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CTG revenue falls 5%

October 22 2013

CTG (NASD: CTG), a Buffalo, N.Y.-based information technology services company, reported third-quarter total revenue fell 5.4 percent year over year to $100.7 million. However, a 6-percent operating profit margin enabled the firm to meet guidance despite the revenue decline.

In a press release, Chairman and CEO James Boldt said the company’s healthcare business declined from last year because a number of hospital clients are postponing system investments while they determine how to adjust their cost structure to deal with lower reimbursements due to the U.S. federal budget sequestration.

“While the federal budget sequestration is affecting revenue growth from healthcare providers in the short term, we also know that hospitals must invest in EMR systems to comply with health reform mandates and to lower costs in order to remain competitive and financially viable in a rapidly changing business environment,” Boldt said. He noted a “significant increase” in requests for proposals for healthcare application outsourcings.

Staffing revenue was $60.7 million in the third quarter, down 2.4 percent from $62.2 million in the same quarter last year. Solutions revenue fell 9.5 percent to $40.0 million from $44.2 million in last year’s third quarter.

CTG’s European revenue rose 11.6 percent year over year to $18.2 million; the company attributed the increase to growth in its financial services practice and the addition of etrinity, the Belgium-based health IT services provider acquired in February 2013.  

Third-quarter gross margin narrowed to 21.0 percent from 21.7 percent in the year-ago quarter.

Net income rose 1.3 percent year over year to $3.9 million in the third quarter.

CTG lowered its projected full-year 2013 revenue to between $420 million and $422 million, down from a projection of $428 million to $436 million made in the company’s second quarter earnings announcement and a 0.8 percent decrease from full-year 2012 at the midpoint of the range. The new guidance reflects reduced demand for resources on hospital EMR projects and a reduction in resources currently needed by a large staffing client. CTG still expects earnings and margin growth for the full year.

CTG repurchased 225,000 of its shares in the third quarter, and its board of directors approved a new stock buyback of one million common shares.

For the third quarter ended Sept. 27, 2013, compared with the same period in the previous year.
Revenue: $100.7 million, -5.4 percent
Net income: $3.9 million, +1.3 percent


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