CTG (Nasdaq: CTG) (“Company”), a leader in North America and
Western Europe helping companies employ digital IT solutions and
services to drive their productivity and profitability, today
reported its financial results for the first quarter ended March
31, 2023. Results include Eleviant Technologies (Eleviant),
acquired by CTG on September 29, 2022.
Filip Gydé, CTG President and CEO, commented, “We continue to
successfully execute our strategy despite the difficult
macroeconomic environment. As we work to complete the first phase
of our transformation, we are driving the digital solutions and
services business mix to more than 80% of revenue, our highest
level to date, and expanding our IT solutions margins. Our first
quarter North America IT Solutions and Services segment achieved
gross margins of 38.7%, up 510 basis points from a year ago.”
“As the integration of Eleviant progresses, we continue to be
very pleased with the talent and capabilities of this team. We
recently won a sophisticated digital IT solutions engagement for a
North American client where the services will be provided primarily
by the Eleviant team, in line with our expectations of leveraging
the offshore model as a result of this acquisition. We look forward
to further successes across our portfolio and the accelerated
contribution Eleviant will make in the future.”
“We invested during the quarter to further expand our North
American sales, solutions and marketing teams. While these
investments reduced our operating margin in the quarter, we
continue to take a long-term approach to position the Company for
accelerated growth and profitability in the future. We are
encouraged by our strong pipeline and are excited to have signed at
the end of the first quarter another project that is one of the
largest IT Solutions projects in recent years in North America,
which contributed to a significant level of global IT bookings
approaching $100 million in the quarter. We anticipate this project
will help accelerate significant growth specifically in the IT
Solutions and Services segments, with second quarter revenue in
those segments increasing more than 10% from the prior year
period.”
Consolidated First Quarter 2023 Review
(Narrative compares with prior-year period unless otherwise noted)
(unaudited)
($ in thousands) |
For the Quarter Ended |
|
Change 2022-2023 |
|
Change 2021-2022 |
|
Mar. 31, 2023 |
|
Apr. 1, 2022 |
|
Apr. 2, 2021 |
|
$ |
|
% |
|
$ |
|
% |
Revenue |
$ |
78,202 |
|
|
$ |
89,417 |
|
|
$ |
97,129 |
|
|
$ |
(11,215 |
) |
|
(12.5 |
)% |
|
$ |
(7,712 |
) |
|
(7.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Profit |
$ |
20,135 |
|
|
$ |
20,595 |
|
|
$ |
20,767 |
|
|
$ |
(460 |
) |
|
(2.2 |
)% |
|
$ |
(172 |
) |
|
(0.8 |
)% |
GAAP Gross Margin |
|
25.7 |
% |
|
|
23.0 |
% |
|
|
21.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
$ |
707 |
|
|
$ |
3,199 |
|
|
$ |
2,098 |
|
|
$ |
(2,492 |
) |
|
(77.9 |
)% |
|
$ |
1,101 |
|
|
52.5 |
% |
GAAP Operating Margin |
|
0.9 |
% |
|
|
3.6 |
% |
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income* |
$ |
2,108 |
|
|
$ |
3,461 |
|
|
$ |
2,742 |
|
|
$ |
(1,353 |
) |
|
(39.1 |
)% |
|
$ |
719 |
|
|
26.2 |
% |
Non-GAAP Operating
Margin* |
|
2.7 |
% |
|
|
3.9 |
% |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income |
$ |
315 |
|
|
$ |
2,240 |
|
|
$ |
1,508 |
|
|
$ |
(1,925 |
) |
|
(85.9 |
)% |
|
$ |
732 |
|
|
48.5 |
% |
GAAP Net Margin |
|
0.4 |
% |
|
|
2.5 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income* |
$ |
1,240 |
|
|
$ |
2,439 |
|
|
$ |
2,006 |
|
|
$ |
(1,199 |
) |
|
(49.2 |
)% |
|
$ |
433 |
|
|
21.6 |
% |
Non-GAAP Net Income
Margin* |
|
1.6 |
% |
|
|
2.7 |
% |
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA* |
$ |
2,765 |
|
|
$ |
4,331 |
|
|
$ |
3,725 |
|
|
$ |
(1,566 |
) |
|
(36.2 |
)% |
|
$ |
606 |
|
|
16.3 |
% |
Adjusted EBITDA Margin* |
|
3.5 |
% |
|
|
4.8 |
% |
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
* A reconciliation of GAAP to non-GAAP information is included
in the financial tables below
- The change in revenue reflects the
Company’s continued business mix shift to more solutions and
services-based business. During the first quarter of 2023, the
Company intentionally disengaged $11.6 million from its
lower-margin non-strategic technology services business.
- The change in business mix has led to
significant improvements in gross margin over the past two years,
increasing 430 basis points over that time.
- The Company’s pipeline continues to be
strong, and the Company achieved IT Solutions and Services bookings
near $100 million in the quarter.
- As a percentage of revenue, selling,
general and administrative (SG&A) expenses were 24.8% compared
with 19.5% in the prior-year period. The increase was primarily due
to significant increases in acquisition-related expenses from the
Eleviant acquisition and additional investments made in support of
North America business development efforts.
- The effective tax rate was 34.0%
compared with 23.9% in last year’s first quarter, which benefited
from windfalls on equity-based compensation transactions.
- Included in GAAP net income was $0.4
million of acquisition-related expenses, $0.3 million of ERP system
implementation costs, and $0.2 million of severance, while the
prior-year period included $0.2 million of acquisition expenses.
Earnings per diluted share were $0.02 for the first quarter of 2023
compared with $0.15 for the first quarter of 2022. Excluding these
expenses from both periods, non-GAAP earnings per diluted share
were $0.08 compared with $0.16.
First Quarter Segment Performance
(unaudited)
IT Solutions and Services
North America
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Mar. 31, 2023 |
|
|
Apr. 1, 2022 |
|
|
Apr. 2, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
23,196 |
|
|
$ |
20,435 |
|
|
$ |
18,454 |
|
|
$ |
2,761 |
|
|
|
13.5 |
% |
|
$ |
1,981 |
|
|
|
10.7 |
% |
Percent of total |
|
29.6 |
% |
|
|
22.9 |
% |
|
|
19.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
8,984 |
|
|
$ |
6,862 |
|
|
$ |
6,012 |
|
|
$ |
2,122 |
|
|
|
30.9 |
% |
|
$ |
850 |
|
|
|
14.1 |
% |
Gross margin |
|
38.7 |
% |
|
|
33.6 |
% |
|
|
32.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
4,187 |
|
|
$ |
3,732 |
|
|
$ |
2,855 |
|
|
$ |
455 |
|
|
|
12.2 |
% |
|
$ |
877 |
|
|
|
30.7 |
% |
Contribution margin |
|
18.1 |
% |
|
|
18.3 |
% |
|
|
15.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- The growth in segment revenue reflects
contributions from Eleviant and new customers or projects in
digital IT solutions.
- Segment gross margins saw substantial
expansion given the focus on digital solutions and contribution
from Eleviant.
Europe
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Mar. 31, 2023 |
|
|
Apr. 1, 2022 |
|
|
Apr. 2, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
40,093 |
|
|
$ |
42,478 |
|
|
$ |
46,007 |
|
|
$ |
(2,385 |
) |
|
|
(5.6 |
)% |
|
$ |
(3,529 |
) |
|
|
(7.7 |
)% |
Percent of total |
|
51.3 |
% |
|
|
47.5 |
% |
|
|
47.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
9,324 |
|
|
$ |
10,480 |
|
|
$ |
11,217 |
|
|
$ |
(1,156 |
) |
|
|
(11.0 |
)% |
|
$ |
(737 |
) |
|
|
(6.6 |
)% |
Gross margin |
|
23.3 |
% |
|
|
24.7 |
% |
|
|
24.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
4,272 |
|
|
$ |
5,251 |
|
|
$ |
5,734 |
|
|
$ |
(979 |
) |
|
|
(18.6 |
)% |
|
$ |
(483 |
) |
|
|
(8.4 |
)% |
Contribution margin |
|
10.7 |
% |
|
|
12.4 |
% |
|
|
12.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- Revenue in the 2023 first quarter was
negatively impacted by approximately $2.0 million due to a change
in foreign currency exchange rates.
- Segment margins reflect the timing of
mandated salary adjustments at the beginning of the year that are
being passed along to clients throughout the year.
Non-Strategic Technology Services
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Mar. 31, 2023 |
|
|
Apr. 1, 2022 |
|
|
Apr. 2, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
14,913 |
|
|
$ |
26,504 |
|
|
$ |
32,668 |
|
|
$ |
(11,591 |
) |
|
|
(43.7 |
)% |
|
$ |
(6,164 |
) |
|
|
(18.9 |
)% |
Percent of total |
|
19.1 |
% |
|
|
29.6 |
% |
|
|
33.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
1,827 |
|
|
$ |
3,253 |
|
|
$ |
3,538 |
|
|
$ |
(1,426 |
) |
|
|
(43.8 |
)% |
|
$ |
(285 |
) |
|
|
(8.1 |
)% |
Gross margin |
|
12.3 |
% |
|
|
12.3 |
% |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
1,464 |
|
|
$ |
2,443 |
|
|
$ |
2,223 |
|
|
$ |
(979 |
) |
|
|
(40.1 |
)% |
|
$ |
220 |
|
|
|
9.9 |
% |
Contribution margin |
|
9.8 |
% |
|
|
9.2 |
% |
|
|
6.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- The Company continues actively
disengaging from its non-strategic technology services consistent
with its long-term strategy.
Balance Sheet and Cash Flow
Cash and cash equivalents were $23.3 million compared with $25.1
million at year-end 2022. Net cash used in operations was $2.6
million.
At the end of the first quarter of 2023, the Company had $1.4
million outstanding on its revolving line of credit facility, with
no other long-term debt. Days sales outstanding were 83 in the
first quarter of 2023 compared with 76 in the prior-year period.
The DSO in the prior year period was lower due to significant
collections of receivables from a large engagement completed in the
fourth quarter of 2021.
Successfully Executing Strategy
CTG is a catalyst for digital transformation, helping IT and
business leaders accelerate integration of digital technology into
all areas of their operations to improve productivity, strengthen
business processes, elevate internal controls, and increase value
delivery to their customers. CTG’s strategy for growth is its
transformation into a higher-performing, digital solutions-based
business. The three key elements of its strategy are:
- Becoming a global provider of digital
IT solutions by capitalizing on the compelling digital
transformation trend, leveraging the CTG brand built on reliability
and results, and delivering solutions primarily to the energy,
healthcare, finance, and manufacturing sectors.
- Growing the team organically by adding
highly qualified and experienced associates, employing innovative
tools and methodologies, and making selective acquisitions.
- Strengthening the Company’s margin
profile by reducing delivery costs and changing the mix of business
by disengaging from low margin IT staffing service support in its
Non-Strategic Technology Services segment.
Fiscal 2023 Outlook
“As we look ahead, we are focused on the disciplined execution
of our strategy and reducing our cost structure to deliver value
for our shareholders,” said John M. Laubacker, Chief Financial
Officer. “The midpoint of our consolidated revenue outlook for 2023
is unchanged from last quarter, but we have increased our IT
Solutions and Services revenue outlook to represent an 18% increase
at the midpoint when compared with 2022. The total revenue outlook
now includes a reduction of $40 million to $45 million from the
prior year as a result of the intentional disengagement from the
lowest margin business in our Non-Strategic Technology Services
segment, slightly offset by a full year of revenue from Eleviant,
which only contributed one quarter of revenue in 2022. We have also
slightly reduced the midpoint of our GAAP and non-GAAP diluted EPS
guidance by $0.02. We expect to expand our margins and reach our
adjusted EBITDA margin* goal of approximately 7% by the end of
2023, representing the completion of the first phase of our
transformation into a pure-play IT solutions business. Our team is
continually focused on enhancing shareholder value and, longer
term, we are committed to 10% adjusted EBITDA margins by the end of
2025.”
The Company’s 2023 GAAP EPS estimates reflect the previously
announced Enterprise Resource Planning (ERP) system implementation
project. However, these costs are being backed out as part of the
non-GAAP EPS disclosures. The difference in the GAAP and non-GAAP
EPS estimates in 2023 is larger than prior years due to the ERP
project, and as the Company also accounts for the amortization of
the intangible assets created by the acquisition of Eleviant.
CTG guidance for 2023 is as follows:
Revenue |
$310 million to $340 million |
IT Solutions and Services Revenue |
$265 million to $285 million |
GAAP diluted EPS |
$0.34 to $0.42 |
Non-GAAP diluted EPS |
$0.56 to $0.64 |
*The corresponding GAAP measure to adjusted EBITDA is net
income. The Company is not providing forward-looking net income
guidance given the significant effort and assumptions involved in
measuring net income. The GAAP to non-GAAP tables below include net
income to adjusted EBITDA displayed on historical results for the
past five quarters and the trailing twelve months ended March 31,
2023.
Conference Call and Webcast
CTG will hold a conference call today, May 9, 2023, at 11:00
a.m. Eastern Time to discuss the Company’s financial results and
business outlook. To access the live call, dial +1 844 826 3035.
The conference call will also be available via webcast in the
Investors section of CTG’s website at
https://investors.ctg.com.
A telephonic replay will be available from 3:00 p.m. ET on the
day of the call through Tuesday, May 23, 2023, by dialing +1 844
512 2921 and entering the access code 10177274. The webcast will be
archived on CTG’s website in the Events & Presentations section
for at least 90 days. A transcript will also be posted to the
website once available.
About CTG
CTG is a leading provider of digital transformation solutions
and services that accelerate clients’ project momentum and
achievement of their desired IT and business outcomes. We have
earned a reputation as a faster and more reliable, results-driven
partner focused on integrating digital technology into all areas of
its clients to improve their operations and increase their value
proposition. CTG’s engagement in the digital transformation process
drives improved data-driven decision-making, meaningful business
performance improvements, new and enhanced customer experiences,
and continuous innovation. CTG operates in North America, South
America, Western Europe, and India. The Company regularly posts
news and other important information at www.ctg.com.
Reconciliation of GAAP to non-GAAP
Information
The Company has referenced non-GAAP information in this news
release. The Company believes that the use of non-GAAP financial
information provides useful information to investors and management
to gain an overall understanding of its current financial
performance and prospects. In addition, management uses non-GAAP
financial measures for forecasting, facilitating ongoing operating
decisions, and measuring the Company’s overall performance. The
Company believes that these non-GAAP measures align closely with
its internal measurement processes and reflect the Company’s core
operating results.
A reconciliation of GAAP to non-GAAP information is included in
the financial tables below. The non-GAAP financial information is
presented using a consistent methodology from quarter-to-quarter
and year-to-year. These measures should be considered in addition
to results prepared in accordance with GAAP. Also, these non-GAAP
financial measures are not based on any comprehensive set of
accounting rules or principles. The Company believes that non-GAAP
financial measures have limitations in that they do not reflect all
amounts associated with the Company's results of operations as
determined in accordance with GAAP and that these measures should
only be used to evaluate the Company's results of operations in
conjunction with the corresponding GAAP financial measures. As
such, the non-GAAP financial measures disclosed by the Company
should not be considered a substitute for or superior to financial
measures calculated in accordance with GAAP, and reconciliations
between GAAP and non-GAAP financial measures included in this
earnings release should be carefully evaluated.
Forward-Looking Statements
This document contains certain forward-looking statements
concerning the Company's current expectations as to future growth,
financial outlook, business strategy and performance expectations
for 2023 and beyond and statements related to cost control, new
business opportunities, financial performance, market demand, and
other attributes of the Company, which are protected as
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Generally, the words “anticipates,” “believes,”
“expects,” “plans,” “may,” “will,” “might,” “would,” “should,”
“could,” “seeks,” “estimates,” “project,” “predict,” “potential,”
“currently,” “continue,” “intends,” “outlook,” “forecasts,”
“target,” and other similar words identify forward-looking
statements. These statements are based upon the Company's current
expectations and assumptions, a review of industry reports, current
business conditions in the areas where the Company does business,
feedback from existing and potential new clients, a review of
current and proposed legislation and governmental regulations that
may affect the Company and/or its clients, and other future events
or circumstances. Actual results could differ materially from the
outlook guidance, expectations, and other forward-looking
statements as a result of a number of factors and risks, including
among others, any new or continuing regulatory, social and business
responses to the COVID-19 pandemic, or the potential impacts of any
similar items on the Company’s business, operations, employees,
contractors and clients, and the potential impacts of any similar
future public health crisis, pandemic, or epidemic, the
availability to the Company of qualified professional staff,
currency exchange risks, domestic and foreign industry competition
for clients and talent, increased bargaining power of large
clients, the Company's ability to protect confidential client data,
the partial or complete loss of the revenue the Company generates
from International Business Machines Corporation (IBM), the ability
to integrate businesses when acquired and retain their clients
while achieving cost reduction targets, the uncertainty of clients'
implementations of cost reduction projects, the effect of
healthcare reform and initiatives, the mix of work between
solutions and services and non-strategic technology services, risks
associated with operating in foreign jurisdictions, renegotiations,
nullification, or breaches of contracts with clients, vendors,
subcontractors or other parties, current macroeconomic conditions
such as inflation, the change in valuation of capitalized software
balances, the impact of current and future laws and government
regulation, as well as repeal or modification of such, affecting
the information technology (IT) solutions and services and staffing
industry, taxes and the Company's operations in particular,
industry, economic and political conditions, including fluctuations
in demand for IT services, consolidation among the Company's
competitors or clients, the need to supplement or change our IT
services in response to new offerings in the industry or changes in
client requirements for IT products and solutions, actions of
activist shareholders, and other risks with domestic and foreign
operations including uncertainty and business interruptions
resulting from political changes and actions in the U.S. and
abroad, such as the conflict between Russia and the Ukraine and
developments in China, and volatility in the global credit and
financial markets and economy, and other factors that involve risk
and uncertainty including those listed in the Company's reports
filed with the Securities and Exchange Commission. Such
forward-looking statements should be read in conjunction with the
Company's disclosures set forth in the Company's Form 10-K for the
year ended December 31, 2022, including the uncertainties described
in the "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" sections and other
reports, including but not limited to subsequent quarterly reports
on Form 10-Q, that may be filed from time to time with the
Securities and Exchange Commission and may be obtained through the
Securities and Exchange Commission's Electronic Data Gathering and
Analysis Retrieval System ("EDGAR") at www.sec.gov.The Company
assumes no obligation to update the forward-looking information
contained in this release.
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Statements of Income(Unaudited) (amounts in thousands
except per share data) |
|
For the Quarter Ended |
|
|
March 31, |
|
|
April 1, |
|
|
April 2, |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
78,202 |
|
|
$ |
89,417 |
|
|
$ |
97,129 |
|
Cost of services |
|
58,067 |
|
|
|
68,822 |
|
|
|
76,362 |
|
Gross profit |
|
20,135 |
|
|
|
20,595 |
|
|
|
20,767 |
|
Selling, general and admin.
expenses |
|
19,428 |
|
|
|
17,396 |
|
|
|
18,669 |
|
Operating income |
|
707 |
|
|
|
3,199 |
|
|
|
2,098 |
|
Other expense, net |
|
(230 |
) |
|
|
(257 |
) |
|
|
(150 |
) |
Income before income
taxes |
|
477 |
|
|
|
2,942 |
|
|
|
1,948 |
|
Provision for income
taxes |
|
162 |
|
|
|
702 |
|
|
|
440 |
|
Net income |
$ |
315 |
|
|
$ |
2,240 |
|
|
$ |
1,508 |
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
0.16 |
|
|
$ |
0.11 |
|
Diluted |
$ |
0.02 |
|
|
$ |
0.15 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
14,704 |
|
|
|
14,199 |
|
|
|
13,696 |
|
Diluted |
|
15,347 |
|
|
|
14,977 |
|
|
|
14,944 |
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Balance Sheets(Unaudited)(amounts in thousands) |
|
March 31, |
|
|
December 31, |
|
|
April 1, |
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
23,300 |
|
|
$ |
25,140 |
|
|
$ |
38,724 |
|
Accounts receivable, net |
|
71,885 |
|
|
|
70,979 |
|
|
|
74,674 |
|
Other current assets |
|
5,016 |
|
|
|
3,769 |
|
|
|
3,065 |
|
Total current assets |
|
100,201 |
|
|
|
99,888 |
|
|
|
116,463 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
5,436 |
|
|
|
5,061 |
|
|
|
4,777 |
|
Operating lease right-of-use assets |
|
18,654 |
|
|
|
18,506 |
|
|
|
20,762 |
|
Cash surrender value |
|
3,971 |
|
|
|
4,120 |
|
|
|
3,756 |
|
Acquired intangibles, net |
|
12,629 |
|
|
|
12,943 |
|
|
|
6,837 |
|
Goodwill |
|
36,229 |
|
|
|
35,998 |
|
|
|
19,174 |
|
Other assets |
|
5,502 |
|
|
|
5,103 |
|
|
|
7,171 |
|
Total Assets |
$ |
182,622 |
|
|
$ |
181,619 |
|
|
$ |
178,940 |
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
15,110 |
|
|
$ |
14,254 |
|
|
$ |
12,444 |
|
Accrued compensation |
|
16,937 |
|
|
|
19,016 |
|
|
|
20,444 |
|
Operating lease liabilities |
|
5,981 |
|
|
|
5,905 |
|
|
|
6,199 |
|
Other current liabilities |
|
13,220 |
|
|
|
12,758 |
|
|
|
17,036 |
|
Total current liabilities |
|
51,248 |
|
|
|
51,933 |
|
|
|
56,123 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
1,369 |
|
|
|
- |
|
|
|
- |
|
Operating lease liabilities |
|
12,503 |
|
|
|
12,466 |
|
|
|
14,379 |
|
Other liabilities |
|
10,198 |
|
|
|
11,241 |
|
|
|
13,030 |
|
Shareholders' equity |
|
107,304 |
|
|
|
105,979 |
|
|
|
95,408 |
|
Total Liabilities and
Shareholders' Equity |
$ |
182,622 |
|
|
$ |
181,619 |
|
|
$ |
178,940 |
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Statements of Cash Flows(Unaudited)(amounts in
thousands) |
|
For the Quarter Ended |
|
|
March 31, |
|
|
April 1, |
|
|
April 2, |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
315 |
|
|
$ |
2,240 |
|
|
$ |
1,508 |
|
Depreciation and amortization expense |
|
837 |
|
|
|
716 |
|
|
|
854 |
|
Equity-based compensation expense |
|
345 |
|
|
|
573 |
|
|
|
590 |
|
Other operating items |
|
(4,065 |
) |
|
|
879 |
|
|
|
(697 |
) |
Net cash provided by (used in)
operating activities |
|
(2,568 |
) |
|
|
4,408 |
|
|
|
2,255 |
|
Net cash used in investing
activities |
|
(697 |
) |
|
|
(61 |
) |
|
|
(891 |
) |
Net cash provided by (used in)
financing activities |
|
1,123 |
|
|
|
(844 |
) |
|
|
163 |
|
Effect of exchange rates on
cash and cash equivalents |
|
302 |
|
|
|
(363 |
) |
|
|
(868 |
) |
Net increase (decrease) in
cash and cash equivalents |
|
(1,840 |
) |
|
|
3,140 |
|
|
|
659 |
|
Cash and cash equivalents at
beginning of period |
|
25,140 |
|
|
|
35,584 |
|
|
|
32,865 |
|
Cash and cash equivalents at
end of period |
$ |
23,300 |
|
|
$ |
38,724 |
|
|
$ |
33,524 |
|
|
|
|
|
|
|
|
|
|
COMPUTER TASK GROUP, INCORPORATED
(CTG)Segment
Information(Unaudited)(amounts in thousands)
For reporting purposes, the Company discloses three segments,
including IT Solutions and Services in each of North America and
Europe, and Non-Strategic Technology Services, primarily in North
America. The Company continues investing in business development,
including solutions, sales, delivery, and recruiting to drive its
digital transformation strategy in the North America and Europe IT
Solutions and Services segments. The Company is not investing in
its Non-Strategic Technology Services segment which includes lower
margin staffing services. Contribution profit represents
operational profit after consideration of expenses such as sales,
solutions, delivery, and recruiting expenses.
|
For the Quarter Ended March 31, 2023 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
23,196 |
|
|
$ |
40,093 |
|
|
$ |
14,913 |
|
Cost of services |
|
14,212 |
|
|
|
30,769 |
|
|
|
13,086 |
|
Gross profit |
|
8,984 |
|
|
|
9,324 |
|
|
|
1,827 |
|
Gross margin |
|
38.7 |
% |
|
|
23.3 |
% |
|
|
12.3 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
4,797 |
|
|
|
5,052 |
|
|
|
363 |
|
Contribution profit |
$ |
4,187 |
|
|
$ |
4,272 |
|
|
$ |
1,464 |
|
Contribution margin |
|
18.1 |
% |
|
|
10.7 |
% |
|
|
9.8 |
% |
|
For the Quarter Ended April 1, 2022 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
20,435 |
|
|
$ |
42,478 |
|
|
$ |
26,504 |
|
Cost of services |
|
13,573 |
|
|
|
31,998 |
|
|
|
23,251 |
|
Gross profit |
|
6,862 |
|
|
|
10,480 |
|
|
|
3,253 |
|
Gross margin |
|
33.6 |
% |
|
|
24.7 |
% |
|
|
12.3 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
3,130 |
|
|
|
5,229 |
|
|
|
810 |
|
Contribution profit |
$ |
3,732 |
|
|
$ |
5,251 |
|
|
$ |
2,443 |
|
Contribution margin |
|
18.3 |
% |
|
|
12.4 |
% |
|
|
9.2 |
% |
|
For the Quarter Ended April 2, 2021 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
18,454 |
|
|
$ |
46,007 |
|
|
$ |
32,668 |
|
Cost of services |
|
12,442 |
|
|
|
34,790 |
|
|
|
29,130 |
|
Gross profit |
|
6,012 |
|
|
|
11,217 |
|
|
|
3,538 |
|
Gross margin |
|
32.6 |
% |
|
|
24.4 |
% |
|
|
10.8 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
3,157 |
|
|
|
5,483 |
|
|
|
1,315 |
|
Contribution profit |
$ |
2,855 |
|
|
$ |
5,734 |
|
|
$ |
2,223 |
|
Contribution margin |
|
15.5 |
% |
|
|
12.5 |
% |
|
|
6.8 |
% |
COMPUTER TASK GROUP, INCORPORATED (CTG)Segment and
Vertical Market Trends (Unaudited)Supplemental Financial
Information |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
|
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
Revenue (in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
North America IT Solutions and Services |
|
$ |
20.435 |
|
|
$ |
20.339 |
|
|
$ |
20.340 |
|
|
$ |
22.924 |
|
|
$ |
23.196 |
|
|
$ |
86.799 |
|
Europe IT Solutions and
Services |
|
|
42.478 |
|
|
|
37.160 |
|
|
|
33.258 |
|
|
|
37.035 |
|
|
|
40.093 |
|
|
|
147.546 |
|
Non-Strategic Technology
Services |
|
|
26.504 |
|
|
|
25.260 |
|
|
|
21.404 |
|
|
|
17.943 |
|
|
|
14.913 |
|
|
|
79.520 |
|
Total Revenue |
|
$ |
89.417 |
|
|
$ |
82.759 |
|
|
$ |
75.002 |
|
|
$ |
77.902 |
|
|
$ |
78.202 |
|
|
$ |
313.865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in North
America |
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency (in
millions)* |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
46.262 |
|
|
$ |
45.042 |
|
|
$ |
41.501 |
|
|
$ |
40.604 |
|
|
$ |
37.859 |
|
|
$ |
165.006 |
|
Foreign Currency Impact |
|
|
(0.040 |
) |
|
|
(0.031 |
) |
|
|
(0.019 |
) |
|
|
0.001 |
|
|
|
- |
|
|
|
Total Revenue in Constant
Currency (non-GAAP) |
|
$ |
46.222 |
|
|
$ |
45.011 |
|
|
$ |
41.482 |
|
|
$ |
40.605 |
|
|
$ |
37.859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency (in
millions)* |
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
$ |
43.155 |
|
|
$ |
37.717 |
|
|
$ |
33.501 |
|
|
$ |
37.298 |
|
|
$ |
40.343 |
|
|
$ |
148.859 |
|
Foreign Currency Impact |
|
|
(1.977 |
) |
|
|
0.233 |
|
|
|
2.164 |
|
|
|
1.939 |
|
|
|
- |
|
|
|
Total Revenue in Constant
Currency (non-GAAP) |
|
$ |
41.178 |
|
|
$ |
37.950 |
|
|
$ |
35.665 |
|
|
$ |
39.237 |
|
|
$ |
40.343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue By
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
51.7 |
% |
|
|
54.4 |
% |
|
|
55.3 |
% |
|
|
52.1 |
% |
|
|
48.4 |
% |
|
|
52.6 |
% |
Europe |
|
|
48.3 |
% |
|
|
45.6 |
% |
|
|
44.7 |
% |
|
|
47.9 |
% |
|
|
51.6 |
% |
|
|
47.4 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Vertical
Market |
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare |
|
|
17 |
% |
|
|
18 |
% |
|
|
19 |
% |
|
|
18 |
% |
|
|
19 |
% |
|
|
18 |
% |
Financial Services |
|
|
17 |
% |
|
|
15 |
% |
|
|
15 |
% |
|
|
17 |
% |
|
|
18 |
% |
|
|
16 |
% |
Manufacturing |
|
|
14 |
% |
|
|
15 |
% |
|
|
17 |
% |
|
|
16 |
% |
|
|
16 |
% |
|
|
16 |
% |
Technology Service
Providers |
|
|
24 |
% |
|
|
24 |
% |
|
|
22 |
% |
|
|
19 |
% |
|
|
16 |
% |
|
|
21 |
% |
Energy |
|
|
5 |
% |
|
|
7 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
General Markets |
|
|
23 |
% |
|
|
21 |
% |
|
|
21 |
% |
|
|
24 |
% |
|
|
25 |
% |
|
|
23 |
% |
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Margins |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Margin |
|
|
3.6 |
% |
|
|
3.8 |
% |
|
|
3.0 |
% |
|
|
3.1 |
% |
|
|
0.9 |
% |
|
|
2.7 |
% |
Non-GAAP Operating Margin |
|
|
3.9 |
% |
|
|
4.2 |
% |
|
|
4.0 |
% |
|
|
5.1 |
% |
|
|
2.7 |
% |
|
|
4.0 |
% |
Other Information (in millions except Billable Days and
EPS)
Billable Days |
|
|
65 |
|
|
64 |
|
|
63 |
|
|
63 |
|
|
64 |
|
|
254 |
Net Income |
|
$ |
2.240 |
|
$ |
2.040 |
|
$ |
1.102 |
|
$ |
1.227 |
|
$ |
0.315 |
|
$ |
4.684 |
GAAP Diluted EPS |
|
$ |
0.15 |
|
$ |
0.13 |
|
$ |
0.07 |
|
$ |
0.08 |
|
$ |
0.02 |
|
$ |
0.30 |
Non-GAAP Diluted EPS |
|
$ |
0.16 |
|
$ |
0.15 |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
0.08 |
|
$ |
0.48 |
Adjusted EBITDA
(non-GAAP) |
|
$ |
4.3 |
|
$ |
4.2 |
|
$ |
3.8 |
|
$ |
4.8 |
|
$ |
2.8 |
|
$ |
15.6 |
Balance Sheet Information (in millions except
DSO)
Cash less Debt, Net |
|
$ |
38.7 |
|
$ |
35.5 |
|
$ |
26.8 |
|
$ |
25.1 |
|
$ |
21.9 |
|
|
Working Capital |
|
$ |
60.3 |
|
$ |
61.8 |
|
$ |
44.5 |
|
$ |
48.7 |
|
$ |
49.0 |
|
|
DSO |
|
|
76 |
|
|
84 |
|
|
83 |
|
|
84 |
|
|
83 |
|
|
* Constant Currency is measured by applying the current fiscal
period's average exchange rate to each of the prior periods
COMPUTER TASK GROUP, INCORPORATED
(CTG)(Unaudited)
The non-GAAP information below excludes expenses associated with
severance, an ERP system implementation, and certain
acquisition-related expenses. The acquisition-related expenses
consist of due diligence costs, amortization of intangible assets,
and changes in the value of earn-out payments upon achievement of
certain financial targets from the Company’s recent
acquisitions.
Reconciliation of GAAP to non-GAAP Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
(in
millions) |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
GAAP Operating Income |
|
$ |
3.199 |
|
$ |
3.173 |
|
$ |
2.253 |
|
$ |
2.451 |
|
$ |
0.707 |
|
$ |
8.584 |
Acquisition-related
expenses |
|
|
0.262 |
|
|
0.290 |
|
|
0.744 |
|
|
0.696 |
|
|
0.634 |
|
|
2.364 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
0.481 |
|
|
0.481 |
Severance |
|
|
- |
|
|
- |
|
|
- |
|
|
0.838 |
|
|
0.286 |
|
|
1.124 |
Non-GAAP Operating
Income |
|
$ |
3.461 |
|
$ |
3.463 |
|
$ |
2.997 |
|
$ |
3.985 |
|
$ |
2.108 |
|
$ |
12.553 |
Reconciliation of GAAP to non-GAAP Operating Margin
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
|
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
GAAP Operating Margin |
|
3.6 |
% |
|
3.8 |
% |
|
3.0 |
% |
|
3.1 |
% |
|
0.9 |
% |
|
2.7 |
% |
Acquisition-related
expenses |
|
0.3 |
% |
|
0.4 |
% |
|
1.0 |
% |
|
0.9 |
% |
|
0.8 |
% |
|
0.8 |
% |
ERP system implementation
costs |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
0.6 |
% |
|
0.2 |
% |
Severance |
|
- |
|
|
- |
|
|
- |
|
|
1.1 |
% |
|
0.4 |
% |
|
0.3 |
% |
Non-GAAP Operating
Margin |
|
3.9 |
% |
|
4.2 |
% |
|
4.0 |
% |
|
5.1 |
% |
|
2.7 |
% |
|
4.0 |
% |
Reconciliation of GAAP to non-GAAP Net Income
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
(in
millions) |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
GAAP Net
Income |
|
$ |
2.240 |
|
$ |
2.040 |
|
$ |
1.102 |
|
$ |
1.227 |
|
$ |
0.315 |
|
$ |
4.684 |
Acquisition-related
expenses |
|
|
0.199 |
|
|
0.212 |
|
|
0.510 |
|
|
0.435 |
|
|
0.419 |
|
|
1.576 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
0.317 |
|
|
0.317 |
Severance |
|
|
- |
|
|
- |
|
|
- |
|
|
0.524 |
|
|
0.189 |
|
|
0.713 |
Non-GAAP Net
Income |
|
$ |
2.439 |
|
$ |
2.252 |
|
$ |
1.612 |
|
$ |
2.186 |
|
$ |
1.240 |
|
$ |
7.290 |
COMPUTER TASK GROUP, INCORPORATED
(CTG) (Unaudited)
Reconciliation of GAAP to non-GAAP Diluted Earnings per Share
(EPS)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
|
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
GAAP Diluted EPS |
|
$ |
0.15 |
|
$ |
0.13 |
|
$ |
0.07 |
|
$ |
0.08 |
|
$ |
0.02 |
|
$ |
0.30 |
Acquisition-related
expenses |
|
|
0.01 |
|
|
0.02 |
|
|
0.04 |
|
|
0.03 |
|
|
0.03 |
|
|
0.12 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
0.02 |
|
|
0.02 |
Severance |
|
|
- |
|
|
- |
|
|
- |
|
|
0.03 |
|
|
0.01 |
|
|
0.04 |
Non-GAAP Diluted
EPS |
|
$ |
0.16 |
|
$ |
0.15 |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
0.08 |
|
$ |
0.48 |
Reconciliation of Net Income to Adjusted EBITDA (non-GAAP)
includes earnings before interest (including amortization of
deferred debt financing costs), taxes, depreciation and
amortization, equity-based compensation, and other, which includes
severance, ERP system implementation costs, and acquisition-related
expenses.
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Mar. |
|
Jun. |
|
Sept. |
|
Dec. |
|
Mar. |
|
Mar. |
(in
millions) |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2023 |
|
2023 |
Net Income |
|
$ |
2.240 |
|
|
$ |
2.040 |
|
|
$ |
1.102 |
|
|
$ |
1.227 |
|
|
$ |
0.315 |
|
|
$ |
4.684 |
|
Taxes |
|
|
0.702 |
|
|
|
0.748 |
|
|
|
0.759 |
|
|
|
0.736 |
|
|
|
0.162 |
|
|
|
2.405 |
|
Interest |
|
|
0.100 |
|
|
|
0.100 |
|
|
|
0.103 |
|
|
|
0.100 |
|
|
|
0.109 |
|
|
|
0.412 |
|
Depreciation and
amortization |
|
|
0.716 |
|
|
|
0.684 |
|
|
|
0.651 |
|
|
|
0.948 |
|
|
|
0.837 |
|
|
|
3.120 |
|
Equity-based compensation
expense |
|
|
0.573 |
|
|
|
0.603 |
|
|
|
0.693 |
|
|
|
0.694 |
|
|
|
0.345 |
|
|
|
2.335 |
|
Other |
|
|
- |
|
|
|
0.049 |
|
|
|
0.516 |
|
|
|
1.102 |
|
|
|
0.997 |
|
|
|
2.664 |
|
Adjusted
EBITDA |
|
$ |
4.331 |
|
|
$ |
4.224 |
|
|
$ |
3.824 |
|
|
$ |
4.807 |
|
|
$ |
2.765 |
|
|
$ |
15.620 |
|
Adjusted EBITDA Margin |
|
|
4.8 |
% |
|
|
5.1 |
% |
|
|
5.1 |
% |
|
|
6.2 |
% |
|
|
3.5 |
% |
|
|
5.0 |
% |
CTG news releases are available at
www.ctg.com.
Contacts:
John M. Laubacker
Chief Financial Officer
Tel: +1 716 887 7368
Investor Relations:
Deborah K. Pawlowski
Kei Advisors LLC
dpawlowski@keiadvisors.com
Tel: +1 716 843 3908
Craig P. Mychajluk
Kei Advisors LLC
cmychajluk@keiadvisors.com
Tel: +1 716 843 3832
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