Thomas Group, Inc. (NasdaqGM:TGIS), a leading operations and
process improvement firm, today announced first quarter 2008 net
income of $0.4 million, or $0.03 per diluted share, on revenues of
$12.4 million, compared to $1.8 million, or $0.16 per diluted
share, on revenues of $14.9 million in the first quarter of 2007.
Earle Steinberg, President and CEO, stated: �The first quarter of
2008 was a challenging one for us. While revenue for our commercial
business was up slightly compared to Q1 of 2007, our government
business was down by 31% over the same period. Additionally, the
first of our two large contracts with the US Navy ended on March
31, and the second will end at the end of April. �During the first
quarter, we clearly did not respond quickly or broadly enough to
the decline in our government business or to the disappointing
results of our efforts to grow the commercial business rapidly. �We
feel that we have learned important lessons from our first quarter
performance and have begun refreshing our pipeline while we also
started to implement our plan for the rebuilding of our business.
In the meantime, we expect several challenging quarters ahead until
our recovery is complete. �We have an aggressive but reasonable
plan to rebuild Thomas Group. We also believe we have the financial
resources to execute our plan at a pace that will ensure long-term
success. We believe that we will be able, as we implement our plan,
to address the issues that have resulted in previous cycles of boom
and bust in our company. �This has been an interesting and exciting
first five weeks as CEO. I look forward to the challenge of
rebuilding Thomas Group and growing it into a successful and
prosperous professional services firm.� First Quarter 2008
Financial Performance Revenue Revenue for the first quarter of 2008
decreased $2.5 million, or 17%, to $12.4 million from $14.9 million
in the first quarter of 2007. Revenue from US government clients
was $9.1 million, or 74% of revenue, in the first quarter of 2008,
compared to $13.3 million, or 90% of revenue, in the first quarter
2007. Revenue from commercial clients was $2.9 million, or 23% of
revenue, in the first quarter of 2008, compared to $1.4 million, or
9% of revenue, in the first quarter of 2007. Reimbursement of
expenses was $0.4 million, or 3% of revenue in the first quarter of
2008, compared to $0.2 million, or 1% of revenue, in the first
quarter of 2007. Gross Margins Gross profit margins for the first
quarter of 2008 were 48%, compared to 50% for the first quarter
2007. The small drop in first quarter margins is related to the
continued slowdown of our government programs in the first quarter
of 2008. Selling, General & Administrative (SG&A) SG&A
costs for the first quarter of 2008 were $5.5 million, compared to
$4.7 million in the first quarter of 2007. The $0.8 million
increase is primarily related to a $0.7 million increase in
salaries and recruiting costs, a $0.4 million increase in bad debt
allowance, and a $0.1 million increase in stock based compensation,
offset by a $0.4 million decrease in professional expenses related
primarily to the review of our historical stock option practices in
the first quarter of 2007. Working Capital and Cash Flow Working
capital increased to $20.2 million at March 31, 2008 from $19.3
million at December 31, 2007, primarily due to increases in cash
balances as the result of accounts receivable collections. For the
first quarter of 2008, the net change in cash was a net increase of
$2.5 million, compared to a net increase of $4.1 million for the
first quarter of 2007. For the first quarter 2008, net cash
provided by operating activities was $3.5 million, compared to $5.8
million for the first quarter of 2007. This is primarily due to the
difference in the collection of accounts receivable balances during
the first quarter of 2007, compared to that of this year. There
were no investing activities in the first quarter of 2008. In the
first quarter of 2007, the $616,000 of net cash used for investing
activities consisted primarily of improvements to our training
facility located inside the Irving, TX office. Cash used for
financing activities for the first quarter of 2008 and 2007 was
$1.1 million related to the payment of dividends. Business
Development and Backlog As we previously announced, we were not
renewed as a provider under the new Fleet Readiness Enterprise
contracting vehicle for the US Navy beyond April 2008. There can be
no assurances when we will be able to replace these revenues. Given
the loss of this contract, we anticipate an operating loss until we
are able to develop sufficient business to replace it. We have put
in place a plan to return to profitability and growth, and as
previously announced we have aggressively cut expenses in order to
minimize the loss and to make it easier to achieve profitability,
but we are unable to predict the timing of this outcome. At the
present time, we feel that our working capital will be sufficient
to fund our operations through this downturn. Of course, there can
be no assurance that this will be the case. Despite the challenges
we face, we continue to be enthusiastic about the future of the
Thomas Group, and its prospects, including its return to
profitability. Many of our commercial contracts provide for
relatively short cancellation periods, even though the contract
period may be longer term, and we typically have add-on contracts.
With the loss of the Fleet Readiness Enterprise contact referenced
above, and our future emphasis on commercial as well as government
contracting, we no longer feel that backlog is a representative
number for predicting future revenues. Thus, we have discontinued
reporting this number as well as bookings. However, had we reported
these numbers for this quarter, we would have reported a
substantially lower figures as compared to December 31, 2007 as
reflected by both the loss of the Fleet Readiness Enterprise
contract and other contract terminations. Earnings Conference Call
We would like to invite you to participate in a conference call
with the senior management of Thomas Group, Inc. to discuss the
earnings for first quarter 2008. Tuesday, April 29, 2008 10:00 a.m.
CDT, 11:00 a.m. EDT To participate in the conference call, please
call 800-351-6808 from the U.S. or 334-323-7224 from outside the
U.S. The event�s passcode is 393837. Although interactive
participation in the call will be limited to investment
professionals, any interested party may listen to a live broadcast
of the call via the internet by logging on to:
http://www.vcall.com/IC/CEPage.asp?ID=126196 Interested persons are
encouraged to log on to the website approximately 15 minutes prior
to the designated start time in case they need to download any
software. Webcast replay is available until 4/29/2009.
Approximately one hour after the earnings conference call, a
playback of the conference call will be available for thirty days.
To listen to the call, U.S. callers may call 877-919-4059 and
international callers may call 334-323-7226. The Conference Call
Replay Pass Code is 73603251. Playback options: press 1 to begin; 4
to rewind 30 seconds; 5 to pause; 6 to fast forward 30 seconds; 0
for instructions; 9 to exit. About Thomas Group Thomas Group, Inc.
(NasdaqGM:TGIS) is an international, publicly-traded professional
services firm specializing in operational improvements. 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 for Breakthrough Process
Performance, 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 and Detroit. For more information, please visit
www.thomasgroup.com. Safe Harbor Statement under the Private
Securities Litigation Reform Act: Any statements in this release
that are not strictly historical statements, including statements
about our beliefs and expectations, are �forward-looking
statements� within the meaning of the United States Private
Securities Litigation Reform Act of 1995. These forward-looking
statements involve certain risks and uncertainties that could cause
actual results to differ materially from those expressed or implied
by these statements, including general economic and business
conditions that may impact clients and the Company�s revenues,
timing and awarding of customer contracts, revenue recognition,
competition and cost factors as well as other factors detailed from
time to time in the Company�s filings with the Securities and
Exchange Commission, including the Company�s Form 10-K for the year
ended December 31, 2007. These forward-looking statements may be
identified by words such as �anticipate,� �expect,� �suggests,�
�plan,� �believe,� �intend,� �estimates,� �targets,� �projects,�
�could,� �should,� �may,� �would,� �continue,� �forecast,� and
other similar expressions. These forward-looking statements speak
only as of the date of this release. Except as required by law, the
Company expressly disclaims any obligation or undertaking to
disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company�s
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based. �
THOMAS GROUP, INC. Selected Consolidated Financial Data (Amounts
stated in thousands, except per share amounts) (Unaudited) � Three
Months Ended March 31, 2008 � 2007 � Consulting revenue before
reimbursements $ 12,040 $ 14,683 Reimbursements � 398 � 223 Total
revenue � 12,438 � 14,906 Cost of sales before reimbursable
expenses 6,047 7,198 Reimbursable expenses � 398 � 223 Total cost
of sales � 6,445 � 7,421 Gross profit 5,993 7,485 Selling, general
and administrative � 5,531 � 4,661 Operating income 462 2,824
Interest income, net � 119 � 104 Income from operations before
income taxes 581 2,928 Income tax expense � 216 � 1,130 Net income
� 365 � 1,798 Earnings per share: Basic $ 0.03 $ 0.16 Diluted $
0.03 $ 0.16 Weighted average shares: Basic 11,073 10,937 Diluted
11,120 11,225 � THOMAS GROUP, INC. Selected Consolidated Financial
Data (Amounts stated in thousands) � � Selected Geographical
Revenue Data (Unaudited) � Three Months Ended March 31, 2008 � 2007
� North America $ 11,695 $ 14,906 Europe 743 � Asia/Pacific � � � �
Total Revenue $ 12,438 $ 14,906 � � � Selected Balance Sheet Data �
March 31, 2008 December 31, 2007 (Unaudited) Cash $ 14,456 $ 11,990
Trade accounts receivables 7,106 9,487 Total current assets 23,654
23,480 Total assets 25,991 25,939 Total current liabilities 3,447
4,157 Total liabilities 3,677 4,395 Total stockholders� equity
22,314 21,544
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