CTG Computer Task

John Laubacker EVP, CFO & Treasurer
Filip Gydé President, CEO & Director
Josh Vogel Sidoti & Company
Kevin Liu K. Liu & Company
Gary Hatton Granahan Investment
Call transcript
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Ladies and gentlemen, thank you for standing by. Welcome to the CTG Quarterly Investor Call. [Operator Instructions]. And I'd now like to turn the conference over to our host, Chief Financial Officer, Mr. John Laubacker. sir. ahead, go Please

John Laubacker

and everyone. Laurie, good you, morning, Thank

Joining President and today's call Gydé, CTG's is Filip Chief me on Executive Officer.

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

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

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

Filip Gydé

joining Thank you today's on us you, John. webcast. Good morning to everyone call. on via We the phone appreciate and connected

by business growing increased operating another through utilization the to Both available and focus quarter year-over-year, resources I'm total in the much unique contribution most operating from pleased While of primarily continue team's sustained disciplined and that strong solutions including associated work quarter. profit in report our and to revenue progress net lower despite and execution of strong higher-margin income the the driven and with of performance. the global to world challenges CTG, commitment the resulted pandemic, businesses,

work continue travel increased have employees no remotely. initiating of transition. higher business As fact, our sustained this work. is year, majority productivity and the previously time incremental since contractors earlier of to as and produce used realized loss part in efficiencies taken to our the We've in utilization by consumed decisive actions And experienced

Importantly, company's transformation solutions. high-margin towards advance digital the rapid we meaningfully to have continued

aimed nearly of sequentially CTG's solutions revenue. quarter, XX% initiatives with total the in notable revenue X.X% X.X% at the strategic of momentum Our year-over-year gained expansion solutions represent to offerings increasing and third

incorporating of and We are to continuously our our robotic revenue automation the and offerings our committed solutions working artificial capabilities. necessary the this continued and and our increase with organization. including solutions strategically complementary resulting in investments making from expansion to solutions portfolio scale the on expand we new With the intelligence to staff offerings, process focus remain business, contribution

and our transformation both we recently Phaedra existing we valuable Additionally, with success position the expanded cloud accomplished steps taking targeted consulting executive actively are in verticals. company services. hired market with Divras, and experience solutions Consistent our offerings end across delivering for to managed these objectives, an

in team important to solutions pleased will America. believe North our she We her are and to welcome be CTG an addition to growing

launched the U.S. America. secured of dollar pipeline quarter, for activity services As increased North help solutions West for in evidence our solutions in care system a multi-million quarter, health engagements contract two growing facilities the the of Coast during testing and development advanced our Also MyChart desk provide to recently we during engagements, Epic meaningfully we with business state hospital large offerings drove a CTG's

and StarDust, success to while services through capabilities an solutions of testing North quality and those acquired has As to a we in earlier success this our reminder CTG, new unique leader leveraging seeking replicate we our testing are crowd testing to in been of contributor the the Europe, America, or solutions year. business purchase assurance important also for that in now a

continue with associated meetings, limit obstacles, critical often Our pandemic. for we delayed which proposals. new restrictions to the client new clients. with and face-to-face Even activities team business temporary the for response new though uncertainty development ongoing potential submission also cultivating in issuance due requests engaged to of continue of contract and proposals, prospective to have CTG's these increased are be wins remains sourcing awards with Travel base. the to actively the of In existing new trust

awarded a of northeastern U.S. efforts, system result during clients healthcare expanded in go-live meaningfully these previously quarter, with a the As we the the implementation

the It successfully quarters. unit the Additionally, maintained we a business been sale financial the amount another our significant team rewarding significant client's the following X over particularly see progress company. have in has to of past Alaska, business made at-risk of to

GAAP first margin quarter. X.X% has in from in Our past XXXX the of to this quarter X.X% operating increased

While that has time our non-GAAP from operating increased margin to X.X%, X.X% period. in same

the economies have increased are of and past all our Additionally, impacted the given pleased this of the EBITDA especially unique over in a resulting X challenges the severely by in also been have provide ahead. very team encouraged the we throughout remain I'm opportunities our which to and what that about pandemic. earnings services, performance date, of meaningful from pandemic, proud quarters. Considering most we our XXXX with year has way the accomplished

to more there done. However, work still be is

what potential. We CTG's I have to believe realize can full only begun be

to progress and business. solutions on will we incremental demonstrating continued take in our build the existing accelerate to continue our strategic to objectives, steps momentum addition upon In

trends needs. it the look to believe agile and both important XXXX company to for we I begin ahead and beyond, and clients' changing quickly adapt As and be will be positioning rapidly market

now John quarter excellent detailed results Our shareholders. we our of a our both outlook the enable are continued and opportunity focus evolve a will transformation turn predominantly remainder team our remaining well the will our necessity delivering of and profitability of expanded over while and for clients' meet to executing long-term our to and job remote offerings working clients' for highly third confident in I needs, new norm, efficient to solutions also and value-add done Recognizing value on review environment. strategy increased best adapting digital result the to that XXXX. call significant that our an has for

John Laubacker

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

impact million quarter of negative on third $X.X in $X.X $XXX,XXX XX our business the ongoing period. associated third transition billable our million earlier a with XXXX from impact small pandemic calendar due revenue quarter in release of well translation million the third was in from lower-margin quarter days impact and ago staffing of second with $XX.X from revenue for in select the transition million the XXXX Total to margin the revenue compared staffing quarter. XX seasonality in the the the on third lower reflected with compared previously demand total part second continued and of year-over-year the The quarter the in as this in as typical XX decline client in The primarily Currency a in XXXX away days quarter with negative mentioned $XX.X positive in quarter. days was business. the the year the COVID-XX press XXXX the consolidated in $XX.X had ago quarter and morning, reported quarter the second of were an compared a in third of XXXX. away As quarter million sequential year decline of and

$XX.X and revenue. XXXX $X.X to of XX% compared of in increased Solutions or million million total sequentially quarter million third X.X% of expanded the with previous nearly or This revenue in revenue $XX.X the XX% to total quarter.

of or total XX.X% X.X% increased million year-over-year $XX Solutions compared revenue or revenue third the million with $X.X also quarter XXXX. in

third quarter in of of operating third X.X% or in in and services quarter. a $XX.X to year's total in of the third ago million continue $XXX,XXX revenue, conference quarter services $XX.X XXXX and with a than third In quarter solutions of of of Cost the from master comparable million our solutions expenses, in the or revenue of ago or of in XX% was profit margin representing XXXX in and X.X% year the second XX% of with revenue operating XXXX X.X% quarter. further year-over-year XX, agreement of XXXX from to which was arrangement. addition, compared was XX.X% and revenue GAAP second million quarter basis revenue during of the in in approximately IBM longer-term the our November of as third quarter quarter. as points periods. XX% with portion the recent the third were a client total XXXX overall extended excludes second of third XXX XX.X% of gross revenue. XXXX, other quarter in to Revenue revenue XXXX of revenue business year more call, percentage of we the year XXXX general of improved X.X% second the or XX.X% X.X% of XX.X% terms was with quarter quarter. quarter the total revenue acquisition-related No the with to margin Non-GAAP XX.X% quarter compared in $XX.X discuss the compared margin compared conditions our larger X.X% of in of ago second IBM quarter XXXX represented the Subsequent and in last

life change enacted XX.X% The Intangible diluted in GAAP rate primarily exclusion quarter in Taxed or was $X.XX with income solutions points but basis was income of in The legislation ago acquisition-related GILTI was the while or rate result a increase income our within revenue effective income was year-over-year. the of of newly the in our third with sequentially, a allows comprised compared expenses. $X.XX onetime million Global tax yet quarter from certain GAAP of quarter the of total and of points per Non-GAAP of and by quarter. The basis tax operating and million associated in XX that third $X.XX third mix or which third negative quarter third a measures XXXX Low quarter. This offset income share net XX.X% the nontaxable was the increased the million the XXXX margin during $XXX,XXX share resulted effective share, lower or services. our share. of flat per XX implementing to diluted quarter XX.X% basis sequentially continued a high of the quarter second execution $X.X or was XX benefit in $X.XX negative partially insurance, XXXX regulations. operating Income in in the improve XXXX margin the per net of nonoperating XXXX diluted tax the year-over-year, of non-GAAP third of per delivery points $X.X $X.X for the legislation included gain the tax net diluted year Both revenue reflect efforts third increased

quarter third diluted the that Additionally, previously with XXXX the of of the non-GAAP the both net for the $X.XX note occurring and during share benefit legislation in per tax included GAAP associated the income quarter. discussed change

for XXXX a diluted GAAP severance share, the the offset a of diluted of sale or comparison, life $X.XX million and of comprised of income gains nontaxable per acquisition-related was expenses. and $X.X $X.XX For net from quarter net per benefit which second insurance included by share, building,

Excluding Non-GAAP was third these of the was included net per $X.X in diluted the year XXXX GAAP was $X.XX million the or in or diluted $XXX,XXX share net for quarter. net ago $X.XX acquisition-related XXXX quarter share, non-GAAP $XXX,XXX expenses. $X.XX items, approximately income share. for second third quarter of income diluted income per

solutions or quarter diluted at non-GAAP trailing per headcount of staffing of reduction XXXX, a basis ago quarters XX% total our compared the ended of includes and headcount reflects EBITDA per of end at in legislation. GAAP four X,XXX change diluted was mentioned quarter the $X.XX away from on net and services. margin second end outside quarter. end in headcount change X,XXX X personnel was approximately the third with lower share, XXXX tax billable. quarter previously both as at million benefit we in share September year compared with The the million. the of third the the of third the year transition For was X,XXX for which our business primarily XXXX prior $X.X was $XX.X Approximately to of income the $X.XX the quarters the Adjusted select the CTG's related trailing continue a to

the in end XXXX revolving million were quarter the facility million. debt of second with during of and company's of in our third Capital $X in Cash was net at balance the quarter were XXXX. of company's of Turning the third the of the on XXXX end credit resulted reflecting long-term expenditures cash and in at previously The the to quarter compared $XX.X third end, quarter $XXX,XXX the equivalents $XXX,XXX at and balance million $XXX,XXX quarter sheet. quarter. $XX.X outstanding the quarter outstanding the of paydown XX% cash of the

That associated the potential forward, Looking full we've to the challenges clients, and COVID-XX year not dynamic quantifying chosen the guidance on quarter given quantitative and in sustained XXXX. success XXXX. pandemic margins fourth the business our third provide the with by progress environment said, CTG's profit increase are and impact we for well of in the solutions quarter very initiatives of encouraged our corresponding as gross of the as company's the

in to committed long-term also business XXXX solutions the while of ahead, We making investments for as to continue for the enhance value strategy of year further of part CTG. of the positioning also be our remainder appropriate to focused the seeking

investors address to want our Before the we made the X open filing yesterday. up I that questions, of for call briefly

and management our and and quarterly could focus please is at Laurie, comment to today's The reviewing session? not of our filing have Board are this letter we and results time. the further manage question-and-answer it. on the you Our discuss seen call will team initiate


Instructions]. [Operator

from Our Josh Vogel line & Company. first the with of Sidoti question

Josh Vogel

care to a proven for be has strong So you. question is first my market health

nice with to existing expanding signing you general You're and pre talk I clients changed was business. engage how business, these there could COVID? new today, success help you just what's wondering seeing relative in some and pipeline in about prospects maybe if the

Filip Gydé

Good question, Josh, certainly.

in saw areas, pipeline not increased our I also in is our COVID business growing in is in we are care in, in number when at a of but some health some that only care areas, health sat Looking areas. they think strong,

increase about all also up employees desk. software also problems, we having in home, taking patient it's collaboration demand, installations of from additional For systems, medical help that about kind laptop, and operations, where processes becoming helped desk the their to an different of time. instance, to in record, work longer still work of the from questions more phone access and We've because work and help but kind had a goes additional to capabilities, think response setting different remote that now think online have in working to are more robust

of in demand area. So lot we see a that

needed updates implementations, increased Europe, in the business, There's replicating with strong in We of had with also the the robust a lot is we're during which now sure systems see a that for us the that that increased said releases and I COVID, growing software testing and bugs, beginning a pipeline in speed faults. is and software very my our new very make everything are testing business without as still of changed. the was to remarks, in to And and be strong, of it states. without

good So in business. in and all, still number all we different potential a see solid of our in areas, healthcare

Josh Vogel

and And the I we port the IT jump solutions, assume when most application maybe appreciate next testing pretty gross that you're you the the you're thinking a you several a insight seeing management. It margin. under was where the solutions IT we all seeing work? give impressive operations, over there. in of offerings sense have overall guess, I of what anticipate And application in about testing, Solutions. When the just and demand Solutions the think of business, can today most traction about information quarters

Filip Gydé

offering. a mainly happening and lot positioned the computing are in really solutions. in We spectrum that that the the I of and all all the in of see cloud, cloud area all solutions of areas. think the We see over of traction see is of we things we platform

is can is lot instance, it as and progress it for of application we operations is process development growing in this robotic support intelligence, for implementation, we've So testing recently artificial demand the automation, software launched testing, the year, also to their make automation if test several to the that economically, even going not a and infrastructure, work in and growing testing market. sets, it is that. focusing of intelligence manually. that if and are most very as we are artificial see if see such, And applying The for it automation. also on And the testing, and years sense how next now, applying it test is be cannot of it demand but only we that's doesn't done amount there is be that see there of huge do you tool vendors in the

we test opportunities thing and part see demand. more So of where the definitely the automation application side, side, the service in the is new desk area an technologies in of strong digital same we see those our But also pipeline. then take

Josh Vogel

billable question maybe July. time Could around your versus the some there take that? Could time late in dampened potentially give vacation in people resources off? And right. expected? Was around a do color expectations perhaps just finally taken quarter QX, of less utilization if utilization initial that All in the more than you some

Filip Gydé

could color John, some that? you give on

John Laubacker

was countries It different actually in among Sure. which we operate. different

continued in Europe, So the we would thought I'll some European of than very it less countries vacation -- to bit utilization very, the a start was with taken and had in high, be time be of QX. some

we in least off. time time a travel, in people take some opened take point to countries want expected, in be holiday operate, So higher impact little of vacation bit, a had and time, that think bit QX. that countries, as to as we previously quarter, time off. in some expected time I a at taken And do holiday in up there which breath to been and an take as did was third than people the say we take at it most some there'll But the little some

off think the expect higher see it but was had wasn't tick we board We did a time that, expected. utilization very any very, we strong. did than we really States, did across that. up United see in So and In I our the

So as North I would say America. expected in

Josh Vogel

just well, Great. one one right. All last And for as you probably John.

to envelope forward how of from? business just I'm was more year profit Or margin complete? about think I XX%, the here? calculating away a that kind transition we should business gross of ago. you back doing up profile curious change the about the Just how are staffing going a planning when at staffing math, of will then be from XX% much in from And in

John Laubacker

a It's question. great

of things something client staffing to staffing the else? There a contract away about. one process. go what look detailed governed list through relationship multiple client? of Your name would hard lower we that. perspective, stepping business a not we got opportunity? deliver? How about that at pretty good. who And step does hard and overall by, look been the the is margin of opportunities, it we've business, the business, one say, lowest like? look larger recruit? are is do What our to or few sort number disengaging plan margin think a the to relationships. that you when location. absolutely continue and Just long multiple We've and is opportunities our math we contracts clients, from to It of the be is of to thoughtful the our all questions in to What are the future staffing overall from as from one around away And relationship and at we How to some business convert is And maybe is or that the it

want away we areas come work want something of to one need these And step the something that's to it's continue those critically one that continue so that of from. decide evaluate each if do we we as or in or to and we might up, each

progression viable lowest it think away we're as to staffing the overall where organization. to continue instrumental from business I trying So the margin isn't or accomplish staffing, what just a to an you'll see

So continue. that is definitely going to

from piece of profile, push margin I we as rapidly believe step as to continue margin up I going it's here, continue that that not think far that the As would incrementally go to but that we'll away lowest from to business. up


[Operator Company. Liu & next go to K. Instructions]. Kevin We'll of Liu

Kevin Liu

close given about wondering you pipeline up. a if that, bit guys still the a these talked related moving Or opportunities the come year? for have that in was do those North pipeline for signs to into so deals current more to of able bit number I slower deals little do environment. the to you testing picking expect a that term? seeing are You coming the is little And are in be the you think near America, these

Filip Gydé

pipeline. kind things business structural, We pipeline going past well, robust We clients be But I the quick see that just COVID. see that really discussing need knows fixes when now think that we our opportunity, We're hold. quick solutions. still said, let's replaced everything pre a can't first the until are only don't they okay, fixes. as term. we who now where for more where, obviously, of are, The have probably do by situation a in phase on things they we're the in they are the is see things that more did through to wait go are say, spread while really everybody better. long doing And

pickups we that see speed though like I we So said, in at it's the before. not still, had activity, some

Kevin Liu

of mix us taper those whether expect the John, just expect just that those and in help continue guys of nearing terms progress work guys Understood. programs margin. start pipeline in for you government forward? questions you gross what then, point of there. sort lot the completion, have around in made the Obviously, of the to a couple received you reimbursement or the changes would And to if you Does you projects off here? maybe solutions a any gross could does you margin from see Europe, going from benefit And to of in

Filip Gydé

me with margins. solutions Okay. let the gross start Well,

solutions and on because our solutions. the things. us year Kevin, we're the is getting combination focusing X frame same of number solutions, more of of obviously happy and and with better And doing of solutions gross what are a a better and We we're in more we same executing. think of repeating I than getting time a very a efficient the now continued It's see, progress margin combination over

that So and come that also What more in demand the more there, And we're yield the in obviously a of higher profit yield we of profitability. that more that the subsets is bigger area focusing on gives you you see solutions definitely a that -- are digital higher higher solutions profitability. margins.

So a those of it's combination two factors.

As increase, strategy, though our forward towards digital definitely obviously, increased we higher-margin in business on mix are it's not we linear our continue solutions move increasing up, and but will executing going of to want that margins going on to the straight-line are be to a John, confident the be going we dilutions, you the a side. do the comment trend to benefit?

John Laubacker

really different is Sure. Thanks, one the of it we Kevin, countries operate. Filip. each in answer which in a

those at we're for a end greatly Belgium, most end year, end at actually of where in instances, take and as instance, of for the of company that's they today, if the part, the of lot would But the to know, you're or August. They well. subsidies doing, in most for In For advantage trouble we you the not. a August. will We're exceptionally can. diminished part, for on of came the some those an we the instance, ended continue rest continue

to or us that benefits after the us be August, available we won't September in So previously to QX. weren't August after impacted received available

passes. the do benefits Some those countries, time continue, at other as level a of but diminished

amount time the countries we from the the of government reduced, be passes. will as in get other benefit it So

in less QX than the impact sustainably was impact will and in be in QX. the So certainly QX

Kevin Liu

kind a was have the how with Got part for with if side, with some of you on managed these of just spun days perhaps IBM? you staffing you longer-term to agreement services being much that That's kind undertaking, of And off expect or a versus then negotiations business this the even shifting more IBM helpful. portion a still they're And affect I the towards on it. how agreements? that's spin-off the early it's wondering engagements this, that's I remaining since comment but could know bit just announced

Filip Gydé


new we nothing announcements. been not have had moment, subsequent We business detailed to And portion this has their yet discussion believe with certain the as a obviously, our move IBM But at of a would yet. decided to company.

As know, IBM is relationship our is and long-term outstanding. you with

November that So new to relationship remarks, discussions current some continuing. in XX. And the of a we company. has John indicated even it continue are been and transition that with expect business of long-term on contract IBM if to would terms the to conditions a deal still his new extended

So I'm I had that with a discussion spin-off impact discussions. But not haven't would sure significant yet. there a them be we from on detailed said, like those


Gary Granahan from question is Hatton Our the next line with of Investment.

Gary Hatton

factually I understand I'm and chance here willing a Are not to out-of-pocket sanctioned. had to just the you're the to even haven't about actually say you what and talk filing, what but see filing they filed said?

Filip Gydé


John Laubacker

press release. financial results the from the quarter Our approach talk today, is that we're in about Gary, to going

so filing was to address the that not going no, we're And made.


to turn for management now it I'll remarks. And closing back

Filip Gydé

in In progress, including with very company's momentum continued our during I first collective challenging Laurie. to organization CTG growing the you, performance contributions strong for business to want for offerings, closing, Thank and environment. I'm and our the entire their quarter year-to-date. and dedicated the pleased third work this solutions the thank especially operating

solutions our As focus multiple across conference Laurie, interest positioned expanded, you that evolves capitalize end be transformation, we on I strategic further opportunities towards well business enable growth am verticals new market long-term confident higher-margin digital CTG's and to will We may value. continued today's your business on Solutions participation call. anticipate and call. now you this profitability expansion the significant shareholder will Thank for yield geographies. disconnect increased and both clients' of


for service, using now for AT&T disconnect. our conclude and your today. this Thank for conferencing and Thank conference gentlemen, you. you Ladies call you participation may will and