Staffing revenues up 17 YoY at year-end 2018 for CTG
CTG has released its financial results for the fourth quarter and full year ended 31st December 2018.
Revenue in the fourth quarter of 2018 increased almost 25% to $93.1m, compared with $90.3m in the third quarter of 2018, and $74.6m in the fourth quarter of 2017. The year-over-year increase in fourth quarter revenue resulted from a combination of organic growth in both North America and Europe, as well as revenue contribution from the acquisition of Soft Company in February of 2018. Revenue from Staffing grew 23% year-over-year, primarily from the largest staffing clients, and represented 68% of total revenue. Currency translation had a negative $1.0m impact on revenue in the fourth quarter, compared with a negligible impact in the third quarter of 2018, and a benefit of $1.9m in the fourth quarter of 2017.
Direct costs in the fourth quarter of 2018 were $75.4m, or 80.9% of revenue, compared with $72.9m, or 80.8% of revenue, in the third quarter of 2018 and $59.5m, or 79.7% of revenue, in the fourth quarter of 2017. SG&A expense in the fourth quarter of 2018 was $18.4m, which included $0.5m in acquisition-related costs associated with Soft Company and Tech-IT, and $0.7m in severance. This compared with $16.5m in the third quarter of 2018, which included $0.7m in acquisition-related costs associated with Soft Company, and $13.6m in the 2017 fourth quarter.
Operating loss in the fourth quarter of 2018 was $0.8m or (0.8%) of revenue, and included employee benefit costs that were significantly higher than planned, and acquisition-related and severance costs. Operating income in the fourth quarter of 2017 was $1.6m, or 2.1% of revenue.
Net loss in the fourth quarter of 2018 was $5.3m, or ($0.39) per share, which included $1.2m, or $0.06 per share, in acquisition-related and severance expenses, and $0.36 per diluted share in tax-related items. This compared with net income in the third quarter of 2018 of $1.1m, or $0.08 per diluted share, which included $0.5m, or $0.04 per diluted share, in acquisition-related expenses and a $0.8m, or $0.06 per diluted share, non-taxable gain from life insurance proceeds. Net loss in the fourth quarter of 2017 was $0.4m, or ($0.03) per share, which included a charge of $1.7m related to a tax law change, and a $0.4m non-taxable gain from life insurance proceeds.
For the full year 2018, revenue was $358.8m, up 19% YoY, compared with $301.2m in 2017. Favorable currency translation benefited revenue by $4.9m in 2018, and by $1.4m in 2017. Direct costs in 2018 were $290.1m, or 80.9% of revenue, compared with $245.2m, or 81.4% of revenue in 2017. Revenue from Staffing grew 17% and represented 69% of total revenue. SG&A expense in 2018 was $66.2m, and included $2.0m in acquisition related costs and $0.7m in severance, compared with $51.8m in 2017, which included $0.8m in severance-related charges.
Operating income for the full year 2018 was $2.1m, which included $2.0m of acquisition-related expenses, $0.7m of severance-related charges, and employee benefit costs that were significantly higher than planned. This compared with operating income of $4.2m in 2017, which included severance-related charges totalling $0.8m. GAAP net loss for 2018 was $2.8m, or ($0.20) per share, which included a $0.06 per share non-taxable life insurance gain, acquisition-related charges of $0.11 per share, severance of $0.04 per share, a $0.29 per share non-cash charge related to reserves for US deferred tax assets, and other tax-related items of $0.07 per share. This compared with 2017 GAAP net income of $806,000, or $0.05 per diluted share, which included a $0.11 per share charge related to a tax law change, severance-related charges of $0.03 per share, and a $0.02 per share non-taxable life insurance gain.
Bud Crumlish, CTG president and CEO, commented, “We continued to execute on our ongoing initiatives to realign CTG’s business and establish a foundation to generate strong, sustainable growth.
“We are very pleased to enter 2019 with significant momentum after making strategic investments for growth in the highest performing areas of our business and to drive operational excellence.”
“We also made progress expanding business with existing clients and believe there is significant upside to be realized from several of our new client initiatives. Leveraging CTG’s longstanding reputation as an industry leader in IT Staffing, our strategic approach in 2018 was to prioritize our business development efforts on higher-margin staffing opportunities. Although the quality of staffing revenue did not improve as planned, we are already beginning to see the results of these efforts in the early part of 2019. Our deep relationships with clients, strong market presence and our proven track record of delivering quality service continue to be hallmarks of our business.”
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