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CTG Computer Task

Participants
Jim Culligan Director of IR
Bud Crumlish President and CEO
John Laubacker SVP and CFO
Vincent Colicchio Barrington Research
Call transcript
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Operator

Ladies and gentlemen thank you for standing by and welcome to the CTG First Quarter 2018 Financial Results Conference Call.

For the conference, all participants' line are in a listen-only mode. There will be an opportunity for your questions; instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded. I'll turn the conference now to Mr. Investor of Director Culligan, Relations. Jim sir. Please go ahead

Jim Culligan

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

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

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

Bud Crumlish

Jim Thanks to morning joining the and good on everyone us call.

a our events, a with brief as financial productive exciting as and recent Beginning company of our highly our news for for as by XXXX has recap evidenced out started results. As well CTG employees.

year-over-year almost and COMPANY. by Europe, continued contribution end The partial exceeded guidance including in of revenue SOFT year-over-year of range a strength improvement X% and the driven XX% grew $XX.X our our from in business primarily and sequential First existing quarter million. was high sequentially to revenue quarter

we integration acquisition, in the continue on largely improvements. as expectations additional the line COMPANY incremental to SOFT operational share incurring at client, well to was with and per the last Despite the achieved related our we guidance. the focused earnings driving the of which of our as with quarter, midpoint margin operating week near-term onboarding largest expenses quarter First at be our of associated cost of occurred staffing accelerated in resources

initial addition investment progress as as plan. increased In is we our to of and tangible past across the activity business. momentum an sales with growing financial traction actions business all over solid on to our we've CTG strategic our XX Increasing consistent demonstrated return results, our new taken the months. areas and reflects It well organization strengthen

execute will recent to both our realize and strategic meaningful contribution wins. continue against we ongoing further from plan, business new As we

the $XX and our is our expand ongoing quarter, our as outstanding CTG's Separately, integrating well announced tender we XX% the The week, earlier shareholder in potential provide capacity integration offer, additional in also commitment of future tender recent shares. the an completed extremely COMPANY, part and to this and additional the began business Board in purchases. this million approximately France; remain of well. process the of further SOFT purchase Europe. our going CTG's in we the as part of increase authorization and offer also value, business future recently The performing and of open we to market value for platform of share potential the confident acquired company's resulting effort During to expanded repurchase presence by previously existing complement also acquisition is

revenue, for few well healthcare, comments make of last strategic with our and have industrials. accounting reflected with staffing this consistent our a solutions result Now, as crosscurrents XX% the as and in Europe, Beginning I few diversified total quarters. of certain focus staffing, will provide specific our updates business on on business areas approximately

offset efforts in We on grew the three largest where mostly consolidated momentum our clients. first impressive business quarter, has an weakness dynamics largest few new our revenue, year-over-year. been ongoing by at a excluding similar our experienced staffing of Continued of clients, XX.X% staffing

win quarter. As we accelerated being portion by last this provider addition a for client. division were schedule morning's awarded asked newest of highlighted this business deliver our incremental a sole client for Specific recently headcount a on Note client to begin transitioning press new previous preferred to designated in provider a as selected the an release, to we as were provider. service from largest that at business long-standing in at new we to this highlighted CTG, this the to is

strategy first the of and the leveraging on key remains and has executed phase successfully the business, support areas team presence. early last of completed phase during staffing existing our the aggressive these we geographies in the on generally, within second this strong April, transitions market quarter. our More Our focused where of And ramp headcount CTG of of client. week

part to several As appointment America we secured build, our new and including of of lead the sales optimize organization, the North during the recently first Susan quarter, Efforts broader and in penetration Sales to clients. pipeline meaningful ongoing We our Tidswell refine saw our Staffing. announced efforts at improvement in February

increasing net both new and of of ramp us with Importantly, our our second will wins in quarter. existing beginning the growth business provides business staffing that combined contribute in our confidence the recent new clients progress to

The the growth we consecutive meaningful what first XX.X% pipeline quarter contributors of to for the revenue of as into approximately solutions key This quarter engagements our and X.X% revenue-generating offerings, and million and $XX.X of particularly and growth desk in sustainable increasing targets, our key a assurance Europe. solutions be as the grew solutions, or service new total convert we higher XX% solutions our to to trend, business percent solutions Notably, staffing. revenue. Turning as believe of our in COMPANY and business. objective margin with continue comprised well our the revenue. Luxembourg, continues versus sequentially one achieving to of business testing SOFT of quality traction business of a IT In and as application acquired support marks CTG's is longer-term financial core management the our to mix a organic total of in our beginning year-over-year and in of growing higher in quarter business both we are is second included Belgium

increased both solution and in new we receive our on solutions interest to positive expect we within a of and have primary towards cultivate mix such, clients. over growth contributor time. significant business an More As feedback existing solutions, broadly Europe to continued continued from Application Advantage be

our solutions actively of dedicated Advantage offering. to number build with to increasing our finalize an new offering capability engagements, next working team addition this In is pursuing the and to our Application global a in I for strategy, Consistent efficiency is solutions specifically meet clients out the value this form tangible next We of lower providing details more look offering a to return of needs providing to launch quarter. by on plan cost. midyear. and formally before forward And about to investment the solution designed

diversified turn Europe, to healthcare, and industrials. our Now, three areas focus of I'll

clients. sector again, was continued as particularly Our performed Demand ministries business, momentum services across our quarter. the European once financial the well strong demonstrating in as with well exceptionally European

offerings. testing multiple incremental Data team the General quarter, and our wins or the Protection for During secured GDPR services Regulation

EMR signed our in XXth Europe. also implementation We

are submitting large and seasoned number responses proposal institutions. of our Our in actively teams and grew opportunities Belgium substantially, a new of European pipeline Luxembourg with

towards As our understanding critical part clients. the the a completed have integration efforts SOFT is of with better of which initial we step first respected early team, needs alignment COMPANY, our collective of an sales

with with Value-based our another care medical application mid-year. begin refined over secured begin healthcare, following ranked center. in application with which area year year, of increased driving is complementary our demand increased a can engagements. and has We Tier suite university management being Highlighting a sales especially continue meaningful is to management, Barras expected are expected combination more highly recent IT from be well solutions scale evidence actions to capabilities single by strategy new Both that In service ramping benefit synergistic organization do for of an in providers is our system last outsourcing. highly a clear Since deliver expansive and we to platform of desk more business notable for demonstrate of and and our reposition excited will hospital services, expanded of to in implementation of to these is resulting as Europe Together, offerings. epic led partial hospital; X progress. QX. And healthcare significant One, engagements offerings. beginning in by to this a the this to end, reinvigorated Rob a clients. areas managed engagement the as our less, CTG these from implementation solutions, our effort with wins U.S.

to increasingly adapt with align industry prevailing care, continuing are our in value-based embraces the healthcare As directly we to strategy trend. this

During the the targeted launched the IT I success of initial first at Two a wins quarter, new sales campaign. mentioned, of this we securing three just specifically reflect engagements. outsourcing partial that campaign,

Our direct roll around team is year. now solutions, second care the in focused more the half to working out value-based of

healthcare continue coming As known traction well-established across our in delivery strong further leverage is of quarters, within and Health Solutions investments gain capability, number positioned for a will to our the which to recruiting sales CTG we in and be larger clients.

across the quarter oil Highlighting wins as also by finalized Our top-tier gas a the companies. the well economy half contracts Alaska, these robust for of largely service new contract energy industry performed to was energy diversified industrials the work multimillion and a continued as logistical economy. broader, struggle three-year beverage to business our during has we concentrated managed one industrials and as dollar, over for food well required is of world's solution unique dependent our client. more Today, compared where U.S. the largest diversified with in business multiple

to with secured of across signed three of business. In impressive staffing, skills on As architects unique geographies and to expand Health a In new delivered large Solutions, we industries are our U.S. we other secured a and new solutions. into quarter number in software working growth beginning consulting had Belgium. our increasingly significant Europe, solutions of of increasingly In the as financial implementation wins organic finalized Within of focused gaining outlined, and work XXth as evidence our are areas client. XXXX, leveraging well we conclusion, the adjacent the with into a we year, largest new, and engineers awarded high-value contracted as were growth is experience our of and contracts. result, converted industry multiple our at Diversified that our in business and financial Since new start have we I initiatives successfully projects we solid all opportunities results the including traction. strong institutions. strategy new another incremental pipeline EMR

the acquisition completed successfully highly the which we accelerate further expect synergistic also accretive growth and SOFT We to quarters. immediately CTG's COMPANY, in of coming

XXXX. declassify we've demonstrated months, our value share purchase two repurchase last and the the XX% the in proposed outstanding existing by maintained Board resulting offer, Board of our week, further tender to Directors; CTG's commitment shareholder also, expanded In CTG's Additionally, only representing million we authorization the X.X this of we shares, previously approximately million. in to completed shares. Earlier $XX announced company's of maximizing

on driving to the few Going of our quarters emphasize improvement investments forward. to plan. operational sales our remain We've made want growth will to continues a in number contracted of a that business. past and into anticipate executing of our continuing over significant forward, our organization pipeline strengthen fundamental robust that and strategic I convert plan we also new advance a efficiencies going strategic the be topline focus to part

financial guidance. will longer-term As to our they support contribute more a for growth, revenue of investments incremental targets. these in turn of goals produce increasingly leverage and detailed I'll first call past quarter our over earnings now review achieving and and operating the financial John to results

John Laubacker

you Good conference joining appreciate morning us everyone. on Bud. you call. We today's Thank

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

translation. for COMPANY. revenue million the $X.X and million we first which recorded related in the Revenue included a global XX requires to XXXX, First year with first due be the subcontractors. fourth XX to quarter quarter the representing in currency the in increase new on a Staffing sequentially primarily revenue days million, accounting to $XX.X quarter revenue recorded of and in SOFT quarter. an days quarter included X.X% were mid-quarter now days guidelines, of favorable in $X.X revenue a net a quarter recognition change basis from XX year-over-year, the XXXX gross compared also Billable basis the on of previously ago addition in XX.X% was

XX.X% and X.X% in the million sequentially was quarter quarter. first year Solutions revenue to $XX.X and ago increased of the XXXX compared

staffing from of Excluding the quarter $XX.X Revenue we revenue per first acquisition XX.X% or share income with in revenues COMPANY was XX.X% and or GAAP or $XX.X the excluding quarter fourth percentage quarter million total X.X% compared or expenses. compared $X XXXX $X.XX per compared X.X% total in fourth XX.X% from income last million fourth clients of net quarter XXXX fourth first in net $XXX,XXX of as were in referenced share, income in quarter and or or includes of Direct per share of XX.X% share. quarter quarter of million compared XXXX net total $XXX,XXX the or $XXX,XXX $XX.X XX.X% in year's per from $X.X with of IBM $X.X XXXX the with million revenue the X.X% the this XX.X% and diluted of releases, three large of ago fourth was first the total diluted or in first in net have from first was diluted of share. of of first quarter first the the Revenue XX.X% or the $X.XX revenue XXXX a in and was which million first SOFT revenue Non-GAAP quarter XXXX million in quarter. or year related per from XXXX in $XXX,XXX first XX.X% the revenue total quarter quarter quarter in Lenovo and XXXX. cost in of of XXXX. in quarter of quarter. increased the $X.XX income GAAP non-GAAP was diluted revenue in previous item revenue with the the $X.XX of $X.XX the

end calculate SOFT to CTG's how the previous subcontractors. approximately consultants, XXXX. and at revised order end end at we Following our which of first relies of define the employees the XX% levels. consistent quarter with the X,XXX headcount billable, acquisition headcount of approach, XXXX this COMPANY, heavily new on quarter of first quarter the of billable report upon all was and compared we've the first at which both X,XXX Approximately X,XXX, XXXX, fourth and which now billable subcontractors, in Based was with the of including quarter headcount is

$X life quarter cash closed short-term the We estimate of less first and employees fund of at capital company in its million on as the quarter subsequent corporate debt save first to Turning February, book of vacated annual from the the gain consolidated of $XX.X $XXX,XXX million value diluted XXXX, and capital April shareholders going headquarters. end that much into recorded as Capital Auction offer end, at outstanding of We we value year, building the a could Monday, The the recent investments million, Buffalo-based a of share on per company sale our to insurance end successfully at cash per XXXX. we single through $X.XX SOFT policies, sales of the April $X.XX first the In closed $XX.X share. building. acquisition $X.X of sheet, our offer, Late its forward. was first tangible CTG's quarter XXth. tender return operating the tender in quarter in our expenses last to consolidation surrender against were to the borrowed working our general In were balance the expenditures quarter million Dutch primarily for COMPANY, and purposes. $XXX,XXX. end. XXXX in we long-term had quarter than

million an repurchase As our of common excluding $X tender approximately expenses. cost we of to remaining million, CTG X.X of of purchase aggregate a million the per an aggregate stock company at shares the expanded a completed approximately to expect have under will Subsequent for price fees offer, previously result, $X.XX $XX.X and authorization. share approximately

the the the total With months. company purchased outstanding offer, XX% past over now will closing of tender the XX have shares successful

second XXXX guidance, million. be revenue our of total to $XX the we in the range to from $XX to in quarter million anticipate Turning

quarter In per diluted the be to amortization, per to in billing from range acquisition-related expect to XXXX. the of the we income, in to in net second quarter second $X.XX diluted of second share. share excluding GAAP the $X.XX quarter the income $X.XX number be and non-GAAP addition, from $X.XX as in net There XX are range days same XXXX,

year full income XXXX, net per revenue $X.XX to income anticipate $X.XX you. be from diluted $X.XX be With to from million, to for $X.XX per now we'll Thank diluted is net $XXX $XXX full in non-GAAP For question-and-answer manage can the John, our questions. GAAP to to you the session? expected and call from million range the that, year we share, to the in please range be share. open

Operator

Vincent Certainly. line [Operator in Barrington ahead. with Instructions] Please Research. And go first Colicchio of

Bud Crumlish

Good morning Vince.

Vincent Colicchio

new to Curious, nice Yes, business historical U.S. margin could staffing that the levels? of business side, in you profile on Europe. Budd, have done a job comment seem versus the adding and your you

Bud Crumlish

it's fairly this the substantially say at which from Nothing point. I'd different consistent historically. way, spend we

Vincent Colicchio

got in Did I correct, of there? is how Europe, substantial business building EMR hear in And that? you a you've so, if pipeline the terms

John Laubacker

these certain Well, over are there's it, think there, a only yes, are going hospitals moving pipeline -- a at multiyear engagements. resources pace. Europe mean the are building definitely and the for about so business. I we to in EMR only And and there's I many be

relationship tremendous with actually So, this it's next really than to this, actually have system over but U.S. we substantially university smaller expect three software, five and that the developed probably they're And going the well. the years. a the the in be doing we to implementations, --

queue. one another excited about So, adding the to we're

Vincent Colicchio

market in broader Europe? us move So, Could give the starting some on color things that? to are you in there

Bud Crumlish

I would yes. say,

think I they are.

financial in I for Luxembourg -- the institutions. specially, think there a -- there's example, is

has we be of move, to to things Brexit. of going discussions to not a And with starting get but right are that. -- now, and and where up do some think a some for to I lot going this that's conversations going think There's geared plus, about they're

high So, finding challenge really, -- qualified because demand them and the is market retain our people really strong. certainly it's really certainly, we and see is

Vincent Colicchio

too from French driver important was opportunities with An you of the client base? the hearing the addition positive Are it for anything acquisition cross-sell SOFT to the Is tell? footprint. the early

Bud Crumlish

we bringing really -- It's to they're lot. sales days just -- team, in the they it And had excited they're on opportunities you really they're taking about mean, and so really didn't bring into a teams do think whole early that acclimated. in COMPANY account to but SOFT we're we in closed on I like sales the what things today. sale -- thing, just I can into we have -- we -- that traditionally ago, clients. that, worries trying their clients what -- it just XX The between doing plans the

very that comments clients them. some So, then really they from that we've bring to offerings we several they're know additional -- gotten can and but excited I like solution these

Vincent Colicchio

go Thank Okay, Good in nice back quarter. you. I'll -- the queue.

Bud Crumlish

Vince. Thanks

Operator

coming we few in. to [Operator have Instructions] the further And allowing moments presenters, questions no

Bud Crumlish

Okay very John. Thank you much.

value. call, over growing quarters the like the the made to today's support we've increased business I progress their out that in would past towards entire several acknowledge and shareholder the CTG delivering team of closing and contribution Before

increased initial also sales activities opportunities we solid our results value strengthen repurchase thank represent forward year to from all of new most With We've we our of that acquisition offer continue of well to execution our presence our create share authorization I And business that, to demonstrate strong continue COMPANY, like pipeline and consistently a John, business on program. engagements shareholder continued of as we quarter call would reporting CTG's converting call. personally over meaningful this into made past our Thank expect you of much. and and return on commitment strengthened may our in now We region. further contracted the progress to as on to through the new and you the the tender CTG. the for Europe investments both continued capitalizing of look joining the very next existing recently, first organization, disconnect Our you performance quarter. us to SOFT in clients. with with for today's support and your