BWI: Patni’s 2008 Revenue Up 8.4% at $718.9 Million (Rs.34,923 million)

Press release from Business Wire India
Source: Patni Computer Systems
Thursday, February 12, 2009 10:37 AM IST (05:07 AM GMT)
Editors: General: Consumer interest, Economy; Business: Accounting & management consultancy services, Banking & financial services, Business services, Financial Analyst, Information technology, Stock exchanges; Technology
Release no: 19219
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Patni's 2008 Revenue Up 8.4% at $718.9 Million (Rs.34,923 million)


Mumbai, Maharashtra, India, Thursday, February 12, 2009 -- (Business Wire India) -- Patni Computer Systems Limited (Patni) today announced its financial results for the fourth quarter and year ended 31st December 2008.

Important Note: As stated in our Q3 2008 earnings release for the quarter ended September 30th 2008, prior year's tax reviews by IRS, certain provisions have been reversed resulting in 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 has increased by US$ 18.7 million for the said quarter. Variation in Patni's Q3 2008 financial performance as a result of such reversals had been referred to as "Extra Ordinary Items" in the said press release.

These extra ordinary items of US$ 18.7 million for Q3 2008 and US$ 18.2 million for the year 2008 (US$ 18.7 million adjusted for current year provisions of US$ 0.5 million) have been separately shown in this release as exclusion for non-GAAP presentation for comparative purposes and should be read together with the reported US GAAP results.

Performance Highlights for the quarter and year ended December 31, 2008

-- Revenues for the quarter at US$ 176.4 million (Rs. 8,570.0 million)

- Down 3.9% sequentially as compared to US$ 183.5 million (Rs. 8,522.5 million) in Q3 2008, down 1.4% on constant currency basis

- Revenues for the year at US$ 718.9 million (Rs.34,923.4 million), up 8.4% compared to US$ 662.9 million (Rs.26,125.3 million) for the previous year

- On a calendar year basis top client contribution towards revenue declined to 10.7% during 2008 from 11.8% in 2007

- Revenue concentration of Top 10 clients declined from 47.3% to 45.6% during 2008

-- Operating Income for the quarter at US$ 14.8 million (Rs. 720.1 million)

- Down 46.4% sequentially from US$ 27.6 million (Rs.1,283.9 million)

- For the year operating income lower by 35.5% at US$ 76.6 million (Rs.3,720.1 million) against US$ 118.7 million (Rs.4,679.4 million) for 2007

- Operating Income excluding extra ordinary items was sequentially lower by 40.4% from US$ 24.9 million and lower by 37.8% at US$ 73.8 million over 2007

-- Net Income for the quarter at US$ 16.1 million (Rs. 780.2 million)

- Down 62.7% sequentially from US$ 43.1million (Rs. 2,001.9 million)

- For the year net Income lower by 11.0% at US$ 101.4 million (Rs.4,927.0 million),as compared to US$ 114.0 million (Rs.4,491.8 million) for 2007

- Net income excluding extra ordinary items was sequentially lower by 34.2% from US$ 24.4 million and lower by 27.0% at US$ 83.2 million over 2007

-- EPS for the quarter at US$ 0.13 per share (US$ 0.25 per ADS)

-- EPS for the year at US$0.75 per share (US$1.5 per ADS) as compared to US$0.82 per share (US$1.6 per ADS) of the previous year

-- Dividend of 150 % recommended for the year 2008

Future Outlook:

-- Q1 CY2009 Revenues are expected to be at US$ 154 million to US$ 155 million and Net Income (Excluding the Foreign Exchange Gain/Loss) is expected to be in the range of US$ 13.5 million to US$ 14.5 million

-- This guidance is based on Constant Rupee -USD rate of Rs 48.5 and constant GBP -USD rate of1.45, EURO-USD rate of1.31

-- Mark to Market Forex loss during Q1 2009 is expected to be in the range of US$ 7 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

Commenting on the quarter, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, "The effect of the global meltdown has been more than expected for everyone and this is impacting our business in the short run. However, our global delivery model will only strengthen further in these tough times and we will remain bullish in our long term strategy and are making prudent investments in our business. In line with the continuous succession planning for our company, I am pleased that Jeya Kumar has joined us as Chief Executive Officer to lead the company into the future".

Mr. Loek van den Boog, Executive Director, said, "The current financial crisis has an adverse impact on our revenue and we see this to continue in the near term. There is pressure both on prices and volumes. We however still believe that global outsourcing will rise as the current dust settles. We continue to work very closely with our customers in these tough times and remain positive of our mid to long term prospects".

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer said, "The continuous currency benefit due to sharp depreciation of the Rupee was seen at operating level as the Dollar appreciated against all major currencies on safety flight. We are working towards realigning our cost structures to sustain the current pressure on margins as demand remains unpredictable".

Corporate Developments

-- Appointment of Chief Executive Officer, Jeya Kumar

Patni appointed Jeya Kumar as Chief Executive Officer during the quarter. Before joining Patni, Mr. Jeya Kumar was CEO of Mphasis and has more than 25 years of global experience spanning several geographies. Prior to Mphasis, he was Sr.Vice President of Sun Microsystems and was a member of Sun's Executive Management Group.

-- Patni wins Marketing Excellence Award

ITSMA (Information Technology Services Marketing Association), the leading marketing association for technology, communication and professional services providers has honored Patni with a 2008 Marketing Excellence Award. The diamond award is the highest designation in strengthening partner relationship category.

Financial Statements Analysis:

Revenues

Revenues during the quarter were in line with the guidance at US$ 176.4 million (Rs.8,570.0 million), representing a sequential decrease of 3.9%.in US dollar terms. Revenue decline in constant currency was 1.4% due to lower capacity during the quarter. For the year ended 31st December, 2008 the overall revenues were at US$ 718.9 million (Rs.34,923.4 million), up 8.4% from 2007 including 1% improvement in pricing on annualized basis. Top customer contribution towards revenue continued to decrease and stands at 10.7% for the year from 11.8% during the previous year. Number of active clients was 331 at year end as compared to 318 at the end of 2007. New client acquisitions during the quarter were 18. On a calendar basis we have acquired 100 new clients.

Gross Margin

Gross Margins for the quarter were at 34.1% or US$ 60.1 million (Rs.2,921.5 million) against 33.5% or US$ 61.5 million (Rs.2,857.0 million) in the previous quarter. Gross Margin (adjusted for Extra Ordinary Items) was at US$ 58.7 million or 32.0% during the previous quarter. The improvement in Gross Margin by 2.1% sequentially is primarily due to currency change in Rupee depreciation adjusted for other currencies.

Gross Margins for 2008 were at US$ 227.6 million (Rs.11,057.7 million) or 31.7% as compared to US$ 212.8 million (Rs.8,387.5 million) or 32.1% in 2007 . Gross Margins (adjusted for Extra Ordinary items) were at US$ 224.8 million or 31.3% during 2008. The change on annual basis is positive impact of 2.5% due currency neutralized by changes in compensation and other operating costs.

Depreciation and amortization expenses in CGS were US$ 4.5 million during the quarter against US$4.9 million in Q3 2008 and US$ 19.7 million during 2008 as compared to US$ 18.3 million in 2007.

Selling General and Administrative Expenses (SGA Expenses)

Sales and marketing expenses during the quarter were at US$ 13.2 million (Rs. 642.1 million),unchanged as compared to previous quarter .On a full year basis sales and marketing expenses were at US$ 52.6 million (Rs.2,553.2 million) or 7.3% as compared to US$ 45.8 million (Rs.1,805.5 million) at 6.9%.

G&A expenses during the quarter were at US$ 18.7 million (Rs.909.3 million) at 10.6% as compared to US$21.2 million (Rs.985.9 million) at 11.6% during previous quarter adjusted for period costs.

For the year 2008 the total cost of US$ 78.5 million (Rs.3,813.5 million) at 10.9% against the previous year cost of US$ 70.4 million (Rs.2,776.3 million) or 10.6% during 2007.

Overall Depreciation and amortization expenses in SGA were at US$1.9 million for the quarter and US$ 8.0 million for the year 2008 as compared to US$ 6.7 millon for the year 2007.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange loss for the quarter were at US$ 12.6 million (Rs.612.7 million) as compared to foreign exchange gain of US$ 1.2 million (Rs.54.5 million) in the previous quarter, due to sharp Rupee depreciation during the quarter. For the full year 2008 the total foreign exchange loss stood at US$ 18.4 million (Rs.891.9 million) against a gain of US$ 23.4 million (Rs.920.3 million) in 2007.

The quarter end rate for debtor's revaluation was Rs.48.75. Outstanding contracts at the end of Q4 2008 were about US$ 394.68 million with contracted in the average range of Rs.39.95 to Rs 51.0.

Operating Income

Operating Income including foreign exchange gain / loss during quarter was at US $14.8 million (Rs 720.1 million) or at 8.4% against US $27.6 million (Rs 1,283.9 million ) or 15.1% during previous quarter , decline of 46.4% largely on account of foreign exchange loss of $12.6 million compared to a gain of US $1.2 million.

For the year 2008 Operating income was at $76.6 million (Rs 3,720.1 million) at 10.7% ($ 73.8 million or 10.3 % adjusted for extra ordinary items) against US $ 118.7 million (Rs 4,679.4 million) during 2007 17.9%. The major changes being due to Foreign exchange gain loss as stated above.

Other Income

For Q4 CY2008, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 2.1% or US$ 3.7 million during the quarter as compared to 6.2% or US$ 11.4 million (Rs.527.9 million) during previous quarter. Other Income adjusted for Extra ordinary items at US$ 3.1 million at 1.7% during previous quarter.

For the year total other income was higher at US$ 30.0 million (Rs 1,459.7 million) as compared to US$ 17.0 million (Rs 670.9 million) in 2007. Other Income adjusted for Extra ordinary items at US$ 23.0 million during 2008.

Profit before Tax

Profit before tax for the quarter at 10.5% was US$ 18.5 million (Rs.897.5 million), lower by 52.6% as compared to US$ 39.0 million (Rs. 1,811.8 million) during previous quarter. PBT adjusted for Extra Ordinary Items was at US $ 28.0 million at 15.2%, lower by 33.9% as compared to previous quarter.

On a full year basis reported Profit before tax was at US$ 106.6 million (Rs.5,179.8 million) at 14.8% as compared to US$ 135.8 million (Rs.5,350.3 million) at 20.5%. PBT adjusted for Extra Ordinary items was at US$ 96.8 million at 13.5% during 2008.

Income Taxes

Income tax for the quarter was at US$ 2.4 million (Rs. 117.3 million) at a 13.1% effective tax rate on profit before tax.

For the full year overall was at US $ 5.2 million ( Rs 252.8 million) which was adjusted for Extra Ordinary items was at US$ 13.6 million at effective tax rate of 14.0%

Net Income

Consequently, net income for the quarter at 9.1% was US$ 16.1 million (Rs 780.2 million), lower by 62.7% as compared to previous quarter net Income of US $ 43.1 million (Rs 2,001.9 million). However previous quarter net income adjusted with Extra Ordinary items was at US$ 24.4 million at 13.3% resulting to 34.2% decline. For the year net Income is US$ 101.4 million (Rs.4,927.0 million) at 14.1%, lower by 11.0% as compared to US$ 114.0 million (Rs.4,491.8 million) for 2007. Net income adjusted for Extra Ordinary items is at US$ 83.2 million lower by 27.0% over 2007.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 16.1 million (Rs.780.2 million), cash from operating activities was at US$ 51.2 million (Rs. 2,489.7 million) net of changes in current assets and liabilities of US $ 33.6 million due to increased collections and non cash charges of US$ 1.6 million. These non cash charges comprise of depreciation and amortization including compensation cost of US$ 7.2 million, and other charges US$ (-) 5.6 million.

Net cash from investing activities was US$ 17.8 million (Rs.866.1 million) including capital expenditure of US$4.0 million (Rs.191.9 million),net proceeds from sale of investments of US$ 13.9 million (Rs.674.1 million).

Net cash outflow on financing activities was US$ 9.8 million (Rs.475.8 million) comprising of payment of buy back of shares of US$ 9.7 million (Rs. 472.9 million) and US$ 0.1 (Rs.2.9 million)on other financing activities. Over all cash and cash equivalents (including short term investments) were at US$ 305.7 million (Rs.14,849.4 million), compared to US$ 278.6 million (Rs.12,938.7 million) at close of Q3 2008.

Receivables at the end of Q4 2008 were at US$ 111.8 million as compared to US$ 137.0 million at the end of Q3 2008. Number of days outstanding (Including Unbilled) for current quarter was 74 days as compared to 89 days in Q3 2008.

Cash ,Cash Equivalents and Investments

Total Cash and Cash equivalents at the end of the period stand at a total of US$ 60.1 million while investments in mutual funds is $243.5 million. The details of these cash, cash equivalents and investments are annexed with this release and also with our financial results.

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 and the year ended December 31, 2008

- 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 10 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 and insurance (BFSI); manufacturing, retail and distribution (MRD); life sciences; communications, media and utilities (CMU), and its technology-focused practices.

With an employee strength of over 15,000; multiple global delivery centers spread across 11 cities worldwide; 23 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 663 million for the year 2007.

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 Q4_2008_PressRelease.pdf
Patni Q4_2008_PressRelease.pdf
http://www.BusinessWireIndia.com/attachments/Fact Sheet Q408_1.pdf
Fact Sheet Q408_1.pdf


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

KEYWORDS
CONSUMER, ECONOMY, CONSULTANCY SERVICES, BANKING, BUSINESS SERVICES, Financial Analyst, IT, STOCK EXCHANGES, TECHNOLOGY, 532517.BO

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