CTG (NASDAQ: CTGX), an international information technology (IT)
solutions and services company, announced its financial results for
the 2010 first quarter which ended on April 2, 2010. Increased
client demand for external IT resources and new healthcare
solutions projects were the primary drivers of CTG’s significant
growth in revenue, margins, and earnings in the 2010 first
quarter.
CTG reported 2010 first quarter revenue of $78.5 million, a 5%
increase from 2009 first quarter revenue of $74.6 million and a 16%
increase from 2009 fourth quarter revenue of $67.7 million. On a
sequential basis, revenue per billing day increased by 11% from the
2009 fourth quarter. CTG’s operating income was $3.1 million, a 28%
improvement from $2.4 million a year ago. The operating margin
expanded by 70 basis points to 3.9% from 3.2% in the 2009 first
quarter. Net income for the first quarter of 2010 was $1.8 million,
37% higher than 2009 first quarter net income of $1.3 million. On a
per diluted share basis, net income was $0.11, a 22% increase from
$0.09 in the 2009 first quarter.
“Our 2010 first quarter results were very favorable with
revenue, margins, and earnings all increasing over last year,” said
CTG Chairman and Chief Executive Officer James R. Boldt. “The
strength of our current business, an increase in proposals for new
electronic medical records (EMR) projects, and further growth in
client demand for technical resources, is prompting us to increase
our 2010 revenue and earnings guidance. At the end of the first
quarter, we closed on a significant multi-year engagement for a
large physician practice that includes an enterprise-wide
electronic health records system implementation to meet the
meaningful use criteria for receiving federal stimulus money. In
addition, in the first quarter of 2010 one of the largest states
notified us that we had been selected to perform state-wide
planning for Health Information Exchanges. This award is funded by
the American Recovery and Reinvestment Act of 2009 (“ARRA”) through
the Office of the National Coordinator for Health Information
Technology (‘ONC”). We also anticipate bidding on several new EMR
opportunities in the second quarter of 2010.”
Mr. Boldt added, “Healthcare remains the market with the
greatest opportunity for CTG to measurably increase our mix of
higher margin solutions work. Healthcare revenue in the first
quarter was 27% of total revenue in the quarter. Electronic medical
records projects represented 11% of total revenue in the quarter,
indicating the start of a favorable growth trend from 9% of total
annual revenue in 2009. Reflecting our excellent reputation and
track record as an EMR provider, CTG was recently cited in
Information Week as one of the top three firms for healthcare
organizations looking for help in implementing electronic medical
records and other health IT investments.”
2010 First Quarter Review
Solutions revenue in the 2010 first quarter increased by $0.1
million to $25.1 million, and represented 32% of total revenue.
Staffing revenue increased by $3.8 million to $53.4 million, or 68%
of total revenue. European revenue was $16.6 million, or 21% of
total revenue, in the 2010 first quarter, compared with $17.7
million, or 24% of total revenue, in the 2009 first quarter.
Foreign currency exchange fluctuations had a $0.9 million favorable
effect on revenue in the quarter. There were 65 billing days in the
2010 first quarter compared with 66 billing days in the 2009 first
quarter.
Selling, general, and administrative (SG&A) expenses were
$13.9 million, or 17.7% of revenue, compared with $14.3 million, or
19.2% of revenue, in the 2009 first 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 first quarter was 41%
compared with 42% in the 2009 first quarter.
The Company used cash from operations of $5.0 million in the
2010 first quarter compared with cash used from operations of $0.4
million in the 2009 first quarter. At April 2, 2010, the Company
had $4.2 million in cash compared with $7.9 million at the end of
the 2009 first quarter. At the 2010 first quarter end, outstanding
debt was $0.9 million compared with no debt a year earlier. CTG
finances its working capital needs through a $35 million revolving
credit agreement that is in place through April 2011.
Stock Repurchase Program
CTG repurchased 131,000 of its shares in the 2010 first quarter
at an average price of $7.26 per share. In April 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 April
20, 2010, approximately 400,000 shares were available under its
current repurchase authorizations.
Stronger Outlook for 2010 Drives Increase in Revenue and
Earnings Guidance
The Company is providing guidance for the 2010 second quarter.
CTG expects its 2010 second quarter revenue to range from $78
million to $82 million, a 20% increase from 2009 at the midpoint of
this range. The Company projects 2010 second quarter net income per
diluted share of $0.11 to $0.13, a 33% increase from 2009 at the
midpoint of this range. There are 64 billing days in the 2010
second quarter compared with 63 billing days in the 2009 second
quarter.
Based on the strength of its current business and trends in its
healthcare and staffing businesses, CTG has raised its 2010 revenue
and earnings guidance. The Company is increasing the range of its
2010 revenue guidance from $301 million to $309 million to $314
million to $322 million, a 15% increase from 2009 at the midpoint
of this range. The Company currently projects 2010 net income per
diluted share of $0.47 to $0.55, a $0.01 increase from the initial
range and a 34% increase from 2009 at the midpoint of the new
range. A tax rate of approximately 41% is projected for 2010.
Mr. Boldt commented, “All indicators are that 2010 will be a
very good year for CTG, reinforcing our forecast of a return to
double-digit revenue and earnings growth. Consistent with a normal
economic recovery cycle, in the 2010 first quarter our managed
services staffing business continued to grow at the strong and
steady pace that began in mid-2009. EMR proposal activity appears
to be accelerating as credit is becoming more available to help
healthcare providers implement the systems to meet the meaningful
use criteria for receiving federal stimulus money. Additionally,
the first portion of the $19 billion in federal stimulus funds
allocated to EMRs has been released to help states advance EMR
projects.
EMRs are an exceptionally large multi-year opportunity that is
just beginning and is expected to drive healthcare IT spending for
several years. As an industry leader in healthcare IT with
substantial EMR expertise and experience, CTG is in a very strong
position to capitalize on this opportunity. Additionally in the
first quarter, we started work on the first engagement using our
medical care management tool, and see this offering and our other
medical informatics solutions having the potential to add
significantly to our long-term profitability. Our strategy
continues to be to focus our growth initiatives and solutions
investments on healthcare offerings that generate higher margins
than traditional solutions work. We are confident this strategy
will produce significant gains in CTG’s revenue and earnings in the
years ahead.”
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 3,100 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 April 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 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 April 28, 2010 and 11:00 p.m. Eastern Time May 1,
2010 by dialing 1-800-475-6701 and entering the conference ID
number 121485.
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)
For the Quarter Ended
April 2,
April 3,
2010
2009
Revenue $ 78,489 $ 74,556 Direct costs 61,481 57,836
Selling, general and administrative expenses 13,919
14,313 Operating income 3,089 2,407 Other expense,
net (47 ) (151 ) Income before income taxes 3,042
2,256 Provision for income taxes 1,256 954
Net income $ 1,786 $ 1,302 Net income
per share: Basic $ 0.12 $ 0.09 Diluted $ 0.11
$ 0.09 Weighted average shares outstanding: Basic
14,722 14,943 Diluted 16,006 15,046
COMPUTER TASK GROUP,
INCORPORATED (CTG)
Condensed Consolidated Balance
Sheets
(Unaudited)
(amounts in thousands)
April 2,
April 3,
April 2,
April 3,
2010
2009
2010
2009
Current Assets: Current Liabilities: Cash and cash equivalents $
4,163 $ 7,891 Accounts payable $ 5,652 $ 6,266 Accounts receivable,
net 51,949 46,380 Accrued compensation 20,088 20,841 Other current
assets 3,392 3,844 Other current liabilities
6,562 6,421 Total Current Assets 59,504 58,115 Total Current
Liabilities 32,302 33,528 Property and equipment, net 8,284 7,118
Long-term debt 945 - Goodwill 35,678 35,678 Other liabilities 9,456
8,864 Other assets 11,643 9,442 Shareholders’ equity
72,406 67,961 Total Liabilities and Total Assets $
115,109 $ 110,353 Shareholders’ Equity $ 115,109 $ 110,353
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