CTG (NASDAQ: CTGX), an international information technology (IT)
solutions and services company, announced its financial results for
the 2010 fourth quarter and full year which ended on December 31,
2010. CTG’s significant increase in revenue, margins, and earnings
in the 2010 fourth quarter and full year primarily reflect growth
in the Company’s healthcare IT and managed services staffing
businesses.
Strong Margin and Earnings Growth Highlight Fourth Quarter
Results
Revenue, operating income, net income, and diluted net income
per share for the 2010 fourth quarter as compared with the 2009
fourth quarter were as follows:
Dec. 31, 2010
Dec. 31, 2009
$ Change
% Change
Revenue $ 87,313 $ 67,653 $ 19,660 29.1% Operating income $
4,235 $ 2,570 $ 1,665 64.8% Net income $ 2,654 $ 1,630 $ 1,024
62.8% Diluted net income per share $ 0.16 $ 0.10 $ 0.06 60.0%
The Company’s operating margin in the 2010 fourth quarter was
4.9%, a 110 basis point increase from 3.8% in the 2009 fourth
quarter. A research and development tax credit added one cent to
2010 fourth quarter net income per diluted share.
“CTG’s fourth quarter performance was very strong topping off an
excellent year marked by a robust return to double digit revenue
and earnings growth,” CTG Chairman and Chief Executive Officer
James R. Boldt said. “Even with the lowest number of billing days
of any quarter in 2010, fourth quarter revenue and earnings were
the highest of the year coming in at the top end of our guidance.
High demand for technical resources from our U.S. clients and our
growing healthcare IT business were the primary contributors to our
strong results in the quarter and throughout 2010.”
Mr. Boldt added, “The profitability of CTG’s business expanded
significantly in 2010 with our operating margin in the fourth
quarter 110 basis points higher than last year. The growth in
healthcare solutions work, particularly EMR projects, combined with
the operating leverage from revenue growth, are driving this higher
level of profitability that we expect to carry over into 2011. We
are currently working on 13 significant EMR engagements, and were
notified in the first quarter of 2011 that we had won four
additional projects.”
2010 Fourth Quarter Review
Solutions revenue in the 2010 fourth quarter increased 41%, or
$9.1 million, to $31.2 million, or 36% of total revenue, compared
with 33% of total revenue in the 2009 fourth quarter. Staffing
revenue increased 23%, or $10.6 million, to $56.1 million, or 64%
of total revenue, compared with 67% in the 2009 fourth quarter.
European revenue was $15.9 million, or 18% of total revenue, in the
2010 fourth quarter, compared with $15.2 million, or 23% of total
revenue, in the 2009 fourth quarter. Revenue from our European
operations was negatively affected by $1.3 million in the 2010
fourth quarter due to an adverse change in foreign currency
exchange rates as compared with the 2009 fourth quarter. There were
62 billing days in both the 2010 and 2009 fourth quarters.
Selling, general, and administrative (SG&A) expenses were
$14.9 million, or 17.1% of revenue, compared with $12.4 million, or
18.4% of revenue, in the 2009 fourth quarter. The decline in
SG&A as a percent of revenue reflects operating leverage from
revenue growth and continued discipline in managing costs.
The Company recorded equity-based compensation expense, net of
tax, of $0.2 million in the 2010 fourth quarter compared with $0.3
million in the 2009 fourth quarter, which reduced net income per
diluted share by $0.01 and $0.02 in the respective quarters.
CTG’s effective tax rate was 37% and 36%, respectively, in the
2010 and 2009 fourth quarters. The Company’s tax rate in the 2010
fourth quarter was favorably affected by the U.S. federal Research
and Development Credit which increased net income by approximately
one cent per diluted share.
Cash provided by operations in the 2010 fourth quarter increased
to $6.6 million from cash provided by operations of $0.3 million in
the 2009 fourth quarter, in part due to a significant increase in
net income. At December 31, 2010, the Company had $14.8 million in
cash compared with $10.4 million at the end of the 2009 fourth
quarter. CTG had no debt at the end of the 2010 and 2009 fourth
quarters. CTG finances its working capital needs through a $35
million revolving credit agreement which was extended in the 2010
fourth quarter through April 2014.
2010 Full Year Review
Results for the 2010 full year reflect the same trends seen in
the fourth quarter.
Revenue, operating income, net income, and diluted net income
per share for 2010 as compared with 2009 were as follows:
2010
2009
$ Change
% Change
Revenue $ 331,407 $ 275,560 $ 55,847 20.3% Operating income
$ 13,930 $ 9,889 $ 4,041 40.9% Net income $ 8,372 $ 5,933 $ 2,439
41.1% Diluted net income per share $ 0.52 $ 0.38 $ 0.14 36.8%
The Company’s operating margin in 2010 expanded by 60 basis
points to 4.2% from 3.6% in 2009. In 2010, CTG’s solutions business
increased 22% to $111.4 million, or 34% of total revenue, and its
staffing business grew 20% to $220.0 million, or 66% of total
revenue. European revenue decreased 3.2% in 2010 to $60.7 million
and represented 18% of total revenue. Strong client demand for
external technical resources in 2010 accounted for an increase in
headcount of 500, or 17%, to 3,400 at year-end 2010.
Selling, general, and administrative expenses were $57.3
million, or 17.3% of revenue, compared with $52.0 million, or 18.9%
of revenue, in 2009. In 2010, CTG recorded $1.7 million in
depreciation and $2.0 million for capital expenditures.
Stock Repurchase Program
The Company repurchased 59,000 of its shares at an average price
of $10.33 per share in the 2010 fourth quarter. In 2010, the
Company repurchased 381,000 shares at an average price of $7.83 per
share. In January 2011, 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 February 21, 2011, the Company was
authorized to acquire approximately 0.2 million shares under its
prior repurchase program.
Reflecting continued confidence in the Company’s future
prospects, CTG’s Board of Directors approved a new 1.0 million
share repurchase authorization announced today. Combined with this
new authorization, approximately 1.2 million shares are currently
available for repurchase by the Company.
2011 Guidance Reflects Another Year of Double-digit Revenue
and Earnings Growth
CTG is issuing initial guidance for 2011 based on its current
business activity and forecast, and assuming that growth in its
healthcare business will accelerate as demand for EMR support
increases and that its U.S. staffing business will continue to grow
but at a lower rate than 2010. Reflecting these assumptions, CTG
expects its 2011 first quarter revenue to range from $90 million to
$93 million, a 17% increase from 2010 at the midpoint of this
range. The Company projects 2011 first quarter net income per
diluted share of $0.15 to $0.17, a 45% increase from 2010 at the
midpoint of this range. There are 65 billing days in the 2011 first
quarter, the same number as the 2010 first quarter.
CTG expects that its 2011 revenue will range from $365 million
to $385 million, a 13% increase from 2010 at the midpoint of this
range. The Company is currently forecasting 2011 net income per
diluted share of $0.63 to $0.73, a 31% increase from 2010 at the
midpoint of this range. A tax rate of 38% to 40% is projected for
2011.
Mr. Boldt commented, “Strategically and financially, CTG is on
an excellent course. Our vertical market strategy with a focus on
the healthcare market produced a five year compound annual growth
rate of 30% in earnings per share during a challenging time for the
IT services industry and a major global recession. In 2010, CTG
grew at a rate well above the IT services industry reinforcing our
position as a growth company in our industry. Our business mix is
starting to shift to a higher level of solutions work and that is
reflected in the expansion of our margins in 2010. We also ended
the year with no debt and $15 million in cash. We expect 2011 to be
another year of double-digit growth driven by increasing volumes of
higher margin solutions work, primarily EMR-related projects in our
healthcare business.”
Mr. Boldt continued, “Given our strength in this category and
the deadlines for federal stimulus incentives for implementing
electronic health record systems, EMRs are clearly our best
opportunity to grow CTG’s business, earnings, and value over the
next few years. We will also continue to sell and build our
portfolio of medical informatics and data analytics solutions to
enhance our mix of higher margin solutions work and long-term
growth prospects. Our strategy, results, and the strength of our
business continue to point CTG in the direction of strong and
increasingly profitable growth.”
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 February 23, 2011
at 10:00 a.m. 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
1-888-276-0009 between 9:45 a.m. and 9:50 a.m., 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 February 23, 2011 and 11:00 p.m. Eastern Time
February 26, 2011 by dialing 1-800-475-6701 and entering the
conference ID number 175309.
A webcast of the call will be available on CTG’s web site:
http://www.ctg.com. 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 Year Ended
Dec. 31,2010 Dec. 31, 2009
Dec. 31,2010 Dec. 31, 2009
Revenue $ 87,313 $ 67,653 $ 331,407 $ 275,560 Direct costs
68,152 52,667 260,172 213,701 Selling, general and administrative
expenses 14,926 12,416 57,305 51,970
Operating income 4,235 2,570 13,930 9,889 Other expense, net
(2) (4) (161) (213) Income before income taxes
4,233 2,566 13,769 9,676 Provision for income taxes 1,579
936 5,397 3,743 Net income $ 2,654 $ 1,630 $
8,372 $ 5,933 Net income per share: Basic $ 0.18 $ 0.11 $
0.57 $ 0.40 Diluted $ 0.16 $ 0.10 $ 0.52 $ 0.38 Weighted
average shares outstanding: Basic 14,674 14,732 14,697 14,808
Diluted 16,287 15,944 16,073 15,549
COMPUTER TASK GROUP, INCORPORATED
(CTG)
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)
Dec. 31,2010 Dec.
31, 2009 Dec. 31,2010 Dec. 31,
2009 Current Assets: Current Liabilities: Cash and
cash equivalents $ 14,837 $ 10,423 Accounts payable $ 6,595 $ 7,741
Accounts receivable, net 57,540 45,423 Accrued compensation 29,646
20,095 Other current assets 3,102 3,382 Other current
liabilities 6,193 5,619 Total Current Assets
75,479 59,228 Total Current Liabilities 42,434 33,455 Property and
equipment, net 8,364 8,146 Long-term debt - - Goodwill 35,678
35,678 Other liabilities 9,919 9,549 Other assets 10,752
11,670 Shareholders’ equity 77,920 71,718
Total Assets $ 130,273 $ 114,722 Total Liabilities
andShareholders’ Equity $ 130,273 $ 114,722
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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