CDI Corp. (CDI)

Q2 2010 Earnings Call

July 29, 2001 11:00 am ET


Vince Webb – VP, Corporate Communications and Marketing

Roger Ballou – President and CEO

Mark Kerschner – EVP and CFO


Ty Govatos – CL King & Associates

Bill Sutherland – Boenning & Scattergood

Paul Condra – BMO Capital Markets



Good morning, and welcome to the Second Quarter 2010 Conference Call. I would like to remind all the participants that today’s conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn today’s meeting over to your host Vince Webb, you may begin.

Vince Webb

Great thank you. Good morning. At this point you should have a copy of the second quarter press release. If not, please call our office at 215-636-1162, and we’ll be happy to send you a copy or you can find a copy on our website at

A telephone replay of today call will begin one hour after the call is concluded, and it will be available for the next 14 days at 203-369-1084 with the password 7051.

On the line with us today are CDI President and Chief Executive Officer Roger Ballou; our Executive Vice President and Chief Financial Officer Mark Kerschner. We will begin with some remarks by Roger, then we will open up the line for questions.

Prior to start of the call, I want to remind you that the conference call includes forward-looking statements, which are subject to risk and uncertainties. Actual results might differ materially from those projected in these forward-looking statements.

We would therefore like to point out the cautionary language regarding forward-looking statements contained in the news release. And remind everyone that that same language applies to any comments made during this conference call.

At this time, I would like to turn the call over to Roger.

Roger Ballou

Thanks Vince. Good morning, and thanks to all of you for joining us this morning to discuss CDI Second Quarter 2010 Results. Following my opening remarks, Mark and I will be happy to take your questions.

We were pleased to see both year-over-year and sequential revenue growth during the second quarter. We believe that this provides an indication that a modest recovery cycle is under way, consistent with patterns that we’ve seen since the fourth quarter of 2009.

For the second quarter, revenues were $219 million, up 1.7% or 0.9% in constant currency from the year-ago second quarter and up 4.3% on a sequential basis. We saw a similar pattern in revenue growth that I commented on in the first quarter.

Revenue growth in the various CDI business units typically begins at different times in recovery cycle. CDI business units influenced by improvements by GDP and in white-collar employment typically improve earlier in the cycle. And those business units influenced by growth and capital spending by clients typically improve later in the cycle.

CDI’s early cycle recovery businesses are our IT Solutions segment and our Management Recruiters International Business. Late cycle businesses are our Engineering Solutions and AndersElite.

The second quarter illustrated this pattern. CDI IT Solutions revenue increased by 31.8% over the prior year quarter. This rate is significantly above market rate growth and was driven by solid business development efforts by the ITF team in generating both new accounts and new project wins.

MRI revenue increased by 14.2% over the year-ago second quarter, as all three MRI revenue areas; royalties, contract staffing, and franchise sales increased on the year-over year basis, reflecting increased hiring demand for white-collar professionals who were replaced by MRI franchise offices.

Additionally continued permanent placement [inaudible] MRI may indicate that the hiring rebound could extend to future quarters, as our MRI franchise owners reported a sequential increase in domestic billings of over 8% and year over year billings growth of over 22%, consistent with royalty growth over the same period.

As a result of a lagging recovery in customer capital spending both Engineering Solutions and our U.K.-based AndersElite segment continue to reflect weak demand in your key market segments, consistent with a late cycle recovery model.

ES revenue decreased 7% versus the prior year second quarter, 8.8% in constant currency and Anders saw a year over year decline of 33.7%, 31.6% in constant currency, compared to the second quarter of 2009.

For the quarter ended June 30 th 2010, the company reported net earnings of $2.6 million or $0.13 per diluted share, versus $0.1 million in net earnings or $.0 per diluted share in the year ago-second quarter.

The second quarter results include a benefit of $1.8 million related to lower estimated penalties and legal fees associated with the claim made under the Federal False Claim Act that the company received from the Civil Division of the U.S. Department of Justice.

We previously recorded a $4.3 million reserve, which we disclosed in the fourth quarter 2009. This benefit was somewhat offset by second quarter pre-tax charges of $0.4 million for severance and real estate exit costs, and $0.3 million in cost associated with the purchase of the business of L. Robert Kimball and Associates Inc. that we announced on June 28 th 2010.

Excluding these items pre-tax earnings for the second quarter were $1.9 million. Second quarter 2009 pre-tax earnings, when excluding severance charges totally $0.7 million disclosed in that prior year period, were approximately $8 million.

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