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US-based IT staffing and solutions company Ciber Inc (CBR: NYSE) reported Q2 revenue of USD 220.4 million, an increase of +2% compared with the same period last year (up +1% in constant currency). Gross margin for Q2 2013 fell to 25.4% from 26.6% a year ago, as a result of decreased delivery efficiency in International business, as well as increased pricing pressure in all regions.
Operating income from continuing operations was USD 5.6 million; however USD 600,000 had been previously earmarked for restructuring charges. Net income for the period was USD 2.9 million; plus an additional USD 500,000 for restructuring charges.
Dave Peterschmidt, president and CEO, said, “In the second quarter Ciber demonstrated its disciplined approach to the business, with ongoing progress on many fronts, including encouraging signs of improvement in our International operations, and a steady North America business in a continuing uncertain macroeconomic environment. Second-quarter consolidated revenue, operating income and [earnings per share] increased from year ago levels, demonstrating our steady progress, especially on the bottom line. There is still work to be done, particularly in driving consistent growth and margin improvement, and we believe we have assembled the building blocks to move this company forward. We are focused on driving margin improvement with growth and greater scale.”
Claude Pumilia, Chief Financial Officer, commented, “Because of the efficiencies we are realizing from our restructuring, including the program we announced today, and improvements we continue to make in our delivery capability, we are positioned for further margin improvement in 2013 and beyond. We have significantly improved our conversion of operating income to earnings. We have enhanced our financial flexibility, reducing our long-term debt and corresponding interest expense, which has benefited our cash flow."
Revenue in the International division was USD 113.9 million for the Q2 2013, an increase of nearly +8% compared to a year ago, and up +6% in constant currency. Operating income for continuing operations for Q2 2013 was USD 6 million compared with USD 5.6 million for the same period last year, equating to a rise of +7.1%. In a continuing soft European economic environment, revenue performance year-on-year was led by Ciber’s businesses in Norway and the UK, partially offset by continued challenges in the Netherlands.
The North American division posted revenue of USD 106.8 million, down -3% from a year ago and down slightly compared to Q1 2013, reflecting decreased demand and pricing pressure. Operating income from continuing operations for the period rose from USD 7.6 million in 2012 to USD 8.5 million in 2013, an increase of +11.8%.
North America accounts for 48% of Ciber’s total revenue, compared with 51% for International and 1% for unspecified ‘Other’. North America, however, accounts for 58% of total operating income, compared with 41 % for International and 1% for ‘Other’.
Looking forward, on 30 July 2013 Ciber approved a restructuring plan focused on International operations. The goal of the 2013 Plan is to improve utilisation, strategically engage lower-cost off-shore and near-shore resources, and centralize management of administrative functions in key markets to leverage shared services functions. The restructuring is expected to impact approximately 190 employees. The 2013 Plan will commence in the third quarter of 2013 and is expected to be completed in the first half of 2014. The estimated total cost of the restructuring for the 2013 Plan will be USD 13 million, substantially all of which will be cash. The charges associated with the 2013 Plan are substantially all related to personnel severance and related employee benefit costs. The 2013 Plan is expected to result in pre-tax net savings of approximately USD 12 million in 2014 and each year thereafter.
In trading yesterday, the share price fell -0.08% to USD 3.76, but increased by +0.27% compared with last year. Based on its current share price, the company has a market value of USD 281.6 million.