CDI Corp. Reports Fourth Quarter and Full Year 2016 Results

PHILADELPHIA, March 8, 2017 /PRNewswire/ -- CDI Corp. (NYSE: CDI), (the "Company") today reported results for the fourth quarter and full year ended December 31, 2016.

"We are pleased to see the benefit of our efficiency and cost management actions on our operating expenses and cash flows in the fourth quarter, providing a stronger foundation for our future success," stated President and Interim Chief Executive Officer Michael S. Castleman.  "As we enter 2017, the entire CDI team remains squarely focused on our transformation. Through targeted programs that leverage inherent strengths of the CDI platform, we are aligned on our primary mission: to deliver profitable growth and thereby generate improved investor returns."

Fourth Quarter and Full-Year 2016 Overview

• Fourth quarter revenue of $183.9 million versus $236.6 million in fourth quarter 2015, or $211.5 million in fourth quarter 2015 excluding CDI AndersElite Limited ("Anders"), which was sold in September 2016

• Fourth quarter net loss attributable to CDI of $1.5 million, or $(0.08) per diluted share, versus net loss attributable to CDI of $17.1 million in fourth quarter 2015, or $(0.87) per diluted share

• Fourth quarter adjusted EBITDA¹ of $0.5 million versus $0.4 million in prior year

• Fourth quarter cash flow from operating activities of $7.0 million

• Full-year 2016 revenue of $864.4 million versus $985.5 million in 2015; Excluding Anders, full-year 2016 revenue was $805.1 million versus $880.5 million in 2015

• Full-year 2016 net loss attributable to CDI of $31.6 million, or $(1.66) per diluted share, versus net loss attributable to CDI of $37.0 million, or $(1.88) per diluted share for 2015

• Full-year adjusted EBITDA¹ loss of $2.1 million versus adjusted EBITDA¹ of $13.2 million in 2015

• Full-year cash flow from operating activities of $13.5 million.

Summary Results from Operations for the Fourth Quarter 2016

For the fourth quarter 2016, revenue of $183.9 million was down 13.1% compared to the prior-year fourth quarter, adjusting for the sale of Anders.  Revenues declined for Enterprise Talent, Engineering Solutions and MRI, partially offset by an increase in Specialty Talent & Technology Solutions.

Enterprise Talent revenue of $95.3 million compares to prior-year fourth quarter revenue of $138.3 million, or $113.3 million excluding Anders, a decline of 15.8%.

¹ Adjusted EBITDA excludes from net income (loss) attributable to CDI, interest, income taxes, depreciation and amortization expense, impairment charges, restructuring and other related costs, share-based compensation expense, leadership transition costs, loss on disposition, certain acquisition and litigation items, gain from the sale of a non-operating corporate asset, impairment related costs and sales and use tax recovery benefit. See the financial tables accompanying this release for more information on non-GAAP financial measures and the reconciliation of these measures to GAAP measures.

Engineering Solutions revenue of $58.0 million compares to prior-year fourth quarter revenue of $67.0 million, or a decline of 13.4%.  Government Services revenue grew 9.8% year-over-year, offset by revenue declines in Energy, Chemicals and Infrastructure (EC&I) and Aerospace and Industrial Equipment (AIE) of 20.8% and 16.7%, respectively.

Specialty Talent & Technology Solutions revenue of $18.5 million, which includes the contribution from EdgeRock acquired on October 6, 2015, compares to prior-year fourth quarter revenue of $18.1 million, or an increase of 2.0%.  Specialty Talent grew 3.3%, while Technology Solutions grew 0.2%.

Management Recruiters International, Inc. (MRI) revenue of $12.0 million compares to prior-year fourth quarter revenue of $13.2 million, or a decline of 8.4%.  Royalty & Franchise Fees declined 12.2% while Contract Staffing declined 7.3%.

Gross profit of $36.2 million compares to prior-year fourth quarter gross profit of $44.7 million, or $40.6 million when excluding Anders, a decline of $4.4 million, or 10.8%.  Gross margin, when excluding Anders, expanded 50 basis points year-over-year, to 19.7%.

The Company reported an operating loss in the fourth quarter of $2.3 million compared to an operating loss of $8.8 million in the year-ago quarter.

Operating and administrative expenses in the fourth quarter were $38.5 million versus prior-year fourth quarter of $49.9 million, or $44.9 million when excluding Anders, an improvement of $6.4 million, or 14.3%.

More detailed segment data are included in the tables accompanying this release and in the Company's Form 10-K Report.

Balance Sheet and Liquidity

CDI ended the year with $3.2 million in cash and cash equivalents versus $16.9 million at the end of 2015 and $10.2 million at the end of the third quarter 2016. The company had no debt outstanding as of December 31, 2016, versus $18.8 million outstanding at December 31, 2015, and $15.0 million outstanding at September 30, 2016. Cash flow from operating activities for the full year was $13.5 million in 2016 versus $14.3 million in 2015. Liquidity, including availability under CDI's bank and credit facilities, totaled $125.5 million at December 31, 2016, versus $137.6 million at the end of 2015 and $120.6 million at September 30, 2016.

Business Outlook and Strategy to Unlock CDI's Potential

The Company expects revenue for the first quarter of 2017 to range from $180 million to $185 million.  This guidance reflects slower activity experienced in the first part of the quarter, consistent with that experienced in the late part of the 2016 fourth quarter, followed by increased activity levels across multiple segments, including Enterprise Talent, beginning in late January.  However, overall demand trends among large clients and programs remain uncertain.

Entering 2016, the Company announced a strategy to create extraordinary outcomes for clients by delivering solutions based on skilled technical and professional talent.  This strategy, which remains our focus, is based on four pillars of CDI strength:

• An ability to identify and recruit skilled technical talent, as evidenced by the Company's approximate four thousand internal and external billable employee hires in 2016;

• Deep industry and technical expertise aligned with positive secular trends in the technology, energy, industrial, aerospace and government sectors;

• A long-established capability to deliver complex technical solutions through project and managed services, with approximately two thousand technical specialists currently in-house; and

• A formidable, blue chip client base, with the Company's top 20 commercial clients having an average relationship tenure of 14 years; sixteen of those top 20 clients are members of the domestic or global Fortune 500.

During 2017, the Company is accelerating its transformation through increased sales and operational discipline.  This discipline is embodied in five enterprise-wide programs currently being executed to accelerate growth and deliver improved profitability. These include:

• Increase client and vertical industry penetration through corporate strategic and key account management;

• Extend multiple engineering and technology service lines to the large federal government sector, including both civilian and defense agencies;

• Integrate our Specialty Talent and Technology Solutions units under the EdgeRock brand and pursue a coordinated go-to-market strategy around high-value IT applications, infrastructure and service management;

• Create a single talent acquisition Center of Excellence serving all CDI operations as an engine for service and client growth; and

• Unify operating platforms and support organizations to reduce cost and complexity while improving effectiveness throughout the enterprise.

Webcast

At 4:30 p.m. Eastern Time on March 8, 2017, Michael S. Castleman, President and Interim CEO, will host a webcast to discuss the fourth quarter and full year 2016 results and business outlook. The webcast can be accessed live, via the Internet, at www.cdicorp.com.

About CDI

CDI Corp. (NYSE: CDI) seeks to create extraordinary outcomes with our clients by delivering solutions based on skilled technical and professional talent. Our business is comprised of four segments: Enterprise Talent, Specialty Talent & Technology Solutions, Engineering Solutions and MRI. We provide engineering and information technology solutions encompassing managed, project and talent services. Our clients are in multiple industries, including energy, chemicals, infrastructure, aerospace, industrial equipment, technology, and also include municipal and state governments, and the U.S. Department of Defense. We have offices and delivery centers in the U.S. and Canada. In addition, we also provide recruiting and staffing services through our global MRINetwork^® of franchisees. Learn more at www.cdicorp.com.

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, from time to time, we and our representatives may make statements that are forward-looking. All statements that address expectations or projections about the future, including, but not limited to, statements about our plans, strategies, adequacy of resources and future financial results (such as revenue, gross profit, operating profit, cash flow, and tax rate), are forward-looking statements. Some of the forward-looking statements can be identified by words like "anticipates," "believes," "expects," "may," "will," "could," "should," "intends," "plans," "estimates" and similar references to future periods. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions that are difficult to predict. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to: weakness or volatility in general economic conditions and levels of capital spending by clients in the industries we serve; weakness or volatility in the financial and capital markets, which may result in the postponement or cancellation of our clients' projects or the inability of our clients to pay our fees; the termination of one or more major client contracts or projects; the uncertain timing and funding of new contract awards and renewals; a high concentration of our business with a few large clients; the failure to achieve the anticipated benefits of acquisitions, and difficulties in integrating acquired businesses with CDI; the inability to obtain favorable price and other terms for any acquisitions and divestitures we may do; delays or reductions in government spending; credit risks associated with our clients; competitive market pressures; foreign currency fluctuations; restrictions on the availability of funds and on our activities under our asset-based, secured credit facility; the availability, retention and cost of qualified labor; our level of success in attracting, training, and retaining qualified management personnel and other staff employees; changes in tax laws and other government regulations, including the impact of health care reform laws and regulations; the possibility of incurring liability for our business activities, including, but not limited to, the activities of our professional employees and our temporary employees; our performance on client contracts; negative outcome of pending and future claims and litigation; improper disclosure or loss of sensitive or confidential company, client, government, employee or candidate information, including personal data; and government policies, legislation or judicial decisions adverse to our businesses. More detailed information about these and other risks and uncertainties may be found in our filings with the United States Securities and Exchange Commission (SEC), particularly in the "Risk Factors" section in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2016. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We assume no obligation to update such statements, whether as a result of new information, future events or otherwise, except as required by law. Unless the context otherwise requires, all references herein to "CDI," the "Registrant," the "Company," "we," "us" or "our" are to CDI Corp. and its consolidated subsidiaries.

Use of Non-GAAP Financial Measures

This press release contains financial information calculated other than pursuant to U.S. Generally Accepted Accounting Principles (GAAP). In particular, it includes Adjusted EBITDA and Adjusted EBITDA Margin which are adjusted to exclude from net income (loss) attributable to CDI, interest, income taxes, depreciation and amortization expense, impairment charges, restructuring and other related costs, share-based compensation expense, leadership transition costs, loss on disposition, certain acquisition and litigation items, gain from the sale of a non-operating corporate asset, impairment related costs and sales and use tax recovery benefits and Adjusted EPS which excludes from diluted earnings per common share impairment charges, restructuring and other related costs, leadership transition costs, loss on disposition, certain acquisition and litigation items, amortization of acquired intangibles, gain on sale of non-operating asset, impairment related costs, sales and use tax recovery benefit and the related income tax effect. We present these as supplemental measures of performance.

These non-GAAP measures have limitations as analytical tools, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EPS as analytical tools are: (i) these measures do not reflect all our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) these measures do not reflect changes in, or cash requirements for, our working capital needs; (iii) these measures do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; (v) share-based compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it from Adjusted EBITDA as an expense when evaluating our ongoing operating performance for a particular period; (vi) these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and (vii) other companies in our industry may calculate these measures differently than we do, limiting its usefulness as a comparative measure.

We present these non-GAAP financial measures because we believe these assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures are also used by management in its evaluation of core operations and financial and operational decision-making.

Financial Tables Follow

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SOURCE CDI Corp.