News Column

Corporate Resource Services Announces First Quarter Fiscal 2014 Revenue of $218.0 Million; 39.8% Increase in Adjusted EBITDA

August 19, 2014

  • Comparable Period Revenue up 21.1 percent to $218.4 million
  • Adjusted EBITDA increases 56.3 percent to $3.9 million
  • Adjusted EBITDA margin rises to 1.8 percent
  • Company Expects to File Fiscal 2014 Q2 Results before the end of the extension granted by NASDAQ

    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 first fiscal quarter ended on April 4, 2014 and will conduct its quarterly conference call at 5:00 PM Eastern Time today, as previously announced. With the filing of its first quarter 10-Q, the Company has also made substantial progress toward becoming current with its Securities and Exchange Commission (the “SEC”) reports and expects to file its Form 10-Q for the second quarter of its current fiscal year before the end of the NASDAQ extension period.

    First Quarter Results

    Revenue for the first quarter of fiscal year 2014, which ended on April 4, 2014 was $218.4 million, an increase of $24.1 million, or 12.5 percent, compared to the first quarter of 2013, which included an additional week of operations based on the Company’s fiscal calendar. Excluding the impact of this additional week, revenues increased by $38.1 million, or 21.1 percent. This increase was driven by both growth from acquisitions, which added $23.9 million, or 13.2 percent, as well as organic revenue growth of approximately $14.2 million, or 7.9 percent, compared to the comparable year-ago period.

    Gross profit for the fiscal first quarter increased by 11.1 percent to $24.1 million, generating a gross margin of 11.0 percent. This is a slight decline in margin compared to the first quarter 2013, when gross profit of $21.6 million generated a margin of 11.1%. These results were impacted by the severe weather conditions in many regions of the U.S., which caused an overall reduction in economic activity.

    CRS continues to implement initiatives intended to increase gross profit, including the diversification of its service offerings, such as Summit Software's technology and related services; the continued review of pricing charged to all customers; and a more effective management of unemployment claims to reduce the related state unemployment taxes.

    For the quarter, selling, general and administrative expenses, excluding non-cash equity compensation expense, increased by $2.6 million, or 13.4 percent, to $22.1 million, or 10.1% of revenues. This compares to $19.5 million, or 10.1% 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 our previously reported financial statements, which accounted for approximately $1.3 million of the increase. Excluding these fees, selling, general and administrative expenses as a percentage of revenues decreased to 9.4 percent from 9.9 percent in the first quarter of 2013. The increase in total expenses was partially offset by the Company’s ability to curb and reduce non-personnel costs, including the ongoing consolidation of Company offices and functions.

    Despite this increase in selling, general and administrative costs, overall revenue growth has allowed the Company to better leverage its fixed costs As previously 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 loss for the quarter of $415,000 compared to operating income of $1.4 million in last year’s first quarter. The reduction in operating income was due primarily to the increase in selling, general and administrative costs as a result of the $1.3 million in higher professional fees, which is expected to decrease in future quarters, as well as a $0.9 million increase in non-cash equity compensation expense.

    For the first quarter of fiscal 2014, the Company reported a loss of $3.0 million compared to a loss in the comparable year-ago quarter of $378,000.

    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 $3.9 million for the fiscal first quarter, an increase of 56.3 percent from $2.5 million in the prior year quarter.

    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 pleased with these strong quarterly results and are well-positioned for continued execution and success throughout the balance of the year,” said John Messina, CEO of Corporate Resource Services. “We have continued to focus on executing our business strategy and moving the business forward, most notably with the acquisitions of Staff Management Group and Alar Staffing in the first quarter of 2014.”

    Mr. Messina continued, “We will continue to make strategic acquisitions to expand our footprint, such as Summit Software, a cloud-based enterprise application and hosting services company we acquired last year. In addition to its attractive margins, Summit will allow us to begin to develop new revenue streams focused on state-of-the-art technologies focused on the employment life cycle, as well as strategic partnerships with a concise affinity marketing program that will add greater profits to CRS. We are confident in our ability to execute our organic growth strategy, and continue to improve our margins through higher margin acquisitions outside the light industrial segment of staffing.”

    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.

    Corporate Resource Services management remains focused on completing and filing of the Company’s Quarterly Report on Form 10-Q for the second quarter ended July 4, 2014, on or before September 29 as stipulated by in its plan submitted to the NASDAQ Stock Market LLC.

    Reconciliation of GAAP Net Income (loss) to Non-GAAP Adjusted EBITDA (Unaudited)

    (In thousands)

          Three months ended
    April 4, 2014       April 5, 2013
     
    Net income (loss) $

    (3,047

    )

     

    $

    (378

    )

     

    Interest expense - related party 691 359
    Interest expense 980 1,166
    Provision for income taxes 18 48
    Depreciation and amortization   1,144       391    
    EBITDA

    (214

    )

     

    1,586
    Other expense 41 -
    Change in contingent consideration 380 41
    Loss from equity investment 522 164
    Non-cash equity compensation 1,234 324
    Acquisition expense 309 60
    Professional fees   1,629       321    
    Adjusted EBITDA $ 3,901     $ 2,496    
     


    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.




    Makovsky

    John McInerney, 212-508-9628

    jmcinerney@makovsky.com

    Source: Corporate Resource Services, Inc.


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