REVENUE AND EARNINGS AT
HIGH END OF GUIDANCE
- Operating margin expanded 50 basis points from 2008 first
quarter
- Healthcare business was 27% of revenue
- Strong balance sheet with nearly $8 million in cash and no
debt at quarter-end
- Full year EPS guidance maintained on reduced revenue
guidance
BUFFALO, N.Y. -- April 28, 2009 -- CTG (NASDAQ: CTGX), an
international information technology (IT) solutions and services
company, today announced its financial results for
the 2009 first quarter which ended on April 3, 2009. In the 2009
first quarter, more profitable solutions work and disciplined cost
management produced modest margin expansion over last year while
mitigating the impact of lower revenue on earnings.
CTG reported 2009 first quarter revenue of $74.6 million, a
14.0% decrease from 2008 first quarter revenue of $86.7 million.
Despite lower revenue, CTG's operating income remained flat at $2.4
million while its operating margin expanded to 3.2%, a 50 basis
point improvement from 2.7% in the 2008 first quarter. CTG's net
income was $1.3 million, 7.3% less than 2008 first quarter net
income of $1.4 million. On a per diluted share basis, net income
remained unchanged at $0.09.
"Given the overall weakness in the economy, we believe that our
ability to report revenue and earnings at the high end of our
guidance and a higher operating margin than last year is evidence
of the strength of our business and operating flexibility," CTG
Chairman and Chief Executive Officer James R. Boldt said. "As
expected, our financial results were affected by declines in demand
for both our staffing and solutions services in the quarter, a
trend we expect to continue into the second quarter followed by
improvement in the second half of the year."
Mr. Boldt continued, "CTG's strength in healthcare IT and the
increasing profitability of our solutions projects are helping us
perform better than many of our competitors in this challenging
economic environment. Our financial discipline also
contributed further to our earnings stability and balance sheet
strength at a time of lower market demand. We continue to
move forward with our strategy to grow our strong healthcare IT
business and build our portfolio of breakthrough solutions
primarily targeted to the healthcare market."
2009 First Quarter Review
Solutions revenue decreased by $5.3 million, or 18.1%, to $24.2
million or 32% of total revenue, in the 2009 first quarter.
Staffing revenue declined by $6.8 million, or 11.9%, to $50.4
million, or 68% of total revenue, with the managed staffing
services component remaining the primary contributor to the revenue
from this business. European revenue was $17.7 million, or 23.7% of
total revenue in the 2009 first quarter, down 6.9% from the prior
year first quarter. Revenue in the 2009 first quarter was
unfavorably affected by $2.8 million from foreign currency exchange
fluctuations when compared with the year-ago quarter. There were 66
billing days in the 2009 first quarter compared with 63 billing
days in the 2008 first quarter.
Selling, general, and administrative (SG&A) expenses were
$14.3 million, or 19.2% of revenue, compared with $16.4 million, or
18.9% of revenue, in the 2008 first quarter. The increase in
SG&A as a percentage of revenue reflects lower revenue which
was largely offset by disciplined cost control and reductions in
overhead expenses primarily tied to lower staffing demand.
The Company recorded equity-based compensation expense, net of
tax, of $0.1 million in both the 2009 and 2008 first quarters,
which reduced net income per diluted share by $0.01 in each of the
respective quarters.
In the 2009 first quarter, the Company recorded a $0.1 million
unfavorable effect from currency exchange on intercompany
borrowings which is included in other expense.
CTG's effective tax rate for the 2009 first quarter was 42.3%
compared with 39.8% in the 2008 first quarter. The Company
currently projects a tax rate of approximately 42% for the 2009
full year.
The Company used cash from operations of $0.4 million in the
2009 first quarter compared with cash used from operations of $0.3
million in the 2008 first quarter. At April 3, 2009, the
Company had $7.9 million in cash and no outstanding debt, compared
with $4.7 million in cash and $2.6 million in debt at 2008 first
quarter-end. CTG finances its working capital needs through a
$35 million revolving credit agreement that is in place through
April 2011.
Mr. Boldt commented, "Profitable operations, excellent cash
flow, quality receivables, and a strong balance sheet all position
CTG favorably as we continue to have the liquidity and access to
credit to fund our business needs, growth plans, and our stock
repurchase program. Notably, at quarter-end, we had almost $8
million in cash and no debt despite the quarter ending on a payroll
date."
Stock Repurchase Program
CTG repurchased 173,000 of its shares in the 2009 first quarter.
In April 2009, the Company extended its 10b5-1 stock repurchase
plan to facilitate the repurchase of its common stock during its
self-imposed blackout periods prior to the announcement of
quarterly results. On April 28, 2009, approximately 1.1 million
shares were available for repurchase by the Company under its
current repurchase authorizations.
Second Quarter and Annual Guidance
Based on the Company's current business activity and pipeline,
CTG expects its 2009 second quarter revenue to range from $66.5
million to $68.5 million, a 28% decrease from 2008 at the midpoint
of this range. The Company projects 2009 second quarter net income
per diluted share of $0.07 to $0.09, a 38% decrease from 2008 at
the midpoint of this range. There are 63 billing days in the
2009 second quarter compared with 64 billing days in the 2008
second quarter.
CTG has reduced its 2009 full-year revenue guidance by $10
million and now expects that its revenue for the full year will
range from $275 million to $295 million, a 19% decrease from 2008
at the midpoint of this range. The Company has not changed its
initial 2009 earnings guidance projecting net income per diluted
share of $0.30 to $0.40, a 29% decrease from 2008 at the midpoint
of this range, or a 24% decrease from 2008 when the 2008 fourth
quarter exchange gain is excluded.
Mr. Boldt commented, "While we are reducing our revenue guidance
for the year, we are maintaining our 2009 earnings guidance based
on the higher profitability of our recent solutions offerings and
the forward-looking actions we took to align our cost structure
with lower revenue. Guidance for the second quarter reflects the
full impact from previously announced reductions in our staffing
business in addition to further reductions in staffing and
solutions headcount that occurred in the first quarter."
CTG Favorably Positioned for 2009 Second Half and
Beyond
Mr. Boldt concluded, "There are a number of factors that point
to our expectation of quarterly results in the second half of 2009
improving from our second quarter forecast. Among these are stable
demand in our staffing business over the last month, improved
proposal activity in our solutions business particularly for
electronic medical records (EMR) projects, and the benefit of the
federal stimulus package on healthcare IT spending expected later
in the year. EMRs are a long-term opportunity that CTG is already
favorably positioned to capitalize on based on our provider and
communitywide EMR work, which was 7% of our 2008 revenue.
For now, CTG's continued profitability and strong financial
position during this major recession are important indicators of
the strength of our business. These strengths are also favorable
indicators of the growth and earnings potential of CTG's business
when the economy recovers and as we further advance our strategy to
increase higher margin solutions work and to expand our healthcare
IT business that is already contributing over 25% to our
revenue."
About CTG
Backed by over 40 years' experience, CTG provides IT solutions
and services to help our clients use technology as a competitive
advantage to excel in their markets. CTG combines in-depth
understanding of our clients' businesses with a full range of
integrated offerings, best practices, and proprietary methodologies
supported by an ISO 9001:2000-certified management system. Our
2,700 IT professionals based in an international network of offices
in North America and Europe have a proven track record of
delivering high-value, industry-specific solutions. CTG serves
companies in several industries and is a leading provider of IT and
business consulting solutions to the healthcare market. CTG posts
news and other important information on the Web at
www.ctg.com.
Safe Harbor
Statement
This document contains certain forward-looking statements
concerning the Company's current expectations as to future growth.
These statements are based upon a review of industry reports,
current business conditions in the areas where the Company does
business, the availability of qualified professional staff, the
demand for the Company's services, and other factors that involve
risk and uncertainty. As such, actual results may differ materially
in response to a change in such factors. Such forward-looking
statements should be read in conjunction with the Company's
disclosures set forth in the Company's 2008 Form 10-K, which is
incorporated by reference. The Company assumes no obligation to
update the forward-looking information contained in this
release.
Conference Call and Webcast
CTG will hold a conference call on Wednesday April 29, 2009, at
10:00 AM Eastern Time to discuss its financial results and business
strategy. CTG Chairman and Chief Executive Officer James R. Boldt
will lead the call. Interested parties can dial in to
1-888-276-0010 between 9:45 AM and 9:50 AM and ask for the CTG
conference call and identify James Boldt as the conference
chairperson. A replay of the call will be available between 12:00
p.m. Eastern Time April 29, 2009, and 11:00 p.m. Eastern Time May
2, 2009, by dialing 1-800-475-6701 and entering the conference
ID number 978256.
A webcast of the call will also be available on CTG's web site:
http://www.ctg.com. You must
have Windows Media Player or RealPlayer's audio software on your
computer to listen to the webcast. Both are available for
downloading at no charge when accessing the webcast. The
webcast will also be archived on CTG's web site at http://investor.ctg.com/events.cfm
for 90 days following completion of the conference call.
Financial statements follow.
COMPUTER TASK GROUP,
INCORPORATED (CTG)
Condensed Consolidated Statements of
Income
(Unaudited)
(amounts in thousands except per
share data)
| April 3, 2009 |
March 28, 2008 |
April 3, 2009 |
March 28, 2008 |
| Current Assets: |
Current Liabilities: |
| Cash and cash equivalents |
$7,891 |
$4,743 |
Accounts payable |
$6,266 |
$10,448 |
| Accounts receivable, net |
$46,380 |
$59,182 |
Accrued compensation |
$20,841 |
$24,265 |
| Other current assets |
$3,844 |
$4,780 |
Other current liabilities |
$6,421 |
$7,608 |
| Total Current Assets |
$58,115 |
$68,705 |
Total Current Liabilities |
$33,528 |
$42,321 |
| Property and equipment, net |
$7,118 |
$6,275 |
Long-term debt |
- |
$2,645 |
| Goodwill |
$35,678 |
$35,678 |
Other liabilities |
$8,864 |
$9,247 |
| Other assets |
$9,442 |
$9,.814 |
Shareholders' equity |
$67,961 |
$66,259 |
| Total Assets |
$110,353 |
$120,472 |
Total Liabilities and Shareholders' equity |
$110,353 |
$120,472 |