Bud Crumlish has his work cut out for him.
Crumlish, who has spent the past 25 years at Computer Task Group, is taking over as the Buffalo information technology company’s president and CEO at one of its darkest times in the past decade.
CTG’s profits are plunging. Its sales are on pace to decline for the fourth straight year. Its stock is at a six-year low.
And Crumlish’s predecessor as CEO, former Dell executive Cliff Bleustein, lasted just 16 months on the job before he “resigned by mutual agreement” with CTG’s board of directors.
In other words, Bleustein was shown the door by CTG’s board, pocketing a $1 million severance package on his way out.
Oh, and Bleustein came to CTG only because James R. Boldt, the company’s CEO for 13 years, died unexpectedly on Columbus Day in 2014.
Amid that tidal wave of misfortune, Crumlish, is charged with trying to pull CTG out of its tailspin.
Crumlish, who has run CTG’s biggest business unit – its staffing segment – for the previous 15 years, thinks the company has what it takes to turn around. In an interview, Crumlish said he’s comfortable with CTG’s general strategy under Bleustein, which put more focus on its staffing business that provides information technology services and personnel to companies.
He still sees opportunity in the health care sector, which fueled CTG’s rapid growth from 2009 to 2012 as hospitals scrambled to install expensive electronic medical records systems under pressure from the federal government.
But as hospitals started feeling the squeeze from lower federal insurance reimbursements, they lost interest in expensive technology upgrades and CTG’s electronic medical records work dried up, leaving a gaping hole in its revenue base. Boldt couldn’t plug the gap before he died, and Bleustein didn’t have any luck, either. In fact, CTG’s slide has accelerated this year, likely contributing to his departure.
“I’ve seen this company enjoy many good times and also weather a few tougher periods, like that which we’re experiencing today,” Crumlish told analysts during a conference call last week. “It takes hard work and resourcefulness to get through the difficult periods.”
Crumlish, for now, isn’t promising any major changes. He said he wants to take the next month or two to review CTG’s strategy. But by and large, Crumlish thinks CTG’s problem isn’t that it’s following the wrong strategy. The issue is how the company is doing at carrying it out.
“There’s not a whole lot of change in the strategy,” Crumlish said in the interview. “It’s more a matter of execution.”
CTG bolstered its sales staff under Bleustein. It’s pushing to win more work from existing clients. Crumlish wants to build closer ties between its staffing and IT solutions businesses, especially in the health care market.
Crumlish warned that those initiatives will take time to develop. “These things take time to build,” he said. “You start small.”
But small improvements won’t stop CTG’s decline.
• CTG’s sales, which peaked in 2012 at $424 million, have dropped for three straight years and are on a path to decline again this year.
Over the past three years, CTG’s sales have fallen by 13 percent and the company warned last week that it expects sales to drop by another 10 percent this year. If that pans out, it would leave CTG’s sales at roughly the same level they were back in 2010.
• CTG’s profits, which more than doubled to an all-time high by 2012 as the company’s health care business grew rapidly, has suffered an equally precipitous fall as the sector softened.
The company’s profits have tumbled by 60 percent over the past three years and are expected to drop by another 50 percent this year, after excluding write-downs and other one-time expenses. That would leave CTG with its weakest annual profits in 10 years.
• The company’s stock has taken a nasty beating. CTG shares, which traded as high as $25.71 in 2013 as optimism over the health care business peaked, now trades for around $5 a share – a plunge that has wiped out 80 percent of the stock’s value.
• The company’s health care market has slumped badly as cash-strapped hospitals have held off on making investments in expensive technology upgrades, including the electronic medical records projects that were such a bright spot for CTG just four years ago.
The health care market, which accounted for a third of CTG’s revenues in 2012, provided less than a quarter of the company’s revenues last year. That decline has cost CTG a lot of money – $53 million in annual revenue from 2012 to 2015.
And it’s only gotten worse since then. During the second quarter of this year, health care clients provided less than 19 percent of CTG’s shrinking revenues.
• CTG’s staffing business has always been heavily dependent on a handful of big clients. IBM Corp. has long been CTG’s biggest client, accounting for 30 percent of the company’s revenues so far this year.
That’s one of the few bright spots for CTG this year: Its IBM business has actually grown by nearly $3 million during the first half of this year.
But it’s a different story for CTG’s No. 2 client – computer maker Lenovo, which accounted for nearly 10 percent of the company’s revenues during the first half of this year. Its business with CTG has been shrinking, dropping by more than $8 million during the first half, more than offsetting the good news from IBM.
Crumlish thinks the Lenovo work is stabilizing and will start growing again.
He can only hope for the same from the rest of CTG’s business.