CTG Computer Task Group Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 8, 2023

 

COMPUTER TASK GROUP, INCORPORATED

(Exact name of registrant as specified in its charter)

 

New York		1-9410		16-0912632
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

300 Corporate Parkway – Suite 214N, Amherst, NY		14226
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (716) 882-8000

Not applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $.01 par value		CTG		The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On November 8, 2023, Computer Task Group, Incorporated issued a press release relating to its 2023 third quarter financial results that is furnished with this report as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number		Description
99.1		Press Release, dated November 8, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		COMPUTER TASK GROUP, INCORPORATED
Date: November 8, 2023		By:		/s/ Peter P. Radetich
				Peter P. Radetich Senior Vice President, General Counsel & Secretary

 

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Exhibit 99.1

CTG IT Solutions and Services Segments Gross Margin

Improved 40 Basis Points to 29.5% in Third Quarter 2023

Cegeka and CTG work toward Completion of

Regulatory Requirements to Complete Acquisition

 

 

BUFFALO, N.Y., November 8, 2023 – CTG (Nasdaq: CTG) (“Company”), a leader in North America and Western Europe helping companies employ digital IT solutions and services to drive their productivity and profitability, today reported its financial results for the third quarter ended September 29, 2023.

Filip Gydé, CTG President and CEO, commented, “We continue to be pleased with the execution of our strategy where our gross margin improved 300 basis points in the third quarter compared with 2022, despite high inflation and a softening demand for IT services, and lower utilization generally incurred during the summer months.”

Mr. Gydé continued, “Regarding the acquisition of CTG by Cegeka, we have found a partner that will enable us to accelerate providing digital transformation services to our clients and are confident that this transaction with Cegeka is the best outcome for our clients, employees, and shareholders. We are pleased to have entered into this transaction with Cegeka, and we are working diligently with them through the regulatory approval processes to complete the sale. As such, although there is no certainty, given the expiration of the tender offer has been extended to December 12, 2023, we expect the sale of CTG to Cegeka to close on December 13, 2023."

 

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Consolidated Third Quarter 2023 Review (Narrative compares with prior-year period unless otherwise noted) (unaudited)

($ in thousands)	For the Quarter Ended						Change 2022-2023				Change 2021-2022
	Sept. 29, 2023		Sept. 30, 2022		Oct. 1, 2021		$		%		$		%
Revenue	$71,291		$75,002		$90,603		$(3,711)		(4.9)%		$(15,601)		(17.2)%
GAAP Gross Profit	$19,467		$18,229		$20,290		$1,238		6.8 %		$(2,061)		(10.2)%
GAAP Gross Margin	27.3%		24.3%		22.4%
GAAP Operating Income (Loss)	$(604)		$2,253		$2,702		$(2,857)		(126.8)%		$(449)		(16.6)%
GAAP Operating Margin	(0.8)%		3.0%		3.0%
Non-GAAP Operating Income*	$2,643		$2,997		$2,982		$(354)		(11.8)%		$15		0.5 %
Non-GAAP Operating Margin*	3.7%		4.0%		3.3%
GAAP Net Income (Loss)	$(871)		$1,102		$1,672		$(1,973)		(179.0)%		$(570)		(34.1)%
GAAP Net Margin	(1.2)%		1.5%		1.8%
Non-GAAP Net Income*	$1,703		$1,612		$1,888		$91		5.6 %		$(276)		(14.6)%
Non-GAAP Net Income Margin*	2.4%		2.1%		2.1%
Adjusted EBITDA*	$3,059		$3,824		$3,747		$(765)		(20.0)%		$77		2.1 %
Adjusted EBITDA Margin*	4.3%		5.1%		4.1%

* A reconciliation of GAAP to non-GAAP information is included in the financial tables below

 

 

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Third Quarter Segment Performance (unaudited)

IT Solutions and Services

North America

($ in thousands)	For the Quarter Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	25,217			$	20,340			$	21,215			$	4,877				24.0	%		$	(875	)			(4.1	)%
Percent of total		35.4	%			27.1	%			23.4	%
Gross profit	$	9,669			$	7,723			$	7,273			$	1,946				25.2	%		$	450				6.2	%
Gross margin		38.3	%			38.0	%			34.3	%
Contribution profit	$	5,141			$	4,129			$	3,809			$	1,012				24.5	%		$	320				8.4	%
Contribution margin		20.4	%			20.3	%			18.0	%

 

Europe

($ in thousands)	For the Quarter Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	36,472			$	33,258			$	39,199			$	3,214				9.7	%		$	(5,941	)			(15.2	)%
Percent of total		51.1	%			44.4	%			43.3	%
Gross profit	$	8,547			$	7,870			$	9,541			$	677				8.6	%		$	(1,671	)			(17.5	)%
Gross margin		23.4	%			23.7	%			24.3	%
Contribution profit	$	3,898			$	3,464			$	4,358			$	434				12.5	%		$	(894	)			(20.5	)%
Contribution margin		10.7	%			10.4	%			11.1	%

Non-Strategic Technology Services

($ in thousands)	For the Quarter Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	9,602			$	21,404			$	30,189			$	(11,802	)			(55.1	)%		$	(8,785	)			(29.1	)%
Percent of total		13.5	%			28.5	%			33.3	%
Gross profit	$	1,251			$	2,636			$	3,476			$	(1,385	)			(52.5	)%		$	(840	)			(24.2	)%
Gross margin		13.0	%			12.3	%			11.5	%
Contribution profit	$	944			$	2,061			$	2,307			$	(1,117	)			(54.2	)%		$	(246	)			(10.7	)%
Contribution margin		9.8	%			9.6	%			7.6	%

 

 

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Consolidated Year-to-Date Results

(unaudited)

($ in thousands)	For the Three Quarters Ended						Change 2022-2023				Change 2021-2022
	Sept. 29, 2023		Sept. 30, 2022		Oct. 1, 2021		$		%		$		%
Revenue	$224,081		$247,178		$279,896		$(23,097)		(9.3)%		$(32,718)		(11.7)%
GAAP Gross Profit	$60,597		$58,574		$61,436		$2,023		3.5 %		$(2,862)		(4.7)%
GAAP Gross Margin	27.0%		23.7%		21.9%
GAAP Operating Income	$388		$8,625		$7,601		$(8,237)		(95.5)%		$1,024		13.5%
GAAP Operating Margin	0.2%		3.5%		2.7%
Non-GAAP Operating Income*	$7,674		$9,920		$8,690		$(2,246)		(22.6)%		$1,230		14.2%
Non-GAAP Operating Margin*	3.4%		4.0%		3.1%
GAAP Net Income (Loss)	$(686)		$5,382		$5,013		$(6,068)		(112.7)%		$369		7.4%
GAAP Net Margin	(0.3)%		2.2%		1.8%
Non-GAAP Net Income*	$4,866		$6,303		$5,846		$(1,437)		(22.8)%		$457		7.8%
Non-GAAP Net Income Margin*	2.2%		2.5%		2.1%
Adjusted EBITDA*	$9,516		$12,379		$11,568		$(2,863)		(23.1)%		$811		7.0%
Adjusted EBITDA Margin*	4.2%		5.0%		4.1%

* A reconciliation of GAAP to non-GAAP information is included in the financial tables below

Year-to-date Segment Performance (unaudited)

IT Solutions and Services

North America

($ in thousands)	For the Three Quarters Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	74,410			$	61,114			$	56,431			$	13,296				21.8	%		$	4,683				8.3	%
Percent of total		33.2	%			24.7	%			20.2	%
Gross profit	$	29,165			$	21,664			$	19,359			$	7,501				34.6	%		$	2,305				11.9	%
Gross margin		39.2	%			35.4	%			34.3	%
Contribution profit	$	15,125			$	11,408			$	9,572			$	3,717				32.6	%		$	1,836				19.2	%
Contribution margin		20.3	%			18.7	%			17.0	%

Europe

($ in thousands)	For the Three Quarters Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	114,958			$	112,896			$	129,260			$	2,062				1.8	%		$	(16,364	)			(12.7	)%
Percent of total		51.3	%			45.7	%			46.2	%
Gross profit	$	27,114			$	27,932			$	31,506			$	(818	)			(2.9	)%		$	(3,574	)			(11.3	)%
Gross margin		23.6	%			24.7	%			24.4	%
Contribution profit	$	12,125			$	13,442			$	15,704			$	(1,317	)			(9.8	)%		$	(2,262	)			(14.4	)%
Contribution margin		10.5	%			11.9	%			12.1	%

 

 

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Year-to-date Segment Performance (continued)

Non-Strategic Technology Services

($ in thousands)	For the Three Quarters Ended												Change 2022-2023								Change 2021-2022
	Sept. 29, 2023				Sept. 30, 2022				Oct. 1, 2021				$				%				$				%
Revenue	$	34,713			$	73,168			$	94,205			$	(38,455	)			(52.6	)%		$	(21,037	)			(22.3	)%
Percent of total		15.5	%			29.6	%			33.6	%
Gross profit	$	4,318			$	8,978			$	10,571			$	(4,660	)			(51.9	)%		$	(1,593	)			(15.1	)%
Gross margin		12.4	%			12.3	%			11.2	%
Contribution profit	$	3,275			$	6,892			$	6,769			$	(3,617	)			(52.5	)%		$	123				1.8	%
Contribution margin		9.4	%			9.4	%			7.2	%

Balance Sheet and Cash Flow

Cash and cash equivalents were $24.1 million compared with $25.1 million at year-end 2022. Net cash provided by operations for the year was $2.8 million.

At the end of the third quarter of 2023, the Company had no amount outstanding on its revolving line of credit facility or any other long-term debt. Days sales outstanding were 82 in the third quarter of 2023 compared with 83 in the prior-year period.

Successfully Executing Strategy

CTG is a catalyst for digital transformation, helping IT and business leaders accelerate integration of digital technology into all areas of their operations to improve productivity, strengthen business processes, elevate internal controls, and increase value delivery to their customers. CTG’s strategy for growth is its transformation into a higher-performing, digital solutions-based business. The three key elements of its strategy are:

Fiscal 2023 Outlook

“Due to the rapid pace of change and continued uncertainty in the macroenvironment, we are not providing full year 2023 guidance," said John M. Laubacker, Chief Financial Officer.

Conference Call and Webcast

Due to the pending acquisition of CTG by Cegeka, CTG will not host an earnings call associated with the financial earnings press release.

About CTG

CTG is a leading provider of digital transformation solutions and services that accelerate clients’ project momentum and achievement of their desired IT and business outcomes. We have earned a reputation as a faster and more reliable, results-driven partner focused on integrating digital technology into all areas of its clients to improve their operations and increase their value proposition. CTG’s engagement in the digital transformation process drives improved data-driven decision-making, meaningful business

 

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performance improvements, new and enhanced customer experiences, and continuous innovation. CTG operates in North America, South America, Western Europe, and India. The Company regularly posts news and other important information at www.ctg.com.

Reconciliation of GAAP to non-GAAP Information

The Company has referenced non-GAAP information in this news release. The Company believes that the use of non-GAAP financial information provides useful information to investors and management to gain an overall understanding of its current financial performance and prospects. In addition, management uses non-GAAP financial measures for forecasting, facilitating ongoing operating decisions, and measuring the Company’s overall performance. The Company believes that these non-GAAP measures align closely with its internal measurement processes and reflect the Company’s core operating results.

A reconciliation of GAAP to non-GAAP information is included in the financial tables below. The non-GAAP financial information is presented using a consistent methodology from quarter-to-quarter and year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP. Also, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations in that they do not reflect all amounts associated with the Company's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP financial measures. As such, the non-GAAP financial measures disclosed by the Company should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP, and reconciliations between GAAP and non-GAAP financial measures included in this earnings release should be carefully evaluated.

Forward-Looking Statements

This press release contains statements that constitute “forward looking statements,” including statements that express the opinions, expectations, beliefs, plans, objectives, assumptions, or projections regarding future events or future results, including statements regarding the proposed acquisition of CTG by Cegeka (the “Proposed Acquisition”), in contrast with statements that reflect historical facts. In some cases, you can identify such forward-looking statements by terminology such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project,” or “expect,” “may,” “will,” “would,” “could,” “potential,” “intend,” or “should,” the negative of these terms or similar expressions. Forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to Cegeka and CTG. However, these forward-looking statements are not a guarantee of performance, and you should not place undue reliance on such statements.

Forward-looking statements are subject to many risks, uncertainties and other variable circumstances, including, but not limited to, the ability of the parties to satisfy the closing conditions for the Proposed Acquisition on a timely basis or at all, including the possibility that a governmental agency may prohibit, delay, or refuse to grant approval for the consummation of the Proposed Acquisition; statements about the expected timetable for completing the Proposed Acquisition; uncertainties as to how many of CTG’s shareholders will tender their shares in the offer; the possibility that competing offers will be made; the occurrence of events that may give rise to a right of one or both of Cegeka and CTG to terminate the merger agreement; negative effects of the announcement of the Proposed Acquisition on the market price of CTG’s common stock and/or on it business, financial condition, results of operations, and financial performance (including the ability of CTG to maintain relationships with its customers, suppliers, and others with whom it does business); the effects of the Proposed Acquisition (or the announcement thereof) on CTG’s ability to retain and hire qualified professional staff and talent, including technical, sales and management personnel; competition for clients; the increased bargaining power of CTG’s large clients; the occurrence of cyber incidents and CTG’s ability to protect confidential client data; the partial or complete loss of the revenue CTG generates from its largest client, International Business Machines Corporation (IBM); the uncertainty of CTG’s clients’ implementations of cost reduction projects; the mix of work at CTG between IT Solutions and Services and Non-Strategic Technology Services, and the risk of disengaging from Non-Strategic Technology Services; currency exchange risks; risks associated with CTG’s domestic and foreign operations, including uncertainty and business interruptions resulting from political changes and actions in the U.S. and abroad, such as the conflict between Russian and Ukraine and recent developments in China, and volatility in the global credit and financial markets and economy; renegotiations, nullification, or breaches of contracts with clients, vendors, subcontractors or other parties; the impact of current and future laws and government regulations, as well as repeal or modification of such, affecting the IT solutions and services industry, taxes and CTG’s operations in particular; industry, economic, and political conditions, including fluctuations in demand for IT services; and consolidation among CTG’s competitors or clients. Such risks and uncertainties may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements. Many of these risks are outside of the control of Cegeka and CTG and could cause actual results to differ materially.

 

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The forward-looking statements included in this press release are made only as of the date hereof. Cegeka and CTG do not undertake, and specifically decline, any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except as required by law.

A further description of risks and uncertainties relating to CTG can be found in CTG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC, and in other documents filed from time to time with the SEC by CTG and available at www.sec.gov and www.ctg.com.

Contacts:

John M. Laubacker
Chief Financial Officer
Tel: +1 716 887 7368

 

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(amounts in thousands except per share data)

 

 

	For the Quarter Ended
	September 29,				September 30,				October 1,
	2023				2022				2021
Revenue	$	71,291			$	75,002			$	90,603
Cost of services		51,824				56,773				70,313
Gross profit		19,467				18,229				20,290
Selling, general and admin. expenses		20,071				15,976				17,588
Operating income (loss)		(604	)			2,253				2,702
Other expense, net		(495	)			(392	)			(542	)
Income (loss) before income taxes		(1,099	)			1,861				2,160
Provision (benefit) for income taxes		(228	)			759				488
Net income (loss)	$	(871	)		$	1,102			$	1,672
Net income (loss) per share:
Basic	$	(0.06	)		$	0.08			$	0.12
Diluted	$	(0.06	)		$	0.07			$	0.11
Weighted average shares outstanding:
Basic		14,903				14,480				14,011
Diluted		14,903				15,157				14,939

 

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

(amounts in thousands except per share data)

 

	For the Three Quarters Ended
	September 29,				September 30,				October 1,
	2023				2022				2021
Revenue	$	224,081			$	247,178			$	279,896
Cost of services		163,484				188,604				218,460
Gross profit		60,597				58,574				61,436
Selling, general and admin. expenses		60,209				49,949				53,835
Operating income		388				8,625				7,601
Other expense, net		(1,089	)			(1,034	)			(948	)
Income (loss) before income taxes		(701	)			7,591				6,653
Provision (benefit) for income taxes		(15	)			2,209				1,640
Net income (loss)	$	(686	)		$	5,382			$	5,013
Net income (loss) per share:
Basic	$	(0.05	)		$	0.37			$	0.36
Diluted	$	(0.05	)		$	0.36			$	0.34
Weighted average shares outstanding:
Basic		14,813				14,366				13,850
Diluted		14,813				15,086				14,951

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands)

 

	September 29,				December 31,				September 30,
	2023				2022				2022
Current Assets:
Cash and cash equivalents	$	24,069			$	25,140			$	26,753
Accounts receivable, net		64,433				70,979				68,415
Other current assets		5,072				3,769				3,412
Total current assets		93,574				99,888				98,580
Property and equipment, net		6,045				5,061				4,888
Operating lease right-of-use assets		19,478				18,506				17,101
Cash surrender value		4,822				4,120				4,087
Acquired intangibles, net		11,639				12,943				5,618
Goodwill		35,487				35,998				38,914
Other assets		6,868				5,103				7,318
Total Assets	$	177,913			$	181,619			$	176,506
Current Liabilities:
Accounts payable	$	9,661			$	14,254			$	11,765
Accrued compensation		18,521				19,016				20,036
Operating lease liabilities		6,186				5,905				5,287
Other current liabilities		14,166				12,758				17,007
Total current liabilities		48,534				51,933				54,095
Long-term debt		-				-				-
Operating lease liabilities		13,412				12,466				11,713
Other liabilities		10,388				11,241				14,680
Shareholders' equity		105,579				105,979				96,018
Total Liabilities and Shareholders' Equity	$	177,913			$	181,619			$	176,506

 

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)

 

	For the Three Quarters Ended
	September 29,				September 30,				October 1,
	2023				2022				2021
Net income (loss)	$	(686	)		$	5,382			$	5,013
Depreciation and amortization expense		2,750				2,051				2,451
Equity-based compensation expense		1,077				1,869				1,974
Other operating items		(359	)			3,207				(7,205	)
Net cash provided by operating activities		2,782				12,509				2,233
Net cash used in investing activities		(3,056	)			(17,917	)			(1,978	)
Net cash used in financing activities		(786	)			(884	)			(1,175	)
Effect of exchange rates on cash and cash equivalents		(11	)			(2,539	)			(917	)
Net decrease in cash and cash equivalents		(1,071	)			(8,831	)			(1,837	)
Cash and cash equivalents at beginning of period		25,140				35,584				32,865
Cash and cash equivalents at end of period	$	24,069			$	26,753			$	31,028

 

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Segment Information

(Unaudited)

(amounts in thousands)

 

For reporting purposes, the Company discloses three segments, including IT Solutions and Services in each of North America and Europe, and Non-Strategic Technology Services, primarily in North America. The Company continues investing in business development, including solutions, sales, delivery, and recruiting to drive its digital transformation strategy in the North America and Europe IT Solutions and Services segments. The Company is not investing in its Non-Strategic Technology Services segment which includes lower margin staffing services. Contribution profit represents operational profit after consideration of expenses such as sales, solutions, delivery, and recruiting expenses.

 

	For the Quarter Ended September 29, 2023
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	25,217			$	36,472			$	9,602
Cost of services		15,548				27,925				8,351
Gross profit		9,669				8,547				1,251
Gross margin		38.3	%			23.4	%			13.0	%
Selling, solutions, delivery, and recruiting expenses		4,528				4,649				307
Contribution profit	$	5,141			$	3,898			$	944
Contribution margin		20.4	%			10.7	%			9.8	%

 

 

	For the Quarter Ended September 30, 2022
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	20,340			$	33,258			$	21,404
Cost of services		12,617				25,388				18,768
Gross profit		7,723				7,870				2,636
Gross margin		38.0	%			23.7	%			12.3	%
Selling, solutions, delivery, and recruiting expenses		3,594				4,406				575
Contribution profit	$	4,129			$	3,464			$	2,061
Contribution margin		20.3	%			10.4	%			9.6	%

 

 

	For the Quarter Ended October 1, 2021
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	21,215			$	39,199			$	30,189
Cost of services		13,942				29,658				26,713
Gross profit		7,273				9,541				3,476
Gross margin		34.3	%			24.3	%			11.5	%
Selling, solutions, delivery, and recruiting expenses		3,464				5,183				1,169
Contribution profit	$	3,809			$	4,358			$	2,307
Contribution margin		18.0	%			11.1	%			7.6	%

 

 

 

 

---

 

COMPUTER TASK GROUP, INCORPORATED (CTG)

Segment Information (continued)

(Unaudited)

(amounts in thousands)

 

	For the Three Quarters Ended September 29, 2023
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	74,410			$	114,958			$	34,713
Cost of services		45,245				87,844				30,395
Gross profit		29,165				27,114				4,318
Gross margin		39.2	%			23.6	%			12.4	%
Selling, solutions, delivery, and recruiting expenses		14,040				14,989				1,043
Contribution profit	$	15,125			$	12,125			$	3,275
Contribution margin		20.3	%			10.5	%			9.4	%

 

 

	For the Three Quarters Ended September 30, 2022
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	61,114			$	112,896			$	73,168
Cost of services		39,450				84,964				64,190
Gross profit		21,664				27,932				8,978
Gross margin		35.4	%			24.7	%			12.3	%
Selling, solutions, delivery, and recruiting expenses		10,256				14,490				2,086
Contribution profit	$	11,408			$	13,442			$	6,892
Contribution margin		18.7	%			11.9	%			9.4	%

 

 

	For the Three Quarters Ended October 1, 2021
	North
	America				Europe				Non-Strategic
	IT Solutions				IT Solutions				Technology
	and Services				and Services				Services
Revenue	$	56,431			$	129,260			$	94,205
Cost of services		37,072				97,754				83,634
Gross profit		19,359				31,506				10,571
Gross margin		34.3	%			24.4	%			11.2	%
Selling, solutions, delivery, and recruiting expenses		9,787				15,802				3,802
Contribution profit	$	9,572			$	15,704			$	6,769
Contribution margin		17.0	%			12.1	%			7.2	%

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

Segment and Vertical Market Trends (Unaudited)

Supplemental Financial Information

 

												Twelve Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
		2022		2022		2023		2023		2023		2023
Revenue (in millions)
North America IT Solutions and Services		$20.340		$22.924		$23.196		$25.997		$25.217		$97.334
Europe IT Solutions and Services		33.258		37.035		40.093		38.393		36.472		151.993
Non-Strategic Technology Services		21.404		17.943		14.913		10.198		9.602		52.656
Total Revenue		$75.002		$77.902		$78.202		$74.588		$71.291		$301.983
Revenue in North America
Constant Currency (in millions)*
North America		$41.501		$40.604		$37.859		$35.970		$34.605		$149.038
Foreign Currency Impact		(0.015)		(0.006)		0.003		0.001		-
Total Revenue in Constant Currency (non-GAAP)		$41.486		$40.598		$37.862		$35.971		$34.605
Revenue in Europe
Constant Currency (in millions)*
Europe		$33.501		$37.298		$40.343		$38.618		$36.686		$152.945
Foreign Currency Impact		2.712		2.537		0.618		0.010		-
Total Revenue in Constant Currency (non-GAAP)		$36.213		$39.835		$40.961		$38.628		$36.686
Revenue By Geography
North America		55.3%		52.1%		48.4%		48.2%		48.5%		49.4%
Europe		44.7%		47.9%		51.6%		51.8%		51.5%		50.6%
Total		100.0%		100.0%		100.0%		100.0%		100.0%		100.0%
Revenue by Vertical Market
Healthcare		19%		18%		19%		23%		24%		21%
Financial Services		15%		17%		18%		17%		15%		17%
Manufacturing		17%		16%		16%		14%		13%		15%
Technology Service Providers		22%		19%		16%		15%		14%		16%
Energy		6%		6%		6%		6%		7%		6%
General Markets		21%		24%		25%		25%		27%		25%
Total		100%		100%		100%		100%		100%		100%
Operating Margins
GAAP Operating Margin (Loss)		3.0%		3.1%		0.9%		0.4%		(0.8)%		0.9%
Non-GAAP Operating Margin		4.0%		5.1%		2.7%		3.9%		3.7%		3.9%

 

Other Information (in millions except Billable Days and EPS)

Billable Days		63		63		64		64		63		254
Net Income (Loss)		$1.102		$1.227		$0.315		$(0.130)		$(0.871)		$0.541
GAAP Diluted EPS		$0.07		$0.08		$0.02		$(0.01)		$(0.06)		$0.03
Non-GAAP Diluted EPS		$0.11		$0.14		$0.08		$0.13		$0.11		$0.46
Adjusted EBITDA (non-GAAP)		$3.8		$4.8		$2.8		$3.7		$3.1		$14.3

 

Balance Sheet Information (in millions except DSO)

Cash less Debt, Net		$26.8		$25.1		$21.9		$19.1		$24.1
Working Capital		$44.5		$48.0		$49.0		$47.8		$45.0
DSO		83		84		83		86		82

 

* Constant Currency is measured by applying the current fiscal period's average exchange rate to each of the prior periods

 

 

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COMPUTER TASK GROUP, INCORPORATED (CTG)

(Unaudited)

 

The non-GAAP information below excludes certain acquisition-related expenses, ERP system implementation costs, costs associated with severance and the evaluation of strategic alternatives. The acquisition-related expenses consist of due diligence costs, amortization of intangible assets, and changes in the value of earn-out payments upon achievement of certain financial targets from the Company’s recent acquisitions.

 

Reconciliation of GAAP to non-GAAP Operating Income (Loss)

												Twelve
												Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
(in millions)		2022		2022		2023		2023		2023		2023
GAAP Operating Income (Loss)		$2.253		$2.451		$0.707		$0.285		$(0.604)		$2.839
Acquisition-related expenses		0.744		0.696		0.634		0.623		0.662		2.615
ERP system implementation costs		-		-		0.481		0.536		0.529		1.546
Severance		-		0.838		0.286		0.497		-		1.621
Non-recurring costs related to certain strategic initiatives		-		-		-		0.982		2.056		3.038
Non-GAAP Operating Income		$2.997		$3.985		$2.108		$2.923		$2.643		$11.659

 

Reconciliation of GAAP to non-GAAP Operating Margin (Loss)

 

												Twelve
												Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
		2022		2022		2023		2023		2023		2023
GAAP Operating Margin (Loss)		3.0%		3.1%		0.9%		0.4%		(0.8)%		0.9%
Acquisition-related expenses		1.0%		0.9%		0.8%		0.8%		0.9%		0.9%
ERP system implementation costs		-		-		0.6%		0.7%		0.7%		0.5%
Severance		-		1.1%		0.4%		0.7%		-		0.6%
Non-recurring costs related to certain strategic initiatives		-		-		-		1.3%		2.9%		1.0%
Non-GAAP Operating Margin		4.0%		5.1%		2.7%		3.9%		3.7%		3.9%

 

Reconciliation of GAAP to non-GAAP Net Income (Loss)

 

												Twelve
												Months
	For the Quarter Ended											Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
(in millions)		2022		2022		2023		2023		2023		2023
GAAP Net Income (Loss)		$1.102		$1.227		$0.315		$(0.130)		$(0.871)		$0.541
Acquisition-related expenses		0.510		0.435		0.419		0.485		0.525		1.864
ERP system implementation costs		-		-		0.317		0.417		0.419		1.153
Severance		-		0.524		0.189		0.387		-		1.100
Non-recurring costs related to certain strategic initiatives		-		-		-		0.764		1.630		2.394
Non-GAAP Net Income		$1.612		$2.186		$1.240		$1.923		$1.703		$7.052

 

 

---

 

COMPUTER TASK GROUP, INCORPORATED (CTG)

(Unaudited)

 

Reconciliation of GAAP to non-GAAP Net Margin (Loss)

												Twelve
												Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
		2022		2022		2023		2023		2023		2023
GAAP Net Margin (Loss)		1.5%		1.6%		0.4%		(0.2)%		(1.2)%		0.2%
Acquisition-related expenses		0.6%		0.5%		0.5%		0.7%		0.7%		0.6%
ERP system implementation costs		-		-		0.4%		0.6%		0.6%		0.4%
Severance		-		0.7%		0.3%		0.5%		-		0.3%
Non-recurring costs related to certain strategic initiatives		-		-		-		1.0%		2.3%		0.8%
Non-GAAP Net Margin		2.1%		2.8%		1.6%		2.6%		2.4%		2.3%

 

 

Reconciliation of GAAP to non-GAAP Diluted Earnings (Loss) per Share (EPS)

 

												Twelve
												Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
		2022		2022		2023		2023		2023		2023
GAAP Diluted EPS		$0.07		$0.08		$0.02		$(0.01)		$(0.06)		$0.03
Acquisition-related expenses		0.04		0.03		0.03		0.03		0.03		0.12
ERP system implementation costs		-		-		0.02		0.03		0.03		0.08
Severance		-		0.03		0.01		0.03		-		0.07
Non-recurring costs related to certain strategic initiatives		-		-		-		0.05		0.11		0.16
Non-GAAP Diluted EPS		$0.11		$0.14		$0.08		$0.13		$0.11		$0.46

 

Reconciliation of Net Income (Loss) to Adjusted EBITDA (non-GAAP) includes earnings before interest (including amortization of deferred debt financing costs), taxes, depreciation and amortization, equity-based compensation, and other, which includes severance, ERP system implementation costs, acquisition-related expenses, and non-recurring costs related to certain strategic initiatives.

 

												Twelve
												Months
		For the Quarter Ended										Ended
		Sept.		Dec.		Mar.		Jun.		Sept.		Sept.
(in millions)		2022		2022		2023		2023		2023		2023
Net Income (Loss)		$1.102		$1.227		$0.315		$(0.130)		$(0.871)		$0.541
Taxes		0.759		0.736		0.162		0.051		(0.228)		0.721
Interest		0.103		0.100		0.109		0.121		0.107		0.437
Depreciation and amortization		0.651		0.948		0.837		0.918		0.995		3.698
Equity-based compensation expense		0.693		0.694		0.345		0.522		0.210		1.771
Other		0.516		1.102		0.997		2.210		2.846		7.155
Adjusted EBITDA		$3.824		$4.807		$2.765		$3.692		$3.059		$14.323
Adjusted EBITDA Margin		5.1%		6.2%		3.5%		4.9%		4.3%		4.7%

 

 

 

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Important Information

This earnings release is not an offer to buy or the solicitation of an offer to sell any securities. The solicitation and the offer to buy all of the outstanding common stock of CTG have been made pursuant to a tender offer statement on Schedule TO, containing an offer to purchase and related materials, filed by Cegeka with the U.S. Securities and Exchange Commission (the “SEC”) on August 23, 2023. CTG filed a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the tender offer with the SEC on August 23, 2023. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, AND ANY AMENDMENTS THERETO FROM TIME TO TIME, CONTAIN IMPORTANT INFORMATION. ANY HOLDERS OF SHARES ARE URGED TO READ THESE DOCUMENTS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION THAT HOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES. The offer to purchase, the related letter of transmittal and the solicitation/recommendation statement are available for free at the SEC’s website at www.sec.gov.

Free copies of the offer to purchase, the related letter of transmittal and certain other offering documents are available by Cegeka and may be obtained by directing a request to the information agent for the tender offer that is named in the Schedule TO and related offer documents. Copies of the documents filed with the SEC by CTG are available free of charge on CTG’s internet website at www.ctg.com or by contacting CTG’s Investor Relations Department at 716 887 7368.

In addition to the offer to purchase, the related letter of transmittal and certain other tender offer documents filed by Cegeka, as well as the solicitation/recommendation statement filed by CTG, CTG will also file periodic and current reports with the SEC. You may read and copy any reports or other information filed by Cegeka or CTG at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. CTG’s filings with the SEC are also available to the public from commercial document-retrieval services and at the website maintained by the SEC at http://www.sec.gov.

 

- END -

CTG news releases are available at www.ctg.com.

- ### -

 

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v3.23.3

Document and Entity Information	Nov. 08, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 08, 2023
Entity Registrant Name	COMPUTER TASK GROUP INC
Entity Central Index Key	0000023111
Entity Emerging Growth Company	false
Entity File Number	1-9410
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	16-0912632
Entity Address, Address Line One	300 Corporate Parkway
Entity Address, Address Line Two	Suite 214N
Entity Address, City or Town	Amherst
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	14226
City Area Code	716
Local Phone Number	882-8000
Entity Information, Former Legal or Registered Name	Not applicable
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, $.01 par value
Trading Symbol	CTG
Security Exchange Name	NASDAQ

---