Exhibit 99.1
TechTeam Global Reports Earnings of $.12 Per Share
for Third Quarter 2005; Company Awarded Four New Contracts
- Revenue of $41.3 million, up 21.4% from third quarter 2004 (3Q04)
- Gross profit of $10.3 million, up 31.1% from 3Q04
- Net income of $1.23 million, down 19.0% from 3Q04
- Cash flow from operations of $7.58 million, up 86.1% from 3Q04
- Company announces that it has been awarded four new contracts totaling
$21 million in revenue to provide IT support services
SOUTHFIELD, Mich., Oct. 27 /PRNewswire-FirstCall/ -- TechTeam Global, Inc.,
(Nasdaq: TEAM), a worldwide provider of information technology ("IT") and
business process outsourcing support services, today reported net income of
$1.23 million, or $.12 per diluted common share for the three months ended
September 30, 2005. For the three months ended September 30, 2004, TechTeam
Global ("the Company") reported net income of $1.52 million, or $.16 per diluted
common share, a year-over-year decline of 19.0% in net income.
Excluding the net income contributed from Sytel, Inc. ("Sytel"), which was
acquired on January 3, 2005, net income was $834,000, or $.08 per diluted common
share, for the three months ended September 30, 2005.
Total revenue grew 21.4% to $41.3 million for the three months ended September
30, 2005, an increase from $34.0 million for the same period in 2004. Excluding
the revenue contributed by Sytel, total revenue declined 2.3% to $33.2 million
for the three months ended September 30, 2005, a decrease from $34.0 million of
revenue reported for the same period in 2004. The year- over-year decline in
revenue was due largely to the absence of a large equipment sale that occurred
at one of the Company's subsidiaries in the third quarter of 2004. Excluding the
revenue contributed by Sytel in the third quarter of 2005 and the revenue which
resulted from the equipment sale in the third quarter of 2004, "organic" revenue
grew 4.3% year-over-year.
Gross profit improved 31.1% to $10.3 million for the three months ended
September 30, 2005, from $7.89 million for the same period in 2004. Excluding
the gross profit contributed by Sytel, gross profit grew 5.2% to $8.30 million
for the three months ended September 30, 2005, an increase from $7.89 million of
gross profit reported for the same period in 2004.
The Company's gross margin (gross profit expressed as a percentage of revenue)
performance improved to 25.0% for the three months ended September 30, 2005 from
23.2% for the same period in 2004. Excluding the results of Sytel, gross margin
was 25.0% for the three months ended September 30, 2005.
Selling, general, and administrative ("SG&A") expense was $8.61 million for the
three months ended September 30, 2005, or 20.8% of the Company's total revenue
of $41.3 million. SG&A expense was $5.78 million, or 17.0% of revenue, for the
same period in 2004. Excluding the results of Sytel, SG&A expense was $7.22
million for the three months ended September 30, 2005, compared with $5.78
million for the same period in 2004.
The year-over-year increase in the Company's SG&A expense was principally due to
the addition of $1.39 million in SG&A expense generated by Sytel and $1.44
million of SG&A expense primarily resulting from our continued deployment of a
new global human resources management system, incremental costs associated with
our compliance efforts with Section 404 of the Sarbanes- Oxley Act of 2002
(detailed below), additional personnel and facility costs associated with the
establishment of the Company's permanent facility in Romania, due diligence
expenses associated with an acquisition which the Company elected not to pursue
during the third quarter, and increased sales and marketing expenses primarily
resulting from the expansion of our North American sales force and higher sales
commissions.
TechTeam incurred approximately $261,000 in expense during the third quarter
associated with the Company's preparatory activities for its compliance this
year with Section 404 of the Sarbanes-Oxley Act of 2002. This compares with
$25,000 and $525,000 in such expense incurred by the Company in the first and
second quarters of 2005, respectively. The Company still anticipates incurring
approximately $1.2-$1.4 million in total expenses to comply with Section 404 in
2005.
Operating income declined 17.8% to $1.74 million for the three months ended
September 30, 2005, a decrease from $2.11 million for the same period in 2004.
Excluding the operating income contributed by Sytel, operating income declined
48.6% to $1.09 million for the three months ended September 30, 2005, a decrease
from $2.11 million of operating income reported for the same period in 2004.
Commenting on the Company's financial results, William F. Coyro, Jr., TechTeam
Global's President and Chief Executive Officer, stated, "TechTeam delivered
earnings of $.12 per share, top-line revenue growth of 21%, and $7.6 million in
cash flow from operations during the third quarter of 2005. While we are
disappointed with the overall decline in revenue and gross margin from the
second quarter to the third quarter -- principally the result of reductions in
sales at some of our European subsidiaries and reductions in sales and gross
margin at Sytel -- we are pleased with the pipeline of new business prospects we
have developed and contracts we have executed -- some of which we are announcing
today -- in what can only be described as an exceptionally difficult market. The
addition of DSC and Sytel to TechTeam has still proven to be very accretive to
the Company's earnings over the past seven quarters and has been instrumental in
executing upon our revenue diversification strategy. Our recently-announced
acquisition of Akela Informatique SRL in Bucharest, Romania will also prove
instrumental in expanding our worldwide product and service offerings, further
expanding of our global customer base, and we anticipate it being accretive to
our earnings performance."
Coyro added, "TechTeam has completed the first three quarters of 2005 with the
strongest financial performance in its history, delivering $126 million in
revenue -- up 33% over last year -- and $.45 in earnings per share, compared
with $.34 per share for the first three quarters of 2004 -- up 32% over last
year. We remain well-positioned to continue executing upon our aggressive
domestic and international growth strategy through a combination of organic
growth coupled with selective, strategic, and accretive acquisitions. TechTeam
also continues to enjoy a solid balance sheet with net cash reserves of $27
million, and a very talented employee base."
Other significant components of TechTeam Global's third quarter 2005 performance
include the following:
-- Revenue from our European operations increased 6.9% to $11.6 million for
the three months ended September 30, 2005 from $10.8 million during the
same period in 2004.
-- Net cash provided by operating activities was $7.58 million for the
three months ended September 30, 2005, versus $4.07 million for the same
period in 2004. Free cash flow (net cash provided by operating
activities less capital expenditures) was $6.91 million for the three
months ended September 30, 2005, versus $3.72 million for the same
period in 2004.
-- For the three months ended September 30, 2005, earnings before interest,
taxes, depreciation, and amortization expense ("EBITDA") from continuing
operations was $2.97 million, or 7.2% of revenue, compared with EBITDA
from continuing operations of $3.27 million for the same period in 2004,
a decrease of 9.1%. Excluding the results of Sytel, EBITDA from
continuing operations was $1.99 million for the three months ended
September 30, 2005, a decrease of 39.0% from EBITDA from continuing
operations of $3.27 million reported for the same period in 2004.
The investment community considers EBITDA an important "non-GAAP"
measure of the Company's financial performance. EBITDA presents
information on earnings that may be more comparable to companies with
different finance structures, capital investments, or capitalization and
depreciation policies. The most closely related GAAP measure is
operating income. Some financial analysts also use EBITDA to assist in
the determination of a company's possible market valuation. (For
additional information regarding the determination of the EBITDA
results, please see the attached financial tables.)
-- Total cash and cash equivalents were $36.5 million as of September 30,
2005, while long-term debt was $9.84 million as of the same date. This
represents $2.69 in net cash and cash equivalents per common share
outstanding as of the end of the third quarter of 2005.
-- Total shareholders' equity increased to $77.8 million as of September
30, 2005 from $76.1 million at June 30, 2005. The Company's net book
value increased from $7.70 per common share outstanding at June 30, 2005
to $7.86 per common share outstanding at September 30, 2005.
-- For the three months ended September 30, 2005, the basic weighted
average number of common shares outstanding was 9,892,237; the diluted
weighted average number of common shares and common share equivalents
outstanding was 10,208,940. The number of common shares issued and
outstanding as of September 30, 2005 was 9,901,857.
Separately, the Company today announced that it has signed contracts with four
major companies to provide specialized IT support services. The estimated
aggregate value of the contracts is approximately $21 million over the
three-year length of each contract. These customers include two prominent
American retail sales firms, a global automobile manufacturer, and a national
real estate sales company.
The first retail firm has selected TechTeam to provide help desk support for its
IT applications and network monitoring services. The second retail firm has
chosen TechTeam to provide telephone support for its retail equipment and
applications, including point-of-sale registers, hand-held terminals, and pin
pads in addition to its internal desktop hardware, software, and networking
technologies. The global automobile manufacturer selected TechTeam to provide a
remote IT disaster recovery site for one of its largest subsidiaries. The
national real estate sales company chose TechTeam to provide help-desk and
desk-side support for office automation hardware and software.
"We are encouraged by our continued sales successes with these vertical markets.
Companies continue to recognize the value of our single-point-of- contact
['SPOC'] support methodology as a significant means to reduce their IT support
costs and improve their overall customer service delivery," stated William F.
Coyro, Jr. "Our SPOC process provides the requisite accountability to our
customers and helps us establish the solid, long-term relationships that
contribute to our Company's success. TechTeam remains focused on delivering the
best overall value proposition in our industry -- the best combination of high
quality, low cost, flexibility, and customer satisfaction."
TechTeam Global, Inc. will host an investor teleconference to discuss its third
quarter 2005 financial results at 4:30 p.m. EDT, today, Thursday, October 27,
2005. To participate in the teleconference, including the question and answer
session that will follow the results announcement and discussion, please call
800-299-0148. (Outside the United States, call +1-617-801-9711.) When prompted,
enter the passcode number: 46176517.
To access a simultaneous Webcast of the teleconference, go to the TechTeam
Global website at http://www.techteam.com/investors and click on the Webcast
icon. From this site, you can download the necessary software and listen to the
teleconference. TechTeam encourages you to review the site before the
teleconference to ensure that your computer is configured properly. TechTeam
will also provide a podcast link for enabling download of the replay for
off-line access and portability.
A taped replay of the call will be available beginning at approximately 6:30
p.m. EDT, Thursday, October 27, 2005. This toll-free replay will be available
until 11:59 p.m. EST, Thursday, November 10, 2005. To listen to the
teleconference replay, call 888-286-8010. (Outside the United States, call
+1-617-801-6888.) When prompted, enter the TechTeam conference number: 74074528.
TechTeam anticipates announcing its fourth quarter 2005 financial results on
February 9, 2006 and its first quarter 2006 financial results on April 26, 2006.
However, these dates are subject to change. Consult the Company's web site for
the most current information.
TechTeam Global, Inc. is a worldwide provider of information technology and
business process outsourcing support services to Fortune 1000 corporations,
multinational companies, product providers, small and mid-sized companies, and
government entities. TechTeam's ability to integrate computer services into a
flexible, total single-point-of-contact (SPOC) solution is a key element of its
success. Partnerships with some of the world's "best-in- class" corporations
provide TechTeam with unique expertise and experience in providing information
technology support solutions, including diversified IT outsourcing services,
government technology services, IT consulting and systems integration, technical
staffing, and learning services. For information about TechTeam Global, Inc. and
its outstanding services, call 1-800-522-4451 or visit http://www.techteam.com .
TechTeam's common stock is traded on the Nasdaq National Market under the symbol
"TEAM."
Headquartered in Southfield, Michigan, TechTeam also has locations in Dearborn,
Michigan; Davenport, Iowa; Chantilly and Herndon, Virginia; Portsmouth, Rhode
Island; Bethesda and Germantown, Maryland; Brussels and Gent, Belgium; Uxbridge,
United Kingdom; Cologne, Germany; Gothenburg, Sweden; and Bucharest, Romania.
Safe Harbor Statement
The statements contained in this press release that are not purely historical,
including statements regarding the Company's expectations, hopes, beliefs,
intentions, or strategies regarding the future, are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements include statements regarding, among other things, the growth of the
Company's core business, revenue, and earnings performance going forward,
management of overhead expenses, productivity, and operating expenses.
Forward-looking statements may be identified by words including, but not limited
to, "anticipates," "believes," "intends," "estimates," "promises," "expects,"
"should," "conditioned upon," and similar expressions. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. Such factors include, but are not limited to, the
award or loss of significant client assignments, timing of contracts, recruiting
and new business solicitation efforts, the market's acceptance of and demand for
the Company's offerings, competition, unforeseen expenses, the costs and risks
associated with our expansion into Romania and in executing an offshore
strategy, demands upon and consumption of the Company's cash and cash equivalent
resources or changes in the Company's access to working capital, currency
fluctuations, changes in the quantity of the Company's common stock outstanding,
regulatory changes and other factors affecting the financial constraints on the
Company's clients, economic factors specific to the automotive industry, general
economic conditions, unforeseen disruptions in transportation, communications or
other infrastructure components, unforeseen or unplanned delays in the Company's
ability to consummate acquisitions, the Company's ability to successfully
integrate acquisitions and to retain key employees. All forward-looking
statements included in this press release are based on information available to
the Company on the date hereof, and the Company assumes no obligation to update
any such forward-looking statement. Prospective investors should also review all
aspects of the Company's Reports on Forms 8-K, 10-Q, and 10-K filed with the
United States Securities and Exchange Commission, including Management's
Discussion and Analysis, and the risks described therein from time to time.
Financial Data
TechTeam Global, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------- --------------------------------------
% %
2005 2004 Change 2005 2004 Change
---------- ---------- ---------- ---------- ---------- ----------
Revenue
Diversified IT outsourcing $ 17,892 $ 18,624 (3.9)% $ 55,631 $ 55,401 0.4%
Government technology services 14,482 7,837 84.8% 43,662 19,720 121%
IT consulting and systems integration 6,758 5,650 19.6% 19,690 13,345 47.5%
Technical staffing 1,967 1,781 10.4% 6,099 5,767 5.8%
Learning services 215 133 61.7% 555 440 26.1%
---------- ---------- ---------- ----------
Total Revenue 41,314 34,025 21.4% 125,637 94,673 32.7%
---------- ---------- ---------- ----------
Cost of Revenue
Diversified IT outsourcing 13,342 13,828 (3.5)% 41,640 40,895 1.8%
Government technology services 10,472 6,011 74.2% 31,061 14,668 112%
IT consulting and systems integration 5,421 4,703 15.3% 15,726 11,099 41.7%
Technical staffing 1,561 1,481 5.4% 4,750 4,625 2.7%
Learning services 175 111 57.7% 408 348 17.2%
---------- ---------- ---------- ----------
Total Cost of Revenue 30,971 26,134 18.5% 93,585 71,635 30.6%
---------- ---------- ---------- ----------
Gross Profit 10,343 7,891 31.1% 32,052 23,038 39.1%
SG&A expense 8,606 5,779 48.9% 25,767 17,928 43.7%
---------- ---------- ---------- ----------
Operating Income 1,737 2,112 (17.8)% 6,285 5,110 23.0%
Net interest income 151 177 (14.7)% 314 502 (37.5)%
Foreign currency transaction loss (99) (50) (3) (268)
---------- ---------- ---------- ----------
Income from Continuing Operations before
Income Taxes 1,789 2,239 (20.1)% 6,596 5,344 23.4%
Income tax provision 563 743 (24.2)% 2,098 2,162 (3.0)%
---------- ---------- ---------- ----------
Income from Continuing Operations 1,226 1,496 (18.0)% 4,498 3,182 41.4%
Income from discontinued
operations, net of tax 3 22 59 36
---------- ---------- ---------- ----------
Net Income $ 1,229 $ 1,518 (19.0)% $ 4,557 $ 3,218 41.6%
========== ========== ========== ==========
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------- --------------------------------------
% %
2005 2004 Change 2005 2004 Change
---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 1,229 $ 1,518 (19.0)% $ 4,557 $ 3,218 41.6%
========== ========== ========== ==========
Diluted Earnings per Common Share
Continuing operations $ 0.12 $ 0.16 $ 0.45 $ 0.33
Discontinued operations $ 0.00 $ 0.00 $ 0.01 $ 0.00
========== ========== ========== ==========
Total $ 0.12 $ 0.16 $ 0.45 $ 0.34
========== ========== ========== ==========
Diluted weighted average common
shares and common share equivalents 10,209 9,594 6.4% 10,045 9,554 5.1%
========== ========== ========== ==========
EBITDA from Continuing Operations (1) $ 2,971 $ 3,268 (9.1)% $ 10,387 $ 8,076 28.6%
========== ========== ========== ==========
(1)Reconciliation of Operating Income to
EBITDA from Continuing Operations
Operating income $ 1,737 $ 2,112 (17.8)% $ 6,285 $ 5,110 23.0%
Depreciation and amortization 1,333 1,206 10.5% 4,105 3,234 26.9%
Foreign currency transaction
gain (loss) (99) (50) (3) (268)
---------- ---------- ---------- ----------
EBITDA from Continuing Operations $ 2,971 $ 3,268 (9.1)% $ 10,387 $ 8,076 28.6%
========== ========== ========== ==========
Condensed Consolidated Statements of Financial Position (unaudited)
(In thousands)
September 30, December 31,
2005 2004 Change
------------- ------------- -------------
Current Assets
Cash and cash equivalents $ 36,515 $ 40,436 (9.7)%
Accounts receivable, less reserves 43,703 28,888 51.3%
Other current assets 2,731 2,288 19.4%
Current assets of discontinued operations 65 97 (33.0)%
------------- -------------
Total Current Assets 83,014 71,709 15.8%
Net Property, Equipment, and Purchased Software 7,642 8,382 (8.8)%
Other Assets
Goodwill 20,069 4,768 321%
Intangibles, less accumulated amortization 10,161 3,672 177%
Other 475 441 7.7%
Noncurrent assets of discontinued operations - 15 (100)%
Total Other Assets 30,705 8,896 245%
------------- -------------
Total Assets $ 121,361 $ 88,987 36.4%
============= =============
Current Liabilities
Accounts payable $ 9,994 $ 3,707 170%
Accrued payroll, related taxes, and withholdings 9,068 7,485 21.1%
Accrued liabilities 11,233 4,424 154%
Current liabilities of discontinued operations - 12 (100)%
------------- -------------
Total Current Liabilities 30,295 15,628 93.9%
Long-Term Liabilities
Long-term debt 9,843 - -
Deferred income tax liability 2,887 1,285 125%
Other long-term liabilities 551 414 33.1%
------------- -------------
Total Long-Term Liabilities 13,281 1,699 682%
Redeemable Convertible Preferred Stock - 5,000 (100)%
Shareholders' Equity
Common stock 99 88 12.5%
Additional paid-in capital 68,300 59,437 14.9%
Unamortized deferred compensation (463) (533) (13.1)%
Retained earnings 9,350 4,793 95.1%
Accumulated other comprehensive income 499 2,875 (82.6)%
------------- -------------
Total Shareholders' Equity 77,785 66,660 16.7%
------------- -------------
Total Liabilities and
Shareholders' Equity $ 121,361 $ 88,987 36.4%
============= =============
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Nine Months Ended September 30,
-------------------------------
2005 2004
-------------- --------------
Operating Activities
Net Income $ 4,557 $ 3,218
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 4,105 3,234
Other adjustments (212) 2,231
Income from discontinued operations (59) (36)
Net operating cash flow from
discontinued operations 55 998
-------------- --------------
Net cash provided by operating activities 8,446 9,645
-------------- --------------
Investing Activities
Purchase of property, equipment,
and software, net (2,344) (1,252)
Cash paid for acquisitions, net of
cash acquired (21,687) (1,036)
-------------- --------------
Net cash used in investing activities (24,031) (2,288)
-------------- --------------
Financing Activities
Proceeds from issuance of long-term debt 15,000 -
Proceeds from issuance of Company
common stock 2,972 1,093
Payments on long-term debt and
notes payable (5,184) (849)
Purchase of Company common stock - (2,744)
Net financing cash flow from
discontinued operations (11) (196)
-------------- --------------
Net cash provided by (used in) financing
activities 12,777 (2,696)
-------------- --------------
Effect of exchange rate changes on cash
and cash equivalents (1,113) 247
-------------- --------------
Increase (decrease) in cash and cash
equivalents (3,921) 4,908
Cash and Cash Equivalents at Beginning of
Period 40,436 35,195
-------------- --------------
Cash and Cash Equivalents at End of Period $ 36,515 $ 40,103
============== ==============
SOURCE TechTeam Global, Inc.
-0- 10/27/2005
/CONTACT: David W. Morgan, Vice President, Chief Financial Officer, and
Treasurer, dmorgan@techteam.com , or Norma F. Robbins, Investor Relations
Manager, nrobbins@techteam.com , of TechTeam Global, Inc., +1-248-357-2866/