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  • North America IT Solutions and Services revenue grew 21.3%, partially offsetting an intentional decline pursuant to our strategy of $6.1 million in Non-Strategic Technology Services, and a $4.9 million revenue decline from foreign currency exchange headwinds
  • Gross margin expanded 180 basis points to 23.9%, the highest level in more than 10 years; two-year gross margin improvement was 290 basis points
  • Operating margin was 3.8% and non-GAAP operating margin was 4.2%, increases of 80 and 100 basis points, respectively
  • Net income increased 11.3%, and adjusted EBITDA increased to 5.1%, an increase of 70 basis points
  • Second quarter GAAP diluted EPS of $0.13 increased $0.01, or 8%, despite lower consolidated revenue; non-GAAP diluted EPS increased 15% to $0.15

BUFFALO, N.Y., Aug. 04, 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 second quarter ended July 1, 2022.

Filip Gydé, CTG President and CEO commented, “Our second quarter results again demonstrated our strong operational execution and the success of our digital solutions and service strategy, while we also continue to disengage over time from our lower margin, non-strategic technology services business. Our margin profile continued to improve with measurable expansion at the gross and operating levels on a consolidated basis, which translated into profitability improvement despite top-line headwinds.”

“While we are still facing uncertainty due to macroeconomic challenges, we have a high level of confidence in our teams’ ability to continue to execute our strategy over the long-term. With our stronger core business platform and flexible balance sheet, we will look to accelerate our pace of growth and enhance our margin profile through focused acquisitions.”

Consolidated Second 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  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 82,759     $ 92,164     $ 89,146     $ (9,405 )     -10.2 %   $ 3,018     3.4 %
                                                     
GAAP Operating Income $ 3,173     $ 2,801     $ 1,914     $ 372       13.3 %   $ 887     46.3 %
GAAP Operating Margin   3.8 %     3.0 %     2.1 %                              
                                                     
Non-GAAP Operating Income* $ 3,463     $ 2,966     $ 2,863     $ 497       16.8 %   $ 103     3.6 %
Non-GAAP Operating Margin*   4.2 %     3.2 %     3.2 %                              
                                                     
GAAP Net Income $ 2,040     $ 1,833     $ 1,759     $ 207       11.3 %   $ 74     4.2 %
GAAP Net Margin   2.5 %     2.0 %     2.0 %                              
                                                     
Non-GAAP Net Income* $ 2,252     $ 1,952     $ 1,441     $ 300       15.4 %   $ 511     35.5 %
Non-GAAP Net Income Margin*   2.7 %     2.1 %     1.6 %                              
                                                     
Adjusted EBITDA* $ 4,224     $ 4,096     $ 4,052     $ 128       3.1 %   $ 44     1.1 %
Adjusted EBITDA Margin*   5.1 %     4.4 %     4.5 %                              

        * 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 $6.1 million decline in revenue related to the disengagement from lower-margin non-strategic technology services business, as well as a negative $4.9 million impact to revenue due to changes in foreign currency exchange rates. Additionally, labor constraints have impeded growth in the Europe IT Solutions and Services segment.
  • Selling, general and administrative (SG&A) expenses as a percentage of revenue increased 90 basis points due to the loss of operating leverage and continued investments in the business but declined on an absolute basis by 5.7% to $16.6 million.
  • Operating income increased 13.3% on improved business mix as the Company continued to advance its strategy to provide higher-value digital IT solutions and reduce its exposure to lower-margin business.


Second Quarter Segment Performance

(unaudited)

IT Solutions and Services

North America

 ($ in thousands) For the Quarter Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 20,339     $ 16,762     $ 16,069     $ 3,577       21.3 %   $ 693     4.3 %
Percent of total   24.6 %     18.2 %     18.0 %                              
                                                     
Gross profit $ 7,079     $ 6,074     $ 5,145     $ 1,005       16.5 %   $ 929     18.1 %
Gross margin   34.8 %     36.2 %     32.0 %                              
                                                     
Contribution profit $ 3,547     $ 2,908     $ 3,006     $ 639       22.0 %   $ (98 )   -3.3 %
Contribution margin   17.4 %     17.3 %     18.7 %                              


Second Quarter Segment Performance (continued)

(unaudited)

Europe

 ($ in thousands) For the Quarter Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 37,160     $ 44,054     $ 36,917     $ (6,894 )     -15.6 %   $ 7,137     19.3 %
Percent of total   44.9 %     47.8 %     41.4 %                              
                                                     
Gross profit $ 9,582     $ 10,748     $ 9,889     $ (1,166 )     -10.8 %   $ 859     8.7 %
Gross margin   25.8 %     24.4 %     26.8 %                              
                                                     
Contribution profit $ 4,727     $ 5,612     $ 5,036     $ (885 )     -15.8 %   $ 576     11.4 %
Contribution margin   12.7 %     12.7 %     13.6 %                              
  • North America IT Solutions and Services revenue increased 21.3%, reflecting new business and strengthened business from existing customers.
  • The revenue change in the Europe IT Solutions and Services segment primarily reflects $4.9 million of unfavorable foreign currency exchange rate fluctuations, and macro-economic headwinds in the European Union, particularly around labor constraints. Despite the lower revenue, segment gross margin expanded 140 basis points on strong execution, which helped to offset inflationary pressures.


Non-Strategic Technology Services

 ($ in thousands) For the Quarter Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 25,260     $ 31,348     $ 36,160     $ (6,088 )     -19.4 %   $ (4,812 )   -13.3 %
Percent of total   30.5 %     34.0 %     40.6 %                              
                                                     
Gross profit $ 3,089     $ 3,557     $ 3,704     $ (468 )     -13.2 %   $ (147 )   -4.0 %
Gross margin   12.2 %     11.3 %     10.2 %                              
                                                     
Contribution profit $ 2,388     $ 2,239     $ 1,881     $ 149       6.7 %   $ 358     19.0 %
Contribution margin   9.5 %     7.1 %     5.2 %                              
  • The Company continued to disengage from its lowest margin IT staffing services within the Non-Strategic Technology Services segment as part of its strategic plan.


Consolidated Year-to-Date Results

(unaudited)

 ($ in thousands) For the Two Quarters Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 172,176     $ 189,293     $ 176,095     $ (17,117)       -9.0 %   $ 13,198     7.5 %
                                                     
GAAP Operating Income $ 6,372     $ 4,899     $ 3,981     $ 1,473       30.1 %   $ 918     23.1 %
GAAP Operating Margin   3.7 %     2.6 %     2.3 %                              
                                                     
Non-GAAP Operating Income* $ 6,924     $ 5,708     $ 5,397     $ 1,216       21.3 %   $ 311     5.8 %
Non-GAAP Operating Margin*   4.0 %     3.0 %     3.1 %                              
                                                     
GAAP Net Income $ 4,280     $ 3,341     $ 2,903     $ 939       28.1 %   $ 438     15.1 %
GAAP Net Margin   2.5 %     1.8 %     1.6 %                              
                                                     
Non-GAAP Net Income* $ 4,691     $ 3,958     $ 2,890     $ 733       18.5 %   $ 1,068     37.0 %
Non-GAAP Net Income Margin*   2.7 %     2.1 %     1.6 %                              
                                                     
Adjusted EBITDA* $ 8,555     $ 7,821     $ 7,425     $ 734       9.4 %   $ 396     5.3 %
Adjusted EBITDA Margin*   5.0 %     4.1 %     4.2 %                              

     * 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 Two Quarters Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 40,773     $ 35,216     $ 29,068     $ 5,557       15.8 %   $ 6,148     21.2 %
Percent of total   23.7 %     18.6 %     16.5 %                              
                                                     
Gross profit $ 13,941     $ 12,086     $ 9,913     $ 1,855       15.3 %   $ 2,173     21.9 %
Gross margin   34.2 %     34.3 %     34.1 %                              
                                                     
Contribution profit $ 7,278     $ 5,763     $ 5,685     $ 1,515       26.3 %   $ 78     1.4 %
Contribution margin   17.9 %     16.4 %     19.6 %                              


Year-to-Date Segment Performance (continued)

(unaudited)

Europe

 ($ in thousands) For the Two Quarters Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,
2020
    $     %     $     %  
Revenue $ 79,638     $ 90,061     $ 72,484     $ (10,423 )     -11.6 %   $ 17,577     24.2 %
Percent of total   46.2 %     47.6 %     41.2 %                              
                                                     
Gross profit $ 20,061     $ 21,965     $ 18,242     $ (1,904 )     -8.7 %   $ 3,723     20.4 %
Gross margin   25.2 %     24.4 %     25.2 %                              
                                                     
Contribution profit $ 9,978     $ 11,346     $ 8,853     $ (1,368 )     -12.1 %   $ 2,493     28.2 %
Contribution margin   12.5 %     12.6 %     12.2 %                              


Non-Strategic Technology Services

 ($ in thousands) For the Two Quarters Ended     Change 2021-2022     Change 2020-2021  
  Jul. 1,
2022
    Jul. 2,
2021
    Jun. 26,

2020

    $     %     $     %  
Revenue $ 51,765     $ 64,016     $ 74,543     $ (12,251 )     -19.1 %   $ (10,527 )   -14.1 %
Percent of total   30.1 %     33.8 %     42.3 %                              
                                                     
Gross profit $ 6,343     $ 7,095     $ 7,629     $ (752 )     -10.6 %   $ (534 )   -7.0 %
Gross margin   12.3 %     11.1 %     10.2 %                              
                                                     
Contribution profit $ 4,831     $ 4,462     $ 3,721     $ 369       8.3 %   $ 741     19.9 %
Contribution margin   9.3 %     7.0 %     5.0 %                              


Balance Sheet and Cash Flow

Cash and cash equivalents were $35.5 million, compared with $35.6 million at year-end 2021. Net cash provided by operations was $2.8 million for the year-to-date period.

At the end of the second 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 84 in the second quarter of 2022 compared with 81 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 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 IT staffing services within the Non-Strategic Technology Services segment

2022 Outlook

John M. Laubacker, Chief Financial Officer, noted, “With nearly half of our revenue coming from European operations, we are not immune to the challenging foreign currency translation impacts resulting from the significantly devalued Euro in the first half of 2022. Additionally, the recent increase in competition for resources in Europe is creating labor constraints in meeting client demand. Finally, the macroeconomic climate in both North America and Europe has slowed our clients’ decision-making process for IT solutions and services. As we mentioned in our first quarter release, we expected quarterly performance at the outset of 2022 to be uneven due to engagement timing. We now expect that to continue for the rest of the year. As a result, we are adjusting our revenue for 2022 to range from $330 million to $350 million which includes a reduction of $20 million to $30 million from the prior year as a result of the intentional disengagement from lowest margin business in our Non-Strategic Technology Services segment.”

“Despite the top-line decrease and challenging macroeconomic headwinds, we expect our operating margins to improve over the prior year given the positive ongoing changes to our business mix. We expect that lower revenue will be offset in part by improving operating margins. We expect 2022 GAAP diluted earnings per share to range from $0.48 to $0.58, and non-GAAP diluted earnings per share to range from $0.53 to $0.63. Our long-range goal remains unchanged as we drive our adjusted EBITDA margins to 7% to 8%* within the next two years.”

* 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 June 2022.

Conference Call and Webcast

CTG will hold a conference call today, August 4, 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 Thursday, August 11, 2022 by dialing +1 844 512 2921 and entering the access code 13731263. 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. 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 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,” “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, the lingering effects of the COVID-19 pandemic and any regulatory, social and business responses thereto 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 current conflict between Russia and the Ukraine, 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, 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     For the Two Quarters Ended  
  July 1,     July 2,     June 26,     July 1,     July 2,     June 26,  
  2022     2021     2020     2022     2021     2020  
                                               
Revenue $ 82,759     $ 92,164     $ 89,146     $ 172,176     $ 189,293     $ 176,095  
Cost of services   63,009       71,785       70,408       131,831       148,147       140,311  
Gross profit   19,750       20,379       18,738       40,345       41,146       35,784  
Selling, general and admin. expenses   16,577       17,578       16,824       33,973       36,247       31,803  
Operating income   3,173       2,801       1,914       6,372       4,899       3,981  
Non-taxable life insurance gain               389                   389  
Gain on sale of building               824                   824  
Other expense, net   (385 )     (256 )     (5 )     (642 )     (406 )     (196 )
Income before income taxes   2,788       2,545       3,122       5,730       4,493       4,998  
Provision for income taxes   748       712       1,363       1,450       1,152       2,095  
Net income $ 2,040     $ 1,833     $ 1,759     $ 4,280     $ 3,341     $ 2,903  
                                               
Net income per share:                                              
Basic $ 0.14     $ 0.13     $ 0.13     $ 0.30     $ 0.24     $ 0.21  
Diluted $ 0.13     $ 0.12     $ 0.12     $ 0.28     $ 0.22     $ 0.20  
                                               
Weighted average shares outstanding:                                              
Basic   14,419       13,845       13,605       14,309       13,770       13,576  
Diluted   15,122       14,972       14,282       15,050       14,958       14,299  


COMPUTER TASK GROUP, INCORPORATED (CTG)
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)

  July 1,     December 31,     July 2,  
  2022     2021     2021  
Current Assets:                      
Cash and cash equivalents $ 35,479     $ 35,584     $ 29,209  
Accounts receivable, net   76,622       84,252       81,777  
Other current assets   3,146       2,929       3,948  
Total current assets   115,247       122,765       114,934  
                       
Property and equipment, net   4,376       5,242       5,508  
Operating lease right-of-use assets   19,005       22,132       23,175  
Cash surrender value   4,039       4,018       3,883  
Acquired intangibles, net   6,219       7,280       8,165  
Goodwill   18,104       19,676       20,548  
Other assets   7,031       7,221       2,942  
Total Assets $ 174,021     $ 188,334     $ 179,155  
                       
Current Liabilities:                      
Accounts payable $ 13,544     $ 21,150     $ 15,333  
Accrued compensation   18,071       22,534       23,228  
Operating lease liabilities   5,838       6,444       6,460  
Other current liabilities   15,992       14,855       15,388  
Total current liabilities   53,445       64,983       60,409  
                       
Operating lease liabilities   13,030       15,612       16,613  
Other liabilities   12,239       13,302       19,336  
Shareholders’ equity   95,307       94,437       82,797  
Total Liabilities and Shareholders’ Equity $ 174,021     $ 188,334     $ 179,155  


COMPUTER TASK GROUP, INCORPORATED (CTG)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(amounts in thousands)

  For the Two Quarters Ended  
  July 1,     July 2,     June 26,  
  2022     2021     2020  
                       
Net income $ 4,280     $ 3,341     $ 2,903  
Depreciation and amortization expense   1,400       1,685       1,641  
Equity-based compensation expense   1,176       1,272       1,149  
Other operating items   (4,022 )     (6,349 )     13,946  
Net cash provided by (used in) operating activities   2,834       (51 )     19,639  
Net cash used in investing activities   (721 )     (1,618 )     (2,473 )
Net cash provided by (used in) financing activities   (707 )     (1,281 )     6,243  
Effect of exchange rates on cash and cash equivalents   (1,511 )     (706 )     129  
Net increase (decrease) in cash and cash equivalents   (105 )     (3,656 )     23,538  
Cash and cash equivalents at beginning of period   35,584       32,865       10,781  
Cash and cash equivalents at end of period $ 35,479     $ 29,209     $ 34,319  
                       


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 invest 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 any investment 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 July 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 $ 20,339     $ 37,160     $ 25,260     $ 82,759             $ 82,759  
Cost of services   13,260       27,578       22,171       63,009               63,009  
Gross profit   7,079       9,582       3,089       19,750               19,750  
Gross margin   34.8 %     25.8 %     12.2 %     23.9 %             23.9 %
Operating expenses   3,532       4,855       701       9,088               9,088  
Contribution profit $ 3,547     $ 4,727     $ 2,388       10,662               10,662  
Contribution margin   17.4 %     12.7 %     9.5 %     12.9 %             12.9 %
General and admin. expense                           7,489       (290 )     7,199  
Operating income                         $ 3,173     $ 290     $ 3,463  
Operating margin                           3.8 %             4.2 %

* Non-GAAP costs represent certain acquisition-related expenses

  For the Quarter Ended July 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 $ 16,762     $ 44,054     $ 31,348     $ 92,164             $ 92,164  
Cost of services   10,688       33,306       27,791       71,785               71,785  
Gross profit   6,074       10,748       3,557       20,379               20,379  
Gross margin   36.2 %     24.4 %     11.3 %     22.1 %             22.1 %
Operating expenses   3,166       5,136       1,318       9,620               9,620  
Contribution profit $ 2,908     $ 5,612     $ 2,239       10,759               10,759  
Contribution margin   17.3 %     12.7 %     7.1 %     11.7 %             11.7 %
General and admin. expense                           7,958       (165 )     7,793  
Operating income                         $ 2,801     $ 165     $ 2,966  
Operating margin                           3.0 %             3.2 %

* Non-GAAP costs represent certain acquisition-related expenses

COMPUTER TASK GROUP, INCORPORATED (CTG)
Segment Information (continued)
(Unaudited)
(amounts in thousands)

  For the Quarter Ended June 26, 2020  
  North                                          
  America     Europe     Non-Strategic                     Non-  
  IT Solutions     IT Solutions     Technology     GAAP     Non-     GAAP  
  and Services     and Services     Services     Totals     GAAP*     Totals  
                                               
Revenue $ 16,069     $ 36,917     $ 36,160     $ 89,146             $ 89,146  
Cost of services   10,924       27,028       32,456       70,408               70,408  
Gross profit   5,145       9,889       3,704       18,738               18,738  
Gross margin   32.0 %     26.8 %     10.2 %     21.0 %             21.0 %
Operating expenses   2,139       4,853       1,823       8,815               8,815  
Contribution profit $ 3,006     $ 5,036     $ 1,881       9,923               9,923  
Contribution margin   18.7 %     13.6 %     5.2 %     11.1 %             11.1 %
General and admin. expense                           8,009       (949 )     7,060  
Operating income                         $ 1,914     $ 949     $ 2,863  
Operating margin                           2.1 %             3.2 %

* Non-GAAP costs in 2020 represent certain acquisition-related expenses and costs associated with severance

  For the Two Quarters Ended July 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 $ 40,773     $ 79,638     $ 51,765     $ 172,176             $ 172,176  
Cost of services   26,832       59,577       45,422       131,831               131,831  
Gross profit   13,941       20,061       6,343       40,345               40,345  
Gross margin   34.2 %     25.2 %     12.3 %     23.4 %             23.4 %
Operating expenses   6,663       10,083       1,512       18,258               18,258  
Contribution profit $ 7,278     $ 9,978     $ 4,831       22,087               22,087  
Contribution margin   17.9 %     12.5 %     9.3 %     12.8 %             12.8 %
General and admin. expense                           15,715       (552 )     15,163  
Operating income                         $ 6,372     $ 552     $ 6,924  
Operating margin                           3.7 %             4.0 %

* Non-GAAP costs represent certain acquisition-related expenses

COMPUTER TASK GROUP, INCORPORATED (CTG)
Segment Information (continued)
(Unaudited)
(amounts in thousands)

  For the Two Quarters Ended July 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 $ 35,216     $ 90,061     $ 64,016     $ 189,293             $ 189,293  
Cost of services   23,130       68,096       56,921       148,147               148,147  
Gross profit   12,086       21,965       7,095       41,146               41,146  
Gross margin   34.3 %     24.4 %     11.1 %     21.7 %             21.7 %
Operating expenses   6,323       10,619       2,633       19,575               19,575  
Contribution profit $ 5,763     $ 11,346     $ 4,462       21,571               21,571  
Contribution margin   16.4 %     12.6 %     7.0 %     11.4 %             11.4 %
General and admin. expense                           16,672       (809 )     15,863  
Operating income                         $ 4,899     $ 809     $ 5,708  
Operating margin                           2.6 %             3.0 %

* Non-GAAP costs represent certain acquisition-related expenses and rebranding costs

  For the Two Quarters Ended June 26, 2020  
  North                                          
  America     Europe     Non-Strategic                     Non-  
  IT Solutions     IT Solutions     Technology     GAAP     Non-     GAAP  
  and Services     and Services     Services     Totals     GAAP*     Totals  
                                               
Revenue $ 29,068     $ 72,484     $ 74,543     $ 176,095             $ 176,095  
Cost of services   19,155       54,242       66,914       140,311               140,311  
Gross profit   9,913       18,242       7,629       35,784               35,784  
Gross margin   34.1 %     25.2 %     10.2 %     20.3 %             20.3 %
Operating expenses   4,228       9,389       3,908       17,525               17,525  
Contribution profit $ 5,685     $ 8,853     $ 3,721       18,259               18,259  
Contribution margin   19.6 %     12.2 %     5.0 %     10.4 %             10.4 %
General and admin. expense                           14,278       (1,416 )     12,862  
Operating income                         $ 3,981     $ 1,416     $ 5,397  
Operating margin                           2.3 %             3.1 %

* Non-GAAP costs in 2020 represent certain acquisition-related expenses and costs associated with severance

COMPUTER TASK GROUP, INCORPORATED (CTG)
Segment and Vertical Market Trends (Unaudited)
Supplemental Financial Information

                                            Twelve Months  
    For the Quarter Ended     Ended  
    Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
      2021       2021       2021       2022       2022       2022  
Revenue (in millions)                                                
North America IT Solutions and Services   $ 16.762     $ 21.215     $ 45.075     $ 20.435     $ 20.339     $ 107.064  
Europe IT Solutions and Services     44.054       39.199       40.081       42.478       37.160       158.918  
Non-Strategic Technology Services     31.348       30.189       27.233       26.504       25.260       109.186  
Total Revenue   $ 92.164     $ 90.603     $ 112.389     $ 89.417     $ 82.759     $ 375.168  
                                                 
Foreign Currency Impact   $ 3.921     $ 0.453     $ (1.520 )   $ (3.106 )   $ (4.943 )   $ (9.116 )
                                                 
Revenue By Geography                                                
North America     51.0 %     55.5 %     63.4 %     51.7 %     54.4 %     56.7 %
Europe     49.0 %     44.5 %     36.6 %     48.3 %     45.6 %     43.3 %
Total     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %
                                                 
Revenue by Vertical Market                                                
Technology Service Providers     29 %     28 %     20 %     24 %     24 %     24 %
Healthcare     15 %     18 %     36 %     17 %     18 %     23 %
Financial Services     17 %     18 %     13 %     17 %     15 %     15 %
Manufacturing     13 %     12 %     10 %     14 %     15 %     13 %
Energy     6 %     5 %     4 %     5 %     7 %     5 %
General Markets     20 %     19 %     17 %     23 %     21 %     20 %
Total     100 %     100 %     100 %     100 %     100 %     100 %
                                                 
Operating Margins                                                
GAAP Operating Margin     3.0 %     3.0 %     4.6 %     3.6 %     3.8 %     3.8 %
Non-GAAP Operating Margin     3.2 %     3.3 %     4.8 %     3.9 %     4.2 %     4.1 %

Other Information (in millions except Billable Days and EPS)

Billable Days     64       63       63       65       64       255  
Net Income   $ 1.833     $ 1.672     $ 8.717     $ 2.240     $ 2.040     $ 14.669  
GAAP Diluted EPS*   $ 0.12     $ 0.11     $ 0.58     $ 0.15     $ 0.13     $ 0.97  
Non-GAAP Diluted EPS*   $ 0.13     $ 0.13     $ 0.25     $ 0.16     $ 0.15     $ 0.69  
Adjusted EBITDA (non-GAAP)   $ 4.1     $ 3.8     $ 6.5     $ 4.3     $ 4.2     $ 18.8  

Balance Sheet Information (in millions except DSO)

Cash less Debt, Net   $ 29.2     $ 31.0     $ 35.6     $ 38.7     $ 35.5          
Working Capital   $ 54.5     $ 56.6     $ 57.8     $ 60.3     $ 61.8          
DSO     81       82       67       76       84          

* GAAP Diluted EPS for the 2021 fourth quarter and Twelve Months Ended June 2022 includes a $0.34 benefit from the reversal of a valuation allowance against deferred tax assets, while the corresponding amounts in the non-GAAP Diluted EPS balances for the 2021 fourth quarter and Twelve Months Ended June 2022 excludes that benefit

COMPUTER TASK GROUP, INCORPORATED (CTG)
(Unaudited)

The non-GAAP information below excludes expenses associated with 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  
  Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
(in millions)   2021       2021       2021       2022       2022       2022  
GAAP Operating Income $ 2.801     $ 2.702     $ 5.141     $ 3.199     $ 3.173     $ 14.215  
Acquisition-related expenses   0.165       0.280       0.211       0.262       0.290       1.043  
Non-GAAP Operating Income $ 2.966     $ 2.982     $ 5.352     $ 3.461     $ 3.463     $ 15.258  

Reconciliation of GAAP to non-GAAP Operating Margin

                                          Twelve  
                                          Months  
  For the Quarter Ended     Ended  
  Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
    2021       2021       2021       2022       2022       2022  
GAAP Operating Margin   3.0 %     3.0 %     4.6 %     3.6 %     3.8 %     3.8 %
Acquisition-related expenses   0.2 %     0.3 %     0.2 %     0.3 %     0.4 %     0.3 %
Non-GAAP Operating Margin   3.2 %     3.3 %     4.8 %     3.9 %     4.2 %     4.1 %

Reconciliation of GAAP to non-GAAP Net Income

                                          Twelve  
                                          Months  
  For the Quarter Ended     Ended  
  Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
(in millions)   2021       2021       2021       2022       2022       2022  
GAAP Net Income $ 1.833     $ 1.672     $ 8.717     $ 2.240     $ 2.040     $ 14.669  
Acquisition-related expenses   0.119       0.216       0.151       0.199       0.212       0.778  
Reversal of tax valuation allowance               (5.094 )                 (5.094 )
Non-GAAP Net Income $ 1.952     $ 1.888     $ 3.774     $ 2.439     $ 2.252     $ 10.353  


COMPUTER TASK GROUP, INCORPORATED (CTG)
(Unaudited)

Reconciliation of GAAP to non-GAAP Diluted Earnings per Share (EPS)

                                          Twelve  
                                          Months  
  For the Quarter Ended     Ended  
  Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
    2021       2021       2021       2022       2022       2022  
GAAP Diluted EPS $ 0.12     $ 0.11     $ 0.58     $ 0.15     $ 0.13     $ 0.97  
Acquisition-related expenses   0.01       0.02       0.01       0.01       0.02       0.06  
Reversal of tax valuation allowance               (0.34 )                 (0.34 )
Non-GAAP Diluted EPS $ 0.13     $ 0.13     $ 0.25     $ 0.16     $ 0.15     $ 0.69  

Reconciliation of Net Income to Adjusted EBITDA (non-GAAP), which includes earnings before interest (including amortization of deferred debt financing costs), taxes, depreciation and amortization, equity-based compensation, and acquisition-related expenses.

                                          Twelve  
                                          Months  
  For the Quarter Ended     Ended  
  Jun.     Sept.     Dec.     Mar.     Jun.     Jun.  
(in millions)   2021       2021       2021       2022       2022       2022  
Net Income $ 1.833     $ 1.672     $ 8.717     $ 2.240     $ 2.040     $ 14.669  
Taxes   0.712       0.488       (3.633 )     0.702       0.748       (1.695 )
Interest   0.161       0.112       0.100       0.100       0.100       0.412  
Depreciation and amortization   0.831       0.766       0.721       0.716       0.684       2.887  
Equity-based compensation expense   0.682       0.702       0.666       0.573       0.603       2.544  
Other   (0.123 )     0.007       (0.058 )           0.049       (0.002 )
Adjusted EBITDA $ 4.096     $ 3.747     $ 6.513     $ 4.331     $ 4.224     $ 18.815  
Adjusted EBITDA Margin   4.4 %     4.1 %     5.8 %     4.8 %     5.1 %     5.0 %

– END –

CTG news releases are available at www.ctg.com.

CONTACT: Contacts:

John M. Laubacker
Chief Financial Officer
Tel: +1 716 887 7368

Investor Relations:
Deborah K. Pawlowski
Kei Advisors LLC
[email protected]
Tel: +1 716 843 3908


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