MAITLAND, Fla., April 14, 2010 (GLOBE NEWSWIRE) -- Workstream Inc. (OTCBB:WSTM) ("Workstream" or the "Company"), a leading provider of on-demand compensation, performance and talent management software that helps companies manage the entire employee lifecycle, today announced financial results for the third quarter ended February 28, 2010.
Remarks on the Third Quarter Include:
- Workstream has satisfied all applicable covenants required to be satisfied under the Senior Secured Note agreements with respect to the Third Quarter Fiscal 2010 operating results; and,
- Closing of exchange and restructuring of senior secured notes in December 2009 leading to a non-cash loss on extinguishment of debt of ($13,071,000);
- Revenues to $4,000,000 during the third quarter of fiscal 2010 in comparison to $5,030,000 during the second quarter of fiscal 2010;
- Impairment of goodwill of ($6,348,000) associated with the Career Networks operating segment (6FigureJobs.com and Allen And Associates);
"The Company's Third Quarter results were reflective of corporate customers hesitating to spend on new capital project while Healthcare and Financial reform continue to point to a jobless recovery, tight credit availability, coupled with our own challenges with our own Note Exchange," said President and Chief Executive Officer, Michael Mullarkey. "While our own Note Restructuring has placed new hurdles for the company to manage through, Management will not allow the Company to be deterred in its overall focus and plans."
As mentioned previously, the Company has implemented a new, more targeted approach during the third quarter of fiscal 2010 to grow revenues. Our initiatives have centered on:
- further development of our technology to meet customer needs;
- focus on existing customer relationships to ensure renewals and identification of potential 'up sell' opportunities; and,
- targeting Fortune 2000 companies that are currently, or in the near future, implementing a talent management software initiative.
Over the past couple of months, we have seen increased pipeline activity, which we are confident will result in improved financial performance. Furthermore, we will continue to focus on the alignment of our financial position with our operational requirements through the management of our financial resources and seeking funding alternatives to improve our capital structure."
Workstream delivered the following results for the three and nine months ended February 28, 2010:
Total revenues were $3,962,000 and $13,204,000 for the three and nine months ended February 28, 2010, respectively, compared to $5,638,000 and $16,335,000 for the three and nine months ended February 28, 2009, respectively.
Total operating expenses increased to $9,400,000 and $15,749,000 for the three and nine months ended February 28, 2010, respectively, from $3,232,000 and $13,815,000 for the three and nine months ended February 28, 2009, respectively. The three and nine months ended February 28, 2010 included a non-cash impairment of goodwill of ($6,348,000) associated with the Career Networks operating segment resulting from an analysis of the current economic conditions, the Company's performance to budget and the lower estimated future cash flows of the operating segment.
Operating income / (loss) were ($7,335,000) and ($7,464,000) for the three and nine months ended February 28, 2010, respectively, compared to $926,000 and ($2,141,000) for the three and nine months ended February 28, 2009, respectively. The three and nine months ended February 28, 2010 included non-cash impairment of goodwill of ($6,348,000) associated with the Career Networks operating segment.
Net income / (loss) was ($20,625,000) and ($21,326,000) for the three and nine months ended February 28, 2010, respectively, compared to $574,000 and ($2,827,000) for the three and nine months ended February 28, 2009, respectively. The three and nine months ended February 28, 2010 included a non-cash impairment of goodwill of ($6,348,000) associated with the Career Networks operating segment and a non-cash loss on extinguishment of debt of ($13,071,000) relating to the exchange and restructuring of senior secured notes in December 2009.
Net income / (loss) per share (basic and diluted) were ($0.36) and ($0.37) for the three and nine months ended February 28, 2010, respectively, compared to $0.01 and ($0.05) for the three and nine months ended February 28, 2009, respectively.
EBITDA, as adjusted, was ($767,000) and ($243,000) for the three and nine months ended February 28, 2010, respectively, compared to $1,271,000 and ($736,000) for the three and nine months ended February 28, 2009, respectively.
Total assets increased to $14,565,000 at February 28, 2010 from $23,076,000 at May 31, 2009.
Working capital, which represents current assets less current liabilities, was ($4.7) million at February 28, 2010 compared to ($24.2) million at May 31, 2009.
Cash flows provided by operating activities increased to $185,000 for the nine months ended February 28, 2010 compared to cash used in operating activities of ($2,044,000) for the nine months ended February 28, 2009. Further, the overall net decrease in cash and cash equivalents was reduced to ($392,000) for the nine months ended February 28, 2010 compared to ($1,951,000) for the nine months ended February 28, 2009.
Conference Call
Management will host a conference call at 9:00 a.m. EDT on Thursday, April 15, 2010 to discuss Workstream's third quarter fiscal 2010 operating results. Interested participants may listen to the call by dialing 253-237-1248 and referencing code 64851456. For those unable to participate in the live call, a replay will be available after 12 noon EDT on the same day, until midnight EDT April 29, 2010, by calling 800-642-1687 or 706-645-9291 utilizing access code 64851456.
About Workstream Inc.
Workstream provides enterprise workforce management solutions and services that help companies manage the entire employee lifecycle – from recruitment to retirement. Workstream's TalentCenter provides a unified view of all Workstream products and services including Recruitment, Benefits, Performance, Compensation, Rewards, Development and Transition. Access to TalentCenter is offered on a monthly subscription basis under an on-demand software delivery model to help companies build high performing workforces, while controlling costs. Workstream services customers with offices across North America. Workstream services such customers as Kaiser, Marshfield Clinic, Chevron, The Gap, and Nordstrom and several government agencies. For more information visit www.workstreaminc.com or call toll free 866-953-8800.
The Workstream, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6175
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Workstream's management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: failure to negotiate the final terms of definitive agreements giving effect to the proposed note restructuring; in the event a restructuring of our indebtedness is not consummated, if an event of default should occur and be continuing with respect to such indebtedness; inability to grow our client base and revenue because of the number of competitors and the variety of sources of competition we face; client attrition; inability to offer services that are superior and cost effective when compared to the services being offered by our competitors; inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the inability to enter into successful strategic relationships and other risks detailed from time to time in filings with the Securities and Exchange Commission.
| WORKSTREAM INC. | ||
| CONDENSED CONSOLIDATED CONSOLIDATED BALANCE SHEETS | ||
| As of February 28, 2010 and May 31, 2009 | ||
| (Unaudited) | ||
| February 28, 2010 | May 31, 2009 | |
| ASSETS: | (Unaudited) | |
| Current assets: | ||
| Cash and cash equivalents | $ 1,252,108 | $ 1,643,768 |
| Accounts receivable, net of allowances of $940,259 and $928,430 at | ||
| February 28, 2010 and May 31, 2009, respectively | 1,266,883 | 2,746,360 |
| Prepaid expenses and other assets | 125,817 | 146,609 |
| Total current assets | 2,644,808 | 4,536,737 |
| Equipment, net | 369,976 | 757,050 |
| Other assets | 168,350 | 30,990 |
| Acquired intangible assets, net | -- | 21,500 |
| Goodwill | 11,381,660 | 17,729,448 |
| TOTAL ASSETS | $ 14,564,794 | $ 23,075,725 |
| LIABILITIES AND SHAREHOLDERS' DEFICIT: | ||
| Current liabilities: | ||
| Accounts payable | $ 1,196,862 | $ 1,856,892 |
| Accrued liabilities | 3,245,773 | 2,924,145 |
| Accrued compensation | 436,818 | 526,935 |
| Current portion of senior secured notes payable and accrued interest | 410,000 | 20,158,044 |
| Embedded put derivative | -- | 493,693 |
| Current portion of long-term obligations | 216,193 | 199,516 |
| Deferred revenue | 1,830,866 | 2,591,328 |
| Total current liabilities | 7,336,512 | 28,750,553 |
| Senior secured notes payable and accrued interest, less current portion | 21,391,484 | -- |
| Long-term obligations, less current portion | 188,014 | 124,594 |
| Deferred revenue – long-term | 1,605 | -- |
| Common stock warrant liability | 1,134,000 | -- |
| Total liabilities | 30,051,615 | 28,875,147 |
| Commitments and Contingencies | ||
| SHAREHOLDERS' DEFICIT: | ||
| Preferred shares, no par value | -- | -- |
| Common shares, no par value | 113,921,164 | 113,668,376 |
| Additional paid-in capital | 30,251,962 | 18,269,589 |
| Accumulated deficit | (158,739,618) | (136,876,313) |
| Accumulated other comprehensive loss | (920,329) | (861,074) |
| Total shareholders' deficit | (15,486,821) | (5,799,422) |
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ 14,564,794 | $ 23,075,725 |
| WORKSTREAM INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| For the Three and Nine Months Ended February 28, 2010 and 2009 | ||||
| (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| February 28 | February 28 | |||
| 2010 | 2009 | 2010 | 2009 | |
| Revenues: | ||||
| Software | $ 1,276,247 | $ 2,099,072 | $ 4,621,702 | $ 5,731,051 |
| Professional services | 168,050 | 638,791 | 675,955 | 1,869,931 |
| Rewards | 1,916,208 | 1,610,241 | 5,436,279 | 4,564,245 |
| Career networks | 601,270 | 1,289,594 | 2,469,703 | 4,169,682 |
| Revenues, net | 3,961,775 | 5,637,698 | 13,203,639 | 16,334,909 |
| Cost of revenues | 1,896,693 | 1,479,848 | 4,918,431 | 4,660,570 |
| Gross profit | 2,065,082 | 4,157,850 | 8,285,208 | 11,674,339 |
| Operating expenses: | ||||
| Selling and marketing | 404,760 | 598,143 | 1,406,941 | 2,950,516 |
| General and administrative | 2,150,352 | 1,758,505 | 6,144,129 | 6,775,338 |
| Research and development | 331,881 | 565,944 | 1,102,168 | 2,853,205 |
| Impairment of goodwill | 6,347,788 | -- | 6,347,788 | -- |
| Amortization and depreciation | 165,457 | 309,399 | 748,158 | 1,236,265 |
| Total operating expenses | 9,400,238 | 3,231,991 | 15,749,184 | 13,815,324 |
| Operating income / (loss) | (7,335,156) | 925,859 | (7,463,976) | (2,140,985) |
| Other income / (expense): | ||||
| Interest income and expense, net | (672,181) | 19,893 | (2,073,758) | 161,655 |
| Loss on extinguishment of debt | (13,071,440) | -- | (13,071,440) | -- |
| Change in fair value of warrants and derivative | 443,800 | -- | 1,231,493 | -- |
| Other income and expense, net | 9,861 | (352,167) | 51,879 | (810,533) |
| Other expense, net | (13,289,960) | (332,274) | (13,861,826) | (648,878) |
| Income / (loss) before income tax benefits / (expense) | (20,625,116) | 593,585 | (21,325,802) | (2,789,863) |
| Income tax benefits / (expense) | 425 | (19,733) | 97 | (37,487) |
| NET INCOME / (LOSS) | $ (20,624,691) | $ 573,852 | $ (21,325,705) | $ (2,827,350) |
| Earnings / (loss) per share - basic and diluted | $ (0.36) | $ 0.01 | $ (0.37) | $ (0.05) |
| Weighted average number of common shares | ||||
| outstanding | ||||
| Basic | 57,568,176 | 56,079,181 | 57,175,404 | 54,534,060 |
| Diluted | 57,568,176 | 58,467,312 | 57,175,404 | 54,534,060 |
| WORKSTREAM INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| For the Nine Months Ended February 28, 2010 and 2009 | ||
| (Unaudited) | ||
| Nine Months Ended | ||
| February 28 | ||
| 2010 | 2009 | |
| Cash flows used in operating activities: | ||
| Net loss | $ (21,325,705) | $ (2,827,350) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Amortization and depreciation | 748,158 | 1,236,265 |
| Leasehold inducement amortization | 3,286 | (38,064) |
| Allowance for doubtful accounts, net | 618,224 | 457,795 |
| Impairment of goodwill | 6,347,788 | -- |
| Stock-based compensation | 124,996 | 168,272 |
| Deferred income taxes | -- | (2,275) |
| Loss on extinguishment of debt | 13,071,440 | -- |
| Interest exchanged for common shares | 6,372 | -- |
| Beneficial conversion feature associated with PIK interest | 132,098 | -- |
| Change in fair value of warrants and derivative | (1,231,493) | -- |
| Net change in components of working capital: | -- | -- |
| Accounts receivable | 861,252 | 286,003 |
| Prepaid expenses and other assets | 20,792 | 380,760 |
| Accounts payable | (572,082) | (1,862,515) |
| Accrued liabilities | 2,228,775 | 857,727 |
| Accrued compensation | (90,117) | (716,788) |
| Deferred revenue | (758,857) | 15,999 |
| Net cash provided by / (used in) operating activities | 184,927 | (2,044,171) |
| Cash flows provided by / (used in) investing activities: | ||
| Purchase of equipment | (106,761) | (2,989) |
| Restricted cash, net | -- | 424,398 |
| Proceeds from sale of short-term investments | -- | -- |
| Net cash provided by / (used in) investing activities | (106,761) | 421,409 |
| Cash flows used in financing activities: | ||
| Payment of costs associated with re-financing of senior secured notes | (137,360) | -- |
| Repayment of non-convertible senior note | (29,250) | -- |
| Repayment of long-term obligations | (200,402) | (416,695) |
| Net cash used in financing activities | (367,012) | (416,695) |
| Effect of exchange rate changes on cash and cash equivalents | (102,814) | 88,742 |
| Net decrease in cash and cash equivalents | (391,660) | (1,950,715) |
| Cash and cash equivalents - beginning of period | 1,643,768 | 3,435,337 |
| Cash and cash equivalents - end of period | $ 1,252,108 | $ 1,484,622 |
| Supplemental schedule of non-cash investing and financing activities: | ||
| Equipment acquired under capital leases | $ 191,298 | $ -- |
| Cumulative effect of change in accounting principle for warrant classification | $ 876,400 | $ -- |
| Exchange of warrant liability for senior secured notes payable | $ -- | $ 19,000,000 |
| Non-cash issuance of common stock in connection with the settlement of class action lawsuits | $ -- | $ 600,000 |
| Non-cash issuance of common stock in connection with exchange of convertible senior secured notes and accrued interest | $ 237,789 | $ -- |
| Exchange of senior secured notes | $ 33,587,377 | $ -- |
| WORKSTREAM INC. | ||||
| EBITDA (AS ADJUSTED) | ||||
| For the Three and Nine Months Ended February 28, 2010 and 2009 | ||||
| (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| February 28 | February 28 | |||
| 2010 | 2009 | 2010 | 2009 | |
| Net income / (loss), as reported under US GAAP | $ (20,624,691) | $ 573,852 | $ (21,325,705) | $ (2,827,350) |
| Effects of certain transactions: | ||||
| Interest income and expense, net | 672,181 | (19,893) | 2,073,758 | (161,655) |
| Income tax benefits / (expense) | (425) | 19,733 | (97) | 37,487 |
| Amortization and depreciation | 165,457 | 309,399 | 748,158 | 1,236,265 |
| Stock-based compensation | 54,721 | 35,571 | 124,996 | 168,272 |
| Loss on extinguishment of debt | 13,071,440 | -- | 13,071,440 | -- |
| Impairment of goodwill | 6,347,788 | -- | 6,347,788 | -- |
| Change in fair value of warrants and derivative | (443,800) | -- | (1,231,493) | -- |
| Other income and expense, net | (9,861) | 352,167 | (51,879) | 810,533 |
| EBITDA, as adjusted | $ (767,190) | $ 1,270,829 | $ (243,034) | $ (736,448) |
EBITDA is a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. EBITDA is commonly defined as earnings before interest, taxes, depreciation and amortization. We believe that EBITDA provides useful information to investors as it excludes transactions not related to the core cash operating business activities including non-cash transactions. We believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations. All companies do not calculate EBITDA in the same manner, and EBITDA as presented by Workstream may not be comparable to EBITDA presented by other companies. Workstream defines EBITDA as earnings or loss from continuing operations before interest, taxes, depreciation and amortization, other income and expense, including effects of foreign currency gains or losses, non-cash stock related compensation, gain or loss on asset disposals or impairment, merger and acquisition costs, and non-recurring goodwill impairment, if applicable.