Good evening, and welcome to the Computer Task Group Inc Second Quarter Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Ms. Deborah Pawlowski from Investor Relations. Please go ahead. Thank you, Ryan, and good morning, everyone. We certainly appreciate your time today and your interest in CTG. Joining me on the call are Filip Gydé, our President and CEO, and John Laubacker, our Chief Financial Officer. We released our second quarter 2022 financial results this morning before the market, and you can access that release at our website, ctg.com, if you do not have it. After Filip and John's formal discussion this morning, we will open the line for Q&A. Let me mention first that, as you are likely aware, we may make some forward-looking statements during the formal discussion 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 Securities and Exchange Commission. You can find these documents on our website or at sec.gov. Also, during today's call, we will discuss some 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 a reconciliation of non-GAAP measures with comparable GAAP measures in the tables in today's release, as well as in the SEC filings. I will now turn the call over to Filip to begin. Filip? Thank you, Deb, and good morning, everyone. We appreciate you joining us today. I would like to spend a few minutes on our progress and then highlight the current environment and our focus for the coming quarters. Our second quarter performance was much like the first quarter. Our top line reflected the continued disengagement of the lower margin non-strategic technology services business, as well as continued foreign exchange headwinds as our European business is nearly half of our overall business, and there was significant depreciation in value of the euro during the quarter. Despite these impacts, strong execution against our well-defined strategy drove our performance as our margin profile continued to improve with measurable expansion at the gross and operating levels on a consolidated basis. Our gross margin improved year-over-year to 23.9% of revenue, our highest margin in more than 10 years. Our operating income improved over 13% from the prior year. These items drove improved profitability with 8% growth in our GAAP EPS to $0.13, or on a non-GAAP basis to $0.15 per share, which represented 15% growth. This impressive performance is a testament to our strategy to become a leader in the delivery of digital solutions and services. More importantly, as we continue to execute our plan, I believe we have further earnings power to unleash. As a reminder, we report our financials within three business segments. IT solutions and services are disclosed for each of North America and Europe and represent our higher margin IT services. The third segment is our non-strategic technology services, which we continue to disengage from at a fairly rapid pace due to its lower margin contribution. For the second quarter of 2022, we saw strong top-line growth of 21% in our North America segment as our teams continued to win new business from existing and new clients. Although in the early stages, we continue to be very encouraged as we ramp up the large multi-year contract we won in this segment earlier this year. In our Europe segment, strong execution helped offset inflationary and labor pressures as contribution margins remained comparable with the year-ago period. Finally, we have also seen a strengthening of our non-strategic technology services segment margins as we have consistently been disengaging from the lowest margin business first. As a reminder, we are only making investments in the IT solutions segments in North America and Europe. Within those investments, we continue to focus on business development, including expanding our digital solutions offerings and adding highly skilled talent at all levels to our global teams. The labor environment remains very competitive. While we have been successful in adding talent in certain geographic areas, our overall growth has been impeded by labor constraints, particularly in Europe. This labor headwind brings to the forefront the importance of part of our strategic plan to expand our offshore delivery centers' capacity. While at modest levels, we are increasing our delivery headcount in both our Colombia and India centers, and are looking forward to expanding our offshore capabilities through targeted acquisitions. As we have mentioned in past communications, we have had a well-defined process for evaluating potential acquisitions. To reiterate our criteria, we are looking for companies with digital solutions that we can add to our existing portfolio of solutions, which accelerate our strategy and are highly synergistic to CTG in terms of both solutions and culture, are established companies that will be accretive to our results, and are primarily located in North America. As we look forward, we recognize that there are underlying pressures and uncertainties that may impact global economic development. We are working hard on the aspects of our business that we can control. I am encouraged with the progress and pipeline of organic opportunities in digital solutions, which continues to expand and has grown significantly over the past year. From a segment perspective, top line comparisons in the second half of the year will be difficult in our North American segment, given the large project-related work from a year ago. We are encouraged with our stronger core business, which has continued to advance. In Europe, we expect continued headwinds with foreign currency, labor constraints, and the unrest in Ukraine, but have confidence in our team's ability to meet those challenges in support of our long-term objectives. Overall, we are on plan to realize our 2023 goal of Adjusted EBITDA margins increasing to 7%-8% of revenue. With that, let me turn it over to John to review our results in more detail. John? Thank you, Filip. Again, good morning, everyone. Thank you for joining us on today's call. Consolidated revenue in the second quarter was $82.8 million, down approximately 10% or $9.4 million, of which $6.1 million was our non-strategic technology services business, primarily resulting from our deliberate disengagement from lower margin IT staffing services. The other negative impact on revenue was a continued foreign currency exchange headwind, which reduced revenue by $4.9 million in the quarter. Second quarter revenue from North American IT solutions and services increased 21.3% to $20.3 million, which reflected solid new core business development and opportunities in digital IT solutions with existing clients. Revenue from our Europe IT solutions and services segment was $37.2 million, down $6.9 million, largely due to the foreign currency exchange impact. Excluding foreign currency, revenue for the segment would have declined approximately 5%. We have not seen any significant loss of business other than the contract that was internalized by a client during the first quarter. However, there is business that we have not been able to capture purely due to labor constraints in the region. As Filip mentioned, the war for talent is intense and our recruiting teams are working hard to compete for resources. We are diligently working to leverage our global delivery centers to provide the needed resources to meet client requirements. As expected and in line with our strategy, our margin profile and profitability improved measurably during the quarter as we continue to optimize our revenue mix toward IT solutions. Consolidated gross margin was 23.9%, up 180 basis points over last year's second quarter, and 290 basis points higher than the two-year period. Again, as Filip mentioned, this was our highest gross margin in more than 10 years. For IT solutions and services, the North American gross margin decreased 140 basis points to 34.8%, reflecting a change in the mix of existing projects and process during the quarter as compared with the prior year. Overall, this gross margin was 280 basis points higher than the margin in 2020. In Europe, the gross margin expanded 140 basis points to 25.8% despite the lower segment revenue. Finally, while we continue to disengage from the lowest margin projects in our non-strategic technology services segment, there was a steady improvement in margins compared with the prior year. SG&A expense was $16.6 million or 20% of revenue, which represented an increase of 90 basis points versus the year ago period, largely due to the loss of operating leverage from lower revenue. SG&A expense decreased $1 million from the prior year quarter. GAAP operating income increased 13.3% to $3.2 million, for an operating margin of 3.8%, which increased 80 basis points year-over-year. Non-GAAP operating income, which excludes $290,000 of acquisition-related expenses, was $3.5 million or 4.2% of revenue, which was up 100 basis points from the prior year. We recorded net income of $2 million or $0.13 per diluted share in the quarter, compared with $1.8 million or $0.12 per diluted share in the second quarter of 2021. That's an 8% increase in earnings per share. Non-GAAP EPS was $0.15 compared with $0.13 in the year ago period, or up 15%. In keeping with our prior improved margin profile, the adjusted EBITDA margin improved 70 basis points to 5.1% in the quarter. CTG's total headcount at the end of the quarter was 3,200, of which approximately 90% was billable. This compares with 90% billable during the prior year period. Now turning to our balance sheet and cash flows. Cash and cash equivalents were $35.5 million, $100,000 less than year-end 2021, and there was no debt outstanding at quarter end, nor have we made any borrowings on our revolving credit agreement this year. Cash provided by operations was $2.8 million for the year-to-date period. As you've heard us say a number of times, acquisitions are a key part of driving our digital IT solution strategy. Where we're looking for a good fit to meet our criteria, we will continue to exercise a diligent capital allocation strategy when assessing acquisition opportunities as they arise. Our strong and flexible balance sheet will provide the leverage we need to accelerate our pace of growth in the future. As we've noted a number of times in today's call, we are not immune to the challenging foreign currency translation impacts given the significantly devalued euro. Additionally, as mentioned, we are seeing headwinds related to the availability of resources, primarily in our European operations. Finally, the macroeconomic environment in both North America and Europe has somewhat slowed our clients' decision-making process for IT services. As a result, we are reducing our annual revenue guidance and now expect our revenue for 2022 to range from $330 million - $350 million. This revised range includes the approximate $20 million-$30 million reduction from the disengagement of lower margin staffing services from the non-strategic technology services segment. Importantly, despite the top line decrease in macroeconomic headwinds, we expect our operating margins to improve over the prior year given the positive ongoing changes to our business mix towards solutions. We expect that lower revenue will be offset in part by improving operating margins and will result in 2022 GAAP diluted earnings per share ranging from $0.48-$0.58, and non-GAAP diluted earnings per share ranging from $0.53-$0.63. Despite the headwinds facing the business, we are energized by the significant improvement in our margins and look forward to continuing our progress in the future. Our long-range vision remains unchanged as we plan to drive our adjusted EBITDA margins to 7%-8% of revenue within the next two years. That completes our prepared remarks. Ryan, could you please handle our question and answer period? Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question is from the line of Kevin Liu from K. Liu & Company. Please go ahead. Hi. Good morning, guys. First question I wanted to ask. Hi, Kevin. How are you doing? Just in terms of some of the labor constraints in Europe and the impacts there, can you just talk a little bit more about how that kind of manifested itself in the quarter? Was this projects you had already won that you weren't able to staff, so this is more of a delay? Or were there other sort of impacts from labor, that we should consider? Yes, pleasure. We see that it is hard to get new staff into the company. If we look at the staffing, we are very strong in the retention part because of the fact of our great places to work, our culture and our HR environment. We tend to have a strong retention. When it comes down to the growth and the additional projects, you need additional people, and there the competition is extremely fierce. It's not projects that we signed and that we cannot execute. It's projects that are oncoming and that we are obviously trying in a conversation with the clients to delay. Obviously when clients now decide and they take more time to decide than before, but when they decide, they really want to start immediately. It's not on the execution of our portfolio as such. It's on the additional projects that we see coming. Understood. So far, you guys have done a good job managing, you know, margins pretty effectively, even with some of the revenue headwinds. As you look particularly in Europe now and some of the labor challenges there, can you just talk about your strategy to get through this period? For instance, are you guys expecting, you know, more significant wage inflation there? Also, what do you think about your ability to kind of pass some of those costs on to your clients? Yeah. Well, as you can see in the numbers, also for Europe, we are making progress in our margin profile, not only in Europe, we're doing it everywhere. I think that's the important message. Our strategy of moving to solutions and moving away of the low margin business is really working, and we're still executing diligently. Our margin profile, even with the labor shortage, even with the wage inflation, is continuing to improve. There is parts of that wage inflation that we can pass on to clients, of course, but there's also becoming more efficient in the delivery and automating part of our delivery and obviously also the retention. People work with CTG. Of course, you need to have fair and competitive compensation. There's a lot more in our employee experience that people will stay for at CTG. Their development possibilities, their career individualized career plans and so on. Wage inflation is affecting us, but I think with both clients and internally, we're able to manage that, and still increase our margin. Appreciate the color there. Maybe one for John. Just on the adjustment to the revenue guidance, could you speak to how much of that was from FX versus other challenges, like in Europe? Thanks, Kevin. As we talked about in the prepared remarks, about $20 million-$30 million of that is the disengagement from the non-strategic year-over-year. Approximately, we estimate right now $20 million of the reduction year-over-year on an annual basis would be from foreign currency. It really has been something that's been difficult to measure. We've looked at a lot of different resources and talked to a lot of people, and I'm not sure anybody three months ago expected the euro to basically fall to par, but it has continued to fall, and you see predictions where it may fall below one to one, or it may hang out just over one to one where it is today. We've estimated within that new guidance, Kevin, about EUR 20 million in foreign currency. Very helpful. I'll pass the line for now. Thanks. Thanks, Kevin. Thanks, Kevin. Thank you. Our next question is from the line of Marc Riddick from Sidoti. Please go ahead. Hey, good morning. Good morning, Marc. I was wondering if you could touch a little bit about the changes in client activity that you've seen more recently, given macro issues in currency and what have you. I was wondering if you could touch a little bit on how that's evolved maybe over the last few weeks and what changes you're seeing there, if any. As a follow-up, I was sort of thinking about the timing of the exiting of the low margin business and sort of how we might think about how that timeframe plays out going forward and when we get to the point of anniversarying the initial start of that process. Okay. Changes in client activity. We are seeing more detailed discussions with clients, and somewhat slower decisions. That is obviously given the high level of the global inflation, and the other pressures around it. When we look at the environment or the conflict in Ukraine, we do not have any business directly in Ukraine, but the conflict created a very difficult economic environment in Europe. It's driving inflation, and it's also slowing the client decision-making processes because we see that clients are pausing and rethinking their priorities, including spending for IT services, including determining what projects are really strategic and putting the not so strategic projects a little bit further down the road. I think that is what we're noticing. It's not very different from what we saw in the first quarter, but it is continuing to be there. Talking about timing for exiting low margin business, and the last couple of years, we have been exiting approximately $50 million the last two years. Our plans at this moment is that we estimate approximately $25-$35 million in 2022, and to continue with that kind of a rhythm in the next couple of years. I think we're exiting at an increased pace, and that is obviously having a very positive effect on our margin profile. John- Right. Is there anything you would like to add on that? No. Filip, I think that was well said. Marc, you know, that $50 million pace over the last two years or $25 million or so on average the last couple of years is a pace that we really see that decreasing over time. We expect it to be at least that much this year and expect that, as Filip said, that rhythm to be pretty ratable over the next couple of years. It'll be a fairly diminished part of the business here within a couple of years. Okay, great. I really appreciate the commentary as to what you're seeing and the client behavior adjustments, given the circumstances. I was wondering if you could talk a little bit about are there particular types of customers, particular industry verticals that are maybe a little more advanced in making those decisions and actually acting on them, and maybe as opposed to maybe some folks that might be lagging in that process. You don't have to be very specific, but I just mean as far as general industry vertical-wise, are you seeing differences and the rate of change of activity? Thank you. I think the difference we don't see a lot of difference between the verticals and that is also understanding looking at the digital transformation projects that are happening all over the different industries. Everybody is working on digital transformation, and everybody is seeing the same inflation and the same tension in the markets. I would say we see more tension in Europe at this moment. Frankly, I don't know if that's because of the proximity to the conflict because with the current tools and weapons distance doesn't mean that much anymore. Right. It must have some effect. Obviously, that's the one sector that I would say is a little less impacted is government. Government still is making decisions at the speed that they were doing before. We have a good size of government business in Europe, which is obviously helping. Okay. The last thing for me, I was sort of curious as to whether you've seen much in the way of change, as far as travel activity, either, you know, what you're hearing from your customers, how much they're engaging in those kinda discretionary expenses, whether that's begun to lift a bit or are folks kind of continuing to sort of, you know, gradually make those adjustments. I would imagine there'd be an economic, you know, macroeconomic impact from that as well. I was wondering if you're beginning to see a little bit of that loosen up or maybe it's too early because of the seasonality. We have been seeing more travel also last quarter, though it's still very slow. I think clients are deciding very consciously when to invite or allow a potential vendor or supplier to come in. Right. We see more and more for the really important projects, the orals, the final presentations that it starts to come back, which for us obviously is a positive. There's no better way to make an impact on a client than by being in front of him and really engage in that conversation in person. Yeah, it's a combination of, yes, there's an expense, and obviously clients need to control the expenses. Also there's a different way of looking at meeting and making more conscious decisions on what do we do virtually on Teams or Zoom and what would we do physically and when. It's not coming back to the level that it was before. That is a certainty. Also, from a practical perspective, traveling at this moment by plane isn't a very nice experience with all of the cancellations, delays and difficulties. Right. Everywhere. Right. Yeah. Right. Unfortunately, I couldn't agree more there. Thank you very much. Thanks. Thanks, Thanks, Marc. Thanks, Marc. Thank you. Our next question is from the line of George Melas from MKH. Please go ahead. Thank you. Good morning, Filip and John. Hi, George. Good morning, George. Good morning. Just looking at North America, if we exclude the fourth quarter of last year that had that very special project, we've seen very good and steady growth there. If we look at the first half of this year versus last year, it was up 16% and 2021 over 2020 was up 21%. Really seems like very good execution there. Help us understand what has been, you know, how you have been executing to get that growth and whether you see that growth being sustainable. We have been executing this by, well, just focusing on our strategy and acting with disciplined execution. If you look to what's happened in the last couple of years in North America, is that we have totally reshaped the organization. There's now one sales organization, there's one delivery and solutions organization. Everybody is very much aligned. We've hired a lot of talent. In the last two years, we have the new Vice President of Delivery and Solutions, Brent Hunt. Just last quarter, we announced Scott Clark as the new VP of Sales. We added a number of very talented solution architects to help build the solutions for each client. I think, George, it's a combination of aligning everybody and getting really top talent in, and then working very hard and disciplined execution. I think the way we approach our clients with a very customized approach and looking to really understand what the core of their issues are and how we can build solutions around that. Those solution architects, together with our sales, are doing a perfect job. That said, because it's fundamental from within the organization and within the people in the organization, I strongly believe that we're going to continue that growth. That was also what we said when we first looked at the segment reporting. The mission for North America is to scale, and I think we're seeing what could be the beginning of a very nice growth track in the next couple of years. Great. That, I think, was very helpful for me. Maybe just adding a little color there. Have you been able, in these last two or three years, to get meaningful new clients, or has it been driven primarily by sort of working with your existing clients? Well- In a way, the mix of growth, how much is the mix of growth, roughly, sort of new clients versus existing clients? Well, that's a bit of a difficult way of presenting it, because a new client normally starts with the first project, and then you build and build around it, so you expand your presence within a client. When you're at an existing client, the growth potential is faster and bigger than when you make an entrance with that new client, where they always want to evaluate how good you're performing in the first project. Naturally, most of the growth is with the existing clients. We have, in the last year and a half, created or added a number of very promising new clients. I'm saying a year and a half because in the first year of COVID, 2020, it was extremely difficult to go out. Well, not physically, but even to go out virtually to new clients and build new relations when you could only see a screen. 2020 was definitely a year where our strong customer base has helped us and is continuing to help us because that's how we look at customers. It's not a project, and then we're moving on. No, it's growing and helping the clients in different areas. With us, a big example, last quarter's largest project that we announced, largest digital project, multimillion over several years. But it's a combination. We're seeing more new clients actually, both in North America and in Europe. Okay, great. I know it's a big picture question, but can you try to give us somewhat similar profile to Europe? How different is Europe than it was two years ago, and where do you hope it to go? I know it's a more complex organization, but maybe you can help us, you know, get some handle on that. Yes, you're right, George. More complex situation because Europe is and I know it's tempting to look at Europe from the States as well. They have countries, and in the States we have different states, but it really is a very different mechanism. Each country is very independent still, has its own culture, its own style, its own priorities. So it's almost impossible to give an answer overall. Looking at CTG within Europe, I think from a couple of years ago, you can see our margin now improving, and that is exactly what we asked Europe to be doing. Structurally, the business is getting better. We're moving to digital. We're starting to implement offshore. We're automating our delivery so the margins are getting better. We're good at retention, so salary inflation is still under control compared to what I hear from other places. Sorry, but I've lost my thread to my answer. I'm sorry. On the business perspective, we see on the growth perspective that foreign exchange, well, obviously, problem within Europe, but we see that the shortage of people, the labor constraints are more severe than what we see in North America. That's also looking back to the question about the growth in North America. That's why we see that growth at a higher percentage than we see it in Europe, because in North America, we still are able to staff our projects together with offshore. In Europe, staffing new projects for growth is a lot more difficult, and that's kind of the same over for all countries. Great. Thanks a lot for this, you know, answer. I appreciate it. Good luck and good execution. Thank you. Thank you, George. Thanks, George. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. Since there are no further questions, I would hand over the conference to Filip, your CEO and President, for closing remarks. Thanks, Ryan. Thank you for participating in our teleconference today. The second quarter was another demonstration of continued progress and the execution of our digital solutions strategy. Although we know we will experience headwinds in the second half of the year, we continue to be excited about our success in significantly improving our gross margins and operating results. For those of you interested, we will be participating in the Midwest IDEAS Investor Conference in Chicago on Thursday, August 25th. Otherwise, as always, please feel free to reach out to us at any time, and we look forward to talking with all of you again after our third quarter 2022 results. We hope you have a great day. Ryan, you may now disconnect the call. Thank you. The conference of Computer Task Group Inc has now concluded. Thank you for your participation. You may now disconnect your line.