PITTSBURGH, July 17, 2008 (PRIME NEWSWIRE) -- iGATE Corporation (Nasdaq:IGTE), an integrated technology and operations (iTOPS) company, today announced its financial results for the three months ended June 30, 2008.
Second quarter highlights
* Diluted earnings from continuing operations were $0.15 per share, a 67% increase from last year's second quarter adjusted for a $2.5 million one-time non-cash charge. * In the iGATE Global Solutions segment, revenues were $55.6 million, a 15% increase from last year's second quarter. The segment's operating income of $8.1 million was up 620% from a year ago. * Five new customers were added during the quarter by iGATE Global Solutions. Three of these are Fortune 1000 companies. * iGATE and Royal Bank of Canada, Canada's largest bank, won the "Best Financial Services" partnership award in the Everest Group's distinguished 2008 Outsourcing Excellence Awards. * The proposed spin-off to iGATE shareholders of the Professional Services segment, which will be renamed Mastech Holdings, Inc., is proceeding smoothly, and is expected to be completed during the third quarter. Mastech Holdings, Inc. filed a Form 10 registration statement with the SEC on June 11, 2008, and is currently responding to the SEC's comments.
"While conditions in the global economic environment were challenging, we maintained our customer acquisition momentum through iTOPS projects," said Phaneesh Murthy, Chief Executive Officer of iGATE Corporation. "We believe that particularly in challenging economic times like these, our outcome-price-based iTOPS model is increasingly more appealing to customers."
"We are pleased with our margin performance during the second quarter, as better management of SG&A costs has helped offset annual salary increases," said Ramachandran Natesan, Chief Financial Officer of iGATE Corporation.
Operating results
iGATE Global Solutions
The segment's revenues for the quarter were $55.6 million, compared to $48.6 million in the corresponding period last year and $54.9 million in the previous quarter. iGATE Global Solutions' gross profit margin was 36% compared to 31% a year ago. Operating income for the quarter was $8.1 million, compared with $1.1 million in the same period last year and $6.7 million in the previous quarter. The operating margin was 15% of revenue, compared with 2% a year ago. Last year's second quarter was impacted by a goodwill impairment charge of $1.9 million related to the LoanPro acquisition.
For the first half of 2008, iGATE Global Solutions revenues were $110.5 million, compared with $96.4 million in last year's first half. The segment's operating income was $14.8 million, compared with $5.4 million a year ago.
Key customer wins and significant projects executed
A Fortune 500 entertainment company has engaged iGATE to manage its news, information and entertainment content from production to distribution. iGATE is implementing a Digital Asset Management system to enable the client to search and view content across the organization, reduce the operating cost of distribution and maximize its revenue stream with a rich library of digital assets.
A large pension fund company in Europe has engaged iGATE to provide equity research and data analytics for FTSE100 companies. iGATE is responsible for data collection, data analysis, data input and quality checks.
iGATE won a multi-year deal from one of the largest food and beverage companies in North America to provide data collection, analysis, management and validation services for new applications that are a part of the client's overall Product Lifecycle Management (PLM) strategy.
iGATE has added another leading Canadian financial services company to its client base and will be implementing a platform that will provide reporting and modeling for global securities holdings across the organization's various legal entities.
A U.S.-based leading construction material manufacturing company selected iGATE to provide data management to its customer fulfillment division. As part of the deal, iGATE will support the client's Customer Sales Order organization around areas like inventory, database management and process optimization.
A leading consumer electronics retailer in North America selected iGATE to provide support for its procurement functions. iGATE will provide services around transaction processing, data management and reporting, order and vendor management.
Additional quarterly highlights
* iGATE was named to The Black Book of Outsourcing's prestigious 2008 list of "50 Best Managed Global Outsourcing Vendors," and ranked No 6 in The Black Book of Outsourcing 2008 Top 10 Knowledge Process Outsourcers (KPO). * The company officially began operations in June at its new $2 million Information and Communication Technology facility in Ballarat in the State of Victoria, Australia. * iGATE announced an expansion of its global delivery facility in Chennai, India. The expanded facility will include a new Media and Entertainment Centre of Excellence.
iGATE Professional Services
Revenues for the quarter declined to $24.4 million compared to $27.0 million in the same period last year and $24.9 million in the previous quarter. The segment's gross profit margin for the second quarter was 19% compared to 22% in the corresponding quarter last year. Operating income declined to $1.7 million from $2.3 million in the same period last year and $1.3 million in the previous quarter.
For the first half of 2008, iGATE Professional Services reported revenues of $49.3 million, compared with $54.1 million in the six-month period last year. Operating income for the first half was $3.0 million, compared with $4.5 million a year ago.
Overall
Consolidated revenues increased 6% to $80.0 million compared to $75.6 million in the second quarter of last year. For the first half of 2008, the consolidated revenues stood at $159.8 million, compared with $150.5 million in last year's first half.
Net income from continuing operations for the second quarter was $8.5 million, or $0.15 per diluted share, compared with $2.3 million, or $0.04 per diluted share a year ago. For the first six months of 2008, net income from continuing operations was $15.9 million, or $0.29 per diluted share, compared with $6.9 million, or $0.13 per diluted share, in last year's first half.
The company's operating cash flow for the first half of 2008 was $23.1 million. As of June 30, 2008, the company's balance sheet remained strong, with $61.3 million in cash and short-term investments, no debt, and $155.9 million in shareholders' equity.
Mr. Murthy concluded, "With the impending sale of our Clinical Research business and the expected spin-off of Professional Services in the immediate future, we are well on our way to completing the restructuring of iGATE as a 'pure play' in the higher-margin IT services and solutions arena. In particular, in the years ahead we believe iGATE is increasingly well-positioned to carve out a leadership role at the intersection of business process outsourcing (BPO) and traditional IT services with our unique iTOPS business model. Looking ahead, while we are satisfied that our cost containment measures are working and that we have strong fiscal practices, we will continue to press to enhance top-line growth through active marketing of our iTOPS model."
Conference Call and Webcast
iGATE will host a telephonic conference call to discuss the company's second quarter financial results at 8:00 a.m. Eastern Time (USA) on Friday, July 18, 2008. A live webcast of this conference call will also be available in the Investor Relations section of the company's website (www.igate.com). The webcast will remain available for replay through July 25, 2008.
About iGATE Corporation
Pittsburgh, Pennsylvania-based iGATE Corporation (Nasdaq:IGTE) is the first fully integrated technology and operations firm with a global service model. iGATE Corporation, through its subsidiary, iGATE Global Solutions Ltd., enables clients to optimize their business through a combination of process investment strategies, technology leverage and business process outsourcing and provisioning. Services include consulting, enterprise data management and data warehousing, business intelligence and analytics, design, development, systems integration, package evaluation, and implementation, re-engineering and maintenance. iGATE Corporation also offers IT Professional Services in the areas of packaged application implementation, custom development, web services and business intelligence. The company services more than 300 clients across the globe. Clients rely on iGATE because of the high quality of service, responsiveness, and cost-effective global reach. More information about iGATE is available at http://www.igate.com/investors.html.
The iGATE Global Solutions logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=5150
Forward-Looking Statements
Some of the statements contained in this news release that are not historical facts are forward-looking statements. These forward-looking statements include the company's financial, growth and liquidity projections as well as statements concerning the company's plans, strategies, intentions and beliefs concerning business cash flows, costs and the markets in which it operates and the proposed divestiture of its Professional Services business. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify certain forward-looking statements. These statements are based on information currently available to the company and it assumes no obligation to update the forward statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from the forward-looking statements. These risks include, but are not limited to, the company's ability to predict its financial performance, the level of market demand for its services, the highly-competitive market for the types of services offered by the company, the impact of competitive factors on profit margins, market conditions that could cause the company's customers to reduce their spending for its services, the company's ability to create, acquire and build new businesses and to grow existing businesses, attract and retain qualified personnel, reduce costs and conserve cash, currency fluctuations and market conditions in India and elsewhere around the world, political and military tensions in India and South Asia, changes in generally accepted accounting principles and/or their interpretation and other risks that are described in more detail in the company's filings with the Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2007.
iGATE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
2008 2007
(unaudited) (unaudited)
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 27,606 $ 49,632
Short term investments 33,724 25,295
Accounts receivable, net 58,565 51,616
Prepaid and other current assets 5,428 10,248
Prepaid income taxes -- 894
Deferred income taxes 722 696
Current assets of discontinued operations 1,945 1,119
-------- --------
Total current assets 127,990 139,500
Investments in unconsolidated affiliates 60 1,005
Deposits 2,995 2,148
Land, building, equipment and leasehold
improvements, net 35,216 34,663
Deferred income taxes 4,458 --
Goodwill 33,912 35,989
Intangible assets, net 2,998 1,003
Noncurrent assets of discontinued operations 1,643 1,627
-------- --------
Total assets $209,272 $215,935
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,405 $ 6,090
Accrued payroll and related costs 18,062 18,502
Accrued income taxes 848 631
Other current liabilities 25,919 18,555
Restructuring reserve 575 1,058
Deferred revenue 387 536
Current liabilities of
discontinued operations 1,486 510
-------- --------
Total current liabilities 51,682 45,882
Other long term liabilities 738 536
Deferred income taxes 961 7,114
-------- --------
Total liabilities 53,381 53,532
Minority interest -- 6,437
Shareholders' equity:
Common Stock, par value $0.01 per share 548 546
Additional paid-in capital 169,221 165,757
Retained earnings (deficit) 9,790 (6,026)
Common stock in treasury, at cost (14,714) (14,714)
Accumulated other comprehensive income (8,954) 10,403
-------- --------
Total shareholders' equity 155,891 155,966
-------- --------
Total liabilities and
shareholders' equity $209,272 $215,935
======== ========
iGATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars and shares in thousands, except per share data)
(unaudited)
Three Months ended Six Months Ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenues $ 80,047 $ 75,612 $159,844 $150,529
Cost of revenues 55,446 54,501 109,943 107,975
-------- -------- -------- --------
Gross margin 24,601 21,111 49,901 42,554
Selling, general and
administrative 13,342 15,200 28,819 29,457
Depreciation and amortization 2,783 2,698 6,057 5,321
Goodwill impairment -- 1,950 -- 1,950
-------- -------- -------- --------
Income from operations 8,476 1,263 15,025 5,826
Other income, net 931 2,509 2,256 4,019
Minority interest (78) (418) (371) (1,313)
Loss on venture investments -- (600) -- (600)
Equity in (loss) income of
affiliated companies (16) 78 (25) 127
-------- -------- -------- --------
Income before income taxes 9,313 2,832 16,885 8,059
Income tax expense 768 527 942 1,145
-------- -------- -------- --------
Income from continuing
operations 8,545 2,305 15,943 6,914
Loss from discontinued
operations, net of income
taxes (137) (233) (127) (515)
-------- -------- -------- --------
Net income $ 8,408 $ 2,072 $ 15,816 $ 6,399
======== ======== ======== ========
Net earnings (loss) per common
share, Basic:
Earnings from continuing
operations $ 0.16 $ 0.04 $ 0.30 $ 0.13
Loss from discontinued
operations -- -- (0.01) (0.01)
-------- -------- -------- --------
Net earnings - Basic $ 0.16 $ 0.04 $ 0.29 $ 0.12
======== ======== ======== ========
Net earnings (loss) per common
share, Diluted:
Earnings from continuing
operations $ 0.15 $ 0.04 $ 0.29 $ 0.13
Loss from discontinued
operations -- -- -- (0.01)
-------- -------- -------- --------
Net earnings - Diluted $ 0.15 $ 0.04 $ 0.29 $ 0.12
======== ======== ======== ========
Weighted average common shares
outstanding, Basic 53,774 53,178 53,717 53,125
======== ======== ======== ========
Weighted average dilutive
common equivalent shares
outstanding 55,359 53,754 55,254 53,704
======== ======== ======== ========
iGATE CORPORATION
OPERATING SEGMENT RESULTS
(dollars in thousands)
(unaudited)
iGate iGate
Three Months Ended iGate Professional Shared
June 30, 2008 Solutions Services Services Total
----------------------- --------- --------- --------- --------
External revenues $ 55,621 $ 24,426 $ -- $ 80,047
Cost of revenues 35,781 19,665 -- 55,446
--------- --------- --------- --------
Gross margin 19,840 4,761 -- 24,601
Selling, general and
administrative 11,744 3,086 1,295 16,125
--------- --------- --------- --------
Income (loss) from
operations $ 8,096 $ 1,675 (1,295) 8,476
========= =========
Other income, net 931 931
Minority interest (78) (78)
Equity in loss of
affiliated companies (16) (16)
--------- --------
(Loss) income before
income taxes $ (458) $ 9,313
========= ========
iGate iGate
Six Months Ended iGate Professional Shared
June 30, 2008 Solutions Services Services Total
----------------------- --------- --------- --------- --------
External revenues $ 110,496 $ 49,348 $ -- $159,844
Cost of revenues 70,292 39,651 -- 109,943
--------- --------- --------- --------
Gross margin 40,204 9,697 -- 49,901
Selling, general and
administrative 25,413 6,700 2,763 34,876
--------- --------- --------- --------
Income (loss) from
operations $ 14,791 $ 2,997 (2,763) 15,025
========= =========
Other income, net 2,256 2,256
Minority interest (371) (371)
Equity in loss of
affiliated companies (25) (25)
--------- --------
(Loss) income before
income taxes $ (903) $ 16,885
========= ========
iGate iGate
Three Months Ended iGate Professional Shared
March 31, 2008 Solutions Services Services Total
----------------------- --------- --------- --------- --------
External revenues $ 54,875 $ 24,922 $ -- $ 79,797
Cost of revenues 34,511 19,986 -- 54,497
--------- --------- --------- --------
Gross margin 20,364 4,936 -- 25,300
Selling, general and
administrative 13,669 3,614 1,468 18,751
--------- --------- --------- --------
Income (loss) from
operations $ 6,695 $ 1,322 (1,468) 6,549
========= =========
Other income, net 1,325 1,325
Minority interest (293) (293)
Equity in loss of
affiliated companies (9) (9)
--------- --------
(Loss) income before
income taxes $ (445) $ 7,572
========= ========
iGate iGate
Three Months Ended iGate Professional Shared
June 30, 2007 Solutions Services Services Total
----------------------- --------- --------- --------- --------
External revenues $ 48,573 $ 27,039 $ -- $ 75,612
Cost of revenues 33,425 21,076 -- 54,501
--------- --------- --------- --------
Gross margin 15,148 5,963 -- 21,111
Selling, general and
administrative 12,074 3,672 2,152 17,898
Goodwill impairment 1,950 -- -- 1,950
--------- --------- --------- --------
Income (loss) from
operations $ 1,124 $ 2,291 (2,152) 1,263
========= =========
Other income, net 2,509 2,509
Minority interest (418) (418)
Loss on venture investments (600) (600)
Equity in income of
affiliated companies 78 78
--------- --------
(Loss) income before
income taxes $ (583) $ 2,832
========= ========