-- Third Quarter Total Revenues of US$32.9 million, an Increase of 79.3%
Year-on-Year;
-- Third Quarter Adjusted(1) Net Income of US$16.5 million, an Increase of
57.7% Year-on-Year;
-- Generated Third Quarter Operating Cash Flow of US$18.8 million;
-- Full Year 2009 Revenue Guidance Increased to US$104.4 million from
US$98.5 million, Adjusted Net Income Guidance Increased to US$50
million from US$49.5 million and Adjusted Diluted Earnings Per Share
Guidance Increased to US$0.96 Per share from US$0.94 Per share
(1) Explanation of the Company’s Adjusted (i.e. non-GAAP) financial
measures and the related reconciliations to GAAP financial
measures are included in the accompanying "Non-GAAP Disclosure"
and the "Consolidated Adjusted Statements of Operations".
XIAMEN, China, Feb. 18 /PRNewswire-Asia/ -- Longtop Financial Technologies Limited ("Longtop") (NYSE: LFT), a leading software developer and solutions provider targeting the financial services industry in China, announced today unaudited financial results for the quarter ended December 31, 2008, which is the third quarter of its fiscal year ending March 31, 2009.
"I’m pleased to report another outstanding quarter in which we exceeded our top and bottom line guidance. Longtop is able to perform well even in a challenging economic environment because our software solutions and services are indispensable business technology for our customers and generate recurring revenue and profits; we serve a diversified and well-funded customer base keen to invest in information technology; and we operate in a market with long-lasting growth potential," commented Weizhou Lian, CEO of Longtop. "Based on these strong business fundamentals and our ongoing discussions with customers about their IT spending plans, we remain confident we can achieve our existing 2010 financial targets."
FISCAL THIRD QUARTER DETAILED FINANCIAL RESULTS
Revenue
2008 Q3 and 2009 Q3 Revenue - US$000s
Three months ended Nine months ended
December December % December December %
31, 2007 31, 2008 Change 31, 2007 31, 2008 Change
Software Development $15,299 $28,857 88.6% $41,631 $68,509 64.6%
Other Services $3,047 $4,041 32.6% $8,141 $11,905 46.2%
Total Revenue $18,346 $32,898 79.3% $49,772 $80,414 61.6%
Total revenues for the quarter ended December 31, 2008, were US$32.9 million, an increase of 79.3% year-on-year (YoY) from US$18.3 million in the corresponding year ago period, and exceeded company guidance of US$29.0 million. Software development revenues of US$28.9 million contributed 87.7% of total revenues, a YoY increase of 88.6%.
Total revenues for the nine months ended December 31, 2008, were US$80.4 million, an increase of 61.6% YoY from US$49.8 million in the corresponding year ago period. Software development revenues, which were 85.2% of total revenues for the nine months ended December 31, 2008, amounted to US$68.5 million, a YoY increase of 64.6%.
Software Development Revenue by customer type - US$000s
Three months ended Nine months ended
December December % Change December December % Change
31, 2007 31, 2008 (Decrease) 31, 2007 31,2008 (Decrease)
Big Four Banks 5,113 13,000 154.3% 21,507 34,028 58.2%
Other Banks 5,645 11,177 98.0% 12,291 25,099 104.2%
Insurance 2,562 3,699 44.4% 4,449 6,868 54.4%
Enterprises 1,979 981 (50.4%) 3,384 2,514 (25.7%)
Total 15,299 28,857 88.6% 41,631 68,509 64.6%
Software development revenue from the Big Four Banks in the third quarter was US$13.0 million, an increase of 154.3% YoY. The higher than normal Big Four Banks growth rate for the quarter was primarily due to a number of standardized solutions being postponed to the third quarter due to the Olympics which had taken place in the second quarter. Big Four banks accounted for 45.0% of software development revenues for the fiscal third quarter 2009, as compared to 33.4% in the corresponding year ago period. Software development revenue from the Big Four Banks for the nine months ended December 31, 2008, was US$34.0 million, an increase of 58.2% YoY. Big Four Banks accounted for 49.7% of software development revenues for the nine months ended December 31, 2008, as compared to 51.7% in the corresponding year ago period.
Software development revenue from Other Banks in the third quarter was US$11.2 million, a YoY increase of 98.0%. Other Banks accounted for 38.8% of software development revenues for the three months ended December 31, 2008, as compared to 37.0% in the corresponding year ago period. Software development revenue from Other Banks for the nine months ended December 31, 2008, was US$25.1 million, an increase of 104.2% YoY. Other Banks accounted for 36.6% of software development revenues for the nine months ended December 31, 2008, as compared to 29.5% in the corresponding year ago period.
Gross Margins
Three months ended Nine months ended
December December % Change December December % Change
31, 2007 31, 2008 (Decrease) 31, 2007 31,2008 (Decrease)
Adjusted Software
Development Gross
Margin 72.2% 76.4% 4.2% 77.9% 74.2% (3.7%)
Adjusted Other
Services Gross
Margin 66.3% 33.8% (32.5%) 70.2% 51.9% (18.3%)
Adjusted Total
Gross Margin % 71.2% 71.2% (0.0%) 76.6% 70.9% (5.7%)
Adjusted Software Development Gross Margin was 76.4% in the third quarter as compared to 72.2% a year ago due to a lower mix of customized revenue with 55.4% of revenue coming from customized solutions this year as compared to 58.9% in the previous year. For the nine months ended December 31, 2008, 62.5% of software development revenue was from customized solutions as compared to 54.6% in the previous year. Adjusted Total Gross Margin of 71.2% in the third quarter was in line with the Company’s guidance and the same as the corresponding year ago period. Adjusted Other Services Gross Margin declined to 33.8% in the third quarter from 66.3% a year ago due to investment in additional headcount and a higher mix of lower gross margin ATM revenues resulting from the acquisition of Huayuchang.
Operating Expenses
Three months ended Nine months ended
December December % December December %
31, 2007 31, 2008 Change 31, 2007 31, 2008 Change
Adjusted Operating
Expenses - US$000s 3,710 6,113 64.8% 9,640 15,119 56.8%
Adjusted Operating
Expenses - % of
revenue 20.2% 18.6% -- 19.4% 18.8% --
Adjusted Operating Expenses, which were 18.6% and 18.8% of revenue for the three and nine months ended December 31, 2008, are in line with full year Company guidance of 20.0%. The YoY increase in total Adjusted Operating Expenses of 56.8% for the first nine months of fiscal 2009 is less than total revenue growth of 61.6% demonstrating leverage in Longtop’s business model.
Operating and Net Income
Three months ended Nine months ended
December December % December December %
31, 2007 31, 2008 Change 31, 2007 31, 2008 Change
Adjusted Operating
Income - US$000s 9,352 17,299 85.0% 28,501 41,923 47.1%
Adjusted Operating
Income - % of
revenue 51.0% 52.6% -- 57.3% 52.1% --
Adjusted Operating Income was US$17.3 million for the third quarter and US$42.0 million for the nine months ended December 31, 2008, a YoY increase of 85.0% and 47.1%, respectively. Adjusted Operating Margin for the nine months ended December 31, 2008, was 52.1%, higher than the Company guidance of 50.0% for the full year.
Three months ended Nine months ended
December December % Change December December % Change
31, 2007 31, 2008 (Decrease) 31, 2007 31,2008 (Decrease)
Adjusted Net Income
- US$000s 10,481 16,532 57.7% 27,546 40,597 47.4%
Adjusted Net Income
per Diluted Share 0.22 0.32 45.6% 0.62 0.78 25.8%
Adjusted Net Income
- % of revenue 57.1% 50.3% -- 55.3% 50.5% --
US GAAP Net Income
(Loss) - US$000s (16,527) 14,356 -- (1,679) 34,640 --
US GAAP Net Income
(Loss) per
Diluted Share (0.37) 0.28 -- (0.04) 0.66 --
US GAAP Net Income
- % of revenue -- 43.6% -- -- 43.1% --
Reconciliation between US GAAP Net Income (Loss) and Adjusted Net Income
Three months ended Nine months ended
December December % Change December December % Change
31, 2007 31, 2008 (Decrease) 31, 2007 31,2008 (Decrease)
Adjusted Net
Income - US$000s 10,481 16,532 57.7% 27,546 40,597 47.4%
Share-based
compensation 26,546 1,463 (94.5%) 26,988 4,205 (84.4%)
Amortization
of acquired
intangible
assets 462 661 43.1% 944 1,643 74.0%
Amortization
of acquired
deferred
compensation -- 52 -- -- 109 --
Loss from
discontinued
operations -- -- -- 1,293 -- (100.0%)
Sub-total 27,008 2,176 (91.9%) 29,225 5,957 (79.6%)
US GAAP Net
Income (Loss) (16,527) 14,356 -- (1,679) 34,640 --
Adjusted Net Income for the quarter ended December 31, 2008, of US$16.5 million or US$0.32 per fully diluted share increased 57.7% as compared to Adjusted Net Income of US$10.5 million in the corresponding year ago period, and exceeded Company guidance of US$15.5 million and US$0.30 per fully diluted share.
US GAAP net income for the quarter ended December 31, 2008, of US$14.4 million or US$0.28 per fully diluted share was significantly higher than the US GAAP net loss of US$16.5 million in the corresponding year ago period primarily due to US$24.8 million one-time share-based compensation expenses related to ordinary shares that prior to the Initial Public Offering were sold by one of our Founders to Longtop’s employees and included in the US GAAP net loss for the three months ended December 31, 2007.
Adjusted Net Income for the nine months ended December 31, 2008, of US$40.6 million or US$0.78 per fully diluted share increased 47.4% as compared to Adjusted Net Income of US$27.5 million in the corresponding year ago period. US GAAP net income for the nine months ended December 31, 2008, was US$34.7 million or US$0.66 per fully diluted share as compared to a US GAAP net loss of US$1.7 million in the corresponding year ago period which included US$24.8 million in one time share-based compensation expenses mentioned above. Adjusted and US GAAP net income for the nine months ended December 31, 2008, included US$1.1 million in exchange losses on US dollar denominated deposits which were in China pending conversion to Renminbi, and included a US$877,000 government subsidy (nine months ended December 31, 2007: Nil).
Unrestricted cash balances at December 31, 2008, were US$236.4 million giving the Company sufficient resources for potential acquisitions in the still fragmented China financial IT services sector.
Commenting on the results, Derek Palaschuk, CFO of Longtop said: "Even in this challenging economic environment we have once again been able to deliver outstanding financial results and are now expecting 2009 fiscal year YoY revenue growth of 58.5% and Adjusted Net Income YoY growth of 47.4% which is up substantially from our earlier guidance. This strong growth is supported by robust cash flow from operations, which was US$18.8 million during the quarter, leaving us with a December 31, 2008, cash balance of US$236.4 million or US$4.67 per ordinary share."
BUSINESS OUTLOOK
Longtop anticipates for the quarter ending March 31, 2009:
i) Total revenues of US$24.0 million, compared to previous guidance in
November 2008 of US$21.5 million; representing an increase of 49.1%
YoY from revenues of US$16.1 million in the corresponding year ago
period. Total software development revenues are expected to be
US$20.0 million, US$1.0 million higher than previous guidance and a
YoY increase of 46.0% from US$13.7 million in the corresponding year
ago period;
ii) Adjusted Operating Income of US$10.0 million as compared to Adjusted
Operating Income of US$7.4 million in the corresponding year ago
period. The corresponding year ago Adjusted Operating Income of
US$7.4 million included a non recurring gain of $662,000 on the
disposal of fixed assets, and excluding this one time gain YoY growth
is expected to be 47.5%.
iii) Adjusted Net Income of US$9.2 million or US$0.18 per diluted share,
representing an increase of 48.4% YoY from Adjusted Net Income of
US$6.2 million in the corresponding year ago period.
Longtop anticipates for its fiscal year ending March 31, 2009:
i) Total revenues of US$104.4 million, compared to previous guidance in
November 2008 of US$98.5 million, representing an increase of 58.4%
YoY from revenues of US$65.9 million in fiscal year 2008;
ii) Adjusted Net Income of US$50.0 million, compared to previous guidance
in November 2008 of US$49.5 million, representing an increase of
47.9% YoY from Adjusted Net Income of US$33.8 million in fiscal year
2008;
iii) Adjusted Diluted Earnings Per Share of US$0.96 per share compared to
US$0.94 guidance provided in November 2008, representing an increase
of 31.5% YoY from Adjusted Diluted Earnings Per Share of US$0.73 in
fiscal year 2008.
CONFERENCE CALL AND WEBCAST
Longtop’s senior management team will host a conference call and audio web cast at 7:00 pm US Eastern Time/ 4:00 pm U.S. Pacific Time on February 18, 2009 (8:00 am Beijing/Hong Kong time on February 19, 2009). To participate in the conference call, please use the dial in numbers below:
U.S Toll Free: 1-866-549-1292
China Toll Free: 800-701-1223
Hong Kong and International: +852-3005-2050
Passcode: 765115#
A replay of the call will be available for 30 days following the call and can be accessed on the Company website or by dialing the numbers below:
U.S Toll Free: 1-866-753-0743
Hong Kong and International: +852-3005-2020
Passcode: 136397#
A live audio webcast of the conference call, as well as online replay of the call, will be available on Longtop’s website at http://www.longtop.com/en .
NON-GAAP DISCLOSURE ("ADJUSTED")
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Longtop’s management reports and uses non-GAAP ("Adjusted") measures of revenues, cost of revenues, operating expenses, net income and net income per share, which are adjusted from results based on GAAP. To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures to exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including share-based compensation, that we believe are helpful in understanding our past financial performance and our future results. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Management believes these non-GAAP financial measures enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP financial measures provide useful information to both management and investors by excluding certain items that we believe are not indicative of our core operating results. The presentation of this additional information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with US GAAP. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies.
Definitions of Non-GAAP Measures
Adjusted Cost of Revenue is defined as cost of revenue excluding, if applicable: (1) non-cash compensation expense and (2) amortization of acquired intangibles.
Adjusted Gross Margin is defined as Adjusted Revenue less Adjusted Cost of Revenue.
Adjusted Operating Expenses is defined as operating expenses excluding, if applicable: (1) non-cash compensation expense, (2) amortization of acquired intangibles, deferred compensation arising on acquisition and goodwill impairment, and (3) one-time items.
Adjusted Operating Income is defined as Adjusted Gross Margin less Adjusted Operating Expenses.
Adjusted Net Income is defined as Adjusted Operating Income plus/minus other income/(expenses), less income taxes, excluding: (1) one-time items and (2) discontinued operations.
Adjusted EPS is defined as Adjusted Net Income divided by diluted shares.
One-Time Items, if applicable, are excluded from Adjusted Operating Income and Adjusted Net Income. These items are one-time in nature and non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years. GAAP results include one-time items.
Expenses That Are Excluded From Our Non-GAAP Measures
Non-cash compensation expense consists principally of expense associated with the grants, including unvested grants assumed in acquisitions, of restricted stock, restricted stock units and stock options. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding which, for restricted stock units and stock options, are included on a treasury method basis. Longtop’s management believes excluding the share-based compensation expense from its non-GAAP financial measure is useful for itself and investors. Further, the amount of share-based compensation expense cannot be anticipated by management and business line leaders and these expenses were not built into the annual budgets and quarterly forecasts, which have been the basis for information Longtop provides to analysts and investors as guidance for future operating performance. Although share-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, and as share-based compensation expense does not involve any upfront or subsequent cash outflow, Longtop does not factor this in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result, the monthly financial results for internal reporting and any performance measure for commission and bonus are based on non-GAAP financial measures that exclude share-based compensation expense.
Amortization of acquired intangibles is a non-cash expense relating to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as backlog, customer relationships, and intellectual property, are valued and amortized over their estimated lives. While it is likely that we will have significant intangible amortization expense as we continue to acquire companies, we have excluded the effect of amortization of intangible assets from our non-GAAP financial measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well.
Acquisition proceeds allocated to deferred compensation arises where a portion of the purchase price paid to shareholders is considered compensation expense rather than purchase price under US GAAP. Deferred compensation arising on acquisition is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of deferred compensation arising on acquisition contributed to revenues earned during the periods presented and will contribute to future period revenues as well.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
It is currently expected that the Business Outlook will not be updated until the release of Longtop’s next quarterly earnings announcement; however, Longtop reserves the right to update its Business Outlook at any time for any reason.
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimates," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include the effectiveness, profitability, and marketability of the company’s solutions; the Company’s limited operating history; its reliance on a limited number of customers that continue to account for a high percentage of the Company’s revenues; risk of payment failure by any of its large customers, which could significantly harm the Company’s cash flows and profitability; the ability of the Company to operate effectively as a public company; future shortage or availability of the supply of employees; general economic and business conditions; including the current severe worldwide economic downturn and slower growth in China; the volatility of the company’s operating results and financial condition; the company’s ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the company’s filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Our actual results of operations for the quarter ended September 30, 2008, are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to us, which is subject to change.
About Longtop Financial Technologies Limited
Longtop is a leading software development and solutions provider targeting the rapidly growing financial services industry in China. Longtop develops and delivers a comprehensive range of software applications and solutions with a focus on meeting the rapidly growing IT needs of financial institutions in China. According to the independent market research firm IDC, Longtop is positioned as the "most competitive banking IT solutions provider" in China in 2007, as measured by both development strategy and development capability in the IDC MarketScape analysis model. Longtop has five solution delivery centers, three research centers and thirty-nine service centers located in 20 provinces throughout China. Longtop was founded in 1996 by Xiaogong Jia, Chairman and Weizhou Lian, CEO, as a system integration company focusing on the financial services industry in China and made the transition to a software and solutions provider in 2001. For more information, please visit: http://www.longtop.com .
CONSOLIDATED BALANCE SHEETS
March 31,September 30,December 31,
2008 2008 2008
(In U.S. dollar thousands, except
share and per share data)
Assets
Current assets:
Cash and cash equivalents $204,526 $208,996 $236,432
Restricted cash 6,733 10,926 1,173
Accounts receivable, net 21,254 37,488 33,559
Inventories 1,351 3,895 3,478
Deferred tax assets 1,517 106 1,940
Other current assets 3,843 6,313 5,321
Total current assets 239,224 267,724 281,903
Fixed assets, net 8,167 18,722 13,302
Land use right -- -- 5,193
Intangible assets, net 7,764 8,929 11,585
Goodwill 14,966 16,559 17,900
Long term investment -- 2,171 --
Deferred tax assets 246 834 834
Other assets 524 1,192 1,162
Total assets $270,891 $316,131 $331,879
Liabilities and shareholders’ equity
Current liabilities:
Short-term borrowings $512 $619 $567
Accounts payable 4,143 12,801 3,533
Deferred revenue 9,487 17,037 22,008
Amounts due to related parties 54 -- --
Deferred tax liabilities 491 504 503
Accrued and other current
liabilities 18,773 17,513 22,095
Total current liabilities 33,460 48,474 48,706
Long-term liabilities:
Obligations under capital
leases, net of current portion 233 220 133
Deferred tax liabilities 1,863 2,331 2,136
Other non-current liabilities 445 259 351
Total liabilities 36,001 51,284 51,326
Shareholders’ equity:
Ordinary shares $0.01 par value
(1,500,000,000 shares authorized,
50,274,126 and 50,670,651 shares
issued and outstanding as of March
31 and December 31, 2008,
respectively) $502 $506 $507
Additional paid-in capital 234,771 238,287 240,174
Retained earnings/(Accumulated
deficit) (14,021) 6,263 20,619
Accumulated other comprehensive
income 13,638 19,791 19,253
Total shareholders’ equity 234,890 264,847 280,553
Total liabilities and
shareholders’ equity $270,891 $316,131 $331,879
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
December December December December
31,2007 31,2008 31,2007 31,2008
(In U.S. dollar thousands, except share and per
share data)
Revenues:
Software development $15,299 $28,857 $41,631 $68,509
Other services 3,047 4,041 8,141 11,905
Total revenues 18,346 32,898 49,772 80,414
Cost of revenues:
Software development 11,906 7,346 16,855 19,116
Other services 1,423 3,134 3,309 6,880
Total cost of revenues 13,329 10,480 20,164 25,996
Gross profit 5,017 22,418 29,608 54,418
Operating expenses:
Research and development 2,172 1,318 3,093 3,631
Sales and marketing 6,088 3,393 7,917 7,801
General and
administrative 14,413 2,584 18,029 7,020
Total operating expenses 22,673 7,295 29,039 18,452
Income (Loss) from operations (17,656) 15,123 569 35,966
Other income (expenses):
Interest income 1,682 922 2,155 4,438
Interest expense (318) (13) (756) (305)
Other income (expense),
net 180 3 246 (292)
Total other income 1,544 912 1,645 3,841
Income (Loss) before
income tax expense (16,112) 16,035 2,214 39,807
Income tax expense (415) (1,679) (2,600) (5,167)
Income (Loss) from
continuing operations (16,527) 14,356 (386) 34,640
Loss from
discontinued
operations, net of
tax -- -- (1,293) --
Net income (Loss) (16,527) 14,356 (1,679) 34,640
Net income (Loss) per share:
Continuing
operations $(0.37) $0.28 $(0.01) $0.69
Discontinued
operations $-- $-- $(0.03) $--
Basic ordinary share $(0.37) $0.28 $(0.04) $0.69
Continuing
operations $-- $-- $(0.01) $--
Discontinued
operations $-- $-- $(0.03) $--
Basic preferred
share $-- $-- $(0.04) $--
Continuing
operations $(0.37) $0.28 $(0.01) $0.66
Discontinued
operations $-- $-- $(0.03) $--
Diluted $(0.37) $0.28 $(0.04) $0.66
Shares used in computation
of net income (Loss) per
share:
Basic ordinary share 45,103,478 50,590,358 34,835,235 50,467,808
Basic preferred
share -- -- 7,699,292 --
Diluted 45,103,478 52,073,161 44,279,893 52,328,310
Includes share-based
compensation related to:
Cost of revenues software
development $7,545 $432 $7,551 $1,211
Cost of revenues other
services 164 63 164 185
General and administrative
expenses 13,008 477 13,422 1,422
Sales and marketing
expenses 4,437 389 4,459 1,102
Research and development
expenses 1,392 102 1,392 285
UNAUDITED CONSOLIDATED ADJUSTED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
December December December December
31,2007 31,2008 31,2007 31,2008
Revenues:
Software development 15,299 28,857 41,631 68,509
Other services 3,047 4,041 8,141 11,905
Total revenues 18,346 32,898 49,772 80,414
Cost of revenues:
Software development 11,906 7,346 16,855 19,116
Other services 1,423 3,134 3,309 6,880
Total cost of revenues 13,329 10,480 20,164 25,996
Cost of revenue adjustments:
Share-based
compensation
software
development (7,545) (432) (7,551) (1,211)
Share-based
compensation other
services (164) (63) (164) (185)
Amortization of
acquired intangible
assets other
services (233) (363) (715) (895)
Amortization of
acquired intangible
assets software
development (103) (84) (103) (224)
Amortization of
acquired deferred
compensation other
services -- (34) -- (73)
Amortization of
acquired deferred
compensation
software
development -- (18) -- (36)
Adjusted cost of revenues:
Software development 4,258 6,812 9,201 17,645
Other services 1,026 2,674 2,430 5,727
Total adjusted cost
of revenues 5,284 9,486 11,631 23,372
Gross profit 5,017 22,418 29,608 54,418
Adjusted gross profit 13,062 23,412 38,141 57,042
Operating expenses:
Research and
development 2,172 1,318 3,093 3,631
Sales and marketing 6,088 3,393 7,917 7,801
General and
administrative 14,413 2,584 18,029 7,020
Total operating
expenses 22,673 7,295 29,039 18,452
Operating expense adjustments:
Share-based compensation
research and
development (1,392) (102) (1,392) (285)
Share-based
compensation sales
and marketing (4,437) (389) (4,459) (1,102)
Share-based
compensation
general and
administrative (13,008) (477) (13,422) (1,422)
Amortization of
acquired intangible
assets sales and
marketing (100) (152) (100) (395)
Amortization of
acquired intangible
assets general and
administrative (26) (62) (26) (129)
Adjusted operating expenses:
Research and development 780 1,216 1,701 3,346
Sales and marketing 1,551 2,852 3,358 6,304
General and
administrative 1,379 2,045 4,581 5,469
Total adjusted
operating expenses 3,710 6,113 9,640 15,119
Income (loss) from
operations (17,656) 15,123 569 35,966
Adjusted income from
operations 9,352 17,299 28,501 41,923
Other income (expenses):
Interest income 1,682 922 2,155 4,438
Interest expense (318) (13) (756) (305)
Other income
(expenses), net 180 3 246 (292)
Total other income 1,544 912 1,645 3,841
Adjusted other income
(expenses):
Interest income 1,682 922 2,155 4,438
Interest expense (318) (13) (756) (305)
Other (expenses)
income, net 180 3 246 (292)
Total adjusted other
income 1,544 912 1,645 3,841
Income (loss) before
income tax expense (16,112) 16,035 2,214 39,807
Adjusted income before
income tax expense 10,896 18,211 30,146 45,764
Income tax expense (415) (1,679) (2,600) (5,167)
Income (loss) from
continuing operations (16,527) 14,356 (386) 34,640
Adjusted income from
continuing operations 10,481 16,532 27,546 40,597
Loss from
discontinued
operations -- -- (1,293) --
Net income (loss) (16,527) 14,356 (1,679) 34,640
Adjusted net income 10,481 16,532 27,546 40,597
Adjusted net income per share:
Basic ordinary share $0.23 $0.33 $0.65 $0.80
Diluted $0.22 $0.32 $0.62 $0.78
Shares used in computation
of net income and
adjusted net income per
share:
Basic ordinary share 45,103,478 50,590,358 34,835,235 50,467,808
Basic preferred
share -- -- 7,699,292 --
Diluted 47,679,365 52,073,161 44,279,893 52,328,310
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended
December December December December
31,2007 31,2008 31,2007 31,2008
(In U.S. dollar thousands, except share and
per share data)
Cash flows from operating
activities:
Net income $(16,527) $14,356 $(1,679) $34,640
Adjustments to reconcile net
income to net cash provided
by operating activities:
Share-based compensation 26,546 1,463 26,988 4,205
Depreciation 370 791 1,224 2,109
Amortization of
intangibles 505 716 1,157 1,789
Amortization of land use
right -- 82 -- 82
Provision for doubtful
accounts 144 55 140 101
Impairment of intangible
asset -- -- 393 --
Loss on disposal of
fixed assets 38 165 36 207
Changes in assets and
liabilities, net of effects of
acquisitions:
Accounts receivable (7,201) 3,783 (8,963) (10,681)
Inventories 986 408 (415) (521)
Other current assets (1,546) 1,236 (3,968) (1,118)
Other non-current assets 14 104 83 (575)
Other non-current
liabilities -- 6 20 (188)
Accounts payable 3,444 (9,337) 1,586 (1,075)
Deferred revenue 6,945 5,011 7,826 12,043
Accrued and other
current liabilities 51 1,836 340 (654)
Deferred income taxes (753) (1,836) (557) (965)
Net cash provided by operating
activities 13,016 18,839 24,211 39,399
Cash flows from investing
activities:
Change in restricted
cash (12,311) 9,753 (9,163) 5,560
Proceeds from sale of
fixed assets -- 11 32 225
Purchase of fixed assets (213) (1,005) (806) (13,041)
Purchase of intangible
assets (82) -- (85) (3)
Long term investment -- -- -- (3,911)
Acquisitions, net of cash
acquired -- (19) (3,824) (1,397)
Amounts due from related
parties 4 -- (50) --
Net cash used in investing
activities (12,602) 8,740 (13,896) (12,567)
Cash flows from financing
activities:
Proceeds from short-term
borrowings 6,109 -- 28,576 --
Repayment of short-term
borrowings (15,381) -- (25,770) --
Dividend paid (30,000) -- (36,105) --
Stock options exercised 478 425 478 1,203
Sale of ordinary shares,
net of issue costs 146,470 -- 146,470 --
Repayments of capital
leases obligations (128) (139) (426) (721)
Amounts due to related
parties 11,825 -- 11,825 (54)
Net cash provided by financing
activities 119,373 286 125,048 428
Effect of exchange rates
differences 2,544 (429) 4,349 4,646
Net increase (decrease) in cash
and cash equivalents 122,331 27,436 139,712 31,906
Cash and cash equivalents,
beginning of period 87,301 208,996 69,920 204,526
Cash and cash equivalents,
end of period $209,632 $236,432 $209,632 $236,432
Supplemental disclosure of cash
flow information:
Income taxes paid $804 $3,515 $1,248 $6,326
Interest paid $346 $13 $756 $308
Supplemental disclosure of
non-cash investing and
financing activities:
Fixed assets purchased under
capital leases $92 $-- $447 $655
Dividends paid in form of assets $-- $-- $18,348 $--
Acquisition:
Fair value of ordinary
shares issued $3,062 $-- $3,062 $--
Cash consideration $-- $19 $3,524 $5,308
Cash consideration payable $2,670 $3,061 $2,670 $3,061
Assets acquired $5,732 $3,080 $9,256 $8,369
For more information, please contact:
Longtop Financial Technologies Limited
Charles Zhang, CFA
Phone: +86-10-8421-7758
Email: ir@longtop.com
IR Inside BV
Caroline Straathof
Phone: +31-6-5462-4301
Email: caroline.straathof@irinside.com
