GREENWOOD VILLAGE, Colo., Feb. 23, 2012– Ciber, Inc. (NYSE: CBR), a global information technology consulting, services and outsourcing company, today reported results for the fourth quarter of 2011.
The Company has made a strategic decision to sell its Federal division to focus on its core offerings. The Company anticipates completing the sale in the first quarter of 2012 and therefore the Federal division is presented as a discontinued operation and its results are not included in results from continuing operations for all periods presented in Ciber’s consolidated financial statements herein, unless otherwise noted. A schedule of quarterly results from continuing operations and Federal as a discontinued operation for 2011 and 2010 is included with this release.
Highlights from continuing operations for the fourth quarter 2011 include:
Significant highlights since year end:
President and Chief Executive Officer Dave Peterschmidt said, “We have made measured progress this past year on the turnaround of Ciber. The significant actions we have taken, including stabilizing North America, lowering our risk profile, agreeing to sell our Federal business and improving delivery quality, have come about by the changes we have made on several fronts including strengthening our leadership and overhauling our operational processes. The results of these actions are now being reflected in a stronger balance sheet. We do, however, understand the importance of delivering improved operating profits and cash flows and remain confident that we will achieve these goals as we move through 2012.”
Peterschmidt continued, “My focus is on continuing the momentum we have created in North America, and carrying that momentum to our International performance. As part of this effort, Rick Genovese has been promoted to COO with responsibility for global operations. His charge is to unify the organization globally to ensure that Ciber is truly operating as one company. While much work remains in 2012, I am confident that we are building a business model that will generate improved returns to shareholders as we drive revenue growth and profitability in the back half of this year.”
Claude Pumilia, Executive Vice President and Chief Financial Officer, commented, “I am pleased to have taken steps, as promised, to strengthen our balance sheet. In January, we effectively deployed international cash to pay down $25 million of debt and plan to reduce total debt further by utilizing at least a portion of the net cash proceeds from the Federal sale. In this past quarter, we improved our cash collections, which resulted in a meaningful reduction in days sales outstanding, and enabled us to turn cash flow positive for the year. I expect improved cash flow in 2012 as our financial performance improves in the second half of the year.”
Fourth Quarter Financial Results from Continuing Operations
Revenue of $238.9 million decreased 5% on a reported and constant currency basis compared with the fourth quarter last year. The North America segment experienced a decline of 12%. This rate of the year-over-year revenue decline has lessened sequentially from the third quarter. The International division’s revenue growth was 3% or 4% constant currency.
Gross margin for the fourth quarter was 25.9%. Selling, general and administrative expenses (SG&A) in the quarter were 23.8% of revenue. Ciber has improved both its gross margin and SG&A cost structure through increased utilization, targeted cost reductions, as well as less bad debt and project write-off charges.
Fourth quarter operating income was $5.0 million with an operating margin of 2.1%. This compares to last year’s fourth quarter operating loss of $3.7 million which included $7.3 million of bad debt and project write-off charges. Excluding these charges, operating income in the fourth quarter 2010 was $3.6 million with an operating margin of 1.4%.
Net income for the fourth quarter was $2.2 million or $0.03. Fourth quarter 2010 net loss was $1.6 million or $0.02 per share including the bad debt and project write-off charges. Excluding the charges, fourth quarter 2010 net income was $2.8 million, or $0.04 per share. The decrease in net income and EPS was driven by higher tax expense and interest expense.
The International division, which represented 49% of consolidated revenue, delivered revenue growth for the quarter of 3%, or 4% on a constant currency basis over the fourth quarter 2010. Revenue growth slowed in light of the economic environment in Europe as well as lower billable headcount at two large customers. Operating margin for the segment was 6.2%. Gross and operating margins were down slightly from last year’s fourth quarter driven mostly from lower revenue.
The North American division, 43% of consolidated revenue, saw revenue decline 12% compared with 2010’s fourth quarter. Gross margin in the fourth quarter was in the high twenties, an improvement from last year’s fourth quarter, as a result of fewer project overruns and improvements in utilization. Operating margin, aided by cost reductions, was 4.6%. The improved utilization rate and lower cost base should drive increased operating margins within this division throughout 2012.
Capital Deployment and Liquidity
Ciber’s cash balance at December 31, 2011 was $65.6 million, while the total outstanding balance on the senior credit facility was $66.2 million. On January 31, 2012 the company met its obligation to repay $25 million under the facility through the repatriation of a portion of the International division’s cash, with no cash-tax impact. The company also anticipates using at least a portion of the cash proceeds from the sale of its Federal division to reduce outstanding debt.
Including Federal, cash flow from operating activities for the year was $31.5 million; capital expenditures totaled $15.4 million; yielding free cash flow of $16.1 million.
Through aggressive cash management and structural improvements in cash collections, Ciber reduced days sales outstanding as of December 31, 2011 to 53 days.
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/cbr. To participate in the conference call, dial 866-362-5158 (U.S.) or +1-617-597-5397 (outside the U.S.) ten minutes prior to the start of the call and provide the operator with the pass code 35338634.
A replay of the call and audiocast will be available one hour after the call ends through Mar. 23, 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 73600296. The audiocast replay will be available at www.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: Free cash flow (cash flow from operations less capital expenditures); International revenue change adjusted for currency; and fourth quarter 2010 operating income from continuing operations, operating margin from continuing operations, net income from continuing operations and EPS from continuing operations excluding $7.3 million of bad debt and project write-off charges.
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 forward-looking statements. For example, we make certain forward-looking statements regarding our current expectations for revenue, cash flow, debt balances and profitability for certain of our business units or the Company for 2012 and the future. 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) the sale of the Federal division does not close as expected; (3) the refinancing of our credit facility is not completed as expected, in which case we face covenant issues; (4) we cannot expand and develop our services and solutions in response to changes in technology and client demand; (5) we cannot compete as effectively as we expect in the highly competitive consulting, systems integration and technology and outsourcing markets; (6) our work in the government contracting environment exposes us to additional risks; (7) 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; (8) our outsourcing services subject us to operational and financial risk; (9) we cannot maintain favorable pricing and utilization rates; (10) 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; (11) we cannot anticipate the cost and complexity of performing our work or we are not able to control our costs especially on fixed price contracts; (12) our global operations are subject to complex risks, some of which are 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) our share price could fluctuate due to numerous factors, including variability in revenues, operating results and profitability; and/or (17) 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 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. 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 2011 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. For more information, visit www.Ciber.com.