CTG - Earnings call transcript Q1 2022 | Computer Task Group Inc

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Operator

Greetings, and welcome to Computer Task Group, Inc., First Quarter Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Craig Mahalik with Investor Relations. sir. proceed, Please

Craig Mahalik

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

Filip Chief released Joining John before the financial are Gydé, and morning President me opened. CEO; results Laubacker, this our first Financial our We market Officer. quarter XXXX our and

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

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

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

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

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

Filip Gydé

joining today. Thank you, morning, Craig, appreciate good We us and everyone. you

was profit our solutions mix increase testament the IT first business and, at solutions demand our digital capitalizing strong success of of ultimately, on to to and market continue of for the strategy drive demonstrate execution The the margins. transformation disciplined to quarter XXXX a

down share per technology lower-margin nonstrategic headwinds. being and from GAAP drove Our revenue grew foreign XX%. currency power services margins despite earnings Improving earnings

North we Services new America structure disclosed through introduced reminder, financial Solutions of and with each services. As and higher-margin represents are segments: our business our IT quarter, IT reporting and a Europe last three

And during only continuing We are development making strong achieved we to investments growth solutions when our and quarter, earnings the in business invest two segments. these delivery resources. in even

to may We be of IT create from strive digital $X.X delivery Technology with quarter We ways more opportunities succeed and staffing where as Non-Strategic leader in segment, Services million can to efficient finding digitizing business, seen the their decreased our prior which revenue includes in continued to the that a also lowest-margin to and disengage by the our the clients for compared in be assets. they for operate Services face. Solutions despite processes the our This headwinds year. clients

successful will of the in we IT contracts we a North the are solutions future. Brett position further despite an drive Vice look our our extremely our new and will with our we In digital HP. digital progress competitive solutions making, our years headwinds. of colleagues our Hunt The of We steady strategy have formed our newly quarter, in of encouraged to history development we executing am meet and America. are during ever-changing in years span delivery making people, be and we foundation our executing advance adding tough us XXXX CTG and provides are Company's North As a five are responsible progress his in to after to a significant talent of with most America. XX support for won and labor role, result contract example the America. to continuing been largest for Delivery in promoted macroeconomic solutions Brett and challenges our to assets needs the July joined success. as critical Brett first that evolve Solutions important who in President in strategy and on for I and strategy to the the clients. strengthen are CTG a In North Wins environment, like continued team to of recently

organic But expand in of we digital allocation. We opportunities will on the our of solutions producing financial is pipeline execute be have important year. acquire the and Our past solid to over grown opportunities. process our capital that has to flexibility have is we believe prudent as continues a focus always, where and we acquisitions companies. Equally with pipeline well-defined significantly a

and fits. Our earnings have accretive are that opportunities, cultural are acquisition criteria focused on good provide digital margins expansion a and businesses

impacted revenue on quarterly our that timing our billable Based project second current the call, As to in we and due COVID XXXX a from last resources. cadence pipeline, the quarter illness of of on higher due the timing to in revenue year. opportunities on for variants half our engagements soft utilization rate lower earnings mentioned of we and the a we expect beginning anticipated of the

for look we in to to deliver our further the out, Services revenues IT is contribution Solutions in mid segments and mid-teens. As organically these margins grow and the single-digits high objective

achieve John? it We over of to this review EBITDA With me let to years our more to adjusted X% expect that, results increasing margins will next over revenue. two of detail. X% our turn in enable goal the to us to John

John Laubacker

for disengagement in joining Filip, revenue Thank of which Consolidated you million, morning, quarter today's first us million, to you, business. was the call. $X.X our on Technology Non-Strategic million attributable and X% Thank approximately down everyone. planned $X.X the from or was again, Services good $XX.X

the unfavorable quarter Foreign million. and $X.X currency substantial material impact than a also had totaling expected more in than

$X.X segment and and XX to Solutions during quarter million, XX% X-year segment IT of Revenue resources $XX.X Services in solutions, IT this customers new down impact client nearly digital to IT unfavorable largely currency captured First translation. foreign for the Europe our contract increased including and and project a as America the due million a million, previously Filip the Services internalizing was opportunities about Solutions mentioned. from quarter $XX.X that continued revenue North from

this X%. revenue for declined have approximately currency, foreign would segment Excluding

We change with a This does end expect the resources. million to the of the or indicate the client, a concern than the project by €X client's rather but of total not client internalize XXXX. internalizing impact more to desire the problem

a margin result million, improved first than points a equaled changing margin. year's was profile revenue and North largely XXX the points This period. two year-ago the quarter. and basis America, which $XX.X than mix, of basis during driven higher higher gross profitability by was our the measurably quarter As last Consolidated profit XX% XXX

the XX.X%, higher-margin Services IT North IT XX gross revenue. points segments mix Solutions margin Services, For Europe basis expanded XX.X%. Both increased America of gross and Solutions increased and to points reflect XXX while basis margin to

year-over-year. increased up net year-ago which operating X.X% points. acquisition-related XXX SG&A points achieved to diluted While In continue of was Technology We period. the increase in That's includes steady was segment first represented in has lowest-margin the per compared $XXX,XXX a EPS share Services, a headcount which which the with expenses, also per or disengage CTG's to million, to improved million total with quarter or operating the compared up billable. in we basis year basis revenue, in diluted GAAP in of XXX million This of from the $X.XX at was billable XX% $X.X the margin Non-GAAP share projects was income basis quarter share points. adjusted the quarter a in Non-Strategic margins. basis was quarter seen X.XX improvement the year-ago nominal XX% period. of points revenue, million EBITDA of margin income XXXX increase $X.X $XX.X of first of per the earnings compares of XXX $X.X X.X% Non-GAAP or approximately the $X.XX our or income, XX XX% share $X.XX versus to diluted was period. XX% expense profile, which X.X%, XXXX. million during quarter. margin XX.X% in the $X.X with end in that $X.XX or of an of operating improved per million prior $ keeping

balance year-end sheet provided debt XXXX. million, was was $X.X cash end. approximately last Turning and operations and Cash up or were by equivalents at nearly quarter flow. X% There to period. comparable Cash million no from $XX.X our year's million, double cash $X.X outstanding

release, see European decreased and the have in euro, do Union the of significantly we this macroeconomic the reversing not in the conditions in As the we value noted term. short

guidance to million reflects from the Technology As revenue a annual from to are solely exchange. We by reducing This million million, impact Services level to from Non-Strategic for $XX disengagement currency $XXX this revised result, our expect year. XXXX to $XX revenue our still $XXX million. approximate foreign the due we now $XX range million

non-GAAP diluted business IT diluted continued the mix. $X.XX prepared our on questions? we growth solutions completes and share. earnings expected achieve per to our is $X.XX could drive track please of per remain ranging for this transformation share Importantly, That higher-margin call you to The the from year as earnings the remarks. Maria, open to

Operator

[Operator question Liu. from Instructions] K. with Our Kevin first Liu comes

Kevin Liu

margins Nice job on touch Europe. on to wanted I here. the

course talk seems or First, like is over the to recorded you guidance year? within full impact was of due most the Can then whether just more client you internalizing €X revenue purely the And about resources some FX. quarter the there. out the million of it first the mentioned kind of spread that's if generally, maybe the of that's

and of year, Europe environment So expect you this whether be the if some constant to return broader growth you there demand could just would the to noise in speak on that macro later out basis to currency you're a helpful. that's seeing maybe given

Filip Gydé

John?

John Laubacker

about be the Kevin, projects throughout decided internalization address the had where to great. Sure. if be we resources, Filip, €X environment, those of want macro internalize and, that pieces just financial really clients would to that million talk year. the the expect we to But you that I'll the

So QX the that of first throughout the of think, the then but is in sort and in was not quarter, distributed started year. evenly, all rest we not --

So that's has projects. past and years, our the staffing just in you Relative overall the couple entire know, disengage of of been, reflects the the million lowest-margin is not quarter. over just first something year, numbers plan part from certainly €X the as themselves, strategically growth to to that

last so to million out think, we And this million to guidance to been million will has the Kevin, $XX come $XX million to of been sort within as guides process $XX that's million, what our $XX revenue of That year. $XX as overall and us say that got where from year. million two $XX far for it over years, number, the has we've past

Kevin Liu

It actually, focusing all guys a seems standpoint. see piece. you It the on going FX. I like it's so sound like on much just just more from macro And Yes. Europe was doesn't too

-- there or the half return there? European be to there on basis, sort business are you that the macro constant services we growth year? of Or able of So on are the the hinders to an kind operating basis maybe those to demand is if back look currency a in any concern of expecting for

Filip Gydé

that that's you the inflation, one. second center place regarding of Europe we're Kevin, the the inflation Those half macroeconomic the pipeline our on we cadence have as we our see we any true headwinds that. can experienced Well, high has solid. headwinds the any this with result of say to revenue at energy, affected for do definitely on our conflict, for or the up delivery Europe is the things: saying cost everything, too. not course, and is and, been a suggested moment, expectations. have think, two are or that we significant the pick is conflict. in uncertainty were Russia-Ukraine nearshore that labor But is delivery impact. as of That We only But first, I don't associated Ukraine. not year, some in in too; the name centers When a popular see with of We have,

Kevin Liu

the you That's wanted if whether then sorts on America. And are annual the that quarter? in about size, terms perhaps great give got first touch similar you here to seeing you'd pipeline? of in big North anything to opportunities win the can America basis you an in for talked North of hear. expect. you're How on And there I the Maybe much

Filip Gydé

Well, largest in have or America North more had view alluding we our generally? to win the

Kevin Liu

The on the one guys or largest call. talked you about announced

Filip Gydé

a lot Yes, actually offers and It's agile using It's this digital application okay. principles. perspective. nice it Well, a is very DevOps development of a and win, modernization.

client's transforming the their this in about really the products It's the industry. in it's core And client manufacturing So its it's the ships to way of clients. business.

the for client But we the the scope client. is this a this to have about expanding We for of used processes years. modernizing business transforming had were technology, us deliver number and of now to the services

our similar drive offshore to will clients. We in this expand experience capabilities we deliver utilize here digital knowledge sell definitely gain and services to project and this to also use other and solutions and

our very transformation win a in a digital important solutions really So to company.

Kevin Liu

today about deals is that course typical size well? your seeing in the as And those the maybe of year? this pipeline of over overall the confidence And of deals the you're converting in and level just talk to the

Filip Gydé

of Agile the has a areas lot definitely traction. and our items all for almost true is automation. on. of see digital same We of in that in our the focusing area But that a we're is pipeline lot DevOps transformation intelligent

you transformation You talking we really say digital without when can't DevSecOps and modernization, think testing. are computing. development of also about cloud And automated

moving ago. last see those pipeline solid we opportunities healthy all -- our from And a And the improved year in good the optimistic we're see throughput significantly speed. I the that's of quarter, yes, term, why half second So parts told on the about and up, we pipeline. just in increasing longer the year. saw we we that pipeline now increasing of the we're see And so you

Kevin Liu

luck That's year. Good as you great. move here through the

John Laubacker

Thanks, Kevin.

Filip Gydé

Thanks, Kevin.

Operator

next Instructions] comes [Operator Our from Sidoti. Riddick with Marc question

Marc Riddick

So for that. about I year what with could versus the wondering the your on was what maybe ago? was of seeing like two you wondering for you now what can a just follow about what in looks you're visibility -- want or you're -- talk if I that pipeline, seeing to up that maybe I how -- sort talk if

Filip Gydé

we percentage have delivering a Marc, the are Normally, people of repeated the contract normally, our loyalty not on all any but is basis, of year. next good business we given That's testament XX% in with Well, the in high on that's a the clients. business. have work just repeat year, our very to and

headwind growing. our it's I retainability. going like the because bigger at that revenue to but And solid it's year conflict Europe pipeline, the visibility uncertainty And the I So was looking of say than a the the see and can increases obviously to of only last because which forward visibility we little moment, the at inflation, it business of a in of year. lot the of is this of remainder said, our always bit the

Marc Riddick

wanted of verticals any mix maybe if activity than to a I then contract as And revenue little aside shifts gears in others point. and in at was wondering Excellent. you're a vertical shift this for seeing aggressive I the by the moment new putting being much other win are to more with manufacturing. that

Filip Gydé

all I the is solid wouldn't digital say so, solid industries. Marc. it's The beauty about It's industries, transformation that it's government. valid for for

giving hotter say You know a now And focus financial couldn't a is in moment. over That manufacturing services. health on major is four, with government, win strong care, this the this at spread industries. very the energy, on other five one I specifically we together us important that good in there specifically government, have European than

Marc Riddick

about the for year and And be thinking target What to headcount. we Great. remainder hiring Okay. the areas? adding shifting potential then and potential gears should for of

Filip Gydé

experts, our design hiring architects focusing people the are also focusing digital talent liking hiring, manufacturing, the their obviously, their those to of and on new architects space, on clients solution shipping ways solution but clients. in goods we're new the are to that Well, helping processes, on

only So We focus. the just definitely the is war know for is fact. a That's harder. talent getting that that

we think position are in very Looking that, I at positioned. our well

we that's be have work huge are recruitment a factor to working, in a because like two which ways. It's Great for Places people Work great they new striving in every in a We is are friends to the certification attracts lot company just makes place us. location are is the people know their of can it best coming the you and you our also, because find own those to But a work. And hires referring colleagues for culture. staff that to to

very grow already You junior that they're somebody much just know we're of the people we that, average. who's with hard being talent supported than focusing is classes. those see to Besides And own by so higher our there. retention

fresh India the growing that testing both is that through have automation. presence our school, different Colombia, global And process in and where adding be robotic in people of DevOps, could XXXX network, have economy CTG crowd at capability hiring a in putting we be It's testing, StarDust obviously testers of forget not our through we're out acquisition that that looking we also could and the curriculum of a them it network we're there. could X,XXX acquired our to than So in all over more be our delivery world.

So it's It's a competitive, in not easy. position. but good I very we're think

Marc Riddick

me. the seeing see know to needed sort the And Or a I is really to improved in you what I Great. expenses? you certainly about if boost Or for that revenue which last bit more strategy. you direction is as has that to margins, beginning little not mix with could certainly, yet? for wondering begun the maybe generate you're was then one business? to right talk travel? discretionary or Are of of happen moving

Filip Gydé

see limited. we -- meeting an replaces It's to maybe hesitant is adopting effective the little very very the at But new we looking is also bit be be a for that. we to happening still or and travel with in are sales see that process that luckily, still Well, that in-person clients selling. again. nothing There clients. a know But model

it not as happening happened as it's So will before, and come I frequently it back entirely. don't think

and at we that of whole are and through, to But expenses travel with own sector tools have the in. time looking the cause revolution side, went aware we collaborate, traveling very that. loss of other internal of all the On digital that the the our of some own our

wisely. very that use we So

going to -- there's but back don't of yes, before. are solutions to what going I was that not well, happening. become We're see we of -- to to there for even hybrid, many that's half it the meetings, going now. see different Marc, think, I definitely that's

Operator

George question with next Our from MKH comes Melas Management.

George Melas

the about IT or targeting complex on focusing Are more you there ago? years greater projects, About your versus, solutions, of strategy let's two just a more say, less change? kind are has the your same? strategy somewhat been projects, verticals? differently it you ago or go-to-market with very Or year larger clarity to market Is some going new

Filip Gydé

sphere. more into technology And goods the years I'm that That's general going need at and going we how very going Thank we're for necessarily of win, now with, was that. projects question, example a that it's we take would of start Obviously, George. level projects different ago. we're the the But a our large to that in couple customers complex our same we technology to, way that. say it business ship you for we not good and more I now than do the okay, totally need transform to to do in

to a speak their speak difference long the strong language of only a those really language loyal with know we five were their them staying that you the were and So in that, to know level where four we before objective in project speak the very strong that more sticking the that language the client. we we have time. to because more of start Because don't were and And because the that's you business understand been That for them realization in. to business they have we to the why said, industries sector, have also knowledge, clients being are on only. some having than or means do industries technology we makes

does answer your this question, George? So

George Melas

Yes. of training the shift are What challenges of Does this? opposed to do salespeople a your tech transformation, the talk to people? as to people sort business more to to like that a certain imply

Filip Gydé

been is designing solution with and would in that I sales sometimes together already, while -- project. we hasn't sales now or no multiple sells of architects, working no -- a the story designing say, focus client challenge the for solution project. putting It's it that the with a future it's longer longer, a The are the together architects

those a sales with our those like more that or experts already. But that talking solution are yes, doing call. -- with that six-legged more major it's call before. bringing sales wasn't we're a than four-legged in, it's architects, They business So people sales were now change. But

more involves it the in So sales people process.

George Melas

these and have is you And just RFP that not in a out and are execution? then bid lot then that design the in customer design the you that there that, the then an you Great. Okay. that finally by involved bid involved mean Or to of on? you do still projects on the are does

Filip Gydé

game or -- opinion a moving There's companies the Always say I of And wouldn't to or A. designing with. to if combination, compare in a clients. or want are then other all column more the others future or together, difference it's we information. some George. a a them in second later I have shift to a RFP the coming what you're Obviously, third less you're have the call don't see

So our win. chances it to improves

Operator

to We session. call have closing remarks. of the turn back over the end question-and-answer And would I reached our like for management now to

Filip Gydé

Thank you our teleconference today. in for you, Maria. Thank participating

Maria, the another strategy. your quarter interest of and we demonstration appreciate digital begun. to has And out journey continued first The support. reach feel our and Please believe continued certainly was free of We progress execution just you We solution us to the to we And talking when a our any have with call. XXXX of you you disconnect look results. great day. hope may again quarter second all now at report we forward time.

Operator

conference. This concludes today's

your disconnect lines you at can participation. for this Thank your You time.

Computer Task (CTG) 14 May 222022 Q1 Earnings call transcript