BWI: Patni’s Net Income* up 21 % for the Quarter and 17.5% for 2009

Press release from Business Wire India
Source: Patni Computer Systems
Thursday, February 11, 2010 09:51 AM IST (04:21 AM GMT)
Editors: General: Consumer interest, Economy; Business: Banking & financial services, Business services, Financial Analyst, Information technology, Stock exchanges; Technology
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Patni's Net Income* up 21 % for the Quarter and 17.5% for 2009


Mumbai, Maharashtra, India, Thursday, February 11, 2010 -- (Business Wire India) -- During the current quarter, based on reviews of certain tax positions for previous years, an amount of US$ 11.0 million has been written back. Similarly as stated in our earnings release of Q3 2009 and year 2008, based on prior years tax reviews, provisions of US$ 11.4 million and US$ 18.2 million were reversed in these periods respectively. Consequently, profit after tax has increased by US$ 22.0 million for 2009 and by US$ 18.2 million in 2008. These Variations are referred to as "Extra Ordinary Items" in this press release and have been separately shown as exclusion for non-GAAP presentation in respective lines of gross profit, other income, tax expense and net income, for comparative purposes and should be read together with the reported US GAAP results.

*Important Note: During the current quarter, based on reviews of certain tax positions for previous years, an amount of US$ 11.0 million has been written back. Similarly as stated in our earnings release of Q3 2009 and year 2008, based on prior years tax reviews, provisions of US$ 11.4 million and US$ 18.2 million were reversed in these periods respectively. Consequently, profit after tax has increased by US$ 22.0 million for 2009 and by US$ 18.2 million in 2008. These Variations are referred to as "Extra Ordinary Items" in this press release and have been separately shown as exclusion for non-GAAP presentation in respective lines of gross profit, other income, tax expense and net income, for comparative purposes and should be read together with the reported US GAAP results.

Performance Highlights for the quarter and year ended December 31,2009

Revenues for the quarter at US$ 170.2 million (Rs.7,896.1 million)

-- Up 1.8% QoQ from US$ 167.2 million (Rs.8,040.2 million)
-- Revenues for the year at US$ 655.9 million (Rs.30,434.6 million) , down 8.8 % compared to US$ 718.9 million (Rs. 34,923.4 million) for the previous year.
-- Top Customer contribution towards revenue decreased to 11.1% in Q4 from 11.9% from Q3
-- Revenue concentration of Top 10 customer also reduced sequentially to 50.9% from 51.4% in Q3.

Operating Income for the quarter at US$ 33.3 million (Rs.1,545.6 million)

-- Up 22.9% QoQ from US$ 27.1 million (Rs.1,303.1 million)
-- Operating Income adjusted for Extra Ordinary items was sequentially higher by 28.4% from US$ 25.9 million.
-- For the year operating income higher by 31.4% at US$ 100.6 million (Rs.4,669.6 million) against US$ 76.6 million (Rs. 3,720.1 million) for 2008.
-- Operating income adjusted for Extra Ordinary items is at US$ 99.5 million for the year, higher by 34.8% against US$ 73.8 million for 2008.

Net Income for the quarter at US$ 40.5 million (Rs.1,878.4 million)

-- Up 13.5% QoQ from US$ 35.7 million (Rs. 1,715.7 million)
-- Net Income adjusted for Extra Ordinary items is at US$ 29.4 million for the quarter and was sequentially higher by 21.1% from US$ 24.3 million.
-- For the year Net income higher by 18.1% at US$ 119.8 million (Rs.5,557.8 million) against US$ 101.4 million (Rs.4,927.0 million) for 2008.
-- Net income adjusted for Extra Ordinary items is at US$ 97.8 million for the year, higher by 17.5% against US$ 83.2 million for 2008.

EPS for the quarter at US$ 0.31 per share (US$ 0.63 per ADS)

- EPS adjusted for Extra Ordinary items is at US$ 0.23 per share (US$ 0.46 per ADS)

EPS for the year at US$ 0.93 per share (US$ 1.86 per ADS) as compared to US$ 0.75 per share (US$ 1.50 per ADS) of the previous year.

- EPS adjusted for Extra Ordinary items for the year is at US$ 0.76 per share (US$ 1.52 per ADS) as compared to US$ 0.61 per share (US$ 1.23 per ADS)

-- Dividend of 150 % recommended for the year 2009

Future Outlook:

-- Q1 CY2010 Revenues are expected to be at US$ 170 million to US$ 174 million and Net Income (Excluding the hedging Gain/Loss) is expected to be in the range of US$ 28 million to US$ 29 million
-- This guidance is based on constant Rupee -USD rate of Rs.46.5.
-- Mark to Market foreign exchange gain during Q1 2010 is expected to be in the range of US$ 1 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, " We are pleased with our execution during 2009 which saw most uncertainty caused by global recession. As the economies globally stabilize we are prepared well and poised for growth. We are now looking at 2010 and beyond with renewed optimism as we expand our services and geographical reach. We remain cautiously optimistic of our growth prospects and are managing our business with due focus on operating and strategic priorities."

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, said, " We have managed our cost structure and risks well during the year 2009 which is reflected in our operating results. While the market is still thwart with risks of double dip recession, we are positioned well to reap the opportunities. We are working aggressively on creating sustainable competitive advantage and increase market share. We have adequate financial and management scale to grow our business faster through acquisitions."

Corporate Developments

Appointments:

-- Derek Kemp takes on role of President - EMEA at Patni to drive regional growth

Patni recently announced the appointment of Derek Kemp as President - EMEA region. In his new role, Derek will spearhead growth in the region, across all verticals, and will be a part of the Executive Leadership team of the company. Prior to being appointed for this role, Derek has been working as Global Industry Head for Communication, Media and Utilities (CMU) at Patni.

-- Patni appoints Dr. Anil Gupta as EVP and Global Head of Business Operations

Patni recently announced the appointment of Dr. Anil Gupta as Executive Vice President and Global Head of Business Operations to its Leadership Team. At Patni, Anil will be responsible for driving key functions including Sales Operations, Enterprise Resource Planning, Business Continuity, Enterprise Risk Management, Global Travel, IT, Procurement and Facilities. He will work closely with the CEO, Jeya Kumar, to augment business operations globally in line with Patni's strategy of IP led verticalised growth and a renewed focus on emerging geographies.

Innovation:

-- Patni Expands Actuarial BPO Service Offerings

Patni recently announced expansion of its "Actuarial Centre of Excellence" (ACET) to provide consulting, risk management and actuarial services for Insurance and Financial services companies in an onshore and offshore delivery model. ACET provides proven Actuarial expertise and a rich pool of seasoned actuarial consultants in the US, India and Europe to provide customers an optimized and cost-effective solution for improved financial performance.

-- Patni Introduces Hosted Reconciliation Solution for Global Financial Institutions

Patni announced a new solution to complete the lifecycle management of financial data for diversified, global financial institutions. The Overnight Global Reconciliation Factory (GRF), offered in conjunction with Patni's Operational Fund Accounting Services (OFA) and Financial Control and Reporting Program (FRP) as a suite of solutions, will alleviate the daunting back office reporting requirements that challenge asset management firms. The solutions, available as a package or individually, enable financial institutions to cut costs and manage fixed expenses, while maintaining a focus on continued growth.

Client Initiatives:

-- Edwards chooses Patni to provide global enterprise IT support

Edwards, a vacuum equipment manufacturer for the scientific industries, has selected Patni to become a global IT services partner. As part of the deal, Patni has already successfully completed a finance process migration and is currently working with Edwards to provide ongoing IT & BPO services. Edwards will also work with Patni on IT migration projects and other BPO opportunities. In addition, Patni will deliver skills and knowledge in developing and moving complex processes as Edwards reorganises its business operations globally.

-- Cable & Wireless International and Patni announce successful go live of new customer information system

Cable & Wireless International (CWI) and Patni recently announced the completion of Project Liberate - a system modernisation programme for the CWI full-service telecoms business operating in 38 countries. The programme involved a complete re-engineering of CWI's existing CIS system. As a trusted technology partner, Patni was tasked with modernising not only the applications but also the associated processes.

Financial Statements Analysis:

Revenues

Revenues during the quarter were higher by 1.8% sequentially to US$ 170.2 million (Rs.7,896.1 million), from US$ 167.2 million (Rs.8,040.2 million) in the preceding quarter. For the year ended 31st December 2009 the overall revenues were at US$ 655.9 million (Rs.30,434.6 million) ,down 8.8% from 2008. Number of active clients was 272 at year end as compared to 331 at the end of 2008. New clients acquisitions during the quarter were 20. On calendar basis, we have acquired 56 new clients.

Gross Margin

Gross Margins were at 37.9% or US$ 64.5 million (Rs.2,995.1 million) against 37.1% or US$ 62.0 million (Rs.2,983.5 million) in the previous quarter. Gross Margin adjusted for Extra Ordinary Items was at US$ 60.9 million at 36.4% during the previous quarter. Improvement in Gross margin is primarily on account of higher utilization and impact of cost rationalization measures.

Gross Margins for 2009 were at US$ 234.6 million (Rs.10,885.9 million) or 35.8% as compared to US$ 227.6 million (Rs.11,057.7 million) or 31.7% in 2008. Gross Margin adjusted for Extra Ordinary items were at US$ 233.5 million or 35.6% during 2009 as compared to US$ 224.8 million or 31.3% in 2008.

Overall non cash expense is US$ 5.7 million which includes depreciation and amortization expenses of US$ 4.9 million and stock option charge of US$ 0.8 million. Corresponding expense for Q3 was US$ 4.5 million for depreciation and amortization and US$ 0.9 million for stock option charge.

For the year 2009 Non cash expense in CGS were US$ 19.8 million which includes depreciation and amortization expenses of US$ 18.3 million and stock option charge of US$ 1.6 million . Corresponding expense for 2008 was US$ 21.2 million which includes US$ 19.7 million for depreciation and amortization and US$ 1.5 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.660.1 million) at 8.4% as compared to US$ 14.2 million (Rs.680.8 million) at 8.5% in the previous quarter. On a full year basis sales and marketing expenses were at US$ 53.8 million (Rs.2,495.0 million) or 8.2% as compared to US$ 52.6 million (Rs.2,553.2 million) at 7.3% in 2008.

G&A expenses during the quarter were at US$ 18.4 million (Rs.852.8 million) or 10.8% as compared to US$ 18.0 million (Rs.865.7 million) at 10.8% during the previous quarter. For the year 2009 the total cost of US$ 68.2 million (Rs,3,166.3 million) at 10.4% against the previous year cost of US$ 78.5 million (Rs. 3,813.5 million) at 10.9% during 2008.

Overall non cash expenses is US$ 3.3 million which includes depreciation and amortization expenses at US$ 1.6 million for the quarter as against US$ 2.4 million in Q3 2009 and stock option charge at US$ 1.7 million for the quarter as against 1.5 million in Q3 2009. For the year 2009 non cash expense in SGA were US$ 11.7 million which includes depreciation and amortization expense were at US$ 8.0 million,unchanged as compared to previous year and stock option charge were at US$ 3.7 million as against US$ 2.4 million in 2008.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange gain for the quarter were at US$ 3.2 million (Rs.148.5 million) as compared to foreign exchange loss of US$ 2.3 million (Rs.108.6 million) during the previous quarter.

For the full year 2009 the total foreign exchange loss stood at US$ 9.7 million (Rs.449.7 million) against a loss of US$ 18.4 million (Rs.891.9 million) in 2008.

The quarter end rate for debtor's revaluation was Rs.46.52. Outstanding contracts at the end of Q4 2009 were about US$ 320 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$ 33.3 million (Rs.1,545.6 million) or at 19.6% during the quarter as compared to US$ 27.1 million or at 16.2% during previous quarter. Operating income adjusted a for Extra Ordinary items is at US$ 25.9 million or at 15.5% during previous quarter.

For the year 2009 Operating income was at US$ 100.6 million (Rs.4,669.6 million) at 15.3% (US$ 99.5 million or 15.2% adjusted for extra ordinary items) against US$ 76.6 million (Rs.3,720.1 million) at 10.7% (US$ 73.8 million or 10.3% adjusted for Extra ordinary items) in 2008.

Other Income

For Q4 CY2009, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 2.5% or US$ 4.3 million (Rs.197.4 million) during the quarter as compared to 3.5% or US$ 5.9 million (Rs.283.4 million) during previous quarter.

Other Income adjusted for Extra ordinary items is at US$ 2.7 million or at 1.6% for the quarter against US$ 3.8 million at 2.3% during previous quarter.

For the year total other income was at US$ 23.9 million (Rs.1,109 million) as compared to US$ 30.0 million (Rs.1,459.7 million) in 2008. Other Income adjusted for Extra Ordinary items is at US$ 20.9 million during 2009 as compared to US$ 23.0 million in 2008.

Profit before Tax

Profit before tax for the quarter at 22.1% was US$ 37.6 million (Rs.1,743.0 million),higher by 13.9% as compared to US$ 33.0 million (Rs.1,586.5 million) during previous quarter. Profit before Tax adjusted for Extra Ordinary is at US$ 36.0 million or at 21.2% for the quarter sequentially higher by 21.0% from US$ 29.8 million.

On a full year basis reported profit before tax was at US$ 124.5 million (Rs.5,778.6 million) at 19.0% as compared to US$ 106.6 million (Rs.5,179.8 million) at 14.8%. Profit before Tax adjusted for Extra Ordinary items is at US$ 120.3 million for the year at 18.3% ,against US$ 96.8 million at 13.5% for 2008.

Income Taxes

Income tax for the quarter was at US$ (-) 2.9 million (Rs.135.5 million). There has been a one time reversal of US$ 9.5 million for the quarter due to statute of limitation. However effective tax rate is at 18.3%.

For the full year overall tax was at US$ 4.8 million (Rs.220.8 million) which was adjusted for Extra Ordinary items was at US$ 22.6 million at effective tax rate of 18.8%.

Net Income

Consequently, net income for the quarter is at 23.8% was US$ 40.5 million (Rs.1,878.4 million), higher by 13.5% as compared to previous quarter net income of US$ 35.7 million (Rs.1,715.7 million). Net Income adjusted for Extra ordinary items at US$ 29.4 million at 17.3% as compared to US$ 24.3 million at 14.5% resulting an increase of 21.1% during previous quarter.
For the year net income is US$ 119.8 million (Rs.5.557.8 million) at 18.3% higher by 18.1% as compared to US$ 101.4 million (Rs.4,927.0 million) for 2008. Net income adjusted for Extra Ordinary items is at US$ 97.8 million for the year, higher by 17.5% against US$ 83.2 million for 2008.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 40.5 million (Rs.1,878.4 million),cash from operating activities was at US$ 48.1 million (Rs.2,231.2 million) net of changes in current assets and liabilities of US $ (-) 0.8 million and non cash charges of US$ 8.5 million. These non cash charges comprise of depreciation and amortization including compensation cost of US$ 9.0 million and other charge of US$ (-)0.6 million.
Net cash used in investing activities was US$ 52.1 million (Rs.2,415.3 million) including capital expenditure of US$ 3.8 million (Rs.177.7 million),net cash invested in securities US$ 48.2 million (Rs.2,237.6 million).

Net cash inflow on financing activities was US$ 5.4 million (Rs.251.2 million) comprising proceeds from common shares issued of US$ 5.5 million (Rs.253.7 million) and US$(-) 0.1 million (Rs.2.5 million) on other financing activities. Over all cash and cash equivalents (including short term investments) post revaluation, were at US$ 439.3 million (Rs.20,384.3 million), as compared to US$ 379.9 million (Rs.18,270.6 million) at the close of Q3 2009.

Receivables at the end of Q4 2009 were at US$109.4 million as compared to US$ 105.6 million at the end of Q3 2009. Number of days outstanding (Including Unbilled) for current quarter was 69 days as compared to 75 days in Q3 2009.

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 year ended December 31, 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 around 13,600; multiple global delivery centers spread across 13 cities worldwide; 28 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


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, BANKING, BUSINESS SERVICES, Financial Analyst, IT, STOCK EXCHANGES, TECHNOLOGY, PATNI.BO, PATNI.NS

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