CTG - Earnings call transcript Q4 2021 | Computer Task Group Inc

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CTG Fourth Quarter and Year End 2021 Investor Call. [Operator Instructions] As a reminder, today’s call is being recorded. I will turn the call now over to Mr. Craig Mahalik. sir. ahead, go Please

Craig Mahalik

John today morning CTG. and you, appreciate We your time your and thank everyone. good certainly Yes, interest in

me morning our are CEO call and full released on our financial quarter market Joining and results open. XXXX President this our Filip fourth and the Financial Chief Gyde, Laubacker, year Officer. before We John the

website morning, You can for discussion Filip this we and open After Q&A. access that at release John’s ctg.com. on line will our the formal

to that mention make documents events just is These Let earnings cause Securities that you with during are formal These sec.gov. and are may first me differ to today’s call. other what well or website that other session. uncertainties the we aware, and provided found as Commission. to in factors risks documents materially at as could on filed the from risks, well uncertainties some the future can likely subject statements stated apply and Q&A statements be factors as forward-looking These are on other the as our well discussion Exchange as during as as actual release results

also are financial performance. discuss we which we measures, believe During call, today’s useful will our evaluating in non-GAAP

You a information in should not prepared in consider this as for substitute additional results isolation or accordance GAAP. with

will SEC to I comparable in Filip the measures filings. GAAP turn tables over the with release We measures provided today’s and non-GAAP Filip? have our of reconciliation the begin. in to now call

Filip Gyde

nearly operating year-over-year. strong fourth revenue XXXX, us everyone. appreciate joining very We and XX% up income today. had with morning Craig a of good increasing We you, XX% and Thank quarter you

The reversal the $X.XX non-GAAP from the ended to tax GAAP and allowance basis. EPS $X.XX the earnings translated diluted and of in basis valuation excluding GAAP $X.XX quarter XX% performance, from with per the $X.XX share costs. with share earnings America this strong was year a North line earnings XXXX. non-GAAP Importantly, and of of of related and We per acquisition bottom non-GAAP a on increase in

demonstrate clearly making we are our and results Our progress digital the services solutions significant strategy. on

making today’s regarding represents we non-strategic our information and sales, a recruiting staffing and including call and financial relate including our segments for revenue business IT It discussions had North staffing. disengage services, that segments Europe have to technology investments of intend The they is by IT to start margin resources, and me services. solutions previous that staffing time. disclosing are from over profit The segment business disclosed margins. Let delivery solutions three and and only America solutions for each services in we revenue business higher both grow margin solutions, explaining development low and these segments, includes how we in to very

the our where our As the are we reporting, you our solutions Europe, for making which America we this in and our XX% business. segment areas, are of clarity around to revenue. revenue of all revenue, and represented revenue strategy North in all segment discussed segments we services release, investments, from year. the to when we staffing is With can included decreased quarter and solutions, staffing XX% see while solutions-based the Previously, providing IT

discussion a progress to strategy. turn our now me Let of the on

specialists, team training with activities new personalize due training supported On our the support America. curriculum and North development, contents, technical their training, to government. assist Epic fourth health system our engagement to execution clients of and to and large XXX over a the providing expectations, This staffing credential preparation trainers that for included Epic on or primarily system. updated engagement, we provided for Our related certified how earnings us implementation results quarter our on training disciplined collaborated a exceeded this by with in

the a We logistics satisfied over a and client. This new to large North system. drive at from America aspects, provide build have a and be I continue project IT support many large deploying such of our have clients’ to confidence was was adoption to clients. of margins. time service engagement the strategy success revenue a quickly contributor in very contribution of also impressed XX% and hard than and a generating the everyday people we This was number and support doubling in the planning year-over-year people very short by skilled period. ensure the significant the the and the working provided more tremendous to solution to to we fourth At engagements, tremendous during X,XXX quarter highly elbow fees solutions all services to including a our end

you even quarter this results operating However, if excellent. our excluded in engagement, the are

insight directly As in segments. is execute we services determined we and best better that or see solutions as while consistently some our affect IT either to perspective quarter’s particular it is driving engagements we a results. in digital provider how continue also that next IT Accordingly, the will to North year America our out. full into contribution strategy any playing the transformation services giving provide occurring Europe the outlook, have on quarter Large

margin XXXX, disengage technology During continue services. non-strategic will lower we to from

at the rate engagement $XXX from expecting non-GAAP have approximately our the fourth the will to to in a expect expect from of about the with will diluted $X.XX range the the from of be the provide to of $X.XX to revenue, both we and year the revenue had million at resulting items in million timing that in revenue due the of will softest for in consolidated do the per a midpoint share $XXX our $XX has resources. similar in headwind greater on This are quarter lower XXXX is to beginning business We which the than our to earnings and model, growth XXXX, in impact million approximately at first we shift do million. quarter that revenue year XXXX Consistent expectation range. quarter size earnings billable our the of $XX to Omicron X% the grow will that COVID-XX variant These illness is be XXXX. Additionally, engagements to rates be had utilization one of not XXXX due of a and down we year-over-year. expect in higher large of

For segments the and these our grow services to IT the single-digits in high is to margins mid-teens. solutions long-term, contribution objective organically deliver mid for and in revenue

revenue And margin execute John continuous information. all digital us CTG accelerating by forward our for our inherent goal our for their strategy, continuing to through the innovation We look focused to in increasing to me to our is expect CTG John? the margins success. our catalyst are the are the operating X in constantly the with our acquisitions. this next often IT outcomes performance to of is facing reason that, review customer it need enable initiatives. being business clients while adjusted critical digital over increasing clients. our financial landscape. over the clients engaged X% let expertise turn address and also years, derive achieve X% enhanced to their We our is experience given on assist to leverage to a to With and business EBITDA transformation the well-positioned change digital to decisions pace and profile data, driven evolving of are Business challenges growth in will

John Laubacker

you everyone. again on us good Filip you, call. morning Thank joining and Thank for today’s

of our lower increasing American have XX% technology As non-strategic Filip disengaged to in engagement revenue Fourth compared in the segments, services $XX million XX% quarter, XX% revenue also in non-strategic discussed the consolidated still nearly our over X% driving million revenue total revenue period. By business, total Filip in Despite $XXX.X fourth XX% reporting healthcare resulted intentionally growth revenue while the revenue revenue. three XXXX. and heavily in the grew prior which XXXX we mentioned, quarter the technology revenue we North influenced our was for clearly by from or services margin through of year, growth quarter revenue totaled year identified with had our to revenue. having vertical in

strength of part plans. and in North continue of business in efforts in services revenue to will to both or XX.X% revenue total million support for million revenue turn in growth we our We of business the invest The million fourth Europe year. this of large the our in the XX.X% or total engagement quarter the and IBM than $XX solutions our and as America $XX.X quarter. revenue $XX.X was greater represented

million For foreign and fourth our Services impact a XXXX. revenue translation IT $X.X on of the in quarter had Europe segment, of negative currency Solutions

$XXX,XXX margin Both from basis the of and in increase Excluding services improved a the have quarter higher to loudly XX.X%. a to bottom fourth saw XX% the illness an foreign the around X.X%, X.X%. fourth was consolidated and line resulting of for measurable decrease note, continued would the declined expense variant. points quarter quarter excluding basis leverage Consolidated year periods increased Omicron approximately non-GAAP of expanded services lower as improvement our reflected gross revenue. and points revenue quarter income holidays, prior quarter performance. XXX and and of solutions in revenue our of higher investment XX margin development our mix downtime the strategy, solutions acquisition-related period quarter. digital operating expenses, of the level full our fourth solutions this the over the business respectively. revenue and SG&A Despite both COVID-XX increased basis in XX.X% When with year margin points results about and from of Operating resources operating margin utilization XXX which percentage of fourth currency, Of X% we support in in mix on operational the a reflects from segment, and IT XX% for

of expanded the For or XX tax the against to in reversal a $X.XX allowance which $X.X on or points United non-GAAP and share in XXXX increased X.X%. the million per basis operating fourth We full achieved million year, net basis of included deferred assets $X.X diluted share X.X% basis income States. diluted quarter, margin evaluation a $X.XX per points to XX

the the the $X.XX diluted allowance our improvement guidance year ago non-GAAP $X.XX, prior period. quarter. Excluding due XX% during to acquisition-related earnings valuation were up significantly nearly expenses, tax exceeded from or This per reversal and the level share margin largely

diluted for XXXX. CTG’s net was was billable than the which points was This full with points. to and compares the XX% delivered million we quarter which of of per rate improved X.X%, a and $X.XX share, XX% the EBITDA Adjusted year full non-GAAP was diluted a XX higher share on the period. up basis end prior $X.XX $X.XX income of was end the at XX% X.X% year headcount approximately $XX.X per billable. year margin XXXX, For X,XXX, year basis or at basis in approximately

in million, $XX.X net had facility were expenditures outstanding our the million. Turning X% by of $X.X line end part the sheet the XXXX. up outstanding of any balance debt. capital flow, cash balance and Also, on used no equivalents $X.X operations Full to to and cash was cash of end million $X.X year, year year credit its million at company revolving and other provided fund or or cash since was

covered we and we the solutions services have continue activities our believe our within and I how enterprise. and to end, the digital we open digitalization pace to Filip by our the talent, skill to to could of work and hard provide source prepared processes would expertise IT investing the and you we guidance, and differentiated execution reflect quality how that solution outlook to opportunities high-speed in reviewing remarks. our continued As These for This means of any John, call skills strategy. strategy approach reemphasize drive please completes That like change. services. investments we adding in knowledge questions? the our necessary skills, price the sets, advance In

Operator

& ahead. Certainly. from go the of Sidoti line Vogel Instructions] [Operator with first Josh And please Company,

Josh Vogel

Good Filip are you and doing John. well. morning, guys Hope Thanks.

Filip Gyde

Good morning, Josh.

John Laubacker

Josh. Hello,

Josh Vogel

Good morning.

there XXXX, like tremendous curious success I with any support from obviously standpoint? whatsoever into maybe a that of just fall So, health system business sort was engagement, just the will is residual

Filip Gyde

and client future, very because good is stickiness. this we in of the the a it Josh. projects That’s type doing exactly want of the creates to continue Yes, question, type

support have going of small a talking a They to client. there value be We continuation very been There working we kind the satisfied. with are and separate was is really were support and And tremendous already afterwards. even will the about Go-Live the tail go-lives the on a project smaller, to with while afterwards.

So yes, short answer. the

Josh Vogel

for the And obviously, other engagement are tell, clients? an and scale opportunities Great. you it other doors or it’s there, open maybe success early of but or seeing too any this prospects to

Filip Gyde

go-live using of project it that am of through word way whole wasn’t not systems. Go-Live, finish. this of start end with is for really And digital actually, from we working supports they this the the have the first kind health Well, the because it doing. It’s I doing been those changing to justice transformation are

we record Go-Lives. track reliability So, the a is the are CTG that we of known acceleration and to that have their delivering for bringing

done this is great the and our this market. same have are we We at looking are as the in really in pipeline that before a reference opportunities we direction. Yes, in speak,

Josh Vogel

expecting you the recurring you that Alright, numbers great. the classify that X% – the fill Thank numbers, at versus kind in where And And the business number to for are pipeline? visibility that how midpoint some gave of as of just of looking have much organic curious you you baked guidance would and growth to out, new I the of implies XXXX. kind was you. of using

Filip Gyde

Okay. to color. a of John work, from of as high then And level more percentage Well, for answer business. normal the usual, refer CTG and business question kind recurring high has

have than loyal decades. have We who a more for lot stayed with of us clients

generate projects creates system health those opportunities same clients have done, other ongoing that the business. as client. So we at These

there that color that? increasing. can you to give anymore John, is So, that only

John Laubacker

– as from have increase continue But we Josh, see we this at consistently. put pretty to Thankfully, not amount really we that. recurring don’t the you revenue done specific And time. out numbers we quarter-to-quarter around know, haven’t

is engagements. has what a engagement some we Filip now in with are of this types which support drive answered, these large well, what follow-on far, work, As to itself so exactly to led itself engagement trying was

our also a providing we great And see base that are recognizing said I would client so and just that our have what loyal often. with reiterate we more Filip more we like base, client to the such that to be that and from renewals be level projects very, whether and we very portfolio of tends high. or new consistently of extensions across quality amount high services, North of America it continuation get Europe

Josh Vogel

other the color Can something that what and quick appreciate or could continues on. Is or post saw we more that hop there. allowances see, in the the profits? the ones as Sorry. future QX like valuation And QX any we let expect two I this others kind business year in I’ll ‘XX? U.S. to we of

Filip Gyde

John, that’s I believe a you. question for

John Laubacker

$X.XX deferred answer anticipate great The of question, – all And reversals Josh. believe allowance, the is don’t we of was no, reversal all assets. other allowance valuation in don’t I quarter I a I allowance. the actual the Yes, it’s U.S. any against of tax fourth valuation that the valuation of

really income in the is large excited generated We business the now that itself But time. North we generate prospects a income have we the But a QX. is there on within reasons itself. what offset by going demonstrates those which obviously, it’s driven cash level financials in And is felt of basis are very quarter at business American a it the that to is forward, the taxes right deferred this actually about felt pickup over primarily part and the long-term earnings in number time. project, confidence for within fourth now improving looking

in So, that it’s company do it allowance event good gives $X.XX about area. the adding future reversing competence a not the just present to It says and us results that the its does ‘XX. in feels positive the valuation the prospects of outlook fourth to the really quarter That now. the

Josh Vogel

to correctly Am Thank QX I that’s margin Okay, for X%. thinking about rate at I’m XXXX? guidance, want That’s lastly, make on And it a you. looking exit I correctly, that your based great. target. just sure to just EBITDA X%

John Laubacker

That’s exactly right. Correct.

whole have XX%, consolidated, XXXX, So margins. EBITDA company exit our as is target to we

Josh Vogel

Well, great and taking on questions my year. last congrats thanks for Perfect. performance the

John Laubacker

Josh. Thanks,

Filip Gyde

Josh. Thanks,

Operator

K. Next from ahead. question Liu Kevin is Company. Liu with & Please go

Kevin Liu

guys. morning, good Hey,

John Laubacker

Good morning, Kevin.

Filip Gyde

Good morning, Kevin.

Kevin Liu

how of the that the Omicron utilization and fourth we’ve the impact, some quarter. terms In you in impacts seen also about touched have in first impacted quarter, here

weren’t or able sort is projects, existing or going cycles terms you where any currently are those you build that’s RFP in of primarily processes of of there impact some through. whether on curious, just Just hours to sales

Filip Gyde

COVID looks was fourth happy affected Omicron, contagious, looking how as it that well, I’m lot extremely causing word of but us of maybe in the a severe Yes, and know, you a I’m very was like little at the using Alright. was the but illnesses workforce, It like It fast, wasn’t kind among our too it. was fluids. of contagious. it quarter, effects

a So lot we had illness. of available not people because more

on the affect as was of luckily, the projects we But It down. went it that utilization really the mostly didn’t Kevin, existing put couldn’t closing were business. pipeline because you So correctly build, people and the sick. you

of large improving opportunities, solid fact, win matter where a on seeing that of some during the seeing seeing throughput a time, lacked rates. defendants. we’re As before had it we’re And for now we’re number pipeline

Kevin Liu

along and terms for helpful, seeing And verticals it maybe you about how pre today? a geographies? of in little does what the lines, – talk That’s And particular it bit can those you concentrated instance, maybe, saying were pipeline in or any compare what is pandemic? you’re

Filip Gyde

was is fast, was, that earlier mostly coming we’ve is the good. back was us excited still what’s is about very that improving, but that making throughput and encouraging there, not all what pandemic, in is the of Well, pipeline And closer solid this as not and experienced continue throughput I renewals phases industry one Like and our win at of jumps no opportunities, digital pipeline is, situation. is of getting out. solution Large in a healthy rates, it we’re all number extensions or business, is set the to that looks pandemic very specific the thing there And that coming. pre high like pace. as the the said, areas

Kevin Liu

work bit hear. expect you to are calling now, out which on the pace And segment you at little further ‘XX, guys non-strategic we seen late? does kind just disengage of and you the kind moderate That’s ‘XX, services than the talk can accelerate a we declines great about then what or it of to of should as have and that think that in more

Filip Gyde

have stepped years, last X release, $XX away intentionally. as seen the have Well, we in from the in million you

of We the with must fast, can one or a while are dates, provisions, continuing possibly is combination extremely that number and at it away of engagements, the segment contractual stepping as or We contracts, a different fast this all we lot maturity impossible. do. supporting of clients. But away, different at looking clients, as moving follow in makes time things,

ending to we prohibits of those to engagements. Some organization. need the solutions and of lower the IT the all from or conditions disengage sale of only the to deliberate immediately as It provisions of margin be invest in it. very is our fast can, And mindful area, business as a focus boundary we Kevin services respecting obviously, impacts the also from and while around

Kevin Liu

labor business? And new on then, impact of seeing of are sort renewals? kind And inflation, been of what terms your claims in and Have and kind what conversely, it. market with curious current Got talent tight are you of you able your then rates environment signs the retention from given engagements a a you on to bill wage I of inflation improve was seeing or perspective? wage

Filip Gyde

now during we talent seeing a seeing here While Obviously, again, all we inflation. are war the the while, again. wage coming for is after there are pandemic,

the a it part bit I or second Europe are first We in we year, seen in the little have of seeing think that everywhere.

related when to is pricing a are because cost able in where to it’s level and or you pricing much so a anymore. to bill not rate our deliverable solutions, service and directly pricing a accordingly, to rate match you are a are pricing We

during improving have you retention, our hard hiring overlap need and best way have people training are you Each is you costs, the provide. some to have project, really the that a have on We the lose because you you margins. re-hire, time you of focusing costs, to

good. moment costs to our still retention And that all at it adds extremely So, the mix. is this

of where time market. that fact contributor of at work present, certified the to the the business, in I delivering we a are history, all is in place now are all first definitely our of top countries that the think to countries And for the retention. the we we we that in great are

Kevin Liu

in just you acquisition And bit little talk Alright. the lastly, with this pipeline, are seeing opportunities me, your are for about a valuations seeing you and what current in could environment? you

Filip Gyde

focusing Well, we looking for on are actively targets. acquisition

very a to you As that. disciplined know, we approach have

a have We allocation framework. capital

at is to in criteria going every with definitely to mind looked So, our or take going for foolish extremely not any pay target risks multiples.

disciplined very approach. So, we have a

We are we And markets. that’s looking. are seeing opportunities the where in

We are looking Kevin seeds for what call I always growth. for

are looking close already at have we we to the that solution additional capabilities, So, have. capabilities or solution with very solutions what that we are already correlate

offshore disciplined or for delivery looking a very from but clients, are geographies always capabilities and We approach.

not of acquisition And So, ‘XX, in multiples. to approach but pay careful, a that think we any I haven’t proof are thorough definite is going our crazy we today. done

Kevin Liu

on ‘XX. thank good And Well, strong it. the the taking you Got Congrats for questions. this year. luck

Filip Gyde

Kevin. Thanks,

Operator

[Operator of And from with do another question go line we came that the Please in Instructions] George MKH. just have ahead. Melas

George Melas

question. morning, taking my gentlemen. for good Thanks Yes,

Filip Gyde

Hello.

George Melas

margin XX% plan? are The XXXX move the over that of is acquisition improvement which at is factors the XXXX, levels, that Hello. a is exit much? part X.X%? as you major needle And that are What goal you to that going the have big

Filip Gyde

are four for mainly realization And there this Thank question, of the main to vision. drivers that George. you

First, solutions, growth. our to our delivery, sales, we partnerships are invest continuing in drive basically to organic robustly

your answering acquisitions part second of the yes, there is involved. question, Second,

Like IT capabilities, a I client sets focus on and capital have have on and expand that approach, digital will offshore acquisitions said, geographies. We segments. and allocation grow solutions services our disciplined and focusing capabilities,

through our Third, more fourth, focusing went on our a delivery segments, delivery into non-strategic our I offshore detail centers. which on question. reducing previous little services in focusing lowering the costs And technology

drive reporting the goals. have towards believe the that where And these also executing disciplined years, in the new ‘XX we all shown segments strategic investments. these operating greater we firmly those X clarity on of four we execution do continuing will providing last is points, results Our we

George Melas

that. the Appreciate clarity. Great. you Okay. Thank for

margins the America X two last provided, of margins the the data and just and gross to explains than the you Can Europe Europe, North margins of is years, over margins? which America. in meaningfully businesses seems have at trying lower solutions are that, in of to if improve European do you also, what what North sort and maybe us contribution to understand are help trying you sort you Looking

John Laubacker

Sure.

again. variant, rising by started have a impacted level in long-term to people the times, had of wage at XXXX, we build a the costs raising normally success And saw impossible challenges, people years, the Omicron costs, our last we we But the to travel do in couple that in utilization Fourth the couple quarter, it created And the to time, we we or clients. the of holiday sickness. for COVID-XX Europe finally, lot also made wage had had quarter, from on have. a as over that to by are profits. particular and on so of third always cannot pandemics lower gross will diminished, we in Starting that have We utilization some future. we – were impacted more pass higher we

forward. but solutions, levels increase work Europe We know in levers, future succeed – On we the believe invest going by part internally also necessary to profits level, margins, four that and it’s sales, we in using these in those we contribution recruitments the success. sorry, to will that improve believe And we why numbers confident story. continue to drive of in to do story will longer very the that’s to these have is we

George Melas

health start are quick final the – phase questions, you you then the did two implementation, question one maybe great. project? you large now? really have just on And the the getting Epic maybe in NOLs systems right the Okay, project, of And on that did go-live quick guys involved or work what

Filip Gyde

we implementation application teams going remarkable involved reference the the keeping the the a directly were the that the years. list. the to We wonderful Epic of we the running, couple merit to support, more were implementation, involved while current were added in which makes on. that not is And older was I go-live the were applications that As over think have a that built in involved have we new they references project, which it Epic – even in managements of last awarded

George Melas

Okay. And NOLs. just on the

Filip Gyde

I sorry could you that. about one? that take am John,

John Laubacker

Sure.

with that we On companies point we previously operating operations, have, losses, or NOLs operations into relate up time them. fed of to or led the that net have in were operations we had at the those most this remaining where were

have we have valuation those those the we and don’t got allowance So, some, future. got changing I against see in

George Melas

Okay. much. Thank you Thank you. very

John Laubacker

you. Thank

Filip Gyde

Thank you.

Operator

further And Instructions] [Operator at coming in. there point, are this no questions

Filip Gyde

you, the solution execution on quarter fourth and marked continued of another progress Thank closing, In digital John. quarter strategy. CTG’s

our XXXX. increased CTG call. vision of long-term year-over-year validate have further team CTG. ongoing shareholders. for of deliver CTG your achievements objectives. Our may support today a to financial catalyst us lead we are continued growth for you success strategy business of commitment Moreover, operating profits place deliver disconnect to building right strategy the for transformation will to expect continues term realizing and in all and clients to value of bottom the and now that previous we an Near-term, that effective on line results, demonstrating longer again and joining digital our for and repositioning you Thank the our to we as accelerated Tom, confident achieve targets the

Computer Task (CTG) 22 Feb 222021 Q4 Earnings call transcript