CTG Computer Task

Jim Culligan Director of IR
Bud Crumlish President & CEO
John Laubacker SVP &CFO
Mark Jordan Noble Capital Markets
Vincent Colicchio Barrington Research
Kevin Liu B. Riley & Company
Call transcript
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Ladies and gentlemen, thank you for standing by. And welcome to the CTG Third Quarter 2017 Conference Call.

Now at this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions].

call Investor recorded Relations, today’s speaker, your reminder, of Director CTG, a is and being hosting As Jim Culligan. sir. ahead go Please

Jim Culligan

Thank Officer. Crumlish, morning, today’s good Laubacker, Senior Executive you, me and John Kevin, on Chief President today Financial Officer everyone. and call President CTG’s With Bud Vice and Chief are and

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

his factors made the as this concerning filings will information release as call that well the GAAP financial both to to the actual measures statements turn results statement management’s measures and our are press release, include conference in results Also, It’s SEC. certain forward-looking remarks. pleasure my Additional and call contained X-K. with in discussions information. from opening earnings cause those company’s now press of reconciliation the Company’s of could the adjusted to release during differ and in financial is to today’s are non-GAAP These for Bud non-GAAP a provided related over Form

Bud Crumlish

our with morning, third on a of overview I’ll good call. everyone begin and Jim to Thanks, quarter financial results. brief the

larger to quarter $XX clients. release, million, press today’s our was million soft our to $XX in was the million due guidance three at which range demand announced revenue for staffing below previously the of $XX As

primarily the instead CTG, to midpoint and in incremental impacting dynamics earnings of offset of This well share. the decrease negatively at new challenges plan at our claims. critical revenue We Despite than quarter unique These believe our secured to approximately our associated medical our met above the each illness expectations unexpected high accounts the objectives, costs, earnings unusually incur see and a insured per these don’t a more operations announced increased we to in headcount quarter these well make of If are the business progress our as new self in our initiatives for were demand with significant these continue X.X% the Europe, it of largest would client reduction but early clients expenses year-over-year. specific these $X.XX due by historical from the averages three have unanticipated looking our these were combined to and of with issuance as grew during accounts. continue we requisitions. we a We our support excluding to in strategic incurred on Also, of and fact when $X.XX. developments from the continue at during quarter business didn’t U.S. growth costs increase we ramp of in newly contribution softness

revenue to And the from we in growth. our supported of by both from and business Additionally, team consecutive seventh a CTG’s favourable across quarter year-over-year efforts currency representing strengthen XX% sales size continue impact aggressively the Europe organization. new grew to excluding work effectiveness

particularly sales endmarkets and well are a within geographies capability expanding has healthcare CTG in where staffing established our on We focussed actively presence. and already

and we conference the signed in position. increasing commitment leading by individual of this of executive subsequently additions last Unfortunately, time this a date letter of had in still fill our a teams our year role to on teams employer. healthcare and both sales are the and on we promising the role filling coming internal decided America. introduced the size our the overseeing our stages North from At the process have We end. I I announce and our to efforts call to candidate sales call planned search hired. update and an further been sales appointment staffing goals with you an leadership this for current of last the and early look quarter save their that to We once making has reinitiated provide start individual publicly our now newly months responsibility I’ll created the forward will in position include sales

relatively weakness by diversified more these that respective to at healthy of with of continue as environment a previously XX% I’ll in specific clients We business our areas In remained commentary strength staffing total X.X% to appears healthcare broader three specific address headwinds of the Now, believe ongoing that which related favourable. focus developments followed are largest due the approximately staffing roughly relationships revenue, I and mentioned. and confident was solution industrials. Europe, in accounts sequentially businesses and and down macro staffing our our to these client our we represented

recently existing with pleased two-year staffing client. largest our December service that XX, extension technical through signed However, XXXX contract we am announce I to a and our

a annual As has of point an historically million. reference, contract revenue in of this excess $XX represented

term. believe the This a also that higher significant end represents new in Recently, system making secured with XXXX. as potential a market business started will it clients opportunities that pipeline meaningful business. a initiatives business staffing public into begin has we a we progress Beyond convert have new expansion a contributor we we these revenue are expansion brought business new can a tangible win that to large a and large over on in university long become substantial

potential existing opportunity example transitioning of a into had a quarter North five we IT incremental secured that am work future, evidence to an our report footprint. highlighted of group represents another that the we last in global that in initial is actively to incremental and win group in America client significant, progress, to staffing are grow further a anticipate This top our individuals services expand transitioning management that we As of larger we significantly pleased client. and believe I has second an XXXX.

which business, we even revenue show sequentially and solutions include offerings testing contributions modestly development management, accounted new to and early the of are as desk, continues and CTG’s business service optimization the to XX% year-over-year. from of both stabilization execution. for of implementation seeking total were solution as signs core and Legacy down revenue in Turning we stages ramping. application, well IT

strategic margin healthcare solutions considerable this May offerings. services, to as have as in of of of number as an we formally industrials. term the year within higher and Since interest its revenue financial the solution advantage longer increasing percentage business increase diversified seen expansion client engagements Our within revenue application and announcing through a is contribution objective well total CTG’s of progress

we service perspective our As needs. understand new to clients maximize with to efficiency clients and work able evolving better cost, lower are we

respond enterprise with solutions CTG steady global we then new solution is collaboration wide systematically Underlying can team of and development solutions. traction incurred application increase early the Our program. this through launch One that in CTG’s for advantage our

oriented program our solutions, our reshape our cultivate believe to In staffing addition and I establishing framework enterprise. cross more selling truly and culture is helping sales CTG a for One both the across to

CTG clients, we also value increases of total further while our to the providing provide this benefits and greater the Importantly, utilization. reach

translation. Starting $XX areas and highlights approximately Europe and our million both our well This the XX% in three increase a quarter have to Europe, or industrials. and XX% of which updates Luxemburg grew and the new includes a a at clients. provide representing as each of few the favourable U.K. was Now Belgium client base the countries of seventh consecutive from achieved excluding Europe, Healthcare business through revenue diversified and on in year-over-year focus across we of solutions which growing incremental year-over-year with growth of and existing I’ll stable staffing Collectively, growth an and as of currency Europe of combination benefit business was

As we markets. services due and in aggregator meaningful result, in during strong demand our to quarter, technology a growth financial the infact billable headcount experienced

leveraging of key markets. leadership Europe geographies verticals market execute targeting on Our CTG’s seasoned in in strategy position sales team while our incremental adjacent market in opportunities to share continues capturing new by well simultaneously and

new During sizeable gear in example three an to converted the opportunities wins, quarter, of notable contract Luxembourg. we which a a is and advantage application of number account

the ERM Belgium. solutions ninth in secured team implementation Additionally, our health

mentioned historically secured As have implementations before, the in we these in typically smaller Europe those and engagements U.S. are

the However, opportunity compared these include many to support five is we of experienced which of years U.S. have the implementations provide completion three work in to what and between favourable upon

value new did will me over of will but quarter drivers Europe the to that ramp wins multiple in the of growth. Similar months incremental of during full years. series the the new contracts, in and future is growth these cases, many this not contribute Let contract emphasize third be business realized over most to

in for continued we As healthy new prospects business reflected Europe growth. feel pipeline by our remains in results our confident the about and

response he of expanding development healthcare, top sales Now years oversees approach enhancing our experience also business towards to business Barras our in our year we will healthcare the positioning to executive our Veteran, a were further and of and sales CTG’s appointment refining on return needs. announce pleased this the actions clients be healthcare to prior our a team sales area sales role and execution turnaround end We our organization. steps of key effectiveness invaluable of in existing and the to Rob the turning CTG to market and team. of healthcare for renewed strategic organization. planning North as healthcare Consistent the the delivery his the already team a focussed efforts growth. drive Among of a more member the the offerings strategic current take also strategy continue strong have be as XX of are on will while of meaningful sales President IT Rob U.S. demand while of in objectives Vice with this Rob’s focussed and and the we priorities, growth, America by

Following better am the positioned to capitalize the CTG actions industry. we date opportunity to a have increasingly that with be combined leadership, I market healthcare within Rob’s will substantial on confident taken

clients a continued area have a these Significant municipalities consulting is our This our and solutions Despite progress team beverage for reduce is engineering at oil on constant has where business challenging that technology focuses and clients industrials They on focus looked skilled engineers. meaningful have CTG food diversified related large for unique state pressures number and by of our by budget our cost. of delivered the demonstrate portion offering of dynamics, clients headwind oil strategic engagements budget of help in and architects to for concentrated. business solutions third and been higher logistics, Alaska and team a solution diversified Our gas, software industrials. construction.

with Alaska IT in secured one example, recently agreement with a a municipality diverse we’ve set service a of As masters’ notable services.

support of proven proactively larger demonstrated our to to One key consulting is across a XD solutions mission such of agreements and pursue we actively these technical and organization high new efforts, leverage strategic management. our business [ph] platform. opportunities working value area expand more and of by partnering its of participating complementary and for business to our providers this in process are team with a capabilities as In facilities virtualization within broadly

business the grows I new team to value our demonstrating CTGs seen be by and expand clients these disappointed new results, recurring have offerings. execution unexpected staffing am largest while in the accomplished. we increase our solutions that geographies these of focussed pipeline were at pipeline of initiative, opportunities headwinds encouraged and that further the very our strongest financial targeted cost the impact in one strategic we our of business evidence and expect what In successful the the tangible support high had conclusion, by medical continues for company’s our has to history. the and for we scope of recent efforts on We're growth As

increasingly we better earlier in more to through growth consolidated our strategic As implemented year. a series positioned and this remain a diversified we are execution of revenue stream a resilient plan drive result, on

guidance. over actions we increased remain ultimately the to term growth, our and up for review for profitability collectively we that that With a offset have our John result more this detailed I’ll financial turn Although and it achievement call in future that, targets. will confident of new time weakness, and secured results take the will the our to of business long ramp

John Laubacker

Thank everyone, you, call. on we you us conference today’s Bud. appreciate joining morning Good

with As $XX.X news release third was the the morning's second and in $XX.X of compared $XX the revenue we third million this in indicated in quarter of XXXX million in quarter million XXXX. quarter

and the third had from quarter due XXXX of staffing third year-over-year business $XXX,XXX as $XX.X a accounts. X.X% in largest third Third currency and year in billing same the compared in sequentially quarter from from buying in representing quarter to the solutions number days included our million translation. quarter. was ago revenue primarily quarter, revenue sequentially benefit the Revenue We quarter. the X.X% XX ago year declined X% to reduced decline our X.X% the Staffing

million of second revenue total from of clients, revenue XX.X% in was Lenovo XX% $X.X million largest of with $X.X X.X% XX.X% year's year-over-year. Revenue total revenue second in or quarter Revenue total three total $XX.X third or or in our was the $X.X the compared of in quarter the revenue the in the of or quarter quarter Excluding million XX.X% $XX quarter compared of the in XX.X% total from third of or XX.X% last million or with $XX.X XXXX. third XXXX quarter. million and third million IBM and increased revenue in XXXX quarter

third of quarter mentioned caps historical in would higher On plan. the plan. XXXX. available higher historical the which income costs to and $XX,XXX net per quarter the medical primarily XX% were illness of quarters. to were increase costs diluted and $XXX,XXX. our share, to per $X.XX quarter per Based non-GAAP per income Non-GAAP net total quarter increased expenses third I the million, XX% included was net and any with or believe $XXX higher in charge and utilization X,XXX normal also the third share. quarter third carries this of $X.XX more due associated significant coming in medical per that than the the $X.XX do the $X approximately in unusually a the than a with overall was income $XXX,XXX above second XXXX or like individual share basis, X,XXX of the billable second XXXX quarter of share the As diluted medical in self-insured quarter CTG well employee on that incurred third of or a GAAP end XXXX higher after-tax approximately of at non-GAAP company’s in that compared costs share, quarter claims high unexpected of a per CTG XXXX second our excluding in point of information $XXX,XXX Bud employees $X.XX or critical quarter represent quarter XXXX. anticipate diluted the new not medical of averages of previous compared income costs at today, the with quarter to insurance was the more our during These X,XXX out resources XXXX return in than the of averages with end CTG’s and XX% third end these exposure for headcount XXXX, and at third were the we and claim the of approximately consistent net levels.

employees $XX.X no value outstanding million life Turning surrender debt quarter were of to at sheet, quarter insurance CTG against cash was end of end agreement. at we investments a policies and to long-term and of is policies the third quarter. balance the the The on million $XX.X former short-term on at up end. our revolving $X.X of borrow the these cash terms had XX million able credit to the

our estimate Buffalo single single a a operating approximately combining $X.XX We that annual could share. building here our in building We by have continue goal to based a into Buffalo. per employees into of expenses consolidating reduce

of share quarter pursue $XX value three book As increase was also the book $X.X a at CTG’s such highlight per end. the million office end which storey bringing CTG’s we net $X.XX million $XX sell of of continue to to recently want a authorization at authorization building had by the our value share. total board the million. the quarter to repurchase I third tangible

company repurchased for approximately an During per the shares share average price third quarter cost of of the $X.X XXXX $X.XX at million. total XXX,XXX of

repurchase available As authorization. the of under $XX.X we million approximately expanded had yesterday

basis Turning between million. margin revenue $XX fourth million operating be to be XXXX to X.X%. the in Fourth $XX of expected a anticipate range in our GAAP total we is the to quarter on and between X.X% quarter and guidance,

for share. anticipate In is to expected fourth expect in per to approximately which and the additional per We year operating expected $X.XX of rate XX%. full share $XXX.X be non-GAAP margin expected and be year to be fourth costs fourth and to tax $X.XX net $X.XX $.XX charge XX per GAAP quarter is for the between the XXXX operating $X.XX per addition, between X.X% billing $X.XX XXXX second is income revenue the income be are net the $XXX.X between and charge medical share. quarter Full severance is related while to XXXX. approximately be excludes between XXXX between costs range be margin X.X%, There GAAP year to quarter is we Non-GAAP income diluted days expected quarter X.X%. million the in for for a expected $X.XX $X.XX and GAAP be range per Effective and and net to in share share. million. the both

we for full the manage Despite we’ll for in the realized that, during Thank effective XX%. we With questions. a ongoing open growth Finally, can session. unexpected challenges please be question-and-answer as Operator, and increase well-positioned are staffing expect soft XXXX. in guidance clients the approximately call the revenue to tax increase we short-term third revise quarter. year you full now demand believe to profitability deliver well the the A as fourth reflects XXXX larger our medical at quarter year costs the rate you.


you. Instructions]. [Operator Thank

Please Markets. ahead. Capital Jordan of go is question First Noble from line the Mark of

Mark Jordan

final your expectations growth break three that that you of being you of of growth Do in more Good down largest Could a or around a it somewhat towards morning, what – significant maturation largest a are allows customers? as about just to that you statement positioned your from the to customers? for the your of see XXXX. business of moving stabilization gentlemen. get state chance your My question wrapped outside process development function growth

Bud Crumlish

certainly out, about start future hoping three incremental is in us we’re as to this we’re to Well, I business, Bud. but for as mean, optimistic Actually to it’s see the even far that. go, tell, clients difficult

after sales And opportunities. on those pursuing that’s as drive adding sales our having level the with where higher more focused go team gain so at we’re markets, we’re really margin to as business teams mid-market well those

Mark Jordan

Question longer All more is right. term.

you again, by that? I mean, it growing start model operating for goal is what take achieve longer-term to your As reasonable a what is company? business what you that would do And margin think this

John Laubacker

is cute This Laubacker. Mark. John Hey, thoughts. Really

plan $XXX -- our margin revenue million year of us by earlier So we that to long-term and of the this approach put out XXXX, a X.X%. end got X% of has in

and try say, So continues goal to be long-term that and X% to that. reach [ph] our really

indicated, Bud the our on As are just focused efforts efforts, our business sales really middle-market. sales development

achieving part that relationships we expand have opportunities volume today we part are largest So, that of have. where are to from achieving and to that growing of than that is business business, little better where the increase clients. largest our of revenue outside growth margin having the margins that

Mark Jordan

much. Thank Okay. very you

John Laubacker

Thank you.


ahead. Colicchio, next of from Our the is Please question Barrington Vincent line go Research.

Vincent Colicchio

be to sure. Just to

closed, largely showing So is business the new midsize success the market focus? that you’ve

Bud Crumlish

takes we’ve some contracts well sign This is can up, a clients well. as certainly of Its imagine as not but is those its midsize Actually and it’s the to time ramp that there executed Bud. of just of and as a some contracts, as midsize, it larger combination really all. combination you

Vincent Colicchio

you’d mentioned Bud, thought services that. be. you IT repeat that? I could Could contract it the the missed size -- And then

Bud Crumlish

from excess was, our we’ve $XX services annually. That IT million historically yes, in of contract revenue Yes. had

Vincent Colicchio

or margin does be that average that expect then how And should Okay. higher we to look? on than

Bud Crumlish

Well, business volume, that’s have. the the of can there doing staffing in you power especially general imagine volume kind with buying that as is clients

lower more So on typically that’s the end.

Vincent Colicchio

the that they I Any about the to previous confidence ask, really would the need comments I management, side, ship fruit the bear just on bear sales force. expanding on be talking do this what you previously [ph] would then fruit. And Okay. helpful? point? in-charge at gives healthcare and that a that know you’re

Bud Crumlish

but got think there the I at what a of the think only matter going Rob after the lot on And are Barras offer that’s we plus. a organization; take healthcare a trained think of the force specifically and different institutions, sales areas certain I and not people that It’s payers. big relationships the I from a focused, lot hospitals and having have that’s the joining think with of I we’re to market.

of different a really it And the to now coordination assignment of five, was years get we think a to technical of be not more and get engagement, put ago everything to focused to it effort close know, that as six it’s that they our that wasn't to a have it, it to on You a really we get of efforts a – sale into more more to meaning we’re actually get difficult was get I type actually environment, going all that, and the resources hunt people. business. – challenge with

to going focus make and the I leadership after difference. of go We’re that’s going Rob, offering think with to it specific

Vincent Colicchio

we're is of And looking back on burner? as acquisition far tuck-ins? the Or a that side out anything sort is as there

John Laubacker

John. is this Vince, Hey,

that something we aren’t it forward. as something looking perspective, we add can find that We’re if we makes definitely from into those a talent regularly would today consider skills expand a skill opportunities into we size and our as perspective, that far an will moving both the at area maybe organization from sense bring that set,

Vincent Colicchio

guys. Thanks

John Laubacker

Thanks Vince.


Our from Company. Riley of is B. Kevin & ahead. go question Please the next Liu, line

Kevin Liu

morning. good Hi,

John Laubacker

Good morning, Kevin.

Kevin Liu

before just those Top level could And get this occur customers of whether take Or your XXXX? you the that talked repeat that more the sort about all of this could company. potential wins some five What of to within kind revenues they those your if couple side of You a longer-term does levels? of new on have is staffing to entail?

Bud Crumlish

good portion in of them be say, initiating wins new We the of were some XXXX. that that a I certainly now. would just would Well,

continued up starting XXXX it’s that things But continue going time. increase. ramp. But going a I’ll to on are to see to but its take then in relatively and certainly and and could even going some So happen XXXX now do time we see certainly to take further out it in then to ramp we’re quickly that, definitely just

John Laubacker

To this Five Top John. be client, annual a million revenue. is of or so be Kevin, $XX you’d north in

Kevin Liu

any like XXXX, And then, there sounds still by of that confident achieving big a a but some you risk margin of the numbers? towards given in customers. that the of those what getting you helpful. in largest just That’s would in shift fairly help order maybe And of you end Is it side goals? see towards you’re have kind goals you’re terms seeing your with mix substantial envision the to solutions drive

Bud Crumlish

about I’ll Well, the -- solution the solution first. certainly talk

things growing and those I business only business we ones that to And put our of be more effect. letter bottomline, absolutely confident solutions topline, will early shareholders of able our not have with to a but We’re in our this I’m our it the accounts, our in of terms help optimistic, certainly number mean, out hit I’m our that in dramatic that targets, place. will a we really is year have will

on long a of mentioned we the I of as long, in the – time. pipeline call largest have opportunity have we We that backlog seen

those. on We’re executing

people. sales accountable being our adding We’re and diligent moving holding forward. people We’ve

there. still we I that put feel that will those confident So out targets we achieve

Kevin Liu

item. housekeeping one just And Great.

of was and split talked pretax of that number expenses. SG&A? the revenues the of about of does how kind the and some after-tax out impacts between medical you think your I What cost

John Laubacker

I’m questions. Kevin, repeat sure could not I you followed all that of that.

Kevin Liu

anticipated, that out revenues the line? in of medical Just of that in SG&A was what pretax either were the does between cost how that terms expenses split what or you number, excess

John Laubacker

thank $X.X pretax into and Apologize, of into direct cost that. quarter total repeating which you we SG&A. during Yes. was was went it $X XXX,XXX -- in million additional for went that It million booked

Kevin Liu

you. Great. Thank


you. have time. no And questions further at we All in this queue right. Thank

Bud Crumlish

Thank you, Kevin.

our execute CTG’s Before in ability like emphasize against I closing confidence up my call, to would strategic continued goal. to the

closed We I into on business that are with of focused the new out sales combination point of including success which the most third we deals tangible execution as prospects growing continues the that majority days from we teams have position we’ve early saw can importantly organization. of only for further meaningful the entirely last pipeline quarter. the are growth. those vast ramping, that in converting global expansion to control Most items demonstrate contracting our in the future XX in of the in evidence should stages CTG focused

much. early joining fourth the may and today. call year. continue year on you We today’s and full we to an align next as buyback look to forward stock I to our to that, update Kevin, with capital through take as continue of Additionally, With our our very you program. XXXX providing will us well interest progress shareholders steps on our return out quarter conclude call want thank you now disconnect call. for Thank


ladies and using That do while for you, joining conference. thank conclude AT&T We you Teleconference. your gentlemen. Thank does Executive

disconnect. now may You