TIDMCLST
RNS Number : 4700H
ClearStar,Inc.
16 March 2015
16 March 2015
ClearStar, Inc.
("ClearStar" or the "Company")
Preliminary Results
ClearStar (AIM: CLST), a leading technology and service provider
to the background check industry, is pleased to announce its
unaudited results for the twelve months ended 31 December 2014.
Financial Highlights
-- Revenues increased by 37% to $10.92 million (FY 2013: $7.97 million)
-- Gross profit increased by 29% to $6.33 million (FY 2013: $4.90 million)
-- Adjusted pre-tax loss* was $71,000 (FY 2013: pre-tax profit of $710,000)
-- Cash and cash equivalents at 31 December 2014 amounted to
$6.48 million (30 June 2014: $0.52 million; 31 December 2013: $0.29
million)
* Adjustments mean net of one-time IPO and SingleSource Services
acquisition related costs of $812,000, investments brought forward
for the UK business launch of $397,000, recruiting fees of key new
hires of $247,000, and income tax adjustments of $122,000.
Operational Highlights
-- Raised gross proceeds of approximately $15 million through an
initial public offering ("IPO") on AIM in July 2014 enabling an
acceleration of strategy
-- Transformational year with increased activity across all business segments, including:
o New client acquisitions in existing markets
o Larger sales team able to approach potential clients
directly
o Enhanced product offering improving user interface
-- Completed the acquisition of SingleSource Services
Corporation ("SingleSource") thereby bolstering the Company's
Direct Services division, which now serves approximately 2,600
active clients compared with approximately 500 prior to
acquisition
-- Processed approximately 6.5 million (FY 2013: 5.6 million)
screening services on over 2 million people (FY 2013: 1.7 million)
that were provided to over 27,000 (FY 2013: 20,000) end users
-- Awarded contract in UK in November 2014 by a world-renowned,
leading global risk management consultancy for the development and
hosting of a white-labelled, customised solution
Post Period-End Highlights
-- Largest Medical Informational Services ("MIS") contract win
to date, expected revenues of $1.3-$1.5 million annually
-- Numerous contracts won in Direct Services
-- Smooth integration process of SingleSource acquisition
Robert Vale, CEO of ClearStar, commented: "As a result of the
IPO, 2014 was a transformational year, as it enabled us to
accelerate and deliver on our growth strategy, resulting in
top-line growth ahead of market expectations.
"Looking ahead, we have maintained the momentum of the second
half of 2014 into the new year. Our Medical Information Services
division is showing substantial growth, as is our Direct Services
division. We continue to experience increasing demand for our
screening services that we provide to our Channel Partners and
Consumer Reporting Agencies, and expect an initial contribution
from our recently set up Global division. We continue to innovate
and scale our technology platform and invest in sales and
marketing. As a result, the Board has a high level of confidence
for delivering strong growth in 2015 and beyond."
Enquiries:
ClearStar
------------------------------ --------------------
Robert J. Vale, Chief
Executive Officer
David Pattillo, Chief
Financial Officer +1 770 416 1900
------------------------------ --------------------
Cenkos Securities (Nominated
Advisor and Broker)
------------------------------ --------------------
Max Hartley, Corporate
Finance
Julian Morse, Sales +44 (0)20 7397 8900
------------------------------ --------------------
Luther Pendragon
------------------------------ --------------------
Harry Chathli, Claire
Norbury, Oliver Hibberd +44 (0)20 7618 9100
------------------------------ --------------------
About ClearStar
ClearStar is a technology and service provider to the background
check industry, supporting background screening companies,
employers and employees with their recruitment and employment
application decisions. ClearStar provides employment intelligence
to its clients through a suite of IT applications for day-to-day
use in their business. Employment intelligence aims to improve
business insight to support better recruitment and other decisions
affecting employees generally, by increasing the quality,
reliability and visibility of information available to
management.
The Directors of ClearStar believe that the Company offers one
of the most complete independent IT application suites that provide
employment intelligence. The suite comprises of a collection of
applications which utilises data from over 3,000 sources ranging
from résumés to records with local authorities. ClearStar's primary
business involves searching the relevant source of data for speci c
employment intelligence information based on clients' bespoke
requirements for its employment applicants. ClearStar extracts the
required input and this information is then processed, allowing the
client to make a swift decision in respect of the relevant
applicant, thereby minimising bottlenecks in the hiring process.
ClearStar's 'Aurora' platform has delivered employment intelligence
to over 27,000 employers, including many global blue-chip
companies.
www.clearstar.net
Operational Review
ClearStar is delighted to announce its maiden full year results.
During the 12 months ended 31 December 2014, the Company achieved
strong growth across all of its divisions with revenues 37% higher
at $10.92 million (FY 2013: $7.97 million). This was due to
increased business from some of the Company's largest clients, new
client wins and new product offerings.
ClearStar offers one of the most complete independent IT
application suites that provides employment intelligence.
Employment intelligence aims to improve business insight to support
better recruitment and other decisions affecting employees
generally by increasing the quality, reliability and visibility of
information available to management.
Following the IPO in 2014, the ClearStar management team decided
to accelerate the execution of its growth strategy in order to take
advantage of the opportunities it was presented due to its raised
profile. In the last five months of 2014, post the IPO, the Company
has:
-- Acquired clients in existing markets, adding new clients each week
-- Expanded geographically outside the US with the establishment
of its Global division in the UK, and immediately winning a
contract with a world-renowned, leading global risk management
consultancy headquartered in the UK. ClearStar is now the only
background screening company with cross-border data centres
compliant with relevant regulatory requirements in the EU as well
as the US
-- Completed the acquisition of SingleSource thereby bolstering
its Direct Services division, which now serves approximately 2,600
active clients compared with approximately 500 prior to
acquisition
-- Expanded its sales team from two to 10 to support the growth in all its divisions
-- Continued to innovate and develop products to improve the
user experience, operational efficiencies and seamless business
partner integrations. The Company continues to hire developers to
maintain its technological lead over its competitors
Business Divisions
In order to satisfy the demand for the business application
suite as part of the background screening process, the Company has
the following four principal business divisions:
a) Channel Partners and Consumer Reporting Agencies ("CRAs")
b) Medical Information Services
c) Direct Services
d) Global
Channel Partners and CRAs Division
In this division, ClearStar provides white labelling technology.
Data logistics services are provided to CRAs and Channel Partners
who use the Company's technology to perform background checks on
job applicants.
This is the largest contributor to overall revenues. Sales
increased by 15% to $6.55 million (FY 2013: $5.68 million). This
was primarily as a result of increased business from some of the
Company's largest clients but also included new client wins. During
the year, ClearStar made ongoing improvements to its offering to
Channel Partners and CRAs, including adding new integration points
to client-centric systems, such as applicant tracking systems;
product development in areas of data distribution; and improvements
to user interface.
Medical Information Services Division
In this division, ClearStar provides services, largely directly
to employers, for the purpose of drug and alcohol tests.
This was the fastest growing division in the Company where sales
increased by 90% to $3.89 million in 2014 (FY 2013: $2.05 million).
This increase was derived from both gaining market share from
competitors, and from its client base which are mainly in the
healthcare, education, manufacturing and transportation
industries.
Drug testing remains the largest contributor (approximately 85%
of revenues in this division) and saw continued growth compared
with the equivalent period last year. The division also commenced
offering additional products such as clinical testing, occupational
testing and increased steroid testing, all of which contributed to
the growth in revenues. During the period, ClearStar conducted drug
tests in 12 countries on behalf of US companies looking to hire
personnel outside the US.
Direct Services Division
In this emerging segment, ClearStar provides background check
services directly to employers.
In 2014, revenues in this division increased by 59% to $382,000
(FY 2013: $240,000) primarily from approximately 500 SMEs with up
to 1000 employees. In the second half of the year, one of the
highlights was the signing of an approximately $100,000 annualised
agreement with a major US logistics company.
In November 2014, ClearStar completed the acquisition of
SingleSource, thereby transforming this business division.
SingleSource adds over 2,200 active direct clients for whom it
carried out background screening in 2014. SingleSource could not
integrate drug testing or credit reporting on its platform.
ClearStar is in the process of integrating SingleSource's clients
on to its platform and will soon be able to offer additional
services to these clients.
Global Division
Prior to the IPO, ClearStar had no presence outside the US. The
Company set up its international base in the UK and expanded its
international technology infrastructure by signing an agreement
with Sungard, a leading technology services provider, for
Enterprise Cloud Services and Managed Hosting Services at its data
centres in the UK. Within a short space of time, the Company signed
an agreement with a world-renowned, leading global risk management
consultancy headquartered in the UK for the development and hosting
of a white-labelled, customised employee screening solution.
ClearStar will also host the Applicant Portal for a period of at
least five years.
Financial Review
The Company recorded a strong financial performance, with total
revenues increasing by 37% for the twelve months ended 31 December
2014 to $10.92 million, compared with $7.97 million for the twelve
months ended 31 December 2013. All three revenue generating
Business Units experienced strong growth, led by MIS with
year-on-year growth of 90%, then Direct Services with 59%, and
Channel Partners and CRAs with 15%. As a result of the above, the
Company exceeded revenue market expectations by 8%.
Gross profit increased by 29% for the twelve months ended 31
December 2014 to $6.33 million, compared with $4.90 million for the
twelve months ended 31 December 2013. Gross profit margin was 58.0%
compared with 61.4% for the same period of the previous year. The
decrease was primarily due to the shift in the product mix with an
increased contribution to revenues from MIS, which has a lower
gross margin than services to CRAs and Channel Partners. Management
believes gross margin will improve due to on-going technology
improvements and cost reductions among suppliers. As a result of
the above, the Company exceeded gross profit expectations for 2014
by $0.50 million.
Total operating expenses increased by 93% for the twelve months
ended 31 December 2014 to $8.07 million, compared with $4.17
million for the twelve months ended 31 December 2013. Due to
heightened demand for its products, the Company has been able to
accelerate its growth plan and bring forward investment in many key
areas that were originally anticipated for 2015 into H2 2014. These
investments include (a) entering the UK screening market with the
signing of an agreement with a world-renowned, leading global risk
management consultancy and (b) strengthening and growing the
Company's service team to capitalise on attractive market
opportunities within the growing US screening market. The largest
increase was in General and Administrative expenses, which
increased by $3.5 million from $3.7 million in 2013 to $7.2 million
in 2014. This increase was primarily as a result of full-time human
resources expanding from 29 at 31 December 2013 to 55 at 31
December 2014, which resulted in overall payroll-related costs
increasing by $2.2 million for the year. The two largest areas of
headcount increases were in direct sales and software
development.
The second largest increase in General and Administrative
expenses was in professional services, which increased by $0.8
million, primarily as a result of SingleSource Services
acquisition-related cost, along with higher legal and accounting
fees. The remaining increase is primarily a result of increased
technology infrastructure and facilities costs.
Included in the operating expenses were approximately $1.67
million in one-time adjustments and investments brought forward,
with the largest components being the IPO and SingleSource Services
acquisition-related cost of $812,000, UK business launch of
$247,000, and recruiting fees of key new hires of $247,000.
The Company reported an adjusted loss before taxes of
approximately $0.07 million compared with a profit before tax of
approximately $0.70 million for the same period of the prior
year.
The Consolidated Balance Sheet expanded significantly as a
result of the IPO, acquisition and overall business expansion.
Total Assets increased from $1.7 million on 31 December 2013 to
$14.3 million on 31 December 2014. The biggest increase is in cash
and cash equivalents with an increase of $6.2 million, followed by
goodwill and other net intangible assets of $4.4 million.
The Company's Total Liabilities as of 31 December 2014 were $2.1
million, and Stockholders' Equity was $12.2 million, resulting in a
debt-to-equity ratio of 0.17.
The Company's Consolidated Statement of Cash Flows shows that
the Company utilised $1.2 million in cash from Operating
Activities, and $5.3 million from Investment Activities. These
Investment Activities consisted of $4.0 million from the
acquisition of goodwill and intangible assets, $0.80 million from
capitalised software costs and $0.49 million from the purchase of
property and equipment. The net cash flow from Financing Activities
was $12.7 million, primarily as a result of the IPO.
Outlook
ClearStar has maintained the momentum of the second half of 2014
into the current year. Its MIS division continues to show
substantial growth as the new products added to the core drug
testing continue to increase their contribution. As announced on 2
February 2015, the MIS division was awarded a contract worth
$1.3-$1.5 million annually from a background screening client.
Similarly, following the acquisition, the Company is migrating
SingleSource's clients onto its platform. SingleSource was
previously unable to integrate drug testing into its product
offering, and it is expected that the MIS division will be able to
upsell its products to SingleSource clients. The SingleSource
acquisition has also bolstered the Direct Services division by
increasing the number of direct clients by over 2,200.
Consequently, management believes this business division will
increase its contribution significantly in 2015.
The Company continues to experience increasing demand for its
screening services that it provides to its Channel Partners and
Consumer Reporting Agencies.
Following the set-up of the Global division, the Company has
experienced a surge in interest from the UK market, and management
believes the Company will be awarded further contracts during the
year.
The Company continues to innovate and scale its technology
platform, and is investing to boost its sales and marketing
capability.
As a result of the demand outlined above and the Company's
ongoing investment, the Board has a high level of confidence for
delivering strong growth in 2015 and beyond.
CLEARSTAR, INC.
Consolidated Statements of Operations
(USD, in thousands)
Year Year
Ended Ended
31 December 31 December
2014 2013
(unaudited)
$ $
Net revenue 10,921 7,972
Cost of revenue 4,590 3,074
---------------------------- -------------------------
Gross profit 6,331 4,898
---------------------------- -------------------------
Operating expenses
Selling and marketing 216 117
Research and development 163 81
Depreciation and amortization 473 278
General and administrative 7,218 3,700
---------------------------- -------------------------
Total operating expenses 8,070 4,176
---------------------------- -------------------------
Income (Loss) from operations (1,739) 722
---------------------------- -------------------------
Other expense
Interest income (expense) (7) (12)
---------------------------- -------------------------
Total other expense (7) (12)
---------------------------- -------------------------
Net income (loss) before taxes (1,746) 710
Provision for income taxes 120 -
---------------------------- -------------------------
Net income (loss) (1,866) 710
============================ =========================
CLEARSTAR, INC.
Consolidated Balance Sheets
(USD, in thousands)
As of As of
31 December 31 December
2014 2013
(unaudited)
$ $
ASSETS
Current assets
Cash and cash equivalents 6,477 285
Accounts receivable -- trade, net 1,096 664
Research and development tax credits 27 122
Prepaid expenses 212 43
Due from shareholders - 33
------------------------- --------------
Total current assets 7,812 1,147
------------------------- --------------
Property and equipment, at cost
Computer equipment 681 349
Furniture and fixtures 260 25
Leasehold improvements 63 11
Less accumulated depreciation (154) (297)
------------------------- --------------
Total property and equipment, net 850 88
------------------------- --------------
Other assets
Goodwill and other intangibles 4,901 468
Deposits 13 4
------------------------- --------------
Total other assets 4,914 472
------------------------- --------------
Total assets 13,576 1,707
========================= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 574 17
Accrued liabilities 163 344
Deferred revenue 102 33
Current portion of long--term debt - 36
Current portion of obligations under capital lease 82 -
Due to shareholder - 58
------------------------- --------------
Total current liabilities 921 488
------------------------- --------------
Long--term liabilities
Accrued liabilities 55 -
Deferred income taxes 120 -
Obligations under capital lease, net of current portion 271 -
Long--term debt, net of current portion - 147
------------------------- --------------
Total long--term liabilities 446 147
------------------------- --------------
Stockholders' equity
Common stock, $0.0001 and no par value; 100,000,000 and 1,000 shares
authorised, respectively; 36,302,900 and 1,000 shares issued and
outstanding, respectively 4 332
Additional paid--in capital 13,346 15
Retained earnings (1,141) 725
------------------------- --------------
Stockholders' equity 12,209 1,071
------------------------- --------------
Total liabilities and stockholders' equity 13,576 1,707
========================= ==============
CLEARSTAR, INC.
Consolidated Statements of Changes in Stockholders' Equity
(USD, in thousands, except no. of shares)
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
No. $ $ $ $
Balances at 31
December 2012 1,000.00 332 15 200 546
Distributions - - - (185) (185)
Net income - - - 710 710
Balances at 31
December 2013 1,000.00 332 15 725 1,071
Stock issued
for cash
prior to IPO 36.27 315 - - 315
Contributed
capital to
holding
company (1,036.27) (647) 647 - -
Stock issued
for
contributed
capital 20,725,400 2 - - 2
Stock issued
for cash at
IPO, net of
IPO costs of
$2,585 15,500,000 2 12,548 - 12,550
Stock issued
for services 77,500 - 76 - 76
Stock-based
compensation - - 61 - 61
Net loss - - - (1,866) (1,866)
Balances at 31
December 2014
(unaudited) 36,302,900 4 13,346 (1,141) 12,209
--------------------- ---------------------- --------------------- --------------------- ----------------------
CLEARSTAR, INC.
Consolidated Statements of Cash
Flows
(USD, in thousands)
Year Year
Ended Ended
31 December 31 December
2014 2013
(unaudited)
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (1,866) 710
Adjustments to reconcile net income
(loss)
to net cash provided by operating
activities:
Change in allowance for doubtful
accounts 12 (3)
Depreciation and amortization 473 278
Deferred income taxes 120 -
Stock issued for services 76 -
Stock-based compensation 61 -
Change in operating assets and
liabilities:
Accounts receivable (445) (116)
Research and development tax
credits 95 (122)
Prepaid expenses (152) (24)
Deposits (10) (4)
Accounts payable 531 (23)
Accrued liabilities (126) 155
Deferred revenue 70 (1)
Total adjustments 705 139
------------------------- ---------------------------
Net cash provided by (used for)
operating activities (1,161) 849
------------------------- ---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of goodwill and other
intangibles (4,000) -
Acquisition of property and equipment (488) (50)
Proceeds from disposition of property
and equipment - 2
Capitalised software development
costs (803) (376)
Net advances made on amounts due
from (to) shareholders - (3)
Net cash used for investing activities (5,291) (427)
------------------------- ---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term
debt (183) (15)
Principal payments on capital
lease obligations (38) (45)
Proceeds from issuance of stock 12,865 -
Stockholder distributions - (185)
Net cash provided by (used for)
financing activities 12,644 (245)
------------------------- ---------------------------
Net cash increase for year 6,192 178
Cash and cash equivalents at beginning
of year 285 108
Cash and cash equivalents at end
of year 6,477 285
========================= ===========================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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