Q1 Results Roughly As Expected.  STAF filed its 10-Q for the first quarter, reporting Revenue of $41.4 million, inline with our estimate.  The Professional segment reported a slightly higher number due to more election-related Headway business.  However, gross margins were slightly lower, at 10.4%, due to that additional business.  The biggest variant from our model was the higher SG&A figure, at $7.1 million, however we would expect there is additional noise in this figure relating to the UK disposal and professional fees.  As a result of the lower GM and higher SG&A, Adjusted EBITDA was $(685,000).  

10-Q Notes.  The shares outstanding jumped after the close of the first quarter, from 634,219 to 905,893.  The increase was related to shares owed to an investor, which have now been fully issued.

The 10-Q noted that the Company retained Transact Capital on February 15 to explore M&A opportunities, which could include the sale of Staffing 360.  The Company was unable to comment beyond this, but we note that Transact brokered a previous transaction involving Headway, prior to its acquisition by STAF.

Model Update.  We made no changes to our model, other than updating the shares outstanding.

Maintaining Rating & Target.  The first quarter was roughly as expected.  Perhaps the biggest surprise of the Q was that it has engaged a firm to assist in M&A activities, which could lead to its sale or to becoming a larger player in the Staffing market through acquisitions.  With no significant changes we are reiterating our Buy rating and $10 target price.  Our target price is based on an EV/aEBITDA multiple of roughly 6 times our aEBITDA estimate for the last nine months of 2024 of $5.4 million and a forward EV/Revenue multiple of 0.20.