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Kanbay (NASDAQ:KBAY), a global IT services firm focused on the financial services industry, today reported strong financial results for its fourth quarter and full year ended December 31, 2005 and announced it has signed a definitive agreement to acquire Adjoined Consulting, Inc.
Definitive Agreement to Acquire Adjoined Consulting Kanbay also announced that it entered into a definitive agreement to acquire privately-held Adjoined Consulting, a mid-sized provider of strategic and operational consulting, technology integration and outsourcing services to Global 2000 clients. The purchase price of approximately $165 million includes the exchange of all outstanding stock of Adjoined for approximately $95.7 million in cash and approximately $69.3 million in Kanbay common stock.
Making conservative estimates for synergies, the acquisition will be immediately cash accretive and is expected to be accretive to income on a run-rate basis within the next twelve months. The transaction has been approved by both companies’ Board of Directors and Adjoined’s stockholders, and the acquisition is expected to close by mid-March following standard regulatory approvals and the satisfaction of other customary closing conditions.
Mr. Spencer commented, “This acquisition is an extension of our proven strategy. The addition of Adjoined enhances our revenue diversification and ensures the achievement of third party revenue growth. We are a creating a company that will provide an agile, highly integrated, single source solution that will position us well to compete in today’s changing business landscape. We welcome all members of the Adjoined family – their management, their over 500 employees, and their impressive roster of clients – to the Kanbay family and look forward to working together.”
In conjunction with this transaction, Kanbay has secured a $125 million debt facility, consisting of a $50 million term loan and a $75 million revolver. Mr. Weissman said, “The size and structure of the debt facility is designed to ensure ample liquidity. Given the cash generating capabilities of Kanbay, we are comfortable with the business’ ability to support this level of debt.”
Headquartered in Miami, Florida, Adjoined offers a highly integrated suite of strategic and operational consulting, technology integration services, and outsourcing solutions to Global 2000 companies with a primary focus on the consumer and industrial products industry.
Rodney Rogers, Chairman, Chief Executive Office and Founder of Adjoined added, “Our similar cultures, complementary skill sets, service offerings, and focus on leveraging both industry and technology expertise make this combination a natural fit. The new Kanbay is positioned as a leading professional services firm with strong vertical focus and is capable of offering our customers a fully integrated suite of strategic solutions through a proven global delivery platform.”
Mr. Spencer will continue in his role as Chairman and Chief Executive Officer and Rodney Rogers will become a Senior Managing Director at Kanbay. Mr. Rogers will report directly to Mr. Spencer and will join Kanbay’s Global Executive Team.
UBS Investment Bank acted as financial advisor to Kanbay and Citigroup represented Adjoined. Winston & Strawn acted as legal advisor to Kanbay and Greenberg Traurig advised Adjoined.
Full Year and Fourth Quarter 2005 Financial Highlights:
-- Revenue for the full year was $230.5 million, a 26 percent increase over 2004
-- Revenue from third parties in 2005 increased 48 percent year-over-year, excluding the products business divestiture
-- Operating income in 2005 was $41.3 million, a 33 percent increase year-over-year
-- Net income for the year was $33.1 million, an increase of 21 percent over 2004
-- Diluted EPS was $0.88 for the year
-- Revenue for the fourth quarter was $61.0 million, a 20 percent increase over the fourth quarter of 2004
-- Operating margin for the fourth quarter was 18.6 percent, up 80 basis points year-over-year
-- Net income for the fourth quarter was $8.9 million, up 11 percent over the fourth quarter of 2004
-- Diluted EPS was $0.24 in the fourth quarter, up from $0.21 in the fourth quarter of 2004
Commenting on the results, Raymond Spencer, Chairman and CEO of Kanbay, said, "I am very pleased to report a strong fourth quarter that exceeded our expectations and an overall successful year in 2005 characterized by strong fundamentals and outstanding client growth. In the year, we increased our number of active clients by 59 percent from the previous year.
In 2005, we built upon our solid platform and strengthened our core business. Our results demonstrate that we are successfully executing on our strategy of servicing our clients by combining deep domain knowledge with technology expertise through a proven global delivery model.”
Bill Weissman, Kanbay’s Chief Financial Officer, added, “In 2005, we executed on our commitment to growing our third party relationships. Excluding our product business divestiture, third party revenue increased 48 percent for the full year. We added over 1,500 net associates in the year and finished 2005 with over 5,200 associates globally. We see continued strong demand and are making the necessary investments to enable our growth.”
Guidance
Before any contribution from Adjoined, for the first quarter of 2006 Kanbay is targeting revenue of $62.5 million dollars and diluted earnings per share of $0.20. This includes a negative impact of $0.04 cents per diluted share due to the implementation of FAS 123(R).
For the full year 2006, Kanbay announced on a stand-alone basis that it is targeting revenues of at least $280 million dollars and diluted earnings per share of $0.88, which includes a negative impact of $0.17 cents per diluted share due to the implementation of FAS 123(R).
This first quarter and full year 2006 guidance assumes no contribution from the Adjoined acquisition and is consistent with Kanbay’s previous long-term performance objectives.
For the full year 2006 including results of Adjoined Consulting, Kanbay is targeting revenues of at least $370 million and diluted earnings per share in the range of $0.79 and $0.83. Excluding the negative FAS 123(R) impact, we expect diluted earnings per share to be in the range of $0.96 and $1.00.
Webcast Details
Kanbay management will now host a conference call on February 14, 2006, at 8:00 a.m. (ET) to discuss the Company's results of operations as well as the definitive agreement to acquire Adjoined. 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 21, 2006, by dialing (888) 286-8010 for domestic callers and (617) 801-6888 for international callers. The passcode for the replay is 65608184. A webcast replay of the conference call will also be available for two weeks following the call, until 5:00 p.m. (ET) on February 28, 2006, through Kanbay’s website at http://www.kanbay.com.
About Kanbay
Founded in 1989, Kanbay International, Inc. (NASDAQ: KBAY) is a global IT services firm focused on the financial services industry. With over 5,200 associates, Kanbay provides its services primarily to banking institutions, insurance companies, and securities and investment 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, and specialized services. Kanbay is a CMM Level 5 assessed company headquartered in greater Chicago with offices in United States and India as well as Toronto, London, Melbourne, Hong Kong, Singapore and Tokyo. Further information about Kanbay can be found at http://www.kanbay.com.
About Adjoined
Founded in 2000, Adjoined Consulting is an industry-focused, full-service management consulting, technology services and outsourcing firm that offers strategic operational consulting, leading-edge technology integration, outsourcing solutions and original, independent research. With over 500 employees and more than 200 Global 2000 companies as clients, Adjoined focuses on solving business challenges for clients in the consumer & industrial products and financial services industries, along with delivering further vertical expertise in the communications & media and life sciences industries.
Headquartered in Miami, Adjoined also has offices in New York, Boston, Phoenix, Washington, D.C., Atlanta and Tampa. Further information on Adjoined can be found at http://www.adjoined.com.
CONTACT:
Sangeeta Sundaram
Kanbay
+91(044) 42097400, extn: 7441
szsundaram@kanbay.com
For press backgrounder on Kanbay click here
KEYWORDS: BANKING, BUSINESS SERVICES, IT, TECHNOLOGY
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