- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the CTG Inc.

Third Quarter Fiscal Year 2022 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Mychajluk, Investor Relations. Thank you, Craig.

begin. may You

Craig Mychajluk

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 opens. CEO; results Laubacker, this our third Financial our We market Officer. quarter XXXX our and

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

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

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

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

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

Filip Gydé

then acquisition joining completed today. spend few progress of a Thank end strategy against the you, morning, to highlight like quarter. we Craig, I minutes would appreciate the good the We and us and at the everyone. on you our

a to and the continue strategy our digital solid even business against third validate with to evolve results effectiveness headwinds. expansion margin Our solutions revenue of services quarter into

while expanded mix demonstrates XXX reducing XX.X% year-over-year margin solutions to a of strategy advancement basis sequentially. higher-level improvement of the was to business. lower-margin This up to noncore basis drive digital XX points points our Our exposure our and gross

inflationary with Our in recorded EBITDA margin a points American Services gross highlighting a combined IT basis income margin million our XX.X%, $X.X XX North of Solutions and and segment Europe We for pressures. also investments adjusted the X.X%. ongoing non-GAAP net operating margin our and From to expanded XXX was basis and increased X.X% improvement $X.X company. points despite perspective, a solutions to continued segment a to further digital transformation million

of business have disengaging our We as strengthening Services we been Non-Strategic segment have first. consistently also margin lowest the seen margins a Technology from

another constraints, labor growth within During impeded in million quarter, competitive, we been by and segment. revenue particularly from $X.X that of The Europe. overall disengaged the environment labor remains has our

delivery combat to challenge expanding capacity. our center's this expect by We offshore

look acquisition, we India Colombia we we a Eleviant recent our privately was in owned had which While both our centers, delivery to have our on transformation and announced in Eleviant, Dallas, leveraging company success headquartered headcount Texas. some increasing forward XX. digital September

cash small was was funded $XX.X million center largely part Coimbatore, by was transaction global clients' the offerings behind purchase rationale strengthened equity AI, our as with capacity by the enjoyed increase alignment services history, mobile such XX-year our and result, retention rates. that quite The competitive and our and technologies the they with flexibility deliver complement in in delivery intelligent in acquisition addition our cloud migration, was of other digital leveraging as business India. and SaaS high transformation development The expectations, solutions established and reputation our its expand results. and This client a and the application blockchain teams existing a and to respective exceeding accelerating they for During built visions commitment have digital driven the emerging as many of Chennai platforms have strong and of best-in-class and learning our machine meaningful price of automation, component. capabilities technologies in

meet we to specific advantages of ability is to and the that is annual our even outlook speaking, its a approximately profile to confident future the accretive our challenges $XX our look to But in team We and We accelerate focus welcome value to to EBITDA to and will it given to the John revenue strategic CTG clients. Eleviant client's expected integration there greater review stronger together, on a that, Our strong remain incremental million, global our to John? soften, With expected objectives. has speak entire drive and developing detail. cultural our continuing our navigate our for underlying margin uncertainties. let by more recognize in over forward add these and synergies results continued John sales is immediately guidance. Eleviant margins. to to to and combined and are to our bright efforts long-term turn earnings deliver ability generally profile me pressures the family.

John Laubacker

was changes exchange related Thank good you, morning, from nonstrategic business lower-margin million the on which you disengagement revenue unfavorable to joining today's revenue Thank the third Filip for million, in to reflected us in $XX $X.X quarter Consolidated $X.X an everyone. call. foreign again and and due impact rates. currency million to a decrease

offset and opportunities. has in our labor constant the currency discussed. of of on with year Strong helped segment, a business core largely climate, items, constraints, a Services X challenges was America IT pipeline are Solutions some around segment revenue revenue of approximately result and Europe period. Filip which was X%, about quarter. of the down From In relatively basis, prior in compared the these perspective, the X%. revenue was down Excluding there's fourth North America execution macroeconomic quarter the to as XXXX Also flat slowed has in Overall, and part the Services. the year's decision-making project was in to Solutions present third process that ramp-up last world, was change completed a clients' solid, North been steady a significant particularly contributing IT the of for that that our

currently pool looking global our resource to delivery capacity improved to that are brings leverage Eleviant with the centers. our offshore We

as the continue XXX a our margin XXX points quarter margin quarter period. X-year third As and over mix. improved basis we basis up optimize highlighted year's gross we today, XX.X%, higher points over Consolidated was last our during to profile revenue

Services, IT America For and pressures. and points about basis solid expanded gross mix the gross the a of Europe's given margin solutions. points, margin given Solutions labor improved inflationary result North revenue XX the XXX lower was down basis digital despite

of points, we in compared last was of XX.X% disengage as the a $X.XX Of loss a While was million declined EPS, GAAP $XXX,XXX expense costs, quarter of in which We projects million, the leverage. in margin Services, the up acquisition-related seen margins. excludes foreign steady the share rate $X.X or of to X% excluding again, $XX previously Non-Strategic $X.XX basis note, percentage of though taken income a SG&A revenue, per Non-GAAP net elevated a Technology with to lowest $X improvement basis tax expenses, $X.XX in at recorded the to reversal deductions was margin, quarter. XXX which year the has largely due due that diluted quarter. of margin flat increased income acquisition-related XX million in with segment the Non-GAAP effective jurisdiction. points. for from operating in million or ago operating continue the to X%, operating was year. revenue an of operating $X.X was X%

compares Lastly, This to the XX% was CTG's approximately our headcount basis adjusted of quarter during with which prior which at year quarter, also up of EBITDA margin points. billable. was end billable the improved in X,XXX, the total period. XXX the X.X% was XX%

and million for of cash flow. from $X.X flexible total and still $XX.X at to operations the future. a that maintain strong $XX.X to and end. There of our our during million, continue quarter in debt can Turning a year $XX.X Cash equivalents Eleviant. be million. usage We acquire were pace XXXX, balance leveraged reflecting is the sheet accelerate cash to million sheet quarter down We at balance from generated the of year-to-date cash end to no growth cash outstanding strong

from $X.XX result XXXX $XX impacts from the lowest business to million disengagement range in For our are our a of in America $X.X operating in to $XXX our the prior expected fourth a to to a project to large compared currency in add year $XXX revenue from million foreign challenging reduction XXXX approximately the line adjusting which $X.XX per from million, with margin our the and as the revenue quarter. the of the outlook, over expect our the North business per Non-Strategic macroeconomic headwinds, we prior Despite the reflects million decrease of $XX given earnings Services is exchange reduction fourth share earnings to intentional diluted improve the and $X.XX. Technology ongoing last GAAP diluted a our range year mix. significant to quarter year, million we expect range in year $X.XX margin positive completion in top segment. to segment. due to for now non-GAAP from for to Eleviant changes expected share approximately We

we adjusted to That further remains X% completes have of Operator, and open to our we to the drive we EBITDA we unchanged by continue questions? approximately you remarks. call could As plan, the margins execute believe please unleash, power our our for our XXXX. goal earnings as long-range prepared end

Operator

Kevin from first & [Operator Liu Instructions] Liu question is Our K. Company. with

Kevin Liu

that add OpEx the on How kind and in Eleviant. And the expect of end the acquisition margin questions gross did some number? basis? with of starting terms we an you just would how on headcount of annualized then much Maybe think about should quarter incremental

Filip Gydé

software Kevin, delivery them, India. vast in majority, Well in employees. of most obviously, engineers, is are the XXX the headcount centers and around X And are the

the significantly margin their the even higher Services to As States. margin, than and IT that's our one than Solutions in gross

XX%, financial anything about profile. add very John, a strong would So we're on talking to above like we you and that? see

John Laubacker

our we you been our Filip. Kevin, really, expense, past the with well asked above The margins operating was about, That be where Not will Solutions have in business. even also perfect. operating

really So profitable nice and business.

Kevin Liu

Solutions to Obviously, there North quarter-to-quarter. the a hear. to revenues then segment just bit. see relatively impressive on expansion great IT gross margin on focusing flattish for That's the And American was

saw if little moving current wondering kind you talk forward? mix in margins sustainable this about are environment we Just of whether bit of getting QX in a you're there the type the work of and could

Filip Gydé

sentence the didn't understand repeat I you've that? said. very Could last you

Kevin Liu

America North to if going the wondering segment saw sustainable gross in XX% we margin for be that is QX, going Just forward? the

Filip Gydé

Thanks. Okay.

that's business about see been America make about question your as good onshore. at opportunities comparisons that the a the in we mix XX% We significant is had quarter the last going projects of second most really year you in So But level business between primarily course, half on moment the margin, digital of margins. difficult. good specified and of in to know is fourth see pipeline, this And the years delivered by in North strong it's pipeline. of we the

we know, you we and capabilities still As in business sorry. of America most them Hyderabad, North onshore, have had before little already offshore the was bit a in India. Eleviant -- offshore But in Colombia

cost America higher. and that North in and system, So the between the of to delivery is is margins means the Eleviant and believe aiming able their XX% with difference create with that We're that leverage Eleviant India we not the end. that

Kevin Liu

Great. pricing talk increase do margins just move to in up? that maybe Europe at And new about to labor could up wrap you've all any segment. your you this I win Can business could or kind improvement some as margin seen constraints there about? And actions , quarter-over-quarter on push how IT about that Solutions from forward potentially here, talked have you with you then the questions through then if ability we of the either feel continuing

Filip Gydé

remain X And how areas, see we it areas is other the are the difficult still battle fill still it's set ways. so still. still that, -- mostly And but stringent, that a level, in grow, we this areas we space. Kevin, Sure. skill constraints ways, combating less we about want the and demand Quarter-over-quarter, situation to on, at the to X digital so to it's we client that want becoming very how focus same the hard labor in in in

will And that the at acquisition, if margins. forward definitely looking offshore If And our to component, we're profitability. deliver First, is we cost the our that go mix moving impact acquired America. platforms back also are number second, and again you positioned with acquisition. way, Eleviant automate and that's lower direction, in a those Europe, of higher to in best-in-class Services. that North existing in only well of to very that's that And parts SaaS our the some Europe Solutions by and not

vBot with existing assignments, projects at that vChat, platforms or in increasing of existing margins. part V-suite look and can we automating their X So work their of and

we towards moving areas. still digital the Solutions is have So main the Europe business of those model the profit driver in X improvement. legacy are Obviously,

Operator

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

Marc Riddick

could that if of to elevated wanted rate. couple mentioned. wondering release little I far that as tax be quarter could on also the that your on. of part to It there start expect So press little we elevated being is a fourth should touch to rate touch on things that as a was that expected was and you in tax in Maybe a bit was you I as and But bit whether the the -- well? guidance the

Filip Gydé

that? like comment to John, you on would

John Laubacker

that on just XX% to Filip. the the Thanks, really -- had over previously Sure. deductions taken. in revisions rate due Marc, relative quarter, it was the some we to tax

a the But authorities quarter. very look conservative a that where done, audits audit the was folks to that take going got some always There that disallowed face things tax around a were company approach and there across a multi-year were to raised in you're prior the rate was years. -- worldwide. some So situation do we've and

goes expect that to to in change, unless higher hanging out quarter. pervasively bit the be It XX%, to might from was I don't XX%, XX% around don't think but QX, in rates little a it I where So statutory of course. XX% continue it

Marc Riddick

Got you.

winding to interesting, done but Non-Strategic. been moving an one down And the -- I I increase Okay, that actually on But to see, it the increase on certainly, margins was, has things Non-Strategic. get that mean the far margins an wanted -- just covered. the you've also better in that in was down you've then to than we so maybe well, kind working and wind we that led of guess, I year-over-year, would of thought

and might revisit that maybe talk about overall has you we off next that picture, is rolls or of sort how that, year? -- in how little should a that So maybe can business bit about some there that you there then and think reduction

Filip Gydé

it's away business Yes, first. very the Marc. Sure, we obvious moving lowest are from margin that

the of we our the then go are want remaining to that's it which first another in if Solutions. to the of to the to talk Non-Strategic part there's the and services, way average going having significantly we're lowest. whole with higher of not of business where And then the We're increasing. to move can at same a get the contracts. renew of margins only see and renew out not, so And at the So list remaining area or if we're clients obviously, if can looking -- focus provide Non-Strategic resulted margin, far margin has we

the our acceptable always this part talk business at find our that we look revisit? and have client profitability we the with us. go So it of might to to policy and ways increase is more It's to make value there and to added

value the the think direction how the But business positioned move all want yes. same right business, then to as that that from, able at with us, away is them we sees now, in the client the on. we're being if look working this for to change we're except parameters I in it if So thinking we

last than next little year the disengaging our to of This plan is a of same business. year. more kind For rates is the at year, continue Marc,

Maybe, I somewhere on looking you think at for expand that? X next in John, the year, numbers. between we're could

John Laubacker

year were a over year, XXXX, of million it's $XX low at from. little bit which $XX we disengaged And we Sure, million. about last in this

$XX going our years averaged run rate sort over that's forward. think of million the have we and So of couple last that

the back from. think bit into down in as we far disengage as mid-XXs we'll what So but 'XX, gravitate higher little a

Marc Riddick

that, maybe little today more though as to well kind of as today Okay, of great. X because the leads talk make acquisition next that seems progress I from reaching that. maybe just reasonable be than some far bit continued attainable 'XX. seeing the seems dynamics to you the a as that the comfort But as in confidence you're making And the X well. attaining as overall as between was view about Non-Strategic, the as it share as that me touch by and X% would goal from more level you ago. or goal outside end the wondering could it if maybe you can goal on pricing you're be in that EBITDA disengagement Does it looking adjusted seems of to sort maybe your And that as maybe on that -- there margin of into though part of months and far sense? can thoughts as

Filip Gydé

moving we're direction on all trying right Well, to that the Sure. elements in of we're the influence.

in right is we're solutions, on business, because focusing that getting higher partnerships, growth grow company the help all, margin. to to margin of First the marketing, going business drive or in us the organic digital talent that sales, increase higher value, investing to digital the

margin reducing technology. our exposure we're to lower Second, Non-Strategic

lowering with on step we're delivery that Third, make through And started, progress leveraging Eleviant well grow the expand to we costs that going delivery And we're prudent to acquisitions a allocation forward, significant on disciplined and approach, focus for business. that. capital Eleviant significant our investments digital our still centers. focusing solutions But looking then we're offshore continue. our lastly, of the additional using again, and on our but is

on levers increase that So have all us progress that X margin, it. we of help the significant made

we're end that's of goal 'XX. to confident for So that why maintain

Marc Riddick

from -- to color. from Okay. touched some just all customer the key you're industry fairly and you dynamics the wanted your me, seeing maybe certainly a you all of sort -- certainly areas. last And broad. base I little on one And the about of then is appreciate bit feedback and talk that I demand

any bit callouts seeing of touch little maybe you for And be might and given helpful pressures if recessionary like, customers a maybe what that can on from so are the and your concerns you're there global us? sort

Filip Gydé

we discussions difficult very in in Sure. Europe, is going the government, shrinking. that And European others both the The It's a only is all we seeing in simple and our and isn't sectors. the as Marc, are is of as governments. the the definitely. that only that but still national everybody much causes we There strong governments inflation almost effect discussions industry and healthy, had same the global It's pause affected environment the All that answer, economic to not the industry kind It's rethink said. detailed, priorities. pipeline more States. are slower that on that priorities same is the focus are absolute top and the

So than at problem States. slowing we moment. States, in Europe more that's global the things labor-constrained looking this yes, -- as have at In in the Europe, a not inflation But of case is the everywhere. down the

Operator

questions this closing like further any time. to I'd turn for back no There the over are management at comments. to floor

Filip Gydé

closing, Paul. CTG's solutions another Thanks, In digital execution of marks continued the strategy. on progress quarter third quarter and

realizing as improvements continue expect for we shareholders. with participating CTG margins. work we of Thank this teleconference We in commitment to for operating the the you to long-term Eleviant, value same building in acquisition our company's the goals and And are today. towards our ongoing all

the at quarter hope great day. call. free XXXX to our fourth As forward have and now out Paul, always, to time, feel to you talking results. with any We again all you disconnect look after may please a you of reach we us

Operator

conference. concludes This today's

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

Computer Task (CTG) 12 Nov 222022 Q3 Earnings call transcript