CTG Reports 2018 First Quarter Results

CTG (NASDAQ:CTG), a leading provider of information technology (IT) solutions and services in North America and Western Europe announced its financial results for the first quarter ended March 30, 2018.

The company had a revenue of $82.8 million with their organic revenue in Europe increasing 10.1 per cent year to year (excluding currency translation). The company’s GAAP net income was $422,000 or $0.03 per share and non GAAP earnings were $0.06 per diluted share.

As quoted in the press release:

“First quarter consolidated revenue grew nearly 11% sequentially to $82.8 million, above the high-end of guidance primarily due to continued strength in our European business including a partial quarter of revenue contribution from SOFT COMPANY. Additionally, revenue grew 15% excluding three of our large staffing clients where business continued to be soft,” stated Bud Crumlish, CTG President and CEO. “Earnings per share was at the mid-point of guidance, as we continued to drive operating improvements while incurring costs associated with the acquisition and integration of SOFT COMPANY, as well as an accelerated onboarding of headcount at our largest Staffing client in the last week of the quarter.”

Direct costs in the first quarter of 2018 were $66.9 million, or 80.8% of revenue, compared with $59.5 million, or 79.7% of revenue, in the fourth quarter of 2017 and $62.8 million, or 81.5% of revenue, in the first quarter of 2017. SG&A expense in the first quarter of 2018 was $15.3 million, which included $0.6 million in acquisition related costs and the SG&A costs associated with SOFT COMPANY, compared with $13.7 million in the fourth quarter of 2017 and $12.9 million in the 2017 first quarter.

“Our primary strategic focus remains centered around generating growth at both new and existing clients. During the quarter, we successfully converted an increasing number of pipeline opportunities into signed engagements. In Staffing, we were designated as the sole service provider for incremental new service desk business at our largest staffing client and began transitioning resources in support of this work near the end of the quarter,” Crumlish said. “This win is in addition to being selected as a preferred provider for a new division to provide support services at this long-standing client that we discussed last quarter. Additionally, we solidified several new engagements for our Application Advantage solution within Health Solutions, including two meaningful wins with notable hospital systems in the U.S., one of which is a highly ranked university medical center. In addition, we were awarded an EHR implementation engagement for a large health system for two of their hospitals. Our Energy business also performed well during the quarter, finalizing several new contracts on the heels of a sizeable multi-year engagement with an oil refinery at a leading energy company.”

Cash and short-term investments at March 30, 2018 were $11.2 million, and the Company had $9.0 million in long-term debt. In April 2018, subsequent to quarter end, the Company borrowed $22.4 million against the cash surrender value of its life insurance policies, primarily to return capital to shareholders through the “Dutch Auction” tender offer, fund the acquisition of SOFT COMPANY, and for general working capital purposes. Days sales outstanding were 84 days in the first quarter of 2018, compared with 79 days in the first quarter of 2017.

In February 2018, the Company closed on the $1.8 million anticipated sale of a recently vacated office building, resulting in a recorded gain of less than $0.1 million in the first quarter of 2018.

“As part of our ongoing commitment to create shareholder value, the Company recently completed its previously announced tender offer, which resulted in the purchase of approximately 10% of CTG’s outstanding shares at an anticipated price of $8.85 per share as of April 18, 2018,” Crumlish said. “To complement the tender offer, the Board also expanded our existing share repurchase authorization by $10 million to provide additional capacity for potential open market purchases going forward.”

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