Computer Task Group Incorporated (NASDAQ: CTG) has orchestrated an impressive ascent today, with its shares surging by 27.81% to reach $10.23 during the current trading session. This remarkable upswing follows a closing price of $8.00 in the previous session. The impetus behind CTG’s stock surge stems from the unveiling of its recent financial performance as well as a strategic acquisition maneuver.
In a disclosure marking a significant juncture, Computer Task Group (CTG) has unveiled its financial results for the second quarter concluding on June 30, 2023. A noteworthy facet of these results is the recorded revenue of $74.6 million. It is crucial to note that this figure incorporates a deliberate disengagement of $15.1 million from the non-strategic technology services sector, emblematic of CTG’s calculated reorientation.
The financial landscape for CTG appears increasingly promising as the company’s gross margin flourished to 28.1%, marking an impressive upswing of 420 basis points compared to the prior year. The company’s financial reserves, denoted by cash and cash equivalents, stand at $19.1 million, reflecting a slight decrease from the $25.1 million at the culmination of 2022. Concurrently, net cash utilized in operational activities tallies at $4.6 million, underscoring CTG’s strategic allocation of resources.
A notable feature of CTG’s financial posture is its resolute stance against long-term debt, a commendable achievement that positions the company favorably. Furthermore, the days sales outstanding metric stood at 86 during the second quarter of 2023, a marginal increase from the 84 recorded in the comparable period of the previous year.
On the earnings front, CTG reported a marginal net loss of ($0.1) million, reflecting a slender margin of (0.2%). Meanwhile, the adjusted EBITDA, which serves as a key indicator of operational profitability, demonstrated resilience at $3.7 million, with an accompanying margin of 4.9%.
Cegeka Groep nv, a prominent European IT solutions leader, and CTG have collectively disclosed a definitive agreement that will see Cegeka acquire CTG through an all-cash transaction. The transactional value, set at $10.50 per common stock share, translates to an estimated equity value of approximately $170 million.
CTG’s transformative journey over recent years has enabled it to substantially augment its gross margin, transitioning from 19.1% in 2018 to an impressive 28.1% as of June 30, 2023. This transformation, characterized by an emphasis on recurring and higher-margin Solutions work, has positioned CTG as a formidable player in the IT landscape.
The acquisition’s far-reaching implications are expected to propel Cegeka’s annual turnover to €1.4 billion by 2024, accompanied by a workforce exceeding 9,000 individuals across 18 nations. A transformation of this magnitude will elevate Cegeka from its standing as a leading European IT solutions provider to a global IT integrator.
The merger agreement dictates that a wholly owned subsidiary of Cegeka will initiate a tender offer, seeking to acquire all outstanding CTG shares at $10.50 per common stock share in cash. This offer presents a notable 44.8% premium compared to the trailing 90-day volume weighted average stock price as of August 7, 2023. Both the boards of Cegeka and CTG have extended unanimous approval for this merger agreement.
