- Midpoint of 2010 revenue guidance range indicates 18%
revenue growth and 26% eps increase
- Operating margin expands 70 basis points to 4.3% from
2009 second quarter
- Healthcare business 27% of total revenue; electronic
medical records projects 13% of total revenue
- Three major electronic medical records projects awarded
in second quarter; emr project pipeline
expanding
- Strong demand drives headcount increase of 100 for a
year-to-date increase of 300 or 10% since year-end
2009
BUFFALO, N.Y. -- July 27, 2010 -- CTG (NASDAQ: CTGX), an
international information technology (IT) solutions and services
company, announced its financial results for the
2010 second quarter which ended on
July 2, 2010. The continued increase in client demand for
external IT resources and the start of new electronic medical
records (EMR) solutions projects were the primary drivers of CTG's
significant growth in revenue, margins, and earnings in the 2010
second quarter.
2010 Second Quarter Results Summary
Revenue, operating income, net income and diluted net income per
share for the 2010 second quarter as compared with the 2009 second
quarter are as follows:
|
|
|
July 2, 2010
|
|
|
July 3, 2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
81,142
|
|
$
|
66,580
|
|
$
|
14,562
|
|
|
21.9%
|
|
Operating income
|
$
|
3,489
|
|
$
|
2,424
|
|
$
|
1,065
|
|
|
43.9%
|
|
Net income
|
$
|
1,905
|
|
$
|
1,395
|
|
$
|
510
|
|
|
36.6%
|
|
Diluted net income per share
|
$
|
0.12
|
|
$
|
0.09
|
|
$
|
0.03
|
|
|
33.3%
|
|
|
|
|
|
|
|
|
|
|
|
The Company's operating margin expanded by 70 basis points to
4.3% from 3.6% in the 2009 second quarter.
"Continued strong demand from our staffing and healthcare
businesses enabled us to achieve double-digit growth in revenue and
earnings and significant margin expansion over last year" said CTG
Chairman and Chief Executive Officer James R. Boldt.
"Healthcare revenue in the second quarter increased 21% over
last year and was 27% of total revenue with EMR projects
contributing almost half of all healthcare revenue. We
believe we are still in the early stages of the significant
increases in demand expected for EMR assessments, systems
implementation, and development work. During the second
quarter, we began work on a health information exchange assessment
for the state of Texas and were awarded three new major EMR
projects. In the second quarter, we also signed our first
contract for our actuarial underwriting solution that uses employer
group financial information to more equitably and competitively
price group premiums. We added 100 people to CTG's headcount
in the quarter, reflecting the strong demand in our managed
services staffing business and EMR implementation services."
"CTG also continues to be recognized on a national level as a
leading provider of healthcare IT services, being named in June by
Healthcare Informatics to its annual ranking of the
largest healthcare IT providers, the Healthcare Informatics 100
(HCI 100). CTG was ranked 7th of the companies on the list
that generated 100% of 2009 healthcare provider revenue from
consulting services. Our visibility and reputation as a
leading provider of healthcare IT continues to keep us on the short
list for EMR requests for proposals, a significant advantage as EMR
proposal activity is steadily increasing."
2010 Second Quarter Review
Solutions revenue in the 2010 second quarter increased 14%, or
$3.2 million, to $26.3 million, and represented 32% of total
revenue. Staffing revenue increased 26%, or $11.4 million, to
$54.8 million, or 68% of total revenue. European revenue was
$14.4 million, or 18% of total revenue, in the 2010 second quarter,
compared with $15.0 million, or 23% of total revenue, in the 2009
second quarter. Foreign currency exchange fluctuations had a
$1.0 million unfavorable effect on revenue in the quarter.
There were 64 billing days in the 2010 second quarter compared with
63 billing days in the 2009 second quarter.
Selling, general, and administrative (SG&A) expenses were
$14.3 million, or 17.6% of revenue, compared with $12.5 million, or
18.8% of revenue, in the 2009 second quarter. The decline in
SG&A as a percent of revenue reflects operating leverage from
revenue growth and continued disciplined cost management.
CTG's effective tax rate for the 2010 second quarter was 44%
compared with 42% in the 2009 second quarter.
The Company provided cash from operations of $6.7 million in the
2010 second quarter compared with cash provided from operations of
$6.8 million in the 2009 second quarter. At July 2, 2010, the
Company had
$8.6 million in cash compared with $14.7 million at the end of the
2009 second quarter. CTG had no debt at the end of the 2010
and 2009 second quarters. CTG finances its working capital
needs through a $35 million revolving credit agreement that is in
place through April 2011.
2010 First Half Review
Results for the first half of the year reflect the same trends
seen in the second quarter.
Revenue, operating income, net income and diluted net income per
share for the 2010 first half as compared with the 2009 first half
are as follows:
|
|
|
July 2, 2010
|
|
|
July 3, 2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
159,631
|
|
$
|
141,136
|
|
$
|
18,495
|
|
|
13.1%
|
|
Operating income
|
$
|
6,578
|
|
$
|
4,831
|
|
$
|
1,747
|
|
|
36.2%
|
|
Net income
|
$
|
3,691
|
|
$
|
2,697
|
|
$
|
994
|
|
|
36.9%
|
|
Diluted net income per share
|
$
|
0.23
|
|
$
|
0.18
|
|
$
|
0.05
|
|
|
27.8%
|
The Company's operating margin increased by 70 basis points to
4.1% from 3.4% in the 2010 first half compared with the 2009 first
half. During the first half of 2010, CTG's solutions business
increased 8% to $51.5 million, or 32% of total revenue, and its
staffing business grew 16% to $108.1 million, or 68% of total
revenue. European revenue decreased 5.4% to $31.0 million in
the 2010 first half and represented 19% of consolidated revenue.
Strong client demand for external technical resources in the
2010 first half accounted for a year-to-date increase in headcount
of 300, or 10%, since year-end 2009.
Selling, general, and administrative expenses were $28.2
million, or 17.7% of revenue, compared with $26.8 million, or 19.0%
of revenue, in the 2009 first half.
Stock Repurchase Program
CTG repurchased 101,000 of its shares in the 2010 second quarter
at an average price of $7.42 per share. In
July 2010, 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 July 26, 2010, approximately 281,000
shares were available under CTG's current repurchase
authorizations.
Revenue and Earnings Guidance Updated
CTG expects its 2010 third quarter revenue to range from $81
million to $83 million, a 23% increase from 2009 at the midpoint of
the projected range. The Company expects 2010 third quarter
net income per diluted share of $0.11 to $0.13, a 20% increase from
2009 at the midpoint of the projected range. There are 63
billing days in the 2010 third quarter compared with 64 billing
days in the 2009 third quarter.
Based on the strength of its current business and trends in its
healthcare and staffing businesses, CTG has increased its 2010
revenue guidance to $320 million to $328 million from $314 million
to $322 million, an 18% increase from 2009 at the midpoint of the
new projected range. The Company has changed its 2010 net
income per diluted share guidance to $0.45 to $0.51 from $0.47 to
$0.55, a 26% increase from 2009 at the midpoint of the new
projected range. A tax rate of approximately 40% is projected
for 2010.
Mr. Boldt commented, "Second quarter revenue came in at the high
end of expectations, and that combined with current and new
business activity in our staffing and healthcare businesses, caused
us to raise our revenue guidance for the year. At the same
time, we lowered our 2010 earnings guidance because we are
experiencing a reduction in demand for solutions work from a large
customer in our energy practice. Overall, the favorable
effect from the significant growth coming from our staffing and
healthcare businesses still keeps us solidly on track to achieve
double-digit revenue and earnings growth in 2010."
Mr. Boldt concluded, "As we look beyond 2010, EMR projects
and our new healthcare solutions will be the growth
engines of our business for the foreseeable future. While our
staffing business is currently growing at a greater rate than our
more profitable solutions business in 2010, we expect that staffing
demand will level off next year as the economic recovery progresses
and our clients begin to make more internal hires. We also
expect that demand for EMR solutions work will grow at a faster
pace next year as access to financing for capital investments
continues to improve for healthcare providers, more federal
stimulus money becomes available, and the deadline for meaningful
use incentives draws closer. Increasing EMR work and our
success at winning and implementing lucrative EMR projects put CTG
in an excellent position for further margin expansion and continued
growth in revenue and earnings over the next several years."
About CTG
CTG develops innovative IT solutions to address the business
needs and challenges of companies in several higher-growth
industries including healthcare, energy, and technology
services. As a leading provider of IT and business consulting
solutions to the healthcare market, CTG offers hospitals, physician
groups, and regional health information exchanges a full range of
electronic medical record services. Additionally, CTG has
developed for the healthcare provider and payer markets unique,
proprietary software solutions that support better and lower cost
healthcare. CTG also provides managed services IT staffing
for major technology companies and large corporations. Backed
by nearly 45 years' experience, proprietary methodologies, and an
ISO 9001-certified management system, CTG has a proven track record
of delivering high-value, industry-specific solutions. CTG's
3,200 IT professionals are based in an international network of
offices in North America and Western Europe. 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 2009 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 to discuss its financial results
and business strategy on Wednesday July 28, 2010 at 10:00 AM
Eastern Time. CTG Chairman and Chief Executive Officer James
R. Boldt will lead the call. Interested parties can dial
1-888-276-0010 between 9:45 AM and 9:50 AM, 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 July 28, 2010 and 11:00 p.m. Eastern Time
July 31, 2010 by dialing 1-800-475-6701 and entering the conference
ID number 121486.
Financial statements follow.
NOTE - financial tables are under development and will be
corrected by go-live date.
COMPUTER TASK GROUP,
INCORPORATED (CTG)
Condensed Consolidated Statements of
Income
(Unaudited)
(amounts in thousands except per
share data)
|
|
For the Quarter
Ended
|
|
For the Two
Quarters Ended
|
|
|
|
July 2,
2010
|
|
|
July 3,
2009
|
|
|
July 2,
2010
|
|
|
July 3,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
81,142
|
|
$
|
66,580
|
|
$
|
159,631
|
|
$
|
141,136
|
|
Direct costs
|
|
63,350
|
|
|
51,628
|
|
|
124,831
|
|
|
109,464
|
|
Selling, general and administrative expenses
|
|
14,303
|
|
|
12,528
|
|
|
28,222
|
|
|
26,841
|
|
Operating income
|
|
3,489
|
|
|
2,424
|
|
|
6,578
|
|
|
4,831
|
|
Other expense, net
|
|
(71)
|
|
|
(29)
|
|
|
(118)
|
|
|
(180)
|
|
Income before income taxes
|
|
3,418
|
|
|
2,395
|
|
|
6,460
|
|
|
4,651
|
|
Provision for income taxes
|
|
1,513
|
|
|
1,000
|
|
|
2,769
|
|
|
1,954
|
|
Net income
|
$
|
1,905
|
|
$
|
1,395
|
|
$
|
3,691
|
|
$
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.13
|
|
$
|
0.09
|
|
$
|
0.25
|
|
$
|
0.18
|
|
Diluted
|
$
|
0.12
|
|
$
|
0.09
|
|
$
|
0.23
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
14,728
|
|
|
14,874
|
|
|
14,725
|
|
|
14,908
|
|
Diluted
|
|
16,095
|
|
|
15,373
|
|
|
16,051
|
|
|
15,210
|
|
COMPUTER TASK GROUP, INCORPORATED (CTG)
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 2,
2010
|
|
|
July 3,
2009
|
|
|
July 2,
2010
|
|
|
July 3,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
8,584
|
|
$
|
14,694
|
Accounts payable
|
$
|
5,583
|
|
$
|
7,499
|
|
Accounts receivable, net
|
|
50,914
|
|
|
42,612
|
Accrued compensation
|
|
25,576
|
|
|
22,742
|
|
Other current assets
|
|
4,013
|
|
|
3,947
|
Other current liabilities
|
|
5,083
|
|
|
5,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
63,511
|
|
|
61,253
|
Total Current Liabilities
|
|
36,242
|
|
|
35,391
|
|
Property and equipment, net
|
|
8,362
|
|
|
7,430
|
Long-term debt
|
|
-
|
|
|
-
|
|
Goodwill
|
|
35,678
|
|
|
35,678
|
Other liabilities
|
|
9,441
|
|
|
8,812
|
|
Other assets
|
|
11,308
|
|
|
9,581
|
Shareholders' equity
|
|
73,176
|
|
|
69,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
118,859
|
|
$
|
113,942
|
Total Liabilities and
Shareholders' Equity
|
$
|
118,859
|
|
$
|
113,942
|