BEIJING, Feb. 27 /Xinhua-PRNewswire/ -- VanceInfo Technologies Inc.
(NYSE:VIT), an IT service provider and one of the leading offshore
software development companies in China, today announced its
unaudited financial results for the fourth quarter and full year
ended December 31, 2007. Fourth Quarter and Full Year 2007
Financial and Operating Highlights -- Net revenues for the fourth
quarter were US$19.3 million, up 96.1% from the fourth quarter
2006. -- Net revenues for the year 2007 were $62.7 million, up
115.9% from 2006. -- Gross margin was 38.6% in the fourth quarter
of 2007 and 38.5% for the year, up from 37.2% and 38.2%,
respectively, for the same periods in 2006. -- Net income for the
fourth quarter was US$3.1 million, up 136.3% from the fourth
quarter of 2006. -- Net income for the full year 2007 was US$9.6
million, up 118.7% from 2006. -- Employees at year end 2007 totaled
3,675, up 60.5% from year end 2006. Of these, billable
professionals totaled 3,224, up 64.3% from year end 2006. "We are
pleased to announce our fourth quarter and annual results for the
first time as a public company, especially given our strong
performance for both the quarter and the year," commented Mr. Chris
Chen, Chairman and Chief Executive Officer of VanceInfo
Technologies. "Historically, our business tended to be stronger in
the second and third quarters due to the seasonality of the
business related to working days, but this year, our fourth quarter
results clearly exceeded those of our third quarter. This strong
performance demonstrates our ability to execute our strategies and
positions us for sustained growth. During the fourth quarter, we
continued to improve our service quality and to generate increasing
customer demand. In particular, revenues from research &
development services, quality assurance & testing, and
application development & maintenance were up strongly due to
increased demand from both current and new clients. I believe our
long-term commitment to expand geographically and to provide
clients with a higher quality service has contributed to our growth
in 2007. We expect further robust growth, driven by the booming
Chinese economy, the growing number of multinational corporations
expanding in China, and the fast-maturing engineering and IT
workforce in China. Additionally, China is increasingly becoming an
important alternative for IT outsourcing solutions. These highly
favorable trends should largely mitigate the potential effects of
the U.S. economic slowdown." Fourth Quarter 2007 Financial Results
Net Revenues Net revenues were US$19.3 million in the fourth
quarter of 2007, up 96.1% from the same quarter of 2006. The
increase in net revenues was primarily driven by the strong organic
growth from VanceInfo's existing clients, incremental revenues and
cross-selling revenue synergies from a number of small acquisitions
completed in the first nine months of 2007, and the new client
relationships developed during the year. Net Revenues by Service
Lines Three Months Ended Three Months Ended December 31, 2007
December 31, 2006 (in US$ thousands, except percentages) Research
& development service $10,524 54.6% $ 6,349 64.6% Enterprise
solutions 3,138 16.3% 716 7.3% Application development &
maintenance 3,351 17.4% 872 8.9% Quality assurance & testing
1,304 6.8% 996 10.1% Globalization & localization 950 4.9% 891
9.1% Total net revenues $19,267 100.0% $9,824 100.0% Net revenues
from research & development services grew 66% compared with the
fourth quarter of 2006 and continued to account for the majority of
the Company's revenues. Net revenues from enterprise solutions and
application development & maintenance had the strongest growth,
up 338 % and 284%, respectively, from the fourth quarter of 2006 as
a result of significant organic investments and selective
acquisitions. Net Revenues by Geographic Markets Based on the
location of the clients' headquarters, the U.S. was the largest of
the Company's geographic markets, accounting for US$12.2 million,
or 63.2% of net revenues in the fourth quarter of 2007, followed by
13.2% from clients headquartered in China, 11.6% in Europe and
11.6% in Japan. However, of the US$12.2 million net revenues from
U.S. headquartered clients, more than 70% were contracted with
their Chinese or other Asian subsidiaries, driven by these
customers' rising investments in the Asia Pacific region and desire
to grow their businesses in the China markets. As a result, the
Company has experienced minimal effect from the U.S. economic
slowdown. For the same reason, only 20.4% of the Company's net
revenues in the fourth quarter of 2007 were subject to any effect
from the U.S. dollar depreciation against the Chinese Renminbi. Top
Clients The Company's client population continued to become more
diverse, and the net revenues have become less dependent on a few
large clients. For example, the total revenues from the Company's
largest two clients, Microsoft and IBM, accounted for 29.8% of the
Company's net revenues in the fourth quarter, compared to 53.2% of
net revenues in the fourth quarter 2006. Similarly, revenues from
the top five clients totaled 49.1% of net revenues in the quarter,
compared to 68.8% in the fourth quarter of 2006. Gross Profit and
Gross Margin Gross profit in the fourth quarter of 2007 was US$7.4
million, an increase of 103.1% from the fourth quarter of 2006.
Gross margin was 38.6% in the fourth quarter of 2007, up from 37.2%
in the fourth quarter of last year, as the Company continued to
optimize its service mix with improved average billing rates while
effectively managing the staff costs. Operating Expenses Operating
expenses in the fourth quarter 2007 were US$5.5 million, compared
to US$2.3 million in the fourth quarter 2006. The increase in
operating expenses was mainly due to increased general and
administrative expenses associated with becoming a public company,
as well as higher selling and marketing expenses due to recent
hires in the United States as part of the Company's global business
development efforts. The fourth quarter operating expenses also
included US$0.4 million in professional fees that will not recur on
a quarterly basis going forward. Other Operating Income Other
operating income was US$0.7 million in the fourth quarter of 2007,
consisting primarily of government grants that the Company received
for its internal process management system and to subsidize part of
the Company's training costs incurred in 2007. The Company expects
continued financial support from the Chinese government in areas
such as employee training and process improvements. Operating
Income and Margin Income from operations in the fourth quarter of
2007 was US$2.7 million, compared to US$1.3 million in the fourth
quarter of 2006. Operating margin was 13.9% in the fourth quarter
of 2007, up from 13.4% in the fourth quarter of 2006, mainly due to
gross margin expansion, partly offset by the higher selling,
marketing, general and administrative expenses to support the
Company's continuing strong growth, as well as higher expenses
associated with becoming a public company. Net Income and EPS Net
income in the fourth quarter of 2007 was US$3.1 million, up 136.3%
from US$1.3 million in the fourth quarter of 2006. Net margin was
16.2% in the fourth quarter 2007, up from 13.4% in the same period
last year. The quarter's diluted earnings per share ("EPS") were
US$0.07, up from US$0.02 in the fourth quarter 2006. Non-GAAP
diluted EPS, which assumes conversion of the preferred shares for
the entire quarter and excludes share-based compensation expense,
was US$0.10 in the fourth quarter, compared to US$0.05 in the same
period of 2006. The non-GAAP measures are described below and
reconciled to the corresponding GAAP measures in the section below
titled "About Non-GAAP Financial Measures." Full Year 2007 Results
Net Revenues Net revenues for the year 2007 were US$62.7 million,
up 115.9% from US$29.1 million in 2006. The increase was driven
primarily by strong organic growth, complemented by incremental
revenues and cross-selling synergies from the acquisitions
completed in 2007. Net Revenues by Service Lines Year Ended
December 31, Year Ended December 31, 2007 2006 (in US$ thousands,
except percentages) Research & development service $36,013
57.4% $18,266 62.9% Enterprise solutions 8,748 14.0% 2,163 7.4%
Application development & maintenance 9,348 14.9% 2,328 8.1%
Quality assurance & testing 4,719 7.5% 3,208 11.0%
Globalization & localization 3,886 6.2% 3,086 10.6% Total net
revenues $62,714 100.0% $29,051 100.0% Net revenues generated from
research & development services in 2007 grew 97.2% compared
with 2006 and continued to account for the majority of the
Company's net revenues for the year 2007. Net revenues from both
enterprise solutions and application development & maintenance
grew more than 300% compared with 2006, as the Company expanded its
service offerings and moved aggressively into these new service
lines through both organic investments and strategic acquisitions.
Gross Profit and Gross Margin Gross profit for the full year 2007
was US$24.2 million, an increase of 117.9% from US$11.1 million in
2006. Gross margin was 38.5% in the full year 2007, up from 38.2%
in 2006 as the Company continued to move up the value chain and
provided new higher margin services. Net Income and EPS Net income
for the year 2007 was US$9.6 million, up 118.7% from US$4.4 million
in 2006. Net margin was 15.3% in 2007, up from 15.1% in 2006.
Diluted EPS for the year was US$0.19, up from US$0.07 in 2006.
Non-GAAP diluted EPS, which assumes conversion of the preferred
shares for the entire year and excludes share-based compensation
expense, were US$0.34 for the full year 2007, compared to US$0.21
in 2006. Business Outlook for First Quarter and Full Year 2008
VanceInfo expects to generate net revenues between US$18.5 million
and US$19.5 million in the first quarter 2008, representing a 77%
to 87% increase from the corresponding period in 2007. First
quarter diluted EPS is expected to be US$0.06 on a GAAP basis and
US$0.07 on a non-GAAP basis, which excludes share-based
compensation, based on 40.3 million total ADS-equivalent average
shares outstanding. The first quarter diluted EPS reflects the
normal seasonality effect from the extended Chinese New Year
holiday and the increased average shares outstanding after the
Company's initial public offering in December 2007. For the full
year 2008, the Company expects to generate net revenues between
US$92 million and US$96 million, representing a 47% to 53% increase
from 2007. The Company expects to report diluted EPS between
US$0.34 and US$0.38 on a GAAP basis, and non-GAAP diluted EPS
excluding share-based compensation between US$0.37 and US$0.41,
based on 40.6 million total ADS- equivalent average shares
outstanding. Total headcount by the end of 2008 is expected to be
between 4,800 and 5,000. Chairman and CEO, Mr. Chris Chen,
continued, "Our strategic and operating plans are in place, and we
have been executing well, adding new clients and talented
employees, developing new tools and advanced processes, and
delivering on our clients' and our investors' expectations. We
expect to continue that trend." Conference Call The Company will
host a conference call and live webcast to discuss the results at
8:00 AM Eastern Standard Time (EST) on Wednesday February 27, 2008
(9:00 PM Beijing/Hong Kong time). Please dial-in five to ten
minutes prior to the call to register and receive further
instruction. The dial-in details for the live conference call are
as follows: -- U.S. Toll Free Number: +1 800-510-9691 --
International dial-in number: +1 617-614-3453 -- 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 12:00 p.m. EST, March 4, 2008 at +1 617-801-6888;
Passcode: 99744021. About VanceInfo: VanceInfo Technologies Inc. is
an IT service provider and one of the leading offshore software
development companies in China. VanceInfo ranked among the top
three Chinese offshore software development service providers for
the North American and European markets as measured by 2006
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, as well as
globalization & localization. VanceInfo provides these services
primarily to corporations headquartered in the United States,
Europe, Japan and China, targeting high growth industries such as
technology, telecommunications, financial services, manufacturing,
retail and distribution. Safe Harbor This press 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 "Business Outlook for First Quarter
and Full Year 2008" 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 overall economic growth 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 China and supply of qualified professionals,
as well as the PRC government's investment in infrastructure
construction and adoption of various incentives in the IT service
industry. Further information regarding these and other risks is
included in VanceInfo's filings with the U.S. Securities and
Exchange Commission, including its registration statement on Form
F-1. All information provided in this press release and in the
attachments is as of February 27, 2008, and VanceInfo does not
undertake any obligation to update any forward- looking statement
as a result of new information, future events or otherwise, except
as required under applicable law. 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. 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. VANCEINFO TECHNOLOGIES INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per
share data) Three Months Ended Years Ended December 31, December
31, 2007 2006 2007 2006 Net revenues $19,267 $9,824 $62,714 $29,051
Cost of revenues (1) 11,839 6,166 38,544 17,961 Gross profit 7,428
3,658 24,170 11,090 Selling and marketing expenses (1) 905 205
2,342 681 General and administrative expenses (1) 4,564 2,134
13,839 6,140 Other operating income 721 2 861 54 Income from
operations 2,680 1,321 8,850 4,323 Other income (expense): Interest
income 386 258 1,032 592 Interest expenses (27) (4) (47) (4)
Exchange gain (loss) 185 (33) 317 (93) Change in fair value of
warrants -- (179) (357) (405) Income before income taxes and
minority interest 3,224 1,363 9,795 4,413 Provision for income
taxes 143 1 174 2 Minority interest 33 (44) (52) (35) Net income
$3,114 $1,318 $9,569 $4,376 Earnings per share Basic - ordinary
share $0.08 $0.02 $0.22 $0.08 Basic - Series A convertible
redeemable preferred share $0.12 $0.06 $0.40 $0.24 Basic - Series
B-1 convertible redeemable preferred share $0.12 $0.06 $0.40 $0.25
Basic - Series B-2 convertible redeemable preferred share $0.16
$0.08 $0.51 $0.33 Basic - Series B-3 convertible redeemable
preferred share $0.08 N/A $0.22 N/A Diluted - ordinary share $0.07
$0.02 $0.19 $0.07 Weighted average shares used in calculating net
income per share Basic - ordinary share 15,254 8,696 11,426 9,606
Basic - Series A convertible redeemable preferred share 5,980 7,175
6,860 7,175 Basic - Series B-1 convertible redeemable preferred
share 2,503 2,990 2,867 1,999 Basic - Series B-2 convertible
redeemable preferred share 5,340 6,380 6,118 4,265 Basic - Series
B-3 convertible redeemable preferred share 308 N/A 78 N/A Diluted -
ordinary share 18,266 9,332 13,446 10,205 (1) Depreciation and
amortization expenses totaled US$0.7 million and US$0.3 million for
the three months ended December 31, 2007 and 2006, respectively,
and US$2.5 million and US$0.9 million for the year ended December
31, 2007 and 2006, respectively. VANCEINFO TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures to Comparable GAAP
Measures (In thousands, except per share data and percentages)
Three Months Ended Three Months Ended December 31, December 31,
2007 2007 2007 2006 2006 2006 GAAP Adjustments Non-GAAP GAAP
Adjustments Non-GAAP Net income $3,114 $287(a) $3,401 $1,318
$181(c) $1,499 Net margin 16.2% 1.5%(a) 17.7% 13.4% 1.9%(c) 15.3%
Average shares (d) 18,266 15,466 33,732 9,332 18,140 27,472 Diluted
EPS $0.07 $0.03(e) $0.10 $0.02 $0.03(e) $0.05 Twelve Months Ended
Twelve Months Ended December 31, December 31, 2007 2007 2007 2006
2006 2006 GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP Net
income $9,569 $996(b) $10,565 $4,376 $713 (f) $5,089 Net margin
15.3% 1.5%(b) 16.8% 15.1% 2.4% (f) 17.5% Average shares (d) 13,446
17,453 30,899 10,205 14,506 24,711 Diluted EPS $0.19 $0.15(e) $0.34
$0.07 $0.14(e) $0.21 Notes: (a) Adjustment to exclude stock based
compensation of $287 from operations of which $43 was reported in
cost of revenues, $39 was reported in selling and marketing
expenses and $205 was reported in general and administrative
expenses in the unaudited condensed consolidated statements of
operations. (b) Adjustment to exclude stock based compensation of
$996 from operations of which $111 was reported in cost of
revenues, $76 was reported in selling and marketing expenses and
$809 was reported in general and administrative expenses in our
unaudited condensed consolidated statements of operations. (c)
Adjustment to exclude stock-based compensation of $181 from income
from operations of which $11 was reported in cost of revenues, $9
was reported in selling and marketing expenses and $161 was
reported in general and administrative expenses in the unaudited
condensed consolidated statements of operations. (d) Represent
weighted average number of ordinary and dilutive shares outstanding
(e) Non-GAAP diluted EPS is computed by dividing Non- GAAP net
income by the weighted average number of ordinary and dilutive
shares outstanding for the respective periods plus the number of
ordinary shares resulting from the assumed conversion of the Series
A, B-1, B-2 and B-3 convertible redeemable preferred shares as of
the beginning of the respective periods. (f) Adjustment to exclude
stock-based compensation of $713 from income from operations of
which $45 was reported in cost of revenues, $35 was reported in
selling and marketing expenses and $633 was reported in general and
administrative expenses in the unaudited condensed consolidated
statements of operations. VANCEINFO TECHNOLOGIES INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) December 31,
December 31, 2007 2006 Assets Current Assets Cash and cash
equivalents $78,206 $20,565 Accounts receivable 24,708 11,815 Other
current assets 5,879 1,004 Total Current Assets 108,793 33,384
Property and equipment, net 7,999 5,000 Goodwill and other
intangible assets 11,701 2,084 Other assets 583 1,576 Total Assets
$129,076 $42,044 Liabilities and Stockholders' Equity Current
Liabilities $16,972 $5,404 Other liabilities 954 179 Total
Liabilities 17,926 5,583 Minority interest 630 173 Series A
convertible redeemable preferred shares -- 7,837 Series B-1
convertible redeemable preferred shares -- 6,246 Series B-2
convertible redeemable preferred shares -- 17,565 Shareholders'
equity 110,520 4,640 Total Liabilities and $129,076 $42,044
Stockholders' Equity For further information, please contact:
Melissa Ning Director, Investor Relations VanceInfo Technologies
Inc. Tel: +86-10-8282-5330 Email: Tip Fleming Christensen Tel:
+852-2232-3922 Email: Chris GustafsonChristensen Tel:
+1-602-980-0048 Email: DATASOURCE: VanceInfo Technologies Inc.
CONTACT: Melissa Ning, Director of Investor Relations of VanceInfo
Technologies Inc., +86-10-8282-5330, or ; or Tip Fleming,
+852-2232-3922, or ; or Chris Gustafson, +1-602-980- 0048, or ,
both of Christensen for VanceInfo Technologies Inc.
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