Signed Three Large Multi-Year Deals Each Valued at $100 Million or Greater
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Fremont, CA – July 17, 2013 — iGATE Corporation (NASDAQ:IGTE), the first integrated Technology and Operations Company providing Business Outcomes- based solutions, today announced its financial results for the second quarter and six months ended June 30, 2013.
Second Quarter Highlights
Revenues increased by 6% year-over-year and 3% sequentially
Net Income attributable to iGATE Corporation increased by 136%
$ 30.0 million in Q2, 2013, which includes $3 million attributable to the forfeiture of vested stock options compared to $12.7 million in Q2, 2012
Gross margin was 37.9%, an increase compared to 37.4 % in the corresponding quarter of 2012
GAAP diluted EPS increased by 300%
Non GAAP diluted EPS increased by 57%
iGATE added 11 new customers during the quarter including two Fortune 1000 companies
The company ended the second quarter of 2013 with over 28,300 employees
Gerhard Watzinger, CEO, iGATE said, “I am pleased with our performance in the second quarter with revenue growing 3% sequentially. We booked orders worth over $600 million including three significant multi-year contracts each valued at $100 million or greater. I am happy to see that the Business Outcomes proposition is resonating well with our customers and markets.”
“We are seeing more positive signs related to offshore IT services spending and stability in the overall business environment, with clients spending to their budgets,” he added.
Sujit Sircar, CFO, iGATE said, “I am happy with the margin growth seen in the quarter as we absorbed our annual wage hikes which were offset largely by operational efficiencies and to an extent the depreciation of the Indian Rupee. Our profits increased and the cash flow position looks good. The diluted earnings per share increased by 57% on a non GAAP basis, which is another positive.”
On the currency fluctuation, Sircar said, “The tailwinds provided by the rupee fluctuation against the U.S. dollar appear to be short-lived with the operating costs going up in the medium to long term.”
Second Quarter Operating Results
Results for the three and six months ended June 30, 2013 and 2012, respectively on a GAAP and non-GAAP basis are provided in the table below.
New customer and project wins in the quarter
iGATE secured a multi-year iTOPS-based contract worth approximately $200 million from a leading financial services company in Europe to increase operational and technological efficiencies across the client’s financial instrument data management systems. As part of this managed services contract, iGATE will consolidate fragmented Business Processes across multiple technology systems to provide a Financial Instrument Data managed service, which will lower risk and complexity for the client and provide significant cost savings.
iGATE won a multi-year contract with a leading telecom provider in Europe worth approximately $100 million to transform the company’s IT infrastructure and rationalize its vendor landscape in the region. As part of the engagement, iGATE will take responsibility for transforming and managing all enterprise systems, including ERP, Business Intelligence, Infrastructure and Data Network & Telephony services. iGATE will also provide ‘Infrastructure as a Service’ for the client and specific partners – as well as a multilingual service desk to monitor and report all vendor performance metrics.
iGATE announced a $100 million multi-year managed services contract, as an extension to a current agreement for providing global infrastructure services to a leading global provider of insurance, annuities and employee benefit programs. As part of the engagement, iGATE will assist the company in building an innovative Infrastructure model to manage its IT systems towards greater efficiency and flexibility, in order to drive lower costs and increase business agility. The bid was awarded to iGATE on its quality and creativity of the solution, as well as innovative commercial structuring based on the industry leading ITIL based Infrastructure support model.
iGATE signed a contract worth over $20 million to establish and manage the next generation of IT service operations for a North America-based premier designer and provider of luxury shoes, bags, and fine leather accessories. As part of this multi-year engagement, iGATE will leverage its world-class managed on-demand services capabilities to migrate, host, configure and manage the client’s IT infrastructure. iGATE will deploy its “iNSIGHT” monitoring platform service to manage the client’s infrastructure and application footprint across multiple sites and retail locations worldwide focusing on efficiency and enhanced end-user experience.
iGATE won contracts worth over $10 million with a leading Fortune 500 conglomerate in North America to provide Business Intelligence-based solutions and Enterprise systems rollout across different businesses and countries that the client operates in. The multi-year contract will involve enterprise systems implementations in Brazil, France, the U.S., Canada, Mexico, India and China.
iGATE was selected by a leading Fortune 500-listed tobacco corporation in North America to provide end-to-end technology services integrated with their business processes. In a multi-million, multi-year contract, iGATE will identify business processes that are directly linked to the client’s business demands and translate them into well understood software features. iGATE will then develop and deploy iTOPS based-platforms with such features in the client’s business environment.
iGATE was awarded a multi-year, multi-million technology services contract by a leading provider of mission critical communication solutions and services for enterprise and the Government sector in North America. As part of the engagement, iGATE will be responsible for a global implementation of the client’s Enterprise Systems and integrating it with the business processes using an Agile-based approach.
Awards and Recognitions
Sujit Sircar, CFO, iGATE, won the esteemed IMA India’s ‘The Ninth India CFO Award for the year 2013’ in the ‘Excellence in Mergers & Acquisitions’ category. The India CFO Awards, instituted by IMA India, recognize excellence in the finance function. These awards have become the gold standard for excellence in various dimensions of the function and remain the most coveted in the growing legion of awards.
iGATE’s Solution for Reference Data Management – RADAR, won the award for ‘Excellence in Data Management’ at FSOkx’s 7th Annual Financial Services Outsourcing Forum, USA. iGATE RADAR is a diagnostic data management solution that can serve all domains especially within the banking and financial services group, including retail banking, insurance, capital markets, investment banking, asset management, wealth management and private banking.
iCARE, the corporate social responsibility arm of iGATE has crossed the 100,000 beneficiary mark for one of its projects called Project Akshara. This initiative aims at providing writing books to underprivileged school-going children in India.
Conference Call and Webcast
iGATE will host a telephone conference call on Wednesday, July 17, 2013 at 8:00 am Eastern time to discuss the results of its second quarter and six months ended June 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 417632. The telephonic replay will be available until July 24, 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 28,300 employees and consistently delivers effective solutions to over 360 Fortune 1000 clients 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 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:
Amortization of intangible assets: Intangible assets are comprised of the value of customer relationships from the recent acquisition of iGATE Computer Systems Limited (formerly known as Patni Computer Systems Limited and referred to herein as "iGATE Computer") and the previous delisting of iGATE Computer. iGATE incurs charges relating to the amortization of these intangibles. These charges are included in iGATE's GAAP presentation of earnings from operations, operating margin, net income and diluted earnings per share. iGATE excludes these charges for purposes of calculating these non-GAAP measures.
Stock-based compensation: Although stock-based compensation is an important component of the compensation of iGATE’s employees and executives, determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expense recorded may not reflect the actual value realized upon the future exercise or termination of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock-based compensation is determined using a complex formula that incorporates factors, such as market volatility, that are beyond the Company's control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of iGATE's core business.
Foreign exchange (gain)/loss: In March 2012, the Company entered into a forward foreign exchange contract to mitigate the risk of changes in foreign exchange rates on payments related to the delisting of iGATE Computer. During the years of 2013 and 2012, the Company recognized foreign currency loss on re-measurement of escrow account balance and foreign exchange gain on re-measurement of redeemable non-controlling interest liability. iGATE believes that eliminating the non-capitalized items for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of iGATE’s current performance and comparisons to its past performance.
Delisting expenses: iGATE voluntarily delisted the equity shares of its majority owned subsidiary, iGATE Computer, from the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited and the American Depository Shares from the New York Stock Exchange. Delisting is an infrequent activity and expenses incurred in connection with the delisting are inconsistent in amount and are significantly impacted by the timing and nature of the delisting. iGATE believes that eliminating these expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of iGATE's current operating performance and comparisons to its past operating performance.
Merger and reorganization expenses: iGATE is merging and reorganizing its overseas subsidiaries and branches with a view to simplifying the corporate structure and has incurred legal and professional expenses in this connection. Merger and reorganization is an infrequent activity and expenses incurred in connection therein are inconsistent in amount and significantly impacted by the timing and nature of the reorganization. iGATE believes that eliminating these expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of iGATE's current operating performance and comparisons to its past operating performance.
Preferred dividend and accretion to preferred stock: The Company has issued 8.00% Series B Preferred Stock. The Company also incurred issuance costs which have been netted against the proceeds received from the issuance of Series B Preferred Stock. The Series B Preferred Stock is being accreted over a period of six years. The Company believes that eliminating these expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of iGATE's current operating performance and comparisons to its past operating performance.
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 demand for the products and services, 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, forecasts of market growth, future revenues, future expectations concerning growth of business, cost competitiveness and expansion of global reach following the acquisition, 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.
The number of outstanding participative convertible preferred stock for which the earnings per share exceeded the earnings per share of common stock aggregated to 19.5 million and 18.0 million for the three and six months ended June 30, 2013 and 2012, respectively. These shares were excluded from the computation of diluted earnings per share because they were anti-dilutive.
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 attributable to iGATE Corporation 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:
Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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.