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SOURCE iGATE Corporation
Ashok Vemuri Joins as the President and CEO
ISELIN, New Jersey, October 10, 2013 /PRNewswire/ --
iGATE Corporation ("iGATE or the "Company"; NASDAQ:IGTE), the first integrated Technology and Operations company providing Business Outcomes-based solutions, today announced its financial results for the third quarter and nine months ended September 30, 2013.
Third Quarter Financial Highlights
Ashok Vemuri, President and CEO, said, "I am pleased with our ability to accelerate revenue growth both sequentially and year-over-year. I am also happy with the quality of deals we are winning that are longer-term in nature with focus on innovation and productivity gains to our customers."
"Our iTOPS model is a clear differentiator in the IT services marketplace. Clients are increasingly looking for partners to deliver solutions that can integrate emerging technologies with business process expertise to drive innovation and value. This is what our iTOPS model does and its increasing acceptance positions the company well among its competitors," he added.
Sujit Sircar, CFO, said, "Overall it has been a very good quarter for iGATE. Our operational efficiencies coupled with a positive gain out of the Indian Rupee depreciating against the U.S. Dollar resulted in an expansion of our margins and earnings. We also generated $86 million of operating cash during the quarter which is another positive."
"The forex tailwinds however seem to have settled down with the Rupee gaining marginal stability over the past couple of weeks," he added.
Third Quarter Operating Results
Results for the three and nine months ended September 30, 2013 and 2012, respectively on a GAAP and non-GAAP basis are provided in the table below.
Nine Nine Months months ended ended Q3 FY'13 Q3 FY'12 FY'13 FY'12 Y/Y Y/Y Net revenue ($Millions) 293.4 271.1 8.2% 851.6 802.3 6.1% Operating margin($Millions) 66.0 53.7 22.9% 168.2 149.9 12.2% GAAP net income ($Millions) 31.9 28.3 12.7% 96.6 65.0 48.6% GAAP diluted EPS ($) 0.30 0.27 11.1% 0.91 0.56 62.5% Adjusted EBITDA ($Millions) 78.4 68.6 14.3% 210.1 200.2 4.9% Non-GAAP net income ($Millions) 36.3 35.6 2.0% 110.7 86.0 28.7% Non-GAAP diluted EPS ($) 0.46 0.46 0.0% 1.39 1.12 24.1%
New customer and project wins in the quarter
Significant Events in the Quarter
Conference Call and Webcast
iGATE will host a telephone conference call on Thursday, October 10, 2013 at 8:00 am Eastern time to discuss the results of its third quarter and nine months ended September 30, 2013. The live discussion may be accessed by dialing 877-407-8037 (toll free) or 201-689-8037 (toll). The on-demand version of the webcast will be available on the iGATE website.
Investors, potential investors, shareholders and bond holders can access the telephonic replay by dialing 877-660-6853 (toll free) or 201-612-7415 (toll) and entering conference number 421721. The telephonic replay will be available until October 15, 2013.
About Business Outcomes
iGATE's industry-first Business Outcomes-based approach focuses on the realization of tangible and measurable results, unlike traditional models, which are driven by work, effort, time and manpower. By integrating technology and processes in a proprietary way and pricing services on results, iGATE exchanges fixed costs for a variable cost structure in an attempt to get clients to pay-for-results-only while enabling them to adjust to the peaks and valleys of their demand.
iGATE Corporation is the first integrated technology and operations (iTOPS) company providing full-spectrum consulting, technology and business process outsourcing, and product and engineering solutions on a Business Outcomes-based model. Armed with over three decades of IT Services experience and powered by the iTOPS platform, iGATE's multi-location global organization has a talent pool of over 28,200 employees and consistently delivers effective solutions to over 300 clients including Fortune 1000 companies spanning verticals such as: banking and financial services; insurance and healthcare; life sciences; manufacturing, retail, distribution and logistics; media, entertainment, leisure and travel; communication, energy and utilities; public sector; and independent software vendors. Please visit http://www.igate.com for more information.
iGATE Corporation is listed on NASDAQ under the symbol "IGTE."
Use of non-GAAP Financial Measures
This press release contains non-GAAP financial measures as defined by the Securities and Exchange Commission. These non-GAAP measures are not in accordance with, or an alternative for measures prepared in accordance with, generally accepted accounting principles in the United States ("GAAP") and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables.
iGATE believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with iGATE's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate iGATE's results of operations in conjunction with the corresponding GAAP measures. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.
iGATE believes that providing Adjusted EBITDA and non-GAAP net income and non-GAAP diluted earnings per share in addition to the related GAAP measures provides investors with greater transparency to the information used by iGATE's management in its financial and operational decision-making. These non-GAAP measures are also used by management in connection with iGATE's performance compensation programs.
More specifically, the non-GAAP financial measures contained herein exclude the following items:
From time to time in the future, there may be other items that iGATE may exclude in presenting its financial results.
Statements contained in this press release regarding the business outlook, the expected performance of the Company's products and services for its clients, and all other statements in this release other than recitation of historical facts are forward-looking statements. Words such as "expect", "potential", "believes", "anticipates", "plans", "intends" and other similar expressions are intended to identify such forward-looking statements. Forward-looking statements in the press release include, without limitation, statements regarding the business outlook, and the expected performance of the Company's products and services for its clients, and other matters that involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others: difficulties encountered in integrating business; whether certain market segments grow as anticipated; the competitive environment in the information technology services industry and competitive responses to the Company's acquisition of iGATE Computer; and whether iGATE can successfully provide services/products and the degree to which these gain market acceptance. Furthermore, in connection with the iGATE Computer acquisition, the Company has borrowed significant amounts, including through the issuance of high yield notes, and will need to use a significant portion of its cash flows to service such indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past. Additional risks relating to the Company are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as well as the Company's other reports filed with the Securities and Exchange Commission. Actual results may differ materially from those contained in the forward-looking statements in this press release. Any forward-looking statements are based on information currently available to the Company and it assumes no obligation to update these statements as circumstances change. This document does not constitute an offer to purchase or to sell securities in any jurisdiction.
iGATE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) September 30, December 31, 2013 2012 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $ 141,979 $ 95,155 Restricted cash - 3,072 Short-term investments 304,826 510,816 Accounts receivable, net 146,821 162,335 Unbilled revenues 83,836 72,901 Prepaid expenses and other current assets 37,557 31,710 Prepaid income taxes 8,330 8,541 Deferred tax assets 20,681 14,655 Foreign exchange derivative contracts 7,580 782 Total current assets 751,610 899,967 Deposits and other assets 21,094 25,372 Prepaid income taxes 28,856 28,351 Property and equipment, net 155,154 167,252 Leasehold land 75,809 86,933 Deferred tax assets 14,745 30,635 Goodwill 433,184 493,141 Intangible assets, net 120,202 144,428 Total assets $1,600,654 $1,876,079 LIABILITIES, REDEEMABLE NON CONTROLLING INTEREST, PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,215 $ 7,799 Line of credit 77,000 77,000 Term loans 52,500 35,000 Accrued payroll and related costs 53,822 54,802 Other accrued liabilities 104,284 79,008 Accrued income taxes 10,042 9,134 Foreign exchange derivative contracts 8,071 7,516 Deferred revenue 15,115 17,890 Total current liabilities 329,049 288,149 Other long-term liabilities 3,217 3,265 Senior notes 770,000 770,000 Term loans - 263,500 Accrued income taxes 19,590 17,272 Deferred tax liabilities 48,299 55,494 Total liabilities 1,170,155 1,397,680 Redeemable non controlling interest - 32,422 Series B Preferred stock , without par value 402,081 378,474 Shareholders' equity: Common Stock, par value $0.01 per share 593 585 Common stock in treasury, at cost (14,714) (14,714) Additional paid-in capital 198,484 185,340 Retained earnings 243,897 170,875 Accumulated other comprehensive loss (403,913) (274,583) Total iGATE Corporation shareholders' equity 24,347 67,503 Non controlling interest 4,071 - Total equity 28,418 67,503 Total liabilities, redeemable non controlling interest, preferred stock and shareholders equity $1,600,654 $1,876,079
iGATE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands) (unaudited) Three Months ended Nine Months ended September 30, September 30, 2013 2012 2013 2012 Revenues $ 293,406 $ 271,090 $ 851,592 $ 802,348 Cost of revenues (exclusive of depreciation and amortization) 172,063 163,269 518,073 488,380 Gross margin 121,343 107,821 333,519 313,968 Selling, general and administrative expense 46,862 44,064 139,004 127,348 Depreciation and amortization 8,439 10,027 26,305 36,757 Income from operations 66,042 53,730 168,210 149,863 Other income (loss), net (19,415) (16,942) (27,023) (56,372) Income before income taxes 46,627 36,788 141,187 93,491 Income tax expense 14,634 8,495 44,461 24,007 Net income before non controlling interest 31,993 28,293 96,726 69,484 Non controlling interest 97 - 97 4,476 Net income attributable to iGATE Corporation 31,896 28,293 96,629 65,008 Accretion to preferred Stock 126 103 361 295 Preferred dividend 7,994 7,419 23,246 21,590 Net income attributable to iGATE common shareholders $ 23,776 $ 20,771 $ 73,022 $ 43,123
iGATE CORPORATION Earnings Per Share (Amounts in thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, PARTICULARS 2013 2012 2013 2012 Net income attributable to iGATE common shareholders $ 23,776 $ 20,771 $ 73,022 $ 43,123 Add: Dividends on Series B Preferred Stock 7,994 7,419 23,246 21,590 31,770 28,190 96,268 64,713 Less: Dividends on Series B Preferred Stock [A] 7,994 7,419 23,246 21,590 Undistributed Income $ 23,776 $ 20,771 $ 73,022 $ 43,123 Allocation of Undistributed Income Common stock [B] 17,716 15,712 54,411 32,619 Unvested restricted stock [C] 7 12 21 26 Series B Preferred Stock [D] 6,053 5,047 18,590 10,478 $ 23,776 $ 20,771 $ 73,022 $ 43,123 Shares outstanding for allocation of undistributed income: Common stock 58,311 57,318 58,311 57,318 Unvested restricted stock 23 45 23 45 Series B Preferred Stock 19,923 18,411 19,923 18,411 78,257 75,774 78,257 75,774 Weighted average shares outstanding: Common stock [E] 58,148 57,271 57,895 57,076 Unvested restricted stock [F] 23 45 23 45 Series B Preferred Stock [G] 19,923 18,411 19,923 18,411 78,094 75,727 77,841 75,532 Weighted average common stock outstanding 58,148 57,271 57,895 57,076 Dilutive effect of stock options and restricted shares outstanding 1,688 1,622 1,669 1,638 Dilutive weighted average shares outstanding [H] 59,836 58,893 59,564 58,714 Distributed earnings per share: Series B Preferred Stock [I=A/G] $0.40 $0.40 $1.17 $1.17 Undistributed earnings per share: Common stock [J=B/E] $0.30 $0.27 $0.94 $0.57 Unvested restricted stock [K=C/F] $0.30 $0.27 $0.93 $0.57 Series B Preferred stock [L=D/G] $0.30 $0.27 $0.93 $0.57 Basic earnings per share from operations : Common stock [J] $0.30 $0.27 $0.94 $0.57 Unvested restricted stock [K] $0.30 $0.27 $0.93 $0.57 Series B Preferred stock [I+L] $0.70 $0.67 $2.10 $1.74 Diluted earnings per share from operations [[B+C]/H] $0.30 $0.27 $0.91 $0.56
The number of outstanding participative convertible preferred stock for which the earnings per share exceeded the earnings per share of common stock aggregated to 19.9 million and 18.4 million for the three and nine months ended September 30, 2013 and 2012, respectively. These shares were excluded from the computation of diluted earnings per share because they were anti-dilutive.
iGATE CORPORATION Reconciliation of Selected GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per share data) (unaudited) Three Months ended Nine Months ended September 30, September 30, 2013 2012 2013 2012 GAAP Net income attributable to iGATE common shareholders $ 23,776 $ 20,771 $ 73,022 $ 43,123 Adjustments Preferred dividend and accretion to preferred stock 8,120 7,522 23,607 21,885 Amortization of intangible assets 2,540 2,886 7,980 8,806 Stock based compensation 3,878 3,795 10,243 9,270 Delisting expenses - 328 93 3,532 Merger and reorganization expenses - 764 5,264 764 Foreign exchange (gain) / loss on acquisition hedging and remeasurement - 2,105 489 5,259 Forfeiture of vested stock options - - (3,005) - Income tax adjustments (2,020) (2,588) (7,028) (6,595) Non-GAAP Net income attributable to iGATE common shareholders $ 36,294 $ 35,583 $ 110,665 $ 86,044 Weighted average shares outstanding, Basic 58,171 57,316 57,918 57,121 Add back: assumed preferred stock conversion 19,923 18,411 19,923 18,411 Non-GAAP weighted average shares outstanding, Basic 78,094 75,727 77,841 75,532 Weighted average dilutive common shares outstanding 59,836 58,893 59,564 58,714 Add back: assumed preferred stock conversion 19,923 18,411 19,923 18,411 Weighted average dilutive common equivalent shares outstanding 79,759 77,304 79,487 77,125 Basic EPS (GAAP) to Basic EPS (Non-GAAP): Basic EPS (GAAP) from operations $ 0.30 $ 0.27 $ 0.94 $ 0.57 Preferred dividend and accretion to preferred stock 0.11 0.10 0.31 0.29 Amortization of intangible assets 0.03 0.04 0.10 0.12 Stock based compensation 0.05 0.05 0.13 0.12 Delisting expenses - 0.01 0.00 0.05 Merger and reorganization expenses - 0.01 0.07 0.01 Foreign exchange (gain) / loss on acquisition hedging and remeasurement - 0.03 0.01 0.07 Forfeiture of vested stock options - - (0.04) - Income tax adjustments (0.03) (0.04) (0.09) (0.09) Basic EPS (Non-GAAP) from operations $ 0.46 $ 0.47 $ 1.43 $ 1.14 Diluted EPS (GAAP) to Diluted EPS (Non-GAAP): Diluted EPS (GAAP) from operations $ 0.30 $ 0.27 $ 0.91 $ 0.56 Preferred dividend and accretion to preferred stock 0.11 0.10 0.30 0.29 Amortization of intangible assets 0.03 0.04 0.10 0.11 Stock based compensation 0.05 0.05 0.13 0.12 Delisting expenses - 0.00 0.00 0.05 Merger and reorganization expenses - 0.00 0.07 0.01 Foreign exchange (gain) / loss on acquisition hedging and remeasurement - 0.03 0.01 0.07 Forfeiture of vested stock options - - (0.04) - Income tax adjustments (0.03) (0.03) (0.09) (0.09) Diluted EPS (Non-GAAP) from operations $ 0.46 $ 0.46 $ 1.39 $ 1.12
iGATE CORPORATION Reconciliation of Net Income, Net of Tax, to Adjusted EBITDA (Amounts in thousands) (unaudited) Three Months ended Nine Months ended September 30, September 30, 2013 2012 2013 2012 Net income $ 31,993 $ 28,293 $ 96,726 $ 69,484 Adjustments Depreciation and amortization 8,439 10,027 26,305 36,757 Interest expense 20,256 21,994 67,025 62,149 Income tax expense 14,634 8,495 44,461 24,007 Other income, net (5,213) (8,815) (39,910) (23,975) Foreign exchange (gain) / loss 4,372 3,763 (92) 18,198 Stock based compensation 3,878 3,795 10,243 9,270 Delisting expenses - 328 93 3,532 Merger and reorganization expenses - 764 5,264 764 Adjusted EBITDA (a non-GAAP measure) $ 78,359 $ 68,644 $ 210,115 $ 200,186
The Company presents the non-GAAP financial measures EBITDA and adjusted EBITDA because management uses these measures to monitor and evaluate the performance of the business and believes that the presentation of these measures will enhance investors' ability to analyze trends in the business and evaluate the Company's underlying performance relative to other companies in the industry.
Non-GAAP Disclosure of Adjusted EBITDA
We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net income plus (i) depreciation and amortization, (ii) interest expense, (iii) income tax expense, minus (iv) other income, net plus (v) foreign exchange (gain)/loss, (vi) stock based compensation (vii) Delisting expenses (viii) Merger and reorganization expenses. We eliminated the impact of the above as we do not consider them as indicative of our ongoing operating performance. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA: (i) as a factor in evaluating management's performance when determining incentive compensation, (ii) to evaluate the effectiveness of our business strategies and (iii) because our credit agreement and our indenture use measures similar to Adjusted EBITDA to measure our compliance with certain covenants.
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
Because of these limitations, adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
Prabhanjan Deshpande "PD"
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