BWI: Patni Q3 Revenues up 3.3% at $167.2 Million; Net Income* up 24.5% QoQ

Press release from Business Wire India
Source: Patni Computer Systems
Saturday, October 31, 2009 06:49 PM IST (01:19 PM GMT)
Editors: General: Consumer interest, Economy; Business: Banking & financial services, Financial Analyst, Information technology, Stock exchanges; Technology
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Patni Q3 Revenues up 3.3% at $167.2 Million; Net Income* up 24.5% QoQ


Mumbai, Maharashtra, India, Saturday, October 31, 2009 -- (Business Wire India) -- Patni Computer Systems Limited (Patni) today announced its financial results for the third quarter ended 30th September 2009.

*Important Note: In Q3 2009, based on prior years tax reviews by IRS, which were concluded during the quarter, certain provisions have 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 has increased by US$ 11.4 million for the quarter. Similarly in our Q3 2008 release, prior year's tax reviews by IRS, had resulted in reversal of certain provisions which led to a one time increase in gross profit of US$ 2.8 million, other income of US$ 8.3 million and decrease in tax expense of US$ 7.7 million. Consequently, profit after tax had increased by US$ 18.7 million for Q3 2008. Variations in Patni's Q3 2008 & 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 been considered for comparative performance review in this release.

Performance Highlights for the quarter ended September 30,2009

Revenues for the quarter at US$ 167.2 million (Rs.8,040.2 million)

-- Up 3.3% QoQ from US$ 161.9 million (Rs.7,729.1 million)
-- Down 8.9 % YoY from US$ 183.5 million (Rs. 8,522.5 million)
-- Revenue concentration from top client lower at 11.9% against 12.3%, Top 5 up at 38.3% from 37.2%, $ 1m relationships up at 92 , 7 new clients added during the quarter.

Operating Income for the quarter at US$ 27.1 million (Rs.1,303.1 million)

-- Up 11.7% QoQ from US$ 24.3 million (Rs.1,158.3 million)
-- Down 2.0% YoY from US$ 27.6 million (Rs.1,283.9 million)
-- Operating Income adjusted for Extra Ordinary items is at US$25.9 million for the quarter, + 6.9% QoQ and +4.3% YoY .

Net Income for the quarter at US$ 35.7 million (Rs. 1,715.7 million)

-- Up 24.5% QoQ from US$ 28.7 million (Rs. 1,368.5 million)
-- Down 17.2% YoY from US$ 43.1 million (Rs.2,001.9 million)
-- Net income adjusted for Extra Ordinary items is at US$ 24.3 million for the quarter, (-)15.2% QoQ and (-)0.4% YoY

EPS for the quarter at US$ 0.28 per share (US$ 0.56 per ADS).

-- EPS adjusted for Extra Ordinary items is at US$ 0.19 per share (US$ 0.38 per ADS)

Future Outlook:

-- Q4 CY2009 Revenues are expected to be at US$ 168 million to US$169 million and Net Income (Excluding the hedging Gain/Loss) is expected to be in the range of US$ 24 million to US$ 25 million
-- This guidance is based on constant Rupee -USD rate of Rs.46.5 and constant GBP -USD rate of 1.65, EURO-USD rate of 1.40.
-- Mark to Market foreign exchange gain during Q4 2009 is expected to be in the range of US$ 1 to $ 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 Overall performance from the quarter has been ahead of our expectations on all counts .We are very pleased with these results and hard work of our employees in these difficult times. While the global macro economic environment is still thwart with risks and challenges, the fading of solvency risks is positive with stable market place. Deflationary pressure on overall global IT services market is likely to continue for foreseeable future, however the off shoring and global delivery services market share will increase over time. We find ourselves in a good position competitively with our micro vertical focused strategy even as sustained visibility to growth is at least 2-3 quarters away."

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, said, "Volumes were up during the quarter and pricing was stable. All customer categories grew on volumes and marginal forex change. Cost realignment gains continued during the quarter as our operating earnings remained ahead of our expectations. With continued investments in geographic expansion, we are confident of capturing faster incremental growth along with inorganic additions besides gains on resultant absorption benefits in our cost base over the next 12- 18 months"

Corporate Developments

Appointments

-- Key leadership Appointments.
Mr. Vijay Mehra has been appointed as Executive Vice President and Head of Business Verticals. Vijay was until recently, Global CIO at Essar Group of Companies and comes with over 20 years of global management and consulting experience. Vijay will define and boost Patni's micro-verticals strategy, structure, systems and skills.

Mr . Naresh K. Lakhanpal,has been appointed as President, Patni Americas Inc. Naresh has over 23 years of diverse business experience including operations, sales, engineering, product development and strategy.

Mr. V Mathivanan , has been appointed President, APAC and will lead this business from Singapore, where Patni has recently established its new regional headquarters. Mathi comes with over 30 years of experience specializing in IT with companies such as Singapore Network Services (SNS) and CrimsonLogic.

Innovation

-- Patni Computer Systems Unveils Cloud Services Strategy

Patni's first in a series of consulting and software services initiatives designed to help customers accelerate deployment to a cloud environment. The first offering, Patni's Cloud Acceleration Program (CAP), gives independent service providers and application developers a structured, business-driven approach based on Patni's proven process and methodologies that take the guesswork out of transitioning to cloud-based solutions.

Awards & Recognition

-- Patni Ranked #7 Preferred Employer in DQ-IDC's Best Employer Survey 2009

Patni has been conferred the #7 Preferred Employer rank in DQ-IDC's Best Employer Survey 2009 based on an industry-wide employee satisfaction survey. The company was also ranked #16 Best IT Employer after a comprehensive analysis of HR policies across the industry. This rank is significant as it indicates a jump of 13 places from last year for Patni.

-- Patni Named "Challenger" in Magic Quadrant for Help Desk Outsourcing, North America

Patni has been positioned by leading industry analyst firm Gartner, Inc., in the "Challengers" quadrant of its "Magic Quadrant for Help Desk Outsourcing, North America" 2009 report by Richard Matlus and William Maurer. The report is designed to help corporations identify and evaluate outsourcing external service providers (ESPs) for help desk services.

Client Initiatives

-- Patni helps "Get Connected" deliver innovative online directory of help and support services for young people in crisis

Patni has collaborated with leading UK charity "Get Connected" to build a new online directory service, 'Webhelp 24/7', that will help young people find solutions to a wide range of issues, from coping with mental illness to learning disabilities. "Get Connected" has also been chosen as Patni's Charity of The Year for the EMEA region.

Financial Statements Analysis:

Revenues
Revenues during the quarter were higher by 3.3% sequentially to US$ 167.2 million (Rs.8,040.2 million), from US$ 161.9 million (Rs.7,729.1 million) in the preceding quarter. Revenue growth was driven by volume growth of 3.0% (including higher number of days) and 0.3% due to currency impacts. Number of active clients were 283 at quarter end as compared to 294 in Q2 2009.

Gross Margin
Gross Margins were at 37.1% or US$ 62.0 million (Rs.2,983.5 million) against 34.7% or US$ 56.2 million (Rs.2,684.5 million) in the previous quarter. Gross Profit adjusted for Extra Ordinary Items is at US$ 60.9 million at 36.4% during the quarter. Improvement in Gross margin is primarily on account of higher utilization and impact of cost rationalization measures.

Overall non cash expense is US$ 5.4 million which includes depreciation and amortization expenses of US$ 4.5 million and stock option charge of US$ 0.9 million. Corresponding expense for Q2 was US$ 4.6 million for depreciation and amortization and US$ 0.2 million for stock option charge.

Selling General and Administrative Expenses (SGA Expenses)
Sales and marketing expenses during the quarter were at US$ 14.2 million (Rs.680.8 million) at 8.5% as compared to US$ 12.0 million (Rs.572.7 million) at 7.4% in the previous quarter.

G&A expenses during the quarter were at US$ 18.0 million (Rs.865.7 million) or 10.8% as compared to US$ 15.9 million (Rs.756.9 million) at 9.8% during the previous quarter. The sequential change is due to period cost change which has got normalized during this quarter.

Overall non cash expense is US$ 3.9 million which includes depreciation and amortization expenses at US$ 2.4 million for the quarter as against US$ 2.1 million in Q2 2009 and stock option charge at US$ 1.5 million for the quarter as against US$ 0.6 million in Q2.

Foreign exchange gain/loss
The revaluation and mark to market foreign exchange loss for the quarter were at US$ 2.3 million (Rs.108.6 million) as compared to foreign exchange loss of US$ 4.1 million (Rs.197.2 million) during the previous quarter.

The quarter end rate for debtor's revaluation was Rs.48.10. Outstanding contracts at the end of Q3 2009 were about US$ 287 million which were contracted in the range of Rs.41.1 to Rs 51.2.

Operating Income
Operating Income including foreign exchange gain / loss was at US$ 27.1 million (Rs.1,303.1 million) or at 16.2% during the quarter. Operating income adjusted a for Extra Ordinary items is at US$ 25.9 million for the quarter or at 15.5% against US $24.3 million (Rs.1,158.3 million) or 15.0% during the previous quarter, reflecting an increase of 6.9% on QoQ and 4.3% on YoY basis.

Other Income
For Q3 CY2009, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 3.5% or US$ 5.9 million (Rs.283.4 million). Other Income adjusted for Extra ordinary items at US$ 3.8 million at 2.3% during the quarter lower than US$ 11.2 million during previous quarter due to cyclical change on account of fixed maturity investments.

Profit before Tax
Profit before tax for the quarter was at US$ 33.0 million (Rs.1,586.5 million) or at 19.7% during the quarter. Profit before Tax adjusted for Extra Ordinary items is at US$ 29.8 million for the quarter or at 17.8% against US $35.5 million (Rs.1,694.2 million) or 21.9% during the previous quarter, reflecting a sequential decrease of 16.1% and increase by 6.4% on YoY basis.

Income Taxes
Income tax for the quarter was at US$ (-) 2.7 million (Rs.129.2 million). Income Tax after adjustment of Extra Ordinary items is at US$ 5.5 million at an effective tax rate of 18.3%.

Net Income
Consequently, net income for the quarter at 21.3% was US$ 35.7 million (Rs.1,715.7 million) against US$ 28.7 million (Rs.1,368.5 million) at 17.7% in the previous quarter. Net income adjusted for Extra Ordinary items at US$ 24.3 million at 14.5% for the quarter.

Balance Sheet and Cash Flow changes
During the quarter, against net income of US$ 35.7 million (Rs.1,715.7 million), cash from operating activities was at US$ 34.4 million (Rs. 1,654.2 million) net of changes in current assets and liabilities of US $ (-) 7.9 million and non cash charges of US$ 6.6 million. These non cash charges comprise of depreciation and amortization including compensation cost of US$ 9.3 million and other charge of US$ (-) 2.7 million.

Net cash from investing activities was US$ 32.7 million (Rs.1,574.1 million) including capital expenditure of US$ 2.4 million (Rs.113.2 million),investment in investments of US$ 30.4 million (Rs.1,460.8 million).

Net cash outflow on financing activities was US$ 0.6 million (Rs.27.5 million) comprising payment of dividend on common shares of US$ 1.4 million (Rs.66.7 million) and US$ (-) 0.8 million (Rs.39.2 million) on other financing activities. Over all cash and cash equivalents (including short term investments) post revaluation, were at US$ 379.9 million (Rs.18,270.6 million), as compared to US$ 347.6 million (Rs.16,595.5 million) at the close of Q2 2009.

Receivables at the end of Q3 2009 were at US$105.6 million as compared to US$ 100.7 million at the end of Q2 2009. Number of days outstanding (Including Unbilled) for the current quarter were 75 days similar to the previous quarter.

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 third quarter ended September 30, 2009

- 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 (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is a global provider of IT Services and business solutions, servicing Global 2000 clients. Patni services its clients through its industry-focused practices, including banking, financial services (BFS) and insurance (I); manufacturing, retail and distribution (MRD); life sciences; communications, media and utilities (CMU), and its technology-focused practices.

With an employee strength of 13,800; multiple global delivery centers spread across 12 cities worldwide; 27 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 719 million for the year 2008.

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 clients' businesses through well-established and structured methodologies, tools and techniques. Patni is an ISO 9001: 2000 certified and SEI-CMMI Level 5 (V 1.2) 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.

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 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, please click on the link given below:

Press Release with Tables
For picture(s)/data to illustrate this release click below:

http://www.BusinessWireIndia.com/attachments/Patni Q3_2009_PressRelease.doc
Patni Q3_2009_PressRelease.doc
http://www.BusinessWireIndia.com/attachments/Fact Sheet Q309.pdf
Fact Sheet Q309.pdf


CONTACT DETAILS
Gaurav Agarwal, Patni US, Investor Relations,, Patni Computer Systems, +1-617-914-8360, investors@patni.com
Gavin Desa, Citigate Dewe Rogerson India, Patni Computer Systems, +91 (22) 40075037, gavin@cdr-india.com
Heena Kanal, Patni India, Media Relations, Patni Computer Systems, +91 (22) 66930500, heena.kanal@patni.com
Tony Viola, Patni US, Media Relations, Patni Computer Systems, +1-617-354-7424, tony.viola@patni.com

KEYWORDS
CONSUMER, ECONOMY, BANKING, Financial Analyst, IT, STOCK EXCHANGES, TECHNOLOGY, PATNI.BO, PATNI.NS

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