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CTG revenue falls 6%

July 22, 2014

CTG (NASD: CTG), a Buffalo, N.Y.-based information technology services company, reported second-quarter revenue fell 6.3 percent year over year to $100.3 million. Second quarter results reflected lower revenue in CTG's healthcare and staffing businesses in North America. Earnings in the quarter also reflected the absence of tax credits that contributed to net income in the 2013 second quarter, and by much higher than expected medical costs from the company's self-insured medical plan.

Staffing revenue fell 7 percent to $60.0 million in the second quarter, and solutions revenue fell 5 percent to $40.3 million.

Net income fell 20.3 percent year over year to approximately $3.2 million in the second quarter. However, gross margin remained at 21.1 percent, the same as in the year-ago quarter.

European revenue rose 6 percent to $19.8 million in the second quarter.

Quote
“CTG's second quarter financial results came in with revenue and earnings just under the original guidance range we provided in our first quarter news release,” Chairman and CEO James Boldt said. “Without the unexpected, significant increase in medical expenses from our self-insured employee health plan, which decreased diluted earnings per share by $0.02, earnings would have met the midpoint of our original guidance.”

"Our lower healthcare revenue in 2014 reflects a reduction in spending on electronic medical records (EMR) systems,” Boldt said. “As hospitals contend with reductions in government reimbursements over the last year we have seen an increase in opportunities for our application outsourcing and advisory services offerings, areas we are focused on growing.”

Revenue

  Q2 2014 (000s) Q2 2013 (000s) % growth
Revenue $100,331 $107,117 -6.3%

Revenue by segment and geography

  Q2 2014 (000s) Q2 2013 (000s) % growth
Revenue by segment      
Staffing $60,000 $64,800 -7.4%
Solutions $40,300 $42,300 -4.7%
       
European revenue $19,800 $18,600 6.5%

Gross margin

Q2 2014  Q2 2013 
Gross margin 21.1% 21.1%

Net income

  Q2 2014 (000s) Q2 2013 (000s) % growth
Net income $3,233 $4,055 -20.3%

Guidance
CTG expects third-quarter revenue of between $96 million and $98 million, down 4 percent at the range midpoint, because of increased medical expenses. CTG earlier this month updated its full-year 2014 revenue prediction to between $390 million and $400 million — down 6 percent at the range midpoint — from the prediction of between $393 million and $407 million provided in its first-quarter report.

Share price and market cap
Shares in CTG fell 0.13 percent in early afternoon trading to $15.05 and the firm had a market cap of $277.84 million, according to Yahoo!