BackIGate sees stronger second half, Q2 sales rise 10%
The company posted a net profit of $311.7 million, as compared with $283.3 million in the second quarter of 2013
PremiumBangalore/Mumbai: Nasdaq-listed software services exporter IGate Corp.’s chief executive Ashok Vemuri forecast a stronger performance in the second half, backed by a healthy deal pipeline, after the company repaid a sizable chunk of its net debt that hurt its second quarter profit.
For the quarter ended June, IGate posted net profit of $3.1 million, compared with $30 million in the year-ago period —down nearly 90%. Revenue jumped 10% to $311.7 million, helped mainly by healthy spending from existing and new clients.
The company attributed the decline in net income to a one-time charge of $51.8 million arising from the extinguishment of debt in the quarter.
Since CEO Vemuri took over at IGate, he has led an organizationwide reshuffle, creating new verticals to focus on newer opportunities and exited non-strategic markets and geographies. The reorganization also led to the exit of executives such as former chief delivery officer Sean Narayanan.
IGate has also managed to win key outsourcing contracts from the likes of UBS and French telecom firm Orange, since Vemuri took over the reins of the company. Vemuri said that the company’s deal pipeline is healthy and expects a strong pickup in the second-half of the year.
“We’re happy with the way we’ve performed in H1 and we believe that our H2 will be stronger," Vemuri said in a post-earnings interview.
IGate’s net debt currently stands at about $475 million and CEO Vemuri said the company was satisfied with current debt levels. “Debt to EBITDA right now is 1.6 times, which is in our comfort zone.There’s nothing wrong in having some level of debt—obviously we can’t have crazy levels of debt like we had previously. We’ve brought it down to reasonable levels now," Vemuri said in a post-earnings interview.
Last year, IGate had signed a $360 million refinancing deal to save on interest costs, aiming to bring down interest costs by at least $100 million over the next five years.
IGate accumulated most of its debt from the $1.2 billion acquisition of Patni Computer Systems in 2011 under then CEO Phaneesh Murthy. Since Vemuri took over as CEO, he has attempted to allay concerns over the company’s high net debt and has set about repaying chunks of the debt.
On a sequential basis, IGate’s revenue rose 3.2% to $311.7 million from $302.2 million in the first quarter of 2014.
IGate also saw a slight decline in its gross margin at 36.6% in the quarter, compared with 37.9% in the second quarter of 2013, and 37.5% in the first quarter of 2014.
Further, adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) came in $70 million, compared to $66.2 million in the second quarter of 2013 and $75.2 million in the first quarter of 2014.
During the June quarter, the company added nine new clients including five Global 2000 companies. As of 30 June 2014, it had 32,742 employees with a net addition of 1,907.
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