- Revenue Decline: FY2025 and Q4 revenues fell 10% ($96.5M) and 11% ($23.5M) YoY, driven by hiring challenges.
- Losses and Margins: FY2025 reported a $34.7M net loss ($0.32/share) and $1.2M non-GAAP EBITDA loss; Q4 showed a $613K loss ($0.01/share) and $306K EBITDA loss.
- Strategic Adjustments: Reduced SG&A by $3.8M annually and acquired Hornet Staffing in March 2025 to revive profitability, targeting FY2026 turnaround.
- Liquidity: $21.4M cash, $4.8M undrawn ABL facility, and $24M net working capital maintain strong short-term financial stability.
- Ownership Alignment: Senior management owns 25% of shares, with $1.3M forfeited in unvested stock options due to performance, signaling stakeholder commitment.
Strategic Adjustments and Cost Management
The company is taking actions to adjust and enhance its strategic focus, growth plans, and financial performance. It completed the acquisition of Hornet Staffing in March 2025 and reduced SG&A expenses by an estimated annual amount of $3.8 million. Management believes that AI and automation will play an important role in restoring profitability, targeting to become profitable again in fiscal 2026. As the senior management team collectively owns around 5-6 million shares, with over 25% of the company's outstanding stock, they have a vested interest in the company's performance.
Liquidity Position and Capital Allocation
The company's liquidity position remains strong, with $21.4 million in cash, an undrawn ABL credit facility with availability of $4.8 million, and net working capital of $24.0 million. The company evaluates share buyback options at every Board meeting but prioritizes restoring profitability. They consider buying back shares as an option to grow per-share value but focus on investing in growth opportunities through acquisitions, particularly in AI, cybersecurity, and high-end IT consulting.
Valuation and Growth Prospects
Analysts estimate next year's revenue growth at 18.6%. The current valuation metrics show a P/S Ratio of 0.21 and an EV/EBITDA of -2.84. With a strong liquidity position and a focus on restoring profitability, the company's prospects for growth are promising. The management's alignment with shareholders, as evident from their significant shareholding and forfeited stock options worth $1.3 million due to performance issues, indicates a strong commitment to creating shareholder value.
Operational Efficiency and Future Plans
The company is moving towards a hybrid work model, leveraging technology to reduce their brick-and-mortar footprint, having closed or consolidated about half a dozen offices over the past 2-3 years. They leverage offshore teams in India for sales and recruiting and plan to increase utilization and expand into nearshore opportunities in Latin America, aiming to achieve positive cash flow and free cash flow.