BUFFALO, N.Y., July 26, 2016 (GLOBE NEWSWIRE) -- CTG (NASDAQ:CTG), an information technology (IT) solutions and services company, today announced its financial results for the second quarter ended July 1, 2016.

Second Quarter and Recent Highlights

• Revenue was $83.5 million, compared with $94.7 million in the prior year second quarter;
• Operating margin was 2.3%, compared with 1.2% in the second quarter of 2015, which included $2.3 million in charges;
• Net income was $1.3 million, or $0.08 per diluted share, compared with $554,000, or $0.03 per diluted share, in the year-ago quarter, which included $0.08 per diluted share in charges;
• Cash and short-term investments net of debt were $6.3 million at quarter-end;
• Declared cash dividend of $0.06 per share, paid on July 6, 2016; and
• Appointed Bud Crumlish CEO on July 21, 2016.

Commenting on the results, Bud Crumlish, CTG’s President and Chief Executive Officer, stated, “Second quarter earnings exceeded our guidance, due primarily to a $0.03 foreign payroll tax credit; quarterly earnings excluding the credit were at the high-end of guidance. However, revenue in the quarter was below our expectations, largely reflecting weakness at significant staffing customers.

“Despite these headwinds, we continued to gain new business traction during the quarter by securing new clients in each of our four vertical markets. In addition to new client accounts, we’ve been successful at expanding business at existing accounts. Collectively, these wins demonstrate the early results from the investments in our sales team and market expansion, as well as targeted efforts to diversify CTG’s customer base and future growth opportunities.

“Also notable during the quarter, we established a staffing subsidiary in Hyderabad, India to provide offshore recruiting and sourcing solutions to customers in the U.S. and U.K. CTG’s India subsidiary expands our capabilities and offerings for both new and existing clients. As part of launching this new fulfillment center and also in support of servicing new business, we further increased recruiter and account manager headcount in both the United States and India.”

Consolidated Results
Revenue in the second quarter ended July 1, 2016 was $83.5 million, compared with $85.9 million in the prior quarter and $94.7 million in the second quarter of 2015. The year-over-year decline primarily reflects a decrease in staffing revenue at significant staffing customers and the continued trail-off of legacy electronic medical records (EMR) account business. Positive currency translation increased revenue in the second quarter by $0.3 million.

Direct costs in the second quarter were $67.6 million, or 80.9% of revenue, compared with $79.1 million, or 83.5% of revenue, in the year-ago second quarter. Direct costs in the current period benefited from approximately $0.7 million in foreign payroll tax credits. Second quarter 2015 direct costs included $2.1 million in charges for a European workforce reduction and the write-off of the Company’s medical management software. SG&A expenses were $14.0 million, compared with $14.5 million in the year-ago quarter.

Operating income in the second quarter was $1.9 million, or 2.3% of revenue, compared with $1.1 million, or 1.2% of revenue, in the second quarter of 2015. Operating income in the current quarter included the foreign payroll tax credits, while the second quarter of 2015 included $2.3 million in charges. Operating margin, excluding the payroll tax credits, continues to reflect a shift toward lower margin staffing business.

CTG’s effective income tax rate in the second quarter was 29.6%, which benefitted from certain U.S. federal tax credits that had not been reinstated as of the end of last year’s second quarter. The effective income tax rate in second quarter of 2015 was 48.4%, which was unusually high due to the absence of the tax credits as well as certain costs in the United Kingdom for which the Company received no tax benefit.

Net income in the second quarter of 2016 was $1.3 million, or $0.08 per diluted share, compared with net income of $554,000, or $0.03 per diluted share, in the second quarter of 2015. Second quarter 2016 earnings included the benefit of $0.03 per diluted share related to foreign payroll tax credits, while last year’s second quarter included $0.08 per diluted share in charges.

Balance Sheet
Cash and short term investments at July 1, 2016 were $10.9 million; long-term debt was $4.6 million. Days sales outstanding were 81 days in the second quarter of 2016 compared with 61 days in the year-ago second quarter, primarily reflecting the previously implemented cessation of an early payment discount with a significant customer and the lengthening in payment terms by multiple larger customers. Tangible book value at July 1, 2016 was $4.98 per share.

Guidance and Outlook
CTG expects total revenue for the third quarter of 2016 to range between $79.0 and $81.0 million. GAAP net loss is expected to be between ($0.02) and ($0.04) per share, including severance charges of approximately $0.06 per diluted share related to the Company’s former CEO. There are 63 billing days in the third quarter of 2016 compared with 64 billing days in the third quarter of 2015.

For the full year 2016, CTG expects revenue to range between $328.0 and $334.0 million. GAAP net loss is expected to range from ($1.21) to ($1.27) per share. Full year non-GAAP net income, which excludes the non-cash goodwill impairment charge of $21.5 million taken in the first quarter and a charge related to the former CEO’s severance, is expected to range from $0.17 and $0.23 per diluted share.

Mr. Crumlish concluded, “As largely anticipated, current macro and industry trends are continuing to be challenges for a number of our clients, resulting in lower revenue expectations for the third quarter and full year. However, we remain fully committed to working closely with all of our clients and providing the consistent unmatched reliability that sets CTG apart. Equally important is our continued execution on business objectives and growth initiatives. We expect to further build on CTG’s existing roster of new clients and our broadening business pipeline, with the goal of exiting 2016 on strong footing and growing momentum.”

Conference Call and Webcast
CTG will hold a conference call today at 8:30 a.m. Eastern Time to discuss its financial results and business outlook. To access CTG’s conference call via telephone, dial 1-800-553-5260 by 8:20 a.m. Eastern Time and ask for the CTG conference call. The call will also be webcast from CTG’s website at www.ctg.com.

A replay of the call will be available between 10:30 a.m. Eastern Time July 26, 2016, and 11:59 p.m. Eastern Time July 29, 2016, by dialing 1-800-475-6701 and entering conference ID 382583. The webcast will be archived on CTG’s website at http://investor.ctg.com/events.cfm for approximately 90 days following completion of the conference call.

About CTG
CTG provides industry-specific IT services and solutions that address the business needs and challenges of clients in high-growth industries in North America and Western Europe. CTG also provides strategic staffing services for major technology companies and large corporations. Backed by 50 years of experience and proprietary methodologies, CTG has a proven track record of reliably delivering high-value, industry-specific staffing services and solutions to its clients. CTG has operations in North America, Western Europe, and India. The Company regularly posts news and other important information online at www.ctg.com.

Safe Harbor Statement
This document contains certain forward-looking statements concerning the Company's current expectations as to future growth, financial outlook, business strategy and expectations for 2016, and statements related to cost control, new business opportunities, financial performance, market demand, and other attributes of the Company. These statements are based upon the Company's expectations and assumptions, a review of industry reports, current business conditions in the areas where the Company does business, feedback from existing and potential new customers, a review of current and proposed legislation and governmental regulations that may affect the Company and/or its customers, and other future events or circumstances. Actual results could differ materially from the outlook guidance, expectations, and other forward-looking statements as a result of a number of factors, including among others, the availability to the Company of qualified professional staff, domestic and foreign industry competition for customers and talent, increased bargaining power of large customers, the Company's ability to protect confidential client data, the partial or complete loss of the revenue the Company generates from International Business Machines Corporation (IBM) and/or SDI International (SDI), the uncertainty of customers' implementations of cost reduction projects, the effect of healthcare reform and initiatives, the mix of work between staffing and solutions, currency exchange risks, risks associated with operating in foreign jurisdictions, renegotiations, nullification, or breaches of contracts with customers, vendors, subcontractors or other parties, the change in valuation of recorded goodwill or capitalized software balances, the impact of current and future laws and government regulation, as well as repeal or modification of such, affecting the information technology (IT) solutions and staffing industry, taxes and the Company's operations in particular, industry and economic conditions, including fluctuations in demand for IT services, consolidation among the Company's competitors or customers, the need to supplement or change our IT services in response to new offerings in the industry or changes in customer requirements for IT products and solutions and other factors that involve risk and uncertainty including those listed in the Company's reports filed with the Securities and Exchange Commission as of the date of this document. Such forward-looking statements should be read in conjunction with the Company's disclosures set forth in the Company's 2015 Form 10-K, which is incorporated by reference, and other reports that may be filed from time to time with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.

CTG news releases are available on the Web at www.ctg.com.

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