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.
COMPUTER TASK GROUP, INCORPORATED (CTG) Condensed
Consolidated Statements of Income (Unaudited)
(amounts in thousands except per share data)
For the Quarter Ended
For the TwoQuarters
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 andShareholders’ Equity $
118,859
$ 113,942
Today’s news release, along with CTG news releases for the past
year, is available on the Web at www.ctg.com.
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