Net profits continue in Q3 2009 despite revenue decline in
challenging economic environment Substantial improvement in cash
flow and debt reduction through the first nine months of 2009,
versus last year SOUTHFIELD, Mich., Nov. 9 /PRNewswire-FirstCall/
-- TechTeam Global, Inc. (NASDAQ:TEAM), a worldwide provider of
information technology outsourcing and business process outsourcing
services, today reported net income of $0.9 million, or $0.08 per
diluted share, for the three months ended September 30, 2009,
compared to a net income of $1.9 million, or $0.18 per diluted
share, for the three months ended September 30, 2008. Third quarter
highlights include the following: -- Revenue was $52.3 million, a
decrease of $11.8 million or 18.4% from the third quarter 2008. The
decrease was largely due to $1.9 million lower revenues from the
divestiture of ANE (on October 31, 2008), an approximate $1.8
million impact of exchange rates on revenue, and an approximate
$8.1 million or 13.1% decrease of revenue related to erosion and
the previously announced wind-down of certain customer contracts.
-- Cash provided by operations for the nine months ended September
30, 2009 was $16.4 million, a significant improvement over the $3.8
million in cash provided by operations for the same period in 2008,
principally driven by improvements in profitability and working
capital management. -- The Company reduced its total debt by $16.0
million during the nine months ended September 30, 2009.
Approximately 46% of the Company's outstanding debt has been
eliminated over the past nine months. -- Gross margin was 23.0% in
the third quarter 2009, essentially flat versus 23.1% in the third
quarter 2008. SG&A expense was $10.4 million in the third
quarter 2009, a decrease of 6.1% from $11.0 million in the third
quarter 2008. SG&A costs as a percent of revenue increased to
19.8% from 17.2% due to the revenue decline year over year. --
TechTeam was named to the No. 1 position globally in help desk
outsourcing in the Black Book of Outsourcing 2009 Survey on Top
Infrastructure Management Outsourcing Vendors. -- The Company
continues to expand existing client relationships in its commercial
business with numerous wins totaling $13 million in contract value,
including substantial scope expansions with two large
multi-national clients. -- The Company's government business unit
was awarded numerous re-competes and option renewals in the quarter
totaling approximately $15 million in contract value. Further, the
business unit won new business totaling $2 million. "The Company's
third quarter 2009 results continued to be affected by a
challenging global economic environment," said Gary J. Cotshott,
President and Chief Executive Officer. "We experienced some revenue
erosion and new business decision delays during the quarter. To
counter the challenge of price pressure and volume reductions, we
continue to manage costs very closely and quickly adjust capacity
to meet changes in demand. Despite the tough environment, customers
continue to seek high quality, lower cost alternatives to support
their IT infrastructure. As a result, our pipeline of new account
opportunities continues to be strong. While decisions are subject
to longer decision cycles, our pipeline provides a solid basis to
recover lost revenue over time." In the first quarter of fiscal
2009, management changed its methodology for evaluation of the
performance of the Company's outsourcing services. As a result of
this change, certain costs, which were previously included in
Selling, general and administrative expense, are now being included
in Cost of revenue in the Company's Condensed Consolidated
Statement of Income because they are directly related to revenue.
The Company's financial statements for fiscal year 2008 have been
revised, for all periods presented, to conform to the current year
presentation. This re-categorization of expenses did not change net
income or earnings per share, for all periods presented, in fiscal
year 2008. There was no cumulative effect to retained earnings as a
result of this re-categorization, and there was no change to the
carrying amount of assets and liabilities in fiscal 2008. For
additional financial information please refer to the Company's Form
10-Q, for the quarterly period ending September 30, 2009, filed
today. Further information regarding the re-categorization of
expense can be found in "Note 1 - Basis of Presentation" of the
Form 10-Q. Conference Call Information TechTeam Global, Inc. will
also host an investor teleconference to discuss its third quarter
2009 financial results at 4:30 p.m. EST, today, Monday November 9,
2009. To participate in the teleconference, including the question
and answer session that will follow the results announcement and
discussion, please call 1-877-941-8631 (outside the United States,
call +1-480-629-9820). When prompted, enter the passcode: 4181028.
To access a simultaneous Web cast of the teleconference, go to the
TechTeam Global Web site at
http://www.techteam.com/investors/investor-relations and click on
the Web cast icon. From this site, you can download the necessary
software and listen to the teleconference. TechTeam encourages you
to review the site before the teleconference to ensure that your
computer is configured properly. A taped replay of the call will be
available beginning at approximately 6:30 p.m. EST, Monday November
9, 2009. This toll-free replay will be available through Monday
November 23, 2009. To listen to the teleconference replay, call
1-800-406-7325 (outside the United States, call +1-303-590-3030).
When prompted, enter the passcode: 4181028. About TechTeam Global,
Inc. TechTeam Global, Inc. is a leading provider of IT outsourcing
and business process outsourcing services to large and medium
businesses, as well as government organizations. The Company's
primary services include service desk, technical support, desk-side
support, security administration, infrastructure management and
related professional services. TechTeam also provides a number of
specialized, value-added services in specific vertical markets.
Founded in 1979, TechTeam has nearly 3,000 employees across the
world, providing IT support in 32 languages. TechTeam's common
stock is traded on the NASDAQ Global Market under the symbol
"TEAM." For more information, call 800-522-4451 or visit
http://www.techteam.com/. Safe Harbor Statement The statements
contained in this press release that are not purely historical,
including statements regarding the Company's expectations, hopes,
beliefs, intentions, or strategies regarding the future, are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may
differ materially from those expected because of various known and
unknown risks and uncertainties, including, but not limited to, the
continuing effects of the U.S. recession and global credit
environment, other changes in general economic and industry
conditions, the award or loss of significant client assignments,
timing of contracts, recruiting and new business solicitation
efforts, currency fluctuations, and other factors affecting the
financial health of our clients. These and other risks are
described in the Company's most recent annual report on Form 10-K
and subsequent reports filed with or furnished to the U.S.
Securities and Exchange Commission. The forward-looking statements
included in this press release are based on information available
to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. Financial
Tables to Follow on the Next Page Financial Data TechTeam Global,
Inc. Condensed Consolidated Statements of Income (unaudited) (In
thousands, except per share data) Third Quarter Ended Nine Months
Ended September 30, September 30, % % 2009 2008 Change 2009 2008
Change Revenue Commercial - IT Outsourcing Services $26,184 $30,452
(14.0)% $80,462 $91,154 (11.7)% IT Consulting and Systems
Integration 2,711 6,338 (57.2)% 9,780 21,283 (54.0)% Other Services
3,740 5,406 (30.8)% 11,981 19,358 (38.1)% ----- ----- ------ ------
Total Commercial 32,635 42,196 (22.7)% 102,223 131,795 (22.4)%
Government Technology Services 19,713 21,988 (10.3)% 60,557 66,230
(8.6)% ------ ------ ------ ------ Total Revenue 52,348 64,184
(18.4)% 162,780 198,025 (17.8)% ------ ------ ------- ------- Cost
of Revenue Commercial - IT Outsourcing Services 20,838 24,137
(13.7)% 62,903 72,847 (13.7)% IT Consulting and Systems Integration
2,083 4,988 (58.2)% 7,712 16,702 (53.8)% Other Services 2,860 4,189
(31.7)% 9,008 14,911 (39.6)% ----- ----- ----- ------ Total
Commercial 25,781 33,314 (22.6)% 79,623 104,460 (23.8)% Government
Technology Services 14,525 16,063 (9.6)% 43,841 48,391 (9.4)%
------ ------ ------ ------ Total Cost of Revenue 40,306 49,377
(18.4)% 123,464 152,851 (19.2)% ------ ------ ------- ------- Gross
Profit 12,042 14,807 (18.7)% 39,316 45,174 (13.0)% Selling, general
and administrative expense 10,351 11,021 (6.1)% 32,393 35,325
(8.3)% Restructuring charge (credit) (57) - (756) 3,884 --- ---
---- ----- Operating Income 1,748 3,786 (53.8)% 7,679 5,965 28.7%
Net interest expense (314) (425) (918) (1,291) Foreign currency
transaction loss (68) (277) (717) (46) --- ---- ---- --- Income
before Income Taxes 1,366 3,084 6,044 4,628 Income tax provision
504 1,175 2,242 2,866 --- ----- ----- ----- Net Income $862 $1,909
$3,802 $1,762 ==== ====== ====== ====== Diluted Earnings per Common
Share $0.08 $0.18 $0.36 $0.17 ===== ===== ===== ===== Diluted
weighted average common shares and common share equivalents 10,754
10,592 10,664 10,540 ====== ====== ====== ====== Condensed
Consolidated Balance Sheet (unaudited) (In thousands) September 30,
December 31, 2009 2008 ---- ---- Current Assets Cash and cash
equivalents $16,659 $16,881 Accounts receivable, net 49,599 59,705
Prepaid expenses and other current assets 4,148 4,315 ----- -----
Total current assets 70,406 80,901 ------ ------ Property,
Equipment and Software, Net 7,017 8,327 Goodwill and Other
Intangible Assets, Net 75,224 77,361 Other Assets 662 774 --- ---
Total Assets $153,309 $167,363 ======== ======== Current
Liabilities Current portion of long-term debt $7,944 $7,987
Accounts payable 5,670 6,340 Accrued payroll and related taxes
11,809 12,477 Accrued expenses and other current liabilities 8,539
11,670 ----- ------ Total current liabilities 33,962 38,474 ------
------ Long-Term Liabilities Long-term debt, less current portion
11,203 27,202 Other long-term liabilities 2,305 2,954 ----- -----
Total long-term liabilities 13,508 30,156 ------ ------
Shareholders' Equity Preferred stock - - Common stock 111 109
Additional paid-in capital 79,385 77,939 Retained earnings 25,161
21,359 Accumulated other comprehensive income (loss) 1,182 (674)
----- ---- Total shareholders' equity 105,839 98,733 ------- ------
Total Liabilities and Shareholders' Equity $153,309 $167,363
======== ======== Condensed Consolidated Statements of Cash Flows
(unaudited) (In thousands) Nine Months Ended September 30,
----------------- 2009 2008 ---- ---- Operating Activities Net
income $3,802 $1,762 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 5,059 5,813 Other adjustments, primarily changes in
working capital 7,493 (3,755) ----- ------ Net cash provided by
operating activities 16,354 3,820 ------ ----- Investing Activities
Purchase of property, equipment and software (1,211) (2,101) Cash
paid for acquisitions, net of cash acquired (375) (5,958) ----
------ Net cash used in investing activities (1,586) (8,059) ------
------ Financing Activities Proceeds from issuance of long-term
debt 600 5,000 Proceeds (expenditures) from issuance of common
stock (28) 351 Tax expense from stock options - (5) Payments on
long-term debt (16,640) (4,227) ------- ------ Net cash provided by
(used in) financing activities (16,068) 1,119 ------- ----- Effect
of exchange rate changes on cash and cash equivalents 1,078 (440)
----- ---- Decrease in cash and cash equivalents (222) (3,560) Cash
and cash equivalents at beginning of period 16,881 19,431 ------
------ Cash and cash equivalents at end of period $16,659 $15,871
======= ======= Reconciliation of Third Quarter and Year-to-Date
Earnings Excluding Restructuring Charges to Net Income (In
thousands, except per share data) 2009 2008 --------------------
------------------- Earnings After-Tax Earnings After-Tax (Loss)
Earnings per Share Earnings per Share --------- --------- ---------
--------- Reconciliation of Third Quarter Earnings Excluding
Restructuring Charges to Net Income Earnings excluding
restructuring charges $805 $0.07 $- $- Restructuring charges, net
of tax 57 0.01 - - -- ---- --- --- Net Income - Third Quarter $862
$0.08 $- $- ==== ===== == == Reconciliation of Year-to-Date
Earnings Excluding Restructuring Charges to Net Income Earnings
excluding restructuring charges $3,046 $0.29 $4,907 $0.47
Restructuring charges, net of tax 756 0.07 (3,145) (0.30) --- ----
------ ----- Net Income - Year-to-Date $3,802 $0.36 $1,762 $0.17
====== ===== ====== ===== Contacts: TechTeam Global, Inc. Margaret
M. Loebl Vice President, Chief Financial Officer and Treasurer
(248) 357-2866 Boscobel Marketing Communications Jessica Klenk
(301) 588-2900 ext. 121 DATASOURCE: TechTeam Global, Inc. CONTACT:
TechTeam Global, Inc., Margaret M. Loebl, Vice President, Chief
Financial Officer and Treasurer, +1-248-357-2866, , or Boscobel
Marketing Communications, Jessica Klenk, +1-301-588-2900 ext. 121,
Web Site: http://www.techteam.com/
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