CTG Earnings per Share Increased 50% in First Quarter 2022 Despite Planned Lower Revenue as Digital Transformation Drives Improved Earnings Power

May 10, 2022
  • 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.

 


John M. Laubacker Chief Financial Officer Tel: +1 716 887 7368 Investor Relations: Deborah K. Pawlowski Kei Advisors LLC dpawlowski@keiadvisors.com Tel: +1 716 843 3908