Second-quarter revenue at Computer Task Group Inc. (NASDAQ; CTG) fell 9.9% year over year to $74.6 million, but gross margin hit a record-high for the Buffalo, New York-based IT staffing and solutions provider. 

Separately, CTG today announced it is being acquired by Cegeka Groep nv, an IT solutions provider based in Hasselt, Belgium. 

Revenue decreases in CTG’s “Non-strategic technology services” segment — which fell 58.4% year over year to $10.5 million — offset increases in other segments; however, gross margin remained at 12.2% in the segment. 

The company noted that continued disengagement from nonstrategic technology services is consistent with its long-term strategy and that revenue was also negatively impacted by challenging macroeconomic conditions. 

Revenue from CTG’s “North America IT solutions and services” segment rose 27.8% year over year to $26.0 million. Gross margin in the segment improved to 40.4% from 34.8% in the year-ago quarter. This segment includes results from Eleviant Technologies, which CTG acquired in September 2022. 

In CTG’s “Europe IT solutions and services” segment, second-quarter revenue rose 3.3% to $38.4 million. Gross margin narrowed to 24.1% from 25.8% in the second quarter of last year. 

The company reported it disengaged $74.6 million in nonstrategic technology services business during the second quarter. It also reported software engineering revenue in the second quarter of more than $30 million with gross margin of 32.7%. 

“We continue to be encouraged by CTG’s successes this quarter as we execute our strategy, win new engagements and deliver critical solutions for our clients amid the difficult macroeconomic environment,” President and CEO Filip Gydé said in a press release. “We have now driven our digital solutions and services business mix to more than 85% of revenue, our highest level to date, and increased the gross margin in our IT solutions and services segments by 170 basis points from the prior year quarter.” 

Looking at CTG’s revenue by geography, North America second-quarter revenue fell 20.1% in constant currency to $36.0 million, while European revenue edged upward 0.2% in constant currency to $38.6 million. 

Click chart to enlarge. 

Guidance 

Citing the rapid pace of change and continued uncertainty in the macroenvironment, CTG withdrew its full-year 2023 guidance.   

With its first-quarter earnings report, CTG had forecast full-year 2023 revenue growth to between $310 million and $340 million, representing a year-over-year decline in revenue of 4.6% to year-over-year growth of 4.6%.  

Share price and market cap 

Shares in CTG were up 27.94% to $10.24 as of 12:40 p.m. Eastern time; they set a new 52-week high in trading today when they reached $10.20, according to FT.com.