Ciber CEO: Return to Growth, Profitability 'Painfully Slow' As Stock Hits All-Time Low

Delays in legacy projects and uncertainty around the future of European operations plagued Ciber in its most recent quarter, sending its stock price plummeting to a 22-year low.

"Ciber's return to growth and profitability will be painfully slow as it reflects our efforts to offset many years of under-investment in key businesses and new offerings," said Ciber CEO Michael Boustridge during the company's second-quarter earnings call Thursday with financial analysts before the stock market opened. "Corporate recoveries of this scale are rarely achieved in less than two years."

Boustridge started as Ciber's CEO 26 months ago, and has worked to narrow the company's focus to areas where it can achieve high margins and low risk by divesting from non-profitable operations. But the journey has been a rocky one.

The Greenwood Village, Colo.-based company – No. 43 on CRN's Solution Provider 500 list – saw sales fall to $165.9 million in the quarter ended June 30, down16.2 percent from $197.9 million in the same quarter last year.

[RELATED: Ciber To Sell Netherlands Business For $25M, Stock Skyrockets]

Net loss from continuing operations was $51.7 million, or a loss of 64 cents per share, compared to a gain of $1.2 million in the second quarter of 2015.

Adjusting for restructuring and amortization costs, Ciber's net loss was $22 million, or 27 cents per share, down from an adjusted net income of $2 million. Seeking Alpha had projected a net loss of just 4 cents per share.

Wall Street reacted very unfavorably to the results, sending Ciber's stock into free-fall, closing down nearly 36 percent at 94 cents per share. That's the lowest price at which Ciber stock has traded since the company went public in March 1994.

Sales in Ciber's North American business fell 13 percent from $108.8 million last year to $95.1 million this year, with weakness in the company's Oracle, SAP and Application Development and Management (ADM) practice partially offset by new transformation services revenue, Metzger said.

Ciber specifically struggled in North America with project delays around a small number of older Oracle projects, Metzger said, resulting in $5 million of lost revenue for the quarter. Additionally, Ciber expected to have $20 million of new business signings in the second quarter that ended up getting delayed until the third quarter, Metzger said.

To add insult to injury, Ciber erroneously issued bonus payments of $760,000 and $100,000 to Boustridge and CFO Christian Metzger, respectively, on June 29, that were not authorized by the Board of Directors' Compensation Committee due to miscommunication at the committee level, according to a filing Thursday with the U.S. Securities and Exchange Commission (SEC).

Boustridge and Metzger have agreed to repay the money, and the Board's Audit Committee is "reviewing the circumstances that gave rise to the control deficiencies that led to such erroneous bonus payments," according to the SEC filing.

Ciber's European business has suffered from high employee attrition and customer uncertainty regarding the company's future in Europe after Ciber sold its Netherlands business in June, Boustridge said. The company said its international revenues dropped 21 percent from $89.3 million last year to $71 million this year.

Ciber will spend the rest of 2016 exploring potential business divestiture opportunities in an effort to drive out more costs, Boustridge said. Regulatory rules have made it difficult for Ciber to adjust the size of its European workforce to align with fluctuations in demand, resulting in compressed margins, said CFO Metzger during the call.

Additionally, Ciber's agreement to sell to its $10 million Australian business to local management fell through. Metzger said the company is now evaluating alternative options since Ciber's Australian business isn't aligned with operations in other countries.

A bright spot has been Ciber's new app modernization tool, known as Ciber Momentum, which Boustridge said is critical to the company's efforts to generate revenue streams beyond legacy staffing, implementation and managed services.

The company is on track to spend $5 million on Ciber Momentum in 2016, Boustridge said, and signed its first strategic partnership agreement with a global systems integrator. Bringing a systems integrator on board to help with engineering and pre-sales services will provide Ciber with access to a different type of customer, Boustridge said.

Ciber Momentum offers particularly strong potential in the financial and industrial verticals, Boustridge said, as well as for state and local governments as they begin an organization-wide journey to the cloud. Boustridge has found that conversations around Ciber Momentum are increasingly taking place at the portfolio level rather than specific to a single app.

Ciber is also enjoying success with its new European Oracle practice, Boustridge said, particularly as it relates to implementations in higher education settings in Great Britain.

Ciber expects to record another net loss in the third quarter, Boustridge said. Excluding $12 million of expected litigation costs this year, Ciber expects to have positive cash flow in the fourth quarter thanks to cost containment efforts and improvements in its North American business, Boustridge said.