Computer Task Group (CTG) Misses Q3 EPS by 1c, Miss on Revenues; FY17 EPS/Revenue Guidance Below Consensus

Computer Task Group (NASDAQ: CTG) reported Q3 EPS of $0.05, $0.01 worse than the analyst estimate of $0.06. Revenue for the quarter came in at $74 million versus the consensus estimate of $75.8 million.

Guidance and OutlookCTG expects total revenue for the fourth quarter of 2017 to range between $72.0 and $75.0 million with the operating margin expected to be between 1.8% and 2.2%. Net income is expected to be between $0.05 and $0.07 per diluted share. There are 63 billing days in both the 2017 and 2016 fourth quarters.

For the 2017 full year, CTG expects revenue to range between $298.5 and $301.5 million with the operating margin estimated to be 1.3%. GAAP net income for the full year is expected to be between $0.13 and $0.15 per diluted share. Non-GAAP operating margin is estimated to be 2.0%, while non-GAAP net income is expected to range between $0.21 and $0.23 per diluted share.

John M. Laubacker, CTG’s Chief Financial Officer, commented, “Our revised full-year revenue guidance reflects the continued soft demand from several of our large staffing clients. The impact of higher medical-related costs will exceed the progress from our diligent cost management initiatives during the second half of this year. However, we remain encouraged by the additional business we have landed to-date, which converts our sales pipeline to future revenue and will increasingly begin contributing to our results in future quarters. Combined with further expected progress on what is still a very healthy pipeline of new clients and projects, we believe we are well positioned to achieve revenue growth and increased profitability in 2018.”

GUIDANCE:

Computer Task Group sees Q4 2017 EPS of $0.21-$0.23, versus the consensus of $0.24. Computer Task Group sees Q4 2017 revenue of $298-301.5 million, versus the consensus of $308 million.

Third Quarter Financial Results

• Revenue was $74.0 million, down 5.2% from $78.1 million in the third quarter of 2016
• Revenue excluding three largest clients grew 6.7% year-over-year
• GAAP net income was $40,000, or $0.00 per diluted share, which reflects a $0.05 per diluted share unexpected increase in employee medical costs incurred under CTG’s self-insured healthcare plan
• Non-GAAP earnings were $0.05 per diluted share, excluding the increased medical costs, meeting the midpoint of guidance
• Revenue in Europe increased 13% year-over-year, excluding favorable currency translation
• GAAP operating margin was 0.6%. Non-GAAP operating margin was 2.2%, excluding the medical costs.

For earnings history and earnings-related data on Computer Task Group (CTG) click here.

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