IMRS files 0930 qtr 10-Q. Reports $56.1 mil tot rev and $.33 EPS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1996
REVENUES. For the three months ended September 30, 1997, revenues increased to $23.0 million representing a 227.0% increase over revenues of $7.0 million for the three months ended September 30, 1996. The Company's acquisition of a 100% interest in IMR-U.K. in January 1997 (see Note 4 of Notes to Consolidated Financial Statements) and the consolidation of revenues realized by IMR-U.K. accounted for $4.9 million of the revenue increase. In addition, revenues from the Company's core transitional outsourcing services (software development, application maintenance and migration and re-engineering services) increased 113.5% over the third quarter of 1996. Third quarter revenues from the Company's Year 2000 conversion service increased to $12.8 million (including IMR-U.K. revenues), compared to $2.2 million for the third quarter of 1996.
COST OF REVENUES. Cost of revenues was $12.6 million, or 54.7% of
revenues, for the three months ended September 30, 1997, as compared to $3.9 million, or 55.6% of revenues, for the three months ended September 30, 1996 The decrease in cost of revenues as a percentage of revenues reflects: (i) the Company's implementation of better controls over project pricing and margins; (ii) a higher percentage of Year 2000 conversion services projects in the most recent quarter, which generally have resulted in higher margins than contracts for the Company's professional service and maintenance service offerings; and (iii) improved utilization of software development and personnel in India. This improved utilization reflected the benefits associated with the expansion and training of the Company's India-based personnel. Wage costs continue to increase at a greater rate than inflation in each of the countries in which IMR has operations, and the Company anticipates that this trend will continue in the near term. The Company has been able to pass these wage increases on to its customers in the form of increased prices for its service offerings. However, there can be no assurance that the Company will be able to continue to increase prices to its customers to offset future wage increases.
GROSS PROFIT. Gross profit increased to $10.4 million in the third quarter
of 1997 compared to $3.1 million in the prior comparable period. As a percentage of revenues, gross profit increased to 45.3% in the third quarter of 1997 compared to 44.4% in the third quarter of 1996. The Company's gross profit margin increased for the U.S. and India operations; however, the U.K. operations partially offset this increase as the U.K. operations derived a substantial portion of its revenues from professional services which generally result in lower profit margins.
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