Kanbay International Reports Fourth Quarter and Full Year 2004 Results
Results Driven by Strong Year-Over-Year Revenue Growth of Over 70 Percent
ROSEMONT, Ill., Feb 15, 2005 /PRNewswire-FirstCall via COMTEX/ -- Kanbay International, Inc. (Nasdaq: KBAY), a global IT services firm focused on the financial services industry, today announced financial results for the fourth quarter and full year ended December 31, 2004.
Full Year and Fourth Quarter 2004 Financial Highlights
- Revenue for the full year was $182.6 million, a 70 percent increase over 2003
- Revenue from third parties in 2004 increased 72 percent year-over-year
- Operating income in 2004 was $31.1 million, a 275 percent increase year over year
- Net income for the year was $27.4 million, an increase of 140 percent over 2003
- Diluted EPS was $0.83 for the year
- Revenue for the fourth quarter was $50.9 million, a 60 percent increase over 2003
- Operating margin for the fourth quarter was 17.8 percent, up 9.1 percentage points year-over-year and up 40 basis points sequentially
- Net income for the quarter was $8 million, 72 percent over 2003 and a 6 percent increase sequentially
- Diluted EPS was $0.21 in the fourth quarter
Commenting on the results, chairman and CEO of Kanbay, Raymond Spencer said, "2004 has been a banner year for Kanbay. It was a year of strong growth and accomplishment, including our very successful initial public offering in July. We are pleased by the response we received from the investment community to both our IPO and a secondary offering in December. We have started to experience benefits of being a public company, including more awareness and enhanced visibility for Kanbay in the marketplace.
"During 2004 we added almost 1,400 associates, grew revenue by over 70 percent, increased our profitability and improved in all our quality metrics. I view our ability to achieve such dramatic growth while maintaining our commitment to quality as a testament to our associates around the globe, to our business model and to the foundation of quality and process that we have invested in over the past several years."
Spencer continued, "We are seeing strong demand for our services. Our business model, which combines deep domain knowledge and strong technical skills with a flexible global delivery model, allows us to effectively compete with, and differentiate ourselves from, our competitors. Due to our specialized focus on the financial services industry, we have developed extensive domain and technical expertise. That deep level of knowledge allows us to truly partner with our clients to help them achieve their strategic and business goals. Our expertise, combined with our efficient global delivery process, enables us to deliver high value solutions to our clients in a high quality and cost effective manner. We are confident that we have a scalable and value oriented business model that will continue to be successful," Spencer concluded.
"The financial results and metrics demonstrate what an outstanding year 2004 has been for the company," said Bill Weissman, Kanbay's Chief Financial Officer. "We are very pleased with our revenue growth and our increase in operating income. Our operating income nearly quadrupled to $31.1 million from $8.3 million last year and operating margins grew from 7.7 percent to 17.0 percent in 2004. Operating margins increased due to improved gross margins and a reduction of SG&A as a percentage of revenue. We continue to predict rising operating margins for 2005 as we benefit from further economies of scale.
"One of our key goals for 2004 was to grow our revenues from third parties. Third parties include all clients other than HSBC, Morgan Stanley and their respective affiliates. We are pleased that the investments we made in our sales and marketing organization over the past year and a half have proved successful, as revenues from third parties increased 72 percent in 2004," Weissman concluded.
Outlook for 2005
- 2005 revenue is expected to increase by at least 25 percent to at least $228 million, with a target of $52 million in the first quarter
- Third party revenues are expected to grow at least 40 percent over 2004.
- Growth in net income is expected to at least keep pace with revenue growth and will be at least $34 million in 2005, despite an increase in our effective tax rate.
"We are looking forward to another successful year," said Raymond Spencer. "Kanbay has reached an important phase in its development, and we have raised the bar for our associates and set new goals for 2005, which will be a year of execution against our proven business model. Our top priorities for 2005 will be to grow our third party revenue, improve our operating profit through additional economies of scale, and continue to optimize our related party relationships. We enter the year with every confidence in our business model and in our ability to perform successfully and deliver superior results," Spencer concluded.
Conference Call Details
Kanbay management will host a conference call on February 15, 2005 at 8:30 a.m. (ET) to discuss the Company's results of operations for the fourth quarter and full year 2004. To participate in the call, domestic callers can dial (800) 659-1966 and international callers can dial (617) 614-2711. The passcode for the conference call is 63225579. 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 for one week, until 5:00 p.m. (ET) on February 22, 2005, by dialing (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. The passcode for the replay is 62792186. A webcast replay of the conference call will also be available for two weeks following the call, until 5:00 p.m. (ET) on March 1, 2005, through Kanbay's website at http://www.kanbay.com.
About Kanbay International, Inc.
Founded in 1989, Kanbay International, Inc. (Nasdaq: KBAY) is a global IT services firm focused on the financial services industry. With over 3,700 employees, Kanbay provides its services primarily to banks, credit service providers, insurance companies, and capital markets firms. The company uses a global delivery model to provide application development, maintenance and support, software package selection and integration, business process and technology advice, network and system security, and specialized services. Kanbay is a CMM Level 5 assessed company headquartered in greater Chicago with offices in the U.S., Canada, U.K., Australia, Hong Kong, Japan, Singapore and India.
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 make 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" section of the prospectus we recently filed with the SEC.
Tables Follow
Kanbay International, Inc.
Condensed Consolidated Statement of Income (Unaudited)
(dollars in thousands except per share amounts)
Three months ended Twelve months ended
December 31 December 31
2004 2003 2004 2003
Net revenues --
related parties $33,069 $22,033 $120,377 $70,942
Net revenues --
third parties 17,809 9,696 62,229 36,211
Total revenues 50,878 31,729 182,606 107,153
Cost of revenues 26,813 17,258 96,139 58,675
Gross profit 24,065 14,471 86,467 48,478
Sales and marketing
expenses 4,440 3,445 17,501 11,420
General and
administrative
expenses 8,419 6,914 30,958 24,072
Stock compensation
expense 305 328 1,179 1,354
Total selling, general
and administrative
expenses 13,164 10,687 49,638 36,846
Depreciation and
amortization 1,852 1,003 5,712 3,308
Loss (gain) on sale
of fixed assets (2) 5 32 36
Income from operations 9,051 2,776 31,085 8,288
Other income (expense)
Interest expense
and other, net 328 (121) 431 (347)
Equity in earnings
of affiliate 508 477 2,517 2,046
Total other
income/(expense) 836 356 2,948 1,699
Income before
income taxes 9,887 3,132 34,033 9,987
Income tax expense 1,850 (1,552) 6,679 (1,452)
Net income 8,037 4,684 27,354 11,439
Dividends on
preferred stock - (153) (277) (608)
Increase in carrying
value of stock
subject to repurchase - 5,425 - 3,063
Income available to
common stockholders $8,037 $9,956 $27,077 $13,894
Income per share of
common stock
Basic $0.25 $0.49 $1.02 $0.68
Diluted $0.21 $0.36 $0.83 $0.50
Weighted average
number of common
shares outstanding 32,516,556 20,520,948 26,573,373 20,493,852
Weighted average
number of common
and dilutive
shares outstanding 37,751,111 28,309,212 33,087,554 28,964,911
Kanbay International, Inc.
Condensed Consolidated Statement of Financial Position (Unaudited)
(In thousands)
December 31, December 31,
2004 2003
Assets
Current Assets
Cash and cash equivalents $29,126 $17,419
Restricted cash 2,478 -
Short term investments 35,730 -
Trade accounts receivable 24,664 10,469
Other current assets 17,099 5,062
Total Current Assets 109,097 32,950
Property and equipment - net 20,892 11,315
Investment in affiliate 25,094 22,185
Long term investments 24,423 -
Other assets 660 1,909
Total Assets $180,166 $68,359
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $3,972 $2,312
Accrued and other current liabilities 33,114 18,539
Total Current Liabilities 37,086 20,851
Total Liabilities 37,086 20,851
Stockholders' Equity 143,080 47,508
Total Liabilities and Stockholders' Equity $180,166 $68,359
