- Cegeka to acquire CTG for $10.50 per share in a cash transaction valued at approximately $170 million. See the separate press release issued earlier today that announced this transaction.
- Software Engineering revenue in the second quarter of more than $30 million with gross margin of 32.7%
- IT Solutions and Services segments represent 86% of total revenue in the second quarter, CTG’s highest level to date
- IT Solutions and Services segments gross margin improved 170 basis points year-over-year
- Revenue of $74.6 million reflected intentional disengagement of $15.1 million from non-strategic technology services business
- Gross margin improved to 28.1%, or 420 basis points from the prior year
- GAAP operating margin was 0.4% in second quarter; non-GAAP operating margin was 3.9%
- Net loss was ($0.1) million, with a margin of (0.2)%; adjusted EBITDA was $3.7 million, with a margin of 4.9%
BUFFALO, N.Y., Aug. 09, 2023 (GLOBE NEWSWIRE) -- CTG ( CTG) (“Company”), a leader in North America and Western Europe helping companies employ digital IT solutions and services to drive their productivity and profitability, today reported its financial results for the second quarter ended June 30, 2023.
Filip Gydé, CTG President and CEO, commented, “The sale of CTG to Cegeka is a testament to the significant efforts we have undertaken to drive our transformation strategy to make CTG a pure-play digital IT solutions provider. At CTG, our mission is to drive better, faster results for our clients with high-value digital transformation solutions. In Cegeka, we have found a partner that will enable us to accelerate this important work and we are confident that this transaction with Cegeka is the best outcome for our clients, employees, and shareholders. We are also pleased to have entered into this transaction with Cegeka, which delivers immediate value to our shareholders.”
“We continue to be encouraged by CTG’s successes this quarter, as we execute our strategy, win new engagements and deliver critical solutions for our clients amid the difficult macroeconomic environment,” Mr. Gydé continued. “We have now driven our digital solutions and services business mix to more than 85% of revenue, our highest level to date, and increased the gross margin in our IT Solutions and Services segments by 170 basis points from the prior year quarter. Our second quarter North America IT Solutions and Services segment, including the results of the Eleviant acquisition in late 2022, grew revenue nearly 28%, and achieved gross margins of 40.4%, up 560 basis points from a year ago. Overall, our gross margin in the quarter grew to 28.1%, the highest in company history.”
Consolidated Second Quarter 2023 Review (Narrative compares with prior-year period unless otherwise noted) (unaudited)
| ($ in thousands) | For the Quarter Ended | Change 2022-2023 | Change 2021-2022 | ||||||||||||||||||||||
| Jun. 30, 2023 | Jul. 1, 2022 | Jul. 2, 2021 | $ | % | $ | % | |||||||||||||||||||
| Revenue | $74,588 | $82,759 | $92,164 | $(8,171 | ) | (9.9 | )% | $(9,405 | ) | (10.2 | )% | ||||||||||||||
| GAAP Gross Profit | $20,995 | $19,750 | $20,379 | $1,245 | 6.3 | % | $(629 | ) | (3.1 | )% | |||||||||||||||
| GAAP Gross Margin | 28.1 | % | 23.9 | % | 22.1 | % | |||||||||||||||||||
| GAAP Operating Income | $285 | $3,173 | $2,801 | $(2,888 | ) | (91.0 | )% | $372 | 13.3 | % | |||||||||||||||
| GAAP Operating Margin | 0.4 | % | 3.8 | % | 3.0 | % | |||||||||||||||||||
| Non-GAAP Operating Income* | $2,923 | $3,463 | $2,966 | $(540 | ) | (15.6 | )% | $497 | 16.8 | % | |||||||||||||||
| Non-GAAP Operating Margin* | 3.9 | % | 4.2 | % | 3.2 | % | |||||||||||||||||||
| GAAP Net Income (Loss) | $(130 | ) | $2,040 | $1,833 | $(2,170 | ) | (106.4 | )% | $207 | 11.3 | % | ||||||||||||||
| GAAP Net Margin | -0.2 | % | 2.5 | % | 2.0 | % | |||||||||||||||||||
| Non-GAAP Net Income* | $1,923 | $2,252 | $1,952 | $(329 | ) | (14.6 | )% | $300 | 15.4 | % | |||||||||||||||
| Non-GAAP Net Income Margin* | 2.6 | % | 2.7 | % | 2.1 | % | |||||||||||||||||||
| Adjusted EBITDA* | $3,692 | $4,224 | $4,096 | $(532 | ) | (12.6 | )% | $128 | 3.1 | % | |||||||||||||||
| Adjusted EBITDA Margin* | 4.9 | % | 5.1 | % | 4.4 | % | |||||||||||||||||||
* A reconciliation of GAAP to non-GAAP information is included in the financial tables below
- The decrease in revenue reflects the Company’s continued business mix shift to more solutions and services-based business. As compared with the second quarter of 2022, the Company disengaged from $15.1 million in its lower-margin non-strategic technology services business.
- The change in business mix and focus on digital solutions has led to significant improvements in gross margin over the past two years, increasing 600 basis points over that time.
- As a percentage of revenue, selling, general and administrative (SG&A) expenses were 27.8% compared with 20.0% in the prior-year period. The increase was primarily due to increases in acquisition-related expenses from the Eleviant acquisition, costs associated with the new ERP implementation, severance, and non-recurring costs related to certain strategic initiatives.
- Included in the GAAP net loss was $0.5 million of acquisition-related expenses, $0.4 million of ERP system implementation costs, $0.4 million of severance, and $0.8 million of non-recurring costs related to certain strategic initiatives, while the prior-year period included $0.2 million of acquisition expenses. Loss per diluted share was ($0.01) for the second quarter of 2023 compared with $0.13 for the second quarter of 2022. Excluding these expenses from both periods, non-GAAP earnings per diluted share were $0.13 compared with $0.15.
Second Quarter Segment Performance (unaudited)
IT Solutions and Services
North America
($ in thousands)For the Quarter Ended Change 2022-2023 Change 2021-2022 Jun. 30, 2023 Jul. 1, 2022 Jul. 2, 2021 $ % $ % Revenue$25,997 $20,339 $16,762 $5,658 27.8% $3,577 21.3%Percent of total 34.8% 24.6% 18.2% Gross profit$10,512 $7,079 $6,074 $3,433 48.5% $1,005 16.5%Gross margin 40.4% 34.8% 36.2% Contribution profit$5,797 $3,547 $2,908 $2,250 63.4% $639 22.0%Contribution margin 22.3% 17.4% 17.3%The significant growth in revenue and gross margins in North America IT Solutions and Services reflects continued strong contributions from the acquisition of Eleviant, organic growth of approximately 10%, and CTG’s enhanced focus on delivering digital transformation services.Europe
($ in thousands)For the Quarter Ended Change 2022-2023 Change 2021-2022 Jun. 30, 2023 Jul. 1, 2022 Jul. 2, 2021 $ % $ % Revenue$38,393 $37,160 $44,054 $1,233 3.3% $(6,894) (15.6)%Percent of total 51.5% 44.9% 47.8% Gross profit$9,243 $9,582 $10,748 $(339) (3.5)% $(1,166) (10.8)%Gross margin 24.1% 25.8% 24.4% Contribution profit$3,955 $4,727 $5,612 $(772) (16.3)% $(885) (15.8)%Contribution margin 10.3% 12.7% 12.7%Europe IT Solutions and Services margins continue to reflect the impact of mandated salary increases at the beginning of the year that are being passed to clients throughout the year.Non-Strategic Technology Services
($ in thousands)For the Quarter Ended Change 2022-2023 Change 2021-2022 Jun. 30, 2023 Jul. 1, 2022 Jul. 2, 2021 $ % $ % Revenue$10,198 $25,260 $31,348 $(15,062) (59.6)% $(6,088) (19.4)%Percent of total 13.7% 30.5% 34.0% Gross profit$1,240 $3,089 $3,557 $(1,849) (59.9)% $(468) (13.2)%Gross margin 12.2% 12.2% 11.3% Contribution profit$867 $2,388 $2,239 $(1,521) (63.7)% $149 6.7%Contribution margin 8.5% 9.5% 7.1%Continued disengagement from Non-Strategic Technology Services is consistent with the Company’s long-term strategy. Revenue was also negatively impacted by challenging macroeconomic conditions.Consolidated Year-to-Date Results
(unaudited)
| ($ in thousands) | For the Two Quarters Ended | Change 2022-2023 | Change 2021-2022 | ||||||||||||||||||||||
| Jun. 30, 2023 | Jul. 1, 2022 | Jul. 2, 2021 | $ | % | $ | % | |||||||||||||||||||
| Revenue | $ | 152,790 | $ | 172,176 | $ | 189,293 | $ | (19,386 | ) | (11.3 | )% | $ | (17,117 | ) | (9.0 | )% | |||||||||
| GAAP Gross Profit | $ | 41,130 | $ | 40,345 | $ | 41,146 | $ | 785 | 1.9 | % | $ | (801 | ) | (1.9 | )% | ||||||||||
| GAAP Gross Margin | 26.9 | % | 23.4 | % | 21.7 | % | |||||||||||||||||||
| GAAP Operating Income | $ | 992 | $ | 6,372 | $ | 4,899 | $ | (5,380 | ) | (84.4 | )% | $ | 1,473 | 30.1 | % | ||||||||||
| GAAP Operating Margin | 0.6 | % | 3.7 | % | 2.6 | % | |||||||||||||||||||
| Non-GAAP Operating Income* | $ | 5,031 | $ | 6,924 | $ | 5,708 | $ | (1,893 | ) | (27.3 | )% | $ | 1,216 | 21.3 | % | ||||||||||
| Non-GAAP Operating Margin* | 3.3 | % | 4.0 | % | 3.0 | % | |||||||||||||||||||
| GAAP Net Income | $ | 185 | $ | 4,280 | $ | 3,341 | $ | (4,095 | ) | (95.7 | )% | $ | 939 | 28.1 | % | ||||||||||
| GAAP Net Margin | 0.1 | % | 2.5 | % | 1.8 | % | |||||||||||||||||||
| Non-GAAP Net Income* | $ | 3,163 | $ | 4,691 | $ | 3,958 | $ | (1,528 | ) | (32.6 | )% | $ | 733 | 18.5 | % | ||||||||||
| Non-GAAP Net Income Margin* | 2.1 | % | 2.7 | % | 2.1 | % | |||||||||||||||||||
