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 third quarter ended
September 29, 2023.
Filip Gydé, CTG President and CEO, commented, “We continue to be
pleased with the execution of our strategy where our gross margin
improved 300 basis points in the third quarter compared with 2022,
despite high inflation and a softening demand for IT services, and
lower utilization generally incurred during the summer months.”
Mr. Gydé continued, “Regarding the acquisition of CTG by Cegeka,
we have found a partner that will enable us to accelerate providing
digital transformation services to our clients and are confident
that this transaction with Cegeka is the best outcome for our
clients, employees, and shareholders. We are pleased to have
entered into this transaction with Cegeka, and we are working
diligently with them through the regulatory approval processes to
complete the sale. As such, although there is no certainty, given
the expiration of the tender offer has been extended to December
12, 2023, we expect the sale of CTG to Cegeka to close on December
13, 2023."
Consolidated Third 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 |
|
Sept. 29, 2023 |
|
Sept. 30, 2022 |
|
Oct. 1, 2021 |
|
$ |
|
% |
|
$ |
|
% |
Revenue |
$ |
71,291 |
|
|
$ |
75,002 |
|
|
$ |
90,603 |
|
|
$ |
(3,711 |
) |
|
(4.9 |
)% |
|
$ |
(15,601 |
) |
|
(17.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Profit |
$ |
19,467 |
|
|
$ |
18,229 |
|
|
$ |
20,290 |
|
|
$ |
1,238 |
|
|
6.8 |
% |
|
$ |
(2,061 |
) |
|
(10.2 |
)% |
GAAP Gross Margin |
|
27.3 |
% |
|
|
24.3 |
% |
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income
(Loss) |
$ |
(604 |
) |
|
$ |
2,253 |
|
|
$ |
2,702 |
|
|
$ |
(2,857 |
) |
|
(126.8 |
)% |
|
$ |
(449 |
) |
|
(16.6 |
)% |
GAAP Operating Margin |
|
(0.8 |
)% |
|
|
3.0 |
% |
|
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income* |
$ |
2,643 |
|
|
$ |
2,997 |
|
|
$ |
2,982 |
|
|
$ |
(354 |
) |
|
(11.8 |
)% |
|
$ |
15 |
|
|
0.5 |
% |
Non-GAAP Operating Margin* |
|
3.7 |
% |
|
|
4.0 |
% |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income (Loss) |
$ |
(871 |
) |
|
$ |
1,102 |
|
|
$ |
1,672 |
|
|
$ |
(1,973 |
) |
|
(179.0 |
)% |
|
$ |
(570 |
) |
|
(34.1 |
)% |
GAAP Net Margin |
|
(1.2 |
)% |
|
|
1.5 |
% |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income* |
$ |
1,703 |
|
|
$ |
1,612 |
|
|
$ |
1,888 |
|
|
$ |
91 |
|
|
5.6 |
% |
|
$ |
(276 |
) |
|
(14.6 |
)% |
Non-GAAP Net Income Margin* |
|
2.4 |
% |
|
|
2.1 |
% |
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA* |
$ |
3,059 |
|
|
$ |
3,824 |
|
|
$ |
3,747 |
|
|
$ |
(765 |
) |
|
(20.0 |
)% |
|
$ |
77 |
|
|
2.1 |
% |
Adjusted EBITDA Margin* |
|
4.3 |
% |
|
|
5.1 |
% |
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
* A reconciliation of GAAP to non-GAAP information is included
in the financial tables below
- The decrease in revenue reflects the
Company’s continued business mix shift to more solutions and
services-based business. As compared with the third quarter of
2022, the Company disengaged from $11.8 million in its lower-margin
non-strategic technology services business.
- The change in business mix and focus on
digital solutions has led to significant improvements in gross
margin over the past two years, increasing 490 basis points over
that time.
- As a percentage of revenue, selling,
general and administrative (SG&A) expenses were 28.2% compared
with 21.3% in the prior-year period. The increase was primarily due
to increases in non-recurring costs related to the acquisition of
CTG by Cegeka, acquisition-related expenses from the Eleviant
acquisition, and costs associated with the new ERP
implementation.
- Included in the GAAP net loss was $1.6
million of non-recurring costs related to certain strategic
initiatives, $0.5 million of acquisition-related expenses, and $0.4
million of ERP system implementation costs, while the prior-year
period included $0.5 million of acquisition-related expenses. Loss
per diluted share was ($0.06) for the third quarter of 2023
compared with income of $0.07 for the third quarter of 2022.
Excluding these expenses from both periods, non-GAAP earnings per
diluted share was $0.11 in both periods.
Third Quarter Segment Performance
(unaudited)
IT Solutions and Services
North America
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
25,217 |
|
|
$ |
20,340 |
|
|
$ |
21,215 |
|
|
$ |
4,877 |
|
|
|
24.0 |
% |
|
$ |
(875 |
) |
|
|
(4.1 |
)% |
Percent of total |
|
35.4 |
% |
|
|
27.1 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
9,669 |
|
|
$ |
7,723 |
|
|
$ |
7,273 |
|
|
$ |
1,946 |
|
|
|
25.2 |
% |
|
$ |
450 |
|
|
|
6.2 |
% |
Gross margin |
|
38.3 |
% |
|
|
38.0 |
% |
|
|
34.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
5,141 |
|
|
$ |
4,129 |
|
|
$ |
3,809 |
|
|
$ |
1,012 |
|
|
|
24.5 |
% |
|
$ |
320 |
|
|
|
8.4 |
% |
Contribution margin |
|
20.4 |
% |
|
|
20.3 |
% |
|
|
18.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- The significant growth in revenue and
gross margins in North America IT Solutions and Services reflects
continued strong contributions from the acquisition of Eleviant and
strong organic growth, despite a general decrease in the current
demand for IT services.
Europe
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
36,472 |
|
|
$ |
33,258 |
|
|
$ |
39,199 |
|
|
$ |
3,214 |
|
|
|
9.7 |
% |
|
$ |
(5,941 |
) |
|
|
(15.2 |
)% |
Percent of total |
|
51.1 |
% |
|
|
44.4 |
% |
|
|
43.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
8,547 |
|
|
$ |
7,870 |
|
|
$ |
9,541 |
|
|
$ |
677 |
|
|
|
8.6 |
% |
|
$ |
(1,671 |
) |
|
|
(17.5 |
)% |
Gross margin |
|
23.4 |
% |
|
|
23.7 |
% |
|
|
24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
3,898 |
|
|
$ |
3,464 |
|
|
$ |
4,358 |
|
|
$ |
434 |
|
|
|
12.5 |
% |
|
$ |
(894 |
) |
|
|
(20.5 |
)% |
Contribution margin |
|
10.7 |
% |
|
|
10.4 |
% |
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- Europe IT Solutions and Services
margins continue to reflect the impact of mandated salary increases
at the beginning of the year.
Non-Strategic Technology Services
($ in thousands) |
For the Quarter Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
9,602 |
|
|
$ |
21,404 |
|
|
$ |
30,189 |
|
|
$ |
(11,802 |
) |
|
|
(55.1 |
)% |
|
$ |
(8,785 |
) |
|
|
(29.1 |
)% |
Percent of total |
|
13.5 |
% |
|
|
28.5 |
% |
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
1,251 |
|
|
$ |
2,636 |
|
|
$ |
3,476 |
|
|
$ |
(1,385 |
) |
|
|
(52.5 |
)% |
|
$ |
(840 |
) |
|
|
(24.2 |
)% |
Gross margin |
|
13.0 |
% |
|
|
12.3 |
% |
|
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
944 |
|
|
$ |
2,061 |
|
|
$ |
2,307 |
|
|
$ |
(1,117 |
) |
|
|
(54.2 |
)% |
|
$ |
(246 |
) |
|
|
(10.7 |
)% |
Contribution margin |
|
9.8 |
% |
|
|
9.6 |
% |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
- Continued disengagement from
Non-Strategic Technology Services is consistent with the Company’s
long-term strategy. Revenue was also impacted by challenging
macroeconomic conditions which reduced demand for these
services.
Consolidated Year-to-Date Results
(unaudited)
($ in thousands) |
For the Three Quarters Ended |
|
Change 2022-2023 |
|
Change 2021-2022 |
|
Sept. 29, 2023 |
|
Sept. 30, 2022 |
|
Oct. 1, 2021 |
|
$ |
|
% |
|
$ |
|
% |
Revenue |
$ |
224,081 |
|
|
$ |
247,178 |
|
|
$ |
279,896 |
|
|
$ |
(23,097 |
) |
|
(9.3 |
)% |
|
$ |
(32,718 |
) |
|
(11.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Gross Profit |
$ |
60,597 |
|
|
$ |
58,574 |
|
|
$ |
61,436 |
|
|
$ |
2,023 |
|
|
3.5 |
% |
|
$ |
(2,862 |
) |
|
(4.7 |
)% |
GAAP Gross Margin |
|
27.0 |
% |
|
|
23.7 |
% |
|
|
21.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
$ |
388 |
|
|
$ |
8,625 |
|
|
$ |
7,601 |
|
|
$ |
(8,237 |
) |
|
(95.5 |
)% |
|
$ |
1,024 |
|
|
13.5 |
% |
GAAP Operating Margin |
|
0.2 |
% |
|
|
3.5 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating
Income* |
$ |
7,674 |
|
|
$ |
9,920 |
|
|
$ |
8,690 |
|
|
$ |
(2,246 |
) |
|
(22.6 |
)% |
|
$ |
1,230 |
|
|
14.2 |
% |
Non-GAAP Operating
Margin* |
|
3.4 |
% |
|
|
4.0 |
% |
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Income (Loss) |
$ |
(686 |
) |
|
$ |
5,382 |
|
|
$ |
5,013 |
|
|
$ |
(6,068 |
) |
|
(112.7 |
)% |
|
$ |
369 |
|
|
7.4 |
% |
GAAP Net Margin |
|
(0.3 |
)% |
|
|
2.2 |
% |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income* |
$ |
4,866 |
|
|
$ |
6,303 |
|
|
$ |
5,846 |
|
|
$ |
(1,437 |
) |
|
(22.8 |
)% |
|
$ |
457 |
|
|
7.8 |
% |
Non-GAAP Net Income
Margin* |
|
2.2 |
% |
|
|
2.5 |
% |
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA* |
$ |
9,516 |
|
|
$ |
12,379 |
|
|
$ |
11,568 |
|
|
$ |
(2,863 |
) |
|
(23.1 |
)% |
|
$ |
811 |
|
|
7.0 |
% |
Adjusted EBITDA Margin* |
|
4.2 |
% |
|
|
5.0 |
% |
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
* A reconciliation of GAAP to non-GAAP information is included
in the financial tables below
Year-to-date Segment Performance
(unaudited)
IT Solutions and Services
North America
($ in thousands) |
For the Three Quarters Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
74,410 |
|
|
$ |
61,114 |
|
|
$ |
56,431 |
|
|
$ |
13,296 |
|
|
|
21.8 |
% |
|
$ |
4,683 |
|
|
|
8.3 |
% |
Percent of total |
|
33.2 |
% |
|
|
24.7 |
% |
|
|
20.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
29,165 |
|
|
$ |
21,664 |
|
|
$ |
19,359 |
|
|
$ |
7,501 |
|
|
|
34.6 |
% |
|
$ |
2,305 |
|
|
|
11.9 |
% |
Gross margin |
|
39.2 |
% |
|
|
35.4 |
% |
|
|
34.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
15,125 |
|
|
$ |
11,408 |
|
|
$ |
9,572 |
|
|
$ |
3,717 |
|
|
|
32.6 |
% |
|
$ |
1,836 |
|
|
|
19.2 |
% |
Contribution margin |
|
20.3 |
% |
|
|
18.7 |
% |
|
|
17.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Europe
($ in thousands) |
For the Three Quarters Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
114,958 |
|
|
$ |
112,896 |
|
|
$ |
129,260 |
|
|
$ |
2,062 |
|
|
|
1.8 |
% |
|
$ |
(16,364 |
) |
|
|
(12.7 |
)% |
Percent of total |
|
51.3 |
% |
|
|
45.7 |
% |
|
|
46.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
27,114 |
|
|
$ |
27,932 |
|
|
$ |
31,506 |
|
|
$ |
(818 |
) |
|
|
(2.9 |
)% |
|
$ |
(3,574 |
) |
|
|
(11.3 |
)% |
Gross margin |
|
23.6 |
% |
|
|
24.7 |
% |
|
|
24.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
12,125 |
|
|
$ |
13,442 |
|
|
$ |
15,704 |
|
|
$ |
(1,317 |
) |
|
|
(9.8 |
)% |
|
$ |
(2,262 |
) |
|
|
(14.4 |
)% |
Contribution margin |
|
10.5 |
% |
|
|
11.9 |
% |
|
|
12.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date Segment Performance
(continued)
Non-Strategic Technology Services
($ in thousands) |
For the Three Quarters Ended |
|
|
Change 2022-2023 |
|
|
Change 2021-2022 |
|
|
Sept. 29, 2023 |
|
|
Sept. 30, 2022 |
|
|
Oct. 1, 2021 |
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Revenue |
$ |
34,713 |
|
|
$ |
73,168 |
|
|
$ |
94,205 |
|
|
$ |
(38,455 |
) |
|
|
(52.6 |
)% |
|
$ |
(21,037 |
) |
|
|
(22.3 |
)% |
Percent of total |
|
15.5 |
% |
|
|
29.6 |
% |
|
|
33.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
4,318 |
|
|
$ |
8,978 |
|
|
$ |
10,571 |
|
|
$ |
(4,660 |
) |
|
|
(51.9 |
)% |
|
$ |
(1,593 |
) |
|
|
(15.1 |
)% |
Gross margin |
|
12.4 |
% |
|
|
12.3 |
% |
|
|
11.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution profit |
$ |
3,275 |
|
|
$ |
6,892 |
|
|
$ |
6,769 |
|
|
$ |
(3,617 |
) |
|
|
(52.5 |
)% |
|
$ |
123 |
|
|
|
1.8 |
% |
Contribution margin |
|
9.4 |
% |
|
|
9.4 |
% |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet and Cash Flow
Cash and cash equivalents were $24.1 million compared with $25.1
million at year-end 2022. Net cash provided by operations for the
year was $2.8 million.
At the end of the third quarter of 2023, the Company had no
amount outstanding on its revolving line of credit facility or any
other long-term debt. Days sales outstanding were 82 in the third
quarter of 2023 compared with 83 in the prior-year period.
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
“Due to the rapid pace of change and continued uncertainty in
the macroenvironment, we are not providing full year 2023
guidance," said John M. Laubacker, Chief Financial Officer.
Conference Call and Webcast
Due to the pending acquisition of CTG by Cegeka, CTG will not
host an earnings call associated with the financial earnings press
release.
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 press release contains statements that constitute “forward
looking statements,” including statements that express the
opinions, expectations, beliefs, plans, objectives, assumptions, or
projections regarding future events or future results, including
statements regarding the proposed acquisition of CTG by Cegeka (the
“Proposed Acquisition”), in contrast with statements that reflect
historical facts. In some cases, you can identify such
forward-looking statements by terminology such as “anticipate,”
“intend,” “believe,” “estimate,” “plan,” “seek,” “project,” or
“expect,” “may,” “will,” “would,” “could,” “potential,” “intend,”
or “should,” the negative of these terms or similar expressions.
Forward-looking statements are based on management’s current
beliefs and assumptions and on information currently available to
Cegeka and CTG. However, these forward-looking statements are not a
guarantee of performance, and you should not place undue reliance
on such statements.
Forward-looking statements are subject to many risks,
uncertainties and other variable circumstances, including, but not
limited to, the ability of the parties to satisfy the closing
conditions for the Proposed Acquisition on a timely basis or at
all, including the possibility that a governmental agency may
prohibit, delay, or refuse to grant approval for the consummation
of the Proposed Acquisition; statements about the expected
timetable for completing the Proposed Acquisition; uncertainties as
to how many of CTG’s shareholders will tender their shares in the
offer; the possibility that competing offers will be made; the
occurrence of events that may give rise to a right of one or both
of Cegeka and CTG to terminate the merger agreement; negative
effects of the announcement of the Proposed Acquisition on the
market price of CTG’s common stock and/or on it business, financial
condition, results of operations, and financial performance
(including the ability of CTG to maintain relationships with its
customers, suppliers, and others with whom it does business); the
effects of the Proposed Acquisition (or the announcement thereof)
on CTG’s ability to retain and hire qualified professional staff
and talent, including technical, sales and management personnel;
competition for clients; the increased bargaining power of CTG’s
large clients; the occurrence of cyber incidents and CTG’s ability
to protect confidential client data; the partial or complete loss
of the revenue CTG generates from its largest client, International
Business Machines Corporation (IBM); the uncertainty of CTG’s
clients’ implementations of cost reduction projects; the mix of
work at CTG between IT Solutions and Services and Non-Strategic
Technology Services, and the risk of disengaging from Non-Strategic
Technology Services; currency exchange risks; risks associated with
CTG’s 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 Russian and
Ukraine and recent developments in China, and volatility in the
global credit and financial markets and economy; renegotiations,
nullification, or breaches of contracts with clients, vendors,
subcontractors or other parties; the impact of current and future
laws and government regulations, as well as repeal or modification
of such, affecting the IT solutions and services industry, taxes
and CTG’s operations in particular; industry, economic, and
political conditions, including fluctuations in demand for IT
services; and consolidation among CTG’s competitors or clients.
Such risks and uncertainties may cause the statements to be
inaccurate and readers are cautioned not to place undue reliance on
such statements. Many of these risks are outside of the control of
Cegeka and CTG and could cause actual results to differ materially.
The forward-looking statements included in this press release are
made only as of the date hereof. Cegeka and CTG do not undertake,
and specifically decline, any obligation to update any such
statements or to publicly announce the results of any revisions to
any such statements to reflect future events or developments,
except as required by law.
A further description of risks and uncertainties relating to CTG
can be found in CTG’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2022, as filed with the SEC, and in other
documents filed from time to time with the SEC by CTG and available
at www.sec.gov and www.ctg.com.
Contacts:
John M. Laubacker |
|
|
Chief Financial Officer |
|
|
Tel: +1 716 887 7368 |
|
|
|
|
|
|
|
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Statements of Income (Loss)(Unaudited) (amounts in
thousands except per share data) |
|
|
For the Quarter Ended |
|
|
September 29, |
|
|
September 30, |
|
|
October 1, |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
71,291 |
|
|
$ |
75,002 |
|
|
$ |
90,603 |
|
Cost of services |
|
51,824 |
|
|
|
56,773 |
|
|
|
70,313 |
|
Gross profit |
|
19,467 |
|
|
|
18,229 |
|
|
|
20,290 |
|
Selling, general and admin.
expenses |
|
20,071 |
|
|
|
15,976 |
|
|
|
17,588 |
|
Operating income (loss) |
|
(604 |
) |
|
|
2,253 |
|
|
|
2,702 |
|
Other expense, net |
|
(495 |
) |
|
|
(392 |
) |
|
|
(542 |
) |
Income (loss) before income
taxes |
|
(1,099 |
) |
|
|
1,861 |
|
|
|
2,160 |
|
Provision (benefit) for income
taxes |
|
(228 |
) |
|
|
759 |
|
|
|
488 |
|
Net income (loss) |
$ |
(871 |
) |
|
$ |
1,102 |
|
|
$ |
1,672 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share: |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.06 |
) |
|
$ |
0.08 |
|
|
$ |
0.12 |
|
Diluted |
$ |
(0.06 |
) |
|
$ |
0.07 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
14,903 |
|
|
|
14,480 |
|
|
|
14,011 |
|
Diluted |
|
14,903 |
|
|
|
15,157 |
|
|
|
14,939 |
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Statements of Income (Loss)(Unaudited) (amounts in
thousands except per share data) |
|
|
For the Three Quarters Ended |
|
|
September 29, |
|
|
September 30, |
|
|
October 1, |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
224,081 |
|
|
$ |
247,178 |
|
|
$ |
279,896 |
|
Cost of services |
|
163,484 |
|
|
|
188,604 |
|
|
|
218,460 |
|
Gross profit |
|
60,597 |
|
|
|
58,574 |
|
|
|
61,436 |
|
Selling, general and admin.
expenses |
|
60,209 |
|
|
|
49,949 |
|
|
|
53,835 |
|
Operating income |
|
388 |
|
|
|
8,625 |
|
|
|
7,601 |
|
Other expense, net |
|
(1,089 |
) |
|
|
(1,034 |
) |
|
|
(948 |
) |
Income (loss) before income
taxes |
|
(701 |
) |
|
|
7,591 |
|
|
|
6,653 |
|
Provision (benefit) for income
taxes |
|
(15 |
) |
|
|
2,209 |
|
|
|
1,640 |
|
Net income (loss) |
$ |
(686 |
) |
|
$ |
5,382 |
|
|
$ |
5,013 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share: |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.05 |
) |
|
$ |
0.37 |
|
|
$ |
0.36 |
|
Diluted |
$ |
(0.05 |
) |
|
$ |
0.36 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
14,813 |
|
|
|
14,366 |
|
|
|
13,850 |
|
Diluted |
|
14,813 |
|
|
|
15,086 |
|
|
|
14,951 |
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Balance Sheets(Unaudited)(amounts in thousands) |
|
September 29, |
|
|
December 31, |
|
|
September 30, |
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
24,069 |
|
|
$ |
25,140 |
|
|
$ |
26,753 |
|
Accounts receivable, net |
|
64,433 |
|
|
|
70,979 |
|
|
|
68,415 |
|
Other current assets |
|
5,072 |
|
|
|
3,769 |
|
|
|
3,412 |
|
Total current assets |
|
93,574 |
|
|
|
99,888 |
|
|
|
98,580 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
6,045 |
|
|
|
5,061 |
|
|
|
4,888 |
|
Operating lease right-of-use assets |
|
19,478 |
|
|
|
18,506 |
|
|
|
17,101 |
|
Cash surrender value |
|
4,822 |
|
|
|
4,120 |
|
|
|
4,087 |
|
Acquired intangibles, net |
|
11,639 |
|
|
|
12,943 |
|
|
|
5,618 |
|
Goodwill |
|
35,487 |
|
|
|
35,998 |
|
|
|
38,914 |
|
Other assets |
|
6,868 |
|
|
|
5,103 |
|
|
|
7,318 |
|
Total Assets |
$ |
177,913 |
|
|
$ |
181,619 |
|
|
$ |
176,506 |
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
9,661 |
|
|
$ |
14,254 |
|
|
$ |
11,765 |
|
Accrued compensation |
|
18,521 |
|
|
|
19,016 |
|
|
|
20,036 |
|
Operating lease liabilities |
|
6,186 |
|
|
|
5,905 |
|
|
|
5,287 |
|
Other current liabilities |
|
14,166 |
|
|
|
12,758 |
|
|
|
17,007 |
|
Total current liabilities |
|
48,534 |
|
|
|
51,933 |
|
|
|
54,095 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
- |
|
|
|
- |
|
|
|
- |
|
Operating lease liabilities |
|
13,412 |
|
|
|
12,466 |
|
|
|
11,713 |
|
Other liabilities |
|
10,388 |
|
|
|
11,241 |
|
|
|
14,680 |
|
Shareholders' equity |
|
105,579 |
|
|
|
105,979 |
|
|
|
96,018 |
|
Total Liabilities and
Shareholders' Equity |
$ |
177,913 |
|
|
$ |
181,619 |
|
|
$ |
176,506 |
|
COMPUTER TASK GROUP, INCORPORATED (CTG)Condensed
Consolidated Statements of Cash Flows(Unaudited)(amounts in
thousands) |
|
For the Three Quarters Ended |
|
|
September 29, |
|
|
September 30, |
|
|
October 1, |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(686 |
) |
|
$ |
5,382 |
|
|
$ |
5,013 |
|
Depreciation and amortization expense |
|
2,750 |
|
|
|
2,051 |
|
|
|
2,451 |
|
Equity-based compensation expense |
|
1,077 |
|
|
|
1,869 |
|
|
|
1,974 |
|
Other operating items |
|
(359 |
) |
|
|
3,207 |
|
|
|
(7,205 |
) |
Net cash provided by operating
activities |
|
2,782 |
|
|
|
12,509 |
|
|
|
2,233 |
|
Net cash used in investing
activities |
|
(3,056 |
) |
|
|
(17,917 |
) |
|
|
(1,978 |
) |
Net cash used in financing
activities |
|
(786 |
) |
|
|
(884 |
) |
|
|
(1,175 |
) |
Effect of exchange rates on
cash and cash equivalents |
|
(11 |
) |
|
|
(2,539 |
) |
|
|
(917 |
) |
Net decrease in cash and cash
equivalents |
|
(1,071 |
) |
|
|
(8,831 |
) |
|
|
(1,837 |
) |
Cash and cash equivalents at
beginning of period |
|
25,140 |
|
|
|
35,584 |
|
|
|
32,865 |
|
Cash and cash equivalents at
end of period |
$ |
24,069 |
|
|
$ |
26,753 |
|
|
$ |
31,028 |
|
|
|
|
|
|
|
|
|
|
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 September 29, 2023 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
25,217 |
|
|
$ |
36,472 |
|
|
$ |
9,602 |
|
Cost of services |
|
15,548 |
|
|
|
27,925 |
|
|
|
8,351 |
|
Gross profit |
|
9,669 |
|
|
|
8,547 |
|
|
|
1,251 |
|
Gross margin |
|
38.3 |
% |
|
|
23.4 |
% |
|
|
13.0 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
4,528 |
|
|
|
4,649 |
|
|
|
307 |
|
Contribution profit |
$ |
5,141 |
|
|
$ |
3,898 |
|
|
$ |
944 |
|
Contribution margin |
|
20.4 |
% |
|
|
10.7 |
% |
|
|
9.8 |
% |
|
For the Quarter Ended September 30, 2022 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
20,340 |
|
|
$ |
33,258 |
|
|
$ |
21,404 |
|
Cost of services |
|
12,617 |
|
|
|
25,388 |
|
|
|
18,768 |
|
Gross profit |
|
7,723 |
|
|
|
7,870 |
|
|
|
2,636 |
|
Gross margin |
|
38.0 |
% |
|
|
23.7 |
% |
|
|
12.3 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
3,594 |
|
|
|
4,406 |
|
|
|
575 |
|
Contribution profit |
$ |
4,129 |
|
|
$ |
3,464 |
|
|
$ |
2,061 |
|
Contribution margin |
|
20.3 |
% |
|
|
10.4 |
% |
|
|
9.6 |
% |
|
For the Quarter Ended October 1, 2021 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
21,215 |
|
|
$ |
39,199 |
|
|
$ |
30,189 |
|
Cost of services |
|
13,942 |
|
|
|
29,658 |
|
|
|
26,713 |
|
Gross profit |
|
7,273 |
|
|
|
9,541 |
|
|
|
3,476 |
|
Gross margin |
|
34.3 |
% |
|
|
24.3 |
% |
|
|
11.5 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
3,464 |
|
|
|
5,183 |
|
|
|
1,169 |
|
Contribution profit |
$ |
3,809 |
|
|
$ |
4,358 |
|
|
$ |
2,307 |
|
Contribution margin |
|
18.0 |
% |
|
|
11.1 |
% |
|
|
7.6 |
% |
COMPUTER TASK GROUP, INCORPORATED (CTG)Segment
Information (continued)(Unaudited)(amounts in thousands) |
|
For the Three Quarters Ended September 29,
2023 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
74,410 |
|
|
$ |
114,958 |
|
|
$ |
34,713 |
|
Cost of services |
|
45,245 |
|
|
|
87,844 |
|
|
|
30,395 |
|
Gross profit |
|
29,165 |
|
|
|
27,114 |
|
|
|
4,318 |
|
Gross margin |
|
39.2 |
% |
|
|
23.6 |
% |
|
|
12.4 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
14,040 |
|
|
|
14,989 |
|
|
|
1,043 |
|
Contribution profit |
$ |
15,125 |
|
|
$ |
12,125 |
|
|
$ |
3,275 |
|
Contribution margin |
|
20.3 |
% |
|
|
10.5 |
% |
|
|
9.4 |
% |
|
For the Three Quarters Ended September 30,
2022 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
61,114 |
|
|
$ |
112,896 |
|
|
$ |
73,168 |
|
Cost of services |
|
39,450 |
|
|
|
84,964 |
|
|
|
64,190 |
|
Gross profit |
|
21,664 |
|
|
|
27,932 |
|
|
|
8,978 |
|
Gross margin |
|
35.4 |
% |
|
|
24.7 |
% |
|
|
12.3 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
10,256 |
|
|
|
14,490 |
|
|
|
2,086 |
|
Contribution profit |
$ |
11,408 |
|
|
$ |
13,442 |
|
|
$ |
6,892 |
|
Contribution margin |
|
18.7 |
% |
|
|
11.9 |
% |
|
|
9.4 |
% |
|
For the Three Quarters Ended October 1, 2021 |
|
|
North |
|
|
|
|
|
|
|
|
America |
|
|
Europe |
|
|
Non-Strategic |
|
|
IT Solutions |
|
|
IT Solutions |
|
|
Technology |
|
|
and Services |
|
|
and Services |
|
|
Services |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
56,431 |
|
|
$ |
129,260 |
|
|
$ |
94,205 |
|
Cost of services |
|
37,072 |
|
|
|
97,754 |
|
|
|
83,634 |
|
Gross profit |
|
19,359 |
|
|
|
31,506 |
|
|
|
10,571 |
|
Gross margin |
|
34.3 |
% |
|
|
24.4 |
% |
|
|
11.2 |
% |
Selling, solutions, delivery,
and recruiting expenses |
|
9,787 |
|
|
|
15,802 |
|
|
|
3,802 |
|
Contribution profit |
$ |
9,572 |
|
|
$ |
15,704 |
|
|
$ |
6,769 |
|
Contribution margin |
|
17.0 |
% |
|
|
12.1 |
% |
|
|
7.2 |
% |
COMPUTER TASK GROUP, INCORPORATED (CTG)Segment and
Vertical Market Trends (Unaudited)Supplemental Financial
Information |
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
|
Revenue (in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
North America IT Solutions and
Services |
|
$ |
20.340 |
|
|
$ |
22.924 |
|
|
$ |
23.196 |
|
|
$ |
25.997 |
|
|
$ |
25.217 |
|
|
$ |
97.334 |
|
Europe IT Solutions and
Services |
|
|
33.258 |
|
|
|
37.035 |
|
|
|
40.093 |
|
|
|
38.393 |
|
|
|
36.472 |
|
|
|
151.993 |
|
Non-Strategic Technology
Services |
|
|
21.404 |
|
|
|
17.943 |
|
|
|
14.913 |
|
|
|
10.198 |
|
|
|
9.602 |
|
|
|
52.656 |
|
Total Revenue |
|
$ |
75.002 |
|
|
$ |
77.902 |
|
|
$ |
78.202 |
|
|
$ |
74.588 |
|
|
$ |
71.291 |
|
|
$ |
301.983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in North
America |
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency (in
millions)* |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
$ |
41.501 |
|
|
$ |
40.604 |
|
|
$ |
37.859 |
|
|
$ |
35.970 |
|
|
$ |
34.605 |
|
|
$ |
149.038 |
|
Foreign Currency Impact |
|
|
(0.015 |
) |
|
|
(0.006 |
) |
|
|
0.003 |
|
|
|
0.001 |
|
|
|
- |
|
|
|
Total Revenue in Constant
Currency (non-GAAP) |
|
$ |
41.486 |
|
|
$ |
40.598 |
|
|
$ |
37.862 |
|
|
$ |
35.971 |
|
|
$ |
34.605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue in
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency (in
millions)* |
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
$ |
33.501 |
|
|
$ |
37.298 |
|
|
$ |
40.343 |
|
|
$ |
38.618 |
|
|
$ |
36.686 |
|
|
$ |
152.945 |
|
Foreign Currency Impact |
|
|
2.712 |
|
|
|
2.537 |
|
|
|
0.618 |
|
|
|
0.010 |
|
|
|
- |
|
|
|
Total Revenue in Constant
Currency (non-GAAP) |
|
$ |
36.213 |
|
|
$ |
39.835 |
|
|
$ |
40.961 |
|
|
$ |
38.628 |
|
|
$ |
36.686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue By
Geography |
|
|
|
|
|
|
|
|
|
|
|
|
North America |
|
|
55.3 |
% |
|
|
52.1 |
% |
|
|
48.4 |
% |
|
|
48.2 |
% |
|
|
48.5 |
% |
|
|
49.4 |
% |
Europe |
|
|
44.7 |
% |
|
|
47.9 |
% |
|
|
51.6 |
% |
|
|
51.8 |
% |
|
|
51.5 |
% |
|
|
50.6 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Vertical
Market |
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare |
|
|
19 |
% |
|
|
18 |
% |
|
|
19 |
% |
|
|
23 |
% |
|
|
24 |
% |
|
|
21 |
% |
Financial Services |
|
|
15 |
% |
|
|
17 |
% |
|
|
18 |
% |
|
|
17 |
% |
|
|
15 |
% |
|
|
17 |
% |
Manufacturing |
|
|
17 |
% |
|
|
16 |
% |
|
|
16 |
% |
|
|
14 |
% |
|
|
13 |
% |
|
|
15 |
% |
Technology Service
Providers |
|
|
22 |
% |
|
|
19 |
% |
|
|
16 |
% |
|
|
15 |
% |
|
|
14 |
% |
|
|
16 |
% |
Energy |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
6 |
% |
|
|
7 |
% |
|
|
6 |
% |
General Markets |
|
|
21 |
% |
|
|
24 |
% |
|
|
25 |
% |
|
|
25 |
% |
|
|
27 |
% |
|
|
25 |
% |
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Margins |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Margin
(Loss) |
|
|
3.0 |
% |
|
|
3.1 |
% |
|
|
0.9 |
% |
|
|
0.4 |
% |
|
|
(0.8 |
)% |
|
|
0.9 |
% |
Non-GAAP Operating Margin |
|
|
4.0 |
% |
|
|
5.1 |
% |
|
|
2.7 |
% |
|
|
3.9 |
% |
|
|
3.7 |
% |
|
|
3.9 |
% |
Other Information (in millions except Billable Days and
EPS)
Billable Days |
|
|
63 |
|
|
63 |
|
|
64 |
|
|
64 |
|
|
|
63 |
|
|
|
254 |
Net Income (Loss) |
|
$ |
1.102 |
|
$ |
1.227 |
|
$ |
0.315 |
|
$ |
(0.130 |
) |
|
$ |
(0.871 |
) |
|
$ |
0.541 |
GAAP Diluted EPS |
|
$ |
0.07 |
|
$ |
0.08 |
|
$ |
0.02 |
|
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.03 |
Non-GAAP Diluted EPS |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
0.08 |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.46 |
Adjusted EBITDA
(non-GAAP) |
|
$ |
3.8 |
|
$ |
4.8 |
|
$ |
2.8 |
|
$ |
3.7 |
|
|
$ |
3.1 |
|
|
$ |
14.3 |
Balance Sheet Information (in millions except
DSO)
Cash less Debt, Net |
|
$ |
26.8 |
|
$ |
25.1 |
|
$ |
21.9 |
|
$ |
19.1 |
|
$ |
24.1 |
|
|
Working Capital |
|
$ |
44.5 |
|
$ |
48.0 |
|
$ |
49.0 |
|
$ |
47.8 |
|
$ |
45.0 |
|
|
DSO |
|
|
83 |
|
|
84 |
|
|
83 |
|
|
86 |
|
|
82 |
|
|
* 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 certain
acquisition-related expenses, ERP system implementation costs,
costs associated with severance and the evaluation of strategic
alternatives. 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 (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
(in
millions) |
|
|
2022 |
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|
2023 |
|
|
|
2023 |
GAAP Operating Income
(Loss) |
|
$ |
2.253 |
|
$ |
2.451 |
|
$ |
0.707 |
|
$ |
0.285 |
|
$ |
(0.604 |
) |
|
$ |
2.839 |
Acquisition-related
expenses |
|
|
0.744 |
|
|
0.696 |
|
|
0.634 |
|
|
0.623 |
|
|
0.662 |
|
|
|
2.615 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
0.481 |
|
|
0.536 |
|
|
0.529 |
|
|
|
1.546 |
Severance |
|
|
- |
|
|
0.838 |
|
|
0.286 |
|
|
0.497 |
|
|
- |
|
|
|
1.621 |
Non-recurring costs related to
certain strategic initiatives |
|
|
- |
|
|
- |
|
|
- |
|
|
0.982 |
|
|
2.056 |
|
|
|
3.038 |
Non-GAAP Operating
Income |
|
$ |
2.997 |
|
$ |
3.985 |
|
$ |
2.108 |
|
$ |
2.923 |
|
$ |
2.643 |
|
|
$ |
11.659 |
Reconciliation of GAAP to non-GAAP Operating Margin (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
|
|
2022 |
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|
2023 |
|
|
2023 |
|
GAAP Operating Margin
(Loss) |
|
3.0 |
% |
|
3.1 |
% |
|
0.9 |
% |
|
0.4 |
% |
|
(0.8 |
)% |
|
0.9 |
% |
Acquisition-related
expenses |
|
1.0 |
% |
|
0.9 |
% |
|
0.8 |
% |
|
0.8 |
% |
|
0.9 |
% |
|
0.9 |
% |
ERP system implementation
costs |
|
- |
|
|
- |
|
|
0.6 |
% |
|
0.7 |
% |
|
0.7 |
% |
|
0.5 |
% |
Severance |
|
- |
|
|
1.1 |
% |
|
0.4 |
% |
|
0.7 |
% |
|
- |
|
|
0.6 |
% |
Non-recurring costs related to
certain strategic initiatives |
|
- |
|
|
- |
|
|
- |
|
|
1.3 |
% |
|
2.9 |
% |
|
1.0 |
% |
Non-GAAP Operating
Margin |
|
4.0 |
% |
|
5.1 |
% |
|
2.7 |
% |
|
3.9 |
% |
|
3.7 |
% |
|
3.9 |
% |
Reconciliation of GAAP to non-GAAP Net Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
(in
millions) |
|
|
2022 |
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
GAAP Net Income
(Loss) |
|
$ |
1.102 |
|
$ |
1.227 |
|
$ |
0.315 |
|
$ |
(0.130 |
) |
|
$ |
(0.871 |
) |
|
$ |
0.541 |
Acquisition-related
expenses |
|
|
0.510 |
|
|
0.435 |
|
|
0.419 |
|
|
0.485 |
|
|
|
0.525 |
|
|
|
1.864 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
0.317 |
|
|
0.417 |
|
|
|
0.419 |
|
|
|
1.153 |
Severance |
|
|
- |
|
|
0.524 |
|
|
0.189 |
|
|
0.387 |
|
|
|
- |
|
|
|
1.100 |
Non-recurring costs related to
certain strategic initiatives |
|
|
- |
|
|
- |
|
|
- |
|
|
0.764 |
|
|
|
1.630 |
|
|
|
2.394 |
Non-GAAP Net
Income |
|
$ |
1.612 |
|
$ |
2.186 |
|
$ |
1.240 |
|
$ |
1.923 |
|
|
$ |
1.703 |
|
|
$ |
7.052 |
COMPUTER TASK GROUP, INCORPORATED
(CTG) (Unaudited)
Reconciliation of GAAP to non-GAAP Net Margin (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
|
|
2022 |
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|
2023 |
|
|
2023 |
|
GAAP Net Margin
(Loss) |
|
1.5 |
% |
|
1.6 |
% |
|
0.4 |
% |
|
(0.2 |
)% |
|
(1.2 |
)% |
|
0.2 |
% |
Acquisition-related
expenses |
|
0.6 |
% |
|
0.5 |
% |
|
0.5 |
% |
|
0.7 |
% |
|
0.7 |
% |
|
0.6 |
% |
ERP system implementation
costs |
|
- |
|
|
- |
|
|
0.4 |
% |
|
0.6 |
% |
|
0.6 |
% |
|
0.4 |
% |
Severance |
|
- |
|
|
0.7 |
% |
|
0.3 |
% |
|
0.5 |
% |
|
- |
|
|
0.3 |
% |
Non-recurring costs related to
certain strategic initiatives |
|
- |
|
|
- |
|
|
- |
|
|
1.0 |
% |
|
2.3 |
% |
|
0.8 |
% |
Non-GAAP Net
Margin |
|
2.1 |
% |
|
2.8 |
% |
|
1.6 |
% |
|
2.6 |
% |
|
2.4 |
% |
|
2.3 |
% |
Reconciliation of GAAP to non-GAAP Diluted Earnings (Loss) per
Share (EPS)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
|
|
|
2022 |
|
|
2022 |
|
|
2023 |
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
GAAP Diluted
EPS |
|
$ |
0.07 |
|
$ |
0.08 |
|
$ |
0.02 |
|
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
|
$ |
0.03 |
Acquisition-related
expenses |
|
|
0.04 |
|
|
0.03 |
|
|
0.03 |
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.12 |
ERP system implementation
costs |
|
|
- |
|
|
- |
|
|
0.02 |
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.08 |
Severance |
|
|
- |
|
|
0.03 |
|
|
0.01 |
|
|
0.03 |
|
|
|
- |
|
|
|
0.07 |
Non-recurring costs related to
certain strategic initiatives |
|
|
- |
|
|
- |
|
|
- |
|
|
0.05 |
|
|
|
0.11 |
|
|
|
0.16 |
Non-GAAP Diluted
EPS |
|
$ |
0.11 |
|
$ |
0.14 |
|
$ |
0.08 |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.46 |
Reconciliation of Net Income (Loss) 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,
acquisition-related expenses, and non-recurring costs related to
certain strategic initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
Twelve |
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
For the Quarter Ended |
|
Ended |
|
|
Sept. |
|
Dec. |
|
Mar. |
|
Jun. |
|
Sept. |
|
Sept. |
(in
millions) |
|
|
2022 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
|
|
|
2023 |
|
Net Income
(Loss) |
|
$ |
1.102 |
|
|
$ |
1.227 |
|
|
$ |
0.315 |
|
|
$ |
(0.130 |
) |
|
$ |
(0.871 |
) |
|
$ |
0.541 |
|
Taxes |
|
|
0.759 |
|
|
|
0.736 |
|
|
|
0.162 |
|
|
|
0.051 |
|
|
|
(0.228 |
) |
|
|
0.721 |
|
Interest |
|
|
0.103 |
|
|
|
0.100 |
|
|
|
0.109 |
|
|
|
0.121 |
|
|
|
0.107 |
|
|
|
0.437 |
|
Depreciation and
amortization |
|
|
0.651 |
|
|
|
0.948 |
|
|
|
0.837 |
|
|
|
0.918 |
|
|
|
0.995 |
|
|
|
3.698 |
|
Equity-based compensation
expense |
|
|
0.693 |
|
|
|
0.694 |
|
|
|
0.345 |
|
|
|
0.522 |
|
|
|
0.210 |
|
|
|
1.771 |
|
Other |
|
|
0.516 |
|
|
|
1.102 |
|
|
|
0.997 |
|
|
|
2.210 |
|
|
|
2.846 |
|
|
|
7.155 |
|
Adjusted
EBITDA |
|
$ |
3.824 |
|
|
$ |
4.807 |
|
|
$ |
2.765 |
|
|
$ |
3.692 |
|
|
$ |
3.059 |
|
|
$ |
14.323 |
|
Adjusted EBITDA Margin |
|
|
5.1 |
% |
|
|
6.2 |
% |
|
|
3.5 |
% |
|
|
4.9 |
% |
|
|
4.3 |
% |
|
|
4.7 |
% |
Important Information
This earnings release is not an offer to buy or the solicitation
of an offer to sell any securities. The solicitation and the offer
to buy all of the outstanding common stock of CTG have been made
pursuant to a tender offer statement on Schedule TO, containing an
offer to purchase and related materials, filed by Cegeka with the
U.S. Securities and Exchange Commission (the “SEC”) on August 23,
2023. CTG filed a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the tender offer with the SEC on August 23,
2023. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A
RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS)
AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9,
AND ANY AMENDMENTS THERETO FROM TIME TO TIME, CONTAIN IMPORTANT
INFORMATION. ANY HOLDERS OF SHARES ARE URGED TO READ THESE
DOCUMENTS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION THAT
HOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING
TENDERING THEIR SHARES. The offer to purchase, the related letter
of transmittal and the solicitation/recommendation statement are
available for free at the SEC’s website at www.sec.gov.
Free copies of the offer to purchase, the related letter of
transmittal and certain other offering documents are available by
Cegeka and may be obtained by directing a request to the
information agent for the tender offer that is named in the
Schedule TO and related offer documents. Copies of the documents
filed with the SEC by CTG are available free of charge on CTG’s
internet website at www.ctg.com or by contacting CTG’s Investor
Relations Department at 716 887 7368.
In addition to the offer to purchase, the related letter of
transmittal and certain other tender offer documents filed by
Cegeka, as well as the solicitation/recommendation statement filed
by CTG, CTG will also file periodic and current reports with the
SEC. You may read and copy any reports or other information filed
by Cegeka or CTG at the SEC public reference room at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the public reference room. CTG’s filings
with the SEC are also available to the public from commercial
document-retrieval services and at the website maintained by the
SEC at http://www.sec.gov.
CTG news releases are available at
www.ctg.com.
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