Mumbai, India, April 27, 2011: Patni Computer Systems Limited (Patni) today announced its financial results for the first quarter ended 31st March 2011
*Important Note: During Q4’10, based on reviews of certain tax positions for previous years, an amount of US$ 7.5 million was written back. Consequently, profit after tax increased by US$ 7.4 million in 2010. This Variation is referred to as “Extra Ordinary Items” in this press release and have been separately shown as exclusion for non-GAAP presentation in respective lines of other income, tax expense and net income, for comparative purposes and should be read together with the reported US GAAP results.
Performance Highlights for the quarter ended March 31, 2011
- Revenues for the quarter at US$190.3. million (R 8,476.6million)
- Up 4.0% QoQ from US$ 183.0 million (R 8,200.3 million)
- Up 10.4% YoY from US$ 172.3 million (R 7,745.4 million)
- Revenue concentration of Top 10 Customers also reduced to 45.7% from 48.8% in previous quarter
- Operating Income for the quarter at US$32.1 million (R 1428.1 million)
- Down 3.2% QoQ from US$ 33.1 million (R 1,483.1 million)
- Down 11.4% YoY from US$ 36.2 million (R 1,627.0 million)
- Effective Tax Rate for the quarter at 28% against 15% in previous quarter and 17% for full year 2010 excluding Extra Ordinary items.
- Net Income for the quarter at US$26.5 million (R 1179.8 million)
- Down 32.8% QoQ from US$ 39.4 million (R1,764.6 million)
- Adjusted for Extra Ordinary items down by 16.8% from US$ 31.8 million for the previous quarter
- Down 20.5% YoY from US$ 33.3 million (R1,497.1 million)
- EPS for the quarter at US$ 0.20 per share (US$ 0.40 per ADS).
Mr. Jeya Kumar, Chief Executive Officer, said, “Our performance during the quarter was in line with our expectations. Continued focus on serving our customers and all stakeholders along with the integration planning process with iGATE were the major highlights of the quarter. Our recent deal wins are reflective of our strategy to focus on differentiating in micro verticals. While the short-term results may have volatility, long-term prospects of the combined organization post the change of control are strong and compelling”.
Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer,said,“All parameters of operating and financial metrics were in line with our estimates. We continue to manage cost structures and forex risks well”.
We won four new multiyear, multiservice contracts of $ 25-30M total contract value each. In EMEA, the contracts were with a major international Healthcare provider and a major international service provider operating in the public sector in the UK. In the US, the contracts were with a leading Customer Care company and a company dealing in Forest Products.
Financial Statements Analysis:
Revenues during the quarter were in line with expectation at US$ 190.3 million (R 8,476.6 million) representing a sequential increase of 4.0% from US$ 183.0 million (R 8,200.3 million). Constant currency revenues were up 3.6% on account of volume.
Number of active clients was 299 at quarter end as compared to 297 in Q4’2010. New client acquisitions during the quarter were 14.
Gross Margins were at 33.1% or US$ 63.0 million (R2,804.3 million) against 33.1% or US$ 60.6 million (R2,716.1 million) in the previous quarter. Gross Margin flat compared to last quarter. Marginal reduction in utilization is due to offshore bench and is set off by operating efficiencies.
Non cash expenses in CGS line were US$ 5.6 million which include depreciation and amortization expenses of US$ 5.1 million and stock option charge of US$ 0.5 million. Corresponding expenses for Q4’10 were US$ 5.2 million for depreciation and amortization and US$ 0.8 million for stock option charge.
Selling General and Administrative Expenses (SGA Expenses)
Sales and marketing expenses during the quarter were at US$ 17.6 million (R 785.7 million) at 9.3% as compared to US$ 15.8 million (R 709.2 million) at 8.6% in the previous quarter due period costs
G&A expenses during the quarter were at US$18.9 million (R 840.9 million) at 9.9% as compared to US$ 19.6 million (R 879.6 million) at 10.7%.
Non cash expenses in SGA for the quarter were US$ 4.0 million as compared to US$ 4.1 million in previous quarter which includes depreciation and amortization expenses at US$ 2.2 million for the quarter as compared to US$ 2.0 million in previous quarter and stock option charge at US$ 1.8 million for the quarter as compared to US$ 2.1 million in previous quarter).
Foreign exchange gain/loss
The revaluation and mark to market foreign exchange gain for the quarter were at US$5.5 million (R 243.2 million) as compared to foreign exchange gain of US$ 8.1 million (R 363.8 million) during the previous quarter.
The quarter end rate for debtor’s revaluation was R 44.58. Outstanding contracts at the end of Q1 2011 were about US$ 295 million which are contracted at an overall average rate of R 47.6 against average rupee cost rate of R 45.3
Operating Income including foreign exchange gain / loss was at US$ 32.1 million (R 1428.1million) or at 16.8% during the quarter as compared to US$ 33.1 million (R1,483.1 million) or at 18.1% during previous quarter.
For Q1 CY2011, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 2.5% or US$ 4.8 million (R 212.6 million) during the quarter as compared to 3.1% or US$ 5.6 million (R 251.7 million) during previous quarter.
Other Income adjusted for Extra ordinary items is at US$ 4.3 million or at 2.3% during the previous quarter.
Profit before Tax
Profit before tax for the quarter at 19.4% was US$ 36.8 million (R 1640.6 million), as compared to 21.2% or US$ 38.7 million (R 1,734.8 million) during previous quarter. Profit before Tax adjusted for Extra Ordinary is at US$ 37.4 million or at 20.4% during the previous quarter.
Income tax for the quarter was at US$ 10.3 million (R 460.9 million) at an effective rate of 28.1%. Income Tax adjusted for extra ordinary items was at US$ 5.5 million at an effective tax rate of 14.8% during the previous quarter.
Consequently, net income for the quarter is at 13.9% at US$ 26.5 million (R 1,179.8 million), lower by 32.8% as compared to previous quarter net income of US$ 39.4 million (R1,764.6 million) at 21.5%. Net Income adjusted for Extra ordinary items for previous quarter was at US$ 31.8 million at 17.4% lower by 16.8% as compared to previous quarter.
Balance Sheet and Cash Flow changes
During the quarter, against net income of US$ 26.5 million (R1,179.8 million), cash from operating activities was at US$ 11.2 million (R 499.4 million), net of changes in current assets and liabilities of US$ (-)20.6 million (R 918.4 million),non cash charges comprise of depreciation and amortization including compensation cost of US$ 9.6 million and other adjustments of US$ (-) 4.2 million (comprising of deferred taxes US$2.3 million, deferred cancellation losses relating to roll over cash flow hedges US$0.8 million).
Over all cash and cash equivalents (including short term investments) post translation loss of US$ 2.7 million, cash received from issuances of stock against stock options US$ 4.2 million, capex of US$ 4.4 million were therefore at US$ 377.7 million (R16,822.6 million),as compared to US$ 362.4 million (R16,234.2 million) at the close of previous quarter.
Receivables at the end of Q1 2011 were at US$ 114.1 million (R 5,080,4 million) as compared to US$ 121.6 million at the end of Q4 2010. Number of days outstanding (Including Unbilled receivables) for current quarter was 77 days as compared to 71 days in Q4 2010
Important Notes to this release:
Patni follows a January – December fiscal year. The current review covers the financial and operating performance of the Company for the quarter ended March 31, 2011
A Consolidated Statement of Income in US GAAP is available on page 3 of the Fact Sheet attached to this release
Any percentage amounts, as set forth in this release, unless otherwise indicated, have been calculated on the basis of the U.S. Dollar amounts derived from our consolidated financial statements prepared in accordance with U.S. GAAP, and not on the basis of any translated Rupee amount. Calculation of percentage amounts on the basis of Rupee amounts may lead to results that are different, in a material way, from those calculated as per U.S. Dollar amounts.
A Consolidated Statement of Income as per Convenience Translation prepared in accordance with US GAAP is available on page 6 of the Fact Sheet attached to this release. We have translated the financial data derived from our consolidated financial statements prepared in accordance with U.S. GAAP for each period at the noon buying rate in the City of New York on the last business day of such period for cable transfers in Rupees as certified for customs purposes by the Federal Reserve Bank of New York. The translations should not be considered as a representation that such US Dollar amounts have been, could have been or could be converted into Rupees at any particular rate, the rate stated elsewhere in this document, or at all. Investors are cautioned to not rely on such translated amounts.
About Patni Computer Systems Ltd:
Patni Computer Systems Limited (Patni) (BSE: 532517, NSE: PATNI, NYSE: PTI) is a global provider of IT services and business solutions, servicing global 2000 clients. Patni services its clients through its micro-vertical focus in banking, financial services (BFS) and insurance (I); manufacturing, retail, and distribution (MRD); life sciences; communications, media, and utilities (CMU).
With an employee strength of over 17,500; multiple global delivery centers spread across 16 cities worldwide; 30 international offices across the Americas, Europe-Middle East-Africa (EMEA), and Asia-Pacific; Patni has registered revenues of US$ 702 million for the year 2010.
Patni’s service offerings include application development and management, enterprise software & systems integration services, business and technology consulting, product engineering services, infrastructure management services, customer interaction services & business process outsourcing, quality assurance and engineering services.
Committed to quality, Patni adds value to its clients’ businesses through well-established and structured methodologies, tools and techniques. Patni is an ISO 9001: 2008 certified and SEI-CMMI-Dev Level 5 (V 1.2) organization. In keeping with its focus on continuous process improvements, Patni adopts Six Sigma practices as an integral part of its quality and process frameworks.
Patni leverages its vast experience spanning three decades; deep domain expertise; full-spectrum services; and suites of IP-led solutions, methodologies and frameworks; in being an effective business transformation partner to its clients.
For more information on Patni, visit www.patni.com.
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Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operaterions, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, liability for damages on our service contracts, the success of the companies in which Patni has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.