PeopleSupport Reports Record Revenues for Fourth Quarter and Fiscal Year 2006.Company achieves 77% full year annual revenue growth Record quarterly revenues of $31.0 million, up 82% from same quarter last year LOS ANGELES Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. -- PeopleSupport PeopleSupport Inc. (NASDAQ: PSPT) is a US-based offshore multinational business process outsourcing (BPO) company that provides customer management services, transcription and captioning, and back office support. , Inc. (Nasdaq: PSPT PSPT Passport ), a leading offshore business process outsourcing Business process outsourcing (BPO) is the contracting of a specific business task, such as payroll, to a third-party service provider. Usually, BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain its position in (BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra ) provider, today announced financial results for its fourth quarter and fiscal year ended December 31, 2006. * Revenue in the fourth quarter of 2006 was a record $31.0 million, an increase of 82% from the $17.0 million reported in the fourth quarter of 2005. * Net income for the fourth quarter of 2006 was $4.0 million, or $0.19 per basic share and $0.18 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, based on 21.1 million basic and 21.8 million diluted weighted average shares outstanding, as compared to net income for the fourth quarter of 2005 of $12.3 million, or $0.67 per basic share and $0.65 per diluted share, based on 18.3 million basic and 18.9 million diluted weighted average shares outstanding. Included in net income was a tax benefit of $9.6 million in the fourth quarter of 2005 which increased diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. for that period by an estimated $0.51, compared to a tax benefit of $2.3 million in the fourth quarter of 2006 which increased diluted EPS by an estimated $0.11. * For the full year 2006, PeopleSupport reported record revenues of $110.1 million, an increase of 77% from $62.1 million reported for the full year 2005. * Net income for the full year 2006 was $14.2 million, or $0.74 per basic share and $0.72 per diluted share, based on 19.1 million basic and 19.6 million diluted weighted average shares outstanding, as compared to net income for full year 2005 of $22.8 million, or $1.26 per basic share and $1.21 per diluted share, based on 18.2 million basic and 18.9 million diluted weighted average shares outstanding. Additional reductions of deferred tax valuation allowance increased diluted EPS by approximately $0.07 in 2006 and $0.65 in 2005. For 2006, PeopleSupport recorded an income tax charge of $1.3 million and had additional reductions of its deferred tax valuation allowance amounting to $1.4 million, resulting in a net GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). tax benefit of approximately $0.1 million. By comparison, during 2005, PeopleSupport recorded an additional reduction of $12.3 million in the deferred tax valuation asset allowance, contributing to the $12.1 million net GAAP tax benefit recorded in the year. * Net cash provided by operating activities for 2006 was $22.2 million, compared with $16.7 million for 2005. "PeopleSupport reported a solid quarter of higher than expected revenue growth," said Lance Rosenzweig, PeopleSupport's Chairman and Chief Executive Officer. "For the year, PeopleSupport delivered industry leading growth of 77%. We are building on a broad base of established clients and recent wins with significant potential. We are focused on deepening deep·en tr. & intr.v. deep·ened, deep·en·ing, deep·ens To make or become deep or deeper. Noun 1. deepening - a process of becoming deeper and more profound our expertise in financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , technology, travel and telecom sectors, and we began considering insurance and healthcare, where we see great potential for BPO. During the fourth quarter of 2006, PeopleSupport invested in our production capacity and IT infrastructure. Production seats increased to 5,600 at the end of 2006, up from 3,100 at the end of 2005 and approximately 5,000 at the end of the third quarter of 2006. We are excited about our opportunities ahead." Caroline Rook rook, term used for a common Eurasian bird (genus Corvus) of the family Corvidae (Crow family), smaller than the American crow. The jackdaw is a European species of the genus. Rooks nest in large colonies, whence the term rookery. , PeopleSupport's Chief Financial Officer, commented, "As a result of our higher than expected growth and in order to prepare for future growth, PeopleSupport made significant investments. Fourth quarter 2006 margins softened soft·en v. soft·ened, soft·en·ing, soft·ens v.tr. 1. To make soft or softer. 2. To undermine or reduce the strength, morale, or resistance of. 3. as a result of several factors, including an appreciating Philippine Peso Noun 1. Philippine peso - the basic unit of money in the Philippines; equal to 100 centavos peso centavo - a fractional monetary unit of several countries: El Salvador and Sao Tome and Principe and Brazil and Argentina and Bolivia and Colombia and Cuba and relative to the U.S. dollar, an increase in FAS 123R non-cash stock-based compensation expenses and some other costs that might generally occur during a period of rapid growth. Our goal is to optimize optimize - optimisation our cost structure as we continue to increase our production capacity and strive to mitigate mit·i·gate v. To moderate in force or intensity. mit  i·ga tion n. our
Philippine Peso risk with a hedging strategy."
Fourth Quarter 2006 Financial Highlights Revenues - For the fourth quarter of 2006, PeopleSupport reported record revenues of $31.0 million, as compared to $17.0 million in the fourth quarter of 2005, representing 82% growth year-over-year. Demand for customer management services was robust, with new clients ramping up in key vertical industries. The financial services and technology industries experienced the most rapid growth in the quarter due to increased revenues from clients signed in recent quarters. Other industry sectors, such as travel and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , continued to show solid performance. Cost of Revenues - During the fourth quarter of 2006, cost of revenues was $21.2 million, or 68% of revenues, as compared to $9.9 million, or 58% of revenues, in the fourth quarter of 2005. On a year-over-year basis, cost of revenues was impacted in the fourth quarter of 2006 by our rapid growth. Factors impacting margins included the inability to charge full rates during periods of rapid client growth, the appreciation of the Philippine Peso versus the U.S. dollar, investments in our production capacity in the Philippines, investments in our IT infrastructure, the nature of our contract in Costa Rica Costa Rica (kŏs`tə rē`kə), officially Republic of Costa Rica, republic (2005 est. pop. 4,016,000), 19,575 sq mi (50,700 sq km), Central America. with a single anchor client and increased non-cash, stock-based compensation charges. On a quarter-over-quarter basis, cost of revenues was impacted by items as detailed above as well as fourth quarter seasonality and additional year-end expenses. Selling, General and Administrative - For the fourth quarter of 2006, selling, general and administrative expense was $6.3 million, or 20% of revenues, as compared to $3.6 million, or 22% of revenues, in the fourth quarter of 2005. 2006 was the first year of non-cash FAS 123R stock-based compensation charges, and the net increase in non-cash stock-based compensation charges from the fourth quarter of 2005 increased sales, general and administrative by 1% of revenues. Additionally, as compared to the third quarter of 2006, we incurred increased Sarbanes-Oxley compliance and audit costs, and increased our bad debt reserve in the fourth quarter of 2006. Depreciation and amortization - For the fourth quarter of 2006, depreciation was $2.7 million, or 8.6% of revenues, as compared to fourth quarter 2005 depreciation of $1.2 million, or 6.9% of revenues. PeopleSupport made significant investments in its IT infrastructure and continued its production capacity expansion. During the fourth quarter of 2006, depreciation increased primarily due to infrastructure build and $0.4 million of additional amortization related to our software licenses In computing, software that is copyrighted and licensed under a software license is done under a variety of licensing schemes. For end-users there are proprietary licenses and there are free software licenses, and there are proprietary Within these schemes are further classifications. . Income from Operations - PeopleSupport's fourth quarter 2006 operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $0.8 million, as compared to operating income of $2.3 million in the fourth quarter of 2005. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in the fourth quarter of 2006 were 3% versus 14% in the fourth quarter of 2005 and 13% in the third quarter of 2006. The decrease was due primarily to increased cost of revenues, sales, general and administrative expenses, the Philippine Peso appreciation versus the U.S. dollar, stock-based FAS 123R expenses and depreciation, primarily as detailed above. Stock-based Compensation - In the fourth quarter of 2006, the total charge related to non-cash, stock-based compensation, resulting from FAS 123R, was $0.9 million, of which $0.3 million was associated with cost of revenue and $0.6 million with selling, general and administrative expenses. This compared to non-cash, pre-IPO pre-IPO An offering of a company's shares prior to the firm's initial public offering. Investing in a pre-IPO tends to be very risky, in part because the planned IPO may never take place. stock-based compensation charges in the fourth quarter of 2005 of $0.2 million, of which $0.1 million was associated with cost of revenue and $0.1 million with selling, general and administrative expenses. Income Taxes - During the fourth quarter of 2006, PeopleSupport recorded a net income tax benefit of $2.3 million. This was primarily due to two issues. One of them was a $1.4 million net tax benefit associated with a lower actual effective tax rate based on a lower mix of U.S. earned income Sources of money derived from the labor, professional service, or entrepreneurship of an individual taxpayer as opposed to funds generated by investments, dividends, and interest. versus foreign earned income. Also, management determined that it was more likely than not that the company would continue to generate taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. from operations and be able to realize certain tax benefits arising from the use of its net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. and, as a result, reduced its remaining additional tax valuation allowance of $0.9 million in the fourth quarter. During the fourth quarter of 2005, the company had additional reductions in its tax valuation allowance of $9.7 million, resulting in a net GAAP tax benefit of approximately $9.6 million. Net Income - Net income for the fourth quarter of 2006 was $4.0 million or $0.19 per basic share and $0.18 per diluted share, based on 21.1 million basic and 21.8 million diluted weighted average shares outstanding, as compared to net income for the fourth quarter of 2005 of $12.3 million or $0.67 per basic share and $0.65 per diluted share, based on 18.3 million basic and 18.9 million diluted weighted average shares outstanding. Net income for the fourth quarter of 2006 included non-cash FAS 123R expenses of approximately $0.9 million, as compared to non-cash stock-based compensation charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc pre-IPO stock options of $0.2 million in the fourth quarter of 2005. Furthermore, as we settle our intercompany balance in the Philippines, we accounted for a non-cash foreign exchange charge of $0.3 million in other expense. A tax benefit of $9.6 million in the fourth quarter of 2005 increased diluted EPS for that period by an estimated $0.51, compared to a tax benefit of $2.3 million in the fourth quarter of 2006 increasing diluted EPS by an estimated $0.11. The additional tax valuation allowance release and FAS 123R expenses in the fourth quarter of 2006 had the effect of decreasing net income by $0.1 million, whereas the additional tax valuation allowance release and non-cash, stock-based compensation charges in the fourth quarter of 2005 had the effect of increasing net income by $9.5 million in the fourth quarter of 2005. Fiscal Year 2006 Financial Highlights Revenues - PeopleSupport reported revenues for 2006 of $110.1 million, a 77% increase over the $62.1 million reported for fiscal year 2005. Revenues for the full year were robust across all industry verticals. Organic revenue growth, excluding our transcription transcription /trans·crip·tion/ (-krip´shun) the synthesis of RNA using a DNA template catalyzed by RNA polymerase; the base sequences of the RNA and DNA are complementary. tran·scrip·tion n. and captioning business acquired in 2006, was approximately 60%. Cost of Revenues - For the full year 2006, cost of revenues was $70.2 million, or 64% of revenues, as compared to $35.7 million, or 58% of revenues, for the full year 2005. As a percentage of revenues, cost of revenues increased primarily due to the appreciation of the Philippine Peso versus the U.S. dollar, our investment in our production capacity in the Philippines and Costa Rica, the nature of our contract in Costa Rica with a single anchor client, our transcription and captioning business with U.S. operations and related transition costs, and first year of FAS 123R expenses. Selling, General and Administrative - For fiscal year 2006, selling, general and administrative expense was $20.7 million, or 19% of revenues, as compared to $12.6 million, or 20% of revenues, in fiscal year 2005. First year of FAS 123R expenses increased by $1.5 million, or 1% of revenues, against non-cash stock-based compensation charges in the prior year. Net Income - Net income for the full year 2006 was $14.2 million, or $0.74 per basic share and $0.72 per diluted share, based on 19.1 million basic and 19.6 million diluted weighted average shares outstanding, as compared to net income for full year 2005 of $22.8 million, or $1.26 per basic share and $1.21 per diluted share, based on 18.2 million basic and 18.9 million diluted weighted average shares outstanding. The additional deferred tax valuation allowance release increased diluted EPS by approximately $0.07 in 2006 and $0.65 in 2005. For fiscal year 2006, PeopleSupport recorded an income tax charge of $1.3 million, reduced its remaining additional tax valuation allowance of $1.4 million, resulting in a net GAAP tax benefit of approximately $0.1 million. By comparison, during fiscal year 2005, the company recorded an income tax charge of $0.2 million, reduced additional deferred tax valuation allowance of $12.3 million, resulting in a net GAAP tax benefit of approximately $12.1 million. Net income for fiscal year 2006 included non-cash FAS 123R expenses of $2.8 million, as compared to non-cash, stock-based compensation charges relating to pre-IPO stock options of $0.9 million in 2005. The additional deferred tax valuation allowance reduction offset by FAS 123R charges for fiscal year 2006 had the net effect of decreasing net income by $1.4 million, whereas the additional deferred tax valuation allowance reduction and non-cash, stock-based compensation charges for fiscal year 2005 had the net effect of increasing net income by $11.4 million. Cash Flow - Net cash provided by operating activities for 2006 was $22.2 million, as compared with $16.7 million in 2005. 2006 pre-tax income increased to $14.1 million from $10.8 million in 2005, while cash taxes paid were $0.8 million, compared to $0.1 million in 2005. Capital expenditures were $17.3 million in 2006, as compared with $7.3 million in 2005 primarily due to the expansion of our Philippine and Costa Rican build out. PeopleSupport had cash and cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has totaling $140.5 million as of December 31, 2006, as compared to $51.6 million reported at the end of 2005. This significant increase was primarily a result of our secondary offering in November 2006. The company continues to have no significant long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . As of December 31, 2006, PeopleSupport employed more than 8,000 employees worldwide, as compared to approximately 4,200 employees as of December 31, 2005. Business Outlook For the first quarter of 2007, the company expects revenues to be between $32 million and $33 million. For the same period, the company expects diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of to be $0.10 to $0.12 based on approximately 24.3 million shares outstanding on a diluted basis. Guidance includes a tax rate of 20%, as GAAP taxes are currently forecasted to be in an approximate range Noun 1. approximate range - near to the scope or range of something; "his answer wasn't even in the right ballpark" ballpark ambit, range, scope, reach, compass, orbit - an area in which something acts or operates or has power or control: "the range of a of 15% to 20% in 2007. Additionally, first quarter guidance accounts for FAS 123R expenses resulting in non-cash, stock-based compensation charges of approximately $1.1 million or $0.04 per share on a diluted basis. For the full year of 2007, the company expects revenues to be between $140 million and $144.5 million. Conference Call with Management PeopleSupport's executive management will host a conference call for investors and all interested parties today at 5:30 p.m. Eastern Time (2:30 p.m. Pacific Time). The call will be broadcast over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . To listen to the event via the Internet, please follow the instructions that will be available on the investor relations Investor relations The process by which the corporation communicates with its investors. section of PeopleSupport's website at www.peoplesupport.com. A replay of the conference call will be available on the company's website for an extended period of time. About PeopleSupport PeopleSupport, Inc. (Nasdaq: PSPT), is a leading offshore business process outsourcing (BPO) provider that offers customer management, transcription and captioning and additional BPO services from its centers in the Philippines, Costa Rica and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . PeopleSupport's services are designed to reduce costs, improve performance and increase revenues by delivering high quality, value-added, multilingual mul·ti·lin·gual adj. 1. Of, including, or expressed in several languages: a multilingual dictionary. 2. voice and text services. A majority of PeopleSupport's services are performed in the Philippines, where PeopleSupport is one of the largest outsourcing companies List of Outsourcing Firms<ref name="who" /> Revenue (USD) Logo Company Headquarters Country of Largest Employment Service $3300 million , employing more than 7,500 college-educated, fluent fluent /flu·ent/ (floo´int) flowing effortlessly; said of speech. English speaking personnel. Headquartered in Los Angeles, California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , with more than 8,000 employees worldwide, PeopleSupport serves clients in a variety of industries, such as travel and hospitality, financial services, technology, telecommunications, consumer products, healthcare and insurance, law enforcement, entertainment and education. For more information, visit www.peoplesupport.com. Forward Looking Statements Certain statements in this press release, including without limitation, those related to anticipated revenues, net income and earnings for the first quarter ending March 31, 2007, and anticipated revenue for the full year ending December 31, 2007, expectations regarding expenses, industry and company trends, and market opportunities are forward looking. The company generally identifies forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. by using such terms as "may," "will," "could," "should," "potential," "continue," "expect," "intend," "plan," "estimate," "anticipate," "believe," or similar phrases or the negatives of such terms. The company bases these statements on management's beliefs as well as assumptions using information currently available. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause anticipated results to differ include: the company's dependence on a limited number of clients; foreign currency exchange risk; negative public reaction to offshore outsourcing Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the product or service will be sold or consumed. ; unanticipated technological changes and requirements, including changes that reduce the demand for the company's services; competitive conditions in the markets the company serves; the company's ability to manage growth, including integration of acquired companies; risks associated with operations in the Philippines and Costa Rica; changes in government regulations; and other risks identified from time-to-time in the company's filings with the Securities and Exchange Commission. These forward-looking statements represent estimates and assumptions only as of the date they are made. The company undertakes no obligation to update or revise these forward-looking statements to reflect circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or events that occur after the date the forward-looking statements were made. You should review the risk factors described in reports and registration statements that the company files from time to time with the Securities and Exchange Commission. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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