IGTE (MM)

iGATE Reports Second Quarter Revenue Growth of 8.7% Over Same Quarter a Year Ago - Offshore subsidiary's internal re-organization completed, now focused on selling - PITTSBURGH, Aug. 5 /PRNewswire-FirstCall/ -- iGATE Corporation (NASDAQ:IGTE), a global provider of IT and BPO services, today announced consolidated revenues of $65.9 million for the quarter ended June 30, 2004, an 8.7% increase from $60.6 million reported in the same quarter a year ago and a 2.8% sequential increase from $64.1 million in the first quarter 2004. For the first six months of 2004, revenues were $129.9 million compared with revenues of $118.5 million for the first 6 months of 2003. Current and prior period results reflect iGATE's divestiture of its international staffing businesses in Australia and Scotland (previously announced in June) which are reported as discontinued operations. (Logo: http://www.newscom.com/cgi-bin/prnh/20010110/IGTELOGO ) Net loss for the second quarter of 2004 was ($0.11) per share or ($5.7) million, which included a ($4.9) million restructuring charge and a tax provision of approximately ($3.4) million, primarily for the write-off of certain deferred tax assets. This quarter's results compare with net income of $1.4 million or $0.03 per share reported in the second quarter of 2003. For the six-months ended June 30, 2004, net loss was ($0.14) per share or ($7.5) million compared with net income of $0.9 million or $0.02 per share for the six months ended June 30, 2003. "iGATE Global Solutions (iGS), the offshore subsidiary of iGATE Corporation, continues to develop its offshore outsourcing capabilities and infrastructure. Since Phaneesh Murthy took over as CEO of iGS, he has added several industry veterans to his management team, transitioned its US-based back office services to India in order to decrease its cost structure, invested in the Concours Group to increase executive-level relationships, integrated the operations of all acquisitions, and invested in premier infrastructure. We are confident that these changes have positioned iGS to benefit from the high-growth offshore outsourcing market and believe positive results will start showing over the next two quarters," said Sunil Wadhani, Chief Executive Officer of iGATE Corporation. Commenting on the quarter, Michael Zugay, Chief Financial Officer of iGATE Corporation said: "Although this quarter's results include the impact of several charges, our operating loss, excluding these charges, is in line with what we had anticipated." He added:" In order to enable investors and analysts to track iGS's performances separately from the staffing business, Global Financial Services (GFS) - a small staffing subsidiary formerly managed concurrently with Symphoni - was moved from the iGATE Solutions segment to the iGATE Professional Services segment, and all financial results were recast for this change. As a result, we now have two very separate operating segments: iGS constitutes on its own the iGATE Solutions segment, while the North American staffing business constitutes the iGATE Professional Services segment." Offshore Outsourcing Services iGS made progress on several fronts this quarter. The company: - Further enhanced its management team, with the addition of Chief Sales Officer Srinjay Sengupta. Srinjay was formerly Vice President of Europe at Infosys, a leading offshore services provider. - Increased offshore volume by 8% sequentially, and brought the contribution of offshore effort from 45% to 54% over the last four quarters. - Transitioned all its back-office support functions to India, including finance, accounting and human resources. - Inaugurated a new facility in Hyderabad, India in April, bringing iGS's offshore infrastructure to 300,000 square feet across Bangalore, Hyderabad, Chennai and Noida, India. A 200,000 square feet expansion plan of Bangalore campus is expected to add additional capacity by the end of this year. Commenting on the progress of iGS, Phaneesh Murthy, CEO of iGS said: "Since the new management team has been on board, we have focused on building our operational efficiencies and execution excellence. Progress is steady: with our onsite-offshore ratio improving quarter-on-quarter, upward trend in operating profits and our information systems in place, the time is right for us to focus on our sales engine. We have been putting in place the sales infrastructure that can ensure more Global 2000 organizations benefit from our unique model, and are seeing significant improvement in the number of executive-level meetings we are having, and in our pipeline." iGATE Professional Services business. - As demand for staffing services in North America continued to improve, iGATE Professional Services business reported a 32.2% revenue increase from the same quarter a year ago and an 8.4% sequential increase, from $28.9 million in the first quarter 2004 to $31.3 million in the second quarter. This is the third consecutive quarter of sequential revenue growth in this segment, reflecting the improvement of IT spending in the US. - Through tight management of its SG&A expenses, income from operations as a percentage of revenues increased to 10.6% this quarter in this segment. - Keeping with its strategy to increase profitability and to focus solely on its North American staffing operations, iGATE divested its international staffing businesses in Australia and Scotland during the quarter. "We are very pleased with the results of our North American staffing business. The experience and expertise that we have built over the years in this area enables us to consistently generate profits above industry average. The recent sale of the international staffing businesses also contributed to greater overall profitability in this segment. Although we recognize that staffing is a more mature business, its profitability certainly adds value to iGATE's shareholders," said Ashok Trivedi, iGATE's President and Co-Founder. Looking ahead to Q3 2004, Sunil Wadhwani added, "Despite historically lower utilization rates experienced in the third quarter as a result of the summer vacation season, we expect revenues to increase slightly compared with Q2. In addition, we anticipate our third quarter net loss to range between ($0.01) and ($0.02) per share." iGATE will host its second quarter earnings conference call at 10:00 am EDT, on Thursday, August 5, 2004. The call will be webcast at http://www.igatecorp.com/ via the Investor Relations section of the site. Investors should log on 10 minutes prior to the start of the program. A replay of the call will be available beginning at approximately 2:00 p.m. August 5, 2004 through 12:00 midnight, August 12, 2004. Domestic callers can access the replay by dialing 800-642-1687 and entering pass code 8676429. International callers can access the replay by dialing 706-645-9291 and entering the same pass code: 8676429. The webcast will be available for replay though August 12 on iGATE's corporate website. About iGATE: 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, system integration, package evaluation and implementation, re-engineering and maintenance. iGATE Corporation also offers IT Professional Services. The company services more than 500 clients across five continents. Clients rely on iGATE because of our high quality of service, our responsiveness and our cost-effective global reach. More information on iGATE is available at http://www.igatecorp.com/ . Some of the statements in this news release that are not historical facts are forward-looking statements. These forward-looking statements include our financial, growth and liquidity projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business, cash flows, costs and the markets in which we operate. 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 us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements. These risks include, but are not limited to, our ability to predict our financial performance, the level of market demand for our services, the highly-competitive market for the types of services that we offer, the impact of competitive factors on profit margins, market conditions that could cause our customers to reduce their spending for our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, our ability to 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 our filings with the Securities and Exchange Commission including our Form 10-K for the year ended December 31, 2003. iGATE CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (dollars in thousands) June 30, December 31, 2004 2003 ASSETS Current assets: Cash and cash equivalents $31,279 $36,133 Short term investments 33,620 39,582 Accounts receivable, net 62,558 46,937 Prepaid and other current assets 8,111 7,282 Prepaid income taxes 378 792 Deferred income taxes 4,797 4,545 Current assets of discontinued operations 95 7,182 Total current assets 140,838 142,453 Investments in unconsolidated affiliates 3,932 2,931 Land, building, equipment and leasehold improvements, net 22,019 16,483 Goodwill 8,516 8,624 Intangible assets, net 7,116 8,262 Noncurrent assets of discontinued operations - 2,187 Total assets $182,421 $180,940 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $8,832 $9,092 Accrued payroll and related costs 17,425 18,517 Accrued income taxes 2,532 1,122 Other accrued liabilities 15,735 7,591 Deferred revenue 870 994 Current liabilities of discontinued operations 226 3,844 Total current liabilities 45,620 41,160 Other long term liabilities 4,182 1,304 Deferred income taxes 10,074 8,719 Noncurrent liabilities of discontinued operations - 748 Total liabilities 59,876 51,931 Minority interest 8,555 6,874 Shareholders' equity: Common Stock, par value $0.01 per share 531 529 Additional paid-in capital 161,125 160,336 Retained deficit (25,953) (18,499) Deferred compensation (7,524) (8,933) Common stock in treasury, at cost (14,714) (14,714) Accumulated other comprehensive income 525 3,416 Total shareholders' equity 113,990 122,135 Total liabilities and shareholders' equity $182,421 $180,940 iGate Corporation Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Six Months Ended Ended June 30, June 30, June 30, June 30, 2004 2003 2004 2003 Revenues $65,868 $60,582 $129,931 $118,539 Cost of revenues 49,482 42,493 96,508 83,677 Gross margin 16,386 18,089 33,423 34,862 Selling, general and administrative 16,974 16,727 36,254 32,084 Restructuring charges 4,896 - 4,896 - (Loss) income from operations (5,484) 1,362 (7,727) 2,778 Other (expense) income, net (500) 534 256 1,554 Minority interest 152 (196) 129 (516) Equity in losses of affiliated companies (87) - (187) - (Loss) income before income taxes (5,919) 1,700 (7,529) 3,816 Provision for income taxes 3,428 368 3,740 3,004 (Loss) income from continuing operations (9,347) 1,332 (11,269) 812 Income from discontinued operations net of income taxes 3,645 77 3,815 133 Net (loss) income $(5,702) $1,409 $(7,454) $945 Net (loss) earnings per common share, Basic: (Loss) earnings from continuing operations $(0.18) $0.03 $(0.21) $0.02 Earnings from discontinued operations 0.07 0.00 0.07 0.00 Net (loss) earnings - Basic $(0.11) $0.03 $(0.14) $0.02 Net (loss) earnings per common share, Diluted: (Loss) earnings from continuing operations $(0.18) $0.03 $(0.21) $0.02 Earnings from discontinued operations 0.07 0.00 0.07 0.00 Net (loss) earnings - Diluted $(0.11) $0.03 $(0.14) $0.02 Weighted average common shares outstanding, Basic 52,599 51,560 52,460 51,538 Weighted average dilutive common equivalent shares outstanding 52,599 51,804 52,460 51,764 Reconciliation of GAAP loss to net (loss) earnings excluding the tax provision related to the sale of eJiva to iGATE Global Solutions (1): Net (loss) income $(5,702) $1,409 $(7,454) $945 Add: provision for income taxes related to the sale of eJiva to iGATE Global Solutions - - - 1,786 Net (loss) income excluding the provision for income taxes related to the sale of eJiva to iGATE Global Solutions $(5,702) $1,409 $(7,454) $2,731 Net (loss) earnings excluding the provision for income taxes per common share: $(0.11) $0.03 $(0.14) $0.05 (1) This reconciliation is for informational purposes only, and is not a substitute for the GAAP financial information presented above under net (loss) income. iGate iGate Professional iGate Three Months Ended March 31, 2004 Solutions Services Corporate Total External revenues $34,551 $28,858 $654 $64,063 Cost of revenues 24,188 22,525 313 47,026 Gross margin 10,363 6,333 341 17,037 Selling, general and administrative 11,901 4,302 3,077 19,280 (Loss) income from operations $(1,538) $2,031 (2,736) (2,243) Other income, net 756 756 Minority interest (23) (23) Equity in losses of affiliated companies (100) (100) Loss before income taxes $(2,103) $(1,610) iGate iGate Professional iGate Three Months Ended June 30, 2004 Solutions Services Corporate Total External revenues $34,124 $31,273 $471 $65,868 Cost of revenues 24,490 24,692 300 49,482 Gross margin 9,634 6,581 171 16,386 Selling, general and administrative 11,154 3,280 2,540 16,974 Restructuring charges 4,896 - - 4,896 Goodwill impairment - - - - (Loss) income from operations $(6,416) $3,301 (2,369) (5,484) Other expense, net (500) (500) Minority interest 152 152 Equity in losses of affiliated companies (87) (87) Loss before income taxes $(2,804) $(5,919) iGate iGate Professional iGate Six Months Ended June 30, 2004 Solutions Services Corporate Total External revenues $68,675 $60,131 $1,125 $129,931 Cost of revenues 48,678 47,217 613 96,508 Gross margin 19,997 12,914 512 33,423 Selling, general and administrative 23,055 7,582 5,617 36,254 Restructuring charges 4,896 - - 4,896 (Loss) income from operations $(7,954) $5,332 (5,105) (7,727) Other income, net 256 256 Minority interest 129 129 Equity in losses of affiliated companies (187) (187) Loss before income taxes $(4,907) $(7,529) iGate iGate Professional iGate Three Months Ended March 31, 2003 Solutions Services Corporate Total External revenues $35,136 $22,624 $197 $57,957 Cost of revenues 24,180 16,895 109 41,184 Gross margin 10,956 5,729 88 16,773 Selling, general and administrative 9,871 3,549 1,937 15,357 Income (loss) from operations $1,085 $2,180 (1,849) 1,416 Other income, net 1,020 1,020 Minority interest (320) (320) (Loss) income before income taxes $(1,149) $2,116 Three Months Ended June 30, 2003 External revenues $36,548 $23,652 $382 $60,582 Cost of revenues 24,911 17,378 204 42,493 Gross margin 11,637 6,274 178 18,089 Selling, general and administrative 10,003 3,451 3,273 16,727 Income (loss) from operations $1,634 $2,823 (3,095) 1,362 Other income, net 534 534 Minority interest (196) (196) (Loss) income before income taxes $(2,757) $1,700 Three Months Ended September 30, 2003 External revenues $37,838 $22,085 $415 $60,338 Cost of revenues 26,122 16,680 273 43,075 Gross margin 11,716 5,405 142 17,263 Selling, general and administrative 12,948 3,256 3,099 19,303 (Loss) income from operations $(1,232) $2,149 (2,957) (2,040) Other income, net 81 81 Minority interest 117 117 Loss before income taxes $(2,759) $(1,842) Three Months Ended December 31, 2003 External revenues $36,332 $24,763 $662 $61,757 Cost of revenues 25,488 19,044 370 44,902 Gross margin 10,844 5,719 292 16,855 Selling, general and administrative 14,863 3,627 3,059 21,549 Restructuring charges 524 - 80 604 (Loss) income from operations $(4,543) $2,092 (2,847) (5,298) Other income, net 621 621 Minority interest 87 87 Equity in losses of affiliated companies (99) (99) Loss before income taxes $(2,238) $(4,689) Twelve Months Ended December 31, 2003 External revenues $145,854 $93,124 $1,656 $240,634 Cost of revenues 100,701 69,997 956 171,654 Gross margin 45,153 23,127 700 68,980 Selling, general and administrative 47,685 13,883 11,368 72,936 Restructuring charges 524 - 80 604 (Loss) income from operations $(3,056) $9,244 (10,748) (4,560) Other income, net 2,256 2,256 Minority interest (312) (312) Equity in losses of affiliated companies (99) (99) Loss before income taxes $(8,903) $(2,715) http://www.newscom.com/cgi-bin/prnh/20010110/IGTELOGO http://photoarchive.ap.org/ DATASOURCE: iGATE Corporation CONTACT: Laureen Laby, Investor Relations of iGATE Corporation, +1-412-787-9230, or Web site: http://www.igatecorp.com/

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