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CTG Computer Task

Participants
Jim Culligan Director, IR
Bud Crumlish President & CEO
John Laubacker EVP & CFO
Filip Gyde EVP, GM & President of CTG's European Operations
Vincent Colicchio Barrington Research
Zach Cummins B. Riley FBR
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CTG Quarterly Investor Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to the Director of Investor Relations, Jim Culligan. sir. ahead, go Please

Jim Culligan

Financial and currently, Bud everyone. Chief Crumlish, Laubacker, and Filip CTG's and and Brad, is for us today's incoming President Vice CTG's Executive me President, call John CEO, Chief President Vice are CTG's who Executive operations. Also good you, joining With today is morning, Gyde, on Officer; Officer. Executive Thank European President Manager, and General

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

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

Bud Crumlish

million key for by morning everyone I'll million the quarter. sequentially midpoint our $XX driven fourth brief to with range a primarily approximately increased to morning joining guidance of us overview factors. quarter fourth Growth good the $XX.X was two between this year-over-year call. and XX% $XX of and of the and above X% on million. begin Jim, the Thanks, Revenue

and early outperformance the strength operations, continued in also the benefited organic acquisition European XXXX. which of First, COMPANY our strategic SOFT from of

our secure new client existing Health this contracts increasing where a scope transition Second, as to we the of traction industry's Solutions, with to healthcare with business in of repositioning address wins successful well the expand clients, value-based as continue care. following to

number investments long-term full sustainable initiatives make we that executed the continue revenue $XXX.X certain Throughout the year, million to earnings release our a which our for XXXX, range to strategic quarter CTG's areas as a consolidated guidance positioning we within business, We solid stated early business For foundation have to of in range and growth growth and established high generate significant our growth. progress made XX% increased established XXXX. our in to $XXX end realign third million near of of profitability. and of expected in

drive with accomplish an to goals meet continue confident by reflect and to to line have make end this frame targets towards extended operational long-term the goals. additional achieve in top our progress time efforts, all significant ambitious successful year we the We end. our entered aggressive strategic also XXXX, Europe. of long-term to Company. outstanding our These year-over-year momentum. results not targets, our excellence investments we were the and made these with We XXXX. may we Our absolutely of That significant established said, and success that continued we When targeted achieving can of by these believe an performance targets need coming remain we we in timeline, in these and XXXX

for to improved marketing profitability. and position Company we business During in investment in the significant XXXX, America made and recruiting, growth development, North

results quarter, us in discuss to XXXX, the taxes early of business, a John that the non-cash a in structure. of plan investments we fourth This has positive As as designed outlined drive business, operations, of expecting operating our series the for our and healthcare, these incur not part are release, his these objectives of improvement all frame to in remarks. business press announced that indicated our allowed fundamental time three-year broadly, offerings, the charge European which development, specific from More to we in yet strategic required areas solutions will recent the including investments. staffing today's we us cost see

years its augmenting the CTG's Board several target for over X.X million included in shares create million XXXX, growth shareholders. tender X.X value. governance repurchase our sustainable to past million have shareholder of the stock These a strategic company excellence, CTG taken a The $XX.X used total through with our common offer program. value further the for continue shares share shareholders. and also on we by of both advancing We with repurchase We've specific existing to focused actions align to Company and enhancing corporate acquisitions, organic against and of to efforts execute operational dedicated interest

As CTG consisting continued senior in favor compensation associated program million for vesting we share the of leadership and in providing based grants price. existing We repurchase additional future in share cash a applicable potential shareholders. XXst, innovative of buybacks. providing to of we compensation December based directors with had $X.X company's under authorization the compensation upon by existing significant non-employee share authorization our further approximately shares And program. expanded for interest equity capacity all repurchase We XXXX, increase million, our eliminated remaining for exclusively $XX align

in and for value We to and alignment enhanced best strong governance XXXX will and in with shareholders. efforts initiatives our our continue consider evaluate maintain practices new demonstrate to corporate

in Solutions move the our business. developments recent I Now to

$XX.X area of profitable XX% continue focused continues the year fourth coming solutions past we CTG's key We incremental the higher-margin given two revenue business our over be In to pipeline new fourth representing potential and we invested to Solutions of and year-over-year percentage strong XX% Solutions historically mix compared this million, the expect and approximately to in as of quarter, revenue business revenue a quarter. have to which solutions Our XX% in The strategic business. consolidated a in the engagements years. with quarters. expanded contracts the overall ago increasing the conversion rate, lead remain increase in on quarter, of opportunities to of from

the efficiency, solution clients wins, to transform As management our allows capture, in implementation into EIM, solution generated enables additional cost Information value, these XXXX successful future. to to XXXX, led series analyze is actionable the to and maximize expect manage, launch initiative Management application offerings. and growing we ONE second and offerings clients traction of service we which a This Both them solutions our development offerings CTG our expected, of important and data of in our of launched Enterprise Application Advantage while of across to business client and has the collaboration our initiative or help also effectiveness already information. for led clients new in a have their and in innovative stronger

trend number Looking continues quarter, XX% the Luxembourg-based perform European in delivering in very growth million business the European of European financial represented We to of a around to our purchase Earlier success this maintain complementary pipeline fourth excluding was from area as quarter. Tech-IT the the as earn Soft institutions. in seeing which broader grew positive at outs. to the of specifically led new We business within our and a the ongoing expanding organic be Further growth attractive above Company, of business In in from price of XXXX, we the opportunities, are this This performance of XX% notable specifically our also of consistent $XX.X early compared provider new quarter. this sector France development the of the at market. a the XX% operations. we times and revenue to outstanding we at Europe operations. performance continued month, meaningful in acquisition service double-digit completed to of increase an headcount year the acquired X.X contributor during sales, year-over-year or continues strong combined potential with clients consolidated where revenue converted ago CTG's

We relationship, Europe. able to our importantly, fill strategic software-based Most immediately in in solutions. $XX to existing provide in to complementary expand gap solutions revenue, million offering, add expect and were transaction with a existing results by hardware portfolio operating contribute our client us new and we this approximately annualized and providing

to Europe. integration. existing and across strategic consulting, now management, in the able Luxembourg expect acquisition to capabilities solutions services We full training, In the and end-to-end clients penetration infrastructure offer deepen complementary including to services the financial are project we areas of sectors our and in cloud a solutions market and in government local prospective IT this long-term, current

our months opportunities mix deepen penetration margin service portfolio They significant and markets. made we've increases over Taken also footprint both together and these and in business. and broadens the expand new of XX CTG's of synergy revenue existing with Europe, offerings, cross-selling our past solutions high provide the acquisitions of

there full to done of additional making focused investment our business. performing are integrate our both to areas of and the is the strategy in realize benefit, While be work consistent with transactions highest

substantially We a CTG's results year to revenue represented aid opportunities XXXX. driving that grew the positive of Turning in finished business, a Health the Solutions in consecutive solid will of with growth. pipeline quarter in third business new quarter further and

Solutions engagements a contracts. extended a our two In new and Coast secured converted System. booked important large successfully University or State a East Health During particular, the network healthcare which Midwestern clients, major on include incremental quarter, new team and of business number into the

of and ongoing our solutions care, increase transition our solutions. towards increasing As by Advantage I've following already and ongoing activities of our repositioning to sale marketing is healthcare to our business solutions, efforts concentrate to further indicated, the our continues our to demonstrate such delivery on EIM successful capitalize promote to supported value-based as and industry's team efforts that Health progress Application this the

of ongoing to of positive with and Initiatives, our our increasingly contract represents win business Our announced CTG's Health the subsequently expanded initiatives. future the the contribute within largest CHI, client, Overall, and Solutions one encouraging one results. we effectiveness momentum today financial that reflects previously should which is success of Health these are Solutions is and examples Catholic generating

Growth quarter primarily Now turning consolidated by business grew business. Fourth driven XX% large Staffing be XX% million, with year-over-year of revenue to clients. expanding our continued to $XX.X existing representing revenue. approximately to

clients with record of strong many for are client's reliable our by we strong expanded deep market personal business which proven In considered long-term our service. scopes track fact, work, presence being incremental CTG's delivering testament of and to is of and our a regularly relationships

strategic In addition Staffing realigning to our committed clients, our to better positioning growth. of approach profitable our for existing and we more North and diversified business supporting American remain

added recent the during accounts with our time first quarter. most As evidence of fourth progress six clients, new we

also made XXXX, development refocus of investments resources, course the business drive Over higher value-based in operational numerous and business significant new in to capture with actions we efficiency, better and increased to margins. invested

already have I've remarks, these results As improved opening of investments, expecting fully materialized operations. are number benefit not yet mentioned the a and in our we American for North my from recent

Staffing targeting returns meaningful Importantly, more recognized results. to order we margin remain in on our operational improve with our sustainable opportunities business greater committed future efficiency as we in to combined operating North higher America investments

our so XX to line a for after One have introduce CTG months is across nearly of successful with from as John himself, would Gyde are meet seamless aspects, to the incoming the March positioned the this of has call a as of the over Xst. and had a priority review retirement area I in an in over this a few to my strategic beginning last I of and far, highest that XXXX for all career the our who This use as well we confident Filip, goal. priorities announced XX-year our business like Filip years plan in of transition CEO with of appointment CTG to I'm is enhance business, for December, financials. turning before my performance with our detailed opportunity our to

Filip Gyde

a my you, It's good CTG. the leadership and everyone background brief of have joined would excited join with provide overview the morning Company. roles you I'm CTG like served I why And on executive on lead Thank Bud. my and to Jim to today's John of call. to phone. sincere in along in a XXXX with I pleasure and to number

In March Belgium, my shape activities role operations. be further operating closely and which key to the Executive process, is growth. serving CTG and European growth. the sustainable at in of in right Upon will during serving current for with CTG's time demonstrated strategies Since transition a developing which CTG's CTG's as of My this mentioned to helped a profitable well. European assuming Bud as achieved have CTG's to nine I we've in I've for as in executing global this Manager years Xst, Jim strong teamwork period initiatives the revenue. very on accomplishment priority management successfully first the believe business refine been and we roughly President result consecutive and announcement right of I this General recently beginning today business of senior replicate experience working performance represents success European our approach and sound the have one-third company-wide and Managing President, going at the which has growth As Director generating been Operations, people. improved the drive call, is most and and CEO firmly overseeing role, prior with of consolidated December, my our Vice of sharpen led part consistently I

will initial our I achieving returns the our part particularly these also as business results, enhancing As investments staffing North requisite strategic focus America. well on as within of operating objectives, on in

have years to realigned offerings numerous staffing of services. our We last and focus our two steps IT expand the taken the over solutions

of critical Our continued execution future ongoing initiatives our those overall business. to performance on the is

of investments Additionally, acquisitions I the expanded capable call we've the for over the by that is from depth am highly the in that years improving CTG's offer we're the we one. full to recent significant last I am I clients. forward the few as financials. John leading confident realize our of right and and returns potential. next current to two the we will company. encouraged expect breadth realize in review growth future to we I'm strategic hand as of solutions on, development certain as With higher-margin the that our of for look the from made to progress a teams over well I solutions pursue the trajectory our and the level business the

John Laubacker

Filip, and joining of you, call. all conference good you morning on to Thank today's us

in was and this in $XX.X in quarter in consolidated the had quarter quarter. revenue reported the $XX.X the the As fourth quarter the a XX, Billable $X negative million revenue ago Currency were days of of in fourth the morning's third in with translation of third million XXXX with impact $XX.X XXXX. fourth fourth compared XXXX both quarter. quarter release, fourth on press XX million million and compared year the days in quarter

well several quarter smaller as $XX.X quarter. revenue up fourth quarter reflecting in accounts. third per marketing. revenue client XXXX% as color the $X.X which of a items. compared were areas significant I'd the Solutions was of revenue than providing grew A not Revenue the share, European Year-over-year from XXXX, investments was or the on momentum XX.X% the of percentage in business GAAP the at million business $XX.X of or revenue net XXXX per totaling our and during were $XX.X quarter Solutions quarter in additional $X.X incremental XX% Health was XX.X% or million contribution to loss million development, total during with the quarter. by some and fourth quarter. share sequentially new operations, quarter fourth company driven increased in the revenue fourth of fourth North included investments continued XX.X% has the per the Solutions in $XX.X existing XX% No year staffing XX.X% several investments diluted and $X.XX revenue share client clients the fourth bottom fourth of large last in per in yet expenses primarily of quarter $X.XX as quarter. was million, IBM Direct year's with which business more XX% $XX.X expanded tax-related tax was line severance revenue XXXX the million of improved million in XXXX. revenue $X.XX third $X.XX million with and new in scope compared these growth X.X% share increasing compared ago long-term time million, costs X% in quarter additional of engagements, in new several XX.X%, XX.X% of revenue of total in results. strength drive and Year-over-year the and the of operations, of with items. made of quarter of the in existing of portion sustainable quarter. ramp-up in the made $XX.X third In with total our Staffing revenue revenue profitability. in compared in the other in or third to represented some of recruiting from spend American XXXX, nearly These and leadership, materialized primarily like acquisition-related XXXX

$X.XX of $X.XX a $X.X expenses in $X.XX not fourth quarter we in insurance we're share, per income the GILTI $X.XX Low-Tax which last proceeds. change related the XXX% America, Law or GAAP XXX% to compared which million the and related assets against operations. balance loss foreign at the year-ago establish was $XXX,XXX on fourth $X.XX XXXX compared to share our the Company end related gain net acquisition following determine quarter for operations utilize for the with charge non-taxable million gain per quarter million quarter tax Soft Approximately US of Of rate or GAAP our end non-deductible of and result, fourth from assets share, insurance to the share full was previously life is costs per XXXX Tax non-taxable share non-cash share with XX% Tax life able quarter. or tax quarter total $X.XX in of in acquisition-related the and diluted of per reserve from relates in from reflects XXXX of year this primary a February Staffing quarter in and included at provisions and of and net $X.XX February European Income the growth the was per headcount assets, non-deductible company headcount year-ago includes diluted XX% of X,XXX costs the of As $X.X quarter third fourth share or provisions the income in of the XXXX people, the totaling billable. reserve third Act organic rate $X.XX share, in tax $X.XX per largest Effective our tax of our proceeds. GILTI of XXXX $X.XX Intangible costs from per in and was Cuts related of CTG's Tax growth to acquisition the end services in the X,XXX net quarter. related be Jobs XXXX. and that XXXX, quarter Effective fourth loss US of X,XXX the with in to may a and XXXX remaining year-ago The compares required of per approximately third $X.X The the clients. acquisition-related our Global increase to deferred Soft a the in Company deferred XXXX discussed at share the Europe, the acquisition quarter XXXX. fourth XXXX, of these GAAP fourth non-cash per in to North Act, quarter or the

the One long-term with balance the cash expenditures of million. the was outstanding quarter. note our equivalents fourth repurchase stock in million program. Cash and sheet. at CTG end were related had $XX.X brief $X.X compared the fourth to $XXX,XXX $XXX,XXX, Turning Capital quarter third We debt. in quarter to of

repurchase announced had the was January completed Tech-IT $X.X quarter year, we until million from pending, company recently publicly our of material the year-end, fourth that acquisition of Xrd of XXXX. authorization. this of during was under available restricted shares repurchasing Given in the information most existing At approximately

in release, full-year earnings press share. provide will Turning GAAP, non-GAAP morning's the guidance, for XXXX, only as per and reflected this revenue, to beginning our guidance company in diluted

per range income $X.XX $X.XX from related is expected to excluding revenues is net to full expected completed to million range non-GAAP associated certain transactions, GAAP from share net year previously XXXX, the share. to $XXX to expected $X.XX $XXX from acquisition to with diluted diluted income $X.XX range per For anticipated million, expenses

steps and As call, evaluating indicated today's performance operations. are the comments on improve business to by we the our taking of our continuously and

very improving last to higher We our margin through business our North the year line we line business. with are expansion our over year-over-year top pleased clients generate Staffing bottom and the in solutions adding American continued growth, of on progress our meaningful focused by are

with Our question-and-answer about we'd questions. please CTG confident and past actions in and now ahead for manage demonstrating are With provided the call beyond. to Brad, progress a solid XXXX, our year have the to foundation begin like session? further we can open you that,

Operator

Instructions] Please first from today the comes of question [Operator Colicchio ahead. go Research. with line Vincent Our Barrington

Vincent Colicchio

was I in the anything Bud, in side? give turn the assume that -- investments staffing up there's side XX the in could Yes, I on business of color area. the I you going into terms on was to pipeline next in if months stepping us be could wonder that you're that midmarket, hoping some I

Bud Crumlish

they're so I'm ones, it increasing I more not mean had, that's where driving have possibilities not towards we're is on there's speak, and the still but and saying, know, it's get there. though with we that really in to of a you our, we're higher Vince, pipeline our Yes, midmarket, large, midmarket things, focused certainly we to don't solid more every have month, we've really value large business really on in, the coming certainly

it year. of we outcomes we, gets and speed, certain entire and up the takes with investments got promising, positive the before expect but it we a timing, as some areas So of and paid amount of some of mentioned do that to time throughout has haven't certainly, off, the our lot it's somebody

Vincent Colicchio

XXXX? of And the John, what is for embedded the year expectation gross margin

John Laubacker

The is for direct 'XX, margin about

Vincent Colicchio

Yes.

John Laubacker

Yes.

in Little XXXX. Just higher bit than over it was XX%.

Vincent Colicchio

the taxes. What pieces? And piece. was two you repeat were biggest deferred then the your I got the tax on that? Can other on comments

John Laubacker

$X.XX the had Act, $X.XX acquisition Company. share about about two totaling The in acquisition operations of non-deductible Tax other Sure. Soft pieces of was GILTI were our the European from $X.XX provisions costs XXXX which about per related of and the we

Vincent Colicchio

you size deferred Is $X.XX. that And said? the asset was what

John Laubacker

That's correct.

Vincent Colicchio

Okay.

zero, if So basically your everything then pull right? you out, taxes were

John Laubacker

there tax-related the total $X.XX quarter was there, about in impact. in in Well

Vincent Colicchio

And Bud, the account. still pretty uptick Okay. XXXX? in IBM, for What's it's had We big a the outlook quarter. slight

Bud Crumlish

Well, been an with Filip working we're the on relationship look, no, basis, of that specific But past we lot to to think, better, continue going and the after. never they're got a regular well it's them we've have made, for them, certainly has number on done made, -- strong. year, daily don't We've very outlook. our basis, We're an this and then introduction I additional with business. and the a progress over we've in areas we've doing past particular progress there, this a

So, to I through this certainly positive continue next year. through expect momentum future, the more

Vincent Colicchio

excited that If Bud. sell me, Company, remember correctly, from is, that of the France you is accounts could some you about one existing into. How Soft the in you are you thought one last one deal I reasons then And going? had

Bud Crumlish

in I Filip, since turn one involved. intimately specific he think, been over knows he's don't the I accounts, it's going why to that just great, fact,

Filip Gyde

with But sector, Paris, you're us our the you're now it's accounts Soft of in in looking gives when headquarters have and of was we headquarters it chain, the Obviously, we strengthened the leverage. those Belgium acquisition in of in more business food where and headquarters Company, did the seeing Yes, us and financial France, selling similar which in the lot like couple the same Luxembourg, higher Vince. our in Paris helped We're a at a in position accounts. accounts actually were Luxembourg. already basically, why in is, already are this Belgium country the in we and in reason

starting So, had of that's anticipated. to returns that synergy already actually deliver we

Vincent Colicchio

Right. questions Thanks answering guys. for my

Operator

And line Cummins from of Zach go we ahead. Please FBR. do the with have a Riley B. question

Zach Cummins

Great, questions. taking good morning, thanks my for

both in Solutions you operating some during things XQ? strong the business from about was the off, So impacted and QX, just starting can performance that there but Staffing really of pretty margins talk the

John Laubacker

Sure, have those John. Bud and and is is take Vince, some of indicated made we a that the his Zach, during some amount talked what as about Really, significant those the it's XXXX, organization the presentation time. in part this in of release, of investments throughout talking we to during of

on great the a you've XXXX but a be that, to at incur later to those relative today, return really So expense investment made we a and expect you upfront then you return investments, date. get expect you

a at the So the those year. on had of fairly operating significant end margin the impact

amount the we during as quarter. fourth higher we Additionally, we and was fringe and then that We we that do of folks, costs to than had is didn't regular quarter, the short costs we some than had employee variety associated with estimate basis, we monthly significantly in throughout seen year. had a the we severance had or those $XXX,XXX throughout the benefit costs about anticipated the And year, we but disclose cost, higher specifically, medical benefit well. got had of that what we estimate primarily, a on rest basis,

was a out turn had was medical low, was fourth impacting things planned. process think bit don't or estimates that really complete the which estimating not unusual, the quarter margin. little higher unusual, be our Those just I far So the than to operating are the we it's main

Zach Cummins

a the the it's that coming CTG terms year? economy any impact in been business And Are events geopolitical performer a for Understood. strong or That's Europe, with while helpful macro of potential any the could concerns now. quite context. there in for

Filip Gyde

really for well we're at Well, positioned. not looking Europe,

the offerings, client portfolio those expanding We our in seeds breadth have for. only market us of as broadened shares expanding It's the service and I existing leading to start acquisitions, give growth. and geographies, them two those we're we future the looking acquisitions and depth offerings through for two our have see of will returns portfolio.

questions, said while Company, in I the cross Soft we on started growth we see of revenue with we'll previous synergies, in but XXXX. start As selling, what see organic also

course, Company. expect from we growth new. XXXX, organic very further Tech-IT Soft of it's So

two to additionally of also immediately excluding But be growth, Tech-IT expenses, there, growth So layer are in the we we'll which those those still of And the two added is acquisition-related course. and need with several expect already sorry. strong to quarters full time new the the to over and or poles year year, accretive synergy. this will benefits organic materialize two next

Zach Cummins

And Understood. That's last for helpful. then one me.

really, your into FYXX sort of baking you and how guidance XXXX can any into not sure at specific terms your from how contribution guidance, around amounts, this is much embedded but In provide from point? Tech-IT if FYXX are I'm really guidance? commentary any of much that Tech-IT just you

John Laubacker

one acquisition-related Zach, the but estimated us Europe $XX quite, specifically, about overall. would US a to to of company, this so, the on that it'll tell on be that that million not and an I year revenue the about had we're we year. in the opportunity this costs, eleven-twelfths margin Tech-IT like is is John. it February be closed the you did will we of We entire disclose X, got don't accretive accretive both all doing of things excluding excited what for be We annual We have full revenue. US-based about

beneficial and it margins. positive to be So, will our

Zach Cummins

luck taking questions for QX. again my Well, and Understood. best here thanks of in

John Laubacker

it. Appreciate Zach. Thanks

Operator

for in this at queue. closing questions turn further time, And will back no host there the over it to I remarks. are

Bud Crumlish

Thanks, Brad.

closing I are progress firmly future today's the for one. we've to to CTG right further strengthen call, taken on steps accomplished and we've incremental I'm position past year that the with believe that over growth. the the reiterate Before I it wanted pleased

staffing many and for Company joining CTG. stakeholders serving express leader these the for more again want sustainable for solutions the I IT CTG's achieve have you highest future having a in and my on I years, in profitable past place has foundation the that for Under to your has privilege of growth to Filip's sincere us come. and been quality to all Thank had and CTG is continued increasingly CTG appreciation associated for believe call years. and for with for than XX services XX be poised today's years success. leadership, of confident This firmly providing Company should support Lastly, for been the

Operator

for Thank AT&T Teleconference conference your today. gentlemen, you and Service. participation Executive that for for ladies your And and conclude using does the

disconnect. now may You