Mumbai, Maharashtra, India
Patni Computer Systems Limited (Patni) today announced its financial results for the fourth quarter and year ended 31st December 2007.
*Important note:
As stated in our Q2 2006 release for the quarter ended June 30th 2006, prior years' tax review by the IRS and a review by the Department of Labor of Patni's US operations had resulted in additional provisions which led to an increase in gross profit and operating income by approximately US$ 7.0 million and a decrease in net income by US$ 19.9 million for Q2 2006 .EPS for the year was also affected by these provisions. Variations in Patni's Q2 2006 financial performance as a result of these reviews had been referred to as 'additional provisions' in the said press release. We have presented our financial performance including these additional provisions in accordance with US GAAP. In addition, we have separately excluded these additional provisions as a non-GAAP measure solely for comparative purposes with 2007's gross profit, operating income and net income results and these exclusions should be read together with the US GAAP measures.
Highlights for the quarter and year ended December 31st 2007
-- Revenues for the quarter at US$ 174.1 million (Rs. 6,861.9 million)
-- Up 2.8% sequentially as compared to US$ 169.5 million (Rs. 6,735.7 million) in Q3 CY2007
-- For the year revenues at US$ 662.9 million (Rs. 26,125.3 million), 14.5% higher compared to US$ 578.9 million (Rs 25,533.1 million) for the previous year
-- Operating Income for the quarter at US$ 27.1 million (Rs. 1,066.3 million)
-- Lower 6.6% sequentially from US$ 29.0 million (Rs 1,151.4 million) in the quarter ended Sept 30, 2007
-- For the year operating income higher by 25.7% at US$ 118.7 million (Rs 4,679.4 million) against US $94.5m ( Rs 4,167.2) for 2006, and by 35.9% over 2006 operating income of US$ 87.4 million (Rs. 3,854.8 million ) excluding additional provisions
-- Net Income for the quarter at US$ 25.3 million (Rs 997.2 million)
-- Lower 8.4% sequentially from US$ 27.6 million (Rs 1,097.8 million) in the quarter ended September 30, 2007
-- For the year net income at US$ 114.0 million (Rs. 4,491.8 million),an increase of 92.4% as compared to US$ 59.3 million (Rs. 2,613.6 million) for 2006 and by 44.0% as compared to US $ 79.2 million ( Rs 3,491.3 million) excluding additional provisions
-- EPS for the quarter at US$ 0.18 per share; US$ 0.36 per ADS
-- EPS for the year US$ 0.82per share (US$ 1.64 per ADS) as compared to US $ 0.43 per share ( $0.86 per ADS ) for 2006 and $ 0. 57 ( $1.15 per ADS) excluding additional provisions
-- Stock based expense for the quarter was US$ 1.3 million for the quarter in line with the previous quarter For the full year stock based expense was US$ 4.7 million as compared to US$4.0 million in 2006
-- The Board of Directors have
a) recommended an annual dividend of 150% ,
b) approved a Share buy back programme in open market purchases on the Indian Stock Exchanges prices upto Rs 325 per share for a total purchase upto USD 60 million,
c) recommended repricing of outstanding Employee Stock Options at Current market price.
-- Top Customer contribution towards revenue continued to decrease and was at 11.8% for the year from 14.6% during previous year. Revenue concentration of Top 10 clients also declined from 53.1% to 47.3% during 2007 and was at 46.5% during the quarter against 48.5% during previous quarter.
-- New client acquisitions during the quarter were 37. On a calendar year basis we have acquired 119 new clients. Number of active clients was 318 at quarter end as compared to 293 in Q3 2007 and 239 at the end of 2006.
-- During the year we have fully commercialized our new state of the art Knowledge Park campus at Airoli in Navi Mumbai.
Future Outlook:
-- Q1 2008 revenues are expected to be at US$175 to US$176 million and net income (excluding the foreign exchange gain/loss) is expected to be in the range of US$ 15.5 to 16.0 million taking the operations at a constant dollar value of Rs 39.40 per US$.
Management comments
Commenting on the quarter and full year performance, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, " In 2007, we have grown profits by managing our operations including forex changes very well. This highlights our ability to deliver sustained growth by focusing on improving internal operations while increasing our reach to customers worldwide. Overall as the market dynamics are changing, including our customer mix , we remain confident about our business momentum and continue to further expand the focus on improving internal efficiencies."
Commenting on the performance, Mr. Mrinal Sattawala, Chief Operating Officer, Patni, said, "During CY 2007 we reduced dependence on our top 10 clients resulting in further diversification of our revenue streams, a key focus area for us. For the quarter under review we have added 37 new clients, bringing our tally of active clients to 318. Going forward, we expect to continue our growth drive through leveraging our operating efficiencies."
Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, Patni, added, "During the quarter ended December 2007 revenues and operating margins were as per expectation, efficiency gains absorbing the Rupee appreciation impact. We shall continue to manage our cost base optimally as we move into 2008, invest further in delivering profitable growth through strategic initiatives in our focus markets, verticals and service lines."
Revenues
Revenues during the quarter were marginally ahead of guidance at US$ 174.1 million (Rs 6,861.9 million) representing a sequential increase of 2.8 % in US dollar terms. For the year ended December 2007 the overall revenues were at US$ 662.9 (Rs 26,125.3 million) , up 14.5% from 2006. Top Customer contribution towards revenue continued to decrease and stands at 11.8% for the year from 14.6% during the previous year.
-- Revenue concentration of Top 10 clients also declined from 53.1% to 47.3% during 2007 and was at 46.5% during the quarter against 48.5% during the previous quarter.
-- Number of active clients was 318 at quarter end as compared to 293 in Q3 2007 and 239 at the end of 2006. New client acquisitions during the quarter were 37. On a calendar year basis we have acquired 119 new clients.
Gross profit
Gross profit for the quarter was marginally higher at US$ 53.1 million (Rs 2,092.5 million) against US$ 52.4 million (Rs 2,082.0 million) in the previous quarter due to higher volume. Against 30.9% of Q3 gross margin, Q4 was 30.5%, the movement being mainly on account of rupee appreciation.
Gross profit for 2007 was at US$ 212.8 million (Rs. 8,387.5 million) as compared to US$ 204.9 million (Rs. 9,037.5 million) in 2006, an increase of 3.9%. Gross profit (without additional provision in 2006), increased by 7.6% for the year. Overall Gross profit reduced to 32.1% in 2007 as compared to 34.2% (without additional provisions) in the previous year, largely on account of Rupee appreciation during the year
Depreciation cost in Cost of Revenues was US $4.5 million during the quarter as compared to US $ 4.6 million in previous quarter and US $ 17.8 million during 2007 as compared to US $ 14.1 million in 2006
Selling and Marketing Expenses
Sales and marketing expenses during the quarter were at US$ 11.8 million (Rs. 463.1 million) at 6.7% in line with previous quarter
On a full year basis sales and marketing expenses were at US$ 45.8. million (Rs. 1,806.8 million) from US$ 43.1 million (Rs. 1,900.7 million). Sales and marketing expenses as a percentage of revenues were marginally lower at 6.9% during 2007 as compared to 7.4% in 2006 as a result of absorption benefits.
G&A expenses
G&A Cost at US $ 18.8 million ( Rs 739.8 million ) at 10.8 % was lower than 11.8% during previous quarter. For the year 2007 the total cost of US $70.4 million at 10.6% was marginally rationalized against the previous year cost of US $ 63.4 million or 10.9% during 2006. Depreciation cost in G&A was at US $1.3 million for the quarter and US $ 5.1 million for the year 2007 as compared to US $ 4.5 million in 2006.
Foreign exchange gain/loss
The quarter end rate for debtors revaluation was Rs 39.41. Mark to market impact of forex contracts taken earlier and revaluation of debtors at the quarter end, resulted in foreign exchange gain of US$ 4.7 million (Rs 185.0 million) for the quarter as compared to a similar foreign exchange gain of US$ 7.5 million(Rs 296.3 million) in Q3 2007. For the full year 2007 the total foreign exchange gain stood at approximately US $23.4 million ( Rs 920.3 million) contributing to 3.5% to operating margins during the year as against a loss of US $ 2.7 million (Rs 121.2 million) in 2006.
At the end of Q4 CY 2007 we have overall forex hedges for US$ 249.2 million .
Operating income
Operating income including foreign exchange gains for the quarter at 15.5% at US $ 27.1 million (Rs 1066.3 million) was lower sequentially by 6.6% due to lower forex gains during the quarter.
Overall operating income of 17.9% for 2007 at US$ 118.7 million (Rs. 4,679.4 million) grew by 25.7 % against reported operating income of US$ 94.5 million in 2006. However the operating income excluding additional provisions in 2006 grew by 35.9% in 2007 over operating income of US$ 87.4 million (Rs.3,854.8 million) in 2006.
Other income
For Q4 2007, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at US$2.8 million (Rs 109.9 million) as compared to US $3.6 million in previous quarter.
For the year total other income was higher at US$ 17 million (Rs 670.9 million) as compared to US$ 12.5 million (Rs 550.0 million) in 2006 due to increased interest and dividend income on investments.
Profit before tax
Profit before tax at 17.1 % for the quarter was sequentially lower by 8.4% at US$ 29.8 million (Rs. 1,176.2 million) as compared to US$ 32.6 million (Rs. 1,295.8 million) during previous quarter.
On a full year basis PBT at 20.5% was US$ 135.8 million (Rs. 5,350.3 million) compared to reported Profit before Tax of 18.5 % in 2006 ( 17.2% excluding additional provisions)
Income taxes
Income tax for the quarter was at US$ 4.5 million (Rs 179.0 million) at a 15.2% effective tax rate on profit before tax . For the full year overall tax was at US$ 21.8 million (Rs. 858.5 million) at effective tax rate of 16.0%
Net income
Consequently, net income for the quarter at 14.5% was US$ 25.3 million (Rs 997.2 million), lower by 8.4% as compared to previous quarter net Income of US $ 27.6 million (Rs 1,097.8 million)
For the full year net income is US$ 114.0 million (Rs 4,491.8 million) at 17.2 %, a growth of 92.4% on reported net income of US $ 59.3 million in 2006. However, net income for the year grew by 44.0 % (excluding additional provisions in 2006)
Balance Sheet and Cash Flow changes
During the quarter, against net income of US$ 25.3 million ,cash from operating activities was at US$ 21.1 million ( Rs 832.3 million ) net of changes in current assets and liabilities of US$(-) 5.4 million and non cash charges of US$ 1.2 million. These non cash charges comprise of depreciation and amortization of US$ 6.8 million, deferred taxes of US$ (-) 6.6 million, and other charges including stock option cost of US$ 1.0 million.
Net Cash used in investing activities was US$ 36.6 million (Rs 1,442.4 million) including capital expenditure of US$ 9.8 million (Rs 387.8 million),investment in securities of US$ 14.5 million (Rs. 569.6 million) and payment of acquisition related liabilities of US$ 12.3 million (Rs. 485.0 million)
Net cash inflow on financing activities was US$ 1.5 million (Rs 57.8 million) comprising proceeds from common shares issued. With these changes and including revaluation of investments overall cash and cash equivalents (including short term investments) were at US$ 330.4 million (Rs 13,019.2 million), compared to US$ 322.9 million (Rs 12,833.4 million) at close of Q3 2007.
Receivables at the end of the Q4 2007 were at US$ 136.4 million as compared to previous quarter at US$140.1 million representing a decrease in number of days outstanding to 73 days from 77 days.
Important Notes to this release:
-- Fiscal Year
Patni follows a January - December fiscal year. The current review covers the financial and operating performance of the Company for the fourth quarter ended 31st December 2007
-- U.S. GAAP
A Consolidated Statement of Income in US GAAP is available on page 3 of the Fact Sheet attached to this release
-- Percentage analysis
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.
-- Convenience translation
A Consolidated Statement of Income as per Convenience Translation prepared in accordance with US GAAP is available on page 8 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.
-- Attached Fact Sheet (results & analysis tables)
About Patni Computer Systems Ltd:
About Patni
Patni Computer Systems Limited (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is a global provider of IT Services and business solutions, servicing Global 2000 clients. Patni caters to its clients through its industry-focused practices, including insurance, financial services, manufacturing, life sciences, telecommunications and media & entertainment, and its technology-focused practices.
With an employee strength of over 14,000; multiple global delivery centres spread across 12 cities worldwide; 21 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 579 million for the year 2006.
Patni's service offerings include application development and maintenance, enterprise application solutions, 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 client's businesses through well-established and structured methodologies, tools and techniques. Patni is an ISO 9001: 2000 certified and SEI-CMMI Level 5 organization, assessed enterprise wide at P-CMM Level 3. In keeping with its focus on continuous process improvements, Patni adopts Six Sigma practices as an integral part of its quality and process frameworks.
For more information on Patni, visit www.patni.com.
IMPORTANT NOTE:
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 operations, 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.
To view the Press Release with tables and Fact Sheet, please click on the links given below:
Press release with Tables
Fact Sheet
Source: Patni Computer Systems (Business Wire India)
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