Thomas Group, Inc. (NasdaqGM: TGIS), a leading operations
and process improvement firm, today announced a net loss of $1.4
million, or negative $0.13 per diluted share, for the second
quarter of 2009 on revenues of $2.6 million, compared to net loss
of $1.9 million, or negative $0.17 per diluted share, on revenues
of $5.4 million for the second quarter of 2008. For the first half
of 2009, net loss was $2.6 million, or negative $0.24 per diluted
share, compared to the first half of 2008 net loss of $1.5 million,
or negative $0.14 per diluted share.
Earle Steinberg, President and Chief Executive Officer, stated,
“We continue to be challenged by the economic situation in the
United States and Europe as we seek to close new consulting
engagements and to rebuild our revenue. While we believe that we
have made significant strides in developing new and meaningful
business opportunities over the last year since the new executive
management team arrived at Thomas Group, we continue to experience
delays in gaining client approvals for our proposals. Prospective
clients recognize the need for improving profits and for reducing
costs more quickly and effectively, changes which Thomas Group can
drive efficiently in their organizations. However, we sense that
these prospective clients are more cautious and are moving more
slowly to make decisions, even when the savings opportunities for
their organizations are compelling.
We are optimistic about our ability to deliver the results that
all of our shareholders expect, however timing continues to be
difficult to predict. We realize that we need to close new business
and/or reduce expenses in the near term to reduce our ‘cash burn
rate’. Our cash balance at the end of the quarter was $7.9 million,
or $0.73 per share, strengthened in part by the $2.7 million
Federal tax refund we received during the quarter.”
Second Quarter 2009 Financial Performance
Revenue
Revenue for the second quarter of 2009 was $2.6 million,
compared to $5.4 million in the second quarter of 2008. Consulting
revenue from US government clients, represented by our Government
practice, was $0.5 million, or 21% of revenue, in the second
quarter of 2009, compared to $2.3 million, or 43% of revenue, in
the second quarter of 2008. Consulting revenue from commercial
clients, represented by our Aerospace and Defense, Healthcare,
Industrial, Transportation and Logistics, and European practices,
was $1.7 million, or 64% of revenue, in the second quarter of 2009,
compared to $2.6 million, or 48% of revenue, in the second quarter
of 2008. Reimbursement of expenses was $0.4 million, or 15% of
revenue in the second quarter of 2009, compared to $0.5 million, or
9% of revenue in the second quarter of 2008.
Revenue for the first half of 2009 was $5.9 million, compared to
$17.8 million in the first half of 2008. Consulting revenue from US
government clients was $1.4 million, or 24% of revenue, in the
first half of 2009, compared to $11.4 million, or 64% of revenue,
in the first half of 2008. Consulting revenue from commercial
clients was $3.8 million, or 64% of revenue, in the first half of
2009, compared to $5.5 million, or 31% of revenue, in the first
half of 2008. Reimbursement of expenses was $0.8 million, or 13% of
revenue in the first half of 2009, compared to $0.9 million, or 5%
of revenue, in the first half of 2008.
Gross Margins
Gross profit margins for the second quarter of 2009 were 34%,
compared to 37% for the second quarter of 2008. Gross profit
margins for the first half of 2009 were 39%, compared to 45% for
the first half of 2008. The drop in the quarterly and year-to-date
gross margins is related to a lower level of revenue in 2009 and to
a higher concentration of lower margin client engagements.
Selling, General & Administrative Expenses
(SG&A)
SG&A costs for the second quarter of 2009 were $3.1 million,
compared to $5.0 million in the second quarter of 2008. The
$1.9 million decrease is related primarily to a $0.2 million
decrease in stock-based compensation during the second quarter of
2009, a $0.2 million decrease in sales commissions and executive
bonus, a $0.9 million decrease in payroll costs due to the
decline in the number of consultants employed, a $0.4 million
decrease in severance costs related to the reduction in our labor
force during the second quarter of 2008 and a $0.2 million decrease
in other costs due to a decline in activity as compared to the same
period in 2008.
SG&A costs for the first half of 2009 were $6.5 million
compared to $10.5 million in the first half of 2008. The
$4.0 million decrease is primarily related to a
$1.2 million decrease in payroll costs due to the decline in
the number of consultants employed, a $0.4 million decrease in
severance costs related to the reduction in our labor force during
the second quarter of 2008 a $0.6 million decrease in stock-based
compensation, a $0.7 million decrease in sales commissions and
executive bonus, a $0.3 million decrease in recruiting costs, a
$0.2 million decrease in bad debt allowance, a $0.1 million
decrease in outside consultants used related to the decrease in
activity, a $0.1 million decrease in general insurance costs and a
$0.3 million decline in other costs due to a decrease in
activity and the number of consultants employed as compared to
prior year.
Working Capital and Cash Flow
Working capital decreased from $13.2 million at December 31,
2008 to $10.4 million at June 30, 2009, due primarily to our
operating loss for the first half of 2009.
For the first half of 2009, the net change in cash was a net
decrease of $0.5 million, compared to a net increase of $2.4
million for the first half of 2008. For the first half of 2009, net
cash used in operating activities was $0.3 million, compared to
$4.3 million provided by operating activities for the first half of
2008. This decrease is due primarily to our net loss for the first
half of the year offset by the receipt of income tax refund in
2009. There was no cash used for investing activities in the first
half of 2009 compared to $0.1 million in the first half of 2008,
which consisted of computer and software purchases. Cash used for
financing activities for the first half of 2009 was $0.1 million
consisting primarily of stock repurchases compared to $1.8 million
in the first six months of 2008, related to the $1.2 million
payment of dividends, the $0.4 million purchase of stock under our
stock repurchase plan, and the $0.2 million net tax effect of stock
issuances.
Despite the loss during the first half of 2009, we continue to
have a relatively strong balance sheet and no long-term debt. We
received $2.7 million in Federal income tax refunds during the
second quarter of 2009. At the present time, we estimate that our
working capital will be sufficient to fund our operations until we
are able to return to profitability. We continue to assess this
situation on an on-going basis. Despite the challenges we face, we
remain enthusiastic about the future of Thomas Group.
During the first quarter of 2008, we established a written plan
pursuant to Rule 10b5-1 under the Securities Exchange Act of
1934, which provides for the purchase of our common stock in
support of our announced share repurchase program. After a waiting
period, repurchases commenced on April 7, 2008. During the
second quarter of 2009, we repurchased 58,004 shares for a total of
$50,943, or an average of $0.88 per share including commissions and
fees.
As of June 30, 2009, we had repurchased 628,606 shares for a
total of $1,086,523, or $1.73 per share including commissions and
fees. A total of 176,844 shares remain available for repurchase
under the authority previously provided by our Board of Directors.
We are continuing to purchase shares in the third quarter of
2009.
Operations and Business Development
As we previously announced, during March and April of 2008, two
of our multi-year contracts with the U.S. Navy expired. These
contracts accounted for approximately 85% of our revenue in
2007. Our revenue for 2009 decreased significantly as compared
to 2008, due in large part to these contract expirations.
In response to the loss of these contracts, in early 2008 we put
in place a plan to return to profitability and growth. This
included an immediate reduction of staff as well as on-going
efforts to significantly reduce expenses in order to minimize
losses and to make it easier to return to profitability. However,
in reducing expenses, we have attempted to balance the need for
reduced costs with the need to be able to develop new product
offerings, as well as to maintain the ability to add new clients as
the result of our continuing business development efforts.
In addition to previously announced efforts, we continue to seek
additional ways to reduce costs. As of June 30, 2009 we had 24
consultants on furlough. These furloughed consultants will be
offered the opportunity to return to the payroll if and when we
develop client engagements that require their individual skill
sets. In addition to these reductions in payroll costs, we have
aggressively worked to reduce other costs wherever possible.
Despite our best efforts to reduce costs and control expenses,
we expect to continue to operate at a loss until we are able to
develop client engagements sufficient to generate revenue to allow
us to break even.
During the second quarter of 2009, we received notice from the
Internal Revenue Service that it is reviewing our 2007 Federal
income tax return. We do not anticipate any material impact on our
financial statements as a result of this 2007 audit.
Earnings Conference Call
We would like to invite you to participate in a conference call
with our senior management to discuss the earnings for second
quarter of 2009.
Tuesday, Aug. 4, 2009
2:00 p.m. CT, 3:00 p.m. ET
To participate in the conference call, please call 800-247-5110
from the U.S. or 334-323-7224 from outside the US. The PASSCODE is:
542459. Although interactive participation in the call will be
limited to investment professionals, any interested party may
listen to a live broadcast of the call via the internet by logging
on to:
http://www.investorcalendar.com/IC/CEPage.asp?ID=146861
Interested persons are encouraged to log on to the website
approximately 15 minutes prior to the designated start time in case
they need to download any software. Webcast replay is available
until August 4, 2010. Approximately one hour after the earnings
conference call, a playback of the conference call will be
available for sixty days. To listen to the call, U.S. callers may
call 877-919-4059 and international callers may call 334-323-7226.
The Conference Call Replay Pass Code is 97942571#. Playback
options: press 1 to begin; 4 to rewind 30 seconds; 5 to pause; 6 to
fast forward 30 seconds; 0 for instructions; 9 to exit.
About Thomas Group
Thomas Group, Inc. (NasdaqGM: TGIS) is an international,
publicly-traded professional services firm specializing in
operational improvements. Thomas Group's unique brand of process
improvement and performance management services enable businesses
to enhance operations, improve productivity and quality, reduce
costs, generate cash and drive higher profitability. Known for
Breakthrough Process Performance, Thomas Group creates and
implements customized improvement strategies for sustained
performance improvements in all facets of the business enterprise.
Thomas Group has offices in Dallas and Detroit. For more
information, please visit www.thomasgroup.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act:
Any statements in this release that are not strictly historical
statements, including statements about our beliefs and
expectations, are “forward-looking statements” within the meaning
of the United States Private Securities Litigation Reform Act of
1995. These forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by these statements, including
general economic and business conditions that may impact clients
and our revenues, timing and awarding of customer contracts,
revenue recognition, competition and cost factors as well as other
factors detailed from time to time in our filings with the
Securities and Exchange Commission, including our Form 10-K for the
year ended December 31, 2008. These forward-looking statements may
be identified by words such as “anticipate,” “expect,” “suggests,”
“plan,” “believe,” “intend,” “estimates,” “targets,” “projects,”
“could,” “should,” “may,” “would,” “continue,” “forecast,” and
other similar expressions. These forward-looking statements speak
only as of the date of this release. Except as required by law, we
expressly disclaim any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained
herein to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based.
THOMAS GROUP, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2009
2008 2009 2008 Consulting revenue before
reimbursements $2,236 $4,882 $5,157 $16,922 Reimbursements 383
496 751 894 Total revenue 2,619
5,378 5,908 17,816 Cost of sales before
reimbursable expenses 1,350 2,901 2,829 8,948 Reimbursable expenses
383 496 751 894 Total cost of sales
1,733 3,397 3,580 9,842 Gross profit
886 1,981 2,328 7,974 Selling, general and administrative expenses
3,150 4,996 6,511 10,527 Operating
income (2,264 ) (3,015 ) (4,183 ) (2,553 ) Interest income, net 2
82 6 201 Other income 21 - 27 - Income
from operations before income taxes (2,241 ) (2,933 ) (4,150 )
(2,352 ) Income taxes (887 ) (1,040 ) (1,571 ) (824 ) Net income
($1,354 ) ($1,893 ) ($2,579 ) ($1,528 ) Earnings per share:
Basic: ($0.13 ) ($0.17 ) ($0.24 ) ($0.14 ) Diluted: ($0.13 ) ($0.17
) ($0.24 ) ($0.14 ) Weighted average shares: Basic 10,667
11,076 10,672 11,074 Diluted 10,667 11,076 10,672 11,074
THOMAS GROUP, INC. Selected Consolidated Financial
Data
(Amounts stated in thousands)
Selected Geographical Revenue Data
(Unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2009
2008 2009 2008 Revenue: North
America $1,851 $4,589 $3,771 $16,284 South America - - 17 - Europe
768 789 2,120 1,532 Total revenue $2,619 $5,378 $5,908 $17,816
Selected Balance Sheet Data
(Unaudited)
June 30,2009
December 31,2008
Cash $7,864 $8,349 Trade accounts receivables 1,525 1,432
Income tax receivable, net 1,453 3,650 Total current assets 11,874
14,912 Total assets 14,235 17,154 Total current liabilities 1,449
1,701 Total liabilities 1,626 1,903 Total stockholders’ equity
$12,610 $15,251
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