Patni Computer Systems Limited (Patni) announced its financial results for the second quarter ended 30th June 2009.
Performance Highlights for the quarter ended June 30,2009
— Revenues for the quarter at US$ 161.9 million (Rs.7,729.1 million)
– Up 3.3% QoQ from US$ 156.7 million (Rs.7,969.1 million)
– Down 11.3 % YoY from US$ 182.6 million (Rs. 7,837.1 million)
– Contribution from top customer remained unchanged as compared to previous quarter and was at 12.3% for the quarter.
— Operating Income for the quarter at US$ 24.3 million (Rs.1,158.3 million)
– Up 51.9% QoQ from US$ 16.0 million (Rs.812.4 million)
– Up 44.5% YoY from US$ 16.8 million (Rs.720.7 million)
— Net Income for the quarter at US$ 28.7 million (Rs. 1,368.5 million)
– Up 91.7% QoQ from US$15.0 million (Rs. 760.7 million)
– Up 18.7% YoY from US$ 24.2 million (Rs.1,037.2 million)
— EPS for the quarter at US$ 0.22 per share (US$ 0.45 per ADS)
Future Outlook:
— Q3 CY2009 Revenues are expected to be at US$ 163 million to US$ 165 million and Net Income (Excluding the hedging Gain/Loss) is expected to be in the range of US$ 22.5 million to US$ 23.5 million
– This guidance is based on constant Rupee -USD rate of Rs.48.5 and constant GBP ?USD rate of1.55, EURO-USD rate of1.38
– Mark to Market foreign exchange loss during Q3 2009 is expected to be in the range of US$ 4.0 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 overall operating performance which is ahead of our estimates in this challenging business environment. While growth visibility is shallow in short run, we are working aggressively to realign our overall operations and leverage the changing times to build sustainable competitive advantage in our business. We will continue to invest ahead to create growth beachheads and diversify our business portfolio. We remain bullish on long terms prospects and are investing in extending and deepening the management and overall talent pool of the Company.?
Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, said, ?Sustained efforts on realignment of cost structures and enhanced focus on operating discipline coupled with positive currency movements helped operating margins during the quarter. We also managed our cash flows well and have a good cash position. Protecting bottom line and simultaneously investing in growth levers in newer segments, markets and service lines is our top priority in addition to acquisitive growth.?
Corporate Developments
– Appointment of Executive Vice President and Chief of Operations, Patni appointed Manish Soman as Executive Vice President and Chief of Operations to its Executive Leadership Team. Manish, formerly a part of Genpact?s management team brings over 18 years of experience in the IT Services and BPO Industries
– Patni opened its new EMEA headquarters, based at Heathrow in London. The investment in a new regional headquarters with dedicated operational facilities enables Patni to place an increased focus on helping businesses across Europe and the Middle East to achieve both operational efficiencies and continue to innovate in new products and services
– Patni?s Asset Management Practice Introduces Outsourced Operational Fund Accounting Service
Patni announced an Operational Fund Accounting Service designed to alleviate the challenges of back office operations that buy-side firms face on a daily basis. As asset management firms continue to look for ways to reduce costs while staying focused on areas of core expertise, Patni has developed a service to manage these critical back-office functions that ensure data consistency, accurate financial reporting, customer data security and privacy; essentially freeing customers to build their businesses
– Patni launches ?Claims as a ServiceTM? (CaaS) for Healthcare Payers
Patni recently announced ?Claims as a ServiceTM? (CaaS), an innovative solution specifically designed for the healthcare payer market. Available for immediate delivery, CaaS is a hosted solution powered by TriZetto?s QNXT core administration platform that combines their market leading software technology with Patni?s world-class IT and BPO services
– Patni iCAPA Solution for Life Sciences Certified as Powered by SAP NetWeaver
Patni announced that its iCAPA Solution 2.0 for Life Sciences has achieved SAP certification as powered by the SAP NetWeaver technology platform. The solution has been proven to integrate with SAP solutions, providing customers with access to a Corrective and Preventive Action (CAPA) platform to meet regulatory compliance requirements for Quality Systems and drive new levels of product quality and operational efficiency
– Patni Launches Inventory Liability & Risk Management Dashboard
Patni announced the launch of an Inventory Liability and Risk Management Dashboard in collaboration with SAP. The solution, built on top of the SAP Supply Network Collaboration (SAP SNC) application and leveraging the SAP BusinessObjects Xcelsius Enterprise software, helps enterprises calculate in near real time the monetary value of the inventory which is at risk at any given point across the supply chain
– Patni launches ?Patni Learning Edge?
Patni announced the launch of Patni Learning Edge (PLEdge), an industry-academia collaboration focusing on graduate colleges. Patni has signed MoUs with 14 leading graduate educational institutes of Science in Mumbai, and is designed to effectively integrate into the supply chain, bridging the gap that currently exists between formal education and requirements on-ground
Financial Statements Analysis:
Revenues
Revenues during the quarter were higher by 3.3% sequentially to US$ 161.9 million (Rs.7,729.1 million), from US$ 156.7 million (Rs.7,969.1 million) in the preceding quarter. Revenue growth was driven by volume growth of 2.2% (including higher number of days) and 1.1% due to currency impacts. Number of active clients were 294 at quarter end as compared to 320 in Q1 2009.
Gross Margin
Gross Margins for the quarter were at 34.7% or US$ 56.2 million (Rs.2,684.5 million) against 33.1% or US$ 51.8 million (Rs.2,634.5 million) in the previous quarter reflecting an increase of 8.6%. Higher utilization and other efficiencies net of marginal negative rupee change has impacted the margins favorably.
Depreciation and amortization expenses in cost of revenues were US$ 4.6 million during the quarter against US$ 4.3 million during the previous quarter.
Selling General and Administrative Expenses (SGA Expenses)
Sales and marketing expenses during the quarter were at US$ 12.0 million (Rs.572.7 million) at 7.4% as compared to US$ 13.3 million (Rs.676.7 million) at 8.5% in the previous quarter.
G&A expenses during the quarter were lower at US$ 15.9 million (Rs.756.9 million) or 9.8% as compared to US$ 16.1 million (Rs.818.7 million) at 10.3% during the previous quarter.
Overall Depreciation and amortization expenses in SGA were at US$ 2.1 million for the quarter as against US$ 1.9 million in Q1 2009.
Foreign exchange gain/loss
The revaluation and mark to market foreign exchange loss for the quarter were at US$ 4.1 million (Rs.197.2 million) as compared to foreign exchange loss of US$ 6.5 million (Rs.330.8 million) during the previous quarter.
The quarter end rate for debtor?s revaluation was Rs.47.90. Outstanding contracts at the end of Q2 2009 were about US$ 319 million which were contracted in the range of Rs.41.1 to Rs 51.2.
Operating Income
Operating Income including foreign exchange gain/ loss during the quarter was at US$ 24.3 million (Rs. 1,158.3 million) or at 15.0% against US $16.0 million (Rs.812.4 million) or 10.2% during the previous quarter, reflecting an increase of 51.9% on QoQ and 44.5% YoY, led by operating and cost efficiencies.
Other Income
For Q2 CY2009, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 6.9% or US$ 11.2 million (Rs.536.0 million) compared to 1.6% or US$ 2.5 million (Rs.128.4 million) during the previous quarter, reflecting a period increase due to fixed maturity investments.
Profit before Tax
Profit before tax for the quarter at 21.9% was US$ 35.5 million (Rs.1,694.2 million), higher by 91.9% as compared to 11.8% or US$ 18.5 million (Rs. 940.9 million) during the previous quarter.
Income Taxes
Income tax for the quarter was at US$ 6.8 million (Rs.325.8 million) at 19.2% effective tax rate on profit before tax as compared to 19.1% during the previous quarter. Overall Tax rate for the year is expected to be at 18.5%-19.5% for the year due to expiry of certain STPI unit benefits.
Net Income
Consequently, net income for the quarter at 17.7% was US$ 28.7 million (Rs.1,368.5 million) against US$ 15.0 million (Rs.760.7 million) at 9.5% in the previous quarter.This is 91.7% increase on QoQ and 18.7% on YoY basis.
Balance Sheet and Cash Flow changes
During the quarter, against net income of US$ 28.7 million (Rs.1,368.5 million), cash from operating activities was at US$ 43.8 million (Rs. 2,091.0 million) net of changes in current assets and liabilities of US $ 17.1 million and non cash charges of US$ (-)1.9 million. These non cash charges comprise of depreciation and amortization of US$ 6.6 million and non cash compensation of US$ 0.8m and, FMP income and other charge of US$ (-) 9.4 million.
Net cash from investing activities was US$ 29.9 million (Rs.1,425.4 million) including capital expenditure of US$ 6.7 million (Rs.319.2 million),net proceeds from sale of investments of US$ 23.2 million (Rs.1,106.2 million).
Net cash outflow on financing activities was US$ 7.9 million (Rs.378.4 million) comprising payment of dividend on common shares of US$ 7.9 million (Rs.375.7 million) and US$ 0.1 million (Rs.2.8 million) on other financing activities. Over all cash and cash equivalents (including short term investments) post revaluation change, were at US$ 347.6 million (Rs.16,595.5 million), compared to US$ 297.1 million (Rs.15,115.2 million) at close of Q1 2009.
Receivables at the end of Q2 2009 were at US$ 100.7 million as compared to US$ 110.1 million at the end of Q1 2009. Number of days outstanding (Including Unbilled) for current quarter was 75 days and improved as compared to 83 days in Q1 2009, in line with estimates.
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 second quarter ended June 30, 2009
– US GAAP
A Consolidated Statement of Income in US GAAP is available on page 3 of the Fact Sheet attached to this release
– Per centage analysis
Any per centage amounts, as set forth in this release, unless otherwise indicated, have been calculated on the basis of the US Dollar amounts derived from our consolidated financial statements prepared in accordance with US GAAP, and not on the basis of any translated Rupee amount. Calculation of per centage amounts on the basis of Rupee amounts may lead to results that are different, in a material way, from those calculated as per US 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 US 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.
