ctg noble presentation 01.31.17 final - seeking alpha · 2017-01-31 · appointed ceo july 2016...
TRANSCRIPT
NobleCon 13
Presented by: Bud Crumlish, President and CEOBrendan Harrington, CFO
January 31, 2017
NASDAQ: CTG
© 2017 CTG, Inc. 2
Forward‐Looking Statements
This presentation contains certain forward‐looking statements concerning the Company’s current expectations as to future growth and should be read in conjunction with the Company’s disclosures in its reports that are filed from time to time with the Securities and Exchange Commission.
These statements are based upon a review of industry reports, current business conditions in the areas where the Company does business, the availability of qualified professional staff, and other factors that involve risk and uncertainty.
As such, actual results may differ materially in response to a change in such factors.
© 2017 CTG, Inc. 3
50 years of providing the most reliable IT services
3© 2017 CTG, Inc.
Who We Are
CTG is a leading provider of IT solutions and staffing in North America and Western Europe.• Established in 1966 (NASDAQ: CTG)• 2016 revenues: $321 million(1)
• Approximately 3,500 employees in the United States, Luxembourg, Belgium, the UK, and India
• 15 North American offices, four Western European offices, and one office in India
• Full‐service professional IT solutions and staffing firm• Solutions:
• Leading provider of healthcare IT• Industry revenue CAGR of ~5% for 2015‐2019 **
• Staffing: • Annual industry revenue growth rate of ~6%*
• Since 2013, a top 20 Largest U.S. IT Staffing Firm by Staffing Industry Analysts
(1) Reflects midpoint of company’s guidance as provided on October 25, 2016**Source: Gartner
© 2017 CTG, Inc. 4
CTG At A Glance
Vertical Markets2016 Revenue by Service
IT Staffing71%
IT Solutions29%
Technology
Manufacturing Healthcare
Financial Svcs.Energy
Other
Mission: Provide world‐class IT solutions and staffing to maximize the impact of technology and provide real business value for our clients.
Vision: Remain the most reliable IT services provider with an absolute commitment to customer satisfaction.
© 2017 CTG, Inc. 5
Impressive Global Client List
52% of CTG’s top 25 clients have retained our services for more than 10 years.
© 2017 CTG, Inc. 6
• Appointed a new CEO and Board member, Bud Crumlish, in July 2016 (26 years of IT experience), and two new Board directors with international finance and IT experience
• Strengthened leadership team
• Growing the business development team
• Scaling existing solutions across enterprise
• Pursuing cross‐collaboration opportunities
• Expanded and reorganized company‐wide recruiting and delivery capabilities, including 24X7 availability
• New Hyderabad, India, operations center
• Reorganized U.S. recruiting function to create more scalable staffing solution
• Continued focus on disciplined cost management
Positioned For Growth2016: Established a new foundation
© 2017 CTG, Inc. 7
3‐Year Financial Targets and ObjectivesDemonstrating improved revenue growth and profitability
7% CAGR 33% CAGR36% CAGR
(1)
Revenue Operating Margin Diluted EPS
(1) Reflects midpoint of company’s guidance as provided on October 25, 2016(2) Excludes goodwill impairment and severance charges. See reconciliation of GAAP to non‐GAAP information at Appendix 3
Strategic Objectives• Generate revenue growth that exceeds market rates ‐ capture market share
• Diversify revenue contribution• Cross‐sell IT solution and staffing offerings
• Enhance operating leverage by increasing gross margin and managing fixed costs• Return growth to solutions business• More than double earnings per share
2016EMPG(1)
2019Goal
2016EMPG(1)(2)
2019Goal
2016EMPG(1)(2)
2019Goal
© 2017 CTG, Inc. 8
Strategy: IT Staffing71% of 2016 Q3 revenue
Expand existing accounts while pursuing new accounts to diversify client base forrevenue growth and improved profitability
• Longstanding Fortune 1000 client base with deep relationships
• Significant investment in new account executives focused on selling across all industries
• Advanced technology infrastructure• Targeting large and medium‐sized clients,
resulting in higher margins • 24X7 recruiting and delivery capabilities• Broaden service lines to include staff
augmentation, managed staffing, and permanent placement
• Leverage relationships with large managed service providers (MSP) as a sales channel to access new clients
IT Staffing
*Staffing Industry Analysts – April 2016
Offerings Differentiators
Staffing Augmentation
• Able to compete with anyone• Highly ranked by large clients• High quality technical resources• Cycle time – speed to fulfill
Managed Staffing • Account Management service capability• Recruiting fulfillment – onshore and offshore
Direct/Permanent Placement
• Tenured recruiters with extensive experience
• Significant candidate network, national and international job search capabiiltiies
© 2017 CTG, Inc. 9
Strategy: IT Solutions29% of 2016 Q3 revenue
Refine existing, and develop new, repeatable value‐based solutions
• Implemented an enterprise‐wide global solutions program
• Refine current solutions tailored to meet existing clients changing needs
• Develop new solutions to capitalize on market trends
• Key opportunities include:• Mature solutions in place that are repeatable
across vertical markets• Transition to comprehensive service provider
model by providing solutions and staffing to existing clients
Offerings Differentiators
Application Management Services/ Transitional Application Management (TAM)
• Highly rated provider• Competitive pricing• Extensive history and long client list (over 90 AMS clients company‐wide, to date)
Application Development
• Flexible delivery model• Proven methodology
Help Desk/Service Desk
• Highly rated provider• Competitive pricing• ITIL and industry best practice‐based methodology
Implementation,Optimization, and Performance Improvement
• Deep application expertise• Experienced and certified teams• Competitvely priced
Testing‐ Execution • Market recognition of proprietary tools• Largest software testing capability in Belgium
IT Solutions
© 2017 CTG, Inc. 10
Focus Area (Geography): Europe21% of 2016 Q3 revenue
Offerings Differentiators
Delivery CenterBusiness Operational Support
• Market leader in Luxembourg financial services sector
• 24X7 support available in multiple languages
Testing ‐Execution
• Market recognition of proprietary tools• Largest software testing capability in Belgium
ApplicationDevelopment
• Flexible delivery models tailored to customer needs
• PSF certification of Development Center in Luxembourg
EHR Implementation
• Market leader in Belgium• Leverage U.S. heathcare experience
DisclosureManagementSystem
• Proprietary software as a service (SaaS)application connecting law enforcement with telecommunication service providers
• High profile references: BT and Vodafone
Data Privacy • Combination of IT, compliance, and legal skills results in ability to do all remediation work; one stop shopEurope
Grow existing client base and capture market share in adjacent markets
• Longstanding relationship with European government agencies and Fortune 1000 clients
• Deep financial sector experience in Luxembourg• One of the largest IT services firms in both Belgium
and Luxembourg• On‐site service delivery and Development Centers• Sales organization can cross‐sell application solutions,
testing, and IT service management • Belgium government has initiating funding for EHR
implementations• Capture post‐BREXIT opportunities for IT technology
modifications and enhancements
© 2017 CTG, Inc. 11
Focus Area (Vertical Market): Healthcare*17% of 2016 Q3 revenue
* Includes healthcare providers, health insurers (payers), and life sciences
Offerings Differentiators
Implementation,Optimization, and Performance Improvement
• Extensive experience; more than 200 implementation and optimization clients
• Deep expertise with Epic/Cerner• Seasoned clinical team with special certifications
• Competitvely priced compared to niche and Big 4
Application Management Services/Service Desk/Clinical Help Desk
• Highly ranked, year over year, by KLAS Enterprises, LLC (KLAS)
• Extensive history and long client list; over 50 healthcare AMS clients year to date
• Exceptional references • Proven healthcare methodologies
Validation Testing • Extensive industry experience• Proprietary methodologies
Staff Augmentation • Robust reputation as a staffing company• Technical screening, diligent interviewing, and quality oversight process produces better candidates/results
Healthcare
Reposition and capitalize on attractive market trends
• Expand optimization and performance improvement solutions in hospital, provider, and payer spaces
• Expand regulatory compliance services and staffing in life sciences space
• Capitalize on consolidation and integration activities in hospital, provider, and payer spaces
• Leverage staffing capabilities to support large institutional managed service provider (MSP) programs
• Continue to execute on EHR opportunities• Utilize off‐shore fulfillment in conjunction with
on‐shore capabilities
© 2017 CTG, Inc. 12
Focus Area (Vertical Market): Energy5% of 2016 Q3 revenue
Energy
Leverage solution offerings to existing clients; expand to new clients in the industry
• Penetrate existing energy clients; cross‐sell additional offerings
• Expand high‐value business consulting practice, with emphasis on strategic IT planning and business requirements analysis
• Drive geographic diversification with new clients
Offerings Differentiators
Application Development/ Delivery Center
• Developed specific solutions still in use after many years
• Flexible delivery model
Information Management and Document Control
• Extensive oil and gas knowledge and expertise
• Long‐term client relationships
Project Management Office
• Strong history of performance and references
• PMI certifications
© 2017 CTG, Inc. 13
Strategy: ONE CTG
• Company‐wide framework that:• Encourages and incentivizes
collaboration across the organization
• Promotes cross‐selling and expands existing solutions and staffing across multiple vertical markets
• Allows for reproduction of our unique offerings in new geographies
• Ramps increased utilization of cost‐competitive fulfillment capacity across the enterprise
Launched ONE CTG
ONE CTG increases total value provided to clients, while giving CTG the benefits of greater reach, staffing utilization, and profitability.
ONE CTG
Technology
Other
Energy
Healthcare
Manufacturing
Financial Services
© 2017 CTG, Inc. 14
Returned $29.7 Million in Capital to Shareholders (Since 2013)
Strong balance sheet; net cash of $9.3 million at 9/30/2016• $29.3 million cash surrender value of life insurance policies• $40 million line of credit
$10 million share repurchase authorization in place since November 2016• Purchased 317,000 shares between late November and year‐end• Suspended payment of recurring quarterly dividend initiated in 2013
2013 2014 2015 2016 Total
Dividends $ 2,274 $ 3,422 $ 3,624 $ 2,844 $ 12,164 Share Buybacks $ 7,343 $ 7,432 $ 1,406 $ 1,374 $ 17,555
Capital Returned $ 9,617 $ 10,854 $ 5,030 $ 4,218 $ 29,719
© 2017 CTG, Inc. 15
Robust Investment RationaleWhy We Will Grow• 50‐year history of providing IT solutions and staffing• Focus on:
• Expanding our client base• Significant investment in business development• Capturing market share from competitors• Achieving our published 3‐year financial targets and objectives
Strengthened Leadership and Business Development Teams Across the Organization• Appointed new CEO and Board member, Bud Crumlish, in July 2016 (26 years of IT
experience)• Appointed two new board directors with international finance and IT experience
Strong Financial Position• Solid balance sheet with ample flexibility for operating capital• Implemented and maintaining disciplined cost management• Positioned to benefit from meaningful operating leverage• Commitment to prudent capital allocation and prioritizing shareholder value
Recognized and respected partner with 50‐year history of delivering reliable services and solutions to clients.
© 2017 CTG, Inc. 16© 2017 CTG, Inc. 16
Appendix
© 2017 CTG, Inc. 17
Appendix 1: Focused Leadership TeamBud CrumlishPresident and CEO Appointed CEO July 2016 after directing CTG’s staffing business since 2001; was member of finance team between 1990 and 2001; focused on executing diversified growth.
Brendan HarringtonCFO CFO since 2005; joined CTG in 1994 and worked in various finance capacities, including time in Europe.
Filip Gyde’Senior Vice President and General Manager, EuropeLeader of European operations since 2000; CTG career began in 1987, named Belgium in 1996 and MD Luxembourg in 1999.
Angela RiveraVice President, Health Solutions (North America)23 years in healthcare, 16 with CTG; responsible for growth strategy, quality service delivery, and management of consulting base.
Rick SullivanVice President, Strategic Staffing Services 25‐year IT industry career with CTG; long‐time relationships with largest clients and focused on client relationships.
Jim NichiporukVice President, Strategic Staffing Services12‐year staffing industry career; held leadership positions at Adecco, AtWork, and Peak; joined CTG in January 2016; concentrates on business development.
Aaron BunkerManaging Director, EnergyIn second year with CTG after 12 years with Cisco; began career at IBM in 1990; focused on growing market share in energy and manufacturing.
Elizabeth Martin Savino, Vice President, Human ResourcesVice President of Human Resources at CTG since 2012; began career with CTG as an attorney in the General Counsel office in 1992; focuses on all aspects of employment, compliance, labor laws, and employee benefits.
© 2017 CTG, Inc. 18
$0.52
$0.71
$0.88 $0.92
$0.64
$0.41
$0.21
2010 2011 2012 2013 2014 2015 2016E*
EPS
Appendix 2: Annual Results and Guidance
4.2%4.9%
5.8% 5.9%
4.4%
2.9%
1.6%
2010 2011 2012 2013 2014 2015 2016E*
OperatingMargin
(1) Excludes $0.075 per diluted share of non‐operational gain from insurance proceeds(2) Includes effect of 4Q ‘14 charges of $0.07 per diluted share associated with the death of a former CEO,
and $0.06 per diluted share to write off the net book value of the Company’s medical fraud, waste, and abuse software solution
(3) Includes the effect of charges in 2Q ‘15 of $0.04 per diluted share for the write‐off of the Company’s IT medical management software and $0.04 per diluted share related to a workforce reduction in Europe
(4) Adjusted: excludes $2.39 per diluted share for a goodwill impairment charge related to the Company’shealthcare business in 1Q and 3Q ‘16, and $0.06 per diluted share in severance charges related to twoformer executives
(5) Adjusted operating margin excludes a $37.3 million goodwill impairment charge related to the Company’s healthcare business in 1Q and 3Q ‘16, and $1.0 million in severance changes related to two former executives. See reconciliation of GAAP to non‐GAAP information in the company’s “2016 Third Quarter Results” press release dated October 25, 2016
(2) (3) (5)
(1) (2) (3) (4)
*Reflects midpoint of company’s guidance as provided on October 25, 2016.
• Revenue reflects impact of macroeconomic headwinds on large Staffing clients and trail‐off of EHR business.
• Operating margin and EPS reflect change in mix to lower margin Staffing business and investments in business development and recruiting resources.
EHR peak in 2012, trough in 1H ‘17
$331.4
$396.3$424.4 $419.0
$393.3 $369.5$321.0
$43.7
$59.4$71.0 $62.7 $41.7 $25.4
$13.5
2010 2011 2012 2013 2014 2015 2016EMPG*
Revenue(millions)
EHR
non‐EHR
© 2017 CTG, Inc. 19
Appendix 3: GAAP to non‐GAAP Reconciliations
3Q 2016 Operating Income
Operating Margin
Net Income
Diluted EPS
GAAP Results $(16,480) (21.1%) $(16,183) $(1.03)
Goodwill Impairment Charge $15,785 20.2% $15,785 $1.01
Severance Charges $1,489 1.9% $989 $0.06
Non‐GAAP Results $794 1.0% $591 $0.04
1Q 2016 Operating Income
Operating Margin
Net Income
Diluted EPS
GAAP Results $(20,466) (23.8%) $(20,373) $(1.31)
Goodwill Impairment Charge $21,544 25.1% $21,021 $1.35
Non‐GAAP Results $1,078 1.3% $648 $0.04
© 2017 CTG, Inc. 20
Appendix 4: Five‐Year Financial Summary 2015 2014 2013 2012 2011
(amounts in millions, except per‐share data) (1) (2) (3)
Operating Data
Revenue $ 369.5 $ 393.3 $ 419.0 $ 424.4 $ 396.3
Operating Income $ 10.6 $ 17.2 $ 24.7 $ 24.5 $ 19.3
Net Income $ 6.5 $ 10.4 $ 15.7 $ 16.2 $ 11.9
Basic Net Income per Share $ 0.42 $ 0.68 $ 1.02 $ 1.07 $ 0.80
Diluted Net Income per Share $ 0.41 $ 0.64 $ 0.92 $ 0.96 $ 0.71
Cash Dividend per Share $ 0.24 $ 0.24 $ 0.20 $ — $ —
Financial Position
Working Capital $ 53.0 $ 69.2 $ 67.5 $ 63.5 $ 45.4
Total Assets $ 163.1 $ 170.2 $ 174.4 $ 166.2 $ 147.5
Long‐term Debt $ 1.2 $ — $ — $ — $ —
Shareholders’ Equity $ 117.7 $ 111.0 $ 113.8 $ 102.8 $ 88.8
(1) Includes the effect of charges in 2Q ‘15 of $0.04 per diluted share for the write‐off of the Company’s IT medical management software and $0.04 per diluted share related to a workforce reduction in Europe
(2) Includes effect of 4Q ‘14 charges of $0.07 per diluted share associated with the death of a former CEO, and $0.06 per diluted share to write off the net book value of the Company’s medical fraud, waste, and abuse software solution
(3) Excludes $0.075 non‐operational gain from insurance proceeds
Thank You
Published by Computer Task Group, Inc.
In no event shall all or any portion of this presentationbe disseminated without the express written permissionof CTG. The CTG logo is a registered trademark of CTG.
© 2017 Computer Task Group, Inc. All Rights Reserved.
50 years of providing the most reliable IT services
Company Contacts:
Arthur (Bud) W. CrumlishPresident and Chief Executive Officer
Brendan HarringtonChief Financial Officer
Jim CulliganDirector, Investor Relations and Financial Services
E: [email protected] / P: +1 716 887 7368http://investors.ctg.com