China TransInfo Announces First Quarter 2011 Results

First Quarter 2011 Highlights

• Revenue increased 46.7% year-over-year to $36.5 million
• Gross profit increased 21.8% year-over-year to $10.4 million
• Operating income increased 11.1% year-over-year to $4.1 million
• Net income increased 68.7% year-over-year to $3.0 million
• Earnings per share increased 54.2% to $0.12
• Adjusted net income, which excludes non-cash stock based compensation expense of $0.3 million and amortization expense of intangibles from acquisitions of $0.05 million, increased 49.5% year-over-year to $3.3 million, or $0.13 per diluted share*

"We are pleased with our first quarter results as we achieved strong increases in revenue, net income and earnings per share," commented by Mr. Shudong Xia, Chairman and Chief Executive Officer. "We continue to see very positive market trends in our industry as the government sector in China moves forward with its plans to build more roads and increase intelligent transportation system spending to improve transportation efficiency.  At this stage of the market's development, we believe it is strategically important for us to focus on maximizing market share and consolidating our leadership position in the industry.  As a result, and as is reflected in our first quarter financial results, in many cases we have pursued new contracts aggressively even if it meant a lower margin contribution.  As the ITS industry evolves and matures, we believe that there will be substantial new businesses opportunities addressing users of the ITS infrastructure. The commercial vehicle LBS business is a good example: an increasing portion of the new businesses will be represented by the companies with dominant positions in industry. "  

First Quarter 2011 Results

For the quarter ended March 31, 2011, revenue increased 46.7% to $36.5 million from $24.9 million in the comparable period of 2010. Approximately 91.9% of this increase is attributable to the increase in transportation revenue mainly resulting from the Company's organic growth in the transportation business.  Revenue from products and applications in the transportation business sector was $35.1 million, or 96.3% of total revenue, compared to $24.5 million, or 98.3% of total revenue, in the same period last year.  The remainder of revenue was derived from the digital city, land and resources, and other business sectors.  

The Company's gross profit increased 21.8% to $10.4 million in the first quarter of 2011 compared to $8.5 million in the same period of 2010. Gross margin in the first quarter of 2011 decreased to 28.5% from 34.3% in the same period of 2010, mainly due to the fact that the Company had expanded operations in ITS businesses and substantially increased sales but on average resulted in a relatively lower gross margin profile in the first quarter of 2011 compared to the same period of 2010.

Selling, general and administrative expenses were $6.3 million compared to $4.9 million in the first quarter of 2010. The increase was primarily due to the Company's expanded operations and sales volume as well as enhanced marketing activities. Operating income increased 11.1% to $4.1 million from $3.7 million in the first quarter of 2010.

Net income increased 68.7% to $3.0 million, or $0.12 per diluted share, compared to $1.8 million, or $0.08 per diluted share, in the same period of 2010. Adjusted net income, which excludes non-cash stock based compensation expense of $0.3 million and amortization expense of intangibles from acquisitions of $0.05 million, increased 49.5% to $3.3 million, or $0.13 per diluted share, compared to $2.2 million, or $0.10 per diluted share, in the comparable period of 2010.*  Weighted average diluted shares outstanding increased to 25.3 million shares from 23.1 million shares in the same period of 2010.

(*) See the table following this press release for a reconciliation of net income and diluted EPS to exclude non-cash stock based compensation expense and amortization expense of intangibles from acquisitions.  

Financial Condition

As of March 31, 2011, cash and cash equivalents totaled $25.0 million compared to $43.9 million as of December 31, 2010. Working capital increased to $84.4 million compared to $73.8 million as of December 31, 2010.  Stockholders' equity was $129.2 million compared to $111.2 million as of December 31, 2010.  

Recent Events

• On April 28, 2011, CCTV (China Central Television) featured China TransInfo on CCTV-1's prime-time news program.
• On April 16, 2011, Mr. Liu Qi, Secretary of the CPC Beijing Municipal Committee and Mr. Guo Jinlong, Mayor of Beijing Municipal Government, together with other top Beijing municipal government leaders, visited China TransInfo's Beijing headquarters, where the Company presented its ITS business development and proposed a plan aimed at mitigating traffic jams in the city of Beijing.
• In April 2011, the Company announced it will serve as the Director-General of the Zhongguancun Intelligent Transportation Industry Association, which the Company played a key role in helping establish.
• On April 4, 2011, the Company announced that the Group Company's subsidiary, Beijing Zhangcheng Science and Technology Co., Ltd., recently signed a development agreement with Nissan Motor Co., Ltd. to work on a New Energy and Industrial Technology Development Organization project, which is the first national cooperation between China and Japan aimed at improving the use of energy efficiency and protecting the environment in China through the application of a New Traffic Information System. The two-year agreement is valued at JPY340.9 million, or approximately $4.1 million.
• On March 28, 2011, Beijing Zhangcheng Science and Technology Co., Ltd. (Palmcity) signed a two-year contract with Dongfeng-Yulon Motors Co. Ltd. to preinstall the Company's real time traffic data software in Dongfeng-Yulon's vehicles on a license basis for RMB128 Yuan per vehicle for a two-year term. Dongfeng-Yulon is an automobile manufacturing joint venture between China's Dongfeng Motor and Taiwan's Yulon Motor, targeting middle class consumers in China.  

Business Outlook

Following the issuance of the relevant technology standards by the PRC Ministry of Transport ("MOT") in April 2011, the Company has begun the installation of its commercial vehicle monitoring and controlling terminals in Heibei province.  In the first phase of its plan to be executed in 2011, MOT selected eight pilot provinces to carry out the commercial vehicle monitoring and controlling services.  As of this date, the Company has established local branches and offices in six of the eight provinces.  As the rollout progresses, the Company expects its recurring-revenue commercial vehicle LBS business to drive a long-run increase in the Company's gross margin performance.  

Mr. Xia commented, "At the end of the first quarter, our sales backlog was $183 million compared to $212 million at the year end of 2010. The first quarter is normally our slowest season as the Chinese New Year and other government conferences delay new bidding processes for ITS projects.   It is also typically a negative cash flow quarter, since we increase spending on project bids, fees and other related expenses, whereas receivables collection is normally more active in the latter part of the year.  Following the seasonal pattern of our business, as the year progresses we expect our cash flow to turn positive and our contract awards to pick up.  For fiscal 2011, we continue to expect revenue of between $151 million and $159 million and adjusted net income of between $20 million and $24 million.  Adjusted net income excludes non-cash stock based compensation expense and amortization expense of intangibles from acquisitions."  

Mr. Xia concluded, "We are very excited about our business for the balance of 2011 and beyond.  We see large and growing market opportunities in the ITS market in China, as the Chinese Government has been making great effort to promote transportation safety and improve transportation efficiency.  With our first mover advantage and market leadership position, we believe we have strong prospects for continued success."

Conference Call

The Company will host a conference call on Thursday, May 12, 2011, at 8:00 a.m. Eastern Time to discuss its financial results for the three months ended March 31, 2011.  To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 759-2078. International callers should dial +1 (706) 643-0585. When prompted by the operator, enter conference pass code 65224341.  A replay will be available for 14 days starting on Thursday, May 12, 2011 at 10:00 a.m. Eastern Time and can be accessed by dialing (800) 642-1687. International callers should dial +1 (706) 645-9291. When prompted, enter conference pass code 65224341.

Use of Non-GAAP Financial Information

GAAP results for the three months ended March 31, 2011 and 2010 include non-cash share based compensation and amortization of intangible assets from acquisitions. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information, which are adjusted net income and adjusted earnings per share, excluding the impact of these items in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these adjusted measures reflect the essential operating activities of the Company.  Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure.  However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of adjustments to GAAP results appears in Table 1 in this release.

About China TransInfo

China TransInfo, through its affiliate, the Group Company and the Group Company's PRC operating subsidiaries, is primarily focused on providing urban and highway transportation management solutions and information services. The Company is a leading transportation information products and comprehensive solutions provider, and aims to be the largest real time transportation information service provider and major fleet management service provider in China. As the co-formula1tor of several transportation technology \national standards, the Company owns nine patents and has won a majority of the model cases awarded by the PRC Ministry of Transportation. As a result, the Company is playing a key role in setting the standards for transportation information solutions in China. For more information, please visit the Company's website at http://www.chinatransinfo.com.

Safe Harbor Statement

This press release contains certain statements that may include "forward looking statements". All statements other than statements of historical fact included herein are "forward-looking statements". These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

–FINANCIAL TABLES FOLLOW—