CIBER, Inc., a global information technology consulting, services and outsourcing company, today reported results for the first quarter of 2011.
Financial highlights for the first quarter 2011 included:
• Revenue increased 8% to $282.5 million, the largest year-over-year increase in 10 quarters
• Constant currency adjusted revenue increased 7%
• Gross Margin was 25.8%, the highest in the last 9 quarters
• Operating income of $7.7 million, up 8%
• Net income of $4.1 million, up 17%
• Earnings per share of $0.06
Strategic and operational highlights in the first quarter:
• Launched “10 in 30” focused product initiative;
• Added Chief Information Officer and new Chief Financial Officer;
• Realigned North America management team to improve operational effectiveness.
President and Chief Executive Officer Dave Peterschmidt said,“The transformation of CIBER continues to progress. Our goal is to improve financial performance utilizing a refined strategic approach, improved operational regimens, and increased as well as narrowed focus on higher margin, well developed offerings. Our financial performance this quarter, particularly our improved gross margin, underscores the progress we are making.”
Peterschmidt continued,“The ongoing transformation will have its ups and downs during this transitional year. Our International division, which delivered another great quarter, has made substantial progress. The North America division however, has not progressed as quickly. We made specific changes to the North American leadership to address the operational issues and to ensure that we have a plan in place to deliver financial performance at this division in line with our expectations.”
(Note: In 2011 CIBER combined Custom Solutions and U.S. ERP into a single reporting segment, CIBER North America. The discussion of consolidated results includes comparison to 2010 as if the new reporting structure was in place last year. Additionally, quarterly results for 2010 in the new reporting structure have been provided in the tables of this release.)
First quarter revenue of $282.5 million increased 8%, or 7% on a constant currency basis, compared to last year's first quarter. The International division, CIBER’s largest at 42% of total revenue, grew the top line 28%, or 27% adjusted for currency. The Segmenta acquisition completed in 2010 added 2% and 7% to consolidated revenue growth and International revenue growth, respectively. International growth continues to be driven by strengthening demand for CIBER’s SAP expertise across key verticals including Utilities, Manufacturing and Retail as well as success within the CIBER Managed Services offering in Germany.
The North America division, which comprised 40% of consolidated revenue, saw revenue decline 5%. The decline was driven in part by the expected completion of several engagements at the end of last year and in the first quarter of 2011, as well as delays in the commencement of new projects. The revenue from these engagements was not replaced at the expected rate as new sales performance was weaker than expected since several sales positions remain unfilled and as the newly added sales members are not yet at their full effectiveness. The challenges in North America have continued, but are being addressed aggressively to ensure that the division’s results begin to improve.
Consolidated gross margin for the first quarter increased to 25.8% from 25.1% in the same period last year. The International division contributed to this improvement with higher utilization and more efficient project delivery. Offsetting the improvements in International gross margin was the continuing impact from the previously identified small number of troubled fixed-price contracts in North America.
Sales, general and administrative expenses (SG&A) in the quarter increased 11% and equaled 23% of revenue compared to 22% in last year’s first quarter. On-going investments in growth initiatives comprised the majority of the increase. Also in this quarter’s SG&A were expenses related to recruitment and hiring of sales people as well as incurred severance.
First quarter operating income was $7.7 million, up 8% from last year’s first quarter, resulting in an operating income margin of 2.7%. Net income was $4.1 million or $0.06 per share, compared to $3.5 million or $0.05 per share in the first quarter 2010.
The effective tax rates were 22% and 38% for the first quarters 2011 and 2010, respectively. The primary difference in the rates was the result of changes in geographic mix of income and losses. Improved foreign results along with a domestic loss for the first quarter 2011 combined for the 22% effective rate.
Capital Deployment and Liquidity
CIBER’s total cash balance at March 31, 2011 was $57.6 million. Cash used by operating activities for the quarter was $16.9 million. CIBER continues to expect to generate $30 million of cash flow from operations this year with a step-up in the back half when significant amounts of the existing unbilled revenue will be invoiced and collected. First quarter capital expenditures totaled $3.8 million.
DSO’s were 66 days compared with 62 days at December 31, 2010. Sales growth in the quarter drove a portion of this increase. DSO’s at the end of the first quarter 2010 were 66 days.
The total outstanding balance on the senior credit facility at quarter end was $87.5 million. The Company is in the process of refinancing the existing facility, which is set to expire in August of next year.
Management reaffirmed its long-term outlook and its expectations for 2011.
• Double-digit revenue growth
• Gross profit margin exceeding 30%
• Operating margin exceeding 8%
• Double-digit EPS growth
• Cash flow from operations to approximate net income.
• Revenue growth exceeding 4%
• Gross profit margin exceeding 25.5%
• Operating margin exceeding 3.5%
• EPS exceeding $0.30
• Tax rate in the high-twenty to low-thirty range (original expectation was mid thirties)
• Cash flow from operations of approximately $30 million
• Capital expenditures of approximately $20 million, mostly to fund IT infrastructure improvements and the India build-out
2011 Key Success Factors
• Higher quality deal wins in key verticals
• Improved DSO and cash collection
• Gross and operating margin improvement
• Expanded India delivery
• Enhanced operational execution
“While lagging sales performance within our North America division has impacted financial results into the second quarter, we are confident that we are taking the necessary steps to improve the trend in the back half of this year and to deliver on our full-year expectations,” Peterschmidt concluded.
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 financial results and outlook.
To participate in the conference call, dial 866-800-8649 (U.S.) or +1-617-614-2703 (outside the U.S.) ten minutes prior to the start of the call and provide the operator with the pass code 97703581. 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 June 3, 2011. 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 79308581. 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 and International revenue change adjusted for currency.
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 certain of our business units for 2011. 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 they may 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) our business is restricted by our current level of indebtedness and we could breach our financial covenants, and/or be unable to amend, extend or replace our current debt facility under favorable terms; (10) legal liability may result from solutions or services we provide; (11) we cannot anticipate the cost and complexity of performing our work or we are not able to control our costs; (12) 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; (13) we cannot balance our resources with client demand or hire sufficient employees with the required skills and background; (14) we may incur liability from our subcontractors' or other third parties' failure to deliver their project contributions on time or at all; (15) we cannot manage the organizational challenges associated with our size or our business strategy; (16) consolidation in the industries that we serve could adversely affect our business; (17) our ability to attract and retain business depends on our reputation in the marketplace; (18) our share price could fluctuate due to numerous factors, including variability in revenues, operating results and profitability; and/or (19) 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 the Company’s Form 10-Q and 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 CIBER’s ability to predict or control. Forward-looking statements are not guarantees of performance and speak only as of the date they are made, and CIBER undertakes 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 8,500 employees and subcontractors and operates in 18 countries, serving clients in North America, Europe and Asia/Pacific. Annual revenue in 2010 was $1.1 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.