Workstream Inc. Announces Fiscal 2008 First Quarter Results

    Company Grows Year-Over-Year Revenues and Raises $20 Million in Working
Capital to Expand Operations

    BURLINGAME, CALIF., October 3 /CNW/ - Workstream Inc. (NASDAQ - WSTM), a
leading provider of on-demand compensation, performance and talent management
solutions, today announced its fiscal 2008 first quarter results for the
period ended August 31, 2007. All figures are in U.S. dollars.

    Total revenue for the first quarter was $7.4 million compared to $6.9
million in the prior year's period, an increase of $0.5 million or 7%. EBITDA
loss for the first quarter of fiscal 2008 was $(3.0) million, or $(0.06) per
share, compared to an EBITDA loss of $(1.1) million, or $(0.02) per share, in
the first quarter of fiscal 2007. The Company's net loss for the quarter ended
August 31, 2007 was $(6.9) million, or $(0.13) per share, compared to a net
loss of $(2.9) million, or $(0.06) per share, in last year's comparable

    Commenting on the results, Deepak Gupta, President and Chief Executive
Officer said, "We continue to execute on our business plan by making
investments in sales and marketing as well as expanding into new revenue
opportunities and strategic partnerships, to drive future revenue growth."

    2008 First Quarter Highlights:

    The following highlights were announced or occurred since Workstream
Inc.'s last quarterly earnings statement:

    --  Workstream completed a $20 million capital raise of new working
capital to retire existing debt and drive sales growth

    --  Workstream launched the new mid-market offering, Workstream
Professional, for companies with less than 2,500 employees

    --  PPG Industries was signed as a new customer for Workstream

    --  Aspen Skiing Company was signed as a new customer for Workstream

    --  EMS/Satcom was signed as a new customer for Workstream Recruiting

    --  Gartner rated Workstream as "Promising" in their 2007 Market Scope

    --  Workstream continued to add key industry experienced senior
executives to its management team

    --  Workstream added additional experienced resources to both enterprise
and mid-market sales teams

    Management will host a conference call at 5:00 p.m. ET on Wednesday,
October 3, 2007. The dial-in number to participate in the call is 866-226-1799
for North American participants and 800-8989-6323 for those outside of North
America. The instant replay number for the call will be available until
October 10, 2007 by calling 800-408-3053 using access code 3237062#.

    EBITDA and EBITDA per share are non-GAAP financial measures 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. 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 before
interest, taxes, depreciation amortization, non-cash equity compensation and
non-recurring goodwill impairment, if applicable. Following the financial
statements attached is a reconciliation of net loss to EBITDA loss and EBITDA
per share that should be read in conjunction with the financial statements.

    About Workstream Inc.

    Workstream provides on-demand compensation, performance and talent
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, Performance, Compensation, 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. With offices across North America, Workstream
services customers including Chevron, The Gap, Home Depot, Kaiser Permanente,
Motorola, Nordstrom, VISA and Wells Fargo. For more information visit or call toll free 1-866-470-WORK.

    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: 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

                               WORKSTREAM INC.


                                             August 31, 2007 May 31, 2007
    Current assets:
       Cash and cash equivalents               $ 10,723,083  $  2,752,601
       Restricted cash                              529,383       524,497
       Short-term investments                        66,341        65,851
       Accounts receivable, net                   4,253,812     3,789,838
       Other receivable                           1,000,000             -
       Prepaid expenses and other assets            686,515       848,359
           Total current assets                  17,259,134     7,981,146
    Property and equipment, net                   2,552,984     2,715,494
    Other assets                                     85,122        85,122
    Acquired intangible assets, net               1,666,168     2,602,590
    Goodwill                                     45,276,411    45,276,411

    TOTAL ASSETS                               $ 66,839,819  $ 58,660,763

    Current liabilities:
       Accounts payable                        $  1,882,425  $  2,259,010
       Accrued liabilities                        2,467,822     2,961,928
       Accrued compensation                       1,483,834     1,378,444
       Notes payable                                            4,557,395
       Current portion of long-term
        obligations                                 647,437       639,445
       Deferred revenue                           2,808,828     2,699,461
           Total current liabilities              9,290,346    14,495,683
    Long-term obligations                           650,700       742,025
    Deferred revenue - long term                    234,293       236,492
    Common Stock Warrant Liability               12,038,310             -
           Total liabilities                     22,213,649    15,474,200

       Common stock, no par value: 51,531,152
        and 50,960,845 shares issued and
        outstanding, respectively               112,588,377   112,549,178
       Additional paid-in capital                19,260,449    10,907,755
       Accumulated other comprehensive loss        (868,032)     (867,288)
       Accumulated deficit                      (86,354,624)  (79,403,082)
           Total stockholders' equity            44,626,170    43,186,563

     EQUITY                                    $ 66,839,819  $ 58,660,763

                               WORKSTREAM INC.


                                                    Three Months ended
                                                        August 31,
                                                     2007         2006

    Enterprise Workforce Services                $ 4,871,062  $ 4,808,544
    Career Networks                                2,497,098    2,118,552
        Revenues, net                              7,368,160    6,927,096
        Cost of revenues (exclusive of
         amortization and depreciation expense
         noted below)                              1,735,157    1,792,621
           Gross profit                            5,633,003    5,134,475

    Operating expenses:
    Selling and marketing                          2,648,744    1,847,424
    General and administrative                     5,108,127    3,520,646
    Research and development                       1,484,637    1,038,215
    Amortization and depreciation                  1,300,417    1,643,924
        Total operating expenses                  10,541,925    8,050,209

          Operating loss                          (4,908,922)  (2,915,734)

    Interest and other income                         89,372      125,369
    Interest and other expense                    (1,968,758)     (52,213)
        Other income (expense), net               (1,879,386)      73,156

    Loss before income tax                        (6,788,308)  (2,842,578)
      Current income tax expense                    (151,922)     (47,198)
    NET LOSS FOR THE PERIOD                      $(6,940,230) $(2,889,776)
                                                 ------------ ------------

    Weighted average number of common shares
     outstanding                                  51,532,456   50,960,845

    Basic and diluted net loss per share         $     (0.13) $     (0.06)

                               WORKSTREAM INC.


                                                 Three Months ended Aug 31
                                                     2007         2006
    Cash provided by (used in) operating
    Net loss for the year                        $(6,940,230) $(2,889,776)
    Adjustments to reconcile net loss to net
     cash (used in) provided by operating
       Amortization and depreciation               1,300,417    1,643,924
       Leasehold inducement amortization              (8,971)           -
       (Gain)/Loss on sale or disposal of fixed
        asset                                         12,623            -
       Provision for bad debt                        289,206      100,889
       Non-cash compensation and payments to
        consultants                                  571,065      192,354
       Non-cash interest income                      (55,060)           -
       Change in long-term portion of deferred
        revenue                                            -      (96,174)
    Net change in operating components of
     working capital:
       Accounts receivable                        (1,753,180)    (343,116)
       Prepaid expenses and other assets             161,843       21,817
       Accounts payable and accrued liabilities     (320,693)    (746,308)
       Accrued compensation                          105,391
       Deferred revenue                              109,366      (66,251)
    Net cash used in operating activities         (6,528,223)  (2,182,641)

    Cash provided by (used in) investing
    Purchase of property and equipment              (182,731)     (33,817)
    Decrease in restricted cash                       (4,886)     171,533
    Sale of short-term investments                      (490)      28,577
    Net cash provided by (used in) investing
     activities                                     (188,107)     166,293

    Cash provided by (used in) financing
    Payment of Hilco guaranteed financing costs     (550,000)
    Proceeds from warrant financing               19,875,000
    Repayment of other long-term obligations        (164,594)     (92,220)
    Proceeds from exercise of options and
     warrants                                         39,200
    Line of credit, net activity                  (4,498,619)     (14,524)
    Net cash (used in) provided by financing
     activities                                   14,700,987     (106,744)

    Effect of exchange rate changes on cash and
     cash equivalents                                (14,175)      14,358

    Net decrease in cash and cash equivalents      7,970,482   (2,108,734)
    Cash and cash equivalents, beginning of year   2,752,601    4,577,040

    Cash and cash equivalents, end of year       $10,723,083  $ 2,468,306

    Non-cash investing and financing activities:
    Distribution of restricted stock                  83,333


                                                    Three Months ended
                                                  8/31/2007    8/31/2006

    Net loss, per GAAP                           $(6,940,230) $(2,889,776)
    Income tax expense                               151,922       47,198
    Interest and other income                        (89,372)      52,213
    Interest and other expense                     1,968,758     (125,369)
    Amortization and depreciation                  1,300,417    1,643,924
    Non-cash compensation                            571,065      192,354
    EBITDA (loss)                                $(3,037,440) $(1,079,456)

    Weighted average number of common shares
     outstanding                                  51,532,456   50,960,845

    Basic and diluted loss per share, per GAAP   $     (0.13) $     (0.06)

     Basic and diluted EBITDA loss per share     $     (0.06) $     (0.02)

For further information:

For further information: Workstream Inc. Phil Oreste, 866-953-8800 ext.

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