Thomas Group, Inc. (Nasdaq:TGIS), a leading operational consulting
firm, today announced revenues of $15.6 million for the second
quarter of 2006, representing a 17% increase from the previous
quarter and a 33% increase when compared to the second quarter of
2005. Income from continuing operations before income taxes for the
second quarter was $4.1 million, or a 37% increase from the
previous quarter and a 17% increase when compared to the second
quarter of 2005. Net income for the second quarter was $2.6
million, or $0.23 per diluted share. For the first six months of
2006, net income was $4.7 million, or $0.43 per diluted share
compared to $3.0 million, or $0.28 per diluted share for the first
six months of 2005. "This is our second consecutive quarter of
double-digit revenue percentage growth and our highest quarterly
pre-tax income in over ten years," said Jim Taylor, CEO. "For the
first six months, we continued to increase revenue over comparable
prior periods and generate a 54% increase in fully diluted EPS over
last year, despite being fully taxed in 2006. The 50% increase in
our annual dividend announced during the second quarter is
indicative of our continuing ability to generate positive cash flow
and provide excellent returns for our shareholders." Taylor
continued, "While the consulting industry is expected to grow 6%
this year, we have grown 33% organically. I attribute this to the
outstanding value our people continue to bring to our clients. Many
process improvement methods exist; however, we believe Process
Value Management (PVM), when implemented by our Resultants who
average 25+ years business experience, produces superior results in
a shorter time frame than other methodologies." Second Quarter and
First Half 2006 Financial Performance: -- Revenue: Revenue for the
second quarter of 2006 was $15.6 million, which represents a $3.9
million increase, or 33%, from the second quarter of 2005.
Approximately 80% of the revenue increase is attributable to new
and expanded U.S. governmental contracts, with the remaining 20% of
the revenue growth being attributable to commercial clients.
Revenue for the first half of 2006 was $28.9 million, which
represents a $9.3 million, or 47% increase over the first half of
2006. Approximately 85% of the revenue increase is attributable to
new and expanded U.S. governmental contracts, with the remaining
15% of the revenue growth being attributable to commercial clients.
-- Gross Margins: Gross profit margins for the second quarter of
2006 were 54%, compared to 59% for the second quarter of 2005. The
decrease is primarily attributable to the timing of revenue
recognition in 2005 related to a certain government contract. Gross
profit margins for the first half of 2006 were 51% compared to 54%
for the first half of 2005. The decrease in 2006 gross margin
relates primarily to increases in travel costs and the accrual for
year-end bonuses. -- Selling, General & Administrative
(S,G&A): S,G&A costs for the second quarter of 2006
increased $1.1 million to $4.4 million from $3.3 million in the
second quarter of 2005, but remained at 28% of revenues. This
increase in dollars is primarily due to a $0.7 million increase in
stock-based compensation and $0.3 million increase in commercial
selling costs. For the first six months of 2006, S,G&A costs
increased $1.5 million to $7.8 million and 27% of revenue from $6.3
million and 32% of revenue in the first half of 2005. Although the
percentage of revenue decreased, the dollar increase is primarily
due to a $0.8 million increase in stock-based compensation, $0.4
million in commercial selling and marketing costs, $0.1 million in
sales commissions on increased revenue and $0.2 million in year-end
bonus accruals. -- Cash Flow: For the first six months of 2006, net
cash provided by operating activities was $3.0 million, compared to
$1.5 million for the first half of 2005. The increase in net cash
provided is primarily due to 2006 profits in excess of 2005
profits. Cash used for investing activities consisted primarily of
upgrades to office equipment and software and totaled $256,000 for
the first half of 2006 compared to $34,000 for the first half of
2005. Cash used for financing activities for the first half of 2006
was $0.2 million, consisting of $1.1 million in dividends paid
offset by $0.9 million in cash received and tax benefit realized
from the exercise of stock options. In the first half of 2005, net
cash used in financing activities was $1.5 million, comprised of
$1.8 million used to repay debt and $0.3 million generated from the
issuance of common stock upon the exercise of outstanding options
and warrants. For the first half of 2006, the net change in cash
was a net increase of $2.5 million, compared to a net increase of
$37,000 for the first half of 2005. Income Taxes: The Company
returned to a fully taxable rate of approximately 38% in the second
quarter of 2006, resulting in income tax expense of $1.6 million,
or $0.14 per diluted share. This compares unfavorably to an
effective rate of approximately 3% in the second quarter of 2005
created by net operating loss carryforwards (NOL) resulting in tax
expense of $86,000, or $0.01 per diluted share. For the first half
of 2006, the Company's effective tax rate was approximately 34%,
resulting in income tax expense of $2.4 million, or $0.22 per
diluted share. This compares unfavorably to an effective rate of
approximately 3% in the first half of 2005 and expense of $0.1
million, or $0.01 per diluted share. The Company anticipates a 38%
quarterly effective tax rate for the remainder of 2006. Business
Development: During the second quarter of 2006, the Company signed
$7.7 million in new and extended business, pushing the total for
2006 to $30.1 million. For the year, 83% of bookings have been U.S.
government contracts and 17% have been commercial contracts.
Backlog: At June 30, 2006, the Company had signed backlog of $15.8
million contracted for 2006. Backlog does not include extensions or
option periods, and therefore does not always represent the full
scope of the clients' commitment to Thomas Group. However, backlog
does accurately represent the portion that has been contracted for
in writing. Thomas Group, Inc. (Nasdaq:TGIS) is an international,
publicly traded operational consulting firm. Thomas Group's unique
brand of process improvement and performance management services
enable businesses to enhance operations, improve productivity and
quality, reduce costs, generate cash and drive higher
profitability. Known as The Results Company(SM), Thomas Group
creates and implements customized improvement strategies for
sustained performance improvements in all facets of the business
enterprise. Thomas Group has offices in Dallas, Detroit, and Hong
Kong. For additional information on Thomas Group, Inc., please go
to www.thomasgroup.com. Safe Harbor Statement under the Private
Securities Litigation Reform Act: Statements in this release that
are not strictly historical are "forward-looking" statements, which
should be considered as subject to the many uncertainties that
exist in the Company's operations and business environment. These
uncertainties, which include economic and business conditions that
may impact clients and the Company's performance-oriented fees,
timing of contracts and revenue recognition, competitive and cost
factors, and the like, are set forth in the Company's filings from
time to time with the Securities and Exchange Commission, including
the Company's Form 10-K for the year ended December 31, 2005.
Except as required by law, the Company expressly disclaims any
intent or obligation to update any forward looking statements. -0-
*T Thomas Group, Inc. Selected Consolidated Financial Data
(Unaudited) Three Months Six Months Ended June 30, Ended June 30,
----------------------------------- 2006 2005 2006 2005 --------
-------- -------- -------- In thousands, except per share data
Consulting revenue before reimbursements $15,415 $11,662 $28,609
$19,570 Reimbursements 155 6 257 6 -------- -------- --------
-------- Total revenue 15,570 11,668 28,866 19,576 Cost of sales
before reimbursable expenses 6,987 4,836 13,783 9,074 Reimbursable
expenses 155 6 257 6 -------- -------- -------- -------- Total cost
of sales 7,142 4,842 14,040 9,080 Gross profit 8,428 6,826 14,826
10,496 Selling, general and administrative 4,371 3,269 7,798 6,311
Sublease (gain) loss (16) -- (16) 610 -------- -------- --------
-------- Operating income 4,073 3,557 7,044 3,575 Other income
(expense), net 70 (24) 126 (70) -------- -------- -------- --------
Income from continuing operations before income taxes 4,143 3,533
7,170 3,505 Income tax 1,577 94 2,421 98 -------- -------- --------
-------- Income from continuing operations 2,566 3,439 4,749 3,407
Loss from discontinued operations, net of related income tax
benefit 3 305 3 400 -------- -------- -------- -------- Net income
$2,563 $3,134 $4,746 $3,007 ======== ======== ======== ========
Earnings per share: Basic: Income from continuing operations $0.24
$0.32 $0.44 $0.33 Loss on discontinued operations, net of income
tax benefit -- 0.03 -- 0.04 -------- -------- -------- -------- Net
Income $0.24 $0.29 $0.44 $0.29 Diluted: Income from continuing
operations $0.23 $0.31 $0.43 $0.32 Loss on discontinued operations,
net of income tax benefit -- 0.02 -- 0.04 -------- --------
-------- -------- Net Income $0.23 $0.29 $0.43 $0.28 Weighted
average shares: Basic 10,742 10,655 10,705 10,368 Diluted 10,993
10,952 10,938 10,786 Thomas Group, Inc. Selected Consolidated
Financial Data (Unaudited) Selected Revenue Data Three Months Ended
Six Months Ended June 30, June 30, ------------------
----------------- 2006 2005 2006 2005 --------- -------- --------
-------- Amounts in thousands North America $15,544 $11,647 $28,836
$19,547 Europe -- -- -- -- Asia/Pacific 26 21 30 29 ---------
-------- -------- -------- Total Revenue $15,570 $11,668 $28,866
$19,576 Selected Balance Sheet Data June 30, December 31, 2006 2005
--------------- ------------- Amounts in thousands Cash $6,008
$3,481 Trade Accounts Receivables 11,513 8,382 Total Current Assets
18,304 12,451 Total Assets 18,993 13,031 Total Current Liabilities
5,676 4,340 Total Liabilities 5,829 4,614 Total Stockholders'
Equity 13,164 8,417 *T
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