It has been a long time since I contributed a stock idea to the boards so here we go with my stock ShiftPixy (PIXY).
The company first started business in only 2015 so they are a VERY NEW and an EARLY STAGE growth company. This in turn means the company is still very small and the shares are highly illiquid at the moment. Be advised that this is a very risky company and not for the faint of heart. That being said they are also growing extremely fast which I will touch on a bit later. They just went public a little less then a year ago under the new Reg A+ (I think that is what it was called) guidelines allowing smaller companies to go public with less regulation.
Shiftpixy in it’s most basic form a simple staffing company. Though they are throwing in a unique twist on the staffing industry hoping to take advantage of the current environment. They are initially focused on full time and part time shifts within the restaurant and hospitality industries. ShiftPixy will make an agreement with a company allowing all employees to transfer employment to ShiftPixy. They still work their normal shifts with the restaurant they worked for prior but now ShiftPixy handles all the staffing details such as health insurance benefits, 401k retirement and any liability insurance needs. In turn ShiftPixy is paid by the company a premium for handling the employment details.
This arrangement benefits both the employees and employers. No longer do employers need to worry about meeting all the health insurance requirements now required under Obamacare. They also no longer need to worry about cutting back hours to keep a part time worker under the health insurance requirement threshold. We are also facing record levels of turnover among part time staff. This used to create a paperwork headache of onboarding new employees and letting old employees go. This is also now handled within ShiftPixy. The employee benefits because they get full access to all the benefits through ShiftPixy when these may not have been offered before. Also what if the restaurant they currently work at for some reason needs to cut an employees hours. Before they would have to either endure the limits of a smaller paycheck or get a second job. When working within the ShiftPixy environment they no longer need to do this. They can go on the ShiftPixy app and look for extra available shift work with another participating company without ever leaving employment with ShiftPixy. Yes that is right within the mobile app ShiftPixy is building if an employer needs to fill a one time shift they can post it on the app where a worker desiring an extra shift can pick up the one time shift. It is often compared to being Uber like for restaurant and hospitality shift work. The emerging gig economy among the millennial generation.
I mentioned they are still a very early stage company. They are still finishing the build out of their mobile app. They also only had a presence in Las Angeles (test market) when they first went public. Though within only this one market they were still able to bring in good revenue. They opened their second office in New York last August as their second market. Just recently they released press releases announcing the entering of the Texas market and Florida market by opening offices in both Austin, TX and Orlando, FL. They have a list of future cities they plan to expand to over the next few years.
Zach’s actually released a research article to the public last January that does a really good job at explaining the opportunity so I will also refer you to that article at the following link. Just click the “READ THE FULL RESEARCH REPORT HERE” link toward the bottom.
Still not convinced? Lets get into some of the numbers.
Full Year 2017
Annual fiscal 2017 gross billings more than doubled to $126.4 million from $50.7 million for fiscal year 2016
Net revenue grew 139% to $20.2 million from $8.5 million in fiscal year 2016
Gross profit expanded 143% to $3.7 million in fiscal 2017 from $1.5 million in fiscal 2016
Worksite employees increased 47% to 5,074 from 3,463 in fiscal 2016
2018 First Quarter Guidance
Based on our preliminary development of financial statements for the first quarter ending, which statements have not been reviewed and are not required to be audited, the Company currently expects gross billings for fiscal first quarter 2018 to increase from fiscal fourth quarter 2017 by approximately 20% from $33.1 million to $40 million. This number may change as we continue development of our financial statements for the quarter.
(They guided to a ~20% quarter over quarter growth rate for Q1 2018)
2018 First Quarter
Gross billings grew 14.7% to $40.2 million (over the previous year quarter), compared to $35.0 million for the 2017 first quarter; gross billings for the quarter increased, sequentially, 21.2% from $33.1 million in the prior quarter. (slightly beat their guidance of Q over Q 20% growth rate)
Revenues increased 14.6% to $6.5 million for the quarter, compared to $5.7 million for the first quarter of 2017.
Worksite employees increased by 719 to 5,682 compared to 4,963 as of November 30, 2016; the number of employees at the end of the quarter also represents a sequential increase of 608 over the number of employees at the end of the fourth quarter 2017.
Gross profit for the quarter was $1.2 million versus $2.0 million in the prior year period, and net loss per share was 12 cents during the quarter, versus a net profit of 1 cent the prior year period.
(this is where it gets interesting)
2018 Second Quarter Guidance
Based on our preliminary development of financial statements for the second quarter ending February 28, 2018, the Company currently expects gross billings for fiscal second quarter 2018 to be in the range of $60 million to $65 million, which at the midpoint would represent a sequential increase of 55.6% over the fiscal first quarter 2018. Our expectations may change as we continue development of our financial statements for the quarter.
(they are projecting a Quarter over Quarter ~55% growth rate which seems to be due to the addition of the new york market)
They just announced today at market close today they will release the Q2 numbers April 13th (this coming friday) so we will see how well their growth comes in.
This is still a very early stage company as I said before though I can see a company who may be setting themselves up for many years of very high growth rates going forward with the new staffing software.
Once again I encourage you to read the Zach’s report because it provides a lot of good information regarding the company.