Computer Task Group Sees Q3 Revenue Climb To $90.3M As Earnings Outlook Dims

The third fiscal quarter was a good one for Computer Task Group, which on Thursday reported strong growth in revenue and earnings.

Despite that growth and the Buffalo, N.Y.-based solution provider's increased revenue outlook for fiscal 2018, however, a softening of its full-year GAAP and non-GAAP earnings cast a shadow over the company's financials.

Bud Crumlish, CTG president and CEO, said in a prepared statement that CTG is executing well on its strategic initiatives.

[Related: 2018 Solution Provider 500]

"As a result of deliberate execution on our strategic initiatives, we are realizing consistent and meaningful revenue growth across the organization. I am especially encouraged by the success from new Health Solutions business and the continued strong performance of our European operations. Additionally, we are determined to improve the quality of the revenue we generate from our staffing services, which will contribute to enhancing our overall profitability," Crumlish said.

CTG is ranked No. 78 on CRN's 2018 Solution Provider 500 list.

For its third fiscal quarter of 2018, which ended Sept. 28, CGT reported revenue of $90.26 million, up 21.9 per cent over the $74.04 million the company reported for its third fiscal quarter of 2017. That includes IT solutions revenue of $28.93 million, up 32 percent over last year, and IT staffing revenue of $61.33 million, up 68 percent over last year.

Of CTG's total revenue, 66 percent, or $59.21 million, came from sales in North America, while 32 percent, or $31.05 million, came from Europe. Europe was a big growth area for the company, as only 27 percent of third fiscal quarter of 2017 revenue came from that continent.

Technology service providers accounted for 31 percent of total third fiscal quarter 2018 revenue, followed by 20 percent from manufacturing, 17 percent from healthcare, 16 percent from financial services, 11 percent from general markets, and 5 percent from energy.

CTG reported net income on a GAAP basis of $1.2 million, or 8 percent per share. That was up significantly from the $40,000 in net income reported in the third fiscal quarter of 2017.

On a non-GAAP basis, CTG reported net income of $900,000, or 6 cents per share, up slightly from last year's $700,000, or 5 cents per share.

News about CTG's solid third fiscal quarter of 2018 was tempered by a softening in the company's guidance, despite a positive guidance for its fourth fiscal quarter.

For the fourth fiscal quarter of 2018, CTG is expecting revenue of $89 million to $94 million, up from last year's fourth quarter revenue of $74.6 million. The company is also expecting GAAP earnings per share of 3 cents to 7 cents, a big improvement from last year's GAAP net loss of 3 cents per share. On a non-GAAP basis, the company expects earnings of 6 cents to 10 cent per share compared to last year's 6 cents per share.

For the full year 2018, CTG is expecting revenue of $355 million to $360 million, which is up considerably over last year's $301.2 million. That revenue expectation is in line with previous guidance.

Earnings per share on a GAAP basis are projected to be from 21 cents to 25 cents, which represents a softening from previous guidance of 20 cents to 26 cents. GAAP net income for 2017 was 5 cents per share.

On a non-GAAP basis, CTG is expecting 2018 earnings of 26 cents to 30 cents per share, down from its previous guidance of 30 cents to 36 cents per share. That compares to last year's 22 cents per share.

CTG released its most recent earnings early Thursday. By the end of the trading day, the company's share price was down by over 7 percent to just under $5 per share.