CTG IT Solutions and Services Segments Gross Margin Improved to 28.9% in First Quarter 2023
- Software Engineering revenue in the first quarter of more than
$30 million with gross margin of31.8% - Revenue of
$78.2 million reflected intentional disengagement of$11.6 million from non-strategic technology services business - Signed one of the largest IT Solutions engagements in North America with expected revenue of
$20 million over next two years - IT Solutions and Services segments represent
81% of total revenue in the first quarter - IT Solutions and Services segments gross margin improved 130 basis points year-over-year
- GAAP operating margin was
0.9% in first quarter; non-GAAP operating margin was2.7% - Net income was
$0.3 million , with a margin of0.4% ; adjusted EBITDA was$2.8 million , with a margin of3.5% - Committed to
10% adjusted EBITDA margins by the end of 2025
BUFFALO, N.Y., May 09, 2023 (GLOBE NEWSWIRE) -- CTG (Nasdaq: CTG) (“Company”), a leader in North America and Western Europe helping companies employ digital IT solutions and services to drive their productivity and profitability, today reported its financial results for the first quarter ended March 31, 2023. Results include Eleviant Technologies (Eleviant), acquired by CTG on September 29, 2022.
Filip Gydé, CTG President and CEO, commented, “We continue to successfully execute our strategy despite the difficult macroeconomic environment. As we work to complete the first phase of our transformation, we are driving the digital solutions and services business mix to more than
“As the integration of Eleviant progresses, we continue to be very pleased with the talent and capabilities of this team. We recently won a sophisticated digital IT solutions engagement for a North American client where the services will be provided primarily by the Eleviant team, in line with our expectations of leveraging the offshore model as a result of this acquisition. We look forward to further successes across our portfolio and the accelerated contribution Eleviant will make in the future.”
“We invested during the quarter to further expand our North American sales, solutions and marketing teams. While these investments reduced our operating margin in the quarter, we continue to take a long-term approach to position the Company for accelerated growth and profitability in the future. We are encouraged by our strong pipeline and are excited to have signed at the end of the first quarter another project that is one of the largest IT Solutions projects in recent years in North America, which contributed to a significant level of global IT bookings approaching
Consolidated First Quarter 2023 Review (Narrative compares with prior-year period unless otherwise noted) (unaudited)
| ($ 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 with19.5% 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 with23.9% 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
At the end of the first quarter of 2023, the Company had
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
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 | |
| IT Solutions and Services Revenue | |
| GAAP diluted EPS | |
| Non-GAAP diluted EPS |
*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.
