CDI Corp. Reports First Quarter 2015 Results

PHILADELPHIA, May 5, 2015 /PRNewswire/ -- CDI Corp. (NYSE: CDI) (the "Company") today reported results for the first quarter ended March 31, 2015.

"We are implementing with a sense of urgency multiple business improvement initiatives to deliver profitable growth and transform CDI," said Scott J. Freidheim, Chief Executive Officer and President. "We are adding new leadership in key corporate and operational roles, restoring revenue production capacity, enhancing service delivery, and pursuing corporate development opportunities. We look forward to communicating results of these and other actions in the coming quarters."

First Quarter Overview

• Revenue of $257.5 million, a decrease of 6.8% versus first quarter 2014
• Adjusted EBITDA of $4.9 million versus $8.9 million in first quarter 2014¹
• Adjusted earnings per diluted share of $0.04 versus $0.16 for first quarter 2014¹
• Signed business development alliance with Ascent Engineering to add front-end design capabilities to solution offerings for large Oil, Gas & Chemicals projects
• Increased North American staffing total productive headcount by 13% and U.S. local and regional sales capacity by 65% versus year-end 2014
• Recorded first quarterly MRI net franchise additions in more than seven years

In the first quarter 2015, the Company's net income attributable to CDI was $0.5 million versus net income attributable to CDI of $2.0 million in the prior-year first quarter. In the first quarter 2015, the Company's net earnings per diluted share were $0.02 versus $0.10 per diluted share in the prior-year first quarter.

Business Segment Results

Global Engineering and Technology Solutions segment (GETS) reported $82.5 million in first quarter revenue, an increase of 0.3% versus the prior-year first quarter. Growth in the Oil, Gas & Chemicals (OGC) vertical continued at a double-digit rate, offsetting declines in the other verticals. GETS operating profit was $0.3 million compared to $1.6 million in the prior-year quarter. First quarter 2015 operating profit includes a $0.3 million charge for loss on disposal of our Mexico JV, while first quarter 2014 operating profit includes a $0.3 million restructuring charge. During the period, the Company formed a business development and solutions alliance with Ascent Engineering that will provide CDI with access to front-end engineering design capabilities, and therefore a more complete service offering for larger oil, gas and chemicals projects.

Professional Staffing Services segment (PSS) reported $161.4 million in revenue for the first quarter 2015, a decrease of 10.4% compared to the prior-year first quarter with declines across our North American industry verticals, partially offset by strong growth in AndersElite, the UK staffing business. PSS operating profit was $4.2 million versus $6.1 million in the prior-year first quarter; both quarters' results include nominal restructuring charges. To increase its revenue generating capacity, the Company grew North American total productive headcount (defined as recruiting, delivery and sales personnel) by 13% since the end of 2014, reversing a multi-year trend; within our local and regional account business, CDI increased its sales headcount by 65%. In addition, CDI launched an ERP Solutions practice offering staffing and program management services as part of CDI's strategy to enhance its margin profile through increased specialization in high-skills based segments.   

Management Recruiters International, Inc. (MRI) reported first quarter 2015 revenue of $13.5 million, a decrease of 2.7% compared to the prior-year first quarter, as an increase in royalty and franchise fee revenue was offset by a decrease in contract staffing revenue. MRI's first quarter 2015 operating profit was $1.5 million compared to $1.3 million in the prior-year first quarter. During the quarter, MRI signed eight new franchises, marking its first quarter of net franchise additions in more than seven years.

Balance Sheet and Liquidity

CDI ended the quarter with $28.1 million in cash and cash equivalents versus $36.3 million at the end of fourth quarter 2014, and $6.2 million at the end of first quarter 2014. Total liquidity, including availability under CDI's bank and credit facilities, totaled $96.9 million at March 31, 2015 versus $106.8 million at the end of fourth quarter 2014, and $67.8 million at the end of first quarter 2014. Net cash used in operations during first quarter 2015 was $4.6 million versus $40.8 million used in the prior-year quarter.

Business Outlook

The Company anticipates revenue for the second quarter 2015 in the range of $245 million to $255 million.  This guidance reflects expected weakness in our North American staffing business, particularly within the PSS OGC vertical, while the Company implements its programs to restore and grow its revenue generation capability. We expect this weakness will be partially offset by sequential growth in GETS OGC, GETS government services business and the UK-based AndersElite staffing business.

Conference Call

At 8:30 a.m. Eastern Time on May 6, 2015, Scott J. Freidheim, CEO and President, and Michael S. Castleman, CFO and Executive Vice President, will host a conference call to discuss the 2015 first quarter results and business outlook. The call can be accessed live, via the Internet, at www.cdicorp.com. 

About CDI

CDI Corp. (NYSE:  CDI) provides client-focused engineering, information technology and staffing solutions.  Our customers operate in a variety of industries, ranging from Oil, Gas & Chemicals to Aerospace & Industrial Equipment, and High Technology, and include corporate, federal, state and municipal entities. We serve customers through offices and delivery centers in the United States, Canada and the United Kingdom. We also provide staffing services through our global MRINetwork^® of franchisees.  Learn more at www.cdicorp.com

Caution Concerning Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements that address expectations or projections about the future, including, but not limited to, statements about our strategies for growth and future financial results (such as revenue), 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 expressions. 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 the forward-looking statements include, but are not limited to: weakness 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' capital projects or the inability of our clients to pay our fees; the termination or non-renewal of a major client contract or project; delays or reductions in government spending; credit risks associated with our clients; competitive market pressures; the availability and cost of qualified personnel; 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 healthcare reform laws and regulations; the possibility of incurring liability for our business activities, including the activities of our temporary employees; our performance on client contracts; negative outcome of pending and future claims and litigation; 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 SEC, particularly in the "Risk Factors" section of our Form 10-K and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Form 10-Ks and Form 10-Qs. 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. 

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 interest, income taxes, depreciation, amortization, restructuring charges, share-based compensation, leadership transition costs, and loss on disposition; Adjusted operating expenses, which is the sum of  "Operating and administrative expenses", "Restructuring and other related costs" and "Loss on disposition" in the consolidated statements of operations, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, leadership transition costs, and loss on disposition; and Adjusted EPS which is adjusted to exclude, restructuring charges, leadership transition costs, loss on disposition 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, Adjusted operating expenses 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 will often have to be replaced in the future, and Adjusted EBITDA and Adjusted operating expenses 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 and Adjusted operating expenses 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 their usefulness as comparative measures.

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. 

¹ Adjusted EBITDA excludes from net (loss) income attributable to CDI, interest, income taxes, depreciation and amortization expense, restructuring and other related costs, share-based compensation expense, leadership transition costs, and loss on disposition. Adjusted EPS excludes from diluted earnings per common share restructuring and other related costs, leadership transition costs, loss on disposition and the related income tax effect. See the financial tables accompanying this release for more information on non-GAAP financial measures and the reconciliation of these measures to GAAP measures.

Financial Tables Follow

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SOURCE CDI Corp.

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