CDI CORP. PHILADELPHIA, May 10, 2017 /PRNewswire/ -- CDI Corp. (NYSE: CDI) (the "Company") today reported results for the first quarter ended March 31, 2017.
"During the first quarter, our investments in sales capacity and our collaborative programs to restore growth demonstrated positive momentum, with an expanding sales pipeline, add-on business secured from existing clients, and multiple new client wins," stated President and Interim Chief Executive Officer Michael S. Castleman. "We are progressing from a complex portfolio of independent staffing and service operations to a collaborative company that delivers managed, project and staffing services fueled by technical talent. As we continue this transformation, we remain intensely focused on opportunities to improve sales effectiveness, productivity and operating efficiency."
First Quarter 2017 Overview
-- First quarter revenue of $187.6 million versus $233.5 million in first
quarter 2016, or $210.6 million in first quarter 2016 excluding CDI
AndersElite Limited ("Anders"), which was sold in September 2016
-- First quarter net loss of $6.8 million, or $(0.37) per diluted share,
versus net loss of $4.8 million in first quarter 2016, or $(0.24) per
diluted share
-- First quarter adjusted EBITDA(1) loss of $2.6 million versus a loss of
$0.8 million in first quarter 2016
-- First quarter cash flow from operating activities was a deficit of $7.9
million, and total liquidity was $117.0 million as of March 31, 2017.
Summary Results from Operations for the First Quarter 2017
For the first quarter 2017, revenue of $187.6 million compares to prior-year first quarter revenue of $210.6 million, adjusting for the sale of Anders.
Enterprise Talent revenue of $102.2 million compares to prior-year first quarter revenue of $139.6 million, or $116.7 million excluding Anders.
Specialty Talent & Technology Solutions revenue of $17.9 million compares to prior-year first quarter revenue of $18.4 million. Specialty Talent revenue of $10.2 million compares to prior-year first quarter revenue of $10.0 million, while Technology Solutions revenue of $7.7 million compares to prior-year first quarter revenue of $8.4 million.
(1) Adjusted EBITDA excludes from net loss interest, income taxes, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, certain corporate development related items and earnout adjustments. See the financial tables accompanying this release for more information on non-GAAP financial measures and the reconciliation of these measures to GAAP measures.
Engineering Solutions revenue of $56.2 million compares to prior-year first quarter revenue of $63.3 million. Energy, Chemicals and Infrastructure (EC&I) revenue of $27.4 million compares to prior-year first quarter revenue of $34.0 million. Aerospace and Industrial Equipment (AIE) revenue of $12.6 million compares to prior-year first quarter revenue of $13.1 million. Government Services revenue of $16.2 million was flat with the prior-year first quarter.
Management Recruiters International, Inc. (MRI) revenue of $11.3 million compares to prior-year first quarter revenue of $12.2 million. Contract Staffing revenue of $8.9 million compares to prior-year first quarter revenue of $9.2 million, while Royalty & Franchise Fees of $2.4 million compare to the prior-year figure of $3.0 million.
Gross profit of $34.1 million compares to prior-year first quarter gross profit of $43.3 million, or $39.4 million when excluding Anders, a decline of $5.3 million. Gross margin when excluding Anders declined 50 basis points year-over-year, to 18.2%.
The Company reported an operating loss in the first quarter of $5.9 million compared to an operating loss of $3.8 million in the year-ago quarter.
Operating and administrative expenses in the first quarter were $40.0 million versus prior-year first quarter of $47.0 million, or $42.7 million when excluding Anders, an improvement of $2.7 million.
More detailed segment data are included in the tables accompanying this release and in the Company's Form 10-Q Report.
Balance Sheet and Liquidity
CDI ended the first quarter with $6.7 million in cash and cash equivalents versus $3.2 million at the end of 2016 and $9.8 million as of March 31, 2016. The Company had $14.2 million of debt outstanding as of March 31, 2017, versus no debt outstanding at December 31, 2016, and $16.9 million outstanding as of March 31, 2016. Cash flow from operating activities was a deficit of $7.9 million in the first quarter of 2017 versus a deficit of $0.7 million in the first quarter of 2016. Liquidity, including availability under CDI's bank and credit facilities, totaled $117.0 million at March 31, 2017, versus $125.5 million at the end of 2016 and $136.6 million at March 31, 2016.
Business Outlook
The Company expects revenue for the second quarter of 2017 to range from $170 million to $175 million, with the expected sequential decline primarily attributable to seasonal decreases and client attrition in the lower gross margin Western Canada pipeline inspection business that is part of the North America Staffing vertical. In contrast, the Company expects revenue to be largely stable sequentially across its other business verticals. The Company also expects the impact of revenue pressure in the second quarter to be substantially offset by improvement in gross margin as a result of favorable changes in service mix to higher margin solutions verticals, and by lower operating expenses.
Webcast
At 4:30 p.m. Eastern Time on May 10, 2017, Michael S. Castleman, President and Interim CEO, will host a webcast to discuss the first quarter 2017 results and business outlook. The webcast can be accessed live, via the Internet, at www.cdicorp.com.
About CDI
CDI Corp. (NYSE: CDI) seeks to create extraordinary outcomes with our clients by delivering solutions based on skilled technical and professional talent. Our business is comprised of four segments: Enterprise Talent, Specialty Talent & Technology Solutions, Engineering Solutions and MRI. We provide engineering and information technology solutions encompassing managed, project and talent services. Our clients are in multiple industries, including energy, chemicals, infrastructure, aerospace, industrial equipment and technology, and also include municipal and state governments and the U.S. Department of Defense. We have offices and delivery centers in the U.S. and Canada. In addition, we provide recruiting and staffing services through our global MRINetwork(®) of franchisees. Learn more at www.cdicorp.com.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, we and our representatives may make statements that are forward-looking. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow, and tax rate), are forward-looking statements. Some of the forward-looking statements can be identified by words like "anticipates," "believes," "expects," "may," "will," "could," "should," "intends," "plans," "estimates" and similar references to future periods. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: weakness or volatility in general economic conditions and levels of capital spending by clients in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our clients' projects or the inability of our clients to pay our fees; the termination of one or more major client contracts or projects; the uncertain timing and funding of new contract awards and renewals; a high concentration of our business with a few large clients; the impact and outcome of our decision to explore strategic alternatives, as announced on March 20, 2017; the failure to achieve the anticipated benefits of acquisitions, and difficulties in integrating acquired businesses with CDI; the inability to obtain favorable price and other terms for any acquisitions and divestitures we may do; delays or reductions in government spending; credit risks associated with our clients; competitive market pressures; foreign currency fluctuations; restrictions on the availability of funds and on our activities under our asset-based, secured credit facility; the availability, retention and cost of qualified labor; our level of success in attracting, training, and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our professional employees and our temporary employees; our performance on client contracts; negative outcome of pending and future claims and litigation; improper disclosure or loss of sensitive or confidential company, client, government, employee or candidate information, including personal data; and government policies, legislation or judicial decisions adverse to our businesses. More detailed information about these and other risks and uncertainties may be found in our filings with the United States Securities and Exchange Commission (SEC), particularly in the "Risk Factors" section in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2016. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. Unless the context otherwise requires, all references herein to "CDI," the "Registrant," the "Company," "we," "us" or "our" are to CDI Corp. and its consolidated subsidiaries.
Use of Non-GAAP Financial Measures
This press release contains financial information calculated other than pursuant to U.S. Generally Accepted Accounting Principles (GAAP). In particular, it includes Adjusted EBITDA and Adjusted EBITDA Margin which are adjusted to exclude from net loss interest, income taxes, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, certain corporate development related costs and earnout adjustments, and Adjusted EPS which excludes from diluted earnings per common share certain corporate development related costs, earnout adjustments, amortization of acquired intangibles, and the related income tax effect. We present these as supplemental measures of performance.
These non-GAAP measures have limitations as analytical tools, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EPS as analytical tools are: (i) these measures do not reflect all our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) these measures do not reflect changes in, or cash requirements for, our working capital needs; (iii) these measures do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) share-based compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it from Adjusted EBITDA as an expense when evaluating our ongoing operating performance for a particular period; (vi) these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and (vii) other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.
We present these non-GAAP financial measures because we believe these assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are also used by management in its evaluation of core operations and financial and operational decision-making.
Financial Tables Follow
CDI CORP. AND SUBSIDIARIES
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
Consolidated Statements of
Operations: 2017 2016
-------------------------- ---- ----
Revenue $187,565 $233,524
Cost of services 153,446 190,249
------- -------
Gross profit 34,119 43,275
Operating and administrative
expenses (1) 39,978 47,047
Restructuring and other related
costs (2) - 49
Operating loss (5,859) (3,821)
Other income (expense), net (413) (149)
---- ----
Loss before income taxes (6,272) (3,970)
Income tax expense 565 847
--- ---
Net loss $(6,837) $(4,817)
------- -------
Earnings (loss) per common share:
Basic and diluted $(0.37) $(0.24)
Weighted-average shares
outstanding - Basic and Diluted 18,679 19,679
Selected Balance Sheet Data: March 31, December 31,
2017 2016
--- ---- ----
Cash and cash equivalents $6,707 $3,165
Accounts receivable, net 187,905 178,365
Total current assets 212,209 196,368
Total assets 304,947 289,292
Total current liabilities 102,175 80,870
Total equity 183,029 188,976
Three Months Ended
March 31,
Selected Cash Flow Data: 2017 2016
------------------------ ---- ----
Net cash used in operating
activities $(7,875) $(677)
Depreciation and amortization 2,110 3,082
Capital expenditures 546 1,115
Three Months Ended
March 31,
Selected Earnings and Other
Financial Data: 2017 2016
--------------------------- ---- ----
Gross margin 18.2% 18.5%
Operating and administrative
expenses as a percentage of
revenue 21.3% 20.1%
Operating margin (3.1)% (1.6)%
Effective income tax rate (9.0)% (21.3)%
Three Months Ended
March 31,
Selected Segment Data: 2017 2016
---------------------- ---- ----
Enterprise Talent
Revenue:
North America Staffing $102,161 $116,684
UK Staffing (3) - 22,965
--- ------
Total revenue $102,161 $139,649
-------- --------
Gross profit $10,314 $16,481
Gross margin 10.1% 11.8%
Operating profit (2), (4) $1,780 $1,135
Operating margin 1.7% 0.8%
Specialty Talent and Technology
Solutions
Revenue:
Specialty Talent $10,173 $10,020
Technology Solutions 7,741 8,373
----- -----
Total revenue $17,914 $18,393
------- -------
Gross profit $4,955 $5,312
Gross margin 27.7% 28.9%
Operating profit (loss) (1), (4) $(1,042) $445
Operating margin (5.8)% 2.4%
Engineering Solutions
Revenue:
Energy, Chemicals and
Infrastructure (EC&I) $27,423 $33,951
Aerospace and Industrial
Equipment (AIE) 12,615 13,131
Government Services 16,158 16,172
------ ------
Total revenue $56,196 $63,254
------- -------
Gross profit $13,481 $15,477
Gross margin 24.0% 24.5%
Operating loss (2), (4) $(2,601) $(1,935)
Operating margin (4.6)% (3.1)%
Management Recruiters
International (MRI)
Revenue:
Contract Staffing $8,872 $9,227
Royalties and Franchise Fees 2,422 3,001
----- -----
Total revenue $11,294 $12,228
------- -------
Gross profit $5,369 $6,005
Gross margin 47.5% 49.1%
Operating profit (4) $249 $583
Operating margin 2.2% 4.8%
Three Months Ended
March 31,
Non-GAAP Financial Measures: 2017 2016
---------------------------- ---- ----
Adjusted EBITDA (5) $(2,606) $(766)
Adjusted EBITDA margin (5) (1.4)% (0.3)%
Adjusted operating expenses (5) $36,726 $44,135
Adjusted EPS (5) $(0.33) $(0.24)
(1) In the first quarter of 2016, the
Company's Specialty Talent and
Technology Solutions segment
recorded a benefit to "Operating
and administrative expenses" of
$0.8 million related to the
reversal of an acquisition-
related earnout.
(2) The following table summarizes the
amount of "Restructuring and other
related costs" in the consolidated
statements of operations related
to restructuring plans undertaken
during 2015 by reporting segment
for the indicated periods:
Three Months Ended
March 31,
2017 2016
---- ----
Restructuring and other related
costs:
Enterprise Talent $ - $12
Engineering Solutions - 37
Total restructuring and other related
costs $ - $49
--- --- ---
( )
(3) On September 16, 2016, the
Company completed the sale of
CDI AndersElite Limited
(Anders), the Company's UK
staffing business.
(4) The following table summarizes
the amount of depreciation and
amortization recognized by
reporting segment for the
indicated periods:
Three Months Ended
March 31,
2017 2016
---- ----
Depreciation and amortization:
Enterprise Talent $155 $316
Specialty Talent and Technology
Solutions 440 1,002
Engineering Solutions 1,014 1,271
MRI 68 66
Corporate 433 427
--- ---
Total depreciation and
amortization $2,110 $3,082
------ ------
(5) Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted operating
expenses and Adjusted EPS are non-
GAAP financial measures. Adjusted
EBITDA is calculated by excluding
from net loss, interest, income
taxes, depreciation and
amortization expense,
restructuring and other related
costs, share-based compensation
expense, certain corporate
development related costs and
earnout adjustments. Adjusted
EBITDA Margin is Adjusted EBITDA
as a percentage of revenue.
Adjusted operating expenses
excludes from operating expenses,
which is the sum of "Operating
and administrative expenses",
"Restructuring and other related
costs" in the consolidated
statements of operations,
depreciation and amortization
expense, restructuring and other
related costs, share-based
compensation expense, certain
corporate development related
costs and earnout adjustments.
Adjusted EPS excludes from diluted
earnings per common share,
restructuring and other related
costs, certain corporate
development related costs, earnout
adjustments, amortization of
acquired intangibles and the
related specific income tax
effect. See reconciliation of
these non-GAAP financial measures
to U.S. GAAP financial measures
below.
Reconciliations of non-GAAP Financial Measures to U.S. GAAP Financial Measures:
Three Months Ended
March 31,
2017 2016
---- ----
Net loss to Adjusted
EBITDA:
Net loss $(6,837) $(4,817)
Interest expense, net 414 243
Income tax expense 565 847
Depreciation and
amortization 2,110 3,082
Restructuring and other
related costs (a) - 49
Share-based compensation
(b) 635 693
Corporate development
related (c) 507 16
Earnout adjustments (d) - (879)
Adjusted EBITDA $(2,606) $(766)
------- -----
Adjusted EBITDA margin (1.4)% (0.3)%
Operating expenses to
Adjusted operating
expenses:
Operating expenses (e) $39,978 $47,096
Depreciation and
amortization 2,110 3,082
Restructuring and other
related costs (a) - 49
Share-based compensation
(b) 635 693
Corporate development
related (c) 507 16
Earnout adjustments (d) - (879)
Adjusted operating
expenses $36,726 $44,135
------- -------
EPS to Adjusted EPS:
Earnings (loss) per common
share -diluted $(0.37) $(0.24)
Corporate development
related (c) 0.03 -
Earnout adjustments (d) - (0.05)
Amortization of acquired
intangibles (f) 0.02 0.05
Income tax effect (g) (0.01) -
----- ---
Adjusted EPS $(0.33) $(0.24)
------ ------
(a) Represents "Restructuring and other
related costs" in the consolidated
statements of operations related
to restructuring plan undertaken
during 2015.
(b) Represents share-based
compensation expense included in
"Operating and administrative
expenses" in the consolidated
statements of operations.
(c) Represents incremental costs
associated with corporate
development related activities,
including the acquisition and
divestiture of businesses and the
review of strategic alternatives,
included in "Operating and
administrative expenses" in the
consolidated statements of
operations.
(d) Represents an expense (benefit)
from earnout adjustments
associated with the acquisition of
businesses included in "Operating
and administrative expenses" in
the consolidated statements of
operations.
(e) Operating expenses include
"Operating and administrative
expenses", "Restructuring and
other related costs", "Impairment"
and "Loss on disposition of
business interests" in the
consolidated statements of
operations.
(f) Represents the EPS impact to
"Operating and administrative
expenses" in the consolidated
statements of operations related
to the amortization of definite-
lived intangibles identified as a
result of acquisitions completed
during the fourth quarter of 2015.
(g) Represents the aggregate income tax
effect of each of the adjustments
to diluted earnings per common
share based on the specific income
tax effect, including any related
deferred tax adjustments.
Summary of Historical Impact of Anders on Reported Results
Supplemental Non-GAAP Financial Three Months
Measures: Ended
-------------------------------
March 31,
2016
----
Revenue excluding Anders (i) $210,559
Gross Profit excluding Anders (i) 39,416
Operating and administrative expenses
excluding Anders (i), (ii) 42,678
Depreciation and amortization
excluding Anders (i) 2,919
(i) Revenue excluding Anders, Gross
profit excluding Anders,
Operating and administrative
expenses excluding Anders, and
Depreciation and amortization
excluding Anders are non-GAAP
financial measures. Revenue,
Gross profit, Operating and
administrative expenses and
Depreciation and amortization
excluding Anders, excludes from
the Company's consolidated
revenue, gross profit, operating
and administrative expenses and
depreciation and amortization,
the revenue, gross profit,
operating and administrative
expenses, depreciation and
amortization of UK-based CDI
AndersElite Limited. See
reconciliation of these
supplemental non-GAAP financial
measures to U.S. GAAP financial
measures below.
(ii) Operating and administrative
expenses include depreciation and
amortization expense, share-
based compensation expense,
certain corporate development
related costs and earnout
adjustments as detailed in the
above reconciliation of Operating
expenses to Adjusted operating
expenses.
Reconciliations of Supplemental non-GAAP Financial Measures to U.S. GAAP Financial Measures:
Three Months
Ended
March 31,
2016
----
Revenue to Revenue excluding Anders:
Revenue $233,524
Anders Revenue 22,965
------
Revenue excluding Anders $210,559
--------
Gross Profit to Gross Profit excluding Anders:
Gross profit $43,275
Anders Gross profit 3,859
-----
Gross profit excluding Anders $39,416
-------
Operating and Administrative Expenses to Operating
and Administrative Expenses excluding Anders:
Operating and administrative expenses (i) $47,047
Anders Operating and administrative expenses 4,369
-----
Operating and administrative expenses excluding
Anders $42,678
-------
Depreciation and Amortization to Depreciation and
Amortization excluding Anders:
Depreciation and amortization $3,082
Anders Depreciation and amortization 163
---
Depreciation and amortization excluding Anders $2,919
------
(i) Operating and administrative
expenses include depreciation and
amortization expense, share-
based compensation expense,
certain corporate development
related costs and earnout
adjustments as detailed in the
above reconciliation of Operating
expenses to Adjusted operating
expenses.
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SOURCE CDI Corp.
