Keane 1Q Revenue Up, Earnings Down

Keane

Brian Keane, president and CEO, told analysts during an earnings conference call Wednesday morning the company outperformed its peers, in spite of the soft market and uncertain economy.

"As we enter the second quarter, I feel very good about Keane's positioning," said Keane. "Over the past several months, we've made a series of proactive moves that I am convinced are right for Keane."

For the quarter ended March 31, Keane reported income of $5.6 million, or 7 cents per share, on sales of $221.3 million. That compares with income of $8.5 million, or 12 cents per share, on sales of $203.2 million for the same quarter last year.

Keane's earnings beat Wall Street analysts' estimates by 2 cents per share, according to First Call.

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The biggest chunk of revenue, or $146.9 million, came from Keane's Managed Services business, which includes application development management (ADM) outsourcing. Build Services, which includes health-care solutions and enterprise application integration, drew $55.9 million, followed by $18.5 million from Plan Services, which includes business and IT consulting.

The company's strong bookings for the quarter were primarily due to a $500 million deal signed with PacifiCare Health Systems during the quarter, Keane said.

Keane also identified five strategic priorities for the remainder of 2002. Those priorities include the successful integration of Keane's most recent acquisitions, Metro and SignalTree Solutions Holding; strengthening the company's position in ADM outsourcing; capitalizing on newly acquired offshore capabilities in India; improving the company's top- and bottom-line performance; and maximizing the generation of cash.

Keane signed a $62 million cash deal to acquire SignalTree in mid-February. Along with SignalTree, Keane acquired two software development facilities in India, now dubbed Keane India, and additional operations in the United States.

"We believe a global delivery model that includes on-site, off-site, near-shore and offshore capabilities will increase the value propositions," said Keane. "It will also help ensure Keane's leadership position in the ADM outsourcing market."

Expanding critical mass to grow its customer base is nothing new for Keane. Similar acquisitions include GE Consulting in 1993 and AGS Computers in 1994. The $131 all-stock acquisition of Virginia Beach, Va.-based Metro in late November added hundreds of customers and about 1,700 billable consultants to Keane's organization.

"These actions provide tremendous operating leverage to capitalize on the pent-up demand for new IT initiatives whenever the inevitable uptick in IT spending occurs," Keane told analysts.

Keane estimates second-quarter revenue in the range of $225 million to $235 million and cash earnings per share between 10 cents and 12 cents. Due to continuing economic uncertainty, however, Keane withheld comment about performance beyond the second quarter.