Exhibit 99.1
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)
SOURCE iGATE Corporation
-0- 11/04/2004
/CONTACT: Laureen Laby, Investor Relations of iGATE Corporation,
+1-412-787-9230, or llaby@igate.com /
/Web site: http://www.igatecorp.com /
(IGTE)
CO: iGATE Corporation
ST: Pennsylvania
IN: CPR STW
SU: ERN ERP CCA MAV