TALX Reports 90 Percent Growth in Third-Quarter Earnings from Continuing Operations; Raises Guidance for Fiscal Year
TALX Corporation
L. Keith Graves, 314-214-7000
lkg@talx.com
TALX Corporation (NASDAQ: TALX) today reported that earnings from continuing operations increased 90 percent to $4.8 million, or $0.33 per diluted share, for the fiscal third quarter ended December 31, 2004, from $2.5 million, or $0.18 per diluted share, for the year-ago period. This earnings growth reflected continued strong revenue gains in The Work Number services, contributions from the three acquisitions in the fiscal year, including the October acquisitions of two tax credit management businesses, and higher gross and operating margins resulting from cost control and improved leveraging.
Revenues increased 55 percent for The Work Number services and 29 percent for the tax management services business (formerly referred to as unemployment cost management services) compared to the year-earlier quarter. Overall, revenues grew 35 percent to $39.8 million from $29.4 million in the year-earlier quarter. Gross profit was up 45 percent to $24.1 million from $16.7 million in the year-ago period, with gross margin rising 400 basis points to 60.6 percent from 56.6 percent the year before.
Revenues for the first nine months of fiscal 2005 increased 23 percent to $112.5 million from $91.1 million the year before. Earnings from continuing operations for the period were $8.9 million, or $0.62 per diluted share, which includes a reserve of $3.0 million, or $0.21 per diluted share, related to a potential SEC settlement recorded in the first quarter of fiscal 2005. Excluding this non-operating charge, earnings from continuing operations would have been $11.9 million, or $0.83 per diluted share, representing a 40 percent increase compared with $8.5 million, or $0.60 per diluted share, the year before. See attached "Supplemental Financial Information" for a reconciliation of differences from the comparable GAAP measure.
Due to overall favorable operating trends, TALX is again raising guidance for the fiscal year ending March 31, 2005. Revenue is now estimated to be a range of $154.0 million to $156.0 million compared to previous guidance of $151.0 million to $154.0 million. The estimate for diluted earnings per share from continuing operations, including the $0.21 per share non-operating charge, is now a range of $0.97 to $0.99, compared to the previous estimate of $0.90 to $0.92. Excluding this non-operating charge, guidance for anticipated diluted earnings per share from continuing operations increased to a range of $1.18 to $1.20 from the previous estimate of $1.11 to $1.13. See attached "Supplemental Financial Information" for a reconciliation of differences from the comparable GAAP measure.
TALX also provided initial guidance for the fourth quarter. The Company expects revenues ranging from $41.5 million to $43.5 million and diluted earnings per share from continuing operations of $0.35 to $0.37.
William W. Canfield, president and chief executive officer, commented, "Third-quarter revenues for both of our core businesses exceeded our expectations. We continued to execute our focused strategies within The Work Number services, resulting in strong transaction levels which drove significant revenue growth. In our tax management services business, the quarter benefited from revenues from our October acquisitions of Net Profit, Inc. and TBT Enterprises, Inc. In addition to their contribution to our third quarter, these acquisitions offer two important opportunities. The first is our ability to provide a best-of-class service to help our clients manage available tax credits. The second is the expansion of our cross-selling capabilities."
In the third quarter, revenues from The Work Number services increased 55 percent to $15.6 million from $10.0 million in the year- ago quarter, primarily reflecting higher transaction volume and an increase in the number of records in the database. Additionally, the current quarter includes revenues from the candidate screening and automated hiring services (HireXpress) and employment verification businesses acquired in April. Gross profit increased 64 percent to $11.4 million from $6.9 million in the year-ago quarter, with gross margin increasing 410 basis points to 73.1 percent from 69.0 percent.
The total number of employment records in The Work Number services database increased to 104.1 million at December 31, 2004 from 87.4 million a year ago, representing a 19 percent gain. The company added 3.9 million employment records during the quarter, which is a 4 percent increase in total records over the previous sequential quarter. Total employment records under contract, including those in the contract backlog to be added to the database, increased 17 percent to 109.2 million at December 31, 2004 from 93.2 million a year earlier and 3 percent over the previous sequential quarter total of 105.8 million.
Revenues from tax management services increased 29 percent to $23.6 million from $18.4 million in the year-ago period, primarily representing the contribution from the two tax credit businesses acquired in October. Gross profit in the tax management services business increased 36 percent to $12.3 million from $9.1 million. Gross margin rose 290 basis points to 52.3 percent compared to 49.4 percent in the same quarter last year.
L. Keith Graves, chief financial officer, commented, "We are very pleased with overall cost control within the company. In addition to the 400 basis point improvement in our gross margin, our SG&A expenses as a percentage of revenues improved by 290 basis points compared with the year-earlier quarter. As a result, our operating margin increased 690 basis points for the quarter to a record 21.9 percent."
All references to earnings per diluted share are presented before the effect of a previously announced 3-for-2 stock split payable February 17 to shareholders of record on January 20. |
