CTG - Earnings call transcript Q4 2020 | Computer Task Group Inc

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to CTG Fourth Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, today’s conference call is being recorded for replay purposes. I would now like to turn the conference call over to CTG’s Executive Vice President and Chief Financial Officer, John Laubacker. ahead. go please John,

John Laubacker

and everyone. Kierra, good you, morning, Thank

Joining President and today’s call Gydé, CTG’s is Filip Chief me on Executive Officer.

Before February as of information XX, state to during statements intentions, company’s These It we remind actual listeners forward-looking The future forward-looking those statements and that of differ today, the of is upon based based expectations that after could want begin, predictions statements. no statements Tuesday, hopes, for beliefs, results assumes the this company’s the course call conference or date management’s projected. important are information XXXX. these company conference obligation from note materially are I the update call. today’s made the from to and upon to

factors the results press Additional SEC made contained that from those statements actual in the earnings in today’s could as differ company’s cause in well to forward-looking is filings. as information release concerning

include during turn With company’s the call financial press addition, both call X-K. over to information. reconciliations financial opening measures measures is and In certain non-GAAP for my management and These now provided release Filip related of the release statements adjusted today’s are it to in and his GAAP Form non-GAAP the discussions that, results pleasure and press to of the remarks.

Filip Gydé

demand expanding growth than growth performance. solutions and XX% sequentially, strategic strong than solutions and XX% Fourth today of execution the sequential grew Thank you in solutions disciplined It’s you, to to John. in including team’s of anticipated plan quarter from Good revenue. of digital business. by was up on us speaking portfolio consistent business, our our of a financial participating to to driven resulted a success. strong increase via revenue The from on XX% with phone health webcast. for to you solutions morning on was our total Contributing offerings. exceptional Revenue sequentially to more year all our pleasure commitment be joining our finish continued increase larger a report

we During health completion training U.S. announced benefited the system and with large existing go-live in an the engagement expansion a quarter, the extensive from previously implementation a and care services for further project of

notable was and yearend quarter. fourth Luxembourg. contributed spending our strength area the Another business in to of in infrastructure existing higher implementation IT by sales The meaningfully clients

Additionally, billable resources lower we across organization, of maintain operations. five our bench unallocated within out closed staffing with from with we gradual Combined operating robust our levels our highest margin lower business, including resources the disengagement XXXX our in utilization of European margin years.

year, with For adjusted highs. When the and operating improved to as EBITDA considering environment profitability we year-over-year well net represent full new increasing significantly income, challenging as multi-year overall the both results validation our and the outcomes. year important for as our line and consolidated is serve lower existing revenue bottom that operating a and solution yielding anticipated strategy strong base, the working

focused to have continued momentum in the growing solutions digital We offerings. solutions coupled of expansion to CTG business, our and demonstrate

the digital for to to emphasis Our the environment. on working as prolonged deliver solutions and remotely increase impact them allowed adapted demand and solutions the global the us on ability clients the pandemic capitalize remote of to

conversion that to compliment demands example, expanded year teams broader the in and implementation are and strong of solutions. and we our half services, For XXX Microsoft integration second which for experienced we the offerings our consulting cloud launched

digital businesses there toward sustain trends are of rapidly number in online the by COVID-related as including moving their awarded they and conjunction digitalization digital market and our the evolving solutions to provider a intended disruptors. of engagement given projects existing are increasingly healthcare series global delivery cloud and deliver delivering methodologies our the clients Notably, of collaboration to embrace technological of by remote the operations. opportunity fast of into that of established the our forced to to all record initiated for also new brought clients meet deploy for the COVID-XX centers. based breakthroughs, health machine numerous for shifts were clients. of we reliably as the seek with were through mega to market and solution At ultimately their working technologies and our first the about to has projects repeatable Most platforms. integrate an potential Additionally, technology provide call intelligence, research, strategy, learning, in fail which We this high In emerging portfolio needs proven produce manage computing companies clients’ Things, we translates solutions addresses technology day-to-day track the decisions network transformation applicable transformation XG top majority demand as the digital pandemic, CTG and and one to constantly of meaningful effectively value. – of market solutions according believe transformation priority. CTG Internet Today, business areas, that digital needs artificial of

a for delivery unique and clients. higher minimized our and reliability combination overall approach ensures of centralized Our scalable delivery costs

together digital accelerator operating the next take catalyst are step to year. solution fundamental we solid our in innovative dedicated year, looking have capabilities broader global to foundation meaningfully substantial capabilities. place. performance a strong and digital to of center solutions Today, With as in and a well-defined continued team advance Over expand sales we leadership digital That’s over our has have and of transformations. business development the and a development our strategy now in organizations, place, investments and of past delivery offerings, solution past been expertise the to driver our we new and the strategy progress

several on Over the businesses and with to need the empowering succeed. they we major for been diligently client solutions months, working initiatives at digital the have aimed new past base growing their

substantial of and about I days, of launch take capabilities want growing a the accelerates on of as expansion CTG comprised offerings and digital to market client’s initiative. world-class the are advance professionals preview talented are solutions and key which the planned part multidisciplinary We in this expertise, our actively that expanded areas elements and opportunity. can service to needs. extremely readily focused excited to focused of CTG organization in topics, and In a this which we developing are positioning coming this scaled capitalize on opportunity meet industry of solutions global that four while leaders assembling investments Industry-leading to making initiative, be our digital is

which strategist hires CTG transformation methodologies, and we over spectrum new key promoted accelerated experiences innovate in clients we to to enable direct we of our their and platform Breakthrough to and which offerings, momentum and faster, and January. achievement centers on on transformation of to project these specific of further expert, we delivery clients and Expansion solutions, enable delivery eight will series year, support which driven Olivier we’ve focused with digital for CTG’s empowering programs Solutions and make testing, digital infrastructure innovation working a broader solutions our including transformations. in ability methodologies, of India, CTG’s solution Innovative to our performance. also includes automation, Each initiatives specifically, increase are ongoing America. making transformation elements training expand tangible provide appointments the scalable past network, four North tools proven leverage of focus Europe, leverage outcomes. have inform speed areas services. customers implemented a development and Saucin and performance market, who cloud of a business existing South areas help enhancing high clients’ data America, solutions a enable tools, technologies, maintenance, are ultimately and larger realized President IT Global investments and we’re key process center improvements. support delivery business end management aggressively application digital are and Vice portfolio accelerate the more of to that leaders, to Following better strategy, create in maximize solutions in us successful to Western and investment maintenance, decisions, More of Global

to accelerate digital growth, capabilities we new base. synergistic accretive that will introduction expanded leveraging our continue and new to In geographies to the this initiative new solutions client our towards focus acquisitions across drive offerings addition an on pursue and further existing of transformative complement are

that and hand the are our client behind and strategy optimally, solution higher strategic operating our earnings, margins Importantly, solutions to is expansion the all objectives our strategy the successful along growth a primary solution improve These underlying objectives in performance longer-term that new margin unchanged. transformation initiatives CTG Collectively, that remain And force digital solutions with include in accelerate being continued acquisitions immediately support that I of plan for premier global emphasize margins, also These generating solutions of want provider hand. targeting business. widely portfolio. capital of digital allocate to recognized commitment served above digital and continued our our and they enabling driving go our transformations. digital

we turn strategic toward over goal to to incremental results a current for achieve commentary call for sustained will improvement review will our detailed performance confident the we through quarter and year. the profitability. the I related outlook execution our make our quarter and continue as in of well now John plan, As as this progress of that to we fourth our are operating

John Laubacker

Filip. again, And good today. you morning, joining Thank you, us everyone. Thank for

included was of health by expansion completion of $XX.X the million sequential fourth in that the consolidated quarter business quarter. release primarily the in third quarter press for fourth client $XX.X The driven our in quarter a total in with multi-quarter our increase project was continued the revenue $XXX.X million solutions sizable reported contribution As with led in revenue the morning, compared XXXX. the of the earlier by solutions a multiple fourth and million in factors, this

million fourth the and fourth of translation Total impact positive fourth quarter in currency with revenue fourth of in were billable a compared ago quarter. the the Additionally, the compared a million third impact XX $X.X days positive in a and quarter. year the negative had third million in a in with in quarter days XX quarter days impact quarter, of in XX XXXX $X.X $X.X

increased approximately the and $X.X the or million million represented compared $XX.X XX.X% of $XX.X total in revenue quarter. XX% with total to of or Solutions previous million sequentially This fourth revenue revenues. quarter in XX.X%

IBM XX.X% or million and XXXX. the $XX.X Solutions quarter increased or third of revenue million fourth revenue from total of $XX.X in or XX.X% million fourth compared compared in with was revenue total year-over-year fourth year’s million total or last or of XX.X% of in Revenue million in $XX.X total quarter XX% with revenue of the quarter. $X.X XX.X% also the quarter $XX.X revenue

or in X.X% percentage X.X% compared with the with recent in quarter three-year client periods. other revenue No or the a Cost compared which in the increased compared in GAAP approximately XX.X% period in with points the revenue represented X% As was Non-GAAP margin quarter, utilization XX sequentially revenue purposes. third total fourth was quarter especially European XX.X% ago XX.X% operating mix tax and compared and tax legislation more The and in its agreement income the year-over-year. our acquisition-related quarter resources, primarily fourth rate higher tax The IBM previously fourth year-over-year, year operations. XX% and of quarter. with quarter quarter disclosed, quarter higher the in long-term efforts of to taxed excludes basis in of year X.X% $X.XX quarter. in change effective negative our operating ago the in points of acquisition-related $X.XX fourth fourth successful share intangible was during XXXX. points income in the to quarter, XX% comparable in quarter expiring income in rate newly during and solutions tax basis of fourth in was rate benefit Both million of when with basis year per fourth points operating to the quarter the $XXX,XXX income fourth quarter was tax our or higher CTG an the XX.X% quarter revenue renewed to in XXXX. improved expenses. net was and of quarter master the $XXX,XXX diluted than margin per services share million billable October sustain the included the non-deductible and increased the the margin GAAP of regulations. the due of as basis non-GAAP expenses million of the of share quarter third the The was third fourth during third revenue tax for income quarter fourth of certain quarter. global of This third $X.X effective or ago in implementing or for $X.XX The operating with in negative the the per in quarter the a revenue of fourth net X.X% XXX XX of margin or share. a love and was high Non-GAAP result for services associated fourth fourth enacted in XX.X% measures $X.XX sequentially XX the were quarter. quarter guilty reflect approximately expenses X.X% diluted in diluted $X.X while third results one-time diluted XXXX low GAAP the legislation exclusion per $X.X

insurance share expenses. of life included partially $X.X net the acquisition-related net third $XXX,XXX was GAAP a and or diluted per comprised $X.XX income diluted quarter for comparison, income non-operating from by or gains share For million non-taxable of and offset per $X.XX

non-GAAP the in in was in $X Excluding XXXX quarter. $X.XX GAAP or from these non-GAAP $XXX,XXX GAAP per per gain $X.X million diluted diluted or Non-GAAP or ago and Both $X.XX share of which income income per diluted $X.XX included quarter in the acquisition-related XXXX the share, third million change fourth of net million quarter or $X.XX income net expenses. per income third share. items, included net tax $X.X was for net legislation. $X.XX share diluted the a year quarter was the fourth

XXXX diluted benefit included million ended year total $X.XX or per $X.XX CTG’s of X,XXX the to the the XXXX full approximately net GAAP which increased XXXX Non-GAAP Adjusted per diluted per of headcount XX% for share. $XXX,XXX million offset at the fourth $XX.X December, approximately the full income non-taxable and severance end life $X.XX expenses approximately year-over-year $X.X acquisition-related XX% income increased For EBITDA third comprised to was to gains X,XXX million. sale with insurance quarter the year-over-year end at year-over-year XX% basis net end of the quarter net full the approximately of the by a increased at was or quarter, of year share a billable. headcount share, a on X,XXX and XXXX XX% building. ago of the year from compared for diluted quarter $X.X fourth or and fourth our year approximately

our of and to $XX.X cash equivalents Turning fourth at sheet, end were balance the million. the cash quarter

end the company’s third the year. outstanding debt the and pay resulting revolving outstanding fourth million quarter facility remaining more no of on $XXX,XXX quarter in we compared the of XXXX. quarter, in than Capital were quarter balance the credit the long-term in During at with fourth expenditures the $XXX,XXX the in $X.X

Looking forward, the visibility part the including on markets XX the due dynamic landscape COVID large and impact business sustained clients. global reduced pandemic, of end given to current highly in remains CTG’s

are year We the providing first quantitative full not quarter guidance and XXXX. for

We yield, and which committed of remain with company’s the However, in has solutions, focus and the very pleased digital support we of our recent highest CTGs our initiate are of yielded and value execution organization, long-term priority session, profitability. in global solutions the and will you the to on and margins capabilities digital can improvements Kierra, please strategy the investing significant to the across question-and-answer performance which expanded please. our success all business deliver consistent manage stakeholders. strategic to our our

Operator

move in caller. we a let’s question to Instructions] do queue, go to the first We As the Q&A. [Operator have

go ahead. Please unmuted. Your is line

Kevin Liu

you Liu guys morning. good Hi, Liu How & doing? This Kevin Company. with is Kevin are

Filip Gydé

Hi, Kevin.

Kevin Liu

Great.

like little how of Filip, those how Could First It related question and to bit that you meaningful just talk that first be some about more they over what a providers. series I see a COVID couple health expanding awards are items. wanted care in awards you a time. were, you the of was of them to could touch kind on, mentioned sounded

Filip Gydé

Sure, solutions Kevin. Talking need say about, that helpdesk like, to it be quickly. will related COVID-XX fairly deployed

on or of vaccine. instance and systems speed which for will coming that think the on size and for is can support is the depend the all the depending health and logistics You with of vaccination availability they’re the of

bit So in that’s of a there. it’s a moment target

it’s We it’s in how – become. as difficult and in not to for logistics going to to first sure. a same fast are little is significant. understand the they with vaccines early are how time, Europe. hoping the states big at a already But have And the this as awarded have contracts and been I’d That’s it’s ongoing

Kevin Liu

helpful. then That’s going quarters, maybe And was past pandemic Understood. in few more generally, the the COVID on.

aspects dealing same but guys maybe here, of You the cycle kind at your you flowing over those tunnel. if of of what with cell course to being around healthcare expect talked some about moving curious that they’re terms grow the light customers, And I’m still the the at given your time, in business forward. healthcare bookings XXXX. are there’s of issues other with discussions provider end of able

Filip Gydé

Kevin. very That’s tough difficult a question, and

how me – all a months. next this for going instance, to of countries to to We the in You’re vaccination big get is prove part evolve asking We statement almost is of part going the COVID States out. make on to expect that going solution. also the in UK the small, coming and out of starting couple Israel, we’re see of

In now is I that and end of work very between because the deflected from believe continents work the situation clear, image big. when be, the the to is the funnel very also know global speeding But business to different that vaccination is going don’t going or is log when see it’s extremely that we’re of beginning, in up. that’s collaboration progress the the take on dependent that urgent. when solutions. We also been with the was We home it COVID-related to those support of what at the software, has actually other helpdesk

give at moment. remainder also and is guidance any timing of still Mark, this for question why that’s the didn’t a we So XXXX

Kevin Liu

but point. is John, said, guidance terms more expecting this year. Yes. of as at this in question just this you maybe and revenue I solid growth statements, being But talked Understood. it’s about know of outlook for the qualitative That

Just with from And having curious striving have beyond a to or see check and in other little if how business, engagements expecting mention there much to visibility wanted that walk bit that the staffing sizeable of potentially terms disengagement that, this just are of from guys lower confidence. then on that you away level were margin quicker of just year. you

John Laubacker

Kevin. Sure,

comment growth growth revenue couple to So of release. that revenue solid a Relative the the in points we there. put and

to tell today about strategy. I’m release, fully past the We’re that that deal We closing with execution in some that it’s the focused, primarily has we predict from call from on as the especially you had rather just over at a see grow. solution solution from this throughput digital But can and to or become because said, really excited times in of front opportunities solutions longer. sure in past hard opportunities do were these opportunity we generate, we year to a we area continue of where the regenerate year, that years can now the driving see us, front further can revenue we especially strategy areas, and of we’ve enough somewhat do over the couple the us believe

staffing away number, the to growth staffing not is So double from number. it stepping a solid business. the is a margin but digit lowest business and Relative

we’re think going to do continue I to that.

whether a processes. ways, different business We skills it going it and efforts, understand be where be into and in solutions are focused. driving our variety that’s the we’re resources again, time of of energy methodologies, All where

continuing think the story this is been year our disengage that as from staffing of part has I business. execution great. And appropriate to disciplined

staffing So way, very doing continue evaluate come into to opportunities a that up we envision renewal. are going critically for in as don’t they us very, significant the I but

Kevin Liu

a Well, luck given a and here, in That’s congrats good helpful. year strong the Great. especially XXXX. on circumstances

John Laubacker

Thanks Kevin.

Filip Gydé

Thanks Kevin.

Operator

next to queue. caller the in Moving the

ahead. Your line is unmuted. Please go

Josh Vogel

Good morning, Filip and morning, well. Hey, you Hope Sidoti. Josh Vogel, good John, are guys do John.

down of a absence expect just commentary to one? talk rational sense general the seasonality. bit in in guidance, what completion and of get just of of step project the of want kind little just of revenue kind I we kind with could for being a Can around you this of So the QX QX multi-quarter to

Filip Gydé

John, take would you like one. to this

John Laubacker

Yes, sure.

we we infrastructure definitely be We a Luxembourg multi Josh, done. in had I it see but think the had relative very indicated significant quarter go we’ll down good unusual. a QX, live in won’t We call, on strong, this had and strong we step IT had there. to as sales or business in that revenue

quarter. and are However billable few less also first there a days the in

So having rate materially it think of will than days. different said I sort run on our don’t billable be that,

some a a But perspective, good projects get different that which we materially events revenue and drove be of that significant it’s comfortable think day you to fantastic. run from that I fourth rate sort really really quarter, had from not good in So QX. is the on per static

Josh Vogel

Can remind matches of total want me have you to QX? that number Understood. up. I my for you days make billable the sure

John Laubacker

– that. Yes, I’ll – front on I to you I’ll I’m but don’t back right have of in that get me,

Josh Vogel

margin Okay, grows, utilization should from profile or think I a business. overall that know time. sounds should that direction we the expect normalize? as that? swing good. maybe the post-pandemic we as and Should the back little How so a vacation other utilization little a things benefited understanding to sick Shifting about that in of gears bit little solutions

Filip Gydé

John?

John Laubacker

Sure.

but consistently Josh the is at at margins depends higher. it how on and margins significantly generally upon service day pretty times it, staffing of margins been service have are X Our X and being our solutions we’ve the the higher of staffing sides the the end solutions, both than provided that to internally looked

that would it’s think margins a staffing are the yield a engagement to as X.X times So not reasonable high. that

of opportunity business that portfolio. margin sell solutions again two things. from a that’s the margin overall side within higher One we higher we from we and solutions really higher the on and progression basis pretty think stress both the consistent even deliver and is organization. disengaged there’s would as the think steady a the or progression, staffing we business and the that lowest as we So a that to margin three got on drive perspective for solution digital continue – Two,

should our So solutions again gradually we increase. think margin

to, this had and the in we’ve always a linear be past, that isn’t said general it Now – we’ve going we to in said increase.

won’t down, overall think XXs to steady be up mid-XXs will climb solutions or overall. the long-term higher but to a be quarters some and look beginning more very number mid-to-high towards Some we in quarters from the

Now I’m not going sure to but in that get significant we’re on there ends. that improvement both XXXX,

Josh Vogel

insights the and [indiscernible] appreciate being I The there. our driver there. Northeast increased a with client agreement

financials in sequentially. jump versus Let’s

curious, business Just was expansion there, win an that in or or a related of was to the Luxembourg, or implementation IT bit infrastructure a new there both?

Filip Gydé

the the of you? hear John, sure, didn’t question, I not part first I’m if

John Laubacker

Yes, I’m sorry, Josh.

a the beginning sure. wasn’t of broke so the question, You little exactly I up bit at

Josh Vogel

to Luxembourg? was drove just Then curious that and in win, as in of just what came from. I up, a financial new a saw revenue, apologize. it curious what saw that I both Was that? sequential Just big to increase there just a I we services if expansion, shorten where an bit

Filip Gydé

in of I activity. it’s activity like bit not mix the year big everything, in overall that’s us, was infrastructure there the financial in it Its end Josh. definitely that’s was of services market. one and in think of Belgium help increased a Luxembourg the higher also specific towards a But France, the contract, an little side more

Josh Vogel

for think SG&A a about that? to the new and of given year just And relative curious outside this and giving we great. should base just lastly, kind the how just transformation should and initiative of guidance, XXXX, investments again, digital how there, about we think XXXX I’m Okay,

Filip Gydé

It a sounds for too question like you John.

John Laubacker

know a talked concept about think margins margins expect you themselves. we Overall, about, asked, Okay. go from up within We increase. with we our continue as of solutions the plan that. And business to and as make will we just we’ve then got just to to I investments talked the just disengaging staffing, we on business. And solutions continue, that going our to we’re to side in margin do overall continued of development

that perspective, we margin from goes up. operating the still So think

that operating on margin, increases. know income to that we that or the that the again, that got definitely as So we think We think improve we but not where well. but increases, increases more some gross we Probably at standpoint. the we’ve continue think can sustainably, to believe I think money direct within operations to but spend SG&A level, from are we we

I today, think headed a bit right. at the there we’re And QX is the all passes. past we’ve when but we’re time, not And days we billable a journey, for improvement the see used for first on where know the we’re a destination calls. path There’s to definitely down I going this time in it’s on talk about the gradual of quarter. as XX

Josh Vogel

And I All right, up great. Well, on, details XXXX good XXXX. appreciate impressive going in given for ended the taking how luck the being in all results insight, and to thanks so again see everything questions. my

Filip Gydé

Josh. Thanks,

John Laubacker

Josh. Thanks,

Operator

We back have any no remarks. further questions in the to queue. management for call At turn closing the this time, we will

Filip Gydé

our without landscape ultimately fourth offerings, with in pleased solution. as our loss digital of of we challenges conference call for that value you of proud and highly we I’m together not Thank digital we solutions succeed. of for in services the what XXXX, reflecting our in our unprecedented as to bench. very the we adapt achieve the that any for plan, CTG strategic accomplish. solutions and year transformation call. ongoing disconnect significant only that of business year, long-term for we are clients. near success team our getting excited we a have participating and just will stakeholders. our strongly closing, the solid strides realized into focused to Kierra, made the Today, results today’s very meaningful how continued environment, growing and In execution changing place. positioned with founding worked quarter the And accelerate expanding growth disciplined support meet we are carefully deliver With past on we terms Kierra. in we evolving of portfolio And drive the strategy We on you, foundation clients confident I’m rapidly organization Despite about empower momentum now needs your CTG I’m to all with productivity in our started creation exited overcome in to what and required the are to may the and CTG. Thank dedicated we an you

Operator

That concludes you using our Thank conference. Services. Event for

now may disconnect. You

Computer Task (CTG) 23 Feb 212020 Q4 Earnings call transcript