TechTeam Global Reports Third Quarter 2009 Financial Results

SOUTHFIELD, Mich., Nov. 9 /PRNewswire-FirstCall/ -- TechTeam Global, Inc. (Nasdaq: TEAM), a worldwide provider of information technology outsourcing and business process outsourcing services, today reported net income of $0.9 million, or $0.08 per diluted share, for the three months ended September 30, 2009, compared to a net income of $1.9 million, or $0.18 per diluted share, for the three months ended September 30, 2008.

Third quarter highlights include the following:

• Revenue was $52.3 million, a decrease of $11.8 million or 18.4% from the third quarter 2008. The decrease was largely due to $1.9 million lower revenues from the divestiture of ANE (on October 31, 2008), an approximate $1.8 million impact of exchange rates on revenue, and an approximate $8.1 million or 13.1% decrease of revenue related to erosion and the previously announced wind-down of certain customer contracts.
• Cash provided by operations for the nine months ended September 30, 2009 was $16.4 million, a significant improvement over the $3.8 million in cash provided by operations for the same period in 2008, principally driven by improvements in profitability and working capital management.
• The Company reduced its total debt by $16.0 million during the nine months ended September 30, 2009. Approximately 46% of the Company's outstanding debt has been eliminated over the past nine months.
• Gross margin was 23.0% in the third quarter 2009, essentially flat versus 23.1% in the third quarter 2008. SG&A expense was $10.4 million in the third quarter 2009, a decrease of 6.1% from $11.0 million in the third quarter 2008. SG&A costs as a percent of revenue increased to 19.8% from 17.2% due to the revenue decline year over year.
• TechTeam was named to the No. 1 position globally in help desk outsourcing in the Black Book of Outsourcing 2009 Survey on Top Infrastructure Management Outsourcing Vendors.
• The Company continues to expand existing client relationships in its commercial business with numerous wins totaling $13 million in contract value, including substantial scope expansions with two large multi-national clients.
• The Company's government business unit was awarded numerous re-competes and option renewals in the quarter totaling approximately $15 million in contract value. Further, the business unit won new business totaling $2 million.
  

"The Company's third quarter 2009 results continued to be affected by a challenging global economic environment," said Gary J. Cotshott, President and Chief Executive Officer. "We experienced some revenue erosion and new business decision delays during the quarter. To counter the challenge of price pressure and volume reductions, we continue to manage costs very closely and quickly adjust capacity to meet changes in demand.

Despite the tough environment, customers continue to seek high quality, lower cost alternatives to support their IT infrastructure. As a result, our pipeline of new account opportunities continues to be strong. While decisions are subject to longer decision cycles, our pipeline provides a solid basis to recover lost revenue over time."

In the first quarter of fiscal 2009, management changed its methodology for evaluation of the performance of the Company's outsourcing services. As a result of this change, certain costs, which were previously included in Selling, general and administrative expense, are now being included in Cost of revenue in the Company's Condensed Consolidated Statement of Income because they are directly related to revenue. The Company's financial statements for fiscal year 2008 have been revised, for all periods presented, to conform to the current year presentation. This re-categorization of expenses did not change net income or earnings per share, for all periods presented, in fiscal year 2008. There was no cumulative effect to retained earnings as a result of this re-categorization, and there was no change to the carrying amount of assets and liabilities in fiscal 2008.

For additional financial information please refer to the Company's Form 10-Q, for the quarterly period ending September 30, 2009, filed today. Further information regarding the re-categorization of expense can be found in "Note 1 - Basis of Presentation" of the Form 10-Q.

Conference Call Information
TechTeam Global, Inc. will also host an investor teleconference to discuss its third quarter 2009 financial results at 4:30 p.m. EST, today, Monday November 9, 2009. To participate in the teleconference, including the question and answer session that will follow the results announcement and discussion, please call 1-877-941-8631 (outside the United States, call +1-480-629-9820). When prompted, enter the passcode: 4181028. To access a simultaneous Web cast of the teleconference, go to the TechTeam Global Web site at http://www.techteam.com/investors/investor-relations and click on the Web cast icon. From this site, you can download the necessary software and listen to the teleconference. TechTeam encourages you to review the site before the teleconference to ensure that your computer is configured properly.

A taped replay of the call will be available beginning at approximately 6:30 p.m. EST, Monday November 9, 2009. This toll-free replay will be available through Monday November 23, 2009. To listen to the teleconference replay, call 1-800-406-7325 (outside the United States, call +1-303-590-3030). When prompted, enter the passcode: 4181028.

About TechTeam Global, Inc.
TechTeam Global, Inc. is a leading provider of IT outsourcing and business process outsourcing services to large and medium businesses, as well as government organizations. The Company's primary services include service desk, technical support, desk-side support, security administration, infrastructure management and related professional services. TechTeam also provides a number of specialized, value-added services in specific vertical markets. Founded in 1979, TechTeam has nearly 3,000 employees across the world, providing IT support in 32 languages. TechTeam's common stock is traded on the NASDAQ Global Market under the symbol "TEAM." For more information, call 800-522-4451 or visit www.techteam.com.

Safe Harbor Statement
The statements contained in this press release that are not purely historical, including statements regarding the Company's expectations, hopes, beliefs, intentions, or strategies regarding the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those expected because of various known and unknown risks and uncertainties, including, but not limited to, the continuing effects of the U.S. recession and global credit environment, other changes in general economic and industry conditions, the award or loss of significant client assignments, timing of contracts, recruiting and new business solicitation efforts, currency fluctuations, and other factors affecting the financial health of our clients. These and other risks are described in the Company's most recent annual report on Form 10-K and subsequent reports filed with or furnished to the U.S. Securities and Exchange Commission. The forward-looking statements included in this press release are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements.

Financial Tables to Follow on the Next Page

                                    Financial Data
                                 TechTeam Global, Inc.
              Condensed Consolidated Statements of Income (unaudited)
                        (In thousands, except per share data)

                             Third Quarter Ended        Nine Months Ended
                                 September 30,            September 30,
                                               %                         %
                            2009     2008   Change    2009     2008   Change
    Revenue
      Commercial -
        IT Outsourcing
         Services         $26,184  $30,452  (14.0)% $80,462  $91,154  (11.7)%
        IT Consulting
         and Systems
         Integration        2,711    6,338  (57.2)%   9,780   21,283  (54.0)%
        Other Services      3,740    5,406  (30.8)%  11,981   19,358  (38.1)%
                            -----    -----           ------   ------
      Total Commercial     32,635   42,196  (22.7)% 102,223  131,795  (22.4)%
      Government
       Technology
       Services            19,713   21,988  (10.3)%  60,557   66,230   (8.6)%
                           ------   ------           ------   ------
    Total Revenue          52,348   64,184  (18.4)% 162,780  198,025  (17.8)%
                           ------   ------          -------  -------
    Cost of Revenue
      Commercial -
        IT Outsourcing
         Services          20,838   24,137  (13.7)%  62,903   72,847  (13.7)%
        IT Consulting
         and Systems
         Integration        2,083    4,988  (58.2)%   7,712   16,702  (53.8)%
        Other Services      2,860    4,189  (31.7)%   9,008   14,911  (39.6)%
                            -----    -----            -----   ------
      Total Commercial     25,781   33,314  (22.6)%  79,623  104,460  (23.8)%
      Government
       Technology
       Services            14,525   16,063   (9.6)%  43,841   48,391   (9.4)%
                           ------   ------           ------   ------
    Total Cost of Revenue  40,306   49,377  (18.4)% 123,464  152,851  (19.2)%
                           ------   ------          -------  -------
    Gross Profit           12,042   14,807  (18.7)%  39,316   45,174  (13.0)%
      Selling, general
       and administrative
       expense             10,351   11,021   (6.1)%  32,393   35,325   (8.3)%
      Restructuring
       charge
       (credit)               (57)       -             (756)   3,884
                              ---      ---             ----    -----
    Operating Income        1,748    3,786  (53.8)%   7,679    5,965    28.7%
      Net interest expense   (314)    (425)            (918)  (1,291)
      Foreign currency
       transaction loss       (68)    (277)            (717)     (46)
                              ---     ----             ----      ---
    Income  before
     Income Taxes           1,366    3,084            6,044    4,628
      Income tax
       provision              504    1,175            2,242    2,866
                              ---    -----            -----    -----
    Net Income               $862   $1,909           $3,802   $1,762
                             ====   ======           ======   ======
    Diluted Earnings
     per Common Share       $0.08    $0.18            $0.36    $0.17
                            =====    =====            =====    =====
    Diluted weighted
     average common
     shares and common
     share equivalents     10,754   10,592           10,664   10,540
                           ======   ======           ======   ======

                    Condensed Consolidated Balance Sheet (unaudited)
                                    (In thousands)

                                                    September 30, December 31,
                                                        2009         2008
                                                        ----         ----
    Current Assets
      Cash and cash equivalents                       $16,659      $16,881
      Accounts receivable, net                         49,599       59,705
      Prepaid expenses and other current assets         4,148        4,315
                                                        -----        -----
    Total current assets                               70,406       80,901
                                                       ------       ------
    Property, Equipment and Software, Net               7,017        8,327
    Goodwill and Other Intangible Assets, Net          75,224       77,361
    Other Assets                                          662          774
                                                          ---          ---
    Total Assets                                     $153,309     $167,363
                                                     ========     ========

    Current Liabilities
      Current portion of long-term debt                $7,944       $7,987
      Accounts payable                                  5,670        6,340
      Accrued payroll and related taxes                11,809       12,477
      Accrued expenses and other current
       liabilities                                      8,539       11,670
                                                        -----       ------
    Total current liabilities                          33,962       38,474
                                                       ------       ------
    Long-Term Liabilities
      Long-term debt, less current portion             11,203       27,202
      Other long-term liabilities                       2,305        2,954
                                                        -----        -----
    Total long-term liabilities                        13,508       30,156
                                                       ------       ------
    Shareholders' Equity
      Preferred stock                                       -            -
      Common stock                                        111          109
      Additional paid-in capital                       79,385       77,939
      Retained earnings                                25,161       21,359
      Accumulated other comprehensive income (loss)     1,182         (674)
                                                        -----         ----
    Total shareholders' equity                        105,839       98,733
                                                      -------       ------
    Total Liabilities and Shareholders' Equity       $153,309     $167,363
                                                     ========     ========

            Condensed Consolidated Statements of Cash Flows (unaudited)
                                  (In thousands)

                                                            Nine Months Ended
                                                              September 30,
                                                            -----------------
                                                             2009        2008
                                                             ----        ----
    Operating Activities
      Net income                                           $3,802      $1,762
      Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation and amortization                       5,059       5,813
        Other adjustments, primarily changes in working
         capital                                            7,493      (3,755)
                                                            -----      ------
          Net cash provided by operating activities        16,354       3,820
                                                           ------       -----
    Investing Activities
      Purchase of property, equipment and software         (1,211)     (2,101)
      Cash paid for acquisitions, net of cash acquired       (375)     (5,958)
                                                             ----      ------
          Net cash used in investing activities            (1,586)     (8,059)
                                                           ------      ------
    Financing Activities
      Proceeds from issuance of long-term debt                600       5,000
      Proceeds (expenditures) from issuance of common
       stock                                                  (28)        351
      Tax expense from stock options                            -          (5)
      Payments on long-term debt                          (16,640)     (4,227)
                                                          -------      ------
          Net cash provided by (used in) financing
           activities                                     (16,068)      1,119
                                                          -------       -----
    Effect of exchange rate changes on cash and cash
     equivalents                                            1,078        (440)
                                                            -----        ----
    Decrease in cash and cash equivalents                    (222)     (3,560)
    Cash and cash equivalents at beginning of period       16,881      19,431
                                                           ------      ------
    Cash and cash equivalents at end of period            $16,659     $15,871
                                                          =======     =======

          Reconciliation of Third Quarter and Year-to-Date Earnings Excluding
                           Restructuring Charges to Net Income
                           (In thousands, except per share data)

                                             2009                2008
                                    --------------------  -------------------
                                                                    Earnings
                                    After-Tax  Earnings   After-Tax  (Loss)
                                    Earnings   per Share  Earnings  per Share
                                    ---------  ---------  --------- ---------
    Reconciliation of Third Quarter
      Earnings Excluding
       Restructuring Charges to
       Net Income
      Earnings excluding
       restructuring charges          $805       $0.07        $-        $-
      Restructuring charges,
       net of tax                       57        0.01         -         -
                                        --        ----       ---       ---
    Net Income  - Third Quarter       $862       $0.08        $-        $-
                                      ====       =====        ==        ==

    Reconciliation of Year-to-Date
     Earnings Excluding
     Restructuring Charges to Net
     Income
      Earnings excluding
       restructuring charges        $3,046       $0.29    $4,907     $0.47
      Restructuring charges,
       net of tax                      756        0.07    (3,145)    (0.30)
                                       ---        ----    ------     -----
    Net Income - Year-to-Date       $3,802       $0.36    $1,762     $0.17
                                    ======       =====    ======     =====

    Contacts:
    TechTeam Global, Inc.
    Margaret M. Loebl
    Vice President, Chief Financial Officer and Treasurer
    (248) 357-2866
    investors@techteam.com

    Boscobel Marketing Communications
    Jessica Klenk
    (301) 588-2900 ext. 121
    jklenk@boscobel.com