BEIJING, Aug. 14 /Xinhua-PRNewswire/ -- VanceInfo Technologies Inc.
(NYSE:VIT) ("VanceInfo" or the "Company"), an IT service provider
and one of the leading offshore software development companies in
China, today reported its unaudited financial results for the
second quarter ended June 30, 2008. Second Quarter 2008 Financial
and Operating Highlights -- Net revenues for the second quarter
increased to $24.4 million, up 63.2% from the second quarter of
2007. -- Gross profit rose to $9.6 million, up 65.4% from the
year-ago quarter. Gross margin improved to 39.2%, up from 38.7% in
the same period in 2007. -- Operating margin was 15.2%, compared to
15.1% in the second quarter last year. -- Net income was $3.6
million, compared to $2.3 million in the second quarter of 2007.
Adjusted net income (non-GAAP), which excludes share- based
compensation expense, was $3.9 million, compared to $2.5 million a
year ago. -- Diluted earnings per share ("EPS") were $0.09, and
adjusted diluted EPS (non-GAAP), which excludes share-based
compensation expense, was $0.10 in the second quarter. -- Employees
totaled 4,564, including 4,003 billable professionals, as of June
30, 2008. "We are pleased to see another strong quarter with record
revenues and net profit. Demand from most of our existing clients
continued to rise, and a number of newly acquired customers in the
past year have been expanding the scope of their outsourcing
assignments to us after our successful completion of the pilot
projects," said Mr. Chris Chen, Chairman and Chief Executive
Officer of VanceInfo. "Meanwhile, we see a growing trend of U.S.
and European clients selecting China as a preferred emerging
destination for software development and IT outsourcing services,
thanks to the rapidly expanding IT talent pool in the country. Our
market leadership and enhanced brand recognition since the IPO
position us well in capitalizing this remarkable trend." Second
Quarter 2008 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 2008 and the
second quarter of 2007 as in the following paragraphs. Net Revenues
Net revenues were $24.4 million in the second quarter of 2008, up
63.2% from $15.0 million in the second quarter of 2007. The
increase in net revenues was primarily due to significant growth
from a number of clients acquired in the past twelve months as well
as healthy growth from our long-term core accounts. Net Revenues by
Service Lines Net revenues from research & development services
grew 60.1% compared with the second quarter of 2007 and accounted
for 59.1% of the Company's net revenues. Telecom and wireless
clients contributed a significant part of the growth. Net revenues
from enterprise solutions had the strongest percentage growth in
the second quarter 2008, up 122.8% from the year-ago quarter,
primarily due to the increasing strength of our SAP consulting and
implementation team, which was enhanced through an acquisition in
the third quarter of last year. Growth from application development
and maintenance and quality assurance and testing remained strong,
achieving 79.2% and 34.5% in year over year growth, respectively.
Three Months Ended Three Months Ended June 30, 2008 June 30, 2007
(in thousands, except percentages) Research & development
services $14,428 59.1% $9,014 60.2% Globalization &
localization 1,105 4.5% 1,068 7.2% Enterprise solutions 3,396 13.9%
1,524 10.2% Application development & maintenance 3,896 16.0%
2,174 14.5% Quality assurance & testing 1,591 6.5% 1,183 7.9%
Total net revenues $24,416 100.0% $14,963 100.0% Net Revenues by
Geographic Markets Based on the location of our clients'
headquarters, the United States continued to be the Company's
largest geographic market, accounting for $13.9 million or 56.9% of
net revenues in the second quarter of 2008, followed by 18.8% from
clients headquartered in China, 14.5% in Europe and 9.5% in Japan.
The rising contribution from China headquartered clients is due to
strong growth from the Company's domestic clients as well as the
seasonally strong enterprise solutions service line, which serves a
number of large Chinese enterprises. 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, China accounted for 69.2% of net revenues in the
second quarter 2008, while the United States and Japan accounted
for 17.8% and 8.5%, respectively. The Company provides this
supplemental geographic analysis to present an additional measure
for assessing the Company's geographic participation and highlight
its involvement in the expanding Chinese market. Largest Clients
The total revenues from the Company's two largest clients,
Microsoft and IBM, accounted for 29.5% of the Company's net
revenues in the second quarter of 2008, compared to 36.8% in the
same period last year. Similarly, revenues from the top five
clients totaled 52.9% of net revenues in the quarter, compared to
58.0% in the second quarter of 2007. Gross Profit and Gross Margin
Gross profit in the second quarter of 2008 was $9.6 million, an
increase of 65.4% from $5.8 million in the second quarter of 2007.
Gross margin was 39.2%, up from 38.7% in the same quarter last
year, as the Company continued to improve its average billing rates
for increasingly sophisticated service offerings while effectively
managing the staff costs. Operating Expenses Sales and marketing
expenses were $1.0 million in the second quarter of 2008, up from
$0.5 million in the second quarter of 2007. The sales and marketing
expenses rose as we strengthened our sales force in the third
quarter of 2007 to expand the business development efforts in the
United States. General and administrative expenses were $5.1
million in the second quarter of 2008, up 68.3% from $3.1 million a
year ago. The increase was primarily due to higher administrative
costs associated with being a public company as well as higher
operational spending during the quarter to position the Company for
additional growth in the second half of 2008. Operating Income and
Operating Margin Operating income in the second quarter of 2008 was
$3.7 million, up 64.2% from $2.3 million in the second quarter
2007. Operating margin was 15.2% in the second quarter of 2008,
compared with 15.1% in the year-ago period. Foreign currency
exchange losses Foreign exchange losses were $0.3 million in the
second quarter of 2008, largely due to a loss from the depreciation
of the monetary assets denominated in Japanese Yen against Chinese
Renminbi at two of the Company's PRC operating entities during the
quarter. Provision for income taxes The provision for income taxes
was $0.4 million in the second quarter of 2008, compared to a tax
credit of $15 thousand in the second quarter of 2007. As a "new and
high-technology enterprise", the Company's main operating entity in
China was entitled to a three-year tax exemption from year 2005 to
2007 and a 50% reduction from the 15% preferential tax rate from
year 2008 to 2010. Under the new Chinese Enterprise Income Tax
Regulation that became effective in 2008, however, all new and
high-technology enterprises are required to re- apply for the
status. Prior to receiving the official approval of this status,
the Company calculates income tax expense based on the 25%
statutory tax rate, instead of the 15% preferential tax rate, and a
50% reduction, resulting in a 12.5% income tax rate for the main
operating entity in the first half of 2008. Net Income and EPS Net
income in the second quarter of 2008 was $3.6 million, up 56.8%
from $2.3 million in the second quarter of 2007. The net margin was
14.6% in the second quarter of 2008, compared to 15.2% in the
second quarter of 2007. Non-GAAP net income, which excludes
share-based compensation expense, was $3.9 million, up from $2.5
million a year ago. Non-GAAP net margin was 16.0%, compared to
16.8% in the prior year period. The decline in net margin was due
to larger foreign exchange losses and higher provision for income
taxes in the second quarter of 2008. Diluted EPS was $0.09, and
non-GAAP diluted EPS, which excludes share-based compensation
expense, was $0.10 in the second quarter. The non-GAAP measures are
described below and reconciled to the corresponding GAAP measures
in the section below titled "About Non-GAAP Financial Measures."
First Half 2008 Financial Results Net Revenues Net revenues for the
first half of 2008 were $44.9 million, up 76.9% from $25.4 million
in the first half of 2007. Net Revenues by Service Lines Six Months
Ended Six Months Ended June 30, 2008 June 30, 2007 (in thousands,
except percentages) Research & development service $26,449
58.9% $15,719 61.9% Globalization & localization 2,005 4.5%
1,933 7.6% Enterprise solutions 5,748 12.7% 2,259 8.9% Application
development & maintenance 7,621 17.0% 3,206 12.6% Quality
assurance & testing 3,095 6.9% 2,281 9.0% Total net revenues
$44,918 100.0% $25,398 100.0% Gross Profit and Gross Margin Gross
profit for the first half of 2008 was $17.4 million, an increase of
78.4% from $9.7 million in the first half of 2007. Gross margin was
38.6% in the first half of 2008, up from 38.3% in the prior year
period. Net Income and EPS Net income for the first half of 2008
was $6.6 million, up 86.2% from $3.6 million for the same period of
2007. Net margin was 14.7% in the first half of 2008, up from 14.0%
in the same period in 2007. Non-GAAP net income, which excludes
share-based compensation expense, was $7.3 million, up from $4.0
million a year ago. Non-GAAP net margin was 16.3%, up from 15.8% in
the first half of 2007. Diluted EPS for the first half of 2008 was
$0.16, and non-GAAP diluted EPS, which excludes share-based
compensation expenses, was $0.18 for the first half of 2008. Recent
Developments Increased Equity Ownership in Shanghai Solutions In
July 2008, VanceInfo completed the acquisition of an additional 10%
equity interest in Shanghai Solutions, a 75% owned subsidiary of
the Company as of June 30, 2008, from NEC System Technologies Ltd.
The agreement was signed in April 2008 as disclosed in the
Company's first quarter earnings release. In August 2008, VanceInfo
reached a preliminary agreement to acquire the remaining 15% of
Shanghai Solutions in an all cash transaction from the two original
founders. Upon completion of the transaction in the third quarter
of 2008, Shanghai Solutions will be renamed Shanghai VanceInfo
Technologies Limited and will fully integrate other Japan related
operations to become the single operating entity of the Company
serving Japanese clients. Appointment of Chief Operating Officer
Sidney Huang, currently Chief Financial Officer of VanceInfo, was
appointed Chief Operating Officer of the Company effective August
12, 2008. In this expanded capacity, Mr. Huang will assume more
responsibilities in managing the Company's operations in addition
to his role as the Chief Financial Officer. Sidney Huang has also
been a member of the CEO Office, along with CEO Chris Chen and
President David Chen. Outlook for the Third Quarter and Full Year
2008 VanceInfo expects to generate net revenues between $25 million
and $26 million in the third quarter of 2008, representing a 39% to
44% increase from the third quarter of 2007. Third quarter diluted
EPS is expected to be approximately $0.09 on a GAAP basis and $0.10
on a non-GAAP basis, which excludes share-based compensation, based
on 41.0 million total ADS-equivalent average shares outstanding.
Due to the new national holiday schedule in 2008 and the impact
from the Beijing Olympic Games, the effective working days for the
third quarter of 2008 are reduced by at least two days as compared
to the same quarter in 2007, which will have a direct impact on the
Company's net revenues and EPS expectations. Based on the Company's
current understanding of the new Chinese Enterprise Income Tax
Regulation, the Company's estimate of its effective tax rate for
2008 at this time is between 8% and 14%. The ultimate applicable
tax rate of the Company will depend on many factors, including
whether its main operating entity will receive the approval of its
High and New Technology Enterprise status under the new regulation.
For the full year 2008, the Company has increased its guidance and
expects that: -- Net revenues to be between $96 million and $99
million, representing a 53% to 58% increase from 2007. -- Diluted
EPS to be between $0.35 and $0.38 on a GAAP basis, and non-GAAP
diluted EPS excluding share-based compensation to be between $0.38
and $0.41, based on 40.8 million total ADS-equivalent average
shares outstanding. -- Total headcount by the end of 2008 to be
approximately 5,000. Conference Call VanceInfo will host a
conference call and live webcast to discuss the quarter's results
and outlook at 8:00 AM Eastern Standard Time (8:00 PM Beijing/Hong
Kong time) on August 14, 2008. Please dial-in five to ten minutes
prior to the call to register and receive further instructions. The
dial-in details for the live conference call are: -- U.S. Toll Free
Number: +1 866-510-0705 -- International dial-in number: +1
617-597-5363 -- Hong Kong dial-in number: +852 3002-1672 Passcode:
VanceInfo The conference call will be available live by 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, August 21,
2008 at +1 888-286-8010 or +1 617-801-6888; Passcode: 68016442.
About VanceInfo VanceInfo Technologies Inc. is an IT service
provider and one of the leading offshore software development
companies in China. VanceInfo was the first China software
development outsourcer listed on the New York Stock Exchange. The
Company ranked number one among Chinese offshore software
development service providers for the North American and European
markets as measured by 2007 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 the
United States, Europe, Japan, and China, targeting high-growth
industries such as technology, telecommunications, financial
services, manufacturing, retail, and distribution. 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 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 news
release and in the attachments is as of August 14, 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 Balance Sheets (Unaudited) (US dollars in thousands)
June 30 December 31 2008 2007 Assets Current assets Cash and cash
equivalents $74,949 $76,835 Accounts receivable 30,380 24,708 Other
current assets 7,237 7,250 Total current assets 112,566 108,793
Property and equipment, net 9,784 7,999 Goodwill and other
intangible assets 15,198 11,701 Other long-term assets 1,537 583
Total assets $139,085 $129,076 Liabilities, minority interest, and
shareholders' equity Current liabilities $16,457 $17,114 Other
liabilities 1,547 954 Total liabilities 18,004 18,068 Minority
interest 543 630 Shareholders' equity (a) 120,538 110,378 Total
liabilities, minority interest, and shareholders' equity $139,085
$129,076 (a) As of June 30, 2008, there were 37,314,095 ordinary
shares issued and outstanding. VanceInfo Technologies Inc.
Condensed Consolidated Statements of Operations (Unaudited) (US
dollars in thousands, except share and share related data) Three
months ended Six months ended June 30, June 30, 2008 2007 2008 2007
Net revenues $24,416 $14,963 $44,918 $25,398 Cost of revenues (1)
14,848 9,178 27,566 15,671 Gross profit 9,568 5,785 17,352 9,727
Selling and marketing expenses (1) 1,041 496 2,019 780 General and
administrative expenses (1) 5,140 3,054 9,483 5,393 Other operating
income 315 20 459 21 Income from operations 3,702 2,255 6,309 3,575
Interest income 540 219 1,207 429 Interest expenses 24 -- 47 -
Foreign currency Exchange gains (losses) (285) (120) 91 (193)
Change in fair value of warrants -- 86 -- 127 Income before income
taxes and minority interest 3,933 2,268 7,560 3,684 Provision for
income taxes 437 (15) 1,028 91 Income before minority interest
3,496 2,283 6,532 3,593 Minority interest 63 (12) 87 (38) Net
income $3,559 $2,271 $6,619 $3,555 Earnings per share Basic -
ordinary share $0.10 $0.05 $0.18 $0.07 Basic - Series A convertible
redeemable preferred share N/A 0.09 N/A 0.15 Basic - Series B-1
convertible redeemable preferred share N/A 0.09 N/A 0.16 Basic -
Series B-2 convertible redeemable preferred share N/A 0.12 N/A 0.20
Diluted - ordinary share 0.09 0.05 0.16 0.06 Weighted average
shares outstanding (in thousands) Basic - ordinary share 37,221
10,67 37,210 9,760 Basic - Series A convertible redeemable
preferred share -- 7,155 -- 7,165 Basic - Series B-1 convertible
redeemable preferred share -- 2,990 -- 2,990 Basic - Series B-2
convertible redeemable preferred share -- 6,380 -- 6,380 Diluted -
ordinary share 40,779 11,857 0,483 11,048 (1) Depreciation and
amortization expenses totaled $1,021 and $684 for the three months
ended June 30, 2008 and 2007, respectively, and $1,863 and $1,050
for the six months ended June 30, 2008 and 2007, respectively.
VanceInfo Technologies Inc. Reconciliations of Non-GAAP Financial
Measures to Comparable GAAP Measures (In US dollars in thousands,
except per share data and percentages) Three Months Ended June 30,
2008 GAAP Adjustments Non-GAAP Net income $3,559 $343 (a) $3,902
Net margin 14.6% 1.4% (a) 16.0% Average shares (e) 40,779 -- 40,779
Diluted EPS $0.09 $0.01 (f) $0.10 Three Months Ended June 30, 2007
GAAP Adjustments Non-GAAP Net income $2,271 $237 (c) $2,508 Net
margin 15.2% 1.6% (c) 16.8% Average shares (e) 11,857 18,120 29,977
Diluted EPS $0.05 $0.04 (f) $0.09 Six Months Ended June 30, 2008
GAAP Adjustments Non-GAAP Net income $6,619 $689 (b) $7,308 Net
margin 14.7% 1.6% (b) 16.3% Average shares (e) 40,483 -- 40,483
Diluted EPS $0.16 $0.02 (f) $0.18 Six Months Ended June 30, 2007
GAAP Adjustments Non-GAAP Net income $3,555 $459 (d) $4,014 Net
margin 14.0% 1.8% (d) 15.8% Average shares (e) 11,048 18,130 29,178
Diluted EPS $0.06 $0.08 (f) $0.14 Notes: (a) Adjustment to exclude
share-based compensation of $343 from operations of which $56 was
reported in cost of revenues, $46 was reported in selling and
marketing expenses and $241 was reported in general and
administrative expenses in the unaudited condensed consolidated
statements of operations. (b) Adjustment to exclude share-based
compensation of $689 from operations of which $114 was reported in
cost of revenues, $91 was reported in selling and marketing
expenses and $484 was reported in general and administrative
expenses in the unaudited condensed consolidated statements of
operations. (c) Adjustment to exclude share-based compensation of
$237 from operations of which $19 was reported in cost of revenues,
$11 was reported in selling and marketing expenses and $207 was
reported in general and administrative expenses in the unaudited
condensed consolidated statements of operations. (d) Adjustment to
exclude share-based compensation of $459 from operations of which
$37 was reported in cost of revenues, $21 was reported in selling
and marketing expenses and $401 was reported in general and
administrative expenses in the unaudited condensed consolidated
statements of operations. (e) Represent weighted average number of
dilutive ordinary shares outstanding (f) Non-GAAP diluted EPS is
computed by dividing Non-GAAP net income by the weighted average
number of dilutive ordinary 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 prior year
period. DATASOURCE: VanceInfo Technologies Inc. CONTACT: Melissa
Ning, Director, Investor Relations of VanceInfo Technologies Inc.,
+86-10-8282-5330, or Web site: http://ir.vanceinfo.com/
Copyright
Vanceinfo Technologies American Depositary Shares (NYSE:VIT)
Historical Stock Chart
From Jun 2024 to Jul 2024
Vanceinfo Technologies American Depositary Shares (NYSE:VIT)
Historical Stock Chart
From Jul 2023 to Jul 2024