IGTE (MM)

Ninth Consecutive Quarter Of Year-Over-Year Revenue Growth; Income from Operations of $1.7 million versus a Loss of ($1.5) million; Offshore Subsidiary Adds Eight Clients, Six are Global 1000 PITTSBURGH, Nov. 8 /PRNewswire-FirstCall/ -- iGATE Corporation (NASDAQ:IGTE), a global provider of IT and BPO services, today announced its financial results for the third quarter ended September 30, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20010110/IGTELOGO) Third Quarter Highlights * Consolidated revenues increase 5.3% year-over-year, 3.2% sequentially. * Sequential gross margin increase to 27.0% from 24.7%. * Consolidated income from operations of $1.7 million compared to ($1.5) million loss from operations last year and ($0.6) million loss from operations in 2005 second quarter. * Diluted earnings per share of $0.02 compared to net loss of ($0.03) last year. * Cash flow provided by operations a positive $8.4 million year to date. Third Quarter Results Consolidated revenues for the third quarter increased 5.3% to $70.1 million from $66.6 million in the same quarter last year and rose 3.2% from $67.9 million reported in the second quarter of 2005. The year-over-year revenue increase was due to revenue growth at the Company's offshore subsidiary, iGATE Global Solutions ("iGS"), which was driven by momentum from new clients added during the past 15 months, increases in billable headcount and utilization. The sequential third quarter revenue improvement was due to higher revenues from iGS as well as net growth in the Company's core staffing operations, iGATE Professional Services ("iPS"). Gross margin, as a percentage of sales, increased to 27.0% in the third quarter from 25.3% in last year's third quarter and the 24.7% reported in the 2005 second quarter. The improvements were due to higher revenue and gross margin at iGS and higher utilization rates at both iGS and iPS. Selling, general, and administrative (SG&A) expense for the third quarter decreased 6.0% to $17.2 million from $18.3 million in the same period last year and decreased 0.9% from $17.4 million reported in the 2005 second quarter. The sequential quarter over quarter decrease was due primarily to a reduction in bad debt expense at iPS. As a percentage of sales, third quarter SG&A declined to 24.6% from 27.5% in the corresponding period last year and from 25.6% in the 2005 second quarter. Third quarter income from operations improved to $1.7 million compared to a loss of ($1.5) million in the corresponding period last year. Last year's third quarter included a $1.6 million pretax charge related to the completion of the Company's Quintant acquisition. On a sequential basis, the third quarter income from operations of $1.7 million compared to a second quarter loss from operations of ($0.6) million. The Company reported net income of $0.9 million, or $0.02 per diluted share, for the third quarter compared to a net loss of ($1.8) million, or ($0.03) per diluted share, in the corresponding period last year. "We are pleased with the solid progress being made on our top priorities of growing offshore revenues and expanding our overall profitability," stated Sunil Wadhwani, Chief Executive Officer and co-founder of iGATE Corporation. "During the quarter, we had material revenue growth in offshore services and our overall gross profit margins improved significantly. In conjunction with our shift in strategic focus to pursue more Global 1000 clients that represent greater growth opportunities, we continued to add more high quality clients at iGS during the quarter, and we are gaining more project and service traction with clients added during the previous 15 months. In addition, our staffing business remains steady, is profitable and continues to generate solid cash flow." Ashok Trivedi, President and co-founder of iGATE Corporation commented, "iGS secured eight additional clients during the third quarter and six are Global 1000 companies. In addition, iGS again increased its billable headcount and utilization rates. We are very encouraged by the recent client additions and believe that our business strategy of focusing on larger, multi- year contracts with Global 1000 companies is beginning to show the positive results we expect." Year-To-Date Results Consolidated revenues for the nine months ended September 30, 2005 increased 5.7% to $207.6 million from $196.5 million in the same period last year. The year-to-date revenue increase was due primarily to higher revenues from iPS as a result of a large financial services client project that began in the second quarter of 2004 and reached completion during the 2005 third quarter. Also contributing to the nine month revenue increase was slightly higher revenues reported at iGS. As a percentage of sales, year-to-date gross margin declined slightly to 25.5% from 25.6% in the corresponding period last year. The gross margin decline was attributable to a higher revenue contribution from the Company's lower margin iPS business and annual wage increases at iGS. Year-to-date net income was $1.9 million, or $0.04 per diluted share, compared to a net loss of ($9.3) million, or ($0.18) per basic share, in the same period last year. Operating Segments iGATE Global Solutions (iGS) * iGS reported third quarter revenues of $35.2 million, up 3.2% from second quarter revenues of $34.1 million. * iGS reported third quarter gross margins of 31.0%, up from 26.9% in the second quarter. * iGS reported third quarter operating income of $0.7 million compared to an operating loss of ($0.5) million in the second quarter. * iGS added eight new clients during the third quarter, six of which are Global 1000 companies, bringing to 57 the total number of new clients added during the past 15 months, 33 of which are Global 1000 companies. * The improvement in iGS's third quarter results was primarily due to recent client additions, increases in billable headcount and utilization rates. * The third quarter offshore/onsite ratio improved to 68% / 32% compared with 57% / 43% in the corresponding period last year and 67% / 33% in the 2005 second quarter. * Offshore revenues contributed 40.6% to total third quarter iGS IT services revenues compared with 36.8% in the 2005 second quarter. * iGS added 73 employees during the third quarter, 64 of which are billable employees. As of the end of September, the iGS total employee headcount was approximately 4,360. * Mr. UVG Sekar, formerly with IBM Corporation, joined iGS as the Global Head of Human Resources. He will be leading the company's recruitment and human resource initiatives, policies and administration. * The iGS Board of Directors approved the initial plan regarding Phase III of the company's Whitefield campus at Bangalore, India. This project is projected to add 1,000 seats and is expected to be completed in 2007. iGATE Professional Services * Third quarter revenues of $34.2 million were comparable to $34.4 million reported in the same period last year and up 3.4 percent compared with $33.1 million in the 2005 second quarter. * Third quarter gross margins increased to 22.3%, up from 21.7% in the second quarter. * Third quarter income from operations for iPS of $3.7 million was comparable with the corresponding period last year and up 31.0% compared with the $2.8 million reported in the 2005 second quarter. * Growth in core staffing operations strengthened with a net growth of 50 consultants during the third quarter. Cash Flow & Balance Sheet For the nine month year-to-date period ended September 30, 2005, cash flow provided by operations was a positive $8.4 million compared to cash used by operations of $14.9 million for the corresponding period in 2004. The Company continues to maintain a strong balance sheet. As of September 30, 2005, the Company had $62.5 million in cash and short-term investments and no outstanding borrowings. Conference Call iGATE will host a telephone conference call to discuss the company's third quarter financial results on Tuesday, November 8, 2005 at 10:00 a.m. EST. A live webcast of this conference call will be available on the company's website, http://www.igatecorp.com/. Simply click on the investor relations section and follow the links to the live webcast. The webcast will remain available for replay through November 15, 2005. 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 offshore 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 five continents. 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.igatecorp.com/. 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. 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 (as amended) for the year ended December 31, 2004. iGATE CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (dollars in thousands) September 30, December 31, 2005 2004 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $31,510 $28,201 Short term investments 31,010 35,863 Accounts receivable, net 54,702 61,363 Prepaid and other current assets 6,094 6,985 Prepaid income taxes 1,896 435 Deferred income taxes 1,817 2,304 Total current assets 127,029 135,151 Investments in unconsolidated affiliates 4,328 3,951 Land, building, equipment and leasehold improvements, net 29,880 25,814 Goodwill 9,192 9,398 Intangible assets, net 4,142 5,918 Total assets $174,571 $180,232 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $8,342 $8,636 Accrued payroll and related costs 16,321 16,662 Accrued income taxes - 2,019 Other accrued liabilities 5,750 9,555 Restructuring reserve 2,413 3,692 Deferred revenue 177 653 Current liabilities of discontinued operations 81 88 Total current liabilities 33,084 41,305 Restructuring reserve 2,974 3,777 Other long term liabilities 528 564 Deferred income taxes 9,723 9,520 Total liabilities 46,309 55,166 Minority interest 14,271 13,366 Shareholders' equity: Common Stock, par value $0.01 per share 536 535 Additional paid-in capital 161,587 161,345 Retained deficit (34,777) (36,710) Deferred compensation (1,323) (1,934) Common stock in treasury, at cost (14,714) (14,714) Accumulated other comprehensive income 2,682 3,178 Total shareholders' equity 113,991 111,700 Total liabilities and shareholders' equity $174,571 $180,232 iGATE Corporation Consolidated Statements of Income (dollars in thousands, except per share data) (unaudited) Three Months ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Revenues $70,102 $66,565 $207,599 $196,496 Cost of revenues 51,172 49,728 154,674 146,236 Gross margin 18,930 16,837 52,925 50,260 Selling, general and administrative 17,221 18,311 51,824 54,565 Restructuring charges - - - 4,896 Income (loss) from operations 1,709 (1,474) 1,101 (9,201) Other income, net 411 611 645 867 Minority interest (260) (73) (403) 56 Equity in income (losses) of affiliated companies 137 (98) 108 (285) Income (loss) before income taxes 1,997 (1,034) 1,451 (8,563) Income tax expense (benefit) 1,122 785 (482) 4,525 Income (loss) from continuing operations 875 (1,819) 1,933 (13,088) Income from discontinued operations, net of income taxes - 3 - 3,818 Net income (loss) $875 $(1,816) $1,933 $(9,270) Net earnings (loss) per common share, Basic: Earnings (loss) from continuing operations $0.02 $(0.03) $0.04 $(0.25) Earnings from discontinued operations - 0.00 - 0.07 Net earnings (loss) - Basic $0.02 $(0.03) $0.04 $(0.18) Net earnings (loss) per common share, Diluted: Earnings (loss) from continuing operations $0.02 $(0.03) $0.04 $(0.25) Earnings from discontinued operations - 0.00 - 0.07 Net earnings (loss) - Diluted $0.02 $(0.03) $0.04 $(0.18) Weighted average common shares outstanding, Basic 52,529 52,922 52,507 52,710 Weighted average dilutive common equivalent shares outstanding 52,706 52,922 52,712 52,710 iGATE iGATE Professional iGATE Three Months Ended Solutions Services Corporate Total March 31, 2005 External revenues $32,711 $36,457 $433 $69,601 Cost of revenues 23,193 28,957 254 52,404 Gross margin 9,518 7,500 179 17,197 Selling, general and administrative 9,277 4,551 3,401 17,229 Income (loss) from operations $241 $2,949 (3,222) (32) Other expense, net (286) (286) Minority interest (84) (84) Equity in losses of affiliated companies (117) (117) Loss before income taxes $(3,709) $(519) iGATE iGATE Professional iGATE Three Months Ended Solutions Services Corporate Total June 30, 2005 External revenues $34,071 $33,056 $769 $67,896 Cost of revenues 24,922 25,889 287 51,098 Gross margin 9,149 7,167 482 16,798 Selling, general and administrative 9,660 4,370 3,344 17,374 (Loss) income from operations $(511) $2,797 (2,862) (576) Other expense, net 520 520 Minority interest (59) (59) Equity in income of affiliated companies 88 88 Loss before income taxes $(2,313) $(27) iGATE iGATE Professional iGATE Three Months Ended Solutions Services Corporate Total September 30, 2005 External revenues $35,151 $34,188 $763 $70,102 Cost of revenues 24,246 26,551 375 51,172 Gross margin 10,905 7,637 388 18,930 Selling, general and administrative 10,162 3,973 3,086 17,221 Income (loss) from operations $743 $3,664 (2,698) 1,709 Other expense, net 411 411 Minority interest (260) (260) Equity in income of affiliated companies 137 137 Loss before income taxes $(2,410) $1,997 iGATE iGATE Professional iGATE Nine Months Ended Solutions Services Corporate Total September 30, 2005 External revenues $101,933 $103,701 $1,965 $207,599 Cost of revenues 72,361 81,397 916 154,674 Gross margin 29,572 22,304 1,049 52,925 Selling, general and administrative 29,099 12,894 9,831 51,824 (Loss) income from operations $473 $9,410 (8,782) 1,101 Other expense, net 645 645 Minority interest (403) (403) Equity in income of affiliated companies 108 108 Loss before income taxes $(8,432) $1,451 http://www.newscom.com/cgi-bin/prnh/20010110/IGTELOGO http://photoarchive.ap.org/ DATASOURCE: iGATE Corporation CONTACT: Michael J. Zugay, Sr. Vice President & CFO of iGATE Corporation, +1-412-787-9590, or Web site: http://www.igatecorp.com/

Copyright