Press release from PR Newswire
iGATE Announces 10% Organic Revenue; 15% Adjusted EBITDA Growth
Thursday, April 10, 2014
iGATE Announces 10% Organic Revenue; 15% Adjusted EBITDA Growth06:35 EDT Thursday, April 10, 2014
BRIDGEWATER, New Jersey, April 10, 2014 /PRNewswire/ --
iGATE Corporation (iGATE or the Company) (NASDAQ: IGTE), the New Jersey-headquartered integrated technology and operations solutions provider, today announced its financial results for the first quarter ended March 31, 2014.
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First Quarter Highlights
- Revenues were $302.2million
- Increased 10% compared to $274.9 million in the first quarter of 2013
- Increased 1% sequentially compared to $299.3 million in the fourth quarter of 2013
- Net Income attributable to iGATE Corporation was $31.6 million
- Compared to $34.8 million in the first quarter of 2013
- Compared to $33.1 million in the fourth quarter of 2013
- Gross margin was 37.5 %
- Compared to 38.1% in the first quarter of 2013
- Compared to 39.8% in the fourth quarter of 2013
- Diluted earnings per share were $0.29 GAAP and $0.45 non-GAAP
- Compared to $0.34 GAAP and $0.51 non-GAAP in the first quarter of 2013
- Compared to $0.30 GAAP and $0.49 non-GAAP in the fourth quarter of 2013
- Adjusted EBITDA was $75.2 million
- Compared to $65.5 million in the first quarter of 2013
- Compared to $74.7million in the fourth quarter of 2013
- The Company added nine new customers during the first quarter
- As of March 31, 2014, the Company had 30,835 employees with a net addition of 1,102
Ashok Vemuri, President and Chief Executive Officer, iGATE, said, "We had an encouraging start to the year with a 10% y-o-y growth in revenues. Overall market conditions appear to be favorable across the board. With our healthy pipeline, along with the timely rollout of investments in people and solutions, we believe we are well positioned for sustainable growth."
Sujit Sircar, Chief Financial Officer, iGATE, said, "We successfully secured financing to redeem our $770 million 9% Senior Notes through a combination $325 million of new 4.75% senior notes due in 2019 and bank financing. This refinancing is expected to yield significant cost savings over the coming quarters. I am also pleased with the Company's cash-flow position during the quarter. However, the rupee fluctuation due to forex headwinds will be a concern, as we continue to grow our profits."
First Quarter 2014 Operating Results
Results of the first quarter 2014 and 2013, on GAAP and non-GAAP basis, are provided in the table below.
Q1 FY14 Q1 FY13 Y/Y Net revenue ($Millions) 302.2 274.9 10% Operating margin ($Millions) 61.2 52.6 16% GAAP net income ($Millions) 31.6 34.8 (9)% GAAP diluted EPS ($) 0.29 0.34 (15)% Adjusted EBITDA ($Millions) 75.2 65.5 15% Non-GAAP net income ($Millions) 36.4 39.9 (9)% Non-GAAP diluted EPS ($) 0.45 0.51 (12)%
Key contracts won during the First Quarter
- A leading mining company based in Europe with its operations poised to grow organically selected iGATE as a strategic IT Services partner in a multi-year, multi-million dollar engagement. As part of the contract, iGATE will provide enterprise application management services for the client's ERP system, and implement optimization processes and content management applications for its users. iGATE will also provide an end-to-end fuel management system to enable the client to improve on the fuel consumption efficiency levels leading to significant costs savings.
- A leading apparel retailing company in North America selected iGATE as its IT partner to drive efficiency in its distribution models. As part of the strategy, the client will transition to an omni-channel retail environment, with the new order management systems supported by iGATE. This will lower the operating costs and consolidate operations thus facilitating process efficiency. iGATE will also support integration and testing of the client's new product life management system.
- A large global financial institution based in North America selected iGATE as a strategic IT partner to provide testing and validation services for their core-banking program. As part of the multi-million dollar contract, iGATE will leverage the bank's existing program in a 'box validation framework'. iGATE's rich experience in working with the banking industry and its repository of prebuilt process models along with best practices and test scenarios made it a natural choice as a trusted partner for the engagement.
- A large independent brokerage company based in North America selected iGATE as its IT partner to provide quality assurance services for its new customer facing services. This multi-million dollar deal leverages iGATE's solution assurance service model that enables customers to make more frequent and faster quality releases. iGATE will provide ongoing release and configuration management solutions that will facilitate the client to service its customers faster and better with its newer functionalities and capabilities.
- iGATE has been engaged by a global restaurant chain based in North America to assist it in the architecture and design of its next generation digital platform. This platform plays a significant role in the client's strategy to design a customized customer experience, thus facilitating greater product choice, better value and product information that appeal to a broader spectrum of customers.
Key Highlights and Recognitions during the First Quarter
- Ashok Vemuri was elected to the Board of IT Governors at The World Economic Forum, Davos. As part of the Board, Ashok will contribute to the fulfillment of the Forum's IT agenda.
- iGATE bagged the coveted "Fun @ Work" award for 2013 at the World HRD Congress. The award recognizes iGATE for its innovative efforts in employee engagement making it an employee-friendly company.
- iGATE won the VCCircle Awards under the category- Best PE/VC backed IT Company of the Year 2013. This was the third edition of VCCircle Awards, India's only platform that recognizes the best performing private equity or venture capital-backed companies and transaction advisors.
- The second edition of the iGATE CEO Golf Tournament was conducted at Pinehurst Resort & Country Club, North Carolina. Conducted in association with Forbes and co-hosted by golfing icon Gary Player, the event witnessed CEOs of Global 2000 companies golfing for a noble cause. The winners donated $120,000 to their favorite charities.
- iGATE was ranked as a high performer in the enterprise mobility space by HfS Research - a leading independent analyst authority and community for the global business services and outsourcing industry. iGATE has been rated high for its capabilities in execution and innovation in the new age mobile technologies and platforms.
Conference Call and Webcast
iGATE has scheduled its Earnings Conference Call on Thursday, April 10, 2014 to discuss the results of its first quarter ended March 31, 2014. Senior management of the company will discuss the financial performance for the quarter and answer participants' questions during the call.
Time : 07:30 - 8:30 am Eastern Time Toll Free (U.S.) : 877-407-8037 Toll (U.S.) : 201-689-8037 Toll Free (India) : 000-800-852-1477
The call will be webcast live on iGATE's website (http://www.igate.com) in the Investor Relations page under the 'Events' section. Participants are requested to log in 10 minutes prior to the start of the webcast. The on-demand version of the webcast will be available on the iGATE website shortly after the call.
Investors, potential investors, shareholders and bondholders can access the telephonic replay by dialing 877-660-6853 (toll free) or 201-612-7415 (toll) and entering conference number 13579176. The telephonic replay will be available until April 15, 2014.
iGATE Corporation provides integrated technology and operations (iTOPS) solutions by leveraging its proven capabilities across consulting, technology and business process outsourcing, and product and engineering solutions. Armed with over three decades of IT Services experience and powered by over 30,000 experts, iGATE's multi-location global organization has consistently delivered effective solutions to over 300 companies including many Fortune 1000 clients spanning verticals such as: banking and financial services; insurance; healthcare and life sciences; manufacturing; retail and CPG; media and entertainment; energy and utilities; and independent software vendors. Please visit http://www.igate.com for more information.
Follow iGATE on Twitter: @iGATE_Corp (https://twitter.com/iGATE_Corp)
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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 the 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 primarily comprise of customer relationships. We incur charges relating to the amortization of these intangibles. These charges are included in our GAAP presentation of earnings from operations, operating margin, net income and diluted earnings per share. We exclude 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: From time to time, the Company recognizes foreign currency losses on re-measurement of escrow account balance and foreign exchange gains on re-measurement of redeemable non-controlling interest liability. iGATE believes that eliminating these non-capitalized items for purposes of calculating non-GAAP measures facilitates a more meaningful evaluation of iGATE's current performance and comparisons to its past performance.
- Delisting expenses: We voluntarily delisted the equity shares of our 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 therein 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 its 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 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. Although, the effect of inclusion of equivalent units of common stock towards convertible participating preferred stock is anti-dilutive for GAAP purposes, the non-GAAP diluted earnings per share has been calculated assuming the conversion of all outstanding shares of preferred stock into equivalent units of common stock. The Company believes that eliminating these expenses as well as inclusion of equivalent units of common stock towards the preference shares to compute diluted earnings per share 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.
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of the Company may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements 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 statements of historical fact are statements that could be deemed 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: uncertain global economic conditions, concentrated revenues, new organizational and operational strategies, continued pricing pressures and the significant indebtedness which will 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, 2013, as well as the Company's other reports filed with the Securities and Exchange Commission As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While the Company believes these estimates to be accurate, actual results may differ materially from those contained in the forward-looking statements in this press release. These amounts could also differ materially from actual reported amounts in the Company's quarterly Report on Form 10-Q for the quarter ended March 31, 2014. The Company assumes no obligation and does not intend to update these forward-looking 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) March 31, December 31, 2014 2013 (unaudited) (audited) ASSETS Current assets: Cash and cash equivalents $ 237,944 $ 204,836 Restricted cash 360,000 360,000 Short-term investments 162,196 181,401 Accounts receivable, net of allowances of $3,001 and $4,103, respectively 147,214 157,905 Unbilled revenues 88,223 61,424 Prepaid expenses and other current assets 53,473 44,492 Prepaid income taxes 9,800 838 Deferred tax assets 5,937 10,235 Foreign exchange derivative contracts 6,671 836 Receivable from related parties 6,471 4,046 Total current assets 1,077,929 1,026,013 Deposits and other assets 23,681 24,930 Prepaid income taxes 34,644 32,160 Property and equipment, net of accumulated depreciation of $116,889 and $108,084, respectively 180,917 165,581 Leasehold land 78,405 76,732 Deferred tax assets 15,154 15,153 Goodwill 452,911 438,891 Intangible assets, net 120,294 119,262 Total assets $ 1,983,935 $ 1,898,722 LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 13,489 $ 9,268 Line of credit 52,000 52,000 Senior Notes 770,000 360,000 Term loans 90,000 90,000 Accrued payroll and related costs 46,060 57,093 Other accrued liabilities 101,232 79,785 Accrued income taxes 2,794 5,802 Foreign exchange derivative contracts 15 909 Deferred revenue 13,254 17,776 Total current liabilities 1,088,844 672,633 Other long-term liabilities 4,188 3,532 Senior notes - 410,000 Term loans 270,000 270,000 Accrued income taxes 22,117 13,936 Deferred tax liabilities 37,315 41,717 Total liabilities 1,422,464 1,411,818 Series B Preferred stock , without par value 418,649 410,371 Shareholders' equity: Common shares, par value $0.01 per share 598 594 Common shares held in treasury, at cost (14,714) (14,714) Additional paid-in capital 213,337 204,143 Retained earnings 292,088 268,750 Accumulated other comprehensive loss (353,630) (387,115) Total iGATE Corporation shareholders' equity 137,679 71,658 Non-controlling interest 5,143 4,875 Total equity 142,822 76,533 Total liabilities,preferred stock and shareholders' equity $ 1,983,935 $ 1,898,722
iGATE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands) (unaudited) Three Months ended March 31, 2014 2013 Revenues $ 302,206 $ 274,918 Cost of revenues (exclusive of depreciation and amortization) 188,780 170,239 Gross margin 113,426 104,679 Selling, general and administrative expense 42,661 42,792 Depreciation and amortization 9,558 9,271 Income from operations 61,207 52,616 Other income (loss), net (16,071) (2,896) Income before income taxes 45,136 49,720 Income tax expense 13,425 14,960 Net income before non controlling interest 31,711 34,760 Non controlling interest 95 - Net income attributable to iGATE Corporation 31,616 34,760 Accretion to preferred Stock 139 115 Preferred dividend 8,139 7,500 Net income attributable to iGATE common shareholders $ 23,338 $ 27,145
iGATE CORPORATION Earnings Per Share (Amounts in thousands, except per share data) (unaudited) Three Months Ended March 31, PARTICULARS 2014 2013 Net income attributable to iGATE common shareholders $ 23,338 $ 27,145 Add: Dividends on Series B Preferred Stock 8,139 7,500 31,477 34,645 Less: Dividends on Series B Preferred Stock [A] 8,139 7,500 Undistributed Income $ 23,338 $ 27,145 Allocation of Undistributed Income Common stock [B] 17,256 20,338 Unvested restricted stock [C] - 8 Series B Preferred Stock [D] 6,082 6,799 $ 23,338 $ 27,145 Shares outstanding for allocation of undistributed income: Common stock 58,808 57,270 Unvested restricted stock - 23 Series B Preferred Stock 20,726 19,147 79,534 76,440 Weighted average shares outstanding: Common stock [E] 58,687 57,262 Unvested restricted stock [F] - 23 Series B Preferred Stock [G] 20,726 19,147 79,413 76,432 Weighted average common stock outstanding 58,687 57,262 Dilutive effect of stock options and restricted shares outstanding 1,854 1,741 Dilutive weighted average shares outstanding [H] 60,541 59,003 Distributed earnings per share: Series B Preferred Stock [I=A/G] $0.39 $0.39 Undistributed earnings per share: Common stock [J=B/E] $0.29 $0.36 Unvested restricted stock [K=C/F] - $0.36 Series B Preferred stock [L=D/G] $0.29 $0.36 Earnings per share - Basic Common stock [J] $0.29 $0.36 Unvested restricted stock [K] - $0.36 Series B Preferred stock [I+L] $0.68 $0.75 Earnings per share -Diluted [[B+C]/H] $0.29 $0.34
The number of shares of outstanding Series B Preferred Stock for which the earnings per share exceeded the earnings per share of common stock aggregated to 20.7 million and 19.1 million for the three months ended March 31, 2014 and 2013 respectively. These shares were excluded from the computation of diluted earnings per share as they were anti-dilutive.
iGATE CORPORATION Reconciliation of Net Income, Net of Tax, to Adjusted EBITDA (Amounts in thousands) (unaudited) Three Months ended March 31, 2014 2013 Net income $ 31,711 $ 34,760 Adjustments Depreciation and amortization 9,558 9,271 Interest expense 23,629 22,657 Income tax expense 13,425 14,960 Other income, net (7,354) (17,280) Foreign exchange gain (204) (2,481) Stock-based compensation 4,297 3,125 Delisting expenses - 93 Merger and reorganization expenses 130 419 Adjusted EBITDA (a non-GAAP measure) $ 75,192 $ 65,524
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.
iGATE CORPORATION Reconciliation of Selected GAAP Measures to Non-GAAP Measures (Amounts in thousands, except per share data) (unaudited) Three Months ended March 31, 2014 2013 GAAP Net income attributable to iGATE common shareholders $ 23,338 $ 27,145 Adjustments Preferred dividend and accretion to preferred stock 8,278 7,615 Amortization of intangible assets 2,580 2,748 Stock-based compensation 4,297 3,125 Delisting expenses - 93 Merger and reorganization expenses 130 419 Foreign exchange loss on acquisition hedging and remeasurement - 401 Income tax adjustments (2,243) (1,681) Non-GAAP Net income attributable to iGATE common shareholders $ 36,380 $ 39,865 Weighted average shares outstanding, Basic 58,687 57,285 Add:assumed preferred stock conversion 20,726 19,147 Non-GAAP weighted average shares outstanding , Basic 79,413 76,432 Weighted average dilutive common shares outstanding 60,541 59,003 Add:assumed preferred stock conversion 20,726 19,147 Weighted average dilutive common equivalent shares outstanding 81,267 78,150 Basic EPS (GAAP) to Basic EPS (Non-GAAP): Basic EPS (GAAP) $ 0.29 $ 0.36 Preferred dividend and accretion to preferred stock 0.11 0.10 Amortization of intangible assets 0.03 0.04 Stock-based compensation 0.06 0.04 Delisting expenses - - Merger and reorganization expenses 0.00 0.00 Foreign exchange loss on acquisition hedging and remeasurement - 0.00 Income tax adjustments (0.03) (0.02) Basic EPS (Non-GAAP) $ 0.46 $ 0.52 Diluted EPS (GAAP) to Diluted EPS (Non-GAAP): Diluted EPS (GAAP) $ 0.29 $ 0.34 Preferred dividend and accretion to preferred stock 0.10 0.10 Amortization of intangible assets 0.03 0.04 Stock-based compensation 0.06 0.04 Delisting expenses - 0.00 Merger and reorganization expenses 0.00 0.01 Foreign exchange loss on acquisition hedging and remeasurement - 0.00 Income tax adjustments (0.03) (0.02) Diluted EPS (Non-GAAP) $ 0.45 $ 0.51
Non-GAAP Disclosure of Adjusted EBITDA
iGATE presents Adjusted EBITDA as a supplemental measure of its 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 and (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. These adjustments are itemized below. 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; and
- 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.
Salil Ravindran +1-510-298-8400 Salil.Ravindran@iGATE.com
Prabhanjan Deshpande "PD" +91-80-4104-5006 PD@iGATE.com
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SOURCE iGATE Corporation