Intelligroup, Inc. Q1 2010 Earnings Call Transcript

Intelligroup, Inc. Q1 2010 Earnings Call Transcript
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Intelligroup, Inc. (ITIG)

Q1 2010 Earnings Call Transcript

May 4, 2010 10:00 am ET

Executives

Norberto Aja – IR

Vikram Gulati – CEO and President

Alok Bajpai – CFO

Analysts

Bill Jones – Singular Research

Presentation

Operator

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Ladies and gentlemen, thank you for standing by. Welcome to the Intelligroup first quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded, Tuesday, May 04, 2010.

It is now my pleasure to turn the conference over to Mr. Norberto Aja, Investor Relations. Please go ahead, sir.

Norberto Aja

Thank you, operator. Good morning and welcome to Intelligroup's first quarter conference call. I would like to remind everyone of the Safe Harbor statement included in the press release and that the precautionary statements apply to today's conference call as well.

During the course of the call, the company may make forward-looking statements that reflect management's current expectations regarding future performance or events including those related to market demand for services, strategic partnerships and future sales.

Although management does believe that the expectations reflected in such statements are reasonable, they give no assurance that such expectations will prove to be correct, and you should be aware that actual results could differ materially from those that are contained in the forward-looking statements today.

Forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the impact of the general economic conditions and strength of the global recovery, variability of quarterly operating results, continued uncertainty of the IT market, uncertainty in revenues for traditional professional service offerings and revenues derived from the application management business, loss of one or more significant customers, reliance on large projects, concentration of revenue, ability to attract and retain professional staff, dependence on key personnel, various projects associated risks, including termination with short notice, substantial competition, volatility in quarterly operating results caused by fluctuations in the currency markets, and the ability to manage growth effectively, including risks associated with strategic partnerships, risks associated with intellectual property rights and risks associated with international operations as well as other risks detailed from time-to-time in the company's filings with the Securities and Exchange Commission, including the company's Form 10-K for the fiscal year ended December 31, 2009.

The company's forecasts are dynamic and subject to change. Therefore, this forecast speaks only as of the date of this conference call and webcast today, May 04, 2010. The company assumes no obligation to update such information contained in today's call.

With that, I would now like to turn the call over to Vikram Gulati, CEO of Intelligroup. Vikram?

Vikram Gulati

Thank you, Norberto. Good morning to everyone in the US, and good evening to those in Asia. Thank you for joining us today. I will begin with an overview of the first quarter's performance and then ask Alok Bajpai, our CFO, to discuss our financial results and operating metrics in greater detail before taking our questions.

While we continue to see a gradual improvement in IT spending trends during the first quarter, there still clearly remains a somewhat cautious stance on the part of prospective customers as well as some stepped up pressure on pricing. Operating under these environments, we remain focused on our core strength around enterprise application and the key vertical markets that we know best. We found that focus to be successful in delivering new business and follow-on contracts.

We have maintained our sales and marketing portion [ph] of investment at a consistent level as we do not yet see sufficient reason to accelerate in those areas. This strategy proved successful as we were able to grow our revenues by 8.7%, operating income by 70%, and net income more than double to $2 million in quarter one of 2010; though these comparisons are against a particularly challenged time period last year.

From an industrial vertical perspective, we continue to see good results in the life sciences and consumer products vertical. This is largely due to our deep experience and strong position within these verticals, which we leveraged to win new contracts.

We won a large application development engagement with a major US-based life sciences client expected to generate revenues of over $30 million over the next five years. The contract was secured late last year and we commenced work on the contract in quarter one.

By maintaining our focus in a select group of verticals, we are able to understand the unique needs and business challenges of these customers and deliver tailored solutions that provide substantial value. This remains our core strategy and value proposition.

Application testing also continues to be an area of our emphasis, success and growth for Intelligroup as we see our expertise and proprietary tools in demand. We are successfully being cross-selling this expertise to existing customers, and we continue to win new engagements including with larger enterprises in excess of $5 billion in revenue. As an example, we secured a multi-year multi-million dollar testing engagement and we have commenced work on that contract during the first quarter of this year.

On a geographic basis, our business remains relatively unchanged with contributions from the US representing 81% of the billing; Europe, 14%; and India, Middle East, and Japan comprising the remaining 5%.

As we announced yesterday, we are making very good progress in forging [ph] a base for focus, sales and delivery in the Middle East region, Saudi Arabia in particular. Just yesterday, we announced a registration of a 50-50% joint venture with the Saudi-based Al Tamimi Group. Al Tamimi is a large diversified and well respected business group in Saudi Arabia. The joint venture will be named Intelligroup Saudi Arabia Co. Ltd., and will be focused on bringing our suite of services with the rapidly growing economies of the region.

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