EPS EXCEEDS
GUIDANCE
- Six new electronic medical records projects awarded during
quarter
- Healthcare business at 24% of revenue
- Opportunities for new healthcare solutions work
expanding
- Demand for staffing Services moving higher
- Strong balance sheet with $11 million in cash and no debt
at quarter-end
BUFFALO, N.Y. -- October 27, 2009 -- CTG (NASDAQ: CTGX), an
international information technology (IT) solutions and services
company, today announced its financial results for
the 2009 third quarter which ended on October 2, 2009.
Quarterly earnings exceeded guidance, reflecting an increasing mix
of higher margin solutions projects, increased staffing demand, and
disciplined cost management, which also reduced the impact of lower
revenue on operating margins in 2009.
CTG reported 2009 third quarter revenue of $66.8 million, a 25%
decrease from 2008 third quarter revenue of $89.1 million.
CTG's operating income declined to $2.5 million from $3.5 million a
year ago while its operating margin was 3.7% compared with 3.9% in
the 2008 third quarter and 3.6% in the 2009 second quarter.
CTG's net income was $1.6 million, 23% less than 2008 third quarter
net income of $2.1 million. On a per diluted share basis, net
income was $0.10, a 23% decrease from $0.13 in the 2008 third
quarter and a $0.01 or 11% increase from the 2009 second
quarter.
"We continue to add higher margin solutions work while carefully
controlling costs, which resulted in quarterly earnings that
exceeded the high end of our guidance," CTG Chairman and Chief
Executive Officer James R. Boldt said. "Although our operating
margin is tracking below last year given the decline in revenue, it
has expanded since the start of this year, reflecting our improving
business mix and the higher profitability of new solutions
work."
Mr. Boldt added, "Our focus on expanding our strong healthcare
business, which was 24% of our total revenue, continues to produce
positive results while positioning CTG very favorably for the
future. During the quarter, we were awarded six new
electronic medical record (EMR) projects which will be completed
over the next two to three years. CTG is also at the
forefront of applying data analytics to medical information in
offerings designed to improve patient outcomes and lower health
care costs. During the fourth quarter, we expect to begin the
first implementation of our medical care management solution which
analyzes blood values over extended periods of patient populations
with serious illnesses, such as chronic kidney disease, to identify
the best and most cost-effective course of treatment. We also
anticipate the first sales of our other health informatics
solutions, which support group healthcare insurance underwriting,
and fraud, waste, and abuse detection during the fourth
quarter."
2009 Third Quarter Review
Solutions revenue in the 2009 third quarter decreased by $3.8
million, but increased to 35% of total revenue, compared with 31%
in the 2008 third quarter. On a sequential basis, solutions
revenue increased by $0.5 million compared with the 2009 second
quarter. Staffing revenue declined by $18.6 million, or 30%,
to $43.2 million, or 65% of total revenue, with managed staffing
services the primary contributor to revenue from this
business. European revenue was $14.8 million, or 22% of total
revenue in the 2009 third quarter, versus 21% in the prior year
third quarter. There were 64 billing days in the 2009 third
quarter compared with 63 billing days in the 2008 third
quarter.
Selling, general, and administrative (SG&A) expenses were
$12.7 million, or 19.0% of revenue, compared with $16.2 million, or
18.1% of revenue, in the 2008 third quarter. The reduction in
expenses reflects the Company's ability to quickly align costs with
revenue as market demand declined with the weakening of the global
economy.
The Company recorded equity-based compensation expense, net of
tax, of $0.3 million in the 2009 third quarter compared with $0.1
million in the 2008 third quarter, which reduced net income per
diluted share by $0.02 and $0.01 in the respective quarters.
The Company's effective tax rate for the 2009 third quarter was
34.7% compared with 39.2% in the 2008 third quarter. The tax
rate for the third quarter was favorably affected by one-time
federal tax credits of approximately $0.1 million which added about
one-half cent to earnings per diluted share. The Company
projects a tax rate of approximately 39% for the 2009 full
year.
The Company used cash from operations of $2.9 million in the
2009 third quarter compared with $12.0 million provided in the 2008
third quarter. Cash usage in the 2009 third quarter reflected
the quarter ending on a payroll date for its U.S. operations.
At October 2, 2009, the Company had $10.8 million in cash, compared
with $9.6 million at the 2008 third quarter-end. CTG had no
outstanding debt at the end of the 2009 and 2008 third quarters.
The Company finances its working capital needs through a $35
million revolving credit agreement that is in place through April
2011.
Mr. Boldt commented, "Over the last five quarters, CTG has ended
the quarter debt-free, an excellent indicator of the strength of
our cash flow and ability to manage expenses, even as revenue
declined with the global recession. Additionally, our cash
position has remained strong over the last year with nearly $11
million in cash at the 2009 third quarter-end despite it ending on
a payroll date. Our staffing business contributes
significantly to CTG's excellent cash flow, which combined with our
strong financial position is enabling us to continue funding our
active share repurchase program and investments in our solutions
business."
2009 Year-to-date Review
CTG's revenue in the first three quarters of 2009 decreased 23%,
or $62.0 million, to $207.9 million compared with $269.9 million in
the same 2008 period. Operating income was $7.3 million, 26%
lower than 2008 year-to-date operating income of $9.8
million. CTG's net income was $4.3 million, a 22% decrease
from 2008 year-to-date net income of $5.5 million. On a per
diluted share basis, net income was $0.28, 20% lower than $0.35 in
2008.
During the first three quarters of 2009, CTG's solutions
business decreased 19% to $69.8 million, or 34% of total revenue,
and its staffing business declined 25% to $138.1 million, or 66% of
total revenue. European revenue decreased 20% in the first
three quarters of 2009 and represented 23% of total revenue.
Selling, general, and administrative expenses for the first
three quarters of 2009 were $39.6 million, or 19.0% of revenue,
compared with $50.2 million, or 18.6% of revenue, in 2008.
Lower revenue and earnings in the first three quarters of 2009
reflect the impact of the global recession on CTG's business which
was partially offset by effective cost control and higher margins
on new solutions projects.
Stock Repurchase Program
CTG repurchased approximately 255,000 of its shares in the 2009
third quarter at an average price of $6.53 per share. In
October 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. In the first three quarters of 2009, the
Company repurchased approximately 641,000 shares at an average
price of $5.21 per share. On October 2, 2009, approximately
650,000 shares were available for repurchase by the Company under
its current repurchase authorizations.
Fourth Quarter and Annual Guidance
Based on the Company's current business activity and pipeline,
CTG expects its 2009 fourth quarter revenue to range from $67
million to $69 million, an 18% decrease from 2008 at the midpoint
of this range. The Company projects 2009 fourth quarter net
income per diluted share of $0.09 to $0.11, a 33% decrease from
2008 at the midpoint of this range and a 17% decrease when the 2008
fourth quarter currency exchange gain of $0.03 is excluded.
There are 62 billing days in the 2009 fourth quarter compared
with 66 billing days in the 2008 fourth quarter.
The Company's current revenue forecast for the full year ranges
from $275 million to $277 million, a 22% decrease from 2008 at the
midpoint of this range. CTG currently projects 2009 net
income per diluted share of $0.37 to $0.39, a 22% decrease from
2008 at the midpoint of this range.
Mr. Boldt commented, "Revenue in the fourth quarter is expected
to remain essentially flat or increase modestly. Given there
are two fewer billing days in the fourth quarter than the third,
the midpoint of our guidance indicates a sequential increase of
about 5% in our daily run rate. With new higher margin EMR
work ramping up in the fourth quarter and demand in our staffing
business increasing, we look for earnings per share in the fourth
quarter to be near the level of the third quarter or possibly
higher."
Healthcare IT Leadership and Medical Informatics
Solutions a Strong Platform for Future Growth
Mr. Boldt continued, "CTG's visibility as a national leader in
healthcare IT and consulting is increasing as reflected by our
recent ranking as the eighth largest company on the Modern
Healthcare annual list of the top 15 health management
consulting firms based on revenue to healthcare providers.
Additionally, as CTG is one of a small number of firms with
the experience and capability to support full EMR implementations
at the large provider and communitywide level, we are in an
excellent position to benefit from the EMR opportunity."
Mr. Boldt concluded, "While the global recession continues to
affect overall IT spending, as expected we are seeing demand
increase in the healthcare market for EMR support based on the ARRA
stimulus funds approved for EMR implementation and conditions in
credit markets easing for healthcare providers. We are
already benefiting from these developments as demonstrated by the
new EMR business awarded to us in the third quarter. At the
same time, securing EMR financing is taking providers longer than
initially expected so we expect demand for EMR support will not
accelerate until 2010. Certainly EMR work will drive the
healthcare IT market for several years and that bodes well for CTG.
As the mandate to lower healthcare costs builds, providers
and payers will also be looking beyond EMRs for additional ways to
control costs without compromising care. CTG's medical
informatics solutions address that need very well, providing us a
significant competitive differentiator and a strong platform for
long-term growth."
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-certified management system. Our
2,800 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 October 28, 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, 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 October 28, 2009 and 11:00 p.m. Eastern
Time October 31, 2009 by dialing 1-800-475-6701 and entering
the conference ID number 978258.
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.
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 Three
Quarters Ended
|
|
|
|
Oct. 2,
2009
|
|
|
Sept. 26,
2008
|
|
|
Oct. 2,
2009
|
|
|
Sept. 26,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
66,771
|
|
$
|
89,131
|
|
$
|
207,907
|
|
$
|
269,885
|
|
Direct costs
|
|
51,570
|
|
|
69,488
|
|
|
161,034
|
|
|
209,854
|
|
Selling, general and administrative expenses
|
|
12,713
|
|
|
16,167
|
|
|
39,554
|
|
|
50,185
|
|
Operating income
|
|
2,488
|
|
|
3,476
|
|
|
7,319
|
|
|
9,846
|
|
Other expense, net
|
|
(29)
|
|
|
(55)
|
|
|
(209)
|
|
|
(172)
|
|
Income before income taxes
|
|
2,459
|
|
|
3,421
|
|
|
7,110
|
|
|
9,674
|
|
Provision for income taxes
|
|
853
|
|
|
1,340
|
|
|
2,807
|
|
|
4,139
|
|
Net income
|
$
|
1,606
|
|
$
|
2,081
|
|
$
|
4,303
|
|
$
|
5,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.11
|
|
$
|
0.14
|
|
$
|
0.29
|
|
$
|
0.36
|
|
Diluted
|
$
|
0.10
|
|
$
|
0.13
|
|
$
|
0.28
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
14,680
|
|
|
15,338
|
|
|
14,833
|
|
|
15,419
|
|
Diluted
|
|
15,830
|
|
|
16,195
|
|
|
15,417
|
|
|
16,013
|
|
|
COMPUTER TASK GROUP, INCORPORATED (CTG)
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct.
2,
2009
|
|
|
Sept.
26,
2008
|
|
|
Oct.
2,
2009
|
|
|
Sept.
26,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
10,759
|
|
$
|
9,553
|
Accounts payable
|
$
|
6,346
|
|
$
|
9,499
|
|
Accounts receivable, net
|
|
44,321
|
|
|
54,971
|
Accrued compensation
|
|
21,503
|
|
|
29,103
|
|
Other current assets
|
|
3,967
|
|
|
4,414
|
Other current liabilities
|
|
6,271
|
|
|
5,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
59,047
|
|
|
68,938
|
Total Current Liabilities
|
|
34,120
|
|
|
43,843
|
|
Property and equipment, net
|
|
7,835
|
|
|
6,758
|
Long-term debt
|
|
-
|
|
|
-
|
|
Goodwill
|
|
35,678
|
|
|
35,678
|
Other liabilities
|
|
8,768
|
|
|
9,334
|
|
Other assets
|
|
11,820
|
|
|
10,035
|
Shareholders' equity
|
|
71,492
|
|
|
68,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
114,380
|
|
$
|
121,409
|
Total Liabilities and
Shareholders' Equity
|
$
|
114,380
|
|
$
|
121,409
|