Exhibit 99.1
iGATE CORPORATION REPORTS 2006 FIRST-QUARTER FINANCIAL RESULTS
Consolidated Revenues Increase 10.3%, Excluding Sold Canadian Subsidiary;
iGS Subsidiary Reports Highest Quarterly Revenue Level Since 2003,
Adds 349 Employees
PITTSBURGH, May 4 /PRNewswire-FirstCall/ -- iGATE Corporation, (Nasdaq:
IGTE), a global provider of IT and BPO services, today announced its
first-quarter 2006 financial results for the period ended March 31, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010110/IGTELOGO)
First-Quarter Highlights
- Consolidated revenues, excluding the sold Canadian staffing operation,
increased 10.3% year-over-year and 6.6% sequentially.
- iGATE Global Solutions ("iGS") revenues increased 17.0% year-over-year
and 6.0% sequentially.
- iGATE Professional Services ("iPS") revenues, excluding revenues
associated with the sold Canadian staffing operation, increased 1.9%
year-over-year and 6.7% sequentially.
- Adopted FAS 123(R) and recorded $0.7 million in incremental stock
compensation expense.
- iGS added 8 new clients, including 5 Global 2000 companies.
- iGS improved its offshore/onsite billing volume ratio to 73:27
compared with 66:34 a year earlier.
- iGATE Corporation added 2 new board members, Mr. Goran Lindahl and Mr.
Phaneesh Murthy, bringing to 7 the total number of board members, 4 of
whom are independent.
First-Quarter Results
Revenues:
First-quarter consolidated revenues were $67.7 million versus $69.6 million
in the same period last year and $68.4 million in the fourth-quarter of 2005.
The revenue decline was due to lower revenues in the iPS segment due to the sale
of its Canadian operations in November 2005. This operation contributed $8.2
million to revenues in last year's first-quarter and $4.9 million in the
fourth-quarter of 2005. Excluding revenues from the sold Canadian staffing
operation, consolidated revenues increased 10.3% from the same period last year
and increased 6.6% sequentially.
First-quarter revenues in the iGS segment increased 17.0% year-over-year
and 6.0% sequentially. This revenue increase was due to higher billing volumes,
as projects for clients added during the past 24 months continued to expand, and
an increase in billable headcount. The revenue increase, however, was tempered
by lower utilization rates due to the addition of 349 employees during the
quarter.
First-quarter revenues in the iPS segment, excluding revenues from the sold
Canadian staffing operations, increased 1.9% from the same period last year and
6.7% sequentially. This improvement was due primarily to the initiation of
several new projects and higher billing rates on these new projects.
Gross Margin:
Consolidated gross margin increased to 25.4% compared with 24.7% in the
same period last year, and declined from 26.3% in the previous quarter. The iGS
segment gross profit margin for the first-quarter declined to 27.2% from 29.1%
in the same period last year and from 31.4% in the sequential quarter. The iGS
sequential gross margin decline was due primarily to higher direct costs from
wage increases, lower utilization rates, and a charge for stock compensation
expense of $0.4 million related to the adoption of FAS 123 (R).
The iPS segment gross profit margin improved to 22.6% from 20.8% in the
same period last year and from 20.7% in the sequential quarter. This improvement
was due primarily to the sale of the Company's lower margin Canadian operation
and higher margins on new placement activity.
S,G&A:
Selling, general and administrative (S,G&A) expense declined to $16.9
million from $17.2 million in the same period last year, but increased from
$15.7 million in the fourth-quarter of 2005. The sequential increase was due to
a recovery of bad debt expense of $0.9 million recorded in the fourth- quarter
of 2005 and $0.3 million for the adoption of FAS 123 (R) related to stock
compensation expense in the first-quarter of 2006.
S,G&A expense in the iGS segment declined to 27.1% of revenues from 28.4%
in the same period last year and 27.3% in the fourth-quarter 2005. The
improvement was due primarily to the Company's continued cost rationalization
initiatives, including shifting onsite support resources to India.
S,G&A expense for the iPS segment increased to 13.1% of revenues from 12.9%
in the same period last year and from 11.5% in the sequential quarter. The
sequential increase was due primarily to a recovery of bad debt expense in the
fourth-quarter of 2005.
Operating Income:
Income from operations improved to $0.3 million compared to breakeven in
the same period last year, but declined from operating income of $2.8 million in
the fourth-quarter of 2005.
Operating income for iGS declined to $0.1 million from $0.2 million in the
same period last year and from $1.5 million in the sequential quarter. The
decline was largely the result of the previously mentioned issues that lowered
first-quarter gross profit margins.
Operating income for iPS declined to $2.8 million from $2.9 million in the
same period last year and from $3.4 million in the fourth-quarter of 2005. The
sequential decline was due to the recovery of bad debt expense recorded in the
2005 fourth-quarter.
Net Income:
The Company reported first-quarter net income of $1.1 million, or $0.02 per
diluted share, compared with a net income of $1.3 million, or $0.03 per diluted
share, in the same period last year and net income of $5.0 million, or $0.10 per
diluted share, in the fourth-quarter of 2005. The 2006 first- quarter net income
included a significant income contribution from a favorable mark to market gain
on our hedging of the Indian Rupee against the U.S. Dollar. Last year's
first-quarter included a net tax benefit of $1.9 million primarily related to
the favorable outcome of an IRS tax audit for the years 1999 through 2001. Net
income for the fourth-quarter of 2005 included a pretax $0.5 million
restructuring charge reversal, a pretax $2.1 million loss on venture investments
and affiliated companies, and a pretax $5.5 million gain on sale of stock in
subsidiaries. These items benefited fourth-quarter 2005 net income by $3.9
million on an after tax basis.
General Comments:
"We are pleased to report strong sequential revenue growth in both our key
business units as well as a profitable first-quarter for the first time in two
years," stated Sunil Wadhwani, Chief Executive Officer and co-founder of iGATE
Corporation. "We remain optimistic about our growth prospects because we are
more confident in the quality and opportunities of our current client
relationships as we have shifted to serving the larger Global 2000 companies. In
addition, we have completed our client rationalization initiative and our
offshore-to-onsite ratio is among the best in the industry and in the range we
want to maintain. However, wage pressures and a tight labor market in India
continue to persist."
Ashok Trivedi, President and co-founder of iGATE Corporation stated, "We
are pleased that our primary business strategy of targeting larger Global 2000
companies is producing good results. During the quarter, iGS added 5 more Global
2000 companies. The larger clients added during the past 24 months are now
contributing significantly to our revenue stream and the revenues and volumes
generated from our top 10 clients continues to grow. We believe this validates
the fundamental shift that we made in our business strategy."
Operating Segment Highlights
iGATE Global Solutions (iGS)
- First-quarter revenues increased to $38.3 million from $36.1 million
in the fourth-quarter and from $32.7 million in last year's
first-quarter.
- Added 8 new clients, 5 of which are Global 2000 companies.
- Offshore/onsite billing volume ratio improved to 73:27 compared with
66:34 in the prior year period and 71:29 in the sequential quarter.
- Offshore revenues contributed 45.6% to total first-quarter IT services
revenue compared with 43.3% in the fourth-quarter.
- Added 349 employees during the first-quarter including 318 who are
billable. As of March 31, 2006, the iGS total headcount was 5,152.
- Promoted Sumit Ganguli to Chief Sales Officer from his previous role
as Senior Vice President.
- Established an Enterprise Resource Planning (ERP) Center of Excellence
at its Hyderabad, India software development facility. The center will
focus on the Company's growing systems integration, business
intelligence, and ERP testing services.
iGATE Professional Services (iPS)
- First-quarter revenues declined to $29.0 million from $32.1 million in
the fourth-quarter due primarily to the sale of the Company's Canadian
professional services operation. The Canadian operation generated
revenues of $4.9 million in the fourth-quarter.
- Added 25 consultants during the first-quarter.
- Added several new clients, including 3 in the Business Intelligence
space.
Cash Flow & Balance Sheet
Net cash flow provided from operations for the first-quarter ended March
31, 2006, improved to $0.2 million compared with net cash used of ($4.5) million
in the same period last year.
Depreciation and amortization expense was $2.9 million in the first-
quarter and capital expenditures were $2.6 million in the quarter.
The Company continues to maintain an exceptionally strong balance sheet. At
March 31, 2006, the Company had $74.5 million in cash and short-term investments
and no outstanding borrowings.
Outlook
"The market for offshore-based IT and Business Process Outsourcing (BPO),
services remains very strong and our portfolio of clients is robust and among
the best quality in our history," said Mr. Wadhwani. "We expect revenue growth
to strengthen as more clients are added, as projects with existing clients
expand and as our new service offerings gain more traction. With our
offshore-to-onsite ratio at an all-time high, we expect revenue growth to flow
more quickly to our bottom line. We have implemented an additional wage increase
at our iGS subsidiary in April 2006 and continue to face the tight labor market
challenge in India, but expect revenue growth and operating income for 2006 to
exceed the levels we achieved last year."
Conference Call
iGATE will host a telephone conference call to discuss the Company's
first-quarter financial results on Thursday, May 4, 2006 at 10:00 a.m. EDT. A
live webcast of this conference call will be available on the Company's website,
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
May 11, 2006.
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 for high quality 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 for the year ended December 31, 2005.
iGATE Corporation
Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
Three Months ended
----------------------------------
March 31, 2006 March 31, 2005
--------------- ---------------
Revenues $ 67,696 $ 69,601
Cost of revenues (1) 50,514 52,404
Gross margin 17,182 17,197
Selling, general and administrative (2) 16,882 17,229
Income (loss) from operations 300 (32)
Other income (expense), net 1,431 (286)
Minority interest (145) (84)
Equity in income (losses) of
affiliated companies 65 (117)
Income (loss) before income taxes 1,651 (519)
Income tax expense (benefit) 568 (1,863)
Net income $ 1,083 $ 1,344
Net earnings per common share,
Basic: $ 0.02 $ 0.03
Net earnings per common share,
Diluted: $ 0.02 $ 0.03
Weighted average common shares
outstanding, Basic 52,841 52,479
Weighted average dilutive common
equivalent shares outstanding 53,151 52,723
(1) 2006 includes SFAS 123(R) stock compensation expense of $0.4 million
(2) 2006 includes SFAS 123(R) stock compensation expense of $0.5 million
iGATE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
March 31, December 31,
2006 2005
(unaudited) (audited)
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 43,418 $ 45,837
Short term investments 31,125 30,798
Accounts receivable, net 49,553 49,479
Prepaid and other current assets 7,130 7,237
Prepaid income taxes 1,461 1,060
Deferred income taxes 783 1,058
Total current assets 133,470 135,469
Investments in unconsolidated
affiliates 1,127 1,050
Land, building, equipment and
leasehold improvements, net 29,101 28,539
Goodwill 8,975 8,851
Intangible assets, net 2,996 3,565
Total assets $ 175,669 $ 177,474
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,133 $ 5,958
Accrued payroll and related costs 14,133 16,304
Other accrued liabilities 7,098 8,163
Restructuring reserve 1,595 2,355
Deferred revenue 365 362
Total current liabilities 28,324 33,142
Restructuring reserve 2,289 2,422
Other long term liabilities 311 422
Deferred income taxes 9,649 9,718
Total liabilities 40,573 45,704
Minority interest 15,290 14,098
Shareholders' equity:
Common Stock, par value $0.01
per share 539 538
Additional paid-in capital 161,990 162,278
Retained deficit (28,658) (29,741)
Deferred compensation - (1,119)
Common stock in treasury, at
cost (14,714) (14,714)
Accumulated other comprehensive
income 649 430
Total shareholders' equity 119,806 117,672
Total liabilities and
shareholders' equity $ 175,669 $ 177,474
iGATE
Profes-
iGATE sional iGATE
Three Months Ended March 31, 2006 Solutions Services Corporate Total
- ----------------------------------- ---------- ---------- ---------- ----------
External revenues $ 38,258 $ 29,007 $ 431 $ 67,696
Cost of revenues 27,837 22,460 217 50,514
Gross margin 10,421 6,547 214 17,182
Selling, general and administrative 10,357 3,793 2,732 16,882
Income (loss) from operations $ 64 $ 2,754 (2,518) 300
Other income, net 1,431 1,431
Minority interest (145) (145)
Equity in income of affiliated
companies 65 65
(Loss) income before income taxes $ (1,167) $ 1,651
SOURCE iGATE Corporation
-0- 05/04/2006
/CONTACT: Michael J. Zugay, Sr. Vice President & CFO of iGATE
Corporation, +1-412-787-9590, or mzugay@igate.com/
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