TIDMCLST TIDMCLSU
RNS Number : 9247T
ClearStar,Inc.
23 July 2015
23 July 2015
ClearStar, Inc.
("ClearStar" or the "Company")
Trading Update
ClearStar, Inc. (AIM: CLST), the technology and service provider
to the background check industry, is pleased to provide an update
on trading for the six months ended 30 June 2015, ahead of
announcing its interim results in September 2015.
Business Performance
As stated in the FY 2014 results announcement on 16 March 2015,
ClearStar has maintained the momentum of the second half of 2014
into 2015. In H1 2015, the Medical Information Services ("MIS") and
Direct Services divisions achieved substantial growth, and the
Company received increased demand for screening services provided
to its Channel Partners and Consumer Reporting Agencies. The
Company is also pleased to report that the integration of the
SingleSource acquisition has resulted in a significant increase in
direct sales customers with an approximate revenue increase of
$1.3m. Consequently, the Company expects revenue for the first half
of 2015 to be approximately $7.5m, representing a 43% increase over
the equivalent period in 2014. Additionally during H1 2015,
ClearStar experienced gross margin improvement primarily due to
economies of scale along with a favourable shift in the product mix
with an increased contribution of revenues from higher margin
direct sales. The Company therefore anticipates the gross margin
percentage for H1 2015 being higher by more than 200 basis points
compared with the same period of the previous year, and expects
this trend to continue due to both the revenue mix and purchasing
economies
The increase in revenue was due to strong sales growth across
all three of the Company's divisions. In the first six months of
2015, ClearStar processed approximately 3.6 million screening
services on over 1.1 million people that were provided to over
23,000 end users. The MIS division was awarded its largest single
contract to date in February, which is expected to be worth
$1.3m-$1.5m annually, which is due to start generating revenue in
Q3 2015, which is a slight delay from that originally anticipated.
This service will be delivered via the Company's paperless chain of
custody software (WebCCF). In the newly-formed Direct Services
division, the integration of SingleSource expanded ClearStar's
number of direct sales customers to over 2,000. Excluding the
contribution from SingleSource, direct sales revenue grew from
approximately $150,000 in H1 2014 to $440,000 in H1 2015, an
increase of approximately 190% year-on-year. Additionally, in July
2015, the Company won a direct sales contract with a division of
one of the world's largest security companies, with anticipated
initial revenues of approximately $250,000 annually. This contract
is expected to start contributing revenue in Q3. The Company's
direct sales pipeline is currently over $10 million in annualised
revenue, representing a significant expansion.
Investing in Growth
Since its IPO in July 2014, ClearStar has focused on
strategically investing the equity capital raised at the time of
IPO and positioning the Company for growth. At the end of 2014, the
Board decided that, due to heightened demand for its product
offerings domestically as well as internationally, it would
accelerate its growth programme. As stated previously,
opportunities arose, such as investment in international expansion
and an acquisition to accelerate penetration into the direct sales
channel, along with planned investment in sales and marketing and
R&D, which have resulted in higher operational expenditure and
cost structure than anticipated at the time of the IPO. As a
result, EBITDA for H1 2015 is expected to be a loss of
approximately $(1.3)m. Due to the increased investment referred to
above it is expected that the Company's full year results will be
below market expectations with EBITDA around breakeven for H2 2015.
The Board believes that the continued investment into the business
will see increased sales and higher margins in the medium term and
beyond.
The two main opportunities that the Company invested in earlier
than anticipated are:
(a) Entry into the UK screening market with the signing of the
Company's first agreement with a world-renowned, leading global
risk management consultancy for the development and hosting of a
white-labelled, customised solution. The estimated investment for
2015 associated with this initiative is $1.8m. This investment is
primarily attributable to cost associated with capitalised
software, human resources, and the UK datacentre lease. This has
resulted in the creation of a new platform that supports
international data elements and user interface globalisation, along
with establishing a datacentre presence to meet UK and EU security
and privacy requirements.
Additionally, in July 2015, ClearStar signed a contract with an
EU-based screening company, located outside the UK, to license
ClearStar's new global platform for both background screening and
tenant screening. This will be the first multi-lingual
implementation of the system. The deal is further evidence of the
value of a single multilingual global platform with the ability to
provide in-country data residency - something that no other vendor
offers.
(b) Strengthening and expanding the Company's direct sales and
service team to capitalise on attractive market opportunities
within the growing US screening market. The estimated investment
for 2015 associated with this initiative is $1.6m. The addition of
several experienced sales people and operational support personnel
has enabled us to go upmarket and resulted in the increase in the
direct sales pipeline to over $10m in annualised revenues.
ClearStar Shares to be traded on CREST
At the time of Admission of ClearStar's Ordinary Shares to
trading on AIM on 11 July 2014, restrictions on transfer under the
United States securities laws required that its shares had to be in
certificated form for a period of at least 12 months following
Admission.
On 14 July 2015, ClearStar introduced a Depository Interest
programme with Capita IRG Trustees Limited ("Capita") to enable its
ordinary shares to be traded in CREST, resulting in two lines of
stock, relating to both the restricted and the unrestricted lines
of stock.
On the London Stock Exchange, the unrestricted ordinary shares
trade under the ticker CLSU and trade as Depository Interests in
CREST. The restricted ordinary shares continue to trade outside
CREST, due to restrictions imposed by United States securities
laws, with the existing ticker CLST.
Robert Vale, CEO of ClearStar, commented: "We are pleased that
our team has executed on all fronts of new technology development,
diversification of product offerings and expansion into
international markets. Our brand is emerging as a market leader in
risk mitigation and we have attracted some of the most accomplished
sales professionals in our sector. Our built-to-last strategy
positions the Company to deliver strong, higher margin, growth for
years to come."
Enquiries
ClearStar, Inc.
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Robert J. Vale, Chief Executive
Officer
David Pattillo, Chief Financial
Officer +1 770 416 1900
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Cenkos Securities plc
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Max Hartley, Mark Connelly
- Corporate Finance
Julian Morse - Sales +44 20 7397 8900
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Luther Pendragon Ltd
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Harry Chathli, Claire Norbury,
Oli Hibberd +44 20 7618 9100
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About ClearStar
ClearStar, Inc. is a leading and trusted background check
technology, strategic services, and decision-making information
provider to employers and background screening companies.
A seven-time Inc. 5000 honouree and founding member of the
National Association of Professional Background Screeners,
ClearStar has provided innovative technology solutions to
businesses in the human capital management industry from its
corporate offices in Alpharetta, Georgia since 1995. For more
information about ClearStar, please visit: www.clearstar.net.
This information is provided by RNS
The company news service from the London Stock Exchange
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