2013 Staffing Industry Survey Highlights ATTEST & ASSURANCE | TAX COMPLIANCE & RESEARCH | SPECIALTY & CONSULTING . Survey Participation The survey was distributed to over 500 staffing firms across the U.S. In excess of 100 participants responded, with the majority from the Northeast. Respondents ranged in size from less than $5 million to more than $250 million in annual revenue. 2 . Assessing revenue growth The majority of staffing companies are still  under $25 million in revenue (71.2%). However,  the industry has seen average revenues increasing  at a steady pace since 2010. 2012 Gross Revenue 3.8% Average revenue growth  over the past 3 years. 3.8% Less than $5 million 7.7% 28.8% $5 â€ $9.9 million $10‐$25 million 13.5% 14% 12% 21.2% 12% 9% 10% $26‐$49 million 6% $100‐$249 million 4% $250 million or more Average revenue growth over the past 3 years. 8% $50‐$99 million 21.2% 15% 16% 2% 0% 2010 2011 2012 3 . Assessing revenue growth The composition of gross revenue is changing. Payroll services and master service agreements are starting  to replace the traditional staffing model simply because customers are looking for staffing companies that  can provide a full range of services. Permanent placement is still a significant component of many  traditional  staffing companies. We asked participants to break out the makeup of their total revenue. The chart below illustrates the  average response we received. 100 90 80 76.3% 70 60 50 40 30 17.4% 20 3.7% 10 2.4% Payroll Services MSA â€ Subcontractors 0 Temporary Employment Services Placement/Search Services 0.20% Other 4 . Companies are diversifying In 2010*, we projected that most staffing firms would diversify into IT and Healthcare. The  2013 survey confirmed that 17.3% of respondents expanded into Healthcare and 11.5%    expanded into IT. This increase can be attributed to various factors, including the Affordable  Care Act (ACA), advances in global technology markets, compliance with regulatory matters,  and an aging population (baby boomers), among others.   Which industry sectors have  you diversified or expanded into?  Have not further diversified 51.9% Healthcare 17.3% Information Technology 11.5% Clinical/Scientific 5.8% Office/Clerical 3.8% Industrial 3.8% Finance/Accounting 3.8% Engineering/Design 3.8% Legal 1.9% Marketing/Creative 1.9% *Citrin Cooperman, Sowing the Seeds of Growth: 2010 Staffing Industry Survey 5 . Compensation trends Approximately 91% of survey participants responded that compensation paid to temporary workers was  in the form of a W‐2 as compared to 1099. This indicates an increased level of compliance with IRS  guidelines. This compliance coincides with the enforcement of taxes related to unemployment and  workers’ compensation insurance.  What percentage of your company's total payroll is from each of the following? 9% W‐2 Employees 1099 Contractors 91% 6 . Challenges and issues facing the industry When asked to rate the top issues affecting their business, responses indicated that the top  concerns remain profitability,  cash flow/financing, and the economy.  Furthermore, many respondents echoed 2011 responses and sighted acquiring key talent as  being the biggest opportunity for growing their business. 25% 20% 15% 10% 5% 0% 21% 19% 18% 21% 13% 17% 12% 17% 10% 6% 0% 10% 8% 10% 6% 4% 6% 2% 0% 0% 2013 2011 7 . Addressing fee pressures Over 50% of respondents indicated that they saw greater pricing pressure in the past  year. According to previous surveys, this is a trend that does not look to be slowing  down.  Do you offer pricing  discounts to clients? 76.9% 23.1% Yes No If you offer pricing discounts, what are they based on? Other (please specify) Negotiated discounts Volume of business Quick payment terms Pre‐payment terms 9.3% 44.2% 81.4% 30.2% 7.0% 8 . Looking ahead Over 65% of respondents are encouraged that they will see line revenue growth in 2014 and  beyond, but it will be slow and steady. Only 3.8% indicated that growth would decline. 3.8% Industry will continue to grow at a record pace 9.6% 21.2% It will continue to take a slow and steady approach to growth It will remain stagnant 65.4% It could decline 9 . Nick Florio, CPA Partner and Staffing Industry Practice Leader Image 212.697.1000 nflorio@citrincooperman.com CITRIN COOPERMAN 529 Fifth Avenue, New York NY 10017 CONNECTICUT | NEW JERSEY | NEW YORK | PENNSYLVANIA CITRINCOOPERMAN.COM 10 . CAYMAN | CONNECTICUT | NEW JERSEY | NEW YORK | PENNSYLVANIA CITRINCOOPERMAN.COM .