PeopleSupport Reports Record Revenues for Third Quarter 2005

PeopleSupport, Inc., a leading offshore business process outsourcing (BPO) provider that offers customer management, accounts receivable management and back office services from its facilities in the Philippines, today announced financial results for its third quarter ended September 30, 2005.

• PeopleSupport reported record revenues of $16.3 million for the third quarter of 2005, an increase of 37% over the third quarter of 2004 and 11% over the second quarter of 2005.
• Net income for the third quarter of 2005 was $5.5 million or $0.29 per diluted share, as compared with net income of $1.9 million or $0.14 per diluted share for the third quarter of 2004.
• Net income for the third quarter of 2005 included a charge of $0.3 million for management incentive plan (MIP) payments and non-cash, pre-IPO stock-based compensation charges. The company also recorded a $2.6 million net income tax benefit in the third quarter of 2005 largely associated with deferred tax valuation adjustments during the period. The net impact of these charges and the net tax credit was a $0.12 increase to our diluted earnings per share. Excluding these charges and the net tax credit, net income would have been $3.2 million or diluted earnings per share of $0.17 based on 18.9 million weighted average shares outstanding. The third quarter of 2004 included charges of $0.5 million for non-cash, pre-IPO stock-based compensation charges, and excluding these charges, net income would have been $2.4 million or $0.18 per diluted share based on 13.6 million weighted average shares outstanding.
• See “Use of Non-GAAP Measures” below and the attached Pro Forma Consolidated Statements of Operations for a reconciliation of each non-GAAP measure to the most directly comparable GAAP measure.

“Strong demand in the major industries we support enabled PeopleSupport to achieve excellent results in the third quarter,” said Lance Rosenzweig, PeopleSupport’s Chairman and Chief Executive Officer. “PeopleSupport has grown substantially and achieved numerous milestones and significant accomplishments over the past year since our IPO. During the most recent quarter, seven clients each generated over five percent of our revenues, three of which generated over ten percent of our revenues. Three of these seven clients were signed in 2004, including two travel and hospitality divisions of a Fortune 500 company, as well as a leading VoIP telecommunications provider.”

“Offshore outsourcing has become widely accepted by Corporate America, and the Philippines is now recognized as a premier location for BPO services,” continued Lance Rosenzweig. “PeopleSupport is well positioned to capitalize on these important trends. I am extremely pleased with the quality and accomplishments of our people. Our employee attrition rate, which was elevated in the second quarter, fell back to the low levels we achieved in prior years. We believe this highlights PeopleSupport’s positive work culture and the excellent career options for our people.”