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VanceInfo Reports Record Results for the Second Quarter 2009 and Raises Full Year Guidance
PR Newswire
Aug 14, 2009
Second Quarter 2009 Financial and Operating Highlights
-- Net revenues in the second quarter of 2009 increased to $34.6 million,
up 41.5 % from $24.4 million in the second quarter of 2008.
-- Operating income in the second quarter of 2009 was $5.4 million, up
45.8% from the second quarter of 2008. Operating margin remained stable
at 15.6% in the second quarter of 2009, compared to 15.2% in the second
quarter of 2008.
-- Net income in the second quarter of 2009 was $5.2 million, up 50.1%
from $3.5 million in the year-ago period. Non-GAAP net income, which
excludes share-based compensation expense, was $5.6 million, up 46.1%
from $3.8 million a year ago.
-- Diluted earnings per share ("EPS") were $0.13 in the second quarter,
up from $0.09 in the second quarter of 2008. Non-GAAP diluted EPS,
which excludes share-based compensation expense, was $0.14 in the
second quarter, up from $0.10 in the second quarter of 2008.
-- Employees totaled 6,732, including 6,056 billable professionals, as of
June 30, 2009.
"We are very pleased that VanceInfo continued to deliver outstanding
results during the second quarter of 2009, which exceeded both our top- and
bottom-line expectations," said
Second quarter 2009 Financial Results
Due to the seasonal nature of its business, the Company presents financial analysis on a year-over-year basis between the second quarter of 2009 and the second quarter of 2008 as in the following paragraphs.
Net Revenues
Net revenues were
Net Revenues by Service Lines
The Company provides two broad sets of services: R & D Outsourcing Services and IT Services. R & D Outsourcing Services consist of research & development service line and globalization & localization service line. IT Services consist of enterprise solutions, application development & maintenance, and quality assurance & testing service lines.
Net revenues from R & D Outsourcing Services accounted for 67.8% of the total revenues during the second quarter of 2009 and grew 50.8% compared to the second quarter of 2008. Net revenues from IT Services represented the remaining 32.2% of the revenues, up 25.3% from the year-ago quarter. The growth in IT Services has been negatively impacted by the soft demand for enterprise solutions business as customers cut back on discretionary IT spending during the past twelve months.
Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
(in US$ thousands, except percentages)
R & D Outsourcing
Services $23,424 67.8% $15,533 63.6%
IT Services 11,134 32.2% 8,883 36.4%
Total net revenues $34,558 100.0% $24,416 100.0%
Net Revenues by Geographic Markets
Based on the location of our clients' headquarters,
Measuring the Company's revenues by geographic markets based on the
location of the contract signing entities, rather than the location of the
clients' headquarters,
Largest Clients
Revenues from the top five clients totaled 60.8% of net revenues in the quarter, compared to 52.9% in the second quarter of 2008. The continued strength in a number of large clients reflects the industry's trend of vendor consolidation as well as the Company's solid delivery results with key clients. As business from new customers begins to scale in the third quarter, customer concentration is expected to ease in the second half of 2009.
Gross Profit and Gross Margin
Gross profit in the second quarter of 2009 was
Operating Expenses
Selling, general and administrative expenses totaled
Operating Income and Operating Margin
Operating income in the second quarter of 2009 was
Provision for income taxes
The provision for income taxes was
Net Income and EPS
Net income in the second quarter of 2009 was
Diluted EPS was
The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections of "About Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures."
Cash and Cash Flow
As of
First Half 2009 Financial Results
Net Revenues
Net revenues for the first half of 2009 were
Gross Profit and Gross Margin
Gross profit for the first half of 2009 was
Operating Expenses
Selling, general and administrative expenses were
Operating Income and Operating Margin
Operating income in the first half of 2009 was
Net Income and EPS
Net income for the first half of 2009 was
Recent Development
As previously disclosed, in
Outlook for the Third Quarter and Full Year 2009
VanceInfo expects to generate net revenues of at least
For the full year 2009, the Company has increased its guidance and expects:
-- 2009 net revenues to be at least $140 million, up at least 36% from
2008.
-- 2009 diluted EPS to be between $0.48 and $0.50 on a GAAP basis, and
between $0.53 and $0.55 on a non-GAAP basis, based on 41.1 million
total ADS-equivalent average shares outstanding.
-- 2009 gross margin to be between 37% and 38%, reflecting the effect from
the new client transition in the third quarter and the pricing pressure
from a number of our customers.
-- 2009 operating margin to be between 14.5% and 15.5%, reflecting the
positive effect of improved operating leverage and strong cost control
measures.
Conference Call
VanceInfo will host a corresponding conference call and live webcast to
discuss the results at
The dial-in details for the live conference call are as follows:
-- U.S. Toll Free Dial-in Number: + 1 800.299.7089
-- International Dial-in Number: +1 617.801.9714
-- Hong Kong Dial-in Number: +852 3002-1672
Passcode: Vanceinfo
The conference call will be available live via webcast on the Investors section of VanceInfo Technologies website at http://ir.vanceinfo.com . The archive replay will be available on VanceInfo's website shortly after the call.
A dial-in replay of the conference call will be available until
About VanceInfo
VanceInfo Technologies Inc. is an IT service provider and one of the
leading offshore software development companies in
The Company ranked number one among Chinese offshore software development service providers for the North American and European markets as measured by 2008 revenues, according to International Data Corporation.
VanceInfo's comprehensive range of IT services includes research &
development services, enterprise solutions, application development &
maintenance, quality assurance & testing, and globalization & localization.
VanceInfo provides these services primarily to corporations headquartered in
Safe Harbor
This news release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as will, should, expects, anticipates,
future, intends, plans, believes, estimates, and similar statements. Among
other things, the management's quotations and "Outlook for the Third Quarter
and Full Year 2009" contain forward-looking statements. Such statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Potential risks and uncertainties include,
but are not limited to, the company's dependence on a limited number of
clients for a significant portion of its revenues, the economic slowdown in
its principal geographic markets, the quality and portfolio of its services
lines and industry expertise, and the availability of a large talent pool in
About Non-GAAP Financial Measures
To supplement VanceInfo's consolidated financial results presented in accordance with GAAP, VanceInfo uses the following measures defined as non- GAAP financial measures by the SEC: net income excluding share-based compensation expenses, and diluted EPS excluding share-based compensation expenses, a non-recurring transitional cost in connection with the services to the new online travel service client, and the transaction costs related to the TP acquisition. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP financial measures to comparable GAAP measures" set forth at the end of this release.
VanceInfo believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. A limitation of using non-GAAP net income excluding share-based compensation expenses, and diluted EPS excluding share-based compensation expenses is that these non-GAAP measures exclude the share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures. The reconciliations of the forward-looking guidance for non-GAAP financial measures to the most directly comparable GAAP financial measures in the accompanying table include all information reasonably available to VanceInfo at the date of this press release. The table includes adjustments that the Company can reasonably predict.
VANCEINFO TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets (Unaudited)
(US dollars in thousands, except share data)
June 30, December 31,
2009 2008
Assets
Current assets
Cash and cash equivalents $55,278 $79,963
Term deposits 21,463 1,466
Short-term investments 5,202 --
Accounts receivable 44,390 36,827
Other current assets 4,310 3,369
Total current assets 130,643 121,625
Property and equipment, net 11,695 11,260
Goodwill and other intangible assets 21,013 19,695
Other long-term assets 2,629 2,871
Total assets $165,980 $155,451
Liabilities and shareholders' equity
Current liabilities $20,687 $22,062
Other liabilities 1,902 1,886
Total liabilities 22,589 23,948
Shareholders' equity (a) 143,391 131,503
Total liabilities and shareholders' equity $165,980 $155,451
Note:
(a) As of June 30, 2009, there were 39,120,879 ordinary shares issued and
outstanding.
VANCEINFO TECHNOLOGIES INC.
Condensed Consolidated Statements of Operations (Unaudited)
(US dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2009 2008(a) 2009 2008(a)
Net revenues $34,558 $24,416 $64,645 $44,918
Cost of revenues (b) 21,213 14,848 40,065 27,566
Gross profit 13,345 9,568 24,580 17,352
Selling, general and administrative
expenses (b) 8,121 6,181 15,507 11,502
Other operating income 175 315 646 459
Income from operations 5,399 3,702 9,719 6,309
Interest income 237 540 384 1,207
Interest expenses 20 24 40 47
Exchange differences 93 (285) (105) 91
Income before income taxes and
earnings in equity investment 5,709 3,933 9,958 7,560
Provision for income taxes 470 437 875 1,028
Income before earnings in equity
investment 5,239 3,496 9,083 6,532
Earnings in equity investment 9 -- 10 --
Net income $5,248 $3,496 $9,093 $6,532
Net loss attributable to
noncontrolling interest -- 63 -- 87
Net income attributable to VanceInfo
Technologies Inc. $5,248 $3,559 $9,093 $6,619
Earnings per share
Basic - ordinary shares $0.14 $0.10 $0.24 $0.18
Diluted - ordinary shares 0.13 0.09 0.22 0.16
Weighted average shares outstanding
(in thousands)
Basic - ordinary shares 37,975 37,221 37,823 37,210
Diluted - ordinary shares 41,068 40,779 40,588 40,483
Notes:
(a) Amount in relation to noncontrolling interest, formerly referenced to
as minority interest, for the three months and six months ended June
30, 2008 is reclassified in accordance with FASB Statement No. 160,
"Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No.51", which was adopted by the Company on January 1,
2009.
(b) Depreciation and amortization expenses totaled $1,148 and $1,021 for
the three months ended June 30, 2009 and 2008, respectively and $2,352
and $1,862 for the six months ended June 30, 2009 and 2008,
respectively."
VANCEINFO TECHNOLOGIES INC.
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(US dollars in thousands, except per share data and percentages)
Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Net income $5,248 $359 (a) $5,607 $3,496 $343 (c) $3,839
Net margin 15.2% 1.0% (a) 16.2% 14.3% 1.4% (c) 15.7%
Diluted EPS $0.13 $0.01 (e) $0.14 $0.09 $0.01 (e) $0.10
Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Net income $9,093 $692 (b) $9,785 $6,532 $689 (d) $7,221
Net margin 14.1% 1.0% (b) 15.1% 14.5% 1.6% (d) 16.1%
Diluted EPS $0.22 $0.02 (e) $0.24 $0.16 $0.02 (e) $0.18
Notes:
(a) Adjustment to exclude share-based compensation of $359 from operations
of which $86 was reported in cost of revenues and $273 was reported in
selling, general and administrative expenses in the unaudited
condensed consolidated statements of operations.
(b) Adjustment to exclude share-based compensation of $692 from operations
of which $158 was reported in cost of revenues and $534 was reported
in selling, general and administrative expenses in the unaudited
condensed consolidated statements of operations.
(c) Adjustment to exclude share-based compensation of $343 from operations
of which $56 was reported in cost of revenues and $287 was reported in
selling, general and administrative expenses in the unaudited
condensed consolidated statements of operations.
(d) Adjustment to exclude share-based compensation of $689 from operations
of which $114 was reported in cost of revenues and $575 was reported
in selling, general and administrative expenses in the unaudited
condensed consolidated statements of operations.
(e) Non-GAAP diluted EPS is computed by dividing Non-GAAP net income
attributable to VanceInfo Technologies Inc. by the weighted average
number of dilutive ordinary shares outstanding for the respective
periods.
VANCEINFO TECHNOLOGIES INC.
Reconciliations of Forward-Looking Guidance for
Non-GAAP Financial Measures to Comparable GAAP Measures
(US dollars in thousands, except per share data)
(Unaudited)
Three Months Ending Twelve Months Ending
September 30, 2009 December 31, 2009
GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP
Range of ments Range of Range of ments Range of
Estimate Estimate Estimate Estimate
From To From To From To From To
Diluted
EPS(a) $0.12 $0.13 $0.03(b) $0.15 $0.16 $0.48 $0.50 $0.05(b) $0.53 $0.55
Notes:
(a) Based on 41.5 million and 41.1 million total ADS-equivalent average
shares outstanding for the third quarter and full year 2009,
respectively.
(b) Reflects estimated adjustment for a one-time transitional cost of
approximately $0.5 million in connection with the new online travel
service client, approximately $0.2 million in transaction costs
related to the TP acquisition and share-based compensation expenses of
approximately $0.4 million for the third quarter 2009 and $1.5 million
for the full year 2009.
SOURCE VanceInfo Technologies Inc.
Copyright (2009) PR Newswire. All Rights Reserved.
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