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iGate posts $69.6 M Q4 revenues
By siliconindia
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Friday, 07 February 2003, 20:30 IST
PITTSBURGH: Sunil Wadhwani led iGate Corporation (Nasdaq: IGTE) Friday announced consolidated revenues of $69.6 million for the fourth quarter ended December 31, 2002, compared to revenues of $86.2 million in same quarter a year ago. The quarterly revenues of $69.6 million were in line with the previously announced guidance of $66 to $70 million.
Revenues for the year ended December 31, 2002 were $292.6 million compared to $421.4 million for the year ended December 31, 2001. While this represents a 30.6% revenue decline from 2001 to 2002, effective cost management throughout the year resulted in much lower operating expenses. Operating expenses declined from $148.2 million in 2001 to $87.7 million in 2002. These cost reduction efforts resulted in 2002 income from operations, before special items and goodwill impairment, of $5.7 million compared to a loss from operations in 2001, before special items and goodwill impairment, of ($2.2) million, a positive turnaround of approximately $8 million.
iGate also met its previously stated fourth quarter earnings guidance, reporting net income, before tax and special items, goodwill impairment and loss on venture investments and affiliated companies, of $0.1 million or $0.00 per share. On a GAAP basis, net loss in the quarter was ($35.6) million or ($0.69) per share. Net loss this quarter included a $4.2 million charge for special items related to iGate's restructuring announced in November 2002, and two non-cash charges: a $29.7 million-charge related to goodwill impairment and a $7.4 million-charge related to write-offs of previously acquired investments.
The special $4.2 million charge was specifically related to reorganizing the company into two strategic business units and consolidating its US back office operations into one common support group centralized at one location in Pittsburgh. These expenses consisted of $1.2 million of severance costs, $2.1 million of costs associated with early exits of leased office space and $0.9 million related to the write-off of certain leasehold improvements and equipment leases.
The goodwill impairment charge of $29.7 million was also incurred as a result of the company's restructuring and continued soft market conditions. These conditions necessitated a review of the company's goodwill and resulted in the write-off of approximately $12.1 million in the Enterprise Applications segment and $17.6 million in the IT Staffing segment.
The $7.4 million charge for the loss on venture investments and affiliated companies was recorded in the fourth quarter due to declines in the market values of the investments which were determined to be other than temporary as of December 31, 2002.
Including these fourth quarter charges and on a GAAP basis, the net loss for the year ending December 31, 2002, was ($27.5) million or ($0.54) per share compared to net loss of ($55.5) million or ($1.08) per share reported in 2001.
"In spite of extremely difficult market conditions, which had a direct and negative impact on our 2002 revenues and operations, iGate made significant progress towards increasing profitability while continuing to maintain a very strong cash position. Focusing on cost management helped us achieve greater levels of operating profitability. iGate's current goals are revenue growth and increased profitability. We intend to drive revenues and profitability higher by shifting our activities toward selling and delivering high-quality offshore outsourcing services. Our recent internal restructuring will assist us in capitalizing on this opportunity. We expect this reorganization to benefit our customers through a more aligned sales strategy, efficient delivery processes and a consistent image of one unified company. We also expect the reorganization to benefit our investors and analysts as we operate a simpler structure which is easier to follow and understand," said Sunil Wadhwani, iGate's Chief Executive Officer.
"The fourth quarter 2002 was a transition period for iGate. As previously announced, our strategy consists of expanding and strengthening our offshore outsourcing services. This was highlighted by Mascot's acquisition of eJiva and iGate's development center in Toronto, both of which became effective on January 1, 2003. Mascot also entered into an agreement to acquire Aqua Regia, an independent offshore company based in Hyderabad, India. This acquisition will become effective April 1, 2003. The operational merger of these entities has resulted in a company that is larger in scale, has an expanded customer base, a broader set of service offerings and a larger and more focused sales and account management workforce. The operational integration of these companies is well underway. Our clients have received the change positively, the sales pipeline is growing and all our delivery options (offshore, near- shore and onsite) are now available through one point of contact: Mascot," said Ashok Trivedi, iGate's President and Co-Founder.
iGate's total headcount as of December 31, 2002 was approximately 3,920 and included 3,360 technical consultants. There were approximately 930 people working in India.
iGate's financial position remains very strong as the company ended the year with $108 million in cash and investments, an increase of $12.2 million from 2001. Cash flow from operations for 2002 was $28.6 million.
Looking ahead at Q1 2003, Sunil Wadhwani added, "The ongoing economic uncertainty continues to affect our clients' IT budgets and lengthen their decision making process. As a result we anticipate revenue to be flat from the fourth quarter 2002. However, we believe that our greater focus toward offshore delivery services will play to our advantage as all corporations are focused on achieving cost savings. This combined with iGate's lean internal infrastructure will allow us to achieve EPS of $0.03 to $0.04 in the first quarter of 2003."