COMSYS IT Partners, Inc. Reports Third Quarter 2009 Results and Provides Fourth Quarter 2009 Guidance

October 28, 2009 4:01 PM EDT

HOUSTON--(BUSINESS WIRE)-- COMSYS IT Partners, Inc. (NASDAQ: CITP), a leading provider of information technology staffing and consulting services, today announced its financial results for the third quarter ended September 27, 2009.

Third Quarter 2009 Financial Results Show Sequential Improvements

    --  Revenue was $157.3 million, down 14.4% from $183.7 million during the
        third quarter of 2008, but up sequentially from $156.8 million in the
        second quarter of this year on one less billing day.
    --  Revenue per billing day, excluding reimbursable expense revenue,
        increased sequentially by 2.1% from the second quarter of 2009.
    --  Net income was $3.0 million, or $0.14 per common share, down from $6.0
        million, or $0.30 per common share, in the third quarter of 2008, but up
        sequentially from $2.4 million, or $0.11 per common share, in the second
        quarter this year. Excluding restructuring charges, net income in the
        quarter would have been $3.2 million, or $0.15 per common share.
    --  Gross margin was 24.6%, up from 24.5% in the second quarter this year.
    --  EBITDA, excluding restructuring costs, was $6.5 million in the third
        quarter, down from $10.6 million in the third quarter of 2008, but up
        sequentially from $6.0 million in the second quarter of 2009. EBITDA,
        excluding restructuring costs, is a non-GAAP measure defined below.
    --  Excess availability under COMSYS' revolving credit facility at the end
        of the third quarter was $50.0 million.

"Our quarterly results included sequential improvements in revenue, EBITDA and billable hours, and we are very pleased with the acceleration in billable headcount increases in September," said Larry L. Enterline, COMSYS Chief Executive Officer. "Activity levels have continued to strengthen in October. COMSYS was fortunate during this recession to have the financial flexibility to focus on our business, and we are gratified that we have been able to position ourselves with the right people and resources to take advantage of increasing demand for our services. We believe that the preservation of our infrastructure, together with a resurgence of demand from our financial services customers, has resulted in market share gains for COMSYS through the addition of a number of new clients and increased activity at legacy clients. We plan to continue with our investments in new services offerings and production personnel in the coming quarters, and use them to build momentum as our markets improve."

Enterline cautioned, "Although our third quarter results have given us some cause for optimism that the worst may be behind us, and we have some renewed visibility about our short-term prospects, our overall outlook will remain cautious. Our clients' budgets for 2010 will be the best indicator to us of where we stand in this cycle, and we plan to reserve judgment until then on expected demand for next year."

Enterline added, "I would especially like to thank our operations leaders and their staffs for their efforts during the third quarter. We are pleased with the progress we continue to make, and believe that COMSYS is positioned well to continue taking advantage of its market opportunities."

Amy Bobbitt, COMSYS Senior Vice President and Chief Accounting Officer, commented, "In the third quarter, revenue increased on a sequential basis for the first time since the second quarter of 2008. Billable headcount growth accelerated in September after modest increases in July and August, and that growth has continued into October. Revenue per billing day in September increased by 4.8% over revenue per billing day in June. In addition, gross margin improved by 10 basis points over the second quarter of 2009, and we continued to keep selling and administrative costs relatively flat even with our growth-initiative spending."

Bobbitt added, "Our average daily net debt for the third quarter was $55.8 million versus average daily net debt in the second quarter of $59.8 million. We expect to reduce our debt balance over the remainder of 2009."

Selected operating data and reconciliations of non-GAAP financial measures to GAAP results for the third quarter ended September 27, 2009, are included below.

Fourth Quarter and Full Year 2009 Financial Guidance

For the fourth quarter ending January 3, 2010, the Company expects to report revenue in a range of $161 million to $166 million and net income in the range of $2.5 million to $3.6 million, or approximately $0.13 to $0.18 per diluted share, on three more billing days than in the third quarter. For the year ended January 3, 2010, the Company expects to report revenue in the range of $638 million to $643 million, and net income before restructuring charges in the range of $6.0 million to $7.1 million, or approximately $0.49 to $0.54 per diluted share. These estimates are also based on an effective tax rate of approximately 10%.

The net income and earnings per share estimates above exclude an expected reversal of a portion of restructuring expense previously recognized related to the Company's Washington, DC-area lease, as well as any potential effects of the Company's quarterly review of the recoverability of deferred tax assets. Management does not expect to make any substantial cash payments for taxes in 2009.

Conference Call Information

COMSYS will host a conference call tomorrow (October 29) at 10:00 a.m. Eastern time to discuss the quarterly financial results. The conference call-in number is (913) 312-0403 and the confirmation number is 5846450. The call will also be web cast live at www.comsys.com and www.earnings.com and replayed for 30 days at www.comsys.com. A seven-day telephonic replay of this conference call will be available by dialing (719) 457-0820. Callers should use the pass code 5846450 to gain access to the replay, which will be available through the end of the day on November 5, 2009.

About COMSYS IT Partners

COMSYS IT Partners, Inc. (NASDAQ: CITP) is a leading IT services company with 52 offices across the U.S. and offices in Puerto Rico, Canada and the U.K. COMSYS service offerings include contingent and direct hire placement of IT professionals and a wide range of technical services and solutions addressing requirements across the enterprise. TAPFIN Process Solutions delivers critical management solutions across the resource spectrum from contingent workers to outsourced services.

Forward-looking Statements

Certain information contained in this press release may be deemed forward-looking statements regarding events and financial trends that could affect our plans, objectives, future operating results, financial condition, performance and business. These statements may be identified by words such as "estimate," "forecast," "plan," "intend," "believe," "should," "expect," "anticipate," or variations or negatives thereof, or by similar or comparable words or phrases. These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, including:

    --  economic declines that affect our business, including our profitability,
        liquidity or the ability to comply with applicable loan covenants;
    --  the financial stability of our lenders and their ability to honor their
        commitments related to our credit agreements;
    --  regulatory changes that impose additional regulations or licensing
        requirements in such a manner as to increase our costs of doing business
        or restrict access to qualified technology workers;
    --  the risk of increased tax rates;
    --  adverse changes in credit and capital markets conditions that may affect
        our ability to obtain financing or refinancing on favorable terms or
        that may warrant changes to existing credit terms;
    --  the financial stability of our customers and other business partners and
        their ability to pay their outstanding obligations or provide committed
        services;
    --  changes in levels of unemployment and other economic conditions in the
        United States, or in particular regions or industries;
    --  the impact of changes in demand for our services or competitive
        pressures on our ability to maintain or improve our operating margins,
        including pricing pressures;
    --  the risk in an uncertain economic environment of increased incidences of
        employment disputes, employment litigation and workers' compensation
        claims;
    --  our success in attracting, training, retaining and motivating billable
        consultants and key officers and employees;
    --  our ability to shift a larger percentage of our business mix into IT
        solutions, project management and business process outsourcing and, if
        successful, our ability to manage those types of business profitably;
    --  weakness or reductions in corporate information technology spending
        levels;
    --  our ability to maintain existing client relationships and attract new
        clients in the context of changing economic or competitive conditions;
    --  the entry of new competitors into the U.S. staffing services and
        consulting markets due to the limited barriers to entry or the expansion
        of existing competitors in that market;
    --  increases in employment-related costs such as healthcare and
        unemployment taxes;
    --  the possibility of our incurring liability for the activities of our
        billable consultants or for events impacting our billable consultants on
        our clients' premises;
    --  the risk that we may be subject to claims for indemnification under our
        customer contracts;
    --  the risk that cost cutting or restructuring activities could cause an
        adverse impact on certain of our operations; and
    --  adverse changes to management's periodic estimates of future cash flows
        that may affect our assessment of our ability to fully recover our
        goodwill.

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management's assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or that the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to various factors, including the factors listed in this section and the "Risk Factors" section contained in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

CITP_F

COMSYS IT PARTNERS, INC.

OPERATING DATA, SUPPLEMENTAL CASH FLOW INFORMATION AND NON-GAAP MEASURES

(IN THOUSANDS, EXCEPT OPERATING DATA)

               Three Months Ended

Operating      September 27,  June 28,       September 28,
Data:

               2009           2009           2008

Billing days     63             64             63

Billable         2,071,234      2,050,677      2,244,450
hours

Revenue per
billing day,
excluding
reimbursable   $ 2,458        $ 2,408        $ 2,840
expense
revenue (in
thousands)

Average bill   $ 70.08        $ 70.84        $ 73.72
rate

Gross margin     24.6      %    24.5      %    24.6      %

Effective tax    5.4       %    6.1       %    15.5      %
rate

DSO              47             43             49

Average daily
net debt       $ 55.8         $ 59.8         $ 76.0
balance (in
millions)

               Three Months Ended

Supplemental
Cash Flow      September 27,  June 28,       September 28,
Information:

               2009           2009           2008

Net cash
provided by
(used for)     $ (5,989    )  $ 8,637        $ 3,549
operating
activities

Reimbursable
expense        $ 2,456        $ 2,656        $ 4,761
revenue

Stock-based    $ 891          $ 904          $ 1,118
compensation

Capital        $ 199          $ 251          $ 1,937
expenditures

               Three Months Ended                           Nine Months Ended

Non-GAAP                                                    September   September
Financial      September 27,  June 28,       September 28,  27,         28,
Measures:

               2009           2009           2008           2009        2008

EBITDA,
excluding
restructuring
costs:

GAAP net       $ 3,018        $ 2,386        $ 6,047        $ 3,533     $ 17,363
income

Depreciation
and              2,106          2,050          2,185          6,230       5,903
amortization

Restructuring    155            321            -              4,096       -
costs

Interest         1,057          1,126          1,224          3,135       4,106
expense, net

Other expense    45             (67       )    40             (127   )    (185   )
(income), net

Income tax       164            216            1,105          623         3,847
expense

EBITDA,
excluding      $ 6,545        $ 6,032        $ 10,601       $ 17,490    $ 31,034
restructuring
costs

EBITDA,
excluding
restructuring    4.2       %    3.8       %    5.8       %    3.7    %    5.6    %
costs, as a %
of GAAP
revenue

A non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles ("GAAP"). We believe EBITDA, excluding restructuring costs, to be relevant and useful information to our investors in assessing our financial operating results as these measures are used by our management in evaluating our financial performance, liquidity, our ability to service debt and fund capital expenditures. However, these measures should be considered in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with generally accepted accounting principles, and may not be comparable to similarly titled measures reported by other companies. The non-GAAP measures included in this press release have been reconciled to the nearest GAAP measures as required under SEC rules regarding the use of non-GAAP financial measures.

COMSYS IT PARTNERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                Three Months Ended                 Nine Months Ended

                September  June 28,     September  September 27,  September 28,
                27,                     28,

                2009       2009         2008       2009           2008

Revenues from   $ 157,305  $ 156,765    $ 183,663  $ 476,764      $ 551,110
services

Cost of           118,677    118,386      138,483    361,661        416,442
services

Gross profit      38,628     38,379       45,180     115,103        134,668

Operating
costs and
expenses:

Selling,
general and       32,083     32,347       34,579     97,613         103,634
administrative

Restructuring     155        321          -          4,096          -
costs

Depreciation
and               2,106      2,050        2,185      6,230          5,903
amortization

                  34,344     34,718       36,764     107,939        109,537

Operating         4,284      3,661        8,416      7,164          25,131
income

Interest          1,057      1,126        1,224      3,135          4,106
expense, net

Other expense     45         (67     )    40         (127    )      (185    )
(income), net

Income before     3,182      2,602        7,152      4,156          21,210
income taxes

Income tax        164        216          1,105      623            3,847
expense

Net income      $ 3,018    $ 2,386      $ 6,047    $ 3,533        $ 17,363

Net income per
common share:

Basic           $ 0.14     $ 0.11       $ 0.30     $ 0.17         $ 0.85

Diluted         $ 0.14     $ 0.11       $ 0.30     $ 0.17         $ 0.84

Weighted
average shares
outstanding:

Basic             19,815     19,796       19,612     19,795         19,594

Diluted           19,815     19,796       20,455     19,795         20,611

COMSYS IT PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PAR VALUE AMOUNTS)

                                                     September 27,  December 28,

                                                     2009           2008

Assets

Current assets:

Cash                                                 $ 1,213        $ 22,695

Accounts receivable, net of allowance of $3,480 and    191,266        202,297
$3,232, respectively

Prepaid expenses and other                             2,764          3,116

Restricted cash                                        2,486          2,489

Total current assets                                   197,729        230,597

Fixed assets, net                                      13,810         16,596

Goodwill                                               89,155         89,064

Other intangible assets, net                           9,570          11,962

Deferred financing costs, net                          2,733          1,175

Restricted cash                                        308            308

Other assets                                           1,104          1,478

Total assets                                         $ 314,409      $ 351,180

Liabilities and stockholders' equity

Current liabilities:

Accounts payable                                     $ 122,060      $ 156,528

Payroll and related taxes                              26,947         25,975

Interest payable                                       271            337

Other current liabilities                              9,783          9,728

Total current liabilities                              159,061        192,568

Long-term debt                                         59,170         69,692

Other noncurrent liabilities                           6,660          5,435

Total liabilities                                      224,891        267,695

Commitments and contingencies

Stockholders' equity:

Preferred stock, no par value; 5,000,000 shares        -              -
authorized; none issued

Common stock, par value $.01; 95,000,000 shares
authorized and 21,120,544 shares outstanding;          210            203
95,000,000 shares authorized and 20,465,028 shares
outstanding, respectively

Common stock warrants                                  1,734          1,734

Accumulated other comprehensive loss                   (211     )     (90      )

Additional paid-in capital                             229,974        227,360

Accumulated deficit                                    (142,189 )     (145,722 )

Total stockholders' equity                             89,518         83,485

Total liabilities and stockholders' equity           $ 314,409      $ 351,180

    Source: COMSYS IT Partners, Inc.

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