CTG (NASDAQ: CTGX), an international information technology (IT)
solutions and services company, announced its financial results for
the 2010 third quarter which ended on October 1, 2010. The
continued increase in client demand for external IT resources and
ramp-up of new electronic medical records (EMR) solutions projects
were the primary contributors to CTG’s significant growth in
revenue and earnings in the 2010 third quarter.
Strong Third Quarter 2010 Results Driven by Managed Staffing
Services and Healthcare Businesses
Revenue, operating income, net income, and diluted net income
per share for the 2010 third quarter as compared with the 2009
third quarter were as follows:
Oct. 1, 2010 Oct. 2, 2009
$ Change
% Change Revenue $ 84,463 $
66,771 $ 17,692 26.5 % Operating income $ 3,117 $ 2,488 $ 629 25.3
% Net income $ 2,027 $ 1,606 $ 421 26.2 % Diluted net income per
share $ 0.13 $ 0.10 $ 0.03 30.0 %
The Company’s operating margin was 3.7% in both the 2010 and
2009 third quarters. The contraction in the margin from 4.3% in the
2010 second quarter reflects higher than expected growth in the
lower margin managed staffing services business and the decline in
utilization rates normally seen in the third quarter due to
vacation time taken by the billable staff.
“A very strong quarter in our managed staffing services
business, along with continued growth in healthcare business,
pushed revenue above our forecast and earnings to the top end of
our guidance,” CTG Chairman and Chief Executive Officer James R.
Boldt said. “Demand for technical resources from our clients is
still strong and we are staffing up for new healthcare solutions
work, resulting in a 200 person addition to our headcount in the
quarter. Healthcare revenue increased 32% over last year’s third
quarter reflecting significant growth in EMR projects and
healthcare work across the board. We are currently working on 13
large EMR projects and received six major EMR RFPs in the third
quarter and anticipate client decisions on those projects to be
made during the fourth quarter. With the recent improvements in the
credit markets and the monies available for EMR in The American
Recovery and Reinvestment Act of 2009, we expect the number of EMR
projects to appreciably grow.”
“Given the growing shortage of experienced EMR consultants, in
2010 we began to prepare for the further acceleration of EMR work
by developing a comprehensive EMR training program. The consultants
we trained under this program earlier this year are now performing
very well at client sites. We are confident that our readiness and
proven ability to train EMR technical resources give us a
competitive edge in pursuing new EMR work going forward.”
2010 Third Quarter Review
Solutions revenue in the 2010 third quarter increased 24%, or
$5.5 million, to $28.5 million, or 34% of total revenue. Staffing
revenue increased 28%, or $12.2 million, to $56.0 million, or 66%
of total revenue. European revenue was $13.8 million, or 16% of
total revenue, in the 2010 third quarter, compared with $14.8
million, or 22% of total revenue, in the 2009 third quarter.
Revenue from our European operations was negatively affected by
$1.5 million in the 2010 third quarter due to a change in foreign
currency exchange rates as compared with the 2009 third quarter.
There were 63 billing days in the 2010 third quarter compared with
64 billing days in the 2009 third quarter.
Selling, general, and administrative (SG&A) expenses were
$14.2 million, or 16.8% of revenue, compared with $12.7 million, or
19.0% of revenue, in the 2009 third quarter. The decline in
SG&A as a percent of revenue reflects the operating leverage
from revenue growth and the change in the Company’s business mix
resulting from an increase in the Company’s lowest margin IT
staffing business in 2010, which has significantly lower SG&A
costs compared with the Company’s IT solutions business.
The Company recorded equity-based compensation expense, net of
tax, of $0.2 million in the 2010 third quarter compared with $0.3
million in the 2009 third quarter, which reduced net income per
diluted share by $0.01 and $0.02 in the respective quarters.
CTG’s effective tax rate for the 2010 third quarter was 34%
compared with 35% in the 2009 third quarter. Favorable tax
adjustments associated with the completion of a tax examination and
the filing of state tax returns added approximately one cent to net
income per share in the 2010 third quarter and one-half cent in the
2009 third quarter.
The Company provided cash from operations of $0.9 million in the
2010 third quarter compared with cash used from operations of $2.9
million in the 2009 third quarter. At October 1, 2010, the Company
had $9.8 million in cash compared with $10.8 million at the end of
the 2009 third quarter. CTG had no debt at the end of the 2010 and
2009 third quarters. CTG finances its working capital needs through
a $35 million revolving credit agreement that is in place through
April 2011.
2010 Year-to-date Review
Results for the first three quarters of 2010 reflect the same
trends seen in the third quarter.
Revenue, operating income, net income, and diluted net income
per share for the first three quarters of 2010 as compared with the
first three quarters of 2009 were as follows:
Oct. 1, 2010 Oct. 2, 2009
$ Change
% Change Revenue $ 244,094 $
207,907 $ 36,187 17.4 % Operating income $ 9,695 $ 7,319 $
2,376 32.5 % Net income $ 5,718 $ 4,303 $ 1,415 32.9 % Diluted net
income per share $ 0.36 $ 0.28 $ 0.08 28.6 %
The Company’s operating margin in the first three quarters of
2010 expanded by 50 basis points to 4.0% from 3.5% in the same
period in 2009. During the first three quarters of 2010, CTG’s
solutions business increased 17% to $80.2 million, or 33% of total
revenue, and its staffing business grew 18% to $163.9 million, or
67% of total revenue. European revenue decreased 5.8% to $44.8
million in the first three quarters of 2010 and represented 18% of
consolidated revenue. Strong client demand for external technical
resources in 2010 accounted for a year-to-date increase in
headcount of 500, or 17%, since year-end 2009.
Selling, general, and administrative expenses were $42.4
million, or 17.4% of revenue, compared with $39.6 million, or 19.0%
of revenue, in the same 2009 period.
Stock Repurchase Program
CTG repurchased 90,000 of its shares in the 2010 third quarter
at an average price of $7.48 per share. In October 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 October
25, 2010, approximately 228,000 shares were available under CTG’s
current repurchase authorizations.
Fourth Quarter Expected to Produce Highest Quarterly Revenue
and EPS of 2010
CTG expects its 2010 fourth quarter revenue to range from $85
million to $87 million, a 27% increase from 2009 at the midpoint of
the projected range. The Company expects 2010 fourth quarter net
income per diluted share of $0.13 to $0.15, a 40% increase from
2009 fourth quarter at the midpoint of the projected range. There
are 62 billing days in both the 2010 and 2009 fourth quarters.
Revenue and diluted earnings per share in the 2009 fourth quarter
were $67.7 million and $0.10, respectively.
Based on the strength of its current business and trends in its
healthcare and staffing businesses, CTG increased its 2010 revenue
guidance to $329 million to $331 million from $320 million to $328
million, a 20% increase from 2009 at the midpoint of the new
projected range. The guidance range for net income per diluted
share was moved higher to $0.49 to $0.51 from $0.45 to $0.51, a 32%
increase from 2009 at the midpoint of the new projected range. A
tax rate of approximately 40% is projected for 2010.
Mr. Boldt commented, “Coming into the end of the year, our
managed staffing services and healthcare solutions businesses are
both performing very well, prompting us to raise our revenue
guidance again and to tighten our earnings guidance upward. Even
with the lowest number of billing days of any quarter in 2010, we
expect fourth quarter revenue and earnings per share to be the
highest of this year. Demand in our staffing business continues to
rise, but we expect the pace of that growth to subside in the first
half of 2011 as the economic recovery gains more traction and our
clients begin to make more internal hires. We look for our higher
margin healthcare business to stay on a strong growth track as our
newer EMR engagements ramp up and based on our expectation that we
will continue to win new EMR business.”
Mr. Boldt concluded, “In 2010 we began work on the first
contract for our medical management treatment tool which identifies
treatment models that enhance value-based outcomes for patients
with chronic kidney disease. Based on recent new funding we expect
the scope of our work on this project will grow in 2011. The
longer-term growth prospects for our other data analytics solutions
for the healthcare market also remain very promising as these
offerings increase efficiency and lower costs. In the near term, we
expect EMR projects to be the primary growth driver of our business
and profitability as both the number and size of EMR RFPs is
increasing. Based on market trends and our pipeline of new work,
our visibility going into 2011 is very positive, encouraging us as
to what next year will look like for CTG.”
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 3,400 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 on Wednesday October 27, 2010 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 27, 2010 and 11:00 p.m. Eastern Time
October 30, 2010 by dialing 1-800-475-6701 and entering the
conference ID number 121487.
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 For the Three
Quarters Ended Oct. 1,2010 Oct.
2, 2009 Oct. 1,2010 Oct. 2,
2009 Revenue $ 84,463 $ 66,771 $ 244,094 $ 207,907
Direct costs 67,189 51,570 192,020 161,034 Selling, general and
administrative expenses 14,157 12,713
42,379 39,554 Operating income 3,117
2,488 9,695 7,319 Other expense, net (41 ) (29 )
(159 ) (209 ) Income before income taxes 3,076 2,459
9,536 7,110 Provision for income taxes 1,049
853 3,818 2,807 Net income $
2,027 $ 1,606 $ 5,718 $ 4,303
Net income per share: Basic $ 0.14 $ 0.11 $ 0.39
$ 0.29 Diluted $ 0.13 $ 0.10 $ 0.36
$ 0.28 Weighted average shares outstanding:
Basic 14,666 14,680 14,705 14,833 Diluted 15,904 15,830 16,002
15,417
COMPUTER TASK GROUP, INCORPORATED
(CTG)
Condensed Consolidated Balance
Sheets
(Unaudited)
(amounts in thousands)
Oct. 1,2010 Oct. 2, 2009 Oct.
1,2010 Oct. 2, 2009 Current Assets:
Current Liabilities: Cash and cash equivalents $ 9,814 $ 10,759
Accounts payable $ 7,718 $ 6,346 Accounts receivable, net 56,960
44,321 Accrued compensation 26,720 21,503 Other current assets
3,748 3,967 Other current liabilities 5,611
6,271 Total Current Assets 70,522 59,047 Total
Current Liabilities 40,049 34,120 Property and equipment, net 8,457
7,835 Long-term debt - - Goodwill 35,678 35,678 Other liabilities
9,432 8,768 Other assets 11,002 11,820 Shareholders’
equity 76,178 71,492 Total Assets $ 125,659 $
114,380 Total Liabilities andShareholders’ Equity $ 125,659 $
114,380
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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