IGTE (MM)

iGATE Reports Third Quarter Revenue Growth of 10.3% Over Same Quarter a Year Ago - Offshore subsidiary, iGS, adds 12 new clients and increases offshore volume by 11% - PITTSBURGH, Nov. 4 /PRNewswire-FirstCall/ -- iGATE Corporation (NASDAQ:IGTE), a global provider of IT and BPO services, today announced consolidated revenues of $66.6 million for the quarter ended September 30, 2004, a 10.3% increase from $60.3 million reported in the same quarter a year ago and a 1.0% sequential increase from $65.9 million in the second quarter of 2004. For the first nine months of 2004, revenues increased 9.8% to $196.5 million compared with revenues of $178.9 million for the first nine months of 2003. Gross margin increased sequentially to 25.3% of revenues in the third quarter of 2004 from 24.9% of revenues in the second quarter of 2004, driven by an increase in offshore revenues and the ending of some relatively low margin projects in the iGATE Solutions segment. Net loss for the third quarter of 2004 was ($0.03) per share or ($1.8) million, which included a ($1.6) million compensation charge related to the issuance of iGATE stock as a result of the recent completion of the Quintant acquisition. This quarter's results compare with net loss of ($1.4) million or ($0.03) per share reported in the third quarter of 2003. For the nine- months ended September 30, 2004, net loss was ($0.18) per share or ($9.3) million compared with a net loss of ($0.5) million or ($0.01) per share for the nine months ended September 30, 2003. Regarding Quintant, iGATE revised the structure of the transaction during the third quarter of 2004 to address Indian regulatory restrictions. The revised structure involves iGATE using a small portion of iGATE stock and cash instead of iGS stock as planned. In connection with this change, the employee selling shareholders of Quintant agreed to purchase iGS stock with the majority of the cash proceeds. In addition, iGATE also decided to accelerate the vesting of all stock issued in the deal in order to eliminate the amortization of deferred compensation in future quarters. These modifications resulted in a $1.6 million charge in this quarter and a $9.1 million charge which will be recognized in the next quarter. Commenting on the quarter, Michael Zugay, Chief Financial Officer of iGATE Corporation said: "Although this quarter's loss from operations totaled ($1.5) million, it is important to note that included in this loss is a ($1.6) million charge related to the acquisition of Quintant. Excluding the impact of this charge, this quarter's operating results would have been positive. This shows we are making progress." Sunil Wadhwani, Chief Executive Officer and co-founder of iGATE Corporation said: "iGATE Global Solutions (iGS), the offshore subsidiary of iGATE Corporation, remains on track to go to the next level and increase revenues and profit in line with its peers. Phaneesh Murthy and his team at iGS continue to strengthen processes, differentiate its service offerings, better reward employee performance and build the iGATE brand name. Our Professional Services business continues to grow revenues strongly and maintain high operating margins. Both businesses are showing strong progress and I am confident this will result in measurable improvements at iGATE in 2005." Ashok Trivedi, President and co-founder of iGATE Corporation, commented: "I am convinced the integrated IT and operations business model that iGS offers is the optimal approach to deliver value to clients. I expect the resulting customer satisfaction to translate into increased financial performance in 2005." Offshore Outsourcing Services iGS made progress on several fronts this quarter. The company: - Increased offshore volume by 11% sequentially, and increased the contribution of offshore billable hours from 48% to 57% over the last four quarters. - Added 12 new clients, including 5 Fortune 1000 clients. - Started four new projects in the financial services and retail verticals and one engagement with a leading US academic institution. - Began a BPO financial analytics assignment for a Fortune 1000 financial services firm. Commenting on the progress of iGS, Phaneesh Murthy, CEO of iGS said: "As a result of the changes we have made to our delivery model and sales engine, we are seeing improvement in the quality of engagements, with a clear shift towards more business oriented solutions. Given the upbeat market for our services, companies with well-oiled engines can capitalize on opportunities and we are working to get our company to that stage at the earliest." Professional Services. - Demand for staffing services in North America continued to improve across verticals and skill-sets. iGATE's professional services business reported a 55.9% increase in revenues from $22.1 million in the third quarter of 2003 to $34.4 million in the third quarter this year, and a 10.1% sequential revenue increase from the prior quarter. - SG&A as a percentage of revenues decreased from 14.7% in the third quarter of 2003 to 10.9% in the third quarter 2004, as revenue increased significantly faster than SG&A expenses. - Income from operations increased to $3.7 million in the third quarter this year from $2.1 million in the third quarter of 2003. "We are very pleased with the results of our staffing business this quarter. This is the fourth consecutive quarter of sequential revenue growth in this segment, and it is all organic growth. While revenue growth was higher by 3% sequentially due to the unusual ramp-up of a project which we expect to be completed early 2005, headcount growth and stable pricing contributed to the remainder of our 10% sequential growth," said Steve Shangold, President of iGATE Mastech Inc. and head of the iGATE Professional services segment. He added, "Although revenue growth in the staffing industry will probably remain in the single digit range in the future, we remain focused on maintaining profitability above industry norms and are certainly proud to contribute to iGATE's bottom line." Looking ahead to Q4 2004, Sunil Wadhwani added, "Because of historically lower utilization rates experienced in the fourth quarter as a result of the holiday season, we expect revenues to be flat to slightly down compared with Q3. In addition to this, we anticipate our fourth quarter net loss to range between ($0.16) and ($0.17) per share, including the negative impact of ($0.17) per share directly related to the Quintant acquisition." iGATE will host its third quarter earnings conference call at 8:30 am ET, on Thursday, November 4, 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 11:00 a.m. November 4, 2004 through 12:00 midnight, November 11, 2004. Domestic callers can access the replay by dialing 877-660-6853 and entering account code 293 and conference number 120059. International callers can access the replay by dialing 201-612-7415 and entering the same two codes. The webcast will be available for replay though November 11, 2004 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 in the areas of packaged application implementation, custom development, web services and business intelligence. 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) September 30, December 31, 2004 2003 ASSETS Current assets: Cash and cash equivalents $30,761 $36,133 Short term investments 25,715 39,582 Accounts receivable, net 67,293 46,937 Prepaid and other current assets 5,999 7,282 Prepaid income taxes 388 792 Deferred income taxes 5,256 4,545 Current assets of discontinued operations - 7,182 Total current assets 135,412 142,453 Investments in unconsolidated affiliates 3,702 2,931 Land, building, equipment and leasehold improvements, net 21,854 16,483 Goodwill 8,559 8,624 Intangible assets, net 6,517 8,262 Noncurrent assets of discontinued operations - 2,187 Total assets $176,044 $180,940 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $8,406 $9,092 Accrued payroll and related costs 15,992 18,517 Accrued income taxes 5,385 1,122 Other accrued liabilities 13,724 7,591 Deferred revenue 689 994 Current liabilities of discontinued operations 154 3,844 Total current liabilities 44,350 41,160 Other long term liabilities 4,013 1,304 Deferred income taxes 8,710 8,719 Noncurrent liabilities of discontinued operations - 748 Total liabilities 57,073 51,931 Minority interest 8,731 6,874 Shareholders' equity: Common Stock, par value $0.01 per share 535 529 Additional paid-in capital 162,442 160,336 Retained deficit (27,769) (18,499) Deferred compensation (6,645) (8,933) Common stock in treasury, at cost (14,714) (14,714) Advance to shareholders (4,020) - Accumulated other comprehensive income 411 3,416 Total shareholders' equity 110,240 122,135 Total liabilities and shareholders' equity $176,044 $180,940 iGate Corporation Consolidated Statements of Income (dollars in thousands, except per share data) Three Months Nine Months Ended Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2004 2003 2004 2003 Revenues $66,565 $60,338 $196,496 $178,877 Cost of revenues 49,728 43,075 146,236 126,752 Gross margin 16,837 17,263 50,260 52,125 Selling, general and administrative 18,311 19,303 54,565 51,387 Restructuring charges - - 4,896 - (Loss) income from operations (1,474) (2,040) (9,201) 738 Other income, net 611 81 867 1,635 Minority interest (73) 117 56 (399) Equity in losses of affiliated companies (98) - (285) - (Loss) income before income taxes (1,034) (1,842) (8,563) 1,974 Provision (benefit) for income taxes 785 (413) 4,525 2,591 Loss from continuing operations (1,819) (1,429) (13,088) (617) Income from discontinued operations net of income taxes 3 1 3,818 134 Net loss $(1,816) $(1,428) $(9,270) $(483) Net (loss) earnings per common share, Basic: Loss from continuing operations $(0.03) $(0.03) $(0.25) $(0.01) Earnings from discontinued operations 0.00 0.00 0.07 0.00 Net loss - Basic $(0.03) $(0.03) $(0.18) $(0.01) Net (loss) earnings per common share, Diluted: Loss from continuing operations $(0.03) $(0.03) $(0.25) $(0.01) Earnings from discontinued operations 0.00 0.00 0.07 0.00 Net loss- Diluted $(0.03) $(0.03) $(0.18) $(0.01) Weighted average common shares outstanding, Basic 52,922 51,664 52,710 51,573 Weighted average dilutive common equivalent shares outstanding 52,922 51,664 52,710 51,573 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 $(1,816) $(1,428) $(9,270) $(483) 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 $(1,816) $(1,428) $(9,270) $1,303 Net (loss) earnings excluding the provision for income taxes per common share: $(0.03) $(0.03) $(0.18) $0.03 (1) This reconciliation is for informational purposes only, and is not a substitute for the GAAP financial information presented above under net loss. 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 (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 Three Months Ended September 30, iGate Professional iGate 2004 Solutions Services Corporate Total External revenues $31,704 $34,440 $421 $66,565 Cost of revenues 22,467 26,968 293 49,728 Gross margin 9,237 7,472 128 16,837 Selling, general and administrative 11,673 3,767 2,871 18,311 (Loss) income from operations $(2,436) $3,705 (2,743) (1,474) Other income, net 611 611 Minority interest (73) (73) Equity in losses of affiliated companies (98) (98) Loss before income taxes $(2,303) $(1,034) iGate Nine Months Ended September 30, iGate Professional iGate 2004 Solutions Services Corporate Total External revenues $100,379 $94,571 $1,546 $196,496 Cost of revenues 71,145 74,185 906 146,236 Gross margin 29,234 20,386 640 50,260 Selling, general and administrative 34,728 11,349 8,488 54,565 Restructuring charges 4,896 - - 4,896 (Loss) income from operations $(10,390) $9,037 (7,848) (9,201) Other income, net 867 867 Minority interest 56 56 Equity in losses of affiliated companies (285) (285) Loss before income taxes $(7,210) $(8,563) 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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