- North America IT Solutions and Services grew 10.7%, helping to offset $6.2 million revenue decline from intentional reduction in Non-Strategic Technology Services and $3.1 million impact from foreign currency exchange headwinds
- Gross margin expanded 160 basis points in the first quarter to 23.0%, driven by successful execution of strategy to improve business mix; two-year gross margin improvement of 340 basis points
- GAAP operating income for the quarter increased 52.5%; operating margin was 3.6%, an increase of 142 basis points
- First quarter GAAP diluted EPS of $0.15 increased $0.05, or 50%
- Pipeline of opportunities in digital solutions continued to expand; awarded largest multi-year solutions development contract in North America
BUFFALO, N.Y., May 10, 2022 (GLOBE NEWSWIRE) -- CTG (Nasdaq: CTG) (“Company”), a leader in helping companies employ digital IT solutions and services to drive productivity and profitability in North America and Western Europe, today reported its financial results for the first quarter ended April 1, 2022.
Filip Gydé, CTG President and CEO commented, “Our first quarter results were a strong testament to the success of our strategy to improve the earnings power of CTG through our continued focus on delivering high value digital IT solutions to solve our customers’ operating challenges. Our earnings growth was a direct reflection of improving our business mix. We are helping businesses in healthcare, energy, financial services, government, and other industries to find more efficient ways to operate by digitizing their processes and assets. We believe the power of digital solutions will improve business performance, support data-driven decision making, provide continuous innovation, and enhance customer experience.”
Mr. Gydé added, “I am extremely encouraged with the progress we are making as we continue to build a foundation to support our strategy and strengthen the CTG team that is critical to our success. We are building on our strong momentum, as evidenced by the recent awarding of our largest digital solutions development contract in the Company’s history in North America. Despite the macroeconomic headwinds, we are successfully executing our strategy and our team is energized and excited to develop the next generation of solutions for our customers.”
Consolidated First Quarter 2022 Review (Narrative compares with prior-year period unless otherwise noted) (unaudited)
| ($ in thousands) | For the Quarter Ended | Change 2021-2022 | Change 2020-2021 | ||||||||||||||||
| Apr. 1, 2022 | Apr. 2, 2021 | Mar. 27, 2020 | $ | % | $ | % | |||||||||||||
| Revenue | $ | 89,417 | $ | 97,129 | $ | 86,949 | $ | (7,712 | ) | -7.9 | % | $ | 10,180 | 11.7 | % | ||||
| GAAP Operating Income | $ | 3,199 | $ | 2,098 | $ | 2,067 | $ | 1,101 | 52.5 | % | $ | 31 | 1.5 | % | |||||
| GAAP Operating Margin | 3.6 | % | 2.2 | % | 2.4 | % | |||||||||||||
| Non-GAAP Operating Income* | $ | 3,461 | $ | 2,742 | $ | 2,534 | $ | 719 | 26.2 | % | $ | 208 | 8.2 | % | |||||
| Non-GAAP Operating Margin* | 3.9 | % | 2.8 | % | 2.9 | % | |||||||||||||
| GAAP Net Income | $ | 2,240 | $ | 1,508 | $ | 1,144 | $ | 732 | 48.5 | % | $ | 364 | 31.8 | % | |||||
| GAAP Net Margin | 2.5 | % | 1.6 | % | 1.3 | % | |||||||||||||
| Non-GAAP Net Income* | $ | 2,439 | $ | 2,006 | $ | 1,429 | $ | 433 | 21.6 | % | $ | 577 | 40.4 | % | |||||
| Non-GAAP Net Income Margin* | 2.7 | % | 2.1 | % | 1.6 | % | |||||||||||||
| Adjusted EBITDA* | $ | 4,331 | $ | 3,725 | $ | 3,373 | $ | 606 | 16.3 | % | $ | 352 | 10.4 | % | |||||
| Adjusted EBITDA Margin* | 4.8 | % | 3.8 | % | 3.9 | % | |||||||||||||
| *A reconciliation of GAAP to non-GAAP information is included in the financial tables below. | |||||||||||||||||||
- Strong growth in North America IT Solutions and Services partially offset the $6.2 million decline in revenue related to the disengagement from lower-margin non-strategic business as well as a negative $3.1 million impact to revenue due to changes in foreign currency exchange rates.
- Selling, general and administrative (SG&A) expenses as a percentage of revenue modestly increased 23 basis points, but declined on an absolute basis by 6.8% to $17.4 million on lower revenue.
- Operating income increased 52.5% on improved business mix as the Company continues to advance its strategy to provide higher-value digital IT solutions and reduce its exposure to lower margin business.
- Net income growth of 48.5% further reflects the success of the strategic shift in business.
First Quarter Segment Performance (unaudited)
IT Solutions and Services
| North America | ||||||||||||||||||||
| ($ in thousands) | For the Quarter Ended | Change 2021-2022 | Change 2020-2021 | |||||||||||||||||
| Apr. 1, 2022 | Apr. 2, 2021 | Mar. 27, 2020 | $ | % | $ | % | ||||||||||||||
| Revenue | $ | 20,435 | $ | 18,454 | $ | 12,999 | $ | 1,981 | 10.7 | % | $ | 5,455 | 42.0 | % | ||||||
| Gross profit | $ | 6,862 | $ | 6,012 | $ | 4,767 | $ | 850 | 14.1 | % | $ | 1,245 | 26.1 | % | ||||||
| Gross margin | 33.6 | % | 32.6 | % | 36.7 | % | ||||||||||||||
| Contribution profit | $ | 3,732 | $ | 2,855 | $ | 2,678 | $ | 877 | 30.7 | % | $ | 177 | 6.6 | % | ||||||
| Contribution margin | 18.3 | % | 15.5 | % | 20.6 | % | ||||||||||||||
| Europe | ||||||||||||||||||||
| ($ in thousands) | For the Quarter Ended | Change 2021-2022 | Change 2020-2021 | |||||||||||||||||
| Apr. 1, 2022 | Apr. 2, 2021 | Mar. 27, 2020 | $ | % | $ | % | ||||||||||||||
| Revenue | $ | 42,478 | $ | 46,007 | $ | 35,567 | $ | (3,529 | ) | -7.7 | % | $ | 10,440 | 29.4 | % | |||||
| Gross profit | $ | 10,480 | $ | 11,217 | $ | 8,353 | $ | (737 | ) | -6.6 | % | $ | 2,864 | 34.3 | % | |||||
| Gross margin | 24.7 | % | 24.4 | % | 23.5 | % | ||||||||||||||
| Contribution profit | $ | 5,251 | $ | 5,734 | $ | 3,817 | $ | (483 | ) | -8.4 | % | $ | 1,917 | 50.2 | % | |||||
| Contribution margin | 12.4 | % | 12.5 | % | 10.7 | % | ||||||||||||||
- North America IT Solutions and Services revenue increased 10.7%, as the segment gained new customers and opportunities in digital IT solutions.
- The change in the Europe IT Solutions and Services segment primarily reflects $3.1 million of unfavorable foreign currency exchange rate (FX) fluctuations, a reduction of approximately 20 resources at one client as they internalized a project, and macro-economic headwinds in the European Union. Revenue in the Europe IT Solutions and Services segment increased at a compound annual growth rate of 5.8% over the past two years.
Non-Strategic Technology Services
| ($ in thousands) | For the Quarter Ended | Change 2021-2022 | Change 2020-2021 | ||||||||||||||||
| Apr. 1, 2022 | Apr. 2, 2021 | Mar. 27, 2020 | $ | % | $ | % | |||||||||||||
| Revenue | $ | 26,504 | $ | 32,668 | $ | 38,383 | $ | (6,164 | ) | -18.9 | % | $ | (5,715 | ) | -14.9 | % | |||
| Gross profit | $ | 3,253 | $ | 3,538 | $ | 3,926 | $ | (285 | ) | -8.1 | % | $ | (388 | ) | -9.9 | % | |||
| Gross margin | 12.3 | % | 10.8 | % | 10.2 | % | |||||||||||||
| Contribution profit | $ | 2,443 | $ | 2,223 | $ | 1,840 | $ | 220 | 9.9 | % | $ | 383 | 20.8 | % | |||||
| Contribution margin | 9.2 | % | 6.8 | % | 4.8 | % | |||||||||||||
- The Company continues its strategy to reduce the level of providing lower value, Non-Strategic Technology Services.
Balance Sheet and Cash Flow
Cash and cash equivalents were $38.7 million, up $3.1 million, or 8.8%, since year-end 2021. Net cash provided by operations was $4.4 million.
At the end of the first quarter of 2022, the Company had no outstanding balance on its revolving line of credit facility or any other long-term debt. Days sales outstanding were 76 in the first quarter of 2022 compared with 71 in the prior-year period.
Strategy
CTG is a catalyst for digital transformation, helping IT and business leaders accelerate their project momentum and achieve their desired outcomes. This strategy includes:
- Providing breakthrough digital transformation solutions to our clients
- Investing in expanding our digital transformation solutions and services, both organically through adding industry leading digital and technology talent, and through acquisitions that focus on highly synergistic solutions or personnel
- Utilizing innovative tools and methodologies
- Expanding our global delivery network, and
- Disengaging from our lowest margin Non-Strategic Technology Services business
2022 Outlook
John M. Laubacker, Chief Financial Officer, noted, “We had a strong start to the year, and we expect our improvements in business mix to higher margin IT Solutions will continue to drive earnings growth throughout the year, resulting in 2022 non-GAAP diluted earnings per share of $0.64 to $0.72. This earnings per share guidance is unchanged from the prior quarter. Macroeconomic conditions in the European Union have significantly decreased the value of the Euro, and we do not see this reversing in the short term. As a result, we are reducing our revenue guidance by $15 million solely due to foreign currency exchange. We now expect our revenue for 2022 to range from $360 million to $380 million, which includes a reduction of $25 million to $35 million from the disengagement from Non-Strategic Technology Services.”
“Over the longer term, our objective is to grow IT Solutions and Services revenue in the mid- to high- single digits organically and deliver contribution margins for these segments in the mid-teens. We expect this will enable us to achieve our goal over the next two years of adjusted EBITDA margins increasing to 7% to 8% of revenue, given the operating leverage inherent in the business as we accelerate our pace of growth and enhance our margin profile, including through focused acquisitions.”
The Company expects its quarterly performance throughout 2022 to be uneven due to engagement timing, and after a slower start to the year, that revenue will strengthen in the second half of the year.
Conference Call and Webcast
CTG will hold a conference call today at 11:00 a.m. Eastern Time to discuss the Company’s financial results and business outlook. To access the live call, dial +1 877 704 4453. The conference call will also be available via webcast in the Investors section of CTG’s website at www.ctg.com.
A telephonic replay will be available from 2:00 p.m. ET on the day of the call through Tuesday, May 17, 2022 by dialing +1 844 512 2921 and entering the access code 13728826. The webcast will also be archived on CTG’s website in the Events & Presentations section for at least 90 days following completion of the live conference call.
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 improved data-driven decision making, meaningful business performance improvements, new and enhanced customer experiences, and continuous innovation. CTG has operations 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 are reflective of 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 2022 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”, “anticipates,” “project”, “predict”, “potential”, “currently”, “continue”, “intends”, “outlook”, 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, the effects of the COVID-19 pandemic and the regulatory, social and business responses thereto on the Company’s business, operations, employees, contractors and clients, the availability to the Company of qualified professional staff, 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, currency exchange risks, risks associated with operating in foreign jurisdictions, renegotiations, nullification, or breaches of contracts with clients, vendors, subcontractors or other parties, 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 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, 2021, 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 | |||||||||||
| April 1, | April 2, | March 27, | |||||||||
| 2022 | 2021 | 2020 | |||||||||
| Revenue | $ | 89,417 | $ | 97,129 | $ | 86,949 | |||||
| Cost of services | 68,822 | 76,362 | 69,903 | ||||||||
| Gross profit | 20,595 | 20,767 | 17,046 | ||||||||
| Selling, general and admin. expenses | 17,396 | 18,669 | 14,979 | ||||||||
| Operating income | 3,199 | 2,098 | 2,067 | ||||||||
| Other expense, net | (257 | ) | (150 | ) | (191 | ) | |||||
| Income before income taxes | 2,942 | 1,948 | 1,876 | ||||||||
| Provision for income taxes | 702 | 440 | 732 | ||||||||
| Net income | $ | 2,240 | $ | 1,508 | $ | 1,144 | |||||
| Net income per share: | |||||||||||
| Basic | $ | 0.16 | $ | 0.11 | $ | 0.08 | |||||
| Diluted | $ | 0.15 | $ | 0.10 | $ | 0.08 | |||||
| Weighted average shares outstanding: | |||||||||||
| Basic | 14,199 | 13,696 | 13,547 | ||||||||
| Diluted | 14,977 | 14,944 | 14,316 | ||||||||
| COMPUTER TASK GROUP, INCORPORATED (CTG) Condensed Consolidated Balance Sheets (Unaudited) (amounts in thousands) | |||||||||||
| April 1, | December 31, | April 2, | |||||||||
| 2022 | 2021 | 2021 | |||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 38,724 | $ | 35,584 | $ | 33,524 | |||||
| Accounts receivable, net | 74,674 | 84,252 | 74,468 | ||||||||
| Other current assets | 3,065 | 2,929 | 3,914 | ||||||||
| Total current assets | 116,463 | 122,765 | 111,906 | ||||||||
| Property and equipment, net | 4,777 | 5,242 | 5,799 | ||||||||
| Operating lease right-of-use assets | 20,762 | 22,132 | 23,884 | ||||||||
| Cash surrender value | 3,756 | 4,018 | 3,415 | ||||||||
| Acquired intangibles, net | 6,837 | 7,280 | 8,391 | ||||||||
| Goodwill | 19,174 | 19,676 | 20,415 | ||||||||
| Other assets | 7,171 | 7,221 | 1,693 | ||||||||
| Total Assets | $ | 178,940 | $ | 188,334 | $ | 175,503 | |||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | 12,444 | $ | 21,150 | $ | 14,307 | |||||
| Accrued compensation | 20,444 | 22,534 | 23,488 | ||||||||
| Operating lease liabilities | 6,199 | 6,444 | 6,433 | ||||||||
| Other current liabilities | 17,036 | 14,855 | 14,401 | ||||||||
| Total current liabilities | 56,123 | 64,983 | 58,629 | ||||||||
| Operating lease liabilities | 14,379 | 15,612 | 17,328 | ||||||||
| Other liabilities | 13,030 | 13,302 | 19,472 | ||||||||
| Shareholders' equity | 95,408 | 94,437 | 80,074 | ||||||||
| Total Liabilities and Shareholders' Equity | $ | 178,940 | $ | 188,334 | $ | 175,503 | |||||
| COMPUTER TASK GROUP, INCORPORATED (CTG) Condensed Consolidated Statements of Cash Flows (Unaudited) (amounts in thousands) | |||||||||||
| For the Quarter Ended | |||||||||||
| April 1, | April 2, | March 27, | |||||||||
| 2022 | 2021 | 2020 | |||||||||
| Net income | $ | 2,240 | $ | 1,508 | $ | 1,144 | |||||
| Depreciation and amortization expense | 716 | 854 | 816 | ||||||||
| Equity-based compensation expense | 573 | 590 | 512 | ||||||||
| Other operating items | 879 | (697 | ) | 16,707 | |||||||
| Net cash provided by operating activities | 4,408 | 2,255 | 19,179 | ||||||||
| Net cash used in investing activities | (61 | ) | (891 | ) | (4,653 | ) | |||||
| Net cash provided by (used in) financing activities | (844 | ) | 163 | 6,287 | |||||||
| Effect of exchange rates on cash and cash equivalents | (363 | ) | (868 | ) | (113 | ) | |||||
| Net increase in cash and cash equivalents | 3,140 | 659 | 20,700 | ||||||||
| Cash and cash equivalents at beginning of period | 35,584 | 32,865 | 10,781 | ||||||||
| Cash and cash equivalents at end of period | $ | 38,724 | $ | 33,524 | $ | 31,481 | |||||
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 to make investments in business development, including solutions, sales, delivery, and recruiting to drive its digital transformation strategy in both the North America and Europe IT Solutions and Services segments. The Company is not making investments in its Non-Strategic Technology Services segment that includes lower margin staffing services. Contribution profit represents operational profit after consideration of expenses such as sales, solutions, delivery, recruiting and administrative expenses.
| For the Quarter Ended April 1, 2022 | |||||||||||||||||||||||
| North | |||||||||||||||||||||||
| America | Europe | Non-Strategic | Non- | ||||||||||||||||||||
| IT Solutions | IT Solutions | Technology | GAAP | Non- | GAAP | ||||||||||||||||||
| and Services | and Services | Services | Totals | GAAP* | Totals | ||||||||||||||||||
| Revenue | $ | 20,435 | $ | 42,478 | $ | 26,504 | $ | 89,417 | $ | 89,417 | |||||||||||||
| Cost of services | 13,573 | 31,998 | 23,251 | 68,822 | 68,822 | ||||||||||||||||||
| Gross profit | 6,862 | 10,480 | 3,253 | 20,595 | 20,595 | ||||||||||||||||||
| Gross margin | 33.6 | % | 24.7 | % | 12.3 | % | 23.0 | % | 23.0 | % | |||||||||||||
| Operating expenses | 3,130 | 5,229 | 810 | 9,169 | 9,169 | ||||||||||||||||||
| Contribution profit | $ | 3,732 | $ | 5,251 | $ | 2,443 | 11,426 | 11,426 | |||||||||||||||
| Contribution margin | 18.3 | % | 12.4 | % | 9.2 | % | 12.8 | % | 12.8 | % | |||||||||||||
| General and admin. expense | 8,227 | (262 | ) | 7,965 | |||||||||||||||||||
| Operating income | $ | 3,199 | $ | 262 | $ | 3,461 | |||||||||||||||||
| Operating margin | 3.6 | % | 3.9 | % | |||||||||||||||||||
| For the Quarter Ended April 2, 2021 | |||||||||||||||||||||||
| North | |||||||||||||||||||||||
| America | Europe | Non-Strategic | Non- | ||||||||||||||||||||
| IT Solutions | IT Solutions | Technology | GAAP | Non- | GAAP | ||||||||||||||||||
| and Services | and Services | Services | Totals | GAAP* | Totals | ||||||||||||||||||
| Revenue | $ | 18,454 | $ | 46,007 | $ | 32,668 | $ | 97,129 | $ | 97,129 | |||||||||||||
| Cost of services | 12,442 | 34,790 | 29,130 | 76,362 | 76,362 | ||||||||||||||||||
| Gross profit | 6,012 | 11,217 | 3,538 | 20,767 | 20,767 | ||||||||||||||||||
| Gross margin | 32.6 | % | 24.4 | % | 10.8 | % | 21.4 | % | 21.4 | % | |||||||||||||
| Operating expenses | 3,157 | 5,483 | 1,315 | 9,955 | 9,955 | ||||||||||||||||||
| Contribution profit | $ | 2,855 | $ | 5,734 | $ | 2,223 | 10,812 | 10,812 | |||||||||||||||
| Contribution margin | 15.5 | % | 12.5 | % | 6.8 | % | 11.1 | % | 11.1 | % | |||||||||||||
| General and admin. expense | 8,714 | (644 | ) | 8,070 | |||||||||||||||||||
| Operating income | $ | 2,098 | $ | 644 | $ | 2,742 | |||||||||||||||||
| Operating margin | 2.2 | % | 2.8 | % | |||||||||||||||||||
| * Non-GAAP costs represent certain acquisition-related expenses, and in 2021 also include rebranding costs | |||||||||||||||||||||||
COMPUTER TASK GROUP, INCORPORATED (CTG)
Segment Information (continued)
(Unaudited)
(amounts in thousands)
| For the Quarter Ended March 27, 2020 | |||||||||||||||||||||||
| North | |||||||||||||||||||||||
| America | Europe | Non-Strategic | Non- | ||||||||||||||||||||
| IT Solutions | IT Solutions | Technology | GAAP | Non- | GAAP | ||||||||||||||||||
| and Services | and Services | Services | Totals | GAAP* | Totals | ||||||||||||||||||
| Revenue | $ | 12,999 | $ | 35,567 | $ | 38,383 | $ | 86,949 | $ | 86,949 | |||||||||||||
| Cost of services | 8,232 | 27,214 | 34,457 | 69,903 | 69,903 | ||||||||||||||||||
| Gross profit | 4,767 | 8,353 | 3,926 | 17,046 | 17,046 | ||||||||||||||||||
| Gross margin | 36.7 | % | 23.5 | % | 10.2 | % | 19.6 | % | 19.6 | % | |||||||||||||
| Operating expenses | 2,089 | 4,536 | 2,086 | 8,711 | 8,711 | ||||||||||||||||||
| Contribution profit | $ | 2,678 | $ | 3,817 | $ | 1,840 | 8,335 | 8,335 | |||||||||||||||
| Contribution margin | 20.6 | % | 10.7 | % | 4.8 | % | 9.6 | % | 9.6 | % | |||||||||||||
| General and admin. expense | 6,268 | (467 | ) | 5,801 | |||||||||||||||||||
| Operating income | $ | 2,067 | $ | 467 | $ | 2,534 | |||||||||||||||||
| Operating margin | 2.4 | % | 2.9 | % | |||||||||||||||||||
| * Non-GAAP costs represent certain acquisition-related expenses | |||||||||||||||||||||||
| COMPUTER TASK GROUP, INCORPORATED (CTG) Segment Information (continued) (Unaudited) (amounts in thousands) | |||||||||||||||||||
| North America IT Solutions and Services | |||||||||||||||||||
| For the Year Ended December 31, 2021 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 18,454 | $ | 16,762 | $ | 21,215 | $ | 45,075 | $ | 101,506 | |||||||||
| Cost of services | 12,442 | 10,688 | 13,942 | 31,813 | 68,885 | ||||||||||||||
| Gross profit | 6,012 | 6,074 | 7,273 | 13,262 | 32,621 | ||||||||||||||
| Gross margin | 32.6 | % | 36.2 | % | 34.3 | % | 29.4 | % | 32.1 | % | |||||||||
| Operating expenses | 3,157 | 3,166 | 3,464 | 4,096 | 13,883 | ||||||||||||||
| Contribution profit | $ | 2,855 | $ | 2,908 | $ | 3,809 | $ | 9,166 | $ | 18,738 | |||||||||
| Contribution margin | 15.5 | % | 17.3 | % | 18.0 | % | 20.3 | % | 18.5 | % | |||||||||
| For the Year Ended December 31, 2020 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 12,999 | $ | 16,069 | $ | 16,440 | $ | 22,440 | $ | 67,948 | |||||||||
| Cost of services | 8,232 | 10,924 | 10,415 | 14,382 | 43,953 | ||||||||||||||
| Gross profit | 4,767 | 5,145 | 6,025 | 8,058 | 23,995 | ||||||||||||||
| Gross margin | 36.7 | % | 32.0 | % | 36.6 | % | 35.9 | % | 35.3 | % | |||||||||
| Operating expenses | 2,089 | 2,139 | 2,242 | 2,898 | 9,368 | ||||||||||||||
| Contribution profit | $ | 2,678 | $ | 3,006 | $ | 3,783 | $ | 5,160 | $ | 14,627 | |||||||||
| Contribution margin | 20.6 | % | 18.7 | % | 23.0 | % | 23.0 | % | 21.5 | % | |||||||||
| For the Year Ended December 31, 2019 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 16,715 | $ | 19,259 | $ | 19,162 | $ | 18,987 | $ | 74,123 | |||||||||
| Cost of services | 11,558 | 13,586 | 13,269 | 12,044 | 50,457 | ||||||||||||||
| Gross profit | 5,157 | 5,673 | 5,893 | 6,943 | 23,666 | ||||||||||||||
| Gross margin | 30.9 | % | 29.5 | % | 30.8 | % | 36.6 | % | 31.9 | % | |||||||||
| Operating expenses | 2,315 | 2,275 | 2,296 | 2,112 | 8,998 | ||||||||||||||
| Contribution profit | $ | 2,842 | $ | 3,398 | $ | 3,597 | $ | 4,831 | $ | 14,668 | |||||||||
| Contribution margin | 17.0 | % | 17.6 | % | 18.8 | % | 25.4 | % | 19.8 | % | |||||||||
| COMPUTER TASK GROUP, INCORPORATED (CTG) Segment Information (continued) (Unaudited) (amounts in thousands) | |||||||||||||||||||
| Europe IT Solutions and Services | |||||||||||||||||||
| For the Year Ended December 31, 2021 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 46,007 | $ | 44,054 | $ | 39,199 | $ | 40,081 | $ | 169,341 | |||||||||
| Cost of services | 34,790 | 33,306 | 29,658 | 31,276 | 129,030 | ||||||||||||||
| Gross profit | 11,217 | 10,748 | 9,541 | 8,805 | 40,311 | ||||||||||||||
| Gross margin | 24.4 | % | 24.4 | % | 24.3 | % | 22.0 | % | 23.8 | % | |||||||||
| Operating expenses | 5,483 | 5,136 | 5,183 | 5,543 | 21,345 | ||||||||||||||
| Contribution profit | $ | 5,734 | $ | 5,612 | $ | 4,358 | $ | 3,262 | $ | 18,966 | |||||||||
| Contribution margin | 12.5 | % | 12.7 | % | 11.1 | % | 8.1 | % | 11.2 | % | |||||||||
| For the Year Ended December 31, 2020 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 35,567 | $ | 36,917 | $ | 38,506 | $ | 43,857 | $ | 154,847 | |||||||||
| Cost of services | 27,214 | 27,028 | 28,629 | 34,158 | 117,029 | ||||||||||||||
| Gross profit | 8,353 | 9,889 | 9,877 | 9,699 | 37,818 | ||||||||||||||
| Gross margin | 23.5 | % | 26.8 | % | 25.7 | % | 22.1 | % | 24.4 | % | |||||||||
| Operating expenses | 4,536 | 4,853 | 5,748 | 5,229 | 20,366 | ||||||||||||||
| Contribution profit | $ | 3,817 | $ | 5,036 | $ | 4,129 | $ | 4,470 | $ | 17,452 | |||||||||
| Contribution margin | 10.7 | % | 13.6 | % | 10.7 | % | 10.2 | % | 11.3 | % | |||||||||
| For the Year Ended December 31, 2019 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 36,549 | $ | 36,824 | $ | 34,521 | $ | 40,214 | $ | 148,108 | |||||||||
| Cost of services | 28,691 | 28,809 | 26,244 | 31,095 | 114,839 | ||||||||||||||
| Gross profit | 7,858 | 8,015 | 8,277 | 9,119 | 33,269 | ||||||||||||||
| Gross margin | 21.5 | % | 21.8 | % | 24.0 | % | 22.7 | % | 22.5 | % | |||||||||
| Operating expenses | 4,677 | 4,939 | 4,830 | 5,379 | 19,825 | ||||||||||||||
| Contribution profit | $ | 3,181 | $ | 3,076 | $ | 3,447 | $ | 3,740 | $ | 13,444 | |||||||||
| Contribution margin | 8.7 | % | 8.4 | % | 10.0 | % | 9.3 | % | 9.1 | % | |||||||||
| COMPUTER TASK GROUP, INCORPORATED (CTG) Segment Information (continued) (Unaudited) (amounts in thousands) | |||||||||||||||||||
| Non-Strategic Technology Services | |||||||||||||||||||
| For the Year Ended December 31, 2021 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 32,668 | $ | 31,348 | $ | 30,189 | $ | 27,233 | $ | 121,438 | |||||||||
| Cost of services | 29,130 | 27,791 | 26,713 | 24,286 | 107,920 | ||||||||||||||
| Gross profit | 3,538 | 3,557 | 3,476 | 2,947 | 13,518 | ||||||||||||||
| Gross margin | 10.8 | % | 11.3 | % | 11.5 | % | 10.8 | % | 11.1 | % | |||||||||
| Operating expenses | 1,315 | 1,318 | 1,169 | 1,102 | 4,904 | ||||||||||||||
| Contribution profit | $ | 2,223 | $ | 2,239 | $ | 2,307 | $ | 1,845 | $ | 8,614 | |||||||||
| Contribution margin | 6.8 | % | 7.1 | % | 7.6 | % | 6.8 | % | 7.1 | % | |||||||||
| For the Year Ended December 31, 2020 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 38,383 | $ | 36,160 | $ | 33,702 | $ | 35,051 | $ | 143,296 | |||||||||
| Cost of services | 34,458 | 32,456 | 30,056 | 31,181 | 128,151 | ||||||||||||||
| Gross profit | 3,925 | 3,704 | 3,646 | 3,870 | 15,145 | ||||||||||||||
| Gross margin | 10.2 | % | 10.2 | % | 10.8 | % | 11.0 | % | 10.6 | % | |||||||||
| Operating expenses | 2,085 | 1,823 | 1,490 | 1,594 | 6,992 | ||||||||||||||
| Contribution profit | $ | 1,840 | $ | 1,881 | $ | 2,156 | $ | 2,276 | $ | 8,153 | |||||||||
| Contribution margin | 4.8 | % | 5.2 | % | 6.4 | % | 6.5 | % | 5.7 | % | |||||||||
| For the Year Ended December 31, 2019 | |||||||||||||||||||
| First | Second | Third | Fourth | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Totals | |||||||||||||||
| Revenue | $ | 43,974 | $ | 44,325 | $ | 43,521 | $ | 40,119 | $ | 171,939 | |||||||||
| Cost of services | 39,274 | 39,677 | 38,948 | 35,940 | 153,839 | ||||||||||||||
| Gross profit | 4,700 | 4,648 | 4,573 | 4,179 | 18,100 | ||||||||||||||
| Gross margin | 10.7 | % | 10.5 | % | 10.5 | % | 10.4 | % | 10.5 | % | |||||||||
| Operating expenses | 3,039 | 2,558 | 2,524 | 2,398 | 10,519 | ||||||||||||||
| Contribution profit | $ | 1,661 | $ | 2,090 | $ | 2,049 | $ | 1,781 | $ | 7,581 | |||||||||
| Contribution margin | 3.8 | % | 4.7 | % | 4.7 | % | 4.4 | % | 4.4 | % | |||||||||
| 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. | |||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||||||
| Revenue (in millions) | ||||||||||||||||||||||||
| North America IT Solutions and Services | $ | 18.454 | $ | 16.762 | $ | 21.215 | $ | 45.075 | $ | 20.435 | $ | 103.487 | ||||||||||||
| Europe IT Solutions and Services | 46.007 | 44.054 | 39.199 | 40.081 | 42.478 | 165.812 | ||||||||||||||||||
| Non-Strategic Technology Services | 32.668 | 31.348 | 30.189 | 27.233 | 26.504 | 115.274 | ||||||||||||||||||
| Total Revenue | $ | 97.129 | $ | 92.164 | $ | 90.603 | $ | 112.389 | $ | 89.417 | $ | 384.573 | ||||||||||||
| Foreign Currency Impact | $ | 3.981 | $ | 3.921 | $ | 0.453 | $ | (1.520 | ) | $ | (3.106 | ) | $ | (0.252 | ) | |||||||||
| Revenue By Geography | ||||||||||||||||||||||||
| North America | 51.0 | % | 51.0 | % | 55.5 | % | 63.4 | % | 51.7 | % | 55.8 | % | ||||||||||||
| Europe | 49.0 | % | 49.0 | % | 44.5 | % | 36.6 | % | 48.3 | % | 44.2 | % | ||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
| Revenue by Vertical Market | ||||||||||||||||||||||||
| Technology Service Providers | 31 | % | 29 | % | 28 | % | 20 | % | 24 | % | 25 | % | ||||||||||||
| Healthcare | 15 | % | 15 | % | 18 | % | 36 | % | 17 | % | 22 | % | ||||||||||||
| Financial Services | 17 | % | 17 | % | 18 | % | 13 | % | 17 | % | 16 | % | ||||||||||||
| Manufacturing | 12 | % | 13 | % | 12 | % | 10 | % | 14 | % | 12 | % | ||||||||||||
| Energy | 6 | % | 6 | % | 5 | % | 4 | % | 5 | % | 5 | % | ||||||||||||
| General Markets | 19 | % | 20 | % | 19 | % | 17 | % | 23 | % | 20 | % | ||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
| Operating Margins | ||||||||||||||||||||||||
| GAAP Operating Margin | 2.2 | % | 3.0 | % | 3.0 | % | 4.6 | % | 3.6 | % | 3.6 | % | ||||||||||||
| Non-GAAP Operating Margin | 2.8 | % | 3.2 | % | 3.3 | % | 4.8 | % | 3.9 | % | 3.8 | % | ||||||||||||
Other Information (in millions except Billable Days and EPS)
| Billable Days | 65 | 64 | 63 | 63 | 65 | 255 | |||||||||||||||||
| Net Income | $ | 1.508 | $ | 1.833 | $ | 1.672 | $ | 8.717 | $ | 2.240 | $ | 14.462 | |||||||||||
| GAAP Diluted EPS* | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.58 | $ | 0.15 | $ | 0.96 | |||||||||||
| Non-GAAP Diluted EPS* | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.25 | $ | 0.16 | $ | 0.67 | |||||||||||
| Adjusted EBITDA | $ | 3.7 | $ | 4.1 | $ | 3.8 | $ | 6.5 | $ | 4.3 | $ | 18.7 |
Balance Sheet Information (in millions except DSO)
| Cash less Debt, Net | $ | 33.5 | $ | 29.2 | $ | 31.0 | $ | 35.6 | $ | 38.7 | ||||||||||
| Working Capital | $ | 53.3 | $ | 54.5 | $ | 56.6 | $ | 57.8 | $ | 60.3 | ||||||||||
| DSO | 71 | 81 | 82 | 67 | 76 | |||||||||||||||
| * 2021 fourth quarter GAAP Diluted EPS includes a $0.34 benefit from a reversal of a valuation allowance against deferred tax assets in the United States | ||||||||||||||||||||
COMPUTER TASK GROUP, INCORPORATED (CTG)
(Unaudited)
The non-GAAP information below excludes expenses associated with rebranding, certain acquisition-related expenses, and the reversal of a tax valuation allowance. The acquisition-related expenses consist of amortization of intangible assets and changes in the value of earn-out payments upon the 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) | 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | ||||||||||||||||||
| GAAP Operating Income | $ | 2.098 | $ | 2.801 | $ | 2.702 | $ | 5.141 | $ | 3.199 | $ | 13.843 | ||||||||||||
| Acquisition-related expenses | 0.395 | 0.165 | 0.280 | 0.211 | 0.262 | 0.918 | ||||||||||||||||||
| Rebranding expenses | 0.249 | - | - | - | - | - | ||||||||||||||||||
| Non-GAAP Operating Income | $ | 2.742 | $ | 2.966 | $ | 2.982 | $ | 5.352 | $ | 3.461 | $ | 14.761 | ||||||||||||
Reconciliation of GAAP to non-GAAP Operating Margin
| Twelve | ||||||||||||||||||||||||
| Months | ||||||||||||||||||||||||
| For the Quarter Ended | Ended | |||||||||||||||||||||||
| Mar. | Jun. | Sept. | Dec. | Mar. | Mar. | |||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||||||
| GAAP Operating Margin | 2.2 | % | 3.0 | % | 3.0 | % | 4.6 | % | 3.6 | % | 3.6 | % | ||||||||||||
| Acquisition-related expenses | 0.4 | % | 0.2 | % | 0.3 | % | 0.2 | % | 0.3 | % | 0.2 | % | ||||||||||||
| Rebranding expenses | 0.2 | % | - | - | - | - | - | |||||||||||||||||
| Non-GAAP Operating Margin | 2.8 | % | 3.2 | % | 3.3 | % | 4.8 | % | 3.9 | % | 3.8 | % | ||||||||||||
Reconciliation of GAAP to non-GAAP Net Income
| Twelve | ||||||||||||||||||||||||
| Months | ||||||||||||||||||||||||
| For the Quarter Ended | Ended | |||||||||||||||||||||||
| Mar. | Jun. | Sept. | Dec. | Mar. | Mar. | |||||||||||||||||||
| (in millions) | 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | ||||||||||||||||||
| GAAP Net Income | $ | 1.508 | $ | 1.833 | $ | 1.672 | $ | 8.717 | $ | 2.240 | $ | 14.462 | ||||||||||||
| Acquisition-related expenses | 0.306 | 0.119 | 0.216 | 0.151 | 0.199 | 0.685 | ||||||||||||||||||
| Rebranding expenses | 0.192 | - | - | - | - | - | ||||||||||||||||||
| Reversal of tax valuation allowance | - | - | - | (5.094 | ) | - | (5.094 | ) | ||||||||||||||||
| Non-GAAP Net Income | $ | 2.006 | $ | 1.952 | $ | 1.888 | $ | 3.774 | $ | 2.439 | $ | 10.053 | ||||||||||||
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. | |||||||||||||||||||
| 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||||||
| GAAP Diluted EPS | $ | 0.10 | $ | 0.12 | $ | 0.11 | $ | 0.58 | $ | 0.15 | $ | 0.96 | ||||||||||||
| Acquisition-related expenses | 0.02 | 0.01 | 0.02 | 0.01 | 0.01 | 0.05 | ||||||||||||||||||
| Rebranding expenses | 0.01 | - | - | - | - | - | ||||||||||||||||||
| Reversal of tax valuation allowance | - | - | - | (0.34 | ) | - | (0.34 | ) | ||||||||||||||||
| Non-GAAP Diluted EPS | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.25 | $ | 0.16 | $ | 0.67 | ||||||||||||
Reconciliation of Net Income to Adjusted EBITDA, which includes earnings before interest (including amortization of deferred debt financing costs), taxes, depreciation and amortization, equity-based compensation, rebranding expenses, and acquisition-related expenses.
| Twelve | ||||||||||||||||||||||||
| Months | ||||||||||||||||||||||||
| For the Quarter Ended | Ended | |||||||||||||||||||||||
| Mar. | Jun. | Sept. | Dec. | Mar. | Mar. | |||||||||||||||||||
| (in millions) | 2021 | 2021 | 2021 | 2021 | 2022 | 2022 | ||||||||||||||||||
| Net Income | $ | 1.508 | $ | 1.833 | $ | 1.672 | $ | 8.717 | $ | 2.240 | $ | 14.462 | ||||||||||||
| Taxes | 0.440 | 0.712 | 0.488 | (3.633 | ) | 0.702 | (1.731 | ) | ||||||||||||||||
| Interest | 0.036 | 0.161 | 0.112 | 0.100 | 0.100 | 0.473 | ||||||||||||||||||
| Depreciation and amortization | 0.854 | 0.831 | 0.766 | 0.721 | 0.716 | 3.034 | ||||||||||||||||||
| Equity-based compensation expense | 0.590 | 0.682 | 0.702 | 0.666 | 0.573 | 2.623 | ||||||||||||||||||
| Other | 0.297 | (0.123 | ) | 0.007 | (0.058 | ) | - | (0.174 | ) | |||||||||||||||
| Adjusted EBITDA | $ | 3.725 | $ | 4.096 | $ | 3.747 | $ | 6.513 | $ | 4.331 | $ | 18.687 | ||||||||||||
| Adjusted EBITDA Margin | 3.8 | % | 4.4 | % | 4.1 | % | 5.8 | % | 4.8 | % | 4.9 | % | ||||||||||||
- END -
CTG news releases are available at www.ctg.com.
