CTG Reports 2013 Third Quarter EPS of $0.23
CTG, an information technology (IT) solutions and services company, announced its financial results for the 2013 third quarter which ended on September 27, 2013. CTG also announced today that its Board of Directors approved a new one million common share repurchase authorization.
"The highlight of third quarter results is an operating margin of 6.0% for the second consecutive quarter, the highest level in almost 15 years," said CTG Chairman and Chief Executive Officer James R. Boldt. "The strength of our margin is coming from disciplined expense control, which enabled us to generate earnings that met guidance despite lower than expected revenue."
"Our healthcare business declined from last year as a number of hospital clients are holding off on system investments while they determine how to adjust their cost structure to deal with lower reimbursements as a result of the U.S. federal budget sequestration. While the federal budget sequestration is affecting revenue growth from healthcare providers in the short term, we also know that hospitals must invest in EMR systems to comply with health reform mandates and to lower costs in order to remain competitive and financially viable in a rapidly changing business environment. More recently, we have seen a significant increase in requests for proposals for healthcare application outsourcings, which provide a way for hospitals to reduce their operating costs without making significant financial investments. Late in the quarter, we secured our first European EMR advisory consulting project, an important first step toward doing more significant full-scale EMR implementations as European healthcare providers begin to adopt U.S. EMR software packages to improve healthcare delivery and lower costs."
"Further working to our benefit in the future growth of our healthcare IT business is a strong reputation and standing in the marketplace as reflected by CTG Health Solutions recently placing seventh in the Modern Healthcare 2013 annual ranking of the largest healthcare management consulting firms, three spots above the 2012 survey. CTG Health Solutions was also named as a 2013 Modern Healthcare Best Place to Work in Healthcare which enhances our ability to recruit experienced health IT consultants in a highly competitive market for health IT talent."
2013 Third Quarter Review
Revenue, operating income, net income, and diluted net income per share for the 2013 third quarter as compared with the 2012 third quarter were as follows (dollar amounts in thousands except per-share data):
The Company's operating margin improved by 10 basis points to 6.0% from 5.9% in the 2012 third quarter.
Solutions revenue in the 2013 third quarter was $40.0 million, representing 40% of total revenue compared with 42% of total revenue in the 2012 third quarter. Staffing revenue was $60.7 million, or 60% of total revenue, compared with 58% of total revenue in the 2012 third quarter. European revenue increased 12% to $18.2 million, or 18% of total revenue, from $16.3 million, or 15% of total revenue, in the 2012 third quarter. Foreign currency exchange fluctuations had a $1.0 million favorable effect on revenue in the quarter compared with the 2012 third quarter. The increase in revenue from CTG's European operations is attributable to growth in its financial services practice and the addition of etrinity, the Belgium-based health IT services provider acquired in February 2013. There were 63 billing days in the third quarter of 2013 and 2012.
Selling, general, and administrative (SG&A) expenses in the 2013 third quarter were $15.1 million, or 15% of revenue, a 10% decrease from $16.8 million, or 15.8% of revenue, in the 2012 third quarter.
Cash provided by operations was $3.0 million in the 2013 third quarter compared with cash provided by operations of $6.2 million in the 2012 third quarter. At September 27, 2013, the Company had $31.5 million in cash compared with $29.4 million at the end of the 2012 third quarter. The Company had no outstanding debt at the end of the 2013 and 2012 third quarters. The tax rate for the quarter was 35.2%.
2013 Year-to-date Review
Results for the first three quarters of the year reflect the same trends seen in the third quarter. Revenue, operating income, net income, and diluted net income per share for the first three quarters of 2013 as compared with the first three quarters of 2012 are as follows (dollar amounts in thousands except per share data):
The Company's operating margin increased by 20 basis points to 5.9% in the first three quarters of 2013 from 5.7% in the same period of 2012. For the first three quarters of 2013, CTG's solutions business was $124.3 million, or 39% of total revenue, and its staffing business was $192.0 million, or 61% of total revenue. European revenue in the first three quarters of 2013 increased 12% to $56.2 million, or 18% of total revenue, compared with $50.3 million or 16% of total revenue in the comparable 2012 period.
Selling, general, and administrative expenses were $47.8 million, or 15.1% of revenue, a decrease of $2.0 million or 4% from $49.8 million, or 15.7% of revenue, in the first three quarters of 2012.
Stock Repurchase Program
CTG repurchased 225,000 of its shares in the 2013 third quarter at an average price of $18.41 per share. In October 2013, 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. Including the new one million share repurchase authorization announced today, approximately 1.2 million shares are currently available for repurchase.
Mr. Boldt commented, "Our Board's new one million share repurchase authorization reflects the company's strong financial position and our continued confidence in CTG's future prospects. In addition to our active share repurchase program, our commitment to delivering shareholder value is also reflected in our adoption earlier this year of a regular quarterly cash dividend."