TeamStaff reports sequential improvements in third-quarter 2010 revenue and gross margins

Aug 16 2010

TeamStaff, Inc., (Nasdaq: TSTF) a leading healthcare and logistical services provider to the Federal Government, today announced its financial results for the fiscal quarter ended June 30, 2010.  As a result of the previously disclosed sale of TeamStaff Rx, which was completed on January 4, 2010, all results reported in this release have been reclassified to show TeamStaff Rx as a discontinued operation.

TeamStaff's revenues for the three months ended June 30, 2010 were $10.1 million as compared to $11.3 million in the comparable quarter last year. However, the $10.1 million in revenue in the third quarter of 2010 represents an increase over the second quarter's revenue of $9.8 million. Moreover, gross profit increased from $1.0 million for the second quarter to $1.3 million in the third quarter as a result of the increased profit on sales and control of expenses.

During the quarter ended June 30, 2010, the TeamStaff Government Solutions subsidiary was awarded contracts with a potential value of $3.8 million, assuming all contract renewal options are exercised and including the previously announced Armed Forces Retirement Home contract.  The resulting new business revenue for the third quarter of 2010 was $0.3 million.  This helped to offset the decrease in operating revenues year over year due primarily to government in-sourcing of selected positions under our existing contracts (impact estimated at $0.9 million), reductions in overtime at certain government facilities and the conclusion of our only commercial contract.

TeamStaff incurred a  loss from continuing operations of  $0.6 million or ($0.11) per basic and diluted share as compared to income from continuing operations of $0.1 million or $0.03 per basic and diluted share in the comparable quarter last year.   However, the third quarter net loss of $0.6 million compares favorably to the loss from continuing operations of $1.0 million or ($0.20) per basic and diluted share for the previous quarter ended March 31, 2010.

Commenting on the company's results, TeamStaff's President and Chief Executive Officer Zachary Parker stated, "The sequential quarterly improvements in revenue and gross margins, as well as a reduction in net losses, confirms that TeamStaff is on track to achieve its goals, though a significant amount of work remains ahead.  2010 is clearly a year of transition and stabilization with a focus on preparing for profitable growth in our core and adjacent government services markets.  This will continue to entail changes both at corporate and our GS subsidiary."  

TeamStaff's gross profit was $1.3 million, or 12.9% of revenues for the third quarter of fiscal 2010 as compared to $1.7 million, or 15.0% of revenues, for the third quarter of fiscal 2009.  Several previously explained factors are impacting the decline in gross margin year over year: 1) lower employee turnover rates than last year, resulting in increased vacation accruals for over 800 employees, 2) customer imposed overtime restrictions, and 3) adverse workers' compensation experience and increased healthcare benefits costs.  

SG&A expenses for the three months ended June 30, 2010 and 2009 were $1.8 million and $1.7 million, respectively. The company continues to invest in new business development at TeamStaff GS, incurring $0.1 million in increased new business expense over the comparable period last year for additional sales and recruiting related headcount and marketing expense.  To offset this spending, the company continues with its cost saving initiatives, which have resulted in reduced headcount in non-revenue generating departments and lower G&A costs due to the continued elimination of services deemed to be non-essential to growth or infrastructure.  

Capitalization Discussion

At June 30, 2010, the company had $1.2 million in cash.  On July 29, 2010, the company announced that TeamStaff Government Solutions, Inc., its wholly-owned subsidiary, entered into a $1.5 million loan and security agreement with Presidential Financial Corporation.  The company believes that it has adequate liquidity resources to fund operations and support its working capital needs over the next twelve months.

Nine Month Results

TeamStaff's operating revenues for the nine months ended June 30, 2010 were $30.7 million as compared to $34.8 million last year.  TeamStaff's operating gross profit was $3.7 million, or 12.1% of revenues, for the nine months ended June 30, 2010 as compared to $5.6 million, or 16.1% of revenues, for the nine months ended June 30, 2009.  SG&A expenses and officer severance was $5.6 and $4.9 million for the nine months ended June 30, 2010 and 2009, respectively.  Net loss was $3.4 million or ($0.67) per basic and diluted share for the first nine months of fiscal 2010 compared to net loss of $1.0 million or ($0.21) per basic and ($0.20) per diluted share for the first nine months of fiscal 2009.  

The company recorded a loss from discontinued operations related to the sale of TeamStaff Rx for the nine months ended June 30, 2010 of $1.2 million or ($0.23) per basic share.  Included with the operating loss of the discontinued business is accrued severance of $0.1 million, $0.3 million from recognition of the remaining unfunded operating lease payments, and $0.3 million in various accruals for expenses related to the sale and shut down of the business.