Computer Task Group, Incorporated

Greetings and welcome to the CTG fourth quarter fiscal year 2022 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Mihalik, Investor Relations. Thank you, Craig. You may begin.

Yeah, thank you, and good morning, everyone. We certainly appreciate your time today and your interest in CTG. Joining me are Philippe Adet, our president and CEO, and John Laubacher, our chief financial officer. We released our fourth quarter and full year 2022 financial results this morning before the markets opened. You can access the release on our website at ctt.com. After Philippe and John's formal discussion this morning, we will open the line for Q&A. Just let me first remind you that we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated on today's call. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with the Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we'll also discuss non-GAAP financial measures, which we believe are useful in evaluating our performance. You should not consider this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables in today's release and SEC filing. I'll now turn the call over to Philippe to begin. Philippe?

Thank you, Craig, and good morning, everyone. We appreciate you joining us today. The fourth quarter caps off another excellent year for CTG as we accelerated our transformation into a digital solutions and services business. You can see the results of our efforts in our IT solutions and services segment results, including both North America and Europe, where our fourth quarter gross margin expanded 590 basis points to 31.8%, our highest level in recent years. The performance within our North America segment, which includes the acquisition of Illivion, highlighted the potential of our transformation as we achieved gross margins of 43.9%. Our European segment also drove higher margins, from improved utilization and a greater mix of digital solutions. As we complete the first phase of our transformation by the end of 2023 into an IT digital solutions and services-based business, our strategy is based upon several key elements. First, we are focused on becoming a global provider of digital IT solutions by capitalizing on the compelling trend of digital transformation, leveraging the CTG brands built on a foundation of reliability, speed of delivery, and results, and delivering solutions primarily into the healthcare, finance, manufacturing, government, and energy sectors, all of which are areas of strength for CTGs. As part of our digital solution strategy, we are focusing on providing software engineering services, which includes designing, testing, operating, and enhancing digital products and platforms. We provided more than $100 million of these services in 2022, and the gross margin on these services was greater than 34% in the fourth quarter. We are excited by this success and look forward to increasing these results even more in the future. The second element includes completing acquisitions that can become seeds for growth. We have three main criteria as we evaluate each opportunity. First, the company must be a well-established organization that is profitable. Second, The skill sets they have must accelerate our digital transformation strategy. And third, their solutions and people must be highly synergistic to our strategy. These criteria were met with the acquisition of Eleve, which was previously a privately owned digital transformation company. As a reminder, this acquisition closed at the very end of the 2022 third quarter. And while small from a revenue contribution standpoint, ELEVIANCE has brought significant digital expertise in areas such as AI, machine learning, and intelligent automation, while expanding our capabilities in cloud migration, mobile application development, and other technologies such as blockchain and best-in-class SaaS platforms. To date, the integration has gone exceptionally well and is exceeding our expectations. You can see the early benefits of their strong margin profile in our North America results during the quarter. Over time, we look forward to further driving sales synergies and delivering even greater value for our clients. The third element of our strategy is to focus on lowering our delivery costs. ELEVIANT also brings this element to CTG, as they increased our offshore delivery center capacity and flexibility with the addition of established teams in Chennai and Coimbatore, India. Additionally, their expertise in artificial intelligence and robotic process automation will also allow us to automate the number of functions when we deliver services to our clients, further reducing our costs of delivery. Another important aspect to accelerate the execution of our overall strategy is our most important asset, our people. We continue to add highly experienced colleagues to our ranks. During the fourth quarter, we added a new global position of Chief People Officer to ensure we have consistent policies and practices worldwide and are continuously improving as an employer in the recruiting and retention of today's leading digital services and solutions staff. Our goal is to make CTG a destination of choice for highly talented digital transformational The disciplined execution of our strategy led to improved operating results. For the fourth quarter, our adjusted EBITDA margin was 6.2%, up 40 basis points over last year's period and 130 basis points higher over a two-year period. We continue to make incremental steady progress toward our goals as we approach the end of the first phase of our transformation. These achievements would not have been possible without the hard work and dedication of our 3,000 colleagues across the globe, who respond to constantly evolving trends to create value for our clients every day. Our clients turn to CPG as their trusted digital transformation partner and our outstanding employees are the very key to that success. We believe we are well positioned as we head into 2023. Leveraging our strong foundation, breadth of key capabilities, culture of innovation, and energized workforce provides confidence that we can continue to navigate underlying pressures and macro uncertainties to achieve our near-term goal of approximately 7% adjusted EBITDA margin by the end of 2023. With that, let me turn it over to John to review our results in more detail.