BEIJING, May 13 /PRNewswire-Asia/ -- 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 first
quarter ended March 31, 2009. First Quarter 2009 Financial and
Operating Highlights -- Net revenues in the first quarter of 2009
increased to $30.1 million, up 46.8 % from $20.5 million in the
first quarter of 2008. -- Operating income in the first quarter of
2009 was $4.3 million, up 65.7% from the first quarter of 2008.
Operating margin expanded to 14.4% in the first quarter of 2009, up
from 12.7% in the first quarter of 2008. -- Diluted earnings per
share ("EPS") were $0.10 in the first quarter, up from $0.08 in the
first quarter of 2008. Non-GAAP diluted EPS, which excludes
share-based compensation expense, was $0.10 in the first quarter,
compared to $0.08 in the first quarter of 2008. -- Employees
totaled 6,075, including 5,426 billable professionals, as of March
31, 2009. 'We are pleased that VanceInfo continued to perform well
during the first quarter of 2009. Our revenues exceeded our
expectations, and we expanded our operating margin in a seasonally
weak quarter,' said Chris Chen, Chairman and Chief Executive
Officer of VanceInfo. 'While the seasonal effect and the economic
downturn had a visible impact on some of our businesses, we see
continued growth momentum from our Chinese and European clients.
Our pipeline of business opportunities remains encouraging in all
major geographies, and our cost control measures are taking effect
to protect our margins. With enhanced capabilities and brand
recognition, we are confident that we will continue to win new
customers and execute well for existing ones, and we will weather
through the recession as an even stronger player.' First 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 first quarter of 2009 and the first quarter of 2008 as
in the following paragraphs. Net Revenues Net revenues were $30.1
million in the first quarter of 2009, up 46.8% from $20.5 million
in the first quarter of 2008. The increase in net revenues was
primarily due to continued expansion of business with existing key
clients and the addition of new customers. Net Revenues by Service
Lines The Company provides two broad sets of services: R & D
Outsourcing Services and IT Services. R & D Outsourcing
Services consists of research & development service line and
globalization & localization service line. IT Services consists
of enterprise solutions, application development & maintenance,
and quality assurance & testing service lines. Net revenues
from R & D Outsourcing Services accounted for 63.7% of the
total revenues during the first quarter of 2009 and grew 48.3%
compared to the first quarter of 2008. Net revenues from IT
Services represented the remaining 36.3% of the revenues and was up
44.1% from the year-ago quarter, largely driven by a 76.5%
year-over-year growth in application development and maintenance
services. Three Months Ended Three Months Ended March 31, 2009
March 31, 2008 (in US$ thousands, except percentages) R & D
Outsourcing Services $19,165 63.7% $12,921 63.0% IT Services 10,922
36.3% 7,581 37.0% Total net revenues $30,087 100.0% $20,502 100.0%
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 $13.3 million
or 44.2% of net revenues in the first quarter of 2009, followed by
29.2% from clients headquartered in China, 18.4% in Europe, and
8.1% in Japan. 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 73.3% of net revenues in the first quarter of 2009,
while the United States accounted for 16.9% and Japan accounted for
7.4% in the same period. Largest Clients Revenues from the top five
clients totaled 58.3% of net revenues in the quarter, compared to
51.1% in the first quarter of 2008. The continued strength in a
number of large clients reflects the Company's strong customer
relationship driven by solid delivery results and the industry's
vendor consolidation trend. Gross Profit and Gross Margin Gross
profit in the first quarter of 2009 was $11.2 million, an increase
of 44.3% from $7.8 million in the first quarter of 2008. Gross
margin was 37.3% in the first quarter of 2009, compared to 38.0% in
the first quarter of 2008. The margin decline reflects stronger
seasonality effect due to higher revenue contribution from Chinese
clients and recent pricing pressure from certain customers.
Operating Expenses Sales and marketing expenses were $1.04 million
in the first quarter of 2009, up 6.2% from $0.98 million in the
first quarter of 2008. General and administrative expenses were
$6.3 million in the first quarter of 2009, up 46.1% from $4.3
million a year ago. Operating Income and Operating Margin Operating
income in the first quarter of 2009 was $4.3 million, up 65.7% from
$2.6 million in the first quarter of 2008. Operating margin
expanded to 14.4% in the first quarter of 2009, up from 12.7% in
the first quarter of 2008. The increase was partly attributable to
the Company's cost saving measures as well as a government grant
relating to the Company's training of new employees with college
degrees. The Company expects continued financial support from the
Chinese government in areas such as employee training and process
improvements. Provision for income taxes The provision for income
taxes was $0.4 million in the first quarter of 2009, compared to
$0.6 million in the first quarter of 2008. The effective tax rate
was 9.5% in the first quarter of 2009, reflecting the preferential
tax rate of 7.5% for the Company's main operating entity as a High
and New Technology Enterprise. Net Income and EPS Net income in the
first quarter of 2009 was $3.8 million, up 26.6% from $3.0 million
in the first quarter of 2008. Net margin was 12.8% in the first
quarter of 2009, compared to 14.8% in the first quarter of 2008.
Non-GAAP net income, which excludes share-based compensation
expense, was $4.2 million, up 23.5% from $3.4 million a year ago.
Non-GAAP net margin was 13.9%, compared to 16.5% in the prior year
period. The decrease in net margin was due to lower interest income
and a foreign exchange loss for the quarter. Diluted earnings per
share ('EPS') were $0.10 in the first quarter of 2009, compared to
$0.08 in the first quarter of 2008. Non-GAAP diluted EPS, which
excludes share-based compensation expense, was $0.10 in the first
quarter of 2009, compared to $0.08 in the first quarter of 2008.
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.' Share Repurchase Activity In
February 2009, the Company's Board of Directors approved a share
repurchase program authorizing the Company to acquire up to $10
million worth of the Company's outstanding American Depositary
Shares ('ADSs') within the next 12 months. As of March 31, 2009,
2,800 shares were repurchased for a total consideration of $13,192
under this program. Recent Developments New Contract with a Leading
Online Travel Service Provider In May 2009, VanceInfo signed a
multi-year master agreement with a leading global online travel
service provider. Under this partnership, VanceInfo will provide
application development and maintenance services to the new client,
helping it to enhance its core platforms and services as the client
continues to expand its global reach. The Company will work closely
with the client to build a potentially sizable global delivery team
over the next 12 months. Industry Recognition In the first quarter
of 2009, the Company was listed on two leading global outsourcing
rankings: the 2009 Global Outsourcing 100 list by the International
Association of Outsourcing Professionals (IAOP), and the 2009
Global Services 100 list by Global Services and neoIT. In the IAOP
ranking, VanceInfo has been promoted to the Leaders category, where
the Company was awarded a top 10 spot on the sub-list "Leaders -
Research & Development Services'. VanceInfo was also listed on
the 'Leaders: Emerging Asian Markets' top 10 sub-list of the Global
Services ranking. Outlook for the Second Quarter and Full Year 2009
VanceInfo expects to generate net revenues between $31 million and
$32 million in the second quarter of 2009, representing a 27% to
31% increase from the second quarter of 2008. Second quarter
diluted EPS is expected to be between $0.10 and $0.11 on a GAAP
basis and between $0.11 and $0.12 on a non-GAAP basis, which
excludes share-based compensation, based on 40.4 million total
ADS-equivalent average shares outstanding. For the full year 2009,
the Company has increased its guidance and expects: -- 2009 net
revenues to be at least $128 million, up at least 25% from 2008. --
2009 diluted EPS to be between $0.46 and $0.48 on a GAAP basis, and
between $0.49 and $0.51 on a non-GAAP basis, based on 40.5 million
total ADS-equivalent average shares outstanding. Conference Call
VanceInfo will host a corresponding conference call and live
webcast to discuss the quarter's results at 8:00 AM Eastern
Daylight Time (EDT) on Wednesday, May 13, 2009 (8:00 PM
Beijing/Hong Kong time). Please dial-in five 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 Dial-in Number: + 1 866-271-5140 -- International Dial-in
Number: +1 617-213-8893 -- Hong Kong Toll Free Dial-in Number: 800
96-3844 -- 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 May 20, 2009 at +1
888-286-8010 or +1 617-801-6888; passcode: 74720620 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 Second 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
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. All information provided in this news release and in
the attachments is as of May 13, 2009, 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. The reconciliations of the
forward-looking 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) March 31, December 31, 2009 2008
Assets Current assets Cash and cash equivalents $79,123 $79,963
Term deposit 1,463 1,466 Short-term investment 778 -- Accounts
receivable 38,695 36,827 Other current assets 3,311 3,369 Total
current assets 123,370 121,625 Property and equipment, net 11,335
11,260 Goodwill and other intangible assets 21,139 19,695 Other
long-term assets 2,762 2,871 Total assets $158,606 $155,451
Liabilities and shareholders' equity Current liabilities $20,492
$22,062 Other liabilities 2,004 1,886 Total liabilities 22,496
23,948 Shareholders' equity (a) 136,110 131,503 Total liabilities
and shareholders' equity $158,606 $155,451 Note: (a) As of March
31, 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 March 31, 2009 2008(a)
Net revenues $30,087 $20,502 Cost of revenues (b) 18,852 12,718
Gross profit 11,235 7,784 General and administrative expenses (b)
6,347 4,343 Selling and marketing expenses (b) 1,039 978 Other
operating income 471 144 Income from operations 4,320 2,607
Interest income 147 667 Interest expenses 20 23 Exchange
differences (198) 376 Income before income taxes and earnings in
equity investment 4,249 3,627 Provision for income taxes 405 591
Income before earnings in equity investment 3,844 3,036 Earnings in
equity investment 1 -- Net income $3,845 $3,036 Net loss
attributable to noncontrolling interest -- 24 Net Income
attributable to VanceInfo Technologies Inc. $3,845 $3,060 Earnings
per share Basic - ordinary shares $0.10 $0.08 Diluted - ordinary
shares 0.10 0.08 Weighted average shares outstanding (in thousands)
Basic - ordinary shares 37,670 37,199 Diluted - ordinary shares
40,106 40,188 Notes: (a) Amount in relation to noncontrolling
interest, formerly referenced to as minority interest, for the
three-month periods ended March 31, 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 $1,204 and $841 for
the three months ended March 31, 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 March 31, 2009 March 31, 2008 GAAP Adjustments
Non-GAAP GAAP Adjustments Non-GAAP Net income $3,845 $333 (a)
$4,178 $3,036 $346 (b) $3,382 Net margin 12.8% 1.1% (a) 13.9% 14.8%
1.7% (b) 16.5% Diluted EPS $0.10 -- (c) $0.10 $0.08 -- (c) $0.08
Notes: (a) Adjustment to exclude share-based compensation of $333
from operations of which $72 was reported in cost of revenues, $35
was reported in selling and marketing expenses and $226 was
reported in general and administrative expenses in the unaudited
condensed consolidated statements of operations. (b) Adjustment to
exclude share-based compensation of $346 from operations of which
$58 was reported in cost of revenues, $45 was reported in selling
and marketing expenses and $243 was reported in general and
administrative expenses in the unaudited condensed consolidated
statements of operations. (c) 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. DATASOURCE: VanceInfo
Technologies Inc. CONTACT: Melissa Ning, Senior Director, Investor
Relations, VanceInfo Technologies Inc. at +86-10-8282-5330 or Web
site: http://ir.vanceinfo.com/
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