GREENWOOD VILLAGE, Colo., Aug. 7, 2012– Ciber, Inc. (NYSE: CBR), a global information technology consulting, services and outsourcing company, today reported results for the second quarter of 2012.
Highlights from continuing operations for the second quarter 2012 include:
(Significant items from last year’s second quarter are described at the end of this press release):
President and Chief Executive Officer Dave Peterschmidt said, “We have accomplished a great deal in changing the flight of Ciber during challenging times. In the second quarter we delivered year-over-year operating income growth despite softness in revenue. Our focus on improving the sales engine in North America produced revenue growth sequentially for the second consecutive quarter for this division, we held International revenue flat year-over-year in local currency, and we expanded each segment’s gross margin from first quarter levels.”
Claude Pumilia, Executive Vice President and Chief Financial Officer, commented, “We are pleased with the performance and trajectory of our North America business. On the International side, revenue declined year-over-year as a result of economic headwinds in Europe, as well as the unfavorable changes in currency rates which we expect to be a headwind for the rest of 2012.”
Second Quarter Financial Results from Continuing Operations
Revenue of $237.0 million decreased 2% or increased 3% in constant currency compared with the last year’s second quarter. Excluding the significant items in last year’s second quarter, revenue decreased 7% or 2% in constant currency. Sequentially from the first quarter of 2012, revenue decreased 2% or 1% in constant currency.
The second quarter 2012 gross margin improved to 25.5% from 20.6% (24.8% excluding significant items) in last year’s second quarter. Significantly improved project management resulting in fewer adjustments for project overruns was a major contributor to the year-over-year improvement in gross margin. Ciber also expanded gross margin through stricter operational disciplines, and more efficient delivery of a refined, more concise set of offerings.
Selling, general and administrative expenses (SG&A) in the quarter were $55.5 million equating to 23.4% of revenue. The $4.6 million, 8% reduction in SG&A from the second quarter 2011 was achieved through cost containment and efficiency initiatives. Savings were derived from reduced employee related expenses, and contained discretionary spending.
Second quarter 2012 operating income from continuing operations of $4.7 million compares to an operating loss in the second quarter of 2011 of $27.5 million, or operating income of $4.2 million excluding last year’s significant items. The operating margin in Q2 2012 was 2.0% compared with last year’s second quarter operating margin of (11%), or 1.7% excluding the significant items.
Net income from continuing operations for the second quarter 2012 was $0.3 million or $0.00 per share. Last year’s second quarter net loss excluding significant items was $0.7 million, or $0.01 per share. Last year’s second quarter GAAP net loss from continuing operations was $59.0 million or $0.82 per share.
The International division, which represented 48% of consolidated revenue, delivered $114.8 million in revenue for the second quarter 2012. Revenue declined 10%, or was flat in constant currency year-over-year. Sequentially revenue was down 7% or 5% in constant currency from the first quarter of 2012. Ciber continued to grow revenue in the U.K., Norway and Germany, but this strength was in part offset by lower year-over-year revenue from the division’s largest client. Gross margin was down from last year’s second quarter driven mostly by lower than expected utilization rates and increased use of subcontractors. Gross margin was up 200 basis points from the first quarter 2012. Operating margin for the segment was 6%, a 50 basis points increase from the same quarter last year and was down sequentially from first quarter 2012. The year-over-year increase was driven by lower SG&A.
The North American division, 52% of consolidated revenue, grew revenue sequentially 4% from the first quarter 2012 to $123.8 million. Compared with 2011’s second quarter revenue expanded 9%, or declined 3% excluding the significant items. Gross margin was up both year-over-year and sequentially from improved utilization rates and more efficient, less problematic delivery. The revenue performance, improved gross margin, and lower SG&A yielded an operating margin of 5% which was up 20 basis points sequentially from first quarter 2012, and was up 170 basis points from the second quarter 2011 excluding the significant items.
Capital Deployment and Liquidity
Ciber’s cash balance at the end of the second quarter 2012 was $29.1 million. The outstanding balance on the new credit facility was $36.2 million.
Cash flow used in operating activities (continuing operations) for the first six months was $29.5 million driven mostly by a $29 million increase in accounts receivables. The Company experiences seasonality in cash flows with stronger cash flow occurring during the last six months of the year. Management expects positive cash flow from operations for the full year 2012. DSO’s were 64 days, an improvement from 66 days at June 30, 2011. Capital expenditures in the first half of 2012 have totaled $2.9 million.
Continuing Operations and Segment Realignment
The Company made the strategic decision to sell its Federal division in order to focus on its core offerings. The Company completed the sale on March 9, 2012 and therefore the Federal division is presented as a discontinued operation. Additionally, for 2012, the Company combined the operations of its IT Outsourcing division with the remaining two divisions: International and North America. The discussion of the Company’s results includes comparison to 2011 as if the new reporting segments were in place that year. Quarterly results for 2011 under the new reporting segments and with the Federal division as a discontinued operation were provided in the tables of the first quarter 2012 earnings release and are available at www.ciber.com.
Significant Charges from the Second Quarter 2011 and ITO Sale
In the second quarter 2011, the Company incurred five significant charges which totaled $58.3 million after-tax ($31.7 million pre-tax) or $0.81 per share.
The items were:
Investor and Analyst Conference Call
Ciber President and Chief Executive Officer Dave Peterschmidt invites you to participate in a conference call or audiocast today at 11:00 a.m. Eastern Time to discuss the Company’s financial results.
The conference call and audiocast of the conference call will be available to the public. The audiocast will be available at www.ciber.com/us/index.cfm/company/investor-relations
To participate in the conference call, dial 866-383-8003 (U.S.) or +1-617-597-5330 (outside the U.S.) ten minutes prior to the start of the call and provide the operator with the pass code 85468782.
A replay of the call and audiocast will be available one hour after the call ends through Sep 7, 2012. To access the telephone replay, dial 888-286-8010 (U.S.) or +1- 617-801-6888 (outside the U.S.) and use the pass code 95895795. The audiocast replay will be available at www.ciber.com/us/index.cfm/company/investor-relations.
Non-GAAP Financial Information
Ciber presents a number of non-GAAP measurements because management believes that these metrics provide meaningful supplemental information in addition to the GAAP metrics and provide comparability and consistency to prior periods. These non-GAAP measurements include: revenue change year-over-year and sequentially adjusted for currency; revenue change year-over-year adjusted for second quarter 2011 significant items; revenue change year-over-year adjusted for currency and second quarter 2011 significant items; international revenue change year-over-year and sequentially adjusted for currency; North America revenue change year-over-year adjusted for second quarter 2011 significant items; operating income and operating margin change year-over-year adjusted for second quarter 2011 significant items; gross margin change year-over-year adjusted for second quarter 2011 significant items; gross margin change year-over-year adjusted for second quarter 2011 significant items; and second quarter 2011 operating income, operating margin, net loss and loss per share adjusted for significant items.
Reconciliations of non-GAAP to comparable GAAP measures are available in the body of this release as well as the accompanying schedules. These reconciliations may also be found in the Investor Relations section of the Company's website at www.ciber.com/cbr.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to our operations, results of operations and other matters that are based on our current expectations, estimates, forecasts and projections. Words, such as “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “potential,” “project,” “should,” and “will” and similar expressions, are intended to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based on assumptions as to future events that may not prove to be accurate. Risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by our forward-looking statements include, but are not limited to, risks that: our results of operations may be adversely affected if we are unable to execute on the key elements of our strategic plan; our results of operations can be adversely affected by economic conditions and the impacts of economic conditions on our clients' operations and technology spending; termination of a contract by a significant client and/or cancellation with short notice could adversely affect our results of operations; the IT services industry, in the U.S. and internationally, is highly competitive, with increased focus on offshore capability and we may not be able to compete effectively; our new credit agreement, an asset-based and term loan facility, limits our operational and financial flexibility and we also face the need to comply with covenants in our credit agreement; we may not complete the sale of certain contracts and the related assets of our information technology outsourcing practice, or complete the sale within the time frame we anticipate, or on the terms currently negotiated; possible post-closing adjustments to the purchase price on the sale of our former Federal division could reduce the purchase price and cause us to recognize a loss on that sale; we may experience declines in revenue and profitability if we do not accurately estimate the cost of engagements conducted on a fixed-price basis; our business could be adversely affected if our clients are not satisfied with our services, and we could face damage to our professional reputation and/or legal liability; if we are not able to anticipate and keep pace with rapid changes in technology, our business will be negatively affected; our international operations are susceptible to different financial and operational risks than our domestic operations; we intend to increase our presence in India, which may expose us to operational risks; our revenues, operating results and profitability will vary from quarter to quarter, which may impact our ability to comply with our debt covenants, and may also result in increased volatility in the price of our stock; a data security or privacy breach could adversely affect our business; if we are unable to collect our receivables, our results of operations and cash flows could be adversely affected; our future success depends on our ability to continue to retain and attract qualified sales, delivery and technical employees; we could incur additional losses due to further impairment in the carrying value of our goodwill; we depend on contracts with various state and local government agencies for a significant portion of our revenue and, if the spending policies or budget priorities of these agencies change, we could lose revenue; unfavorable government audits could require us to adjust previously reported operating results, to forego anticipated revenue and subject us to penalties and sanctions; our services or solutions could infringe upon the intellectual property rights of others, or we might lose our ability to utilize rights we claim in intellectual property or the intellectual property of others; we have adopted anti-takeover defenses that could make it difficult for another company to acquire control of Ciber or limit the price investors might be willing to pay for our stock, thus affecting the market price of our securities. For a more detailed discussion of these factors, see the information under the “Risk Factors” heading in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, and our Annual Report on Form 10-K for the year ended December 31, 2011, and other documents filed with or furnished to the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statements in light of new information or future events. Readers are cautioned not to put undue reliance on forward-looking statements.
About Ciber, Inc.
Ciber is a global IT consulting company with 7,000 consultants in North America, Europe and Asia/Pacific, and approximately $1 billion in annual revenue. Client focused and results driven, Ciber partners with organizations to develop technology strategies and solutions that deliver tangible business value. Founded in 1974, the company trades on the New York Stock Exchange (NYSE: CBR). For more information, visit www.Ciber.com.