- In a separate release today, Capgemini and Kanbay International
announced a definitive agreement whereby Capgemini will acquire
Kanbay for $29 per share in cash, subject to Kanbay shareholder and
regulatory approval ROSEMONT, Ill., Oct. 26 /PRNewswire-FirstCall/
-- Kanbay International, Inc. (NASDAQ:KBAY), a leading global
management consulting, technology development, integration and
outsourcing firm, today reported it signed a definitive agreement
to be acquired by Capgemini for $29 per share in cash, subject to
Kanbay shareholder and regulatory approval, and also reported
financial results for its third quarter ended September 30, 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050830/CGTU033LOGO )
Third Quarter 2006 Highlights: -- Consolidated revenue of $114.1
million, 8% sequential growth -- Net income increased 32%
sequentially -- Diluted EPS of $0.23 is net of $0.03 for employee
stock compensation expense -- Kanbay, excluding Adjoined, generated
revenue of $78.2 million, 7.5% sequential and 33% year-over-year
revenue growth, respectively -- Third party revenue, excluding
Adjoined, was $37.6 million, growth of 36% year-over-year and an 9%
sequential increase -- 40 new clients were added in the quarter, a
company record -- Cash flow from operations totaled $21 million
"Kanbay recorded another period of strong growth in the third
quarter", commented Raymond Spencer, Chairman and CEO of Kanbay. "I
am proud of our consistent operating performance. We continue to
strengthen a platform for balanced growth across revenue sources."
"Kanbay's stand-alone third party revenue grew 36% year-over-year
on a comparable basis and 9% sequentially." Kanbay's expertise as a
highly efficient provider of end-to-end, domain- based IT solutions
was independently acknowledged in a report published October 3rd by
Forrester Research which acknowledged Kanbay as a top offshore
provider to the retail banking industry. "Kanbay signed 40 new
clients in the third quarter. Our Platinum account roster now
stands at 34, including one new Platinum client added in the third
quarter." Spencer added: "Given our rapid integration with
Adjoined, we are marketing to clients as a single entity with a
full operating suite of solutions. We regard synergistic revenue
opportunities as business neither company would have won
independently and we closed 20 synergistic deals since March. We
are now focused on accretive, large scale offshore initiatives that
support the output of prior consulting and ERP work conducted in
the past by Adjoined." Financial Review Bill Weissman, Kanbay's
Chief Financial Officer, added, "Our consolidated revenue was
$114.1 million dollars, an 8% sequential increase. Kanbay,
excluding Adjoined, posted $78.2 million in revenue and Adjoined
recorded $35.9 million. Kanbay revenue, excluding Adjoined, was up
33% year-over- year." "Third party revenue was strong again this
quarter. Kanbay third party revenue, before Adjoined, grew 9%
sequentially and 36% year-over-year on a comparable basis."
Weissman added, "Our related party revenue grew 7% sequentially and
30% year-over-year on a comparable basis, higher than our target of
low-to-mid teens. This performance reflects the continued success
of our partnership." "Diluted earnings per share, after stock
compensation expense was $0.23 in the third quarter," Weissman
added. "Employee stock compensation expense decreased EPS by $0.03
in quarter three. Quarter-over-quarter EPS growth of 28% reflects
in part the roll-off of seasonal and integration related expenses."
"In addition to operating margins increasing over the second
quarter to 11.8%, we also had strong operating cash flow of $21
million in the quarter and an increase in our cash balance to $81
million, an $11 million sequential increase." Outlook and Guidance
In the fourth quarter, Kanbay anticipates total consolidated
revenues of at least $119 million. On a stand-alone basis, Kanbay
should achieve revenue of approximately $83 million, while Adjoined
should contribute approximately $36 million in the fourth quarter.
Sequential revenue trends for Adjoined are affected by fewer
billing days due to year-end holidays in the United States. Based
on Kanbay's performance year-to-date and taking into account
revenue synergies, the company is increasing full-year consolidated
revenue guidance from at least $402 million to at least $413
million. In terms of earnings, on a consolidated basis, Kanbay is
targeting fourth quarter 2006 EPS of $0.25, including a negative
$0.03 impact from stock compensation expense with a full year EPS
of at least $0.85, increased from $0.81. Upwardly revised guidance
issued today does not include any impact from costs associated with
the acquisition of Kanbay by Capgemini. Capgemini to Acquire Kanbay
In a separate announcement today, Capgemini and Kanbay announced
they entered into a definitive merger agreement whereby Capgemini,
a global consulting, technology and outsourcing services provider,
would acquire Kanbay in a transaction valued at $1.3 billion.
Capgemini will pay $29 in cash for each Kanbay share. The
transaction is subject to Kanbay shareholder and regulatory
approval and other closing conditions. Additional details on the
transaction are discussed in a press release that can be found at:
http://www.capgemini.com/announcement or http://www.kanbay.com/.
Important Conference Call Details Kanbay and Capgemini will host a
joint conference call to discuss the definitive merger agreement at
8:30 a.m. (ET) on Thursday, October 26, 2006. Domestic callers dial
(718) 354-1359. U.K. callers dial 44 (0) 20 7365 1837. The access
code is 8650423. A 7-day replay of the call will be available as
follows: dial (718) 354-1112. U.K. callers dial 44 (0) 20 7806
1970. The access code is 8650423. Kanbay management had previously
scheduled a conference call to discuss their results of operations
for the third quarter 2006 at 8:30 a.m. (ET) on Thursday, October
26, 2006. That call has now been rescheduled. Kanbay management
will host a conference call on Thursday, October 26, 2006, at 10:30
a.m. (ET) to discuss the Company's results of operations for the
third quarter and to discuss the definitive merger agreement
announced today between Kanbay and Capgemini. The dial-in numbers
and passcodes are unchanged. To participate in the call, domestic
callers can dial (866) 800-8652 and international callers can dial
(617) 614-2705. The passcode for the conference call is 69760823.
The conference call will also be webcast and accessible through
Kanbay's website at http://www.kanbay.com/. Please access the
website at least fifteen minutes prior to the call to register and
download any required software. A replay of the conference call
will be available, beginning in approximately 48 hours, for one
week, through November 2, 2006, by dialing (888) 286-8010 for
domestic callers and (617) 801-6888 for international callers. The
passcode for the replay is 73388142. A webcast replay of the
conference call will also be available in approximately 48 hours
through Kanbay's website at http://www.kanbay.com/. About Kanbay
Founded in 1989, Kanbay International, Inc. (KBAY) is a global IT
services firm with approximately 6,900 associates worldwide. Kanbay
provides a highly integrated suite of management consulting,
technology integration and development, and outsourcing solutions
through a proven global delivery platform to clients focused on
Financial Services and Consumer & Industrial Products, as well
as an emerging presence in the Communications & Media and Life
Sciences industries. Kanbay is a CMM Level 5 assessed company
headquartered in greater Chicago with offices in North America and
India as well as London, Singapore, Hong Kong, Tokyo and Melbourne.
Further information about Kanbay can be found at
http://www.kanbay.com/. Forward-Looking Statements This release
contains statements relating to projections or future results.
These statements are forward-looking statements under the federal
securities laws. We can give no assurance that any projections or
future results discussed in these statements will be achieved. Any
forward-looking statements represent our views only as of today and
should not be relied upon as representing our views as of any
subsequent date. These statements are subject to a variety of risks
and uncertainties that could cause our actual results to differ
materially from the statements contained in this release. For a
discussion of important factors that could affect our actual
results, please refer to our SEC filings, including the "Risk
Factors" disclosure in our Form 10-Q for the quarterly period
ending March 31st 2006. Additional Information and Where To Find It
In connection with the proposed acquisition of Kanbay by Capgemini
and the required stockholder approval, Kanbay intends to file with
the Securities and Exchange Commission (the "SEC") a preliminary
proxy statement and a definitive proxy statement. The definitive
proxy statement will be mailed to the stockholders of Kanbay.
KANBAY'S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT AND
OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE ACQUISITION AND
KANBAY. Investors and security holders may obtain free copies of
these documents (when they are available) and other documents filed
with the SEC at the SEC's web site at http://www.sec.gov/. In
addition, investors and security holders may obtain free copies of
the documents filed with the SEC by Kanbay by going to Kanbay's
Investors page on its corporate website at http://www.kanbay.com/.
Kanbay and its executive officers and directors may be deemed to be
participants in the solicitation of proxies from Kanbay's
stockholders with respect to the proposed acquisition. Information
about Kanbay's executive officers and directors and their ownership
of Kanbay common stock is set forth in the proxy statement for
Kanbay's 2006 Annual Meeting of Stockholders, which was filed with
the SEC on May 1, 2006. Investors and security holders may obtain
more detailed information regarding the direct and indirect
interests of Kanbay and its respective executive officers and
directors in the proposed acquisition by reading the preliminary
and definitive proxy statements regarding the proposed acquisition,
which will be filed by Kanbay with the SEC. Presentation of
Non-GAAP Financial Measures In the text of this press release and
the accompanying supplementary financial information, Kanbay
presents certain revenue measures excluding the acquisition of
Adjoined Consulting, and year-over-year third party revenue growth
including Morgan Stanley, all of which are non-GAAP financial
measures. The Company's management uses revenue excluding the
impact of these matters to evaluate the quarterly and annual growth
of the company before the impact of the Adjoined Consulting
acquisition. This non-GAAP financial information is provided as
additional information for investors and is not in accordance with,
or an alternative to, GAAP. In addition, the non-GAAP financial
information provided may be different than similar measures used by
other companies. However, the Company's management believes these
non-GAAP measures provide useful information to investors,
potential investors, securities analysts and others so each group
can evaluate the Company's current and future growth in the
services business in the same manner as management if they so
chose. Reconciliation from revenue to revenue excluding Adjoined
Consulting has been provided in the accompanying supplementary
financial information. Kanbay International, Inc. Condensed
Consolidated Statements of Income (Unaudited) (dollars in thousands
except per share amounts) Three months ended Nine months ended
September 30 September 30 2006 2005 2006 2005 Net revenues-third
parties $73,267 $20,161 $180,213 $62,100 Net revenues-related
parties 40,852 38,790 114,192 107,329 Total revenues 114,119 58,951
294,405 169,429 Cost of revenues 69,396 31,069 174,658 89,895 Gross
profit 44,723 27,882 119,747 79,534 Sales and marketing expenses
7,230 4,701 20,090 13,915 General and administrative expenses
19,397 9,728 54,421 28,894 Total selling, general and
administrative expenses 26,627 14,429 74,511 42,809 Depreciation
and amortization 4,630 2,452 11,781 6,493 Loss on sale of fixed
assets - 2 15 231 Income from operations 13,466 10,999 33,440
30,001 Other income (expense) Interest income and other 1,038 339
2,663 1,244 Interest (expense) (1,725) - (4,024) (11) Equity in
earnings of affiliate 712 433 1,893 1,110 Total other income 25 772
532 2,343 Income before income taxes 13,491 11,771 33,972 32,344
Income tax expense 3,749 3,060 9,271 8,148 Net income $9,742 $8,711
$24,701 $24,196 Income per share of common stock Basic $0.24 $0.25
$0.64 $0.71 Diluted $0.23 $0.23 $0.61 $0.64 Weighted average number
of common shares outstanding 40,155,105 34,443,660 38,639,086
33,917,665 Weighted average number of common and dilutive shares
outstanding 42,421,413 37,701,410 40,800,950 37,575,604 Kanbay
International, Inc. Condensed Consolidated Statement of Financial
Position (Unaudited) (In thousands) September 30, December 31, 2006
2005 Assets Current Assets Cash and cash equivalents $36,021
$19,520 Short term investments 45,350 54,918 Trade accounts
receivable 78,576 51,771 Other current assets 11,959 13,660 Total
Current Assets 171,906 139,869 Property and equipment - net 77,123
45,745 Investment in affiliate 25,579 22,567 Goodwill and other
intangible assets, net 167,902 9,295 Other assets 3,389 - Total
Assets $445,899 $217,476 Liabilities and Stockholders' Equity
Current Liabilities Accounts payable $7,460 $3,878 Current portion
of long-term debt 7,500 - Accrued and other current liabilities
42,114 24,360 Total Current Liabilities 57,074 28,238 Long-term
debt 88,000 - Other non current liabilities 1,112 1,122 Total Non
Current Liabilities 89,112 1,122 Total Liabilities $146,186 $29,360
Stockholders' Equity 299,713 188,116 Total Liabilities and
Stockholders' Equity $445,899 $217,476 Kanbay International, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited) (In
thousands) Nine Months ended September 30, 2006 2005 Operating
activities Net income $24,701 $24,196 Adjustments to reconcile net
income to net cash provided by operating activities 15,661 5,603
Changes in operating assets and liabilities Trade accounts
receivable (9,488) (18,284) Other current assets 5,509 9,508 Trade
accounts payable (866) (1,543) Other current liabilities 2,726
(10,257) Net cash provided by operating activities 38,243 9,223
Investing activities Additions to property and equipment (38,947)
(20,136) Purchase of businesses, net of cash acquired and common
stock issued (90,863) (6,879) Purchase of software license (3,200)
- Maturities of short term investments 9,568 7,986 Other investing
activities 903 1,334 Net cash used in investing activities
(122,539) (17,695) Financing activities Proceeds from issuance of
long-term debt 98,000 - Payments of long-term debt (2,500) -
Proceeds from exercise of options and employee stock purchase plan
5,673 4,606 Net cash provided by financing activities 101,173 4,606
Effect of exchange rates on cash and cash equivalents (376) 83
Increase (decrease) in cash and cash equivalents 16,501 (3,783)
Cash and cash equivalents at beginning of period 19,520 29,126 Cash
and cash equivalents at end of period $36,021 $25,343 Kanbay
International, Inc. Reconciliation from Revenue to Revenue
Excluding Adjoined Consulting (Unaudited) (in thousands) Three
months ended September 30 2006 2005 Total revenues $114,119 $58,951
Less: Adjoined Consulting (35,896) - Total revenues excluding
Adjoined Consulting $78,223 $58,951 Kanbay International, Inc.
Reconciliation from Third Party Revenue to Third Party Revenue
Excluding Adjoined Consulting (Unaudited) (in thousands) Three
months ended September 30 2006 2005 Total Third Party revenues
$73,267 $20,161 Subtract: Adjoined Consulting Third Party Revenue
(35,657) - Total Third Party revenues excluding Adjoined Consulting
$37,610 $20,161 Kanbay International, Inc. Reconciliation from
Third Party Revenue to Third Party Revenue Including Morgan Stanley
(Unaudited) (in thousands) Three months ended September 30 2006
2005 Total Third Party revenues $73,267 $20,161 Add: Morgan Stanley
Revenue - 7,437 Total Third Party Revenues including Morgan Stanley
$73,267 $27,598
http://www.newscom.com/cgi-bin/prnh/20050830/CGTU033LOGO
http://photoarchive.ap.org/ DATASOURCE: Kanbay International, Inc.
CONTACT: Seth R. Frank, Director, Investor Relations, of Kanbay
International, +1-847-384-4732 Web site: http://www.kanbay.com/
http://www.capgemini.com/announcement
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