Q3 2021 Computer Task Group Inc Earnings Call
[music].
Okay.
Ladies and gentlemen, thank you standing by and welcome to the CTG third quarter 2021 Investor Conference call.
At this time, all participants are in listen only mode.
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As a reminder, today's call is being recorded I will now turn the call over to your host John Law Becker. Please go ahead Sir.
Thank you Kevin Good morning, everyone on the call joining me on today's call as Felipe <unk>, Ctg's, President and Chief Executive Officer.
Before we begin I want to remind listeners that statements made during the course of this conference call.
State, the companys or managements intentions hopes beliefs expectations and predictions for the future are forward looking statements. It is important to note that the company's actual results could differ materially from those projected.
These forward looking statements are based upon information as of today Tuesday November nine 2021.
Company assumes no obligation to update these statements based upon information from and after the date of today's conference call Adil.
Additional information concerning factors that could cause actual results to differ from those made in the forward looking statements is contained in today's earnings press release as well as in the company's SEC filings. In addition, the company's press release and management's statements. During the call include discussions of certain adjusted non-GAAP measures and financial information.
These financial measures and reconciliations of GAAP to non-GAAP results are provided in both today's press release and the related form 8-K.
With that it's now my pleasure to turn the call over to fleet for his opening remarks Felipe.
Okay.
Thank you John and good.
Morning to all of those listening on the phone and webcast. We appreciate you joining us on todays quarterly conference call.
This quarter was another very productive quarter for CTG.
How do we continue to build on the momentum generated from the ongoing strategic repositioning of our operations.
And the rebranding initiatives.
Taking during the first nine months of the year.
For the fourth consecutive quarter.
Revenue increased year over year in Botox solutions business.
And towards the company alcohol.
Solutions grew by 12% to nearly 46% of scope of work.
Compared with 42% in the year ago quarter.
Resulting in an increased mix of higher margin business.
And driving towards our 2023 50.
50% or more solutions revenue.
Additionally, we drove margin improvement within our staffing business.
We continued our stated objective of gradually disengaging from less profitable staffing services.
As a result of successfully executing our strategy.
<unk> operating profit increased 48% year over year.
Demonstrating the significant progress we have made to increase profitability.
Supporting the consistent improvement in our financial results is our focus on the expansion of solutions business.
Including our most recent actions.
CTG has a leading enabler of digital transformation.
Technology innovation remains one of the most disruptive market trends.
Driving reshaped the business smuggled across nearly all companies and industries.
As a result, the market opportunity for digital solutions is not the only large and growing it also accelerated.
According to leading third party research so 75% of companies.
To expedite their digital business transformation plans over the next four to five years.
In fact, the majority of organizations recognize the need to embrace digital transformation in order to effectively compete.
Yet many companies have only scratched the surface of their long term plans.
This is primarily because comprehensive shrunk automation initiatives are often complex and require significant coordination of resources in order to effectively implement change.
Even after implementation companies frequently encounter additional challenges with.
Scaling new digital solutions across their organization.
Or they fall short of realizing the anticipated performance improvements.
Our digital solutions.
Such a jeep.
<unk> CTG to capitalize on this growing need and opportunities.
Leveraging our deep and diverse domain expertise together with an expanding portfolio of solutions, we serve as a catalyst for clients to accelerate their digital transformation.
While also ensuring the achievement of their desired performance objectives.
To provide a recent example.
We have an existing client that has you eat lots of T. T. G horror a broad range of services and support for nearly two decades.
This client approached in support of an expanded engagement.
To migrate their aging and expensive to maintain data centers through a more efficient cloud based solutions.
As a leading provider of telecom related services with <unk>.
In addition, the required no interruption in business continued.
I'm involved in migration of their data centers located in Luxembourg.
Well its 14th business critical applications.
CTG completed the seamless migration of declines data and applications.
Including a complete redesign of software to retrofit a key financial application too.
Scalable and optimized they have you go AWS cloud platform.
In addition to creating more than $1 million of annualized cost savings.
The completed migration resulted in improved data backup and recovery.
As well as enhanced security and monitoring of the clients' digital asset.
Today, we are continuing to provide this client with digitally enabled ikea support for its cloud based platforms.
Including Amazon AWS, Microsoft Azure and $3 65.
Surface snow.
As previously mentioned digital transformation is taking place across every industry.
Some of these transformations are reshaping the future of certain industries.
Today. This is clearly demonstrates its within healthcare.
Which continues to be an important target market and drive growth for CTG.
While you're based care with suspension to redefine healthcare by promoting economics, the borg requirements by the quality of care.
As opposed to the quantity types of care providers.
However.
T mobile is only possible with substantial improvements in all of the industry captures managers and ultimately utilizes interviews.
While many of these variables will also determine the longer term success of value based care. One of the first fundamental building blocks is broad adoption of effective electronic health records or EHR.
CTG has a long history and extensive expertise in this area with many EHR projects successfully completed in the last five years, including a growing number of go lives implementation projects.
In late October we announced CTG has commenced work on a company wide go live implementation of <unk>.
Picks enterprise electronic health record system.
For a large regional healthcare system clients.
This significant multimillion dollar contracts, which will largely be fulfilled during the fourth quarter.
Encompassing both management of the go lives as.
As well as the associated on site and remote classroom training.
In support of more than 10.
We estimate that the end users, including thousands of providers.
With responsibility that span.
As we began planning management and then they the fusion as well as end to end logistics strategy.
The complexity growth overall.
Oh go lives project this size is immense.
A part of delivering a comprehensive solution we.
We are leveraging a broad combination of proven methodologies.
Together with coordinated with internal and external expertise.
Multiple proprietary CTG digital tools.
In addition, we are simultaneously, providing 24 seven legacy application management and support managed services for various applications and systems. So that the clients principal I T focus can remain on the epic implementations.
Okay.
Consistent with all of our digital solutions offerings. The end result for this client will be an accelerated business transformation that achieved desired performance improvements and maximize their return on the significant investment in EHR.
As reflected in our revenue guidance.
This project will also be a significant contributor to our fourth quarter financial results.
The two digital solutions engagements that I have outlined one cloud migration for our telecom services provider.
And the second four go lives EHR implementation for a regional health care system.
Each demonstrates.
How CTG solutions enable clients accelerate their digital transformation.
And the achievement of performance objectives.
These are only two prominent examples.
They represent the type of client engagements and solutions are becoming an increasing portion of our overall business.
More broadly.
The long term branding of our digital solutions strategy continues to be well received.
And more importantly, resonates well with both prospective and existing clients.
We currently have a solid and growing pipeline of new business engagements.
That span our core portfolio of digital transformational.
Including application development Belgian Corporation.
<unk> platforms data analytics and automated testing.
Notably.
This includes an increasing number of opportunities for expanded relationships with existing long served clients per plan business transformations.
Our success to date.
Has been the result of tremendous and disciplined execution of our strategy.
Highly capable team.
Wireline piece with what we've accomplished in a relatively short period of time.
I would emphasize with both the opportunity for digital transformation solutions.
Ctg's penetration of the market.
So it's early.
Therefore, we remain committed to making continued investments targeted by further expansion of our T. K.
Capabilities and our portfolio of scalable digital transformation solutions.
Support for further capitalizing on what we believe is sick.
Significant growth potential in the coming years.
I will now turn the call over to John for a detailed review of our third quarter results and financial guidance for the fourth quarter.
Charles.
Thank you Felipe and again good morning, everyone. Thank you for joining us on today's call.
As reported in our press release earlier. This morning consolidated revenue in the third quarter was $90 6 million compared with $92 2 million in the second quarter and $88 6 million in the third quarter of 2020.
The sequential decrease in third quarter revenue, primarily reflected seasonality in Europe and in our North American staffing business and our continued disengagement from lower margin.
<unk> projects the.
The increase in revenue year over year was driven by the continued expansion of our solutions business, including new client engagements for our digital transformation offerings.
Solutions revenue in the third quarter was $41 3 million or 45, 6% total revenue.
This compares with $41 2 million or 44, 7% of total revenue in the previous quarter year.
Year over year solutions revenue increased $4 3 million or 11, 7%.
From $37 million or 41, 7% of total revenue in the third quarter of 2020.
Currency translation had a positive impact of $5 million on revenue in the third quarter of 2021, compared with a positive impact of $3 9 million in the second quarter.
And a positive impact of $1 8 million in the third quarter of 2020.
Total billable days in the third quarter were 63, compared with 64 days in the second quarter and 63 days in last year's third quarter.
Revenue from IBM in the third quarter was $18 9 million or 29% of revenue.
Compared with $19 6 million or 21, 2% of total revenue in the second quarter.
$18 6 million or 21% of total revenue in the year ago quarter.
No other client represented more than 10% of revenue during the third quarter of 2021 or in recent comparable periods.
Gross profit in the third quarter was $20 3 million or 22, 4% of revenue compared with $20 4 million or 22, 1% of revenue in the second quarter of 2021.
In $19 5 million or 22, 1% of revenue in the year ago third quarter.
Third quarter SG&A expense of $17 6 million reflected our continued investment in digital transformation offerings and business development resources consistent with our solutions strategy.
This was essentially flat with SG&A expense in the second quarter of 2021.
And compares with $17 7 million in the third quarter of 2020.
GAAP operating margin in the third quarter remained steady at 3%.
Which was flat compared with the second quarter.
And a significant increase of nearly 50% from two 1% in the third quarter of 2020.
Non-GAAP operating margin in the third quarter, which excludes approximately 300000 of acquisition related expenses was three 3%.
Compared with three 2% in the second quarter and an increase from two 7% in the year ago third quarter.
The effective income tax rate for the third quarter was 22, 6% compared with 28% in the second quarter and a negative 31, 2% in the third quarter of 2020.
As a reminder, the negative tax rate in the year ago quarter was due to a onetime tax benefit resulting from a change in tax legislation.
GAAP net income in the third quarter was $1 7 million or <unk> 11 per diluted share.
And included approximately 200000 or <unk> <unk> per diluted share of acquisition related costs.
Non-GAAP net income for the third quarter was $1 $9 million or <unk> 13 cents per diluted share.
For comparison GAAP net income for the second quarter of 2021 was $1 8 million or <unk> 12 per diluted share in.
And included approximately 200000 or <unk> <unk> per diluted share of acquisition related expenses.
Non-GAAP net income for the second quarter was $2 million of 13 cents per diluted share.
GAAP net income in the third quarter of 2020 was $2 8 million or <unk> 20 per diluted share.
Which included a net $200000 of income or <unk> <unk> per diluted share comprised of acquisition related expenses offset by a gain from nontaxable life insurance.
Non-GAAP net income was $2 6 million or <unk> 18 per diluted share in the year ago third quarter, but this also included an <unk> <unk> per diluted share gain from the change in tax legislation.
Without that change in tax legislation non-GAAP income in 2003rd quarter would have been 10 cents per diluted share.
Adjusted EBITDA in the third quarter of 2021 was $3 7 million.
Compared with $4 1 million in the second quarter and $3 3 million in the year ago third quarter.
Adjusted EBITDA for the trailing 12 months as of the end of the third quarter of 2021 was $16 5 million.
Ctg's total head count.
At the end of the third quarter was approximately 3600.
Compared with 3650 at the end of the second quarter of 2021, and approximately $37 50 at the end of the year ago third quarter slip.
Slightly over 90% of our third quarter of 2021 headcount was billable.
Turning to our balance sheet.
Cash and cash equivalents at the end of the quarter were $31 million.
Also at the end of the quarter. The company had no outstanding balance on its revolving line of credit facility or any other long term debt.
Capital expenditures in the third quarter were $258000.
Paired with 298000 in the second quarter and 685000 in third quarter of 2020.
Looking forward based upon current bookings and the significant expected work related to the large epic implementation go live engagement, we have discussed.
The company anticipates revenue to increase in the fourth quarter and be in the range of between 110 $115 million.
Additionally, we expect GAAP earnings in the fourth quarter to be between 15, and 17 cents per diluted share.
And non-GAAP earnings are expected to be between 16 and 18 per diluted share.
Taken together with our year to date financial results.
Revenue for the full year of 2021 and is expected to be between 303 hundred $95 million.
GAAP earnings for the full year expected to be between $49 51 per diluted share and non-GAAP earnings are expected to be between $55 57 per diluted share.
We are very pleased with our consistent progress and the continued advancement of our digital solutions strategy.
We will also continue to search for attractive acquisitions to accelerate the growth of our solutions strategy within a disciplined capital allocation framework, we are committed to generating additional value for shareholders.
On margin expansion and EBITDA growth, including our continued investment in offshore delivery capabilities.
That completes our prepared remarks, Kevin could you please initiate and manage our question and answer session. Please.
Thank you and if you have not already done. So you May press. One then zero on your telephone keypad at this time.
Yourself in queue for questions.
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And our first question is from the line of Josh Vogel Sidoti. Please go ahead Sir.
Thank you good morning, John and Felipe Thanks for taking my questions.
Good morning, Josh.
Thanks.
I wanted to start you know that you mentioned this is your third go live engagement over the past year I was wondering if you can talk.
About the pipeline for EHR related work and are there opportunities outside of the U S and basically just given your footing and expertise and brand name in the space now Whats your average conversion rate on landing these types of projects.
Sure Josh.
We have a solid pipeline of.
Let's say EHR related work.
And and had the health care sector.
Basically because we see that well you know the big wave of her charter implementations happens.
Before leaving 2016, we.
We see that those now some kind of a replacement.
Starting to happen.
And also we also see that significant merger and acquisition.
David the in the health care sector, which when you integrate the different parts of hospital systems, you won't there'll be asleep can come to one EHR.
So that's the activity, we see we have a solid pipeline.
As we are making.
Making a solid name for ourselves in that sector in the go lives.
We see that our success rate in closing these opportunities is is hot.
So we are positive looking forward.
Now regarding your question about outside.
The states.
Looking in in Europe.
We have some strong health care activity in Belgium.
But the EHR systems that are being implemented in Belgium are not of the size and the scope of an asset.
So we're talking a different level of EHR systems.
I think has only a couple of.
Implementations in the hole.
Well, the Benelux southern or even less so.
I'm talking about more homegrown EHR systems like our premise, which is the major system from the University hospital of Brussels in Belgium for Rich CTG is.
The prime and only integrator at this moment.
But you cannot control the Belgian the hospital systems with.
With the hospital systems in the states like here.
Talking about more than 10000 end users.
Simply the scale, where we see in Europe.
Sure sure I appreciate those insights.
<unk>.
Maybe more for John can you just share some.
Thoughts around how much is the epic implementation expected to contribute in Q4 guide I just want to get a sense of the sequential uptick we should see here from the $41 million in Q3, and then you.
Also.
It's good to see you're providing guidance again and I just kind of want to get a frame of mind for 2022 is there any residual or long term revenue.
Coming from this engagement that will contribute next year.
Thanks, Josh a couple of good questions are relatively speaking.
When you look at the non the revenue outside of this engagement.
Is sleep. It just said we think our pipeline has been.
Very good.
I think our transition to that pipeline has been good although continue we flip but I continue to believe now that the phase III now pre COVID-19 18 months ago, but still very good and our conversion rate, which was part of your question. It has been good. So I think we're winning a fair number of deals.
Offsetting all of that is as we've said it can really our continued focus.
Around from an engagement perspective.
Stepping away from some of the slowest margin staffing business and so you've got some movements up and you've got some movements down and I think another movement up in Q4 is we've got we expect our utilization to return to a little bit normal when we did have fairly robust over the summer months as we suspected as we expected.
People, taking the advantage after not doing it last summer, but doing it some are taking some holiday time in the third quarter, both in Europe and in our our North American business and so.
You've got <unk>.
And away from some low margin staffing you've got people utilization going up a little bit as they come back and I think a very good throughput on the pipeline, having said that this project. This epic go live implementations very significant impact to the revenue.
And.
A large part of that increase from.
The revenue this quarter.
To where we expect to be at 112 five is related to this project now.
Now as you May know with these types of projects.
Typically what you do is you do training in advance and so you've been working with your client for some time now to do training ahead of time and that's something that we've been working on during this quarter and will continue throughout the project. Then you have a go live period around the specific a go live date before and after the system goes live to make sure that you're you're flooded.
All of their organizations with people to make sure that they can get information in and out of and into the new system.
So the goal ive itself tends to be fairly concise over a defined period of time and most of that will be in.
This quarter, we do expect some residual business from this project to go into Q1, but not certainly not significant compared to the overall size of the engagement.
That is that's really helpful. Thank you.
To your second question was on guidance I think.
Yes. Thank you.
We felt it was very very important for us to give guidance this quarter.
Given the significant change in the revenue and what we believe to be the profits in Q4, and it's something that we're looking at going forward I think as markets have calmed down a little bit from where they were over the past couple of quarters and last year. It gives us a little bit better visibility into where we're going so.
I will say that we will definitively give guidance going forward, but its something were thinking very strongly about and leaning towards.
That's understandable.
Switching gears, a little bit you extended that managed services agreement.
Was that for a multiyear <unk>.
Engagement and I'm just curious are there any other notable projects or engagements that are up for renewal in Q4.
Oh well, yes. This this has been an extension.
Over in the engagement.
<unk> has already been going on for a number of years, it's a long term clients, where we've done.
The total transformation of re <unk>.
Redesign redevelopment of.
Most of their systems.
And now we're continuing like we see that development and in the digital world is not so much.
A project start and finish our way of working anymore. It's more of a managed services as well.
Additional new releases come out there are additional functionalities are being developed.
That's exactly what's happening here, so managed services and development and testing.
Clean the whole automation framework.
So that being said is that we see that many of those.
Initial project now moving into congo's cycle repeatable business and.
And managed services extensions.
So we see more and more of our business.
Bread over the year not necessarily in Q4, that's spread over the year responding to this bathroom.
I appreciate those insights and then one last one I'll, let others jump in more from a macro level you know, obviously very well documented labor shortage, especially when we get into the ranks.
Can you talk about where you may be seeing the most pressure difficulty filling in an assignment or project and on the flip side, where you may be.
Or where you may have a leg up on peers, because you have such a strong bench or a pool of labor to tap.
Okay.
Well, obviously the actions.
The labor shortage.
<unk> is an item in our markets.
And those that smoke you if you if we remember pre COVID-19.
We were talking already about the war for talent.
Starts about in Europe that then started to move to the states.
We've been used to this war for talent and output.
Systems in place.
To make sure that we can keep our retention.
The higher levels.
You have been used to.
Being certified the great place to work and all of the countries, where we operate this is definitely a big support.
Rare do we see labor shortage.
Sliver, everybody sees a digital skill sets.
<unk> are in the in demand right.
I think the reason why we don't have at this moment the really strong difficulties that we see that the market does happen is partly our culture and management style and being a great place to work, but also our focus on develop.
Thing.
Skills in developing people who come from.
Who come right from school.
So we're hiring a lot of juniors and training them and different areas from automated pulse thing two clouds.
To artificial intelligence and intelligent automation.
And it's also looking at a more global workforce, where we can add talents now from India and Colombia.
We have two pools of talent.
We can also in golf and our global projects.
So I think yes labor shortage is definitely in Ireland.
At this moment, but I don't think CTG is really hurting because.
Gotcha, Gotcha, well Felipe and John Thank you for taking all my questions.
Thanks, Josh.
Pleasure Josh.
And I'll make a question.
Please.
It's from the line of Kevin Liu of cable and company. Please go ahead.
Hey, good morning, guys nice quarter and congrats on the strong outlook here.
Thanks, Kevin Kevin Good morning.
There's a question here just as it relates to the guidance obviously for Q4, that's a fairly significant step up on the revenue line in terms of your EPS guidance. It kind of suggests that not all of that flows through to the bottom line. So I was wondering if you could talk a little bit about how much of that is attributable to maybe just kind of the margin profile of the engagements for Q4.
Versus any plans you have to invest more significantly in the business ahead of fiscal 'twenty two.
Sure Kevin I'll start and give you the high level picture and then John can add some color to it.
We see if you look at our Q4 earnings that we have a very strong improvement in operating results from both recent quarters and last year.
We are committed to continue to invest in the fourth quarter and also next year.
In.
Like we said, there's no digital solutions capabilities.
Team in our solutions.
And basically very more specifically in business development and solutions.
Okay.
Okay.
Record regarding to the pricing of the project and the margins of this project of this kind of size of a massive size of.
Go lives, while the pricing associated with those sizes of projects are generally lower than that of smaller projects.
John do you want to add.
I think that I think Kevin that about sums it up I really.
We are absolutely come as we've said.
Consistently say it from quarter to quarter and all of the.
The discussions that we have we're committed to making sure that we have the right people to expand our solutions strategy over time as we move forward and so this is a great time to take some of those dollars and make those investments. So that we can drive a very good consistent start to 2022, so it's really a combination of all.
As Felipe said lower margins from a project of this dramatic size coupled with the continued investments that we want to make to drive the business in the future.
Yes understood.
And then just turning to your European business. The revenue growth was fairly flattish in Q3, how much of that was just purely tied to vacations. This year versus maybe folks not taking any last year and more importantly, as you look to your Q4 guidance are we assuming that goes back to kind of the double digit growth rate, we've seen in the past or are there other impacts here.
That will keep the growth.
Up a little bit more depressed through Europe.
I think your analysis Skegness Paul Gong.
What we've seen in Europe is now more cyclical.
European year, which kind of is encouraging.
John.
We're still.
Looking at Covid, and we're still not back to pre Covid terms, but we see market stabilizing here and there on coming back to normal.
So yes in Q3.
Vacation server.
For Europe, almost back to normal again and that shows in the pipeline of the revenue.
We expect in Q4 that also there will come back to.
Two normal with a slight caveat, but.
The Q1, and Q2 holidays had still being.
Very limited so people have taken.
<unk> taken a lot of holidays in Q3 and are catching up but there is still some holidays to come in in Q4, but I think.
Quarter by quarter, but coming back to a more normalized.
Way of business, which is frankly.
Very encouraging for us in the future.
Yeah, that's definitely good to hear and I think you guys talked about in the pipeline you are seeing some existing customers have opportunities to expand their work I was wondering if that's a cuts both Europe and North America.
Then also if you could just touch on how broad based that is across various industries.
Look at the opportunities going into Q4 and for next year.
Sure, Yes, we see that and in both Europe and North America.
<unk>.
Frankly, it Doug is also a very good evolution.
Because you know since we've been a well working more remotely and since that time.
Coming back totally.
In person meetings with clients and with new clients are typically very useful and building a stocking up relationship. So we're still a little bit away from our normal ways of working with clients and.
I think maybe.
The in person meetings are not going to totally back when we see business normalizing.
But.
Uh huh.
Strong long term clients that are moving together with us that are looking at our.
Offerings and digital solutions and are moving together with us and that area is.
A very strong signal of crushed on very well.
They really like our reliability on the fact that we deliver.
And that's mostly in theory, it's more making new clients is.
More difficult than pre Covid.
Being able to rely on growth with our current client base.
Frankly, fantastic and bundles.
It is definitely something we see.
In Europe, and North America.
Could you repeat the second part of your question Kevin.
It was related to that just trying to get a sense for if it's also broad based across industries or if its concentrated in any specific areas.
Okay.
No it really is across industries.
And that's well that's the opportunity of digital transformation.
It's happening across all industries.
But he is looking at accelerating everybody is really focusing on getting the desired business outcomes and you can see it in the government you can see it in telco like.
Like we talked about different sectors health scanner still looks very strong sector for us.
In the states and in Belgium.
But we see it in all of our industries.
Okay, and then maybe just kind of along the lines of some of the earlier questions from Josh on on.
On the staffing shortages.
Wage inflation is another one that kind of comes up frequently are you guys seeing any.
Impact of that kind of on the margin profile of your business or kind of what you might have to price for some of the opportunities in the pipeline.
Just how do you feel about your ability to offset any potential wage inflation as we go into next year.
Yeah.
Sure.
Yes wage inflation is definitely.
Since we see in in Europe inflation coming back.
Getting to a couple of percentages some of it on an annual basis.
But as you look to our.
Policy.
A chart you see a couple of things that we're doing that somehow or.
Key to position is stronger.
As opposed to that inflation.
Two areas that I talked about just recently won.
Finding young graduates junior people.
And then training them ourselves makes me really have people that aren't exactly trains in the methodologies, India approaches with the skill sets that we really need.
And that our scale.
Junior and still have a strong progressing ahead of them.
This moment being at the right place and in the compensation package and also for wage inflation of immediately issue and then secondly.
Moving more to a really global workforce with our colleagues in India and in Colombia that also helps managing our cost of delivery.
And keeping that under control.
Great and just lastly for me I know you guys, probably aren't ready to provide any sort of guidance for 'twenty two today.
As we think about that.
Early part of next year and you guys are finishing up the work on this large project is it your expectation that you have enough kind of contracted business and the opportunity in the pipeline, where it may not be a dramatic fall off going into Q1 next year.
Or should we think about it more than our baseline or X that project.
That we should kind of keep the revenue level.
Until more of the business starts converting.
Yeah.
Well.
Looking at next year, I think I can say to you say that.
Both John and I are optimistic and like we said we have a growing pipeline, we're very proud of the conversion we see happening.
In that pipeline in all places North America, Europe different industries businesses stabilizing we're not going through.
To be overly optimistic.
Covid isn't leaving.
Leaving us and May never leave us in total but.
We see businesses normalizing stabilizing which is good.
Very positive sign going forward.
Obviously like you said this is a huge.
John used the word dramatic.
Sorry.
Projects.
And that shows.
And a big increase in Q4.
Like we said, we're not giving guidance.
Two for 22, there will be maybe.
Maybe a short tail of that project moving into Q1.
But most of it is being done in the in Q4.
Tom anything you would like to add to that.
Yes, I think thats very well put fleet Ken.
Kevin I think that the.
We should not consider this sort of the baseline going forward that given the size of the project and the fact that it's contained within the quarter.
There will be a a baseline that's more consistent with where we've previously been but I'd also agree with fleets that there's very nice opportunities in both the pipeline and signed business.
We have good progress starting out next year.
All right. That's real helpful. Appreciate the time and thanks for taking the question.
Thanks, Kevin our problem.
Okay. No further questions in queue back over to management for closing remarks.
Thank you Kevin.
In closing the third clinical marked another quarter of continued progress and execution on CTG digital solutions strategy.
Our achievement of year over year growth, both within our solutions business and for the total overall business continues to validate that we have an effective strategy and the right team in place to deliver on our business objectives.
Coupled with this growth we are realizing sustained improvement in the company's operating metrics and generating increased profitability.
Moreover, we are confident that our previous repositioning of CTG.
The catalyst for clients to achieve accelerated digital transformation.
We'll need to realizing our longer term vision and financial targets for 2023.
Near term as discussed in today's call.
We are well positioned and expect to finish off the year with very strong top line growth in the fourth quarter.
Consistent with our progress year to date.
We also expect to deliver increased operating profits in Brooklyn line results.
Demonstrating the success of our strategy and the ongoing commitment to building long term value for all CTG shovel.
Thank you again for joining us today and your continued support of CTG.
Kevin you may now disconnect the call.
Thank you, ladies and gentlemen that does conclude your conference. We do thank you for joining you may now disconnect have a good day.
Okay.
Okay.
Okay.