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Patni’s Q3 2010 Revenue up 6.7% QoQ


October 27, 2010 - Mumbai, Maharashtra, India

Mumbai, India, October 27, 2010: Patni Computer Systems Limited (Patni) today announced its financial results for the third quarter ended 30th September 2010

*Important Note: In Q3 2009, based on prior years tax reviews by IRS, which were concluded during the quarter, certain provisions had been reversed resulting in one time increase in gross profit of US$ 1.2 million, other income of US$ 2.1 million and decrease in tax expense of US$ 8.1 million. Consequently, profit after tax was increased by US$ 11.4 million for the quarter. Variations in Patni’s Q3 2009 financial performance as a result of such write backs have been referred to as “Extra Ordinary Items” in this press release. Financial Performance excluding these Extra ordinary items has also been considered for comparative performance review in this release.

Performance Highlights for the quarter ended September 30,2010
-- Revenues for the quarter at US$ 178.8 million (R7,966.7 million)
- Up 6.7% QoQ from US$ 167.6 million (R7,776.3 million)
- Up 6.9% YoY from US$ 167.2 million (R8,040.2 million)
- Revenue concentration of Top 10 customers remained unchanged at 48.5% from 48.6% in previous quarter.

-- Operating Income for the quarter at US$ 32.2 million (R1,436.8 million)
- Up 2.4% QoQ from US$ 31.5 million (R1,461.4 million)
- Up 19.0% YoY from US$ 27.1 million (R1,303.1 million)
- Up 24.3% YoY from US$ 25.9 million (Excluding extra ordinary items)

-- Net Income for the quarter at US$ 28.7 million (R1,280.9 million)
- Down 9.4% QoQ from US$ 31.7 million (R1,473.0 million)
- Down 19.4% YoY from US$ 35.7 million (R1,715.7 million)
- Up 18.2% YoY from US$ 24.3 million (Excluding extra ordinary items)
-- EPS for the quarter at US$ 0.22 per share (US$ 0.44 per ADS).
Future Outlook:


-- Q4 CY2010 Revenues are expected to be at US$ 180 million to US$ 181 million and Net Income (Excluding the hedging Gain/Loss) is expected to be in the range of US$ 22.5 million to US$ 23 million

- This guidance is based on constant Rupee -USD rate of Rs 45.
- Mark to Market foreign exchange gain during Q4 2010 is expected to be in the range of US$ 1.5 million based on current estimates. This may change depending on further currency movements during the quarter and will impact our Net Earnings accordingly.

Management Comments

Mr. Jeya Kumar, Chief Executive Officer,
said, “Our performance during the quarter was in line with our expectations. The overall market environment is stable with a cautious outlook given the macroeconomic risks. We will have more visibility into IT spending budgets over next couple of months, including discretionary spending. Our portfolio balancing efforts are on track and we remain optimistic of our mid to long term growth prospects.”

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, said, “The overall results reflect cost and cash generation discipline besides growth through identified areas and balance across portfolio. We have also made the capital structure more efficient through one time special dividend to shareholders while keeping enough cash to make strategic investments in our business. Strongly appreciating Rupee remains an overall concern for the industry”.

Corporate Developments

Client Wins

-- Patni signs new contract with Serco Learning to deliver leading edge information management platform for schools

Patni secured a seven-year contract for the development and delivery of ‘Progresso’— Serco’s new information management platform for schools. ‘Progresso’ is a centrally hosted management information platform that provides relevant data, tools and services directly to schools, parents and local authorities. It will reinforce Serco Learning’s position as a provider of high quality and innovative solutions in education, and over time will replace Serco’s existing platform — ‘Facility’. The ‘Progresso’ platform is being designed by Serco and developed by Patni and will be available at the end of 2011.

-- Patni appointed to deliver application management services to the Codan Group in Scandinavia

Patni also secured a seven-figure contract over three years to provide managed services around some of Scandinavia’s core insurance platforms. The Codan Group is part of the insurance giant RSA Group and operates in Denmark, Sweden, and Norway.

Recognition:

-- Patni named Weyerhaeuser’s ‘IT Supplier of the Year’ for second consecutive year


Patni was named the 2010 ‘IT Supplier of the Year’ by Weyerhaeuser, a leading forest products company, for the second year in a row. Weyerhaeuser’s selection was based on a comprehensive evaluation of its largest suppliers with respect to aspects like compliance, cost-effectiveness, quality of delivery, relationship management, and innovation.

Innovation:

• Patni enhances HIPAA 5010, ICD-10 offerings


Last quarter, Patni introduced enhanced versions of its HIPAA 5010 and ICD-10 assessment and migration service offerings. Leveraging the company’s extensive experience in the healthcare domain and its strategic alliance with Milliman consulting, Patni created an assessment framework designed to help healthcare organizations successfully convert from the HIPAA 4010 electronic transaction set to the 5010 set and from ICD-9 code sets to ICD-10.

Appointments:

-- Patni strengthens EMEA leadership team with key appointment


Patni announced the appointment of Avtar Sangha as its new Head of Delivery for the EMEA region. Avtar will be based in Patni’s EMEA headquarters at Heathrow and will be accountable for the delivery of services to all clients in the EMEA region.

-- Patni appoints Sunil Chitale as Chief Strategy and Marketing Officer

Patni also announced the appointment of Sunil Chitale as Executive Vice President and Chief Strategy and Marketing Officer for the company. In his new role, Sunil will lead Patni’s M&A, marketing and strategic planning functions. Sunil began his career with Patni in 1985 and has managed large relationship portfolios, led the manufacturing vertical and led Patni's Enterprise Software business globally.

Patni appoints Apoorva Singh as Global Head – Infrastructure Management Services

Last quarter, Patni announced the appointment of Apoorva Singh as Senior Vice President and Global Head – Infrastructure Management Services. In his new role at Patni, Apoorva will be spearheading the Infrastructure Management Services vertical along with Patni’s Customer Interaction Services (CIS) division relating to technology-based support business.

-- Patni appoints Manish Mehta as EVP and Chief Delivery Officer

Patni recently announced the appointment of Manish Mehta as EVP and Chief Delivery Officer- Applications Services. Manish will be part of the Executive Leadership team and will be responsible for Application Development & Maintenance, Enterprise Software, and System Integration functions.

-- Patni appoints Steve Correa as Chief Human Resources Officer

In the last quarter, Patni announced an addition to its Executive Leadership Team with the appointment of Steve Correa as its Chief Human Resources Officer. Steve will play a key role in driving Patni’s innovation-led growth strategy throughout the organization. He will be responsible for Patni’s people and organization strategy, working in collaboration with the Executive Leadership Team.

Financial Statements Analysis:

Revenues

Revenues during the quarter were higher than guidance at US$ 178.8 million (R7,966.7 million) representing a sequential increase of 6.7% and 6.9% on YoY basis in US dollar terms. Number of active clients were 282 at quarter end as compared to 280 in Q2 2010. New clients acquisitions during the quarter were 13. Number of $1 million clients has increased by 6 to total of 98 reflecting broad based growth.

Gross Margin

Gross Margins were at 33.9% or US$ 60.6 million (R2,699.9 million) against 35.0% or US$ 58.7 million (R2,724.4 million) in the previous quarter. Gross Margin is lower due to lower utilization sequentially. Non cash expenses were US$ 5.7 million which includes depreciation and amortization expenses of US$ 5.4 million and stock option charge of US$ 0.3 million. Corresponding expenses for Q2 were US$ 4.8 million for depreciation and amortization and US$ 0.7 million for stock option charge.

Selling General and Administrative Expenses (SGA Expenses)
Sales and marketing expenses during the quarter were at US$ 15.4 million (R686.1 million) at 8.6% in line with previous quarter.

G&A expenses during the quarter were at US$ 17.9 million (R795.6 million) or 10.0% as compared to US$ 17.1 million (R795.0 million) at 10.2% during the previous quarter.

Non cash expenses is US$ 3.2 million which includes depreciation and amortization expenses at US$ 2.0 million for the quarter as against US$ 2.3 million in Q2 2010 and stock option charge at US$ 1.1 million for the quarter as compared to US$ 1.4 million in previous quarter.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange gain for the quarter were at US$ 4.9 million (R 216.7 million) as compared to foreign exchange gain of US$ 4.3 million (R197.6 million) during the previous quarter.

The quarter end rate for debtor’s revaluation was R44.93. Outstanding contracts at the end of Q3 2010 were about US$ 353.8 million which were contracted in the range of R41.1 to R48.3.

Operating Income

Operating Income including foreign exchange gain / loss was at US$ 32.2 million (R1,436.8 million) or at 18.0% during the quarter as compared to US$ 31.5 million or at 18.8% during previous quarter. Year to date operating income is at 19.3%

Other Income

For Q3 CY2010, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 1.4% or US$ 2.5 million (R111.9 million) during the quarter as compared to 4.1% or US$ 6.9 million (R322.1 million) during previous quarter. The decline is due to cyclical FMP income in Q2’10 and reduction in treasury investments due to special dividend paid during the quarter.

Profit before Tax

Based on above, Profit before tax for the quarter at 19.4% was US$ 34.8 million (R1,548.8 million), as compared to US$ 38.4 million (R1,783.5 million) at 22.9% during previous quarter.

Income Taxes

Income tax for the quarter was at US$ 6.0 million (R267.9 million) at an effective tax rate of 17.3% during the quarter as compared to 17.4 % during previous quarter. Full year tax rate for 2010 is expected to be in the range of 18%.

Net Income

Consequently, net income for the quarter is at 16.1% at US$ 28.7 million (R1,280.9 million), as compared to previous quarter net income of US$ 31.7 million (R1,473.0 million) at 18.9%.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 28.7 million (R1,280.9 million),cash from operating activities was at US$ 45.1 million (R2,008.2 million),net of changes in current assets and liabilities of US$ 14.6 million (R650.3 million) besides non cash charges of US$ 1.7 million (R77.1 million)

Net cash provided in investing activities was US$ 174.0 million (R7,753.3 million) including capital expenditure of US$ 1.5 million (R68.1 million), net cash invested in Joint Venture in Japan US$ 0.6 million (R26.1 million), net proceeds from sale of investments of US$ 176.1 million (R7,847.5 million).

Net cash outflow on financing activities was US$ 204.3 million (R9,104.8 million) comprising of proceeds from common shares issued under ESOP of US$ 3.2 million (R144.2 million) and payment of special dividend including tax on common shares was US$ 208.0 million (R 9,267.0 million) and US$ 0.4 million (R18.1 million) on other financing activities.

Over all cash and cash equivalents (including short term investments) post revaluation gain of US$ 10.7 million, were therefore at US$ 317.8 million (R14,161.2 million),as compared to US$ 466.6 million (R21,655.3 million) at the close of previous quarter.

Receivables at the end of Q3 2010 were at US$ 124.5 million (R5,546.2 million) as compared to US$ 117.5 million at the end of Q2 2010. Number of days outstanding (Including Unbilled receivables) for current quarter was 79 days as compared to 84 days in Q2 2010

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 quarter ended September 30, 2010

- 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 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.

- Attached Fact Sheet (results & analysis tables)

Fact Sheet

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 around 15,000; multiple global delivery centers spread across 15 cities worldwide; 29 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 656 million for the year 2009.

Patni’s service offerings include application development and maintenance, 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.

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 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.

To view the press release with tables, please click on the link given below:

Press Release with tables >

Gaurav Agarwal, Investor Relations, Patni US, +1-617-914-8360
Gavin Desa, Investor Relations, Citigate Dewe Rogerson India, +91 (22) 40075037

Source: Business Wire India

BusinessWireIndia

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