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Computer Task Group's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Solutions revenue in the second quarter of 2012 was $44.3 million, an increase of $8.4 million or 23% compared with the second quarter of 2011. As a percentage of total revenue, Solutions revenue was 42% compared with 37% a year ago. The continued improvement in our business mix was mainly being driven by revenue growth from our more profitable healthcare projects. Staffing revenue in the quarter remained flat at $62.4 million.

Second quarter revenue from IBM, our largest customer, was $29 million compared with $29.6 million in the second quarter 2011. As a percent of total revenue, revenue from IBM decreased to 27.2% in the 2012 second quarter compared with 30.1% of total revenue in the 2011 second quarter.

Revenue from our European operations was $16.8 million, a 3% decrease from the $17.3 million recorded in last year’s second quarter. The effect of foreign currency fluctuations during the second quarter of 2012 decreased consolidated revenue by approximately $1.9 million or 1.8%. At a local currency basis, our European revenue increased by 7.8% compared with the 2011 second quarter.

Direct costs as a percentage of revenue were at 78.5% in the second quarter compared with 78.9% in the second quarter of 2011. SG&A expenses as a percent of revenue decreased to 15.7% from 16.3% in the second quarter of 2011.

The billable travel expenses included in the second quarter 2012 revenue and direct costs are $3,658,000. The billable travel expenses included in the second quarter 2011 revenue and direct costs were $3,079,000.

Second quarter operating income grew to $6.1 million, an increase of $1.5 million or 31% year-over-year reflecting the favorable effect of operating leverage and our higher margin solutions work. Compared with the trailing first quarter of 2011, the second quarter operating income increased $544,000 or 9.7%.

Operating margin in the second quarter increased to 5.8% of revenue, a 100 basis point improvement from last year’s 4.8% and 40 basis points higher than the 5.4% operating margin in first quarter 2012. The year-over-year increase was primarily due to the increase in the Solutions business and our sales mix and the additional operating leverage.

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