CTG Reports 2013 Second Quarter EPS of $0.24
CTG Reports 2013 Second Quarter EPS of $0.24
CTG the information technology (IT) solutions and services company, announced its financial results for the 2013 second quarter which ended on June 28, 2013. Higher demand for technical resources at some staffing clients and medical data analytics work were the primary contributors to earnings growth offsetting the impact of recent reductions in billable headcount at a large staffing client and delays in the start-up of Electronic Medical Record (EMR) projects.
2013 Second Quarter Review
Revenue, operating income, net income, and diluted net income per share for the 2013 second quarter as compared with the 2012 second quarter were as follows (dollar amounts in thousands except per-share data).
The Company's operating margin improved by 20 basis points to 6.0% from 5.8% in the 2012 second quarter and for the first time reached its long-term operating margin objective of 6% to 7% set more than a decade ago.
"CTG's second quarter earnings were at the mid-point of guidance and up 9%, excluding last year's non-operational gain, despite lower than expected revenue growth due to a reduction in technical resource requirements from a large customer in our lower margin staffing business and delays in the start-up of EMR projects," said CTG Chairman and Chief Executive Officer James R. Boldt. "Our focus on higher margin solutions work and the healthcare market is clearly paying off with the operating margin in the quarter reaching 6%, the highest level in over a decade. Healthcare revenue was down slightly from last year as many hospital clients are deferring system investments as a result of the U.S. federal budget sequestration. Long term, we remain optimistic in our healthcare opportunities in EMR and other areas such as post-implementation EMR production support, application management outsourcing, and medical data analytics. Earnings also benefited from work related to our IT medical management solution for chronic diseases. In the quarter, we began an implementation of our medical fraud, waste, and abuse (FWA) software as a service (SaaS) product for a small payer. While we did not record any revenue from this client in the second quarter of 2013, we expect a meaningful contribution to earnings from this engagement in the second half of the year."
Mr. Boldt added, "Our success in steadily growing our healthcare business is reflected in CTG not only being recently named to the 2013 Healthcare Informatics HCI 100 list of the largest healthcare IT companies but also in our moving up 15 places on the list in the last three years to the current position of 54. Our European operations continue to be in a growth mode with revenue up 11% in the quarter based on increased business in our government and financial services practices and the addition of etrinity, our recently acquired Belgium-based health IT services provider. We look for etrinity to help drive further growth in our European business as countries there move toward adoption of U.S. EMR software over the next few years."
Solutions revenue in the 2013 second quarter was $42.3 million, representing 40% of total revenue compared with 41% in the 2012 second quarter. Staffing revenue was $64.8 million, or 60% of total revenue, compared with 59% in the 2012 second quarter. European revenue, which includes the acquisition of etrinity in 2013, increased 11.0% to $18.6 million, or 17% of total revenue, compared with $16.8 million, or 16% of total revenue, in the 2012 second quarter. Foreign currency exchange fluctuations had a $0.3 million favorable effect on revenue in the quarter compared with a $1.9 million unfavorable effect in the 2012 second quarter. There were 64 billing days in the second quarter of 2013 and 2012.
Selling, general, and administrative (SG&A) expenses were $16.2 million or 15.2% of revenue, compared with $16.8 million or 15.7% of revenue in the 2012 second quarter.
Cash provided by operations was $4.9 million in the 2013 second quarter compared with cash provided by operations of $6.0 million in the 2012 second quarter. At June 28, 2013, the Company had $34.0 million in cash compared with $23.6 million at the end of the 2012 second quarter. The Company had no outstanding debt at the end of the 2013 and 2012 second quarters.
The Company's tax rate for the 2013 second quarter was 35.6% compared with 36.8% in the 2012 second quarter. The tax rate for the 2013 second quarter benefited from a federal Work Opportunity Tax Credit attributable to recent hiring while the 2012 second quarter tax rate reflects the favorable effect of non-taxable life insurance proceeds received in the quarter. A tax rate of 36% to 38% is projected for the 2013 full year.
2013 First Half Review
Revenue, operating income, net income, and diluted net income per share for the 2013 first half as compared with the 2012 first half are as follows (dollar amounts in thousands except per share data):
The Company's operating margin increased by 20 basis points to 5.8% in the 2013 first half from 5.6% in the 2012 first half. During the first half of 2013, CTG’s solutions business was $84.6 million, or 39% of total revenue, and its staffing business was $131.0 million, or 61% of total revenue. European revenue, including the acquisition of etrinity in 2013, increased 12.0% to $38.0 million in the 2013 first half and represented 18% of total revenue.
Selling, general, and administrative expenses were $32.7 million, or 15.1% of revenue, compared with $33.0 million, or 15.7% of revenue, in the 2012 first half.