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View All NewsCDI revenue falls 13% in Q2, acquires India firm
CDI Corp. (NYSE: CDI) reported second-quarter revenue fell 13.2% year over year to $246.8 million. The Philadelphia-based staffing provider also announced two transactions: the acquisition of India-based ScaleneWorks People Solutions LLP and the formation of Congruent Talent — an IT and engineering recruitment services company — in partnership with Acro Service Corp. and Mastech Inc. (NYSE: MHH). Read about Congruent here.
Revenue fell in CDI’s professional staffing services and Management Recruiters International segments. And revenue rose only 0.2% in its global engineering and technology solutions segment, where a 13% revenue increase in the oil, gas and chemicals vertical offset declines in the other verticals.
The company, which announced a restructuring plan in December, reported the impact of business improvement initiatives is not yet evident in its financial results.
CDI ranks No. 20 on the list of largest US staffing firms. CDI also ranks No. 6 on the list of largest US engineering staffing providers.
| (US$ thousands) | Q2 2015 | Q2 2014 | % growth |
| Revenue | $246,821 | $284,282 | -13.2% |
| Gross profit | $46,647 | $52,797 | -11.6% |
| Gross margin percentage | 18.9% | 18.6% | |
| Net income/loss | -$157 | $4,452 | -103.5% |
Quote
“We continue to make progress on the key elements of our transformation,” CEO and President Scott Freidheim said. “The impact of our initiatives is not yet evident in our financial results, nor do these results reflect the potential of CDI. Our performance improvement program continues, with new talent additions, enhancements to our operating processes and systems, and advances in client service relationships. In addition, we continue to focus our corporate development to access new and complementary sources of profitable growth, and we today announce two transactions.”
Revenue by segment
| (US$ thousands) | Q2 2015 | Q2 2014 | % growth |
| Global Engineering and Technology Solutions | |||
| Oil, gas and chemicals | $39,368 | $34,725 | 13.4% |
| Aerospace and industrial equipment | $15,615 | $19,807 | -21.2% |
| Hi-Tech | $7,901 | $8,108 | -2.6% |
| Other | $21,553 | $21,648 | -0.4% |
| Total | $84,437 | $84,288 | 0.2% |
| Professional Staffing Services | |||
| Oil, gas and chemicals | $28,997 | $44,417 | -34.7% |
| Aerospace and industrial equipment | $18,820 | $20,583 | -8.6% |
| Hi-Tech | $53,705 | $59,895 | -10.3% |
| Other | $47,870 | $59,835 | -20.0% |
| Total | $149,392 | $184,730 | -19.1% |
| Management Recruiters International | |||
| Contract staffing | $9,628 | $11,808 | -18.5% |
| Royalties and franchise fees | $3,364 | $3,456 | -2.7% |
| Total | $12,992 | $15,264 | -14.9% |
Gross margin by segment
| Q2 2015 | Q2 2014 | |
| Global Engineering and Technology Solutions | 25.9% | 27.1% |
| Professional Services Staffing | 12.3% | 12.3% |
| Management Recruiters International | 49.8% | 47.1% |
ScaleneWorks acquisition
CDI also entered into a definitive agreement to acquire ScaleneWorks People Solutions LLP, a privately held, talent acquisition solutions provider in India.
Financial terms of the transaction were not disclosed. The closing is subject to certain conditions, including regulatory approval by Indian authorities.
Founded in 2010 and headquartered in Bangalore, India, ScaleneWorks provides human capital management solutions, task RPO, enterprise RPO and other on-site recruitment solutions to the IT, ITES and engineering industries. The company operates throughout India. The acquisition provides CDI with the capability to capitalize on the Indian market, deliver support for the offshore needs of existing CDI clients, and develop a cost-effective offshore delivery capability to serve those clients in CDI’s home markets.
“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, executive VP 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.”
“This transaction represents an opportunity to accelerate our growth,”said ScaleneWorks CEO Sanjay Shelvankar. “We wanted to align our capabilities with a global firm that could leverage our strengths across a new base of clients and allow us to continue to expand rapidly in India with innovative recruitment and consultative services.”
Guidance
CDI expects third-quarter revenue in the range of $240 million to $250 million. This guidance reflects expected continued weakness in the company’s North American staffing business.
Share price and market cap
Shares in CDI fell 17.40% to $10.11 in early afternoon trading today and CDI has a market cap of approximately $198.62 million, according to Yahoo!