IGATE Reports Sequential Revenue Growth of 3.5% and Year-on-Year of 10%

IGATE Corporation (“IGATE” or the “Company”) (NASDAQ: IGTE), the New Jersey-headquartered integrated technology and operations solutions provider, today announced its financial results for the third quarter and nine months ended September 30, 2014.

Third Quarter Financial Highlights

• Revenues were $ 322.8 million
  • Increased 10.0% compared to $ 293.4 million in the third quarter of 2013
  • Increased 3.5% sequentially compared to $311.7 million in the second quarter of 2014
• Gross margin was 35.3%
  • Compared to 41.4% in the third quarter of 2013
  • Compared to 36.6% in the second quarter of 2014
• Adjusted EBITDA was $68.8 million
  • Compared to $78.4 million in the third quarter of 2013
  • Compared to $70.0 million in the second quarter of 2014
• Net Income was $37.3 million
  • Compared to $31.9 million in the third quarter of 2013
  • Compared to $3.1 million in the second quarter of 2014 (after a one-time charge of $51.8 million arising from extinguishment of debt)
• Non GAAP diluted earnings per share were $0.52
  • Compared with $0.46 per share in the third quarter of 2013
  • Compared with $0.48 per share in the second quarter of 2014
• GAAP diluted earnings per share were $0.34
  • Compared to GAAP diluted earnings per share of $0.30 in the third quarter of 2013
  • Compared to GAAP diluted earnings per share of $(0.07) in the second quarter of 2014 (after a one-time charge of $51.8 million arising from extinguishment of debt)
• As of September 30, 2014, the Company had 34,455 employees with a net addition of 1,713 during the third quarter ended September 30, 2014

Ashok Vemuri, President and CEO, said, “I am pleased that we are able to sustain our broad-based growth both sequentially as well as year over year. Our clients are responding positively to the changes we have implemented in the Company. Our industry utility solutions, Reference Data Management Solution for the financial sector (IDMS) and our Long Term Care Solution for healthcare sector (IBAS), continue to find significant market traction and drive a differentiated industry value proposition. Through our IGATE Corporate University we are building market-ready talent capital and emerging technology solutions, further strengthening our competitive position.”

“We are pleased to be the only IT services company to be listed in Fortune 100 Fastest-Growing Companies in the U.S., further validating our go-to-market strategy,” he added.

Sujit Sircar, CFO, said, “Although we experienced some margin headwinds due to the continuing investment we had to make in some of our transformational client engagements, expanded client coverage and hiring for growth, I am happy with the increase in net income, while we continue to maintain healthy earnings growth. We lowered our debt by another $126 million during the quarter which has improved our leverage further.”

Third Quarter Operating Results

Results for the three and nine months ended September 30, 2014 and 2013, respectively, on a GAAP and non-GAAP basis are provided in the table below.

New customer and project wins in the quarter

• A U.K.-based global retail company in the business of providing optician services and visual instruments selected IGATE to assist the client’s IT Operations program. As part of the multi-year engagement, IGATE will provide integrated support to over 40 applications covering the functional areas of the client’s Retail and Supply Chain as well as their core business applications such as legacy point of sale and enterprise systems. The engagement is expected to bring improved efficiency in the client’s store operations, order management, product data, pricing and promotion, contact center and warehouse management.
• IGATE has been selected by a large North American-based financial institution to streamline its Life, Health and Disability administration program. As part of the multi-year engagement, IGATE will consolidate the client’s current administration platforms and migrate the bulk of the client’s policies to its proprietary ITOPS-based administration platform. IGATE will introduce a modern administration system to service these blocks and deliver operational efficiency and superior policy holder experience. In addition to the administration platform, IGATE will bring to bear a modern ecosystem, which includes workflow and self-serve portals for policy holders driving contact center volumes down and driving up policy holder satisfaction. This engagement is also expected to make the client’s fixed IT assets and costs variable and also positively impact its reserves.
• A North American-based energy company selected IGATE to provide independent verification and validation services for its internal operations division. As part of the engagement, IGATE’s testing center of excellence team will work with the client’s business and IT divisions to create a coherent end-to-end business process flow to align diverse departments and teams at different stages of the client’s value chain to provide a unified business experience to the end customer. IGATE will also provide Diversity Business Enterprise (DBE) spend by leveraging its technology ecosystem to help the client align with its organization-wide focus.
• One of the world’s largest chains of fast food restaurants selected IGATE to transform its point of sale, back office and digital landscape for its Switzerland operations. As a strategic technology partner, IGATE will provide a future-proof digital and technology ecosystem through its proprietary Store-in-a-Box solution. Through this solution, IGATE will offer a 24x7 multi-lingual service to remotely manage store applications and infrastructure, onsite field service, inventory management, data management and deployment. The engagement is expected to lower the operational costs to the client and enhance customer experience in the region.
• IGATE was selected by a leading North America-based domestic sugar producer to assist the company in increasing operational efficiencies across multiple warehouses around the globe for the distribution and storage of its products. As a strategic partner, IGATE will facilitate a lean distribution network with its warehouse management solutions. IGATE will leverage its consumer packaged goods industry best practices and global delivery model to implement and rollout its solutions to all of the client’s warehouses providing processes standardization. The engagement is expected to bring down operational costs and shore up process efficiencies by managing the inventory across the client’s value chain.

Significant Events and Recognitions in the Quarter

• IGATE was ranked 51 in Fortune’s list of 100 Fastest-Growing Companies in the U.S. – the only IT services company to be featured on the list.
• Srikanth Iyengar joined IGATE as Senior Vice President and Head of Europe and Australia and member of the Executive Council
• IGATE launched IGATE Corporate University in the Company’s training and development facility in Pune, India. The University will focus on building custom training programs and methodologies in association with leading global educational institutions.
• IGATE announced a new facility in Noida, India. The facility is spread across 60,000 sq. ft. and can accommodate about 550 people. The new facility adds to its existing offices in Noida that are housed in the Special Economic Zone.
• IGATE was ranked 29th on IDC’s Financial Insights FinTech Top 100 List
• IGATE was featured in the top quadrant in Zinnov’s Global Service Providers Ratings, 2014 for Product and Engineering Solutions (P&ES). Recognized as an expansive and established player, IGATE was ranked high for its specialization, R&D practice maturity, innovation and IP. IGATE was also ranked in the leadership zone in three sub verticals under P&ES: Automotive, Computer Peripherals and Storage and Industrial Automation.
• IGATE was included in the HFS Blueprint Report for Digital Transformation Services as a “Rising Star.” IGATE was amongst the top 11 players selected in the report from multiple digital solutions providers who participated in this research. IGATE was quoted to be strong in technology and a company that can bring a holistic view across Digital Transformation Services that makes it a true contender–especially in certain industries such as insurance and healthcare and life sciences.
• IGATE was included in Everest PEAK Matrix reports for Life Science IT Outsourcing and Independent Testing Services as a “Major Contender.” The Company was ranked for the scale, scope, domain investments and delivery footprint.
• IGATE continues to be in ‘Established and Expansive’ (Leader) quadrant for the 4th consecutive year in the Zinnov GSPR ratings in the Automotive, Industrial Automation and Storage Devices segments.
• The Asia Pacific HRM Congress awarded the HR Leadership Award for 2014 to Dr. Srinivas Kandula, EVP and Chief People Officer, IGATE, recognizing him for his contributions to the field of HR.
• IGATE won the coveted award on “Innovation in Retention Strategy” at the 5th Asia Best Employer Brand Awards 2014 recognizing the Employee Retention Management initiative of IGATE.
• IGATE was successfully appraised at CMMI Level 5 Version 1.3 under both Development and Services Model. The scope of this appraisal was for the entire organization which included IT, business process outsourcing (BPO) and infrastructure managed services (IMS) across all of IGATE’s locations in North America, Europe and India. With this rating, IGATE joins a very select group of companies who have demonstrated their commitment to better quality and customer service by applying the most rigorous process analysis and improvements.

Conference Call and Webcast

IGATE, the integrated technology and operations company, has scheduled its Earnings Conference Call on Wednesday, October 15, 2014 to discuss the results of its third quarter ended September 30, 2014. Senior management of the company will discuss the financial performance for the quarter and answer participants´ questions during the call.

The call will be webcast live on IGATE’s website (www.igate.com) on the Investor Relations page under the ‘Events’ section. Participants are requested to log in 10 minutes prior to the start of the webcast. The on-demand version of the webcast will be available on the IGATE website shortly after the call.

Investors, potential investors, shareholders and bond holders can access the telephonic replay by dialing 877-660-6853 (toll free) or 201-612-7415 (toll) and entering conference number 13591633. The telephonic replay will be available until October 29, 2014.

About IGATE

IGATE is a global leader in providing integrated technology and operations-based solutions, headquartered in Bridgewater, New Jersey. As a trusted partner to corporations in North America, Europe and Asia Pacific, IGATE provides solutions to clients’ business challenges by leveraging its technology and process capabilities, underwritten by an understanding of domain and industry imperatives. With revenues over US$ 1.2 billion, and a global employee talent capital of over 34,000, IGATE offers productized applications and platforms that provide the necessary competitive and innovation edge to clients across industries, through a combination of speed, agility and imagination. IGATE is listed on NASDAQ under the symbol IGTE.

Follow IGATE on Twitter: @IGATE_Corp
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Use of non-GAAP Financial Measures

This press release contains non-GAAP financial measures as defined by the Securities and Exchange Commission. These non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with, generally accepted accounting principles in the United States (“GAAP”) and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Reconciliations of these non-GAAP measures to their comparable GAAP measures are included in the attached financial tables.

IGATE believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with IGATE´s results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate IGATE´s results of operations in conjunction with the corresponding GAAP measures. These non-GAAP measures should be considered supplemental in nature and should not be considered in isolation or be construed as being more important than comparable GAAP measures.

IGATE believes that providing Adjusted EBITDA and non-GAAP net income and non-GAAP diluted earnings per share in addition to the related GAAP measures provides investors with greater transparency to the information used by IGATE´s management in its financial and operational decision-making. These non-GAAP measures are also used by the Management in connection with IGATE’s performance compensation programs.

More specifically, the non-GAAP financial measures contained herein exclude the following items:

• Amortization of intangible assets: Intangible assets primarily comprise of customer relationships. We incur charges relating to the amortization of these intangibles. These charges are included in our GAAP presentation of earnings from operations, operating margin, net income and diluted earnings per share. We exclude these charges for purposes of calculating these non-GAAP measures.
• Stock-based compensation: Although stock-based compensation is an important component of the compensation of IGATE’s employees and executives, determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expense recorded may not reflect the actual value realized upon the future exercise or termination of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock-based compensation is determined using a complex formula that incorporates factors, such as market volatility, that are beyond the Company´s control. Management believes it is useful to exclude stock-based compensation in order to better understand the long-term performance of IGATE´s core business.
• Foreign exchange (gain)/loss: From time to time, the Company recognizes foreign currency losses on re-measurement of escrow account balance and foreign exchange gains on re-measurement of redeemable non-controlling interest liability. IGATE believes that eliminating these non-capitalized items for purposes of calculating non-GAAP measures facilitates a more meaningful evaluation of IGATE’s current performance and comparisons to its past performance.
• Delisting expenses: We voluntarily delisted the equity shares of our majority owned subsidiary, IGATE Computer Systems Limited from the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited and the American Depository Shares from the New York Stock Exchange. Delisting is an infrequent activity and expenses incurred in connection therein are inconsistent in amount and are significantly impacted by the timing and nature of the delisting. IGATE believes that eliminating these expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of its current operating performance and comparisons to its past operating performance.
• Merger and reorganization expenses: IGATE is merging and reorganizing its overseas subsidiaries and branches with a view to simplifying the corporate structure and has incurred legal and professional expenses in this connection. Merger and reorganization is an infrequent activity and expenses incurred in connection therein are inconsistent in amount and significantly impacted by the timing and nature of the reorganization. IGATE believes that eliminating these expenses for purposes of calculating non-GAAP measures facilitates a more meaningful evaluation of IGATE´s current operating performance and comparisons to its past operating performance.
• Preferred dividend and accretion to preferred stock: IGATE has issued 8.00% Series B Preferred Stock. IGATE also incurred issuance costs, which have been netted against the proceeds received from the issuance of Series B Preferred Stock. The Series B Preferred Stock is being accreted over a period of six years. Although the effect of inclusion of equivalent units of common stock towards convertible participating preferred stock is anti-dilutive for GAAP purposes, the non-GAAP diluted earnings per share has been calculated assuming the conversion of all outstanding shares of preferred stock into equivalent units of common stock. IGATE believes that eliminating these expenses as well as inclusion of equivalent units of common stock towards the preference shares to compute diluted earnings per share for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of IGATE´s current operating performance and comparisons to its past operating performance.
• Loss on extinguishment of Debt: IGATE has extinguished Debt prior to its scheduled maturity which has resulted in non-operating expenses which otherwise would not have been incurred. Debt extinguishment related charges that are excluded from GAAP earnings to determine non-GAAP earnings consist of the extinguishment premium paid as well as the write-off of unamortized debt issuance costs. These expenses are inconsistent and of a non-recurring nature and IGATE believes that eliminating them for purposes of calculating non-GAAP measures facilitates a more meaningful evaluation of IGATE´s current operating performance and comparisons to its past operating performance.

From time to time in the future, there may be other items that IGATE may exclude in presenting its financial results.

Forward-Looking Statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of the Company may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements regarding the business outlook, the expected performance of the Company’s products and services for its clients, and all other statements in this release other than statements of historical fact are statements that could be deemed forward-looking statements. Words such as “expect,” “potential,” “believes,” “anticipates,” “plans,” “intends” and other similar expressions are intended to identify such forward-looking statements. Forward-looking statements in the press release include, without limitation, statements regarding the business outlook, and the expected performance of the Company’s products and services for its clients, and other matters that involve known and unknown risks, uncertainties and other factors that may cause results, levels of activity, performance or achievements to differ materially from results expressed or implied by this press release. Such risk factors include, among others: uncertain global economic conditions, concentrated revenues, new organizational and operational strategies, continued pricing pressures and the significant indebtedness which will use a significant portion of its cash flows to service such indebtedness, as a result of which the Company might not have sufficient funds to operate its businesses in the manner it intends or has operated in the past. Additional risks relating to the Company are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 as well as the Company’s other reports filed with the Securities and Exchange Commission. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While the Company believes these estimates to be accurate, actual results may differ materially from those contained in the forward-looking statements in this press release. These amounts could also differ materially from actual reported amounts in the Company’s quarterly Report on Form 10-Q for the quarter ended September 30, 2014. The Company assumes no obligation and does not intend to update these forward-looking statements as circumstances change. This document does not constitute an offer to purchase or to sell securities in any jurisdiction.

IGATE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands)
(unaudited)
			Three Months ended										Nine Months ended
			September 30,										September 30,
			2014					2013					2014					2013
Revenues			$	322,774				$	293,406				$	936,725				$	851,592
Cost of revenues (exclusive of depreciation and amortization)				208,801					172,063					595,314					518,073
Gross margin				113,973					121,343					341,411					333,519
Selling, general and administrative expense				49,934					46,862					140,103					139,004
Depreciation and amortization				9,384					8,439					27,660					26,305
Income from operations				54,655					66,042					173,648					168,210
Loss on extinguishment of debt				-					-					(51,760	)				-
Other income (loss), net				(170	)				(19,415	)				(22,080	)				(27,023	)
Income before income taxes				54,485					46,627					99,808					141,187
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