’s current financial picture isn’t pretty.
Still, he insists that the future is bright.
“I have to stay focused on the top line, the growth side,” Absher told the Business Journal on Aug. 1. “We’re not pretty to look at, I’ll admit that. People are seeing us very early stage.”
The Irvine-based company (Nasdaq: PIXY) has seen its shares drop 84% in the past year to about 47 cents apiece recently and a market cap of about $16 million. Its shares were priced at $6 in a 2017 initial public offering.
On July 22, it reported a fiscal third-quarter loss of $5 million, or 15 cents a share; more than double the loss of $1.8 million, or 6 cents, in the same period a year earlier.
Absher is betting on growing revenue and a reduced cash burn before it runs out of money.
On July 22, the company also reported a 53% jump in third-quarter revenue to $14.3 million for the three months ended May 31.
“Our burn is diminishing every quarter,” Absher said. “The future is very good for us.”
Defaulting
The company had $2.9 million in cash as of May 31, regulatory filings indicate. It’s burning about $700,000 a month but expects to break even by the end of November, according to a conference call after the company’s latest earnings report.
ShiftPixy said last month it was defaulting on $6.8 million in convertible notes and is seeking a renegotiation. The company said its most recent share decline can be attributed to large shareholders trying to cash out earlier than expected.
“We’re pushing back” against those shareholders, Absher said.
ShiftPixy said that it intends to buy back up to 10 million shares over the next 18 months, which at the current share price, is more than its cash on hand.
Looming in the background is Nasdaq’s potential threat to delist the company unless its share price and market cap rise enough to meet the market’s conditions by the beginning of December. Stocks need to trade at $1 or more for a minimum of 10 consecutive days to satisfy one of the requirements—that’s twice its shares’ current value.
The Shifters
ShiftPixy’s technical platform matches up available shift workers with open slots, helping restaurant and other businesses run more efficiently.
ShiftPixy hires the workers itself and manages the many compliance needs. The workers, or “shifters,” are able to more easily move among flexible shifts. ShiftPixy is designed to help employers reduce turnover by coordinating their need for employees at various times.
Absher sees the company headed toward further growth.
“We know how to rack and stack revenue,” said Absher, who is also the company’s co-founder. “We spent heavily up front for infrastructure.”
The restaurant and hospitality industries that it focuses on account for about half the workers in the U.S part-time labor market. Absher said the company has 15,000 W-2 employees on the platform, and growing.
“W-2 means they’re our employee for payroll tax purposes, for workers’ compensation coverage purposes,” according to Absher. “They’re not independent contractors.”
The W-2 status lets ShiftPixy shift—or “redeploy” in Absher’s words—employees around as needed.
The company said its system “enables you to keep your schedule filled and your bench stocked with a live, local, on-demand workforce.”
ShiftPixy now has about 400 clients; most of them are franchise brand restaurants, according to Absher, who said the average client size is growing.
California accounts for about 70% of the business, with 20% in the New York tri-state area. The company has offices in New York and Chicago while the Orlando office is “transitioning” to Miami, Absher said. The Irvine base has about 80 employees.
New Features
Absher said the company is launching new user features, including a driver management application that helps restaurant clients utilize in-house workers for food delivery rather than resorting to third parties.
“We saw an opportunity to help them fix that and correct some of the brand damage that was occurring in the market,” Absher said. “We could take and intercept those online orders, dispatch them to somebody on the staff that’s in the store and they could take the order out instead of a third-party delivery.”
He said the extra feature will add to the company’s revenue and net profitability.
ShiftPixy recently hired Domonic Carney as its new chief financial officer. Absher said there were no disagreements with outgoing Chief Financial Officer Patrice Launay.
“He felt overwhelmed,’’ Absher said of Launay, noting the “heavy” pace inside the company.
Plus, Launay wanted to return to his native France, according to Absher.
“I think he was a little bit homesick.”
