CIBER, Inc., a global information technology consulting, services and outsourcing company, today reported results for the third quarter of 2010.
Highlights for the third quarter 2010:
• Revenue growth of 4% compared to last year’s third quarter, the strongest in 7 quarters
• Constant currency adjusted revenue growth was 6%
• Operating income was $7.1 million
• Net income attributable to CIBER was $3.4 million, or $0.05 per share
• Cash on hand at quarter end of $51 million
• Year-to-date cash flow from operations of $7 million
Dave Peterschmidt, President and Chief Executive Officer of CIBER said, “Our top-line growth is evidence that the market is healthy and I am pleased to see that client renewals, new wins and improving demand continue to drive our revenue growth. I am not pleased, however, that our lack of strategic focus and poor operational execution has impeded our ability to translate this top-line growth into greater profits or cash flow. I have already begun the process of addressing this with the development of a strategic plan and the implementation of operational regimens that will help us deliver improved, predictable and sustained performance in 2011 and beyond.”
Third Quarter Consolidated Results
In the third quarter, revenue was in line with expectations at $265.9 million, up 4% from last year's third quarter, or up 6% on a constant currency basis. The Segmenta acquisition completed in 2010 added 1% to revenue growth in the quarter. The International, Custom Solutions and U.S. ERP segments, which comprise more than 80% of consolidated revenue, drove the majority of the revenue growth.
Gross margin for the quarter was 24.6%, compared to 25.3% in last year’s third quarter and 25.1% in the second quarter of this year. Gross margin was impacted year-over-year by investments for future revenue growth, particularly in the International segment where CIBER is expanding its service offerings to small- and medium- sized businesses running SAP in Germany. Additionally, the increased use of subcontractors utilized to fill demand reduced gross margin in the quarter.
Operating income was $7.1 million, up 2%, or down 23% excluding a $2.2 million pre-tax non-recurring litigation settlement incurred in the third quarter of 2009. Third quarter operating income margin was 2.7%, flat compared with last year's third quarter. Excluding the litigation settlement, the third quarter 2009 operating margin was 3.6%. The settlement charge was included in 2009’s selling, general and administrative expense, and was not included in operating segment results.
Earnings per share were $0.05 in the third quarter compared to earnings per share in the same period last year of $0.05 or $0.07 excluding the litigation settlement.
The third quarter tax rate was 32% compared to 28% in last year’s third quarter. The higher tax rate was primarily the result of changes to the mix of taxable income across geographies with varying tax rates. Management continues to expect a full-year tax rate in the range of 25% to 29%.
Capital Deployment and Liquidity
CIBER’s total cash balance at quarter end was $51 million. Cash provided by operating activities was $7.1 million for the first nine months of 2010. Capital expenditures for the quarter and nine months were $3.1 million and $9.6 million, respectively.
Days sales outstanding, or DSOs, for services were 71 days at September 30, 2010 compared to 65 days at September 30, 2009.
The outstanding balance on CIBER’s senior credit facility at September 30, 2010 was $93.1 million, compared to $100.8 million at June 30, 2010 and $97.5 million as of December 31, 2009.
Management reaffirmed its expectation for 2010 revenue of at least $1.060 billion and expects 2010 EPS of at least $0.20 excluding the goodwill impairment and the executive change charges incurred in the second quarter 2010. GAAP EPS is expected to be a loss of no greater than $1.02 for the full year 2010. These EPS estimates do not account for any future charges that may be incurred as a result of management’s continued review of the business as well as customer relationships.
Peterschmidt commented on the outlook, “We have tightened our standards governing the quality of engagements that CIBER will accept, understanding the impact that write-offs and other surprises have had on our credibility. I am eager to pursue higher quality engagements with the goal of growing revenue, increasing margins and improving collectability of receivables. I remain committed to delivering improved, sustained and predictable performance.”
Investor and Analyst Conference Call
CIBER President and Chief Executive Officer Dave Peterschmidt invites you to participate in a conference call today at 11:00 am. Eastern Time to discuss the Company’s third quarter 2010 financial results.
To participate in the conference call, dial 866-510-0710 (U.S.) or +1-617-597-5378 (outside the U.S.) ten minutes prior to the start of the call and provide the operator with the pass code 75564263. This conference call will also be available via webcast at .ciber.com/cbr. A replay of the call and webcast will be available one hour after the call ends through Dec. 4, 2010. 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 10217597. The webcast replay will be available at ciber.com/cbr.
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 constant currency adjusted; operating income change, operating income margin, and earnings per share excluding the third quarter 2009 litigation settlement; and 2010 earnings per share guidance excluding goodwill impairment and executive charges.
Reconciliations of non-GAAP to comparable GAAP measures are available in the accompanying schedules and in the Investor Relations section of the Company's website at 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 forward-looking statements. For example, we make certain forward-looking statements regarding our current estimates for revenue and profitability for the Company for 2010. These statements reflect a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by our forward-looking statements. These risks include, without limitation, risks that: (1) economic and political conditions, including regulatory or legislative action, adversely affect us or our clients’ businesses and levels of business activity; (2) we cannot expand and develop our services and solutions in response to changes in technology and client demand; (3) we cannot compete effectively in the highly competitive consulting, systems integration and technology and outsourcing markets; (4) our work in the government contracting environment exposes us to additional risks; (5) our clients may terminate their contracts with us or be unable or unwilling to pay us for our services which may impact our accounting assumptions; (6) our outsourcing services subject us to operational and financial risk; (7) the type and level of technology spending by our clients may change; (8) we cannot maintain favorable pricing and utilization rates; (9) legal liability may result from solutions or services we provide; (10) we cannot anticipate the cost and complexity of performing our work or we are not able to control our costs; (11) our global operations are subject to complex risks, some of which might be beyond our control, including, but not limited to, fluctuations in foreign exchange rates; (12) we cannot balance our resources with client demand or hire sufficient employees with the required skills and background; (13) we may incur liability from our subcontractors’ or other third parties’ failure to deliver their project contributions on time or at all; (14) we cannot manage the organizational challenges associated with our size; (15) consolidation in the industries that we serve could adversely affect our business; (16) our ability to attract and retain business depends on our reputation in the marketplace; (17) our share price could fluctuate due to numerous factors, including variability in revenues, operating results and profitability; and/or (18) other factors discussed from time to time in the Company’s news releases and public statements, as well as the risks, uncertainties and other factors discussed under the “Risk Factors” heading in the Form 10-Q and our most recent annual report on Form 10-K and other documents filed with or furnished to the Securities and Exchange Commission. Most of these factors are beyond our ability to predict or control. Forward-looking statements are not guarantees of performance and speak only as of the date they are made, and 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, Inc. (ciber.com) is a global information technology consulting, services and outsourcing company applying practical innovation through services and solutions that deliver tangible results for both commercial and government clients. Services include application development and management, ERP implementation, change management, project management, systems integration, infrastructure management and end-user computing, as well as strategic business and technology consulting. Founded in 1974 and headquartered in Greenwood Village, Colorado, CIBER has more than 8,000 employees. We operate in 19 countries, serving clients from 14 Global Solution Centers and 70 local offices in North America, Europe and Asia/Pacific. Annual revenue in 2009 exceeded $1.0 billion. CIBER trades on the New York Stock exchange (NYSE: CBR), and is included in the Russell 2000 Index and the S&P Small Cap 600 Index.
Gary Kohn, VP, Investor Relations
P: 303. 220.0100 / E: gkohn[.]ciber.com.
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