NEW YORK--(BUSINESS WIRE)--Corporate Resource Services, Inc. (NASDAQ:CRRS) (the “Company” or “CRS”), a diversified technology, staffing, recruiting, and consulting services firm, today reported its financial results for its second fiscal quarter and six months ended on July 4, 2014. The Company will conduct its quarterly conference call at 5:00 PM Eastern Time on September 25, 2014, as previously announced. With the filing of its second quarter 10-Q, the Company has become current with its Securities and Exchange Commission (the “SEC”) reports within the extension period granted by NASDAQ for making these filings.
Fiscal Second Quarter and First Half Results
Revenue for the second quarter of fiscal year 2014, which ended on July 4, 2014, was $246.1 million, an increase of $47.0 million, or 24 percent, compared to the second fiscal quarter in 2013. The increase was driven by acquisitions made at the end of 2013 that added $32.5 million in revenue. Excluding acquisitions, the Company generated organic growth of $14.5 million for the quarter, or 31 percent of the quarter’s growth.
For the six months ended July 4, 2014, revenue grew 18 percent to $464.5 million from $393.3 million reported in the first six months of fiscal 2013. CRS has generated this growth while pursuing a strategy to eliminate a select number of unprofitable accounts. In addition, our sales force, especially those whose previous firms have left the business, will continue to grow revenue from existing and new customers.
Gross profit for the fiscal second quarter increased by 26 percent to $28.9 million, generating a gross margin of 11.7 percent. This represents a slight increase in gross margin compared to the second quarter of 2013, when gross profit of $23.0 million generated a margin of 11.6%.
For the six months ended July 4, 2014, gross profits rose to $53.0 million, an 18.6 percent increase over the $44.7 million reported the first six months of fiscal 2013. CRS has implemented several initiatives intended to expand its gross margin including the diversification of our service offering, such as Summit Technology and its related services. The Company continues to review its pricing structure across the board, and is undertaking a more effective management of state unemployment taxes.
For the second fiscal quarter, selling, general and administrative expenses, excluding non-cash equity compensation expense, increased by $4.3 million, or 23 percent, to $23.0 million, or 9.4% of revenue. This compares to $18.7 million, or 9.4% of revenue, for the same period a year ago. The increase was primarily due to fees incurred with the change in auditors and the review of previously reported financial statements, which accounted for approximately $1.7 million of the increase. This process concluded at the end of the second quarter with the filing of the Company’s Annual Report on Form 10-K.
Despite this increase in selling, general and administrative costs, overall revenue growth has allowed the Company to better leverage its fixed costs. As earlier announced, the Company has completed and continues to undertake initiatives to reduce selling, general and administrative costs through consolidation of select offices and administrative functions. The Company expects that the integration of recently acquired operations as well as the continued growth of revenues will continue to reduce selling, general and administrative costs as a percentage of revenues in 2014 and beyond.
The Company recorded an operating income for the second quarter of $3.8 million compared to of $3.4 million in the same quarter last year. Operating income for the first six months of fiscal 2014 was $3.4 million compared to operating income of $4.8 million in last year’s second quarter.
Net income for the second quarter of fiscal 2014 was $330,000 compared to $1.3 million in the second quarter of fiscal 2013. For the six months ended July 4, 2014, the Company reported a loss of $2.7 million compared to income of $877,000 for the first six months of fiscal 2013.
Adjusted EBITDA, a non-GAAP measure defined as earnings before interest, taxes, depreciation, amortization of identifiable intangibles, equity-based compensation expense, loss from equity investment, change in fair value of contingent consideration, and due to their significant non-recurring nature, professional fees, was $8.1 million for the fiscal second quarter, an increase of 68.6 percent from $4.8 million in the similar prior-year quarter. Adjusted EBITDA for the six months ending July 4, 2014, was $12.0 million, an increase of 64.4 percent over the $7.3 million reported in the first six months of fiscal 2013.
Adjusted EBITDA is provided to investors to complement results provided in accordance with GAAP, as management believes the measure helps illustrate underlying operating trends in the Company's business and uses the measure to establish internal budgets and goals, manage the business and evaluate performance. Adjusted EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. Reconciliation between the company's results on a GAAP and non-GAAP basis is provided in a table below.
“We are extremely pleased to have completed the filing of our 10-Q within the time mandated by NASDAQ. With our change of auditors we have also adopted some new financial processes that will help us manage the company more effectively,” said John Messina, CEO of Corporate Resource Services. “We are also pleased by these strong quarterly and half-year results. As we move into our peak placement season, we have seen robust demand from our clients for the upcoming holiday season, as well as demand for our higher margin professional services.”
Mr. Messina continued, “CRS continues to expand our global footprint, most notably with the acquisitions of Staff Management Group and Alar Staffing in the first half of 2014, and through other strategic acquisitions. Our acquisition of Summit Software, a cloud-based enterprise application and hosting services company, brings attractive margins and will allow us to begin developing new revenue streams from state-of-the-art technologies focused on the employment life cycle, as well as strategic partnerships with concise affinity marketers. We are confident in our ability to execute our organic growth strategy, and continue to improve our margins through better price management, unemployment tax management and business mix.”
Additional Information
As the company previously reported, CRS revised certain prior period amounts and presentations including reflecting our change in fiscal year end and to reflect the correction of certain errors. Additional information regarding these matters and the impact of the revisions on the consolidated balance sheets and consolidated statements of income by quarter are outlined in the tables that can be found in the company’s Annual and Quarterly Reports on Forms 10-K and 10-Q filed with the SEC.
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Reconciliation of GAAP Net Income (loss) to Non-GAAP Adjusted EBITDA (Unaudited) |
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(In thousands) |
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| Three months ended | |||||||
| July 4, 2014 | July 5, 2013 | ||||||
| Net income (loss) | $ | 330 | $ | 1,255 | |||
| Interest expense - related party | 941 | 421 | |||||
| Interest expense | 1,316 | 1,439 | |||||
| Provision for income taxes | 97 | 62 | |||||
| Depreciation and amortization | 880 | 360 | |||||
| EBITDA | 3,564 | 3,537 | |||||
| Other expense | 205 | - | |||||
| Change in contingent consideration | 381 | 40 | |||||
| Loss from equity investment | 538 | 142 | |||||
| Non-cash equity compensation | 1,192 | 603 | |||||
| Acquisition expense | 49 | 31 | |||||
| Professional fees | 2,202 | 469 | |||||
| Adjusted EBITDA | $ | 8,131 | $ | 4,822 | |||
| Six months ended | |||||||
| July 4, 2014 | July 5, 2013 | ||||||
| Net income (loss) | $ | (2,719 | ) | $ | 877 | ||
| Interest expense - related party | 1,633 | 780 | |||||
| Interest expense | 2,297 | 2,605 | |||||
| Provision for income taxes | 115 | 110 | |||||
| Depreciation and amortization | 2,023 | 751 | |||||
| EBITDA | 3,349 | 5,123 | |||||
| Other expense | 246 | - | |||||
| Change in contingent consideration | 761 | 81 | |||||
| Loss from equity investment | 1,061 | 306 | |||||
| Non-cash equity compensation | 2,426 | 927 | |||||
| Acquisition expense | 356 | 92 | |||||
| Professional fees | 3,831 | 790 | |||||
| Adjusted EBITDA | $ | 12,030 | $ | 7,319 | |||
About Corporate Resource Services, Inc.:
Corporate Resource Services, Inc. provides cloud-based enterprise applications and hosting services to PEO and staffing companies, as well as diversified staffing, recruiting, and consulting services. The Company offers trained employees in the areas of Insurance, Information Technology, Accounting, Legal, Engineering, Science, Healthcare, Life Sciences, Creative Services, Hospitality, Retail, General Business and Light Industrial work. The company’s blended staffing solutions are tailored to our customers’ needs and can include customized employee pre-training and testing, on-site facilities management, vendor management, risk assessment and management, market analyses and productivity/occupational engineering studies.
The Company operates approximately 250 staffing and on-site facilities throughout the United States and the United Kingdom and it offers its services to a wide variety of clients in many industries, ranging from sole proprietorships to Fortune 1000 companies. To learn more, visit http://www.crsco.com
Forward Looking Statements:
Certain information contained in this press release, particularly information regarding completion of this offering, constitutes forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Any forward-looking information presented herein is made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
