Patnis Q1 CY2008 revenues up 13.1%

Written by Businesswire India | Mumbai, April 30: | Updated: Apr 30 2008, 16:58pm hrs
Patni Computer Systems Limited (Patni) on Wednesday announced its financial results for the first quarter ended 31st March 2008.

Performance Highlights for the quarter ended March 31, 2008

-- Revenues for the quarter at US$ 176.4 million (Rs. 7,061.2 million)

-- Up 13.1% YoY from US$ 156.0 million (Rs. 6,724.1 million)

-- Up 1.3% sequentially from US$ 174.1 million (Rs. 6,861.9 million)

-- Contribution from top customer at 11.1% for the quarter from 12.5% during the previous quarter

-- New client acquisitions during the quarter were 34 as compared to 37 of previous quarter. Number of active clients was 331 at the quarter end as compared to 318 in Q4 2007

-- Offshore leverage in the current quarter was 70.8% compared to 70.3% in the previous quarter. On YoY basis offshore leverage has increased by 2.4%.

-- Operating Income for the quarter at US$ 17.3 million (Rs. 693.4 million)

-- Down 42.9% YoY from US$ 30.3 million (Rs. 1,307.8 million)

-- Down 36.0% sequentially from US$ 27.1 (Rs. 1,066.3 million)

-- Net Income for the quarter at US$ 18.1 million (Rs. 724.6 million)

-- Down 35.0% YoY from US$ 27.8 million (Rs. 1,200.3 million)

-- Down 28.4% sequentially from US$ 25.3 million (Rs. 997.2 million)

-- EPS for the quarter at US$ 0.13 per share (US$ 0.26 per ADS)

-- Stock based expenses in Q1 CY2008 were at US$ 1.1 million compared to US$ 1.3 million in the previous sequential quarter

Future Outlook:

-- Q2 CY2008 revenues are expected to be at US$ 180 to US$ 181 million and net income (excluding the foreign exchange gain/loss) is expected to be in the range of US$ 22.0 to US$ 23.0 million taking the operations at a constant dollar value of Rs 40 per US$ for the quarter.

Management Comments

Commenting on the quarter, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, While Revenue and Profits are in line with our guidance we are in a cautious market situation in 2008 with uncertainty and volatility in global markets. We are running our business in lower than normal visibility. At the same time we find ourselves in good position and remain confident of our prospects on mid to long term basis. We are making all the investments necessary to diversify our business. We have recently appointed Mr.Louis Theodoor (Loek) van den Boog from our Board as Executive director of the company to expand and deepen the management.

The newly appointed Executive Director Mr. Loek van den Boog, said, We are committed to build Patni to a next generation services company with adequate differentiation and Business Solutions oriented focus leveraging the global delivery model. We are confident of our abilities to transform the business with mix of internal and market based measures to enhance overall shareholder value with profitable and sustainable growth.

Commenting on the performance, Mr. Mrinal Sattawala, Chief Operating Officer, Patni, said, During the current quarter our revenue base has been diversified further resulting in reduced dependence on top 10 accounts. For the quarter under review we have added 34 new clients bringing our tally of active clients to 331.Going forward we expect to leverage our operating efficiencies significantly to grow profitability.

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, Patni, said, We continue to take steps in rationalization of internal operations to manage costs, and invest in our business to increase our services and market foot prints. We are actively looking for strategic acquisitions and shall invest in the business on all dimensions. We are seeking these acquisitions in BPO, Enterprise applications and consulting specifically in UK and Continental Europe and are expanding geographically to enhance our presence in the region. Similarly Product Engineering business is an area of identified investments organically and inorganically.

Corporate Developments

-- Executive Director Appointment

-- Mr. Louis Theodoor (Loek) van den Boog appointed as Executive Director of the Company with a view to strengthen the management team.

-- Business Leadership Appointments in Europe

-- Peer Gribbohm, Senior Vice-President, Strategic Market Development responsible for the development of Patnis business across Europe.

-- Derek Kemp, Senior Vice-President, - responsible for driving growth in the Communications, Media, and Entertainment sector within Europe.

-- Awards

-- Patni Won Prestigious NASSCOM Award for the 100 IT Innovators for 2007.

Financial Statements Analysis:

Revenues

Revenues during the quarter were marginally ahead of guidance at US$ 176.4 million (Rs.7,061.2 million), representing a sequential increase of 1.3% and 13.1% increase on YoY basis in US dollar terms. In line with our expectation share of Europe and Middle East business has increased to 17.6% from 15.9% YoY while Asia Pacific share has grown to 5.8% from 4.3% YoY.

Gross Margin

Gross Margins were at 28.7% or US$ 50.6 million (Rs.2,024.7 million) against 30.5% or US$ 53.1 million (Rs.2,092.5 million) in the previous quarter.

-- Overall movement in Gross Margins was due to

- Increased immigration cost on account of US H1B filings impacting (-)1.3%.

- Drop in utilization net of other operating cost levers impacting (-)0.5%.

--nDepreciation and amortization expenses in CGS were US$ 5.4 million against US$ 5.0 million in Q4 2007 and US$ 4.1 million in Q1 2007.

Selling General and Administrative Expenses (SGA Expenses)

-- Sales and marketing expenses during the quarter were at US$ 12.3 million (Rs. 494.1 million) at 7.0% as compared to US$ 11.8 million (Rs. 463.1 million) at 6.7% in previous quarter.

-- G&A expenses during the quarter were at US$ 18.7 million (Rs.748.7 million) at 10.6% as compared to US$ 18.8 million (Rs.739.8 million) at 10.8% in previous quarter.

-- Overall Depreciation and Amortization expenses in SGA were US$ 2 million for the quarter as against US$ 1.8 million in Q4 2007.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange loss for the quarter US$ 2.2 million (Rs. 89.0 million) as compared to forex exchange gain of US$ 4.7 million (Rs.185.0 million) in previous quarter.

The quarter end rate for debtors revaluation was Rs. 40.11.Outstanding contracts at the end of Q108 were about US$ 337.5 million contracted in the range of Rs.39.77 to Rs.43.50.

Other Income

For Q1 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 (Rs.148.4 million ) compared to 1.6% or US$ 2.8 million (Rs. 109.9 million) in previous quarter.

Profit before Tax

PBT was down 29.5% sequentially at US$ 21.0 million (Rs. 841.8 million) against US$ 29.8 million (Rs.1,176.2 million) in previous quarter due to changes in gross margin and foreign exchange gain / loss.

Income Taxes

Income tax for the quarter was at US$ 2.9 million (Rs. 117.2 million) at an effective tax rate of 14%. Overall normalized effective tax rate is in the range of 15.5%-16%.

Net Income

Consequently, net income for the quarter at 10.3% was US$ 18.1 million (Rs.724.6 million) against US$ 25.3 million (Rs.997.2 million) at 14.5% in previous quarter.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 18.1 million (Rs.724.6 million), cash from operating activities was at US$ 16.0 million (Rs. 640.0 million) net of changes in current assets and liabilities of US$ 8.5 million and non cash charges of US$ 6.4 million. These non cash charges comprise of depreciation and amortization of US$ 7.4 million ,and other charges including stock option cost of US$(-) 1.0 million.

Net cash from investing activities was US$ 8.3 million (Rs.333.8 million) including capital expenditure of US$ 16.5 million (Rs.660.1 million), net proceeds from sale of investments of US$ 8.2 million (Rs.326.3 million).

Net Cash inflow on financing activities was US$ 0.1 million (Rs.4.4 million) comprising proceeds from common shares issued of 0.2 million (Rs.7.4 million). Over all cash and cash equivalents (including short terms investments) were at US$ 326.1 million (Rs.13,050.7 million),compared to US$ 330.4 million (Rs.13,019.2 million) at close of Q4 2007.

Receivables at the end of Q1 2008 were at US$ 136.8 million as compared to US$ 136.4 million at the end of Q4 2007. Days outstanding for the current quarter were 72 days as compared to 73 days in Q4 2007.

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 first quarter ended 31st March 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 8 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)

About Patni Computer Systems Ltd:

Patni Computer Systems Limited is a global provider of IT Services and business solutions, servicing Global 2000 clients. Patni caters to its clients through its industry focused practices, including insurance, financial services, manufacturing, life sciences, telecommunications and media & entertainment, and its technology-focused practices. With an employee strength of over 15,000; multiple global delivery centres spread across 11 cities worldwide; 22 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 663 million for the year 2007. Patnis 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 client's 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. 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 fact sheet, tables and press release, please click on the links given below:

http://www.businesswireindia.com/attachments/Fact_Sheet_Q108_for_circulation(2).xls

http://www.businesswireindia.com/attachments/Press_ReleaseTable_Q108.xls

http://www.businesswireindia.com/attachments/Patni_results_press_release.doc