CTG Reports Quarter One 2011
CTG Reports Quarter One 2011
CTG an international information technology (IT) solutions and services company, announced its financial results for the 2011 first quarter which ended on April 1, 2011. Strong demand for external IT resources, an increase in new healthcare solutions projects, and the operating leverage from higher revenue were the primary contributors to CTG's significant growth in revenue, margins, and earnings in the 2011 first quarter.
Strong Revenue of $95.9 million up 22% and operating income of $4.6 million up 49%, net income was up 58% to $2.8 million.
"We are reporting excellent financial results for the first quarter with earnings per share up 55% on 22% revenue growth," said CTG Chairman and Chief Executive Officer James R. Boldt. "The demand for managed staffing services was higher than expected in the quarter resulting in revenue exceeding our guidance and earnings per share at the top end of guidance. There also were several large new business wins in our healthcare practice in the quarter."
Mr. Boldt continued, "We are pleased by the continued strong demand in the healthcare market as this industry is the major focus of our growth efforts. In the first quarter, healthcare revenue increased 30% over last year with 17 EMR projects making up over half of total healthcare revenue in the quarter. Our win rate on major EMR proposals remains very high as we have won nearly all of the major proposals we have bid on over the last four years. Margins for EMR and other healthcare-related work are significantly higher than our managed staffing services business so we expect the continued growth of our healthcare business will drive further increases in CTG's profitability."
2011 First Quarter Review
Solutions revenue in the 2011 first quarter increased by $8.6 million or 34% to $33.7 million, and represented 35% of total revenue. Staffing revenue increased by $8.8 million or 17% to $62.2 million, or 65% of total revenue. European revenue was $17.1 million or 18% of total revenue in the 2011 first quarter, compared with $16.6 million or 21% of total revenue in the 2010 first quarter. Foreign currency exchange fluctuations had a $0.2 million unfavorable effect on revenue in the quarter. There were 65 billing days in both the first quarters of 2011 and 2010.
Selling, general, and administrative (SG&A) expenses were $15.2 million or 15.8% of revenue, compared with $13.9 million or 17.7% of revenue in the 2010 first quarter. The decline in SG&A as a percent of revenue reflects the operating leverage from revenue growth, cost controls, and the increase in the Company's IT staffing business in the quarter, which has significantly lower SG&A costs than the Company's IT solutions business.
CTG's effective tax rate for the 2011 first quarter was 38% compared with 41% in the 2010 first quarter.
The Company used cash from operations of $7.2 million in the 2011 first quarter compared with cash used from operations of $5.0 million in the 2010 first quarter. At April 1, 2011, the Company had $8.9 million in cash compared with $4.2 million at the end of the 2010 first quarter. Cash usage from operations in both quarters primarily reflects the quarters ending on a payroll date for the Company's U.S. operations. At the end of the 2011 first quarter, the Company had no outstanding debt compared with $0.9 million a year earlier. CTG finances its working capital needs through a $35 million revolving credit agreement that is in place through April 2014.
Stock Repurchase Program
CTG repurchased 51,000 of its shares in the 2011 first quarter at an average price of $11.80 per share. In April 2011, the Company extended its 10b5-1 stock repurchase plan to facilitate the repurchase of its common stock during its self-imposed blackout periods prior to the announcement of quarterly results. On April 22, 2011, approximately 1.1 million shares were available under its current repurchase authorizations.
2011 Revenue and Earnings Guidance Increased
The Company is providing guidance for the 2011 second quarter. CTG expects its 2011 second quarter revenue to range from $97 million to $99 million, a 21% increase from 2010 at the midpoint of this range. The Company projects 2011 second quarter net income per diluted share of $0.16 to $0.18, a 42% increase from 2010 at the midpoint of this range. There are 64 billing days in the 2011 second quarter, equal to the 2010 second quarter.
Based on the strength of its current business and trends in its healthcare and staffing businesses, CTG has raised its 2011 revenue and earnings guidance. The Company is increasing the range of its 2011 revenue guidance to $380 million to $400 million from $365 million to $385 million, an 18% increase from 2010 at the midpoint of the new projected range. The Company currently projects 2011 net income per diluted share of $0.65 to $0.75, an increase of $0.02 from the previous range and a 35% increase from 2010 at the midpoint of the new range. A tax rate of approximately 38% is projected for 2011.
Mr. Boldt commented, "All indicators are that 2011 will be another very good year for CTG with a continuation of robust double-digit revenue and earnings growth. We are increasing our revenue and earnings guidance for the year based on the stronger than expected growth we are experiencing in our managed staffing services business and the number of new healthcare business wins in the first quarter."
Mr. Boldt concluded, "We are capitalizing on the EMR opportunity and are in an excellent position to continue to grow this business at a vigorous pace. Finding and hiring the number of technical resources required to support the higher volume of new healthcare work expected is an industry-wide challenge that we feel better equipped to address than many competitors given our strengths in recruiting and training. Looking to the future, we are also expanding the scope of our healthcare solutions offerings to address the further impact of healthcare reform on providers and payers. These new offerings include support for conversions to ICD-10 the international standard for diagnostic codes and for the formation of accountable care organizations to improve care quality and reduce unnecessary costs. By building a robust suite of offerings, we are positioning CTG to continue growing as a leading full service provider of health IT and consulting services and solutions. We are confident that our strategic focus on growing our healthcare business will increase our mix of higher margin solutions business and produce significant gains in CTG's revenue and profitability over the next few years."