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


  • 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
[email protected] 
Tel: +1 716 843 3908


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