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View All NewsCDI revenue falls 10%
CDI Corp. (NYSE: CDI), a Philadelphia-based provider of IT and engineering staffing, reported revenue fell 10.0% year over year in the third quarter.
Results for the quarter included $10.5 million in revenue from Edgerock Technologies LLC, which CDI acquired in October 2015.
Results also include partial quarter revenue of $15.8 million for its UK-based subsidiary, CDI AndersElite Ltd. — which it sold in September to the Anders management team and employees versus $25.8 million in the full prior-year period. CDI also recorded a pre-tax restructuring charge of $3.5 million and a loss on disposition associated with Anders of $11.3 million.
In addition, D. Hugo Malan, the company’s executive VP and president of talent and technology solutions, will leave the company effective Nov. 18, according to a filing with the US securities and Exchange Commission.
| (US$ thousands) | Q3 2016 | Q3 2015 | % change |
| Revenue | $220,260 | $244,662 | -10.0% |
| Gross profit | $40,533 | $46,827 | -13.4% |
| Gross margin percentage | 18.4% | 19.1% | |
| Net loss | -$17,818 | -$20,202 | nm |
Specialty talent and technology solutions revenue rose primarily as a result of $10.5 million in revenue from the acquisition of EdgeRock, which currently comprises specialty talent. In technology solutions, revenue grew 9.7% due to increased spending by certain clients.
Revenue fell 13.2% in CDI’s enterprise talent segment. North America staffing revenue fell 7.8%, primarily due to the completion of discrete client projects and reduced spending at the company’s largest client. UK staffing revenue fell 38.7% due to the negative impact of foreign currency exchange rates (approximately $2.9 million), the disposition of Anders (approximately $3.5 million) on Sept. 16 and reductions across engineering and construction sectors, in part associated with the uncertainty following the Brexit referendum.
Engineering solutions revenue fell 20.5% primarily due to declines in demand for engineering services by downstream and midstream clients in energy, chemicals and infrastructure as a result of the completion of several large projects and the impact of the decline in oil and gas prices on new spending. Revenue in aerospace and industrial equipment was down primarily due to reduced spending by a large commercial aviation client and, to a lesser extent, the wind down of the company’s data acquisition and analysis business during 2015. A slight increase in the government services vertical was primarily due to growth in existing naval defense contracts.
Revenue by segment
| (US$ thousands) | Q3 2016 | Q3 2015 | % change |
| Revenue | $220,260 | $244,662 | -10.0% |
| Gross profit | $40,533 | $46,827 | -13.4% |
| Gross margin percentage | 18.4% | 19.1% | |
| Net loss | -$17,818 | -$20,202 | nm |
| Specialty talent and technology solutions | |||
| Specialty talent | $10,461 | -- | -- |
| Technology solutions | $8,477 | $7,724 | 9.7% |
| Total | $18,938 | $7,724 | 145.2% |
| Engineering solutions | |||
| Energy, chemicals and infrastructure | $32,343 | $45,483 | -28.9% |
| Aerospace and industrial equipment | $12,180 | $14,877 | -18.1% |
| Government services | $16,329 | $16,210 | 0.7% |
| Total | $60,852 | $76,570 | -20.5% |
| Management Recruiters International | |||
| Contract staffing | $10,006 | $10,106 | -1.0% |
| Royalties and franchise fees | $2,976 | $3,399 | -12.4% |
| Total | $12,982 | $13,505 | -3.9% |
Gross margin by segment
| Q3 2016 | Q3 2015 | |
| Enterprise talent | 10.9% | 12.4% |
| Specialty talent and technology solutions | 29.7% | 31.4% |
| Engineering solutions | 24.4% | 25.6% |
| Management Recruiters International | 47.8% | 49.0% |
Quote
“Business performance during the third quarter includes actions taken to improve our expense structure and cash conversion, as well as strategic focus with the sale of UK-based AndersElite Ltd,” said President and Interim CEO Michael Castleman. “Going forward, we share as a company a clear operating imperative to build on common pillars of our business, such as talent acquisition and management, to deliver improved growth and profitability. This imperative is supported by the tremendous commitment and collaborative spirit of all CDI employees.”
Guidance
CDI forecasts fourth-quarter revenue in the range of $185 million to $195 million, a year-over-year decrease of between 17.6% and 21.8%. The company cited negative impacts from project delays and volume declines among large clients within enterprise talent, and fewer billing days in the fourth quarter compared to the third quarter.
Share price and market cap
Shares in CDI rose 2.75% in early afternoon trading to $5.60. The company had a market cap of $104.16 million, according to Yahoo.