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CTG revenue falls 4%, healthcare revenue lower

October 21, 2014

CTG (NASD: CTG), a Buffalo, N.Y.-based information technology services company, reported third-quarter revenue fell 3.9 percent year over year to $96.8 million. Third-quarter results reflected lower revenue in CTG’s healthcare business offset in part by higher revenue from its staffing and European businesses. Earnings in the quarter also reflected the absence of tax credits that contributed to net income in the 2013 third quarter.

It was previously announced that CEO James Boldt, who held the leadership role at the firm since 2001, died unexpectedly on Oct. 13.

Staffing revenue rose 1 percent to $61.5 million in the third quarter, and solutions revenue fell 11 percent to $35.3 million.

Net income fell 29.4 percent year over year to approximately $2.7 million in the third quarter. Gross margin narrowed to 19.7 percent from 21.0 percent in the year-ago quarter.

Quote

“CTG's third quarter financial results were consistent with the guidance provided in our second quarter earnings release,” said CTG Interim CEO Brendan Harrington. “The reduction in our operating margin reflects the changing mix of our business due to current conditions in the healthcare markets that we serve. We continue to be challenged in our healthcare business by the continuing reduction in hospital spending for electronic medical records (EMR) implementation support.”

“At the same time, demand from healthcare organizations for application management outsourcing services is increasing,” Harrington said. “For example, CTG won a large healthcare application management engagement in the second quarter that began to ramp up in the third quarter. Faced with lower reimbursement rates and the impact of healthcare reform mandates, large hospitals are seeking more business and IT consulting assistance in the areas of revenue cycle and EMR optimization. We are adjusting to the changing environment by continuing to expand our advisory services team and our offerings to support the shift in healthcare client needs.” 

Revenue

  Q3 2014 (000s) Q3 2013 (000s) % growth
Revenue $96,760 $100,689 -3.9%

Revenue by segment and geography

  Q3 2014 (000s) Q32013 (000s) % growth
Revenue by segment      
Staffing $61,500 $60,700 1.3%
Solutions $35,300 $40,000 -11.8%
       
European revenue $18,300 $18,200 0.5%

Gross margin

  Q3 2014  Q3 2013 
Gross margin 19.7% 21.0%

Net income

  Q3 2014 (000s) Q3 2013 (000s) % growth
Net income $2,726 $3,863 -29.4%

Guidance

CTG expects fourth-quarter revenue of between $100 million and $102 million, down 2 percent at the range midpoint.

Share price and market cap

Shares in CTG fell 0.88 percent in late morning trading to $10.65. The firm had a market cap of $195.81 million, according to Yahoo!