November 5, 2015 – CDI Corp./(NYSE:CDI) posted third quarter revenues of $244.7 million, a decrease of 17.3 percent, compared to $295.7 million a year ago. Analysts at Reuters had projected revenues of $259 million for the quarter. Management Recruiters International, Inc. (MRI) reported revenues of $13.5 million, a decrease of 9.5 percent compared to the prior-year third quarter, driven by a decline in contract staffing revenue.
During the quarter, CDI Corp. recorded $21.5 million of impairment charges related to certain businesses within its Global Engineering and Technology Solutions (GETS) segment and Professional Staffing Services (PSS) group. This amount included charges to goodwill in the aerospace and industrial equipment business within GETS and in the company’s U.K.-based AndersElite business within PSS.
The company also reported a net loss of $20.2 million, or $1.03 per diluted share, versus net income $5.4 million, or $0.27 per diluted share, in the prior year quarter.
“We are continuing to make progress on key elements of our transformation and operational turnaround. While consistent with previously articulated expectations, our third quarter 2015 results reflect the continuing macroeconomic and discrete challenges associated with our concentrated client base,” said CEO Scott J. Freidheim. “As we move into 2016, our business should benefit from improving new business development and client retention, the strengthening of our operational leadership team, strategic transactions that enrich our client offerings, and our enhanced financial flexibility.”
CDI Corp. said it entered into a new secured credit agreement providing for up to $150 million in revolving loans. The new five-year credit agreement, maturing in 2020, may be used for working capital and general corporate purposes, as well as permitted acquisitions and investments. In addition, the credit agreement includes an accordion feature that enables the company, under certain circumstances, to increase borrowing capacity under the facility by up to $75 million. The new facility replaces an existing five-year, $75 million credit facility that was scheduled to mature in 2017.
“This new credit facility reflects the strength of CDI’s balance sheet and provides a significant increase in CDI’s financial flexibility to support business growth and strategic investment,” said CFO Michael S. Castleman.
In July, Heidrick & Struggles made a similar move by increasing its bank credit facilities in order to give the company additional financial options as it explores ways to further invest in its human capital lines of business. This paved the way for the firm to acquire Co Company, a London-based advisory boutique specializing in leadership services that accelerate organizational performance.
Last month, CDI Corp’s U.K. subsidiary, CDI AndersElite, acquired the recruitment business of London-based Ship Shape Resources, a privately held company that provides payroll solutions to the recruitment industry. Financial terms of that transaction were not disclosed.
“We have a long and well-established reputation for providing the construction, civil engineering and rail sectors with high quality recruitment services,” said Simon Trippick, VP of CDI International and managing director of CDI AndersElite. “The addition of Ship Shape’s recruitment team, client relationships, and contractor database will enhance our expertise in the construction market.”
The deal followed CDI’s acquisition of EdgeRock Technologies LLC, a privately held, specialist IT staffing firm headquartered in Boston. Founded in 2005, EdgeRock has additional offices in Tampa and Phoenix; it provides clients with enterprise resource planning talent needed to fully optimize the value of their ERP technology investments. The acquisition provides CDI with a national platform for highly-skilled specialist IT staffing to companies like SAP, Oracle and PeopleSoft. EdgeRock is now a division of CDI and continues to operate under the EdgeRock Technology Partners brand name.
“The acquisition of EdgeRock represents an important step in our expansion of CDI capabilities to more specialized areas of IT staffing,” said Mr. Freidheim. “Working with EdgeRock, and leveraging their strong access to experienced talent in ERP and other specialized technology sectors, we can better meet growing demand from existing and new clients to realize greater value from their technology investments.”
In August, CDI Corp. expanded in India with the acquisition ScaleneWorks People Solutions LLP, which provides enterprise and task recruitment and recruitment process outsourcing (RPO) solutions, as well as other talent analytics and advisory solutions, to multiple leading companies in India.
“The acquisition of ScaleneWorks represents an important step in our plan to expand selectively our footprint to high growth markets and offer new and existing clients additional value-added services,” said David Arkless, EVP and president of CDI International. “ScaleneWorks already has demonstrated its RPO and analytic-based recruitment capabilities with a number of leading global companies. We are excited to welcome the ScaleneWorks team and clients to CDI.”
CDI Corp. anticipates revenue for the fourth quarter 2015 in the range of $230 million to $240 million, including revenue related to the EdgeRock and Ship Shape acquisitions.
The company’s shares have fallen 53 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $8.26, a decline of 52 percent in the last 12 months.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media