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CTG Computer Task

Participants
Jim Culligan Director of IR
Filip President and CEO
John Laubacker EVP and CFO
Kevin Liu K. Liu & Company
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CTG Quarterly Investor Call. At this time, all participants are in a listen-only mode. Later, there'll be a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded.

Now, I'd like to turn the conference over to your host, Jim Culligan, Director of Investor Relations. ahead. go Please

Jim Culligan

Financial and call Shaun Executive everyone. me and With and Thank Filip good Gydé, today's Chief President Vice are Laubacker, Chief CTG’s on John you Executive morning Officer. President Officer; and

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

that as actual made contained Additional cause release, press in information in filing. forward to those in looking the could concerning statements is the company's well differ earnings from SEC factors the as today's results

non-GAAP both company's release and With and discussions for and are related and include during to call opening non-GAAP the adjusted I GAAP certain that in release now Form of Filip information. his addition, press of to reconciliation call will These provided over financial financial In a today's management measures the press statements the X-K. results the measures turn remarks.

Filip Gydé

on joining the well. your you Good us and call. I Thank and we Acknowledging all that people, thank on impact for to the are time doing today. has hope you, Jim. families [brought] of many participate taking appreciate so today's morning you and ongoing broad And COVID-XX you

non-GAAP the strong continued months, start operating few profit on despite We unprecedented sequentially, and in and CTG second delivered past year. build the both solid to revenue results the increasing Over has our half quarter directly to results operating team's achieving our attributable business to collectively first contributed success highest six global non-GAAP share years. earnings CTG execution, per disciplined are and environment. in our margin These and challenging to and

these made the results performance with proof and transformation We past have our and is are to progress we the strategy consistent our over working. our are believe year trends pleased that a solution-centric favorable organization in

focus our served has ongoing us towards on well half shift the strategic first XXXX. Our accelerating of solutions in extremely

are generating We the higher resilience by a we needs meeting range from are pandemic from client enhancing strength. confident while emerge of And broader also will business margins. position our this us of of to the allow a

that diligently CEO across teamwork Over to our our was the on and clients continue worked XX end growth on without the with markets. months goal be capitalize continue advance to commitment opportunities whole team. of possible the unwavering We underway Since CTG. The appointed our be has would I and generating demonstrated long-term take position momentum to strategy for steps to not CTG all team this the added proud value significant our ago, stakeholders. to incredibly in I time, our build of served of end transformation support

in team's all the the when of determination, have Our unprecedented reflective second quarter especially environment recent results we witnessed are considering months.

which work-from-home made last these efficiencies, of included cost global on This team of without the rapidly and COVID-XX. effectiveness transitioning highlighted response in targeted As have to staff and and gas our resilience billable reimbursements associated conference its been efforts. the utilization from for including We team's in took while capabilities employee. which the sold operating line, and our remotely benefits decisive in our containment in to unemployment call, a environment. we action as results, pandemic there certain quarter's both operations. across client inactive second meet costs have well adapt loss demonstrate a working XX, of offset productivity to business Europe to increased oil market highly needs further XX% with are government quickly and prompt operations adjustments quarter in non-recurring on large to high dynamic model, our Also a June transitions multinational meaningful made we The resulted ability the uptick largely Alaska-based as in and bench subsequently implementing related successful and reflected the

to mix margin earnings. this business more quarter the Together, quality resulted lower a highlights, Taken following challenging increase revenue quality and of was by higher and strong year-over-year growth a together, income very financial business our continue improves the generates we margins and as across environment, revenue a profits, sustained which from higher economic lower in in note, operating COVID-XX impacted on been non-GAAP performance by has staff. and in Europe margins most despite performance and margins gradually significant disengage metrics a higher second a key including improvement comprised basis staffing business. Of of largely continued solutions driven and of in

these reinforces results deliver the current the to ability solutions accelerate, need as centric importance solid the CTG our for produced. work-from-home are environment of units prime trends Our and strategy in solution

Solution’s revenue business in groups sequentially to quarter. the XX% second of total

of As services the and also our business. expand around while offerings our to relevant driving opportunities corresponding improvement continue the margin in we market profile

to and the new job slowed of contract efforts. requests for Importantly, development pace pandemic. the heightened have associated outstanding of has business proposals our team though Even due with the wins uncertainty done an sustaining new

in Northeastern of the During with we support help electronic an when we implementation. a the responses client's of - selected to to contribute a multimillion we with EPIC-based future the current engaged number mindset application a a to implementation to submit quarter team healthcare converting system successfully believe engagement to management being for environment. health and This meaningful in our records manage and the CTG the growth U.S. go-live client contract win This that includes and existing for from go-live prominent will the represents this emerge manage quarter, proposal continue secured the dollar

we increase earlier in rapid in a have solutions pipeline of our the As for another offerings within year. business of launch our solutions example this following growing seen traction testing North our business, these America

of making March. on progress capabilities solutions to StarDust, full addition the that portfolio more CTG integration testing company solid lifecycle. also IT acquired the expanded offerings, service testing enabling The cloud are a our provide We unique complete of of in full StarDust's we of the coverage

Application help offerings better their scalable be we easily newest to steps are client. we multiple replicated As both from offering, maximize client consistently enhanced collaborative the Consistent in and scope to Managing support they clients out multiple also investment of planning XXX to end is resulting business are maintenance. with services. Microsoft joined In we and our the of formally increasingly June, markets. quarter, through introduction our Delivery migration solutions opportunities wider company announced CTG deployment, solutions our In of objectives, focus our clients capabilities and model. Brett of drive to in build needs, offerings adoption his growth executive, of implementation development third taking as Solutions, of and our a while we sell North rapid solutions and also supporting value Hunt, solutions Solutions new launch global skills solutions we can continue core of specifically solution in to will seasoned of helping Fundamental This the a services a Center and of new enhance accelerated and business, are EIM Director optimization, address the IT Brett Testing In initial on single new to America. ongoing the Advantage, XXX that solutions people. expansion of positioned the will CTG's service to across solutions the projected is role, expanded and Microsoft that at these Advantage, our

strategic opening in the to business, Bogotá, We Further for new delivery center and Colombia. our forward look services solutions are and the new cost centralized effective approach delivery Europe. We delivery remain have both enhances Brett [technical of growth our IT to high that very pleased his in continued We and as center we clients leverages recently and CTG’s solutions to strength contributions capabilities grand expect our and business working was believe business the is the we evidenced revenue indication quality, strategy platform Americas second with into the an deliver and our entire team. of engagements. to to This solutions as board of complementing growing execution on benefit team. our success, for CTG's about quarter and durability traction of from we and generating higher emerging enthusiastic difficulty] pipeline future convert solid expanded our

as stay-at-home the lower second take utilization we is third months. difficulty] primarily are ahead performance. expected [technical and the increased in lifted quarter on half our particularly related seasonality the to in of we As to coming lower and term This overall difficulty] [technical near look the and anticipate in the summer employees restrictions XXXX,

[technical decision solution second our strategy making to [technical to governmental expect We our and a business difficulty] we in also long-term [technical benefits [technical believe of processes. said, transformation remain that margin difficulty] strongly additionally difficulty] With view due higher believe non-recurring the we gradual to fully in of centric a roll quarter. new the will ongoing difficulty] we realize We the organization.

our a for will review opportunities term now year generating achievement the second during our to call the that our half longer expanded and prudent out advance growth detailed second results, I well the the investment in second development shareholders. CTG of confident for play as of our accelerate are while the business that value offerings future XXXX. as solution in We to substantial John turn quarter over of we expect will of and trends objectives long-term half

John Laubacker

Thank you, joining today. everyone. and us Thank Filip good morning for you

XXXX. quarter with second million with in our revenue revenue in $XX.X expanding total a $X.X and in second As million revenue year impact compared in days XXXX. billable this the XXXX, total was quarter representing in of revenue to with consolidated of second the the quarter on the quarter previous revenue negative compared quarter with compared in XXXX period XXXX compared impact and the morning, and $XX.X in quarter $XX.X release XXXX second solutions XX XX $XX.X% Currency second the same the ago quarter. quarter negative second translation $XX.X earlier XX.X% days of was press million the in the the of had days first quarter reported the XX% representing Total million in XX million of first of total XXXX. in million IT of in were quarter of second $XX.X $XXX.X the in of revenue $XXX,XXX million of

revenue with over business, In staffing quarter or the or XXX addition, XX.X% of $XX.X from basis XX.X%. combined revenue, the revenue million second during of improved of overall of COVID-XX total direct million, previous of in or the from quarter IT to total to XX.X% second a the from points XX% in second solutions in in profit by and $XX.X become reflects $XX.X and in quarter our total of second XXXX revenue Revenue select compared effects growing of continuing XXXX million solutions portion in pandemic from impacted revenue quarters our The the disengagement of the XXXX. clients demand quarter staffing quarter. revenue margin recent the lower the lower staffing business the decrease was

the last XX.X% or in $XX.X $XX.X profit also year's quarter XX.X% the million, million, the second improved in the Revenue staffing was quarter from million, XXXX or quarter. $XX.X to over direct with Additionally, points or compared it revenue, first quarter XXX and in IBM revenue total increased XXXX from second as in XX.X% of total of XX.X%. of total basis revenue of we second

the compared XXXX Direct XXXX comparable a quarter XX.X% first revenue in extended quarter in with business Our of other or general of the XX.X% discuss master GAAP overall quarter. margin percentage of increasing a as were of first No during client business of The in due was one quarter the percentage of extended is in and quarter. X.X% direct includes of second with XXXX compared been mix. of of was second cost represented quarter revenue with of agreement. terms second reduction in in than as compared and XX, to XXXX IBM X.X%, our and quarter XXXX, as XXXX continue revenue the X.X% we the XX% services XX% recent the conditions the year agreement second XXXX an for XXXX solutions in to of of ago in in to revenue the revenue costs X.X% totaling has severance in X.X% more periods. September quarter in quarter. first percentage of million the - ago margin and in the expenses quarter X.X% year-ago which with operating quarter second $X year the of and acquisition-related Non-GAAP operating

pandemic adjusted the evaluation the on our As the $XXX,XXX. which our totaling part us caused quarter we COVID-XX incur of resources, impact severance during to business, continuing approximately costs of our of

of diluted $X.X end per of net net per share, quarter of for diluted expenses. compared and of was in with rate quarter expenses. year quarter second a margin in acquisition-related reflects incurred of price second in of headcount previous first offset second staffing GAAP share gradually or severance the $X.XX with billable share, business. life end estate, effective sale resources net first second XXXX of effective diluted $X.XX share, compared per half was $X.XX diluted diluted net share or GAAP a million first insurance was the during XXXX or the head XXXX from quarter share in diluted per from with quarter includes per real half the quarter. of sale quarter the is income second in primarily $X.XX or diluted of in margin per the XX $XXX,XXX certain XX% $XXX,XXX the due the points This million in or with $X.XX margin proceeds income first ago at quarter, GAAP $X.X total operating prior in XXXX, of $X.XX of million the personnel of we XX year-over-year, decrease by in diluted second million our compared reflecting a the X,XXX, $X.X at related increased million transition per the was basis or and $X.XX of which acquisition XXXX. share as the $X.X or operating for measures or second acquisition $X.X $X.XX XXXX. the $X.X of for estate of included by net quarter. away the cost share to in XXXX first quarter the in compared of was million real half with the related XXXX in acquisition utilization insurance compared to which second of or XX.X% excluding in X,XXX as share XXXX first the proceeds per $X.XX net U.S. both year XXXX higher tax second by income and increased per the nondeductible per diluted the severance with the The ago’s net $X.XX share focus GAAP quarter second in the of included with primarily The income the periods of per well expenses. million related XXXX across to The quarter gains basis reduction and income share lower million continued $X.X A points and and quarter and gains was select was continue management. CTG’s compared per in and the income and per $X.XX $X.XX life $X.X year with quarter end diluted quarter share, business rate X,XXX was in $X.XX IT diluted of million $X.X approximately and high the first Non-GAAP compared on as expenses of the share, tax XXXX. expenses diluted non-GAAP count income or XX.X% diluted from at ago half Non-GAAP the or staffing the income the

the in second a furloughed pandemic during XX% clients. reduction had XXXX we services client of delivered have employees result our demand a as billable. primarily to the headcount quarter our staffing Additionally, Approximately of is

sale assets the from as quarter and were $XX in resulting debt sale. the Capital the held quarter. cash sheet, as the $XXX,XXX million first expenditures been included XXXX second it million equivalents quarter-end $X.X second in outstanding cash second at XXXX. of The quarter of $XX.X balance end headquarters were approximately proceeds quarter. company’s our had million the end with the to quarter at was been second previously approximately first million $XX.X recorded end The of of had value of completed of second compared Turning the corporate of in other building during for at cash cash long-term the net the net which the $XXX,XXX at CTG’s in net $XXX,XXX XXXX quarter and of quarter the current of the

the providing end given been seasonality billable resulting than We forward, not vacations full the will CTG’s we’re quarter pandemic year markets, in impact take the in employees delayed as anticipate normal updated for that of previously on be utilization XXXX. Looking third continued our lower have fiscal of COVID-XX higher guidance resources.

a diluted our take non-GAAP the a long-term IT technical the for near-term to strategy solution in for expect company Despite we We business of our earnings of margin past earnings in per strategic sale six also have in necessary reduction the We year. and half the challenges, experts has period first transformation resulted and the in to continued these another impact in enhance development we Europe share value remain will customer’s our progress reported half highest centric and the and steps committed of unit to continue investments CTG. which in years. operating in to second government Alaska business very solutions unemployment, are by subsidies the encouraged the the to of

the for before reminder, today's quarter. The to the is call purpose results of operational As the move Q&A a financial we session. discuss to

unsolicited acquire not company. address will We to offers the the previous

will course proposal determine evaluate of in of in interest best manage we believe Shaun, past, the consultation to and continue is all any in action question-and-answer our with session? to review Board stakeholders. our and the please can and that its you advisors initiate company As the the such

Operator

Our K. will come go [Operator Liu Liu the ahead. first question from Instructions] of line & Company. from Kevin Please

Kevin Liu

talk RFP subsequent trends that in there on types how of about are pre-COVID the have activity you has focused of shift bit of kind quarter, date? quarter-end? a any both plans sort been then from through throughout Can then quarter, to And mainly projects on current little the the focused been to and

Filip Gydé

traction. in continued. that still not And activity the in did we say speed has teams the business Kevin. reviewing and business furlough contracts. and activity sense we the the were is broader opportunities for RFP and the time, business. our because same for I implement Well, our of is beginning in seen at growth also on solutions across Sure, of of pandemic, have more global non-billable development the or development the some areas to that has real XX% business changed why, employees are second evaluating That and business the and opportunities quarter into more What converting have workloads into our on

have you medical online to work As to response demands patient in our start - from had home. helpdesk clients like to some from their to records supporting can our or like additional access work operations imagine, staff client

there, were some their into and staying with home. commuting time we the helped our of business as also saw have hours work consultants they billable clients focus at We capabilities returning, remote

from has their remote from with all where from helping install And can easier services. offerings, is It from home, we work the can or that then in clients cloud - of way. traction thinking from forward. I'm work home around is to the you so that solutions see home So everything do an going support employees infrastructure to expect areas work

in portfolio, of are you solutions Fortunately, work-from-home CTG’s perfectly if all applicable our environment. a global look solutions to

is strategy us. our our centric two think organization to more I So solutions, move helping solution

in business We’re still development. healthy keeping pace very a our

Kevin Liu

to that that offsite, kind benefit some to productivity Got And it. of efficiencies that And provide longer expecting pandemic? does longer term, term a your work of beyond and the persist you're as allow you then seeing the clients gross increases guys in even margin? to you are

Filip Gydé

in clients early-staged being frankly parts to that and that in new, a the safe lot and around project services protecting our already work. do we say, review, face-to-face and the only with collaboration and a some will will follow-ups more sales employee I still so that those clients the when not environment think far people possible are collaboration, not think with meetings. a also about also that’s back. evolution seen third for And conversation video much. really area especially and makes routine new to with easily the continue XXX has or think platform, proposal to with you’re productivity maybe an I that’s our the do Office coming reason there’s environment sense in cloud, I environment launch how the but while more all have an But areas that’ why where can call, believe own done things about frankly, a using fourth in teams their security, And project more own collaboration while but we to it’s collaboration everybody learning see platforms that would implementing We when we of that going or up. The the our how and meeting it’s definitely come where in lives obviously will the I

Kevin Liu

the related about as that move services. And an primarily Office expect on efforts scale organic or the Filip in Microsoft you you to order partnership to just would work more forward build XXX that mentioned initiative acquire path? on up to the you partners Is or

Filip Gydé

of not organic for it’s it’s lot got this we moment, a and have new States Europe in area At in already partner CTG. in where an where everywhere. the It’s something experience Kevin, Microsoft initiatives and

on contents. references the expertise, global both the have We

do But meet will our it's more - moment the environment, always potential new believe and in in is When to getting traction environment have for current in that always business. to looking of parts be about current stronger acquisitions, disciplined to investment And evaluating the are business. more value. complete an complementary something acquisitions it or difficult it’s we at the and potential investments we talked So something not you acquisition. CTG’s to will be have this criteria our

not focus. So our it's immediate

Kevin Liu

for couple Understood. need and open of questions headcount kind the center, to at you'll that utilization drove just the Colombia. What quarters in of service And time, there any a delivery regarding new sort this the of what especially more the center then scale here, are in how well coming impacts particular then overall as of rate? the implications as sort on exactly

Filip Gydé

question. Good

have Bogotá, with We Colombia already for over working a partner year a in been now.

So we have been Colombia set building the step can experience to already have in in which center how to which organization can center how us has delivery there. delivery India we to our We a Colombia, are over add time to approach work clients our an zone delivery now, it’s environment center with centers Bogotá, team. delivery U.S. a Colombia leverage [ph] economic wasn't with have something to network. working our favorable European taken establish people next centralized that up And haven’t.

center and And a clients delivery cost talent. IT meeting connections access are also activities. so we reliable strong for We from alternatives a technical find in of and can high quality Spanish demand speaking have to competitive infrastructure, labor lot a we speaking Spanish for Bogotá

now, business. expand count already. to step Obviously that we our us we So, on make and were delivery next the present center we help

the So, that's story.

Kevin Liu

business the government the reduced And there impacts also like from in was sounds if Europe. it subsidies the me, impact from lastly of Alaska revenue impacts you just unit in that I wondering a couple QX. what’s of quantify could then are sold? was then the And

Filip Gydé

more financially John, relative, can to as those? take ask those I you are

John Laubacker

Sure hey, Kevin.

in information On Lux officially, so quarters and business approved have the know programs reimbursements companies years, this that unemployment far what August in Belgium, do at out and those like in as Belgium in that government we primarily, the in only in and this as we In we technical the come been France. have included time to at time is CTG. the that point we've now have through France, past point look only done subsidies, out countries the when into the we

time, have So it will be. not point that we anticipate extended - will we know August at we in they beyond be this assumed don't but

quarter don’t diminishing the this we of I we believe, rate reducing not time. full the has Luxembourg until QX. but [ph] that at return, have there is where in end a expect so, And primarily, been the point a those year QX, had Luxembourg countries a full through in quarter for at approved reimbursement a in

make on that at comment. we we what's full QX why been when and quarter just that amount as statement, QX and so, this And benefits know in made that's are in we we focused point QX what approved and of in as time far diminishing

to unit We that haven't the disclosed the revenue business relative Alaska had in we dealt with.

great with new estimates a over forge client very continue them that any from it another extension relationship But we've that more just of an that there that That to from working not to helping the one-for-one have will working that years of made than And an very a new. assumptions taking be a understanding reasonable with have relationship they and of I hard client relationship, is think about going continue. the on think, we're to conservative I transition old approach sort buyer old publicly sale We're just the we that it’s the we've assuming work, to a organization again, talked We're We with. BP Alaska company. done of would awful how organization. to making lot business it's be with, there. conservative some, maybe

Operator

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

Filip Gydé

very the have delivered quarter. challenges demonstrates strategy quarter clearly another our and job closing Shaun. COVID-XX solid the We an while progress we and of durability you, Thank our our associated believe done transformation excellent navigating execution discipline with business, CTG’s the and In of continuing the team's second plan. on to make strength

and results by plan, of light growth any be there's conditions driven reported from with to our variation As quarter-to-quarter uncertain market in especially the in likely pandemic. some the

confident However, business high to remain I benefit offerings and we ever. we with will current a from may and strategy participation future excited value about am call. And our are you prospects maximizing Shaun, traction we from growth disconnect we stronger environment continued for in now the over margin solutions for continued today's than succeed conference and the shareholders. emerge will on success CTG’s expect you executing for that on interest and Thank - that call. time. your

Operator

you. our that conference participation does for AT&T your gentlemen, today using for Executive and Thank and conclude Ladies for Teleconference.

disconnect. may You now