2013 Staffing Industry Survey Highlights ATTEST & ASSURANCE TAX COMPLIANCE & RESEARCH SPECIALTY & CONSULTING

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% 3.8% 7.7% 28.8% 13.5% 21.2% 21.2% Less than $5 million $5 $9.9 million $10 $25 million $26 $49 million $50 $99 million $100 $249 million $250 million or more 16% 14% 12% 10% 8% 6% 4% 2% 0% Average revenue growth over the past 3 years. 12% 15% 9% 2010 2011 2012 Average revenue growth over the past 3 years. 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 20 17.4% 10 0 Temporary Employment Services Placement/Search Services 3.7% 2.4% Payroll Services MSA Subcontractors 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 Healthcare Information Technology Clinical/Scientific Office/Clerical Industrial Finance/Accounting Engineering/Design Legal Marketing/Creative 5.8% 3.8% 3.8% 3.8% 3.8% 1.9% 1.9% 11.5% 17.3% 51.9% *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% 6% 21% 17% 13% 12% 17% 10% 10% 8% 10% 0% 6% 4% 2% 0% 0% 6% 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 Other (please specify) Negotiated discounts Volume of business Quick payment terms Pre payment terms If you offer pricing discounts, what are they based on? 9.3% 7.0% 30.2% 44.2% 81.4% 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. 9.6% 3.8% 21.2% Industry will continue to grow at a record pace It will continue to take a slow and steady approach to growth 65.4% It will remain stagnant 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