BUFFALO, N.Y., Oct. 22, 2012 /PRNewswire/ --
- Operating margin increased 140 basis points to 5.9%
in third quarter 2012
- Healthcare revenue was 33% of total revenue up from 30% in
third quarter 2011
- Solutions revenue increased 13% to 42% of total revenue up
from 39% in third quarter 2011
CTG (NASDAQ: CTGX), an information technology (IT) solutions and
services company, announced its financial results for the 2012
third quarter which ended on September
28, 2012. The increase in higher margin solutions work
from the continued ramp-up of new healthcare projects and the
expansion of larger multi-project healthcare engagements was the
primary contributor to the strength of 2012 third quarter financial
results.
2012 Third Quarter Review
Revenue, operating income, net income, and diluted net income
per share for the 2012 third quarter as compared with the 2011
third quarter were as follows (dollar amounts in thousands except
per share data):
|
Sept.
28, 2012
|
|
Sept.
30, 2011
|
|
$
Change
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
106,418
|
|
$
|
101,119
|
|
$
|
5,299
|
|
5%
|
Operating
income
|
$
|
6,323
|
|
$
|
4,576
|
|
$
|
1,747
|
|
38%
|
Net
income
|
$
|
3,813
|
|
$
|
2,991
|
|
$
|
822
|
|
27%
|
Diluted
net income per share
|
$
|
0.23
|
|
$
|
0.18
|
|
$
|
0.05
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
The Company's operating margin improved by 140 basis points to
5.9% from 4.5% in the 2011 third quarter.
"CTG delivered another quarter of strong financial results with
the increasing volume and profitability of solutions work in our
healthcare business continuing to drive this year's significant
growth in margins and earnings," said CTG Chairman and Chief
Executive Officer James R.
Boldt. "Revenue from our healthcare division increased
17% in the quarter and for the second consecutive quarter was
one-third of CTG's total revenue. As expected, the softness
in the economy is muting growth in our less profitable staffing
business which was stable in the quarter. The combined effect
of these results is the continued favorable shift in CTG's business
mix to an increased percentage of higher margin solutions revenue
which was at least 40% of total revenue for the fourth consecutive
quarter."
Mr. Boldt added, "Growing our healthcare IT business remains the
major focus of CTG's growth strategy and our success in that effort
is reflected in healthcare revenue growth of 20% thus far in
2012. This year's growth in our healthcare business is coming
from both the provider and payer markets in a variety of areas
including electronic medical records (EMR) and other system
implementations, application management outsourcing, and consulting
work. The ramp-up and expansion of large EMR projects
continued in the third quarter with a 25% increase in EMR revenue
in the quarter to 17% of CTG's total revenue. At quarter end,
we were working on 18 large EMR projects and three proposals,
previously bid on, are awaiting client decisions."
Solutions revenue in the 2012 third quarter increased by
$5.1 million or 13% to $44.2 million, representing 42% of total revenue
compared with 39% in the 2011 third quarter. Staffing revenue
was $62.2 million, or 58% of total
revenue, compared with $62.0 million,
or 61% of total revenue in the 2011 third quarter. European
revenue increased 2% to $16.3
million, or 15% of total revenue, compared with $16.0 million, or 16% of total revenue, in the
2011 third quarter. Foreign currency exchange fluctuations
had a $2.1 million unfavorable effect
on revenue in the quarter compared with the 2011 third
quarter. As a leading Belgian provider of IT services based
in Brussels, the location of most
European Union (EU) operations, CTG Europe continues to benefit
from growth in EU spending on external IT support that is
offsetting lower corporate IT spending and the negative movement in
foreign currency exchange. There were 63 billing days in the
third quarter of 2012 and 2011.
Selling, general, and administrative (SG&A) expenses in the
2012 third quarter were $16.8
million, or 15.8% of revenue, compared with $16.4 million, or 16.2% of revenue, in the 2011
third quarter. The more favorable SG&A expense ratio in
the 2012 third quarter reflects continued cost control and the
effect of operating leverage from revenue growth.
Cash provided by operations was $6.2
million in the 2012 third quarter compared with cash
provided by operations of $2.8
million in the 2011 third quarter. At September 28, 2012, the Company had $29.4 million in cash compared with $12.6 million at the end of the 2011 third
quarter. The Company had no outstanding debt at the end of
the 2012 and 2011 third quarters.
The Company's tax rate for the quarter was 39%.
2012 Year-to-date Review
Results for the first three quarters of the year 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 2012 as compared with the first three quarters of
2011 are as follows (dollar amounts in thousands except per share
data):
|
Sept.
28, 2012
|
|
Sept.
30, 2011
|
|
$
Change
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
316,490
|
|
$
|
295,355
|
|
$
|
21,135
|
|
7%
|
Operating
income
|
$
|
18,065
|
|
$
|
13,852
|
|
$
|
4,213
|
|
30%
|
Net
income
|
$
|
11,296*
|
|
$
|
8,649
|
|
$
|
2,647
|
|
31%
|
Diluted
net income per share
|
$
|
0.67*
|
|
$
|
0.52
|
|
$
|
0.15
|
|
29%
|
|
|
|
|
|
|
|
|
|
|
|
*Includes
the effect of one-time proceeds of $0.4 million, or 2 ½ cents per
diluted share, from life insurance
proceeds paid to the Company in the 2012 second quarter.
|
The Company's operating margin increased by 100 basis points to
5.7% in the first three quarters of 2012 from 4.7% in the same
period of 2011. During the first three quarters of 2012,
CTG's solutions business increased 21% to $129.6 million, or 41% of total revenue, and its
staffing business was stable at $186.9
million, or 59% of total revenue. European revenue was
$50.3 million in the first three
quarters of 2012 and represented 16% of total revenue, consistent
with $50.5 million or 17% of total
revenue in the comparable 2011 period.
Selling, general, and administrative expenses were $49.8 million, or 15.7% of revenue, compared with
$47.6 million, or 16.1% of revenue,
in the first three quarters of 2012.
Stock Repurchase Program
CTG repurchased 38,000 of its shares in the 2012 third quarter
at an average price of $14.32 per
share. In October 2012, 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
September 28, 2012, approximately
550,000 shares were available for repurchase under current
authorizations.
2012 Fourth Quarter and Full Year Guidance
CTG is providing guidance for the 2012 fourth quarter and 2012
full year in the table below. Based on year-to-date results
and trends in its business, the Company's range of revenue guidance
has been tightened with the midpoint of revenue guidance unchanged
from that provided in its 2012 second quarter earnings release. The
range of earnings guidance provided in the same news release has
been tightened with the midpoint of earnings guidance increasing
due to the strength of the third quarter results. Earnings guidance
excludes a gain of 5 cents per
diluted share anticipated in the 2012 fourth quarter as a result of
proceeds from a life insurance policy on a former CTG executive who
passed away early in the quarter.
2012
Fourth Quarter (64 billing days vs. 63 in Q4 2011)
|
Range
|
Range
midpoint
|
Change
from 2011 fourth
quarter at range midpoint
|
|
|
|
|
Revenue
|
$108-$110
million
|
$109
million
|
+
8%
|
Diluted
net income per share *
|
$0.22 -
$0.24
|
$0.23
|
+
15%
|
|
|
|
|
|
|
|
|
2012
Full Year (Projected tax rate of 38% to
40%)
|
Range
|
Range
midpoint
|
Change
from 2011
at
range midpoint
|
|
|
|
|
Revenue
|
$424-$426 million
|
$425
million
|
+
7%
|
Diluted
net income per share **
|
$0.87 -
$0.89
|
$0.88
|
+
24%
|
|
|
|
|
*Excludes
anticipated gain of 5 cents from life insurance proceeds
|
**Excludes
7 ½ cents gain from life insurance proceeds (2 ½ cents in 2012
second quarter and 5 cents anticipated in 2012 fourth
quarter)
|
Mr. Boldt commented, "This year's strong growth in revenue from
our healthcare division, CTG's most profitable business unit, has
us in position to achieve our sixth year in the last seven of
robust double-digit earnings growth. Healthcare revenue is
now about one-third of total revenue furthering CTG's
transformation to an IT services and solutions company with a
primary focus on healthcare IT. As we grow our healthcare
business, we are also advancing our position as an industry leader
in healthcare IT as reflected in CTG placing tenth in the Modern
Healthcare 2012 annual ranking of the largest healthcare
management consulting firms, three spots above the 2011
survey."
Mr. Boldt concluded, "With operating margins just under six
percent in the last two quarters and healthcare revenue expected to
continue growing at a brisk pace, we are moving very close to
reaching our goal of operating margins between six and seven
percent. Looking to 2013 and beyond, there are multiple
opportunities to continue growing our healthcare business including
EMR and other system implementations and optimizations, ICD-10
compliance, application management outsourcing, consulting work,
and our proprietary medical analytics tools. Additionally,
our position as a healthcare IT industry leader on the provider
side of the business, combined with a solid foothold in the payer
market, presents further growth opportunities particularly as these
two market segments continue to converge."
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 over 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 has approximately 3,800
employees and operates 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 2011 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 Tuesday, October
23, 2012 at 10:00 a.m. 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 a.m. and 9:50 a.m. and
ask for the CTG conference call. A replay of the call will be
available between 12:00 p.m. Eastern
Time October 23, 2012 and
11:00 p.m. Eastern Time October 26, 2012 by dialing 1-800-475-6701 and
entering the conference ID number 221721.
A live 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
Three
Quarters Ended
|
|
|
|
Sept.
28,
|
|
Sept.
30,
|
|
Sept.
28,
|
|
Sept,
30
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
106,418
|
|
$
|
101,119
|
|
$
|
316,490
|
|
$
|
295,355
|
Direct
costs
|
|
|
83,283
|
|
|
80,152
|
|
|
248,608
|
|
|
233,858
|
Selling,
general and administrative expenses
|
|
16,812
|
|
|
16,391
|
|
|
49,817
|
|
|
47,645
|
Operating
income
|
|
|
6,323
|
|
|
4,576
|
|
|
18,065
|
|
|
13,852
|
Other
income (expense), net
|
|
|
(68)
|
|
|
50
|
|
|
266
|
|
|
(35)
|
Income
before income taxes
|
|
|
6,255
|
|
|
4,626
|
|
|
18,331
|
|
|
13,817
|
Provision
for income taxes
|
|
|
2,442
|
|
|
1,635
|
|
|
7,035
|
|
|
5,168
|
Net
income
|
|
$
|
3,813
|
|
$
|
2,991
|
|
$
|
11,296
|
|
$
|
8,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.25
|
|
$
|
0.20
|
|
$
|
0.75
|
|
$
|
0.58
|
|
Diluted
|
|
$
|
0.23
|
|
$
|
0.18
|
|
$
|
0.67
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,075
|
|
|
15,072
|
|
|
15,123
|
|
|
14,963
|
|
Diluted
|
|
|
16,800
|
|
|
16,723
|
|
|
16,807
|
|
|
16,747
|
COMPUTER TASK GROUP, INCORPORATED
(CTG)
|
Condensed Consolidated Balance
Sheets
|
(Unaudited)
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept.
28
|
|
December 31,
|
|
Sept.
30,
|
|
|
|
2012
|
|
2011
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
29,412
|
|
$
|
22,414
|
|
$
|
12,641
|
|
Accounts
receivable, net
|
|
|
70,600
|
|
|
67,801
|
|
|
68,254
|
|
Other
current assets
|
|
|
3,292
|
|
|
3,097
|
|
|
3,382
|
Total
current assets
|
|
|
103,304
|
|
|
93,312
|
|
|
84,277
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
7,061
|
|
|
7,969
|
|
|
8,367
|
|
Goodwill
|
|
|
35,678
|
|
|
35,678
|
|
|
35,678
|
|
Other
assets
|
|
|
9,545
|
|
|
10,533
|
|
|
11,630
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
155,588
|
|
$
|
147,492
|
|
$
|
139,952
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
9,593
|
|
$
|
9,532
|
|
$
|
7,968
|
|
Accrued
compensation
|
|
|
29,943
|
|
|
30,971
|
|
|
29,827
|
|
Other
current liabilities
|
|
|
6,272
|
|
|
7,423
|
|
|
5,078
|
Total
current liabilities
|
|
|
45,808
|
|
|
47,926
|
|
|
42,873
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
liabilities
|
|
|
10,427
|
|
|
10,761
|
|
|
9,801
|
|
Shareholders' equity
|
|
|
99,353
|
|
|
88,805
|
|
|
87,278
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders' Equity
|
|
$
|
155,588
|
|
$
|
147,492
|
|
$
|
139,952
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTER TASK GROUP, INCORPORATED
(CTG)
|
Condensed
Consolidated Statements Cash Flows
|
(Unaudited)
|
(amounts in thousands)
|
|
|
|
|
|
|
|
For the
Three
Quarters Ended
|
|
|
|
Sept.
28,
|
|
Sept.
30
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
11,296
|
|
$
|
8,649
|
|
Depreciation and amortization expense
|
|
|
1,976
|
|
|
1,627
|
|
Equity-based compensation expense
|
|
|
1,595
|
|
|
1,172
|
|
Other
operating items
|
|
|
(5,109)
|
|
|
(12,993)
|
Net cash
provided by (used in) operating activities
|
|
|
9,758
|
|
|
(1,545)
|
Net cash
used in investing activities
|
|
|
(1,202)
|
|
|
(1,521)
|
Net cash
provided by (used in) financing activities
|
|
|
(1,510)
|
|
|
871
|
Effect of
exchange rates on cash and cash equivalents
|
|
|
(48)
|
|
|
(1)
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
6,998
|
|
|
(2,196)
|
Cash and
cash equivalents at beginning of period
|
|
|
22,414
|
|
|
14,837
|
Cash and
cash equivalents at end of period
|
|
$
|
29,412
|
|
$
|
12,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTG news releases are available on the Web at
www.ctg.com.
ctgx-e
SOURCE CTG