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BEIJING, February 27, 2013 /PRNewswire/ -- Pactera Technology International Ltd. (Nasdaq: PACT) ("Pactera" or the "Company"), a global consulting and technology services provider strategically headquartered in China, today reported its unaudited financial results for the fourth quarter and full year 2012 ended December 31, 2012.
On November 9, 2012, HiSoft Technology International Limited ("HiSoft") and VanceInfo Technology Inc. ("VanceInfo") completed the merger of equals to form Pactera. In the fourth quarter of 2012, Pactera's financial statements consolidated the operating results and financial position of the former HiSoft's results for the whole fourth quarter and VanceInfo's results for the period from November 9, 2012 to December 31, 2012. As a result, the financial results we reported for the fourth quarter and full year 2012 are not comparable to those of prior corresponding periods due to the merger.
Fourth Quarter and Full Year 2012 Financial and Operational Highlights
[1] Pro forma net revenues of the Company for the fourth quarter and full year 2011 and 2012 assume that the merger occurred at the beginning of each such period. The pro forma financial information is provided for information purpose only and does not purport to present what the actual results of operations would have been had the transaction actually occurred at the beginning of each period indicated nor does it purport to present the actual results of operations for any future period or financial position for any future date. Please refer to the accompanying tables at the end of the earnings release. |
[2] Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP basic and diluted net income per ADS and corresponding margins presented in this press release exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, and change in fair value of contingent consideration payable for business acquisition and compensation expenses related to acquisition. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying section of "About Non-GAAP Financial Measures" and the accompanying tables of "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of the news release. |
"We are pleased with our results for the fourth quarter and full year 2012. During the quarter, we successfully achieved our revenue target while also making solid progress with our operational integration and business reorganization," said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera. "Pro forma net revenues in 2012 were up 34.1% year over year. Our BFSI business continued its strong growth momentum with a 62.7% year-over-year increase in pro forma net revenues, positioning us to become the leading IT service provider in this vertical in China. Demand in Greater China remains robust, reflected by our 49.7% growth in pro forma net revenues in the region during 2012.
"Looking forward to 2013, we will remain focused on completing our integration efforts to fully realize the targeted synergies. We will continue to deliver value to our clients and grow our business in a profitable and sustainable manner," added Mr. Loh.
Fourth Quarter 2012 Financial Results
Net Revenues
Net revenues were $142.2 million for the fourth quarter of 2012 as compared to $64.9 million for the fourth quarter of 2011.
Pro forma net revenues of the Company for the fourth quarter of 2012 were $179.3 million, an increase of 17.9% from $152.1 million for the corresponding period in 2011. The year-over-year growth in pro forma net revenues was driven by strong demand of IT services and key geographic markets.
Net Revenues by Service Line
Pactera has two service lines: Information Technology ("IT") services and research and development ("R&D") services. Pactera divides IT services into two categories: consulting and packaged solution services ("CPS") and application development, testing and maintenance services ("ADM").
Net revenues from IT services were $87.7 million for the fourth quarter of 2012. Net revenues from R&D services were $54.5 million for the fourth quarter of 2012.
Net Revenues by Services Line
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | |||
($ in thousands, except percentages) | ||||
IT Services | 87,738 | 61.7% | 39,700 | 61.1% |
CPS | 31,849 | 22.4% | 13,640 | 21.0% |
ADM | 55,889 | 39.3% | 26,060 | 40.1% |
R&D Services | 54,464 | 38.3% | 25,236 | 38.9% |
Total Net Revenues | 142,202 | 100.0% | 64,936 | 100.0% |
Pro forma net revenues from IT services were $110.4 million for the fourth quarter of 2012, an increase of 33.2% from $82.9 million for the corresponding period in 2011, which is primarily due to our expanded service offerings and client portfolio.
Pro forma net revenues from R&D services were $68.9 million for the fourth quarter of 2012, compared to $69.2 million for the corresponding period in 2011.
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
IT Services | 110,433 | 61.6% | 82,936 | 54.5% | 33.2% |
CPS | 36,264 | 20.2% | 29,239 | 19.2% | 24.0% |
ADM | 74,169 | 41.4% | 53,697 | 35.3% | 38.1% |
R&D Services | 68,911 | 38.4% | 69,188 | 45.5% | (0.4)% |
Total Net Revenues | 179,344 | 100.0% | 152,124 | 100.0% | 17.9% |
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $55.4 million in the fourth quarter of 2012, followed by $53.8 million from clients headquartered in Greater China, $16.6 million in Japan, $10.3 million in Europe and $6.1 million in Asia South.
Net Revenues based on Location of Clients' Headquarters
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | |||
($ in thousands, except percentages) | ||||
United States | 55,361 | 38.9% | 30,324 | 46.7% |
Greater China | 53,848 | 37.9% | 13,197 | 20.3% |
Japan | 16,615 | 11.7% | 13,323 | 20.5% |
Europe | 10,262 | 7.2% | 4,851 | 7.5% |
Asia South | 6,116 | 4.3% | 3,241 | 5.0% |
Total Net Revenues | 142,202 | 100.0% | 64,936 | 100.0% |
Pro forma net revenues from clients headquartered in Greater China were $72.0 million or 40.1% of pro forma net revenues for the fourth quarter of 2012, followed by 37.5% from the United States, 10.4% from Japan, 7.7% from Europe and 4.3% from Asia South.
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
Greater China | 71,989 | 40.1% | 53,739 | 35.3% | 34.0% |
United States | 67,264 | 37.5% | 61,712 | 40.6% | 9.0% |
Japan | 18,611 | 10.4% | 16,200 | 10.6% | 14.9% |
Europe | 13,721 | 7.7% | 15,837 | 10.4% | (13.4)% |
Asia South | 7,759 | 4.3% | 4,636 | 3.1% | 67.4% |
Total Net Revenues | 179,344 | 100.0% | 152,124 | 100.0% | 17.9% |
Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 57.9% of net revenues in the fourth quarter of 2012, while the United States accounted for 20.3%, Japan accounted for 11.1%, Asia South accounted for 9.2% and Europe accounted for 1.5%.
Measuring Pactera's pro forma net revenues based on the location of contract signing entity, Greater China accounted for 59.8% of pro forma net revenues in the fourth quarter of 2012, while the United States accounted for 20.7%, Japan accounted for 9.9%, Asia South accounted for 8.2% and Europe accounted for 1.4%.
Net Revenues by Industry
Pactera classifies its clients into four industry segments: High Technology ("High Tech"), Banking, Financial Services and Insurance ("BFSI"), Telecommunications ("Telecom"), and other industry segments including manufacturing, retail, distribution, travel and transportation and public services ("Others").
Net Revenues by Industry
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | |||
($ in thousands, except percentages) | ||||
High Tech | 56,463 | 39.7% | 28,941 | 44.6% |
BFSI | 39,894 | 28.1% | 18,849 | 29.0% |
Telecom | 23,858 | 16.8% | 4,769 | 7.3% |
Others | 21,987 | 15.4% | 12,377 | 19.1% |
Total Net Revenues | 142,202 | 100.0% | 64,936 | 100.0% |
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended December 31, 2012 | Three Months Ended December 31, 2011 | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
High Tech | 69,066 | 38.5% | 59,531 | 39.1% | 16.0% |
BFSI | 47,435 | 26.4% | 32,224 | 21.2% | 47.2% |
Telecom | 35,174 | 19.6% | 36,699 | 24.1% | (4.2)% |
Others | 27,669 | 15.5% | 23,670 | 15.6% | 16.9% |
Total net revenues | 179,344 | 100% | 152,124 | 100.0% | 17.9% |
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 30.7% and 39.6% of net revenues, respectively, during the fourth quarter of 2012, compared to 31.6% and 45.2%, respectively, for the corresponding period in 2011.
Pro forma net revenues from Pactera's top five and top ten clients accounted for 32.2% and 41.2% of pro forma net revenues, respectively, during the fourth quarter of 2012, compared to 39.0% and 48.6%, respectively, for the corresponding period in 2011.
Gross Profit and Gross Margin
Gross profit was $47.6 million for the fourth quarter of 2012, compared to $23.5 million for the corresponding period in 2011. During the fourth quarter of 2012, gross margin was 33.5%, as compared to 36.2% for the fourth quarter of 2011.
Operating Expenses
Total operating expenses were $65.2 million for the fourth quarter of 2012 compared to $16.8 million for the corresponding period in 2011. Operating expenses in the fourth quarter of 2012 reflect $5.5 million in trademark intangible asset write-down due to the corporate re-branding and $19.8 million in other merger related expenses including professional fees, severance costs, and facilities and system integration expenses.
Operating Income and Operating Margin
Operating loss for the fourth quarter of 2012 was $17.5 million, compared to an operating income of $6.7 million for the corresponding period in 2011. Non-GAAP operating income for the fourth quarter in 2012 was $15.3 million, as compared to $9.7 million in the corresponding period in 2011.
Operating margin was negative 12.3% for the fourth quarter of 2012, compared to 10.3% for the same period in 2011. Non-GAAP operating margin was 10.8% for the fourth quarter of 2012, compared to 14.9% for the corresponding period in 2011.
Net Income and Net Income per ADS
Net loss attributable to Pactera was $14.5 million for the fourth quarter of 2012, compared to a net income of $6.8 million for the corresponding period in 2011. Diluted net loss per ADS was $0.22 for the fourth quarter of 2012, as compared to diluted net income per ADS of $0.16 in the corresponding period of 2011.
Non-GAAP net income was $16.4 million for the fourth quarter of 2012, compared to $9.8 million for the same period in 2011. Non-GAAP diluted net income per ADS was $0.24 in the fourth quarter of 2012, compared to $0.23 in the corresponding period of 2011.
Cash Flow and DSO
As of December 31, 2012, Pactera had cash and cash equivalents, restricted cash, term deposits and short-term investment totaling $210.1 million. Operating cash flow for the fourth quarter of 2012 was a net inflow of approximately $33.3 million. Days sales outstanding ("DSO") was 119 days for the quarter.
Full Year 2012 Financial Results
Net Revenues
Net revenues were $359.0 million for the full year 2012 as compared to $219.0 million for the full year 2011.
Pro forma net revenues of the Company for the full year 2012 were $673.3 million, an increase of 34.1% from $502.1 million for the corresponding period in 2011.
Net Revenues by Service Line
Net revenues from IT services were $214.9 million for the full year 2012. Net revenues from R&D services were $144.2 million for the full year 2012.
Net Revenues by Services Line
Twelve Months Ended | Twelve Months Ended | |||
($ in thousands, except percentages) | ||||
IT Services | 214,858 | 59.8% | 126,105 | 57.6% |
CPS | 79,605 | 22.1% | 37,567 | 17.2% |
ADM | 135,253 | 37.7% | 88,538 | 40.4% |
R&D Services | 144,173 | 40.2% | 92,884 | 42.4% |
Total Net Revenues | 359,031 | 100.0% | 218,989 | 100.0% |
Pro forma net revenues from IT services were $381.5 million for the full year 2012, an increase of 46.3% from $260.7 million in 2011. Pro forma net revenues from R&D services were $291.8 million for the full year 2012, compared to $241.4 million in 2011.
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended | Twelve Months Ended | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
IT Services | 381,476 | 56.7% | 260,680 | 51.9% | 46.3% |
CPS | 118,209 | 17.6% | 85,351 | 17.0% | 38.5% |
ADM | 263,267 | 39.1% | 175,329 | 34.9% | 50.2% |
R&D Services | 291,790 | 43.3% | 241,446 | 48.1% | 20.9% |
Total Net Revenues | 673,266 | 100.0% | 502,126 | 100.0% | 34.1% |
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $155.0 million in the full year 2012, followed by $104.2 million from clients headquartered in Greater China, $58.0 million in Japan, $24.4 million in Europe and $17.5 million in Asia South.
Net Revenues based on Location of Clients' Headquarters
Twelve Months Ended | Twelve Months Ended | |||
($ in thousands, except percentages) | ||||
United States | 154,969 | 43.2% | 107,925 | 49.3% |
Greater China | 104,222 | 29.0% | 39,410 | 18.0% |
Japan | 58,010 | 16.2% | 40,724 | 18.6% |
Europe | 24,375 | 6.8% | 18,793 | 8.6% |
Asia South | 17,455 | 4.8% | 12,137 | 5.5% |
Total Net Revenues | 359,031 | 100.0% | 218,989 | 100.0% |
Pro forma net revenues from clients headquartered in the United States were $261.1 million or 38.8% of pro forma net revenues for the full year 2012, followed by 38.2% from Greater China, 10.7% from Japan, 8.4% from Europe and 3.9% from Asia South.
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended | Twelve Months Ended | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
United States | 261,070 | 38.8% | 203,242 | 40.5% | 28.5% |
Greater China | 257,481 | 38.2% | 172,052 | 34.3% | 49.7% |
Japan | 72,050 | 10.7% | 50,167 | 10.0% | 43.6% |
Europe | 56,728 | 8.4% | 61,231 | 12.2% | (7.4)% |
Asia South | 25,937 | 3.9% | 15,434 | 3.0% | 68.1% |
Total Net Revenues | 673,266 | 100.0% | 502,126 | 100.0% | 34.1% |
Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 48.0% of net revenues in thefull year 2012, while the United States accounted for 21.0%, Japan accounted for 16.7%, Asia South accounted for 12.6% and Europe accounted for 1.7%.
Measuring Pactera's pro forma net revenues based on the location of contract signing entity, Greater China accounted for 57.1% of pro forma net revenues in the full year 2012, while the United States accounted for 22.8%, Japan accounted for 10.3%, Asia South accounted for 8.2% and Europe accounted for 1.6%.
Net Revenues by Industry
Net Revenues by Industry
Twelve Months Ended December 31, 2012 | Twelve Months Ended December 31, 2011 | |||
($ in thousands, except percentages) | ||||
High Tech | 153,099 | 42.6% | 105,447 | 48.2% |
BFSI | 102,328 | 28.5% | 60,893 | 27.8% |
Telecom | 41,366 | 11.5% | 14,653 | 6.7% |
Others | 62,238 | 17.4% | 37,996 | 17.3% |
Total Net Revenues | 359,031 | 100.0% | 218,989 | 100.0% |
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended December 31, 2012 | Twelve Months Ended December 31, 2011 | Year-over-Year % Change | |||
($ in thousands, except percentages) | |||||
High Tech | 259,517 | 38.5% | 200,837 | 40.0% | 29.2% |
BFSI | 157,592 | 23.4% | 96,886 | 19.3% | 62.7% |
Telecom | 151,996 | 22.6% | 127,436 | 25.4% | 19.3% |
Others | 104,161 | 15.5% | 76,967 | 15.3% | 35.3% |
Total net revenues | 673,266 | 100.0% | 502,126 | 100.0% | 34.1% |
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 31.0% and 41.7% of net revenues, respectively, during the full year 2012, compared to 34.8% and 50.1%, respectively, in 2011.
Pro forma net revenues from Pactera's top five and top ten clients accounted for 36.1% and 45.5% of pro forma net revenues, respectively, during the full year 2012, compared to 40.0% and 50.6%, respectively, in 2011.
Gross Profit and Gross Margin
Gross profit was $124.4 million for the full year 2012, compared to $76.6 million in 2011. During the full year 2012, gross margin was 34.7%, as compared to 35.0% for the full year 2011.
Operating Expenses
Total operating expenses were $123.5million for the full year 2012 compared to $59.4 million in 2011. Operating expenses in the full year 2012 reflect $5.5 million in trademark intangible asset write-down due to the corporate re-branding as a result of the merger and $22.2 million in other merger related expenses including professional fees, severance costs, and facilities and system integration expenses.
Operating Income and Operating Margin
Operating income for the full year 2012 was $0.9 million, compared to an operating income of $17.2 million in 2011. Non-GAAP operating income for the full year 2012 was $45.4 million, as compared to $27.8 million in 2011.
Operating margin was 0.3% for the full year 2012, compared to 7.9% in 2011. Non-GAAP operating margin was 12.6% for the full year 2012, compared to 12.7% in 2011.
Provision for Income Taxes
Provision for income taxes was $1.2 million for the full year 2012, compared to $1.7 million in 2011. The effective income tax rate was 26.8%. Excluding non-deductible merger related transaction costs for Cayman Island tax purposes, the effective tax rate would have been 13.0% for the year.
Net Income and Net Income per ADS
Net income attributable to Pactera was $2.6 million for the full year 2012, compared to $17.9 million for 2011. Diluted net income per ADS was $0.05 for the full year 2012, as compared to diluted net income per ADS of $0.42 for 2011.
Non-GAAP net income was $45.0 million for the full year 2012, compared to $28.5 million for 2011. Non-GAAP diluted net income per ADS was $0.91 for the full year 2012, compared to $0.66 for 2011.
Cash Flow
Operating cash flow for the full year 2012 was a net inflow of approximately $36.3 million.
Recent Development
Share Repurchase Program
On December 21, 2012, the Company announced that the Board of Directors approved a share repurchase program, under which Pactera had been authorized, but is not obligated, to repurchase up to $30 million worth of outstanding American Depositary Shares (the "ADSs") representing the common shares of Pactera from time to time over the next 12 months. As of February 26, 2013, 348,535 ADS had been repurchased through open market transactions.
Potential Business Transfer Relating to Our Large Telecom Customer
As previously disclosed, one of the Company's major clients formed two joint ventures specializing in the software outsourcing business with the Company's competitors. The customer is now shifting some of its outsourcing business from various vendors to these joint ventures. Recently in 2013, this customer informed the Company of its plan to move some business from the Company to these joint ventures, and the Company intends to fully cooperate in this process. The details are still being discussed between the parties, which may include orderly transfer of certain project teams to the joint ventures in the first half of 2013. In 2012, Pactera and, prior to the completion of the merger, HiSoft and VanceInfo, generated approximately $96 million of net revenues from this customer, which was the largest customer as measured by net revenues. The Company now expects net revenues from this customer to decline by at least 40% in 2013.
Outlook for Pactera's First Quarter and Full Year 2013
For the first quarter of 2013, based on current market and operating conditions and current book orders, Pactera expects:
For the full year 2013, based on current market and operating conditions, Pactera expects:
These estimates are based on current market and operating conditions, are subject to change, and may be influenced positively or negatively by factors outside the Company's control, including but not limited to macroeconomic events in the markets in which the Company operates. See "Safe Harbor Statement" below for additional information regarding forward-looking statements.
Conference Call
The Company will host a corresponding conference call and live webcast to discuss the results at 7:00 AM Eastern Standard Time (EST) on Wednesday, February 27, 2013 (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 below:
- U.S. Toll Free Dial-in Number: + 1.855.500.8701
- International Dial-in Number: + 65.6723.9385
- Hong Kong Dial-in Number: + 852.3051.2745
Passcode: 96031141
The conference call will be available live via webcast on the Investors section of Pactera's website at http://ir.pactera.com. The archive replay will be available on Pactera's website shortly after the call.
A dial-in replay of the conference call will be available until March 6, 2013:
- U.S. Toll Free Dial-in Number: + 1.855.452.5696
- International Dial-in Number: + 61.2.8199.0299
Passcode: 96031141
About Pactera
Pactera Technology International Ltd. (NASDAQ: PACT), formed by a merger of equals between HiSoft Technology International Limited and VanceInfo Technologies Inc., is a global consulting and technology services provider strategically headquartered in China. Pactera provides world-class business / IT consulting, solutions, and outsourcing services to a wide range of leading multinational firms through a globally integrated network of onsite and offsite delivery locations in China, the United States, Europe, Australia, Japan, Singapore and Malaysia. Pactera's comprehensive services include business and technology advisory, enterprise application services, business intelligence, application development & maintenance, mobility, cloud computing, infrastructure management, software product engineering & globalization, and business process outsourcing.
For more information about Pactera, please visit www.pactera.com.
Safe Harbor Statement
This news release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Pactera's control, which may cause Pactera's actual results, performance or achievements to differ materially from those in the forward-looking statements. 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, uncertainty relating to its clients' forming or plan to form joint venture with the Company's competitors, the economic slowdown in its principal geographic markets, the quality and portfolio of its service lines and industry expertise, and the availability of a large talent pool in China and inflation of qualified professionals' wages, 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, uncertainties or factors is included in Pactera's filings with the U.S. Securities and Exchange Commission. All information provided in this news release is as of the date of this news release, and Pactera 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 Pactera's consolidated financial results presented in accordance with GAAP, Pactera uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related costs, change in fair value of contingent consideration payable for business acquisition, and compensation expenses related to acquisition. The non-GAAP income from operations, net income and diluted EPS for prior periods have been reclassified so that the presentations are consistent. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP or as being comparable to results reported or forecasted by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for non-GAAP Financial Measures to Comparable GAAP Measures" set forth at the end of this news release.
Pactera 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. 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 and non-GAAP diluted EPS is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, and change in fair value of contingent consideration payable for business acquisition 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 guidance for non-GAAP financial measures to the most directly comparable GAAP financial measures in the accompanying table include all information reasonably available to Pactera at the date of this news release.
PACTERA TECHNOLOGY INTERNATIONAL LIMITED | |||||||||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||||||||||||
(US dollars in thousands, except share data) | |||||||||||||||||
December 31, 2012 | December 31, 2011 | ||||||||||||||||
ASSETS | |||||||||||||||||
Current Assets | |||||||||||||||||
Cash and cash equivalents | 143,714 | 113,856 | |||||||||||||||
Restricted cash | 6,112 | 1,222 | |||||||||||||||
Term deposits | 58,485 | 21,681 | |||||||||||||||
Short-term investment | 1,765 | - | |||||||||||||||
Accounts receivable, net | 230,693 | 61,413 | |||||||||||||||
Other current assets | 37,435 | 7,135 | |||||||||||||||
Total current assets | 478,204 | 205,307 | |||||||||||||||
Property, plant and equipment, net | 67,607 | 13,774 | |||||||||||||||
Goodwill and intangible assets, net | 157,962 | 52,546 | |||||||||||||||
Other long-term assets | 33,833 | 1,552 | |||||||||||||||
Total assets | 737,606 | 273,179 | |||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||
Current liabilities | 163,152 | 51,029 | |||||||||||||||
Other liabilities | 32,130 | 12,260 | |||||||||||||||
Total liabilities | 195,282 | 63,289 | |||||||||||||||
Total shareholder's equity | 542,324 | 209,890 | |||||||||||||||
Total liabilities and equity | 737,606 | 273,179 | |||||||||||||||
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Note: | |||||||||||||||||
As of December 31,2012, there were 88,312,068 ordinary shares (88,312,068 ADSs) issued and outstanding. | |||||||||||||||||
As of December 31,2011, there were 42,720,067 ordinary shares (42,720,067 ADSs) issued and outstanding, | |||||||||||||||||
Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to ordinary shares that | |||||||||||||||||
PACTERA TECHNOLOGY INTERNATIONAL LIMITED | |||||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) | |||||||||||||||||
(US dollars in thousands, except for share, per share data) | |||||||||||||||||
Three months ended December 31, | Year ended December 31, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Net revenues | 142,202 | 64,936 | 359,031 | 218,989 | |||||||||||||
Cost of revenues | (94,589) | (41,402) | (234,602) | (142,427) | |||||||||||||
Gross profit | 47,613 | 23,534 | 124,429 | 76,562 | |||||||||||||
Operating expenses | (65,152) | (16,832) | (123,514) | (59,351) | |||||||||||||
(Loss) Income from operations | (17,539) | 6,702 | 915 | 17,211 | |||||||||||||
Other income | 709 | 832 | 3,597 | 2,905 | |||||||||||||
Net (loss) income before income tax expenses | (16,830) | 7,534 | 4,512 | 20,116 | |||||||||||||
Income tax benefit (expenses) | 2,359 | (459) | (1,210) | (1,718) | |||||||||||||
(Loss) income before earning in equity method investment | (14,471) | 7,075 | 3,302 | 18,398 | |||||||||||||
Earning in equity method investment | 23 | - | 23 | - | |||||||||||||
(Loss) income after earning in equity method investment | (14,448) | 7,075 | 3,325 | 18,398 | |||||||||||||
Add: Net profit attributable to noncontrolling interest | (69) | (278) | (735) | (497) | |||||||||||||
Net (loss) income attributable to PacteraTechnology International Limited | |||||||||||||||||
(14,517) | 6,797 | 2,590 | 17,901 | ||||||||||||||
Net (loss) income per share | |||||||||||||||||
Basic | (0.22) | 0.17 | 0.05 | 0.44 | |||||||||||||
Diluted | (0.22) | 0.16 | 0.05 | 0.42 | |||||||||||||
Weighted average shares used in calculating net income per common share | |||||||||||||||||
Basic | 66,234,854 | 41,021,197 | 47,547,307 | 40,596,429 | |||||||||||||
Diluted | 66,234,854 | 42,946,070 | 49,444,160 | 42,956,291 | |||||||||||||
Net (loss) income per ADS | |||||||||||||||||
Basic | (0.22) | 0.17 | 0.05 | 0.44 | |||||||||||||
Diluted | (0.22) | 0.16 | 0.05 | 0.42 | |||||||||||||
Weighted average ADS used in calculating net | |||||||||||||||||
Basic | 66,234,854 | 41,021,197 | 47,547,307 | 40,596,429 | |||||||||||||
Diluted | 66,234,854 | 42,946,070 | 49,444,160 | 42,956,291 | |||||||||||||
Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to ordinary shares that effectively resulted in a 1:1.3622 split for its | |||||||||||||||||
PACTERA TECHNOLOGY INTERNATIONAL LIMITED | |||||||||||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | |||||||||||
(US dollars in thousands, except for share, per share data) | |||||||||||
Three months ended December 31, | Year ended December 31, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Net (loss) income | (14,448) | 7,075 | 3,325 | 18,398 | |||||||
Other comprehensive income, net of tax: | |||||||||||
Change in cumulative foreign exchange translation adjustment | 946 | 1,862 | 2,460 | 5,738 | |||||||
Comprehensive (loss) income | (13,502) | 8,937 | 5,785 | 24,136 | |||||||
Less: Comprehensive income attributable to noncontrolling interest | |||||||||||
(69) | (295) | (742) | (547) | ||||||||
Comprehensive income attributable to Pactera | |||||||||||
(13,571) | 8,642 | 5,043 | 23,589 | ||||||||
PACTERA TECHNOLOGY INTERNATIONAL LIMITED | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(in U.S. dollars in thousands) | |||||||||||
Three months ended December 31, | Year ended December 31, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
Cash flows from operating activities: | |||||||||||
Net (loss) income | (14,448) | 7,075 | 3,325 | 18,398 | |||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||||||
(Reversal) Provision for doubtful accounts | 4,851 | (163) | 4,821 | 477 | |||||||
(Gain) loss on disposal of property, plant and equipment | 155 | (1) | 103 | 37 | |||||||
Depreciation | 2,709 | 1,317 | 6,850 | 4,400 | |||||||
Change in fair value of foreign-currency forward contract | 43 | (67) | 20 | (28) | |||||||
Amortization of intangible assets | 2,295 | 1,044 | 6,058 | 2,677 | |||||||
Amortization of land use right | 71 | - | 71 | - | |||||||
Impairment of Intangible Asssets | 5,515 | - | 5,515 | - | |||||||
Non-cash interest income | - | - | - | (34) | |||||||
Share-based compensation expenses | 5,841 | 1,559 | 11,064 | 5,656 | |||||||
Changes in fair value of contingent consideration | (776) | 384 | (659) | 1,824 | |||||||
Earnings in investment | (23) | - | (23) | - | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 10,523 | 627 | (11,946) | (12,405) | |||||||
Other current assets | 757 | 1,416 | (1,374) | (2,565) | |||||||
Other assets | 237 | (66) | (697) | 2,170 | |||||||
Accounts payable | (938) | 1,981 | (3,459) | 216 | |||||||
Other liabilities | 16,478 | 803 | 16,656 | 3,500 | |||||||
Net cash provided by operating activities | 33,290 | 15,909 | 36,325 | 24,323 | |||||||
Cash flows from investing activities: | |||||||||||
Term deposits | (7,232) | 10,675 | (1,908) | (21,681) | |||||||
Sort-term investment | (1,764) | - | (1,764) | - | |||||||
Purchase of property, plant and equipment | (2,219) | (1,785) | (5,600) | (7,691) | |||||||
Purchase of buliding and land use right | (9,126) | - | (15,633) | - | |||||||
Restricted cash | (2,234) | (54) | (3,022) | (836) | |||||||
Cash received from merger with VanceInfo | 31,717 | - | 31,717 | - | |||||||
Deferred and contingent consideration paid for business acquisitions | (2,321) | (2,109) | (9,554) | (7,716) | |||||||
Payment on success fee related to business acquisition | - | - | - | (450) | |||||||
Net cash provided by (used in) investing activities | 6,821 | 6,727 | (5,764) | (38,374) | |||||||
Cash flows from financing activities: | |||||||||||
Repayment of bank loan | (1) | - | (477) | (40,000) | |||||||
Cash received from non-controlling | - | - | - | 909 | |||||||
Proceeds from issuance of common share | 589 | 634 | 1,988 | 5,291 | |||||||
Deferred and contingent consideration paid for business acquisitions | - | (2,150) | (3,047) | (11,710) | |||||||
Payment of principal amount under capital lease obligations | - | - | - | (136) | |||||||
Net cash provided by (used in) financing activities | 588 | (1,516) | (1,536) | (45,646) | |||||||
Effect of exchange rate changes | 528 | 1,063 | 833 | 3,660 | |||||||
Net increase (decrease) in cash and cash equivalents | 41,227 | 22,183 | 29,858 | (56,037) | |||||||
Cash and cash equivalents at beginning of period | 102,487 | 91,673 | 113,856 | 169,893 | |||||||
Cash and cash equivalents at end of period | 143,714 | 113,856 | 143,714 | 113,856 | |||||||
PACTERA TECHNOLOGY INTERNATIONAL LIMITED | |||||||||||
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures | |||||||||||
(US dollars in thousands, except per share data and percentages) | |||||||||||
Three months ended December 31, | Year ended December 31, | ||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||
GAAP operating (loss) income | (17,539) | 6,702 | 915 | 17,211 | |||||||
GAAP operating (loss) margin | -12.3% | 10.3% | 0.3% | 7.9% | |||||||
Adjustments: | |||||||||||
- Share-based compensation | 5,841 | 1,559 | 11,064 | 5,656 | |||||||
- Amortization of acquired intangible assets | 2,295 | 1,044 | 6,058 | 2,677 | |||||||
- Write-down of trademarks due to re-branding | 5,515 | - | 5,515 | - | |||||||
- Change in fair value of contingent consideration payable for M&A | (776) | 384 | (659) | 1,824 | |||||||
- Success fee related to business acquisition | - | - | - | 450 | |||||||
- Compensation expenses | 87 | - | 174 | - | |||||||
- Merger related costs | 19,827 | - | 22,215 | - | |||||||
- Land use right amortization expense | 71 | - | 71 | - | |||||||
Non-GAAP operating income | 15,321 | 9,689 | 45,353 | 27,818 | |||||||
Non-GAAP operating margin | 10.8% | 14.9% | 12.6% | 12.7% | |||||||
GAAP net (loss) income | (14,517) | 6,797 | 2,590 | 17,901 | |||||||
GAAP net (loss) margin | -10.2% | 10.5% | 0.7% | 8.2% | |||||||
Adjustments: | |||||||||||
- Share-based compensation | 5,841 | 1,559 | 11,064 | 5,656 | |||||||
- Write-down of trademarks due to re-branding | 2,295 | 1,044 | 6,058 | 2,677 | |||||||
- Write down of intangible assets | 5,515 | - | 5,515 | - | |||||||
- Change in fair value of contingent consideration payable for M&A | (776) | 384 | (659) | 1,824 | |||||||
- Success fee related to business acquisition | - | - | - | 450 | |||||||
- Compensation expenses | 87 | - | 174 | - | |||||||
- Merger related costs, net of tax effect | 17,837 | - | 20,225 | - | |||||||
- Land use right amortization expense | 71 | - | 71 | - | |||||||
Non-GAAP net income | 16,353 | 9,784 | 45,038 | 28,508 | |||||||
Non-GAAP net margin | 11.5% | 15.1% | 12.5% | 13.0% | |||||||
Non-GAAP net income per ADS | |||||||||||
Basic | 0.25 | 0.24 | 0.95 | 0.70 | |||||||
Diluted | 0.24 | 0.23 | 0.91 | 0.66 | |||||||
Weighted average ADS used in calculating Non-GAAP net income per ADS | |||||||||||
Basic | 66,234,854 | 41,021,197 | 47,547,307 | 40,596,429 | |||||||
Diluted | 68,514,064 | 42,946,070 | 49,444,160 | 42,956,291 | |||||||
GAAP net (loss) income per ADS | |||||||||||
Basic | (0.22) | 0.17 | 0.05 | 0.44 | |||||||
Adjustments: | |||||||||||
- Share-based compensation | 0.09 | 0.04 | 0.23 | 0.14 | |||||||
- Amortization of acquired intangible assets | 0.04 | 0.02 | 0.13 | 0.07 | |||||||
- Write-down of trademarks due to re-branding | 0.08 | - | 0.12 | - | |||||||
- Change in fair value of contingent consideration payable for M&A | (0.01) | 0.01 | (0.01) | 0.04 | |||||||
- Success fee related to business acquisition | - | - | - | 0.01 | |||||||
- Compensation expenses | - | - | - | - | |||||||
- Merger related costs, net of tax effect | 0.27 | - | 0.43 | - | |||||||
- Land use right | - | - | - | - | |||||||
Non-GAAP net income per ADS | |||||||||||
Basic | 0.25 | 0.24 | 0.95 | 0.70 | |||||||
GAAP net (loss) income per ADS | |||||||||||
Diluted | (0.22) | 0.16 | 0.05 | 0.42 | |||||||
Adjustments: | |||||||||||
- Share-based compensation | 0.09 | 0.04 | 0.22 | 0.13 | |||||||
- Amortization of acquired intangible assets | 0.03 | 0.02 | 0.13 | 0.06 | |||||||
- Write-down of trademarks due to re-branding | 0.08 | - | 0.11 | - | |||||||
- Change in fair value of contingent consideration payable for M&A | (0.01) | 0.01 | (0.01) | 0.04 | |||||||
- Success fee related to business acquisition | - | - | - | 0.01 | |||||||
- Compensation expenses | - | - | - | - | |||||||
- Merger related costs, net of tax effect | 0.27 | - | 0.41 | - | |||||||
- Land use right | - | - | - | - | |||||||
Non-GAAP net income per ADS | |||||||||||
Diluted | 0.24 | 0.23 | 0.91 | 0.66 | |||||||
Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to ordinary shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.
| |||||||||||
Unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 | Unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, | Unaudited Pro forma consolidated net revenues for the three months ended December 31, 2012 | Unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2011 | Unaudited historical consolidated net revenues of VanceInfo for the three months ended December 31, 2011 | Unaudited Pro forma consolidated net revenues for the three months ended December 31, 2011 | ||||
Proforma Net Revenue by Service Lines | |||||||||
IT Services | 87,738 | 22,695 | 110,433 | 39,700 | 43,236 | 82,936 | |||
- CPS | 31,849 | 4,415 | 36,264 | 13,640 | 15,599 | 29,239 | |||
- ADM | 55,889 | 18,280 | 74,169 | 26,060 | 27,637 | 53,697 | |||
R&D Services | 54,464 | 14,447 | 68,911 | 25,236 | 43,952 | 69,188 | |||
Total | 142,202 | 37,142 | 179,344 | 64,936 | 87,188 | 152,124 | |||
Proforma Net Revenue by Industry | |||||||||
High Tech | 56,463 | 12,603 | 69,066 | 28,941 | 30,590 | 59,531 | |||
BFSI | 39,894 | 7,541 | 47,435 | 18,849 | 13,375 | 32,224 | |||
Telecom | 23,858 | 11,316 | 35,174 | 4,769 | 31,930 | 36,699 | |||
Others | 21,987 | 5,682 | 27,669 | 12,377 | 11,293 | 23,670 | |||
Total | 142,202 | 37,142 | 179,344 | 64,936 | 87,188 | 152,124 | |||
Proforma Net Revenue by Location of Client's Headquarter | |||||||||
United States | 55,361 | 11,903 | 67,264 | 30,324 | 31,388 | 61,712 | |||
Europe | 10,262 | 3,459 | 13,721 | 4,851 | 10,986 | 15,837 | |||
Japan | 16,615 | 1,996 | 18,611 | 13,323 | 2,877 | 16,200 | |||
Greater China | 53,848 | 18,141 | 71,989 | 13,197 | 40,542 | 53,739 | |||
Asia South | 6,116 | 1,643 | 7,759 | 3,241 | 1,395 | 4,636 | |||
Total | 142,202 | 37,142 | 179,344 | 64,936 | 87,188 | 152,124 | |||
Note: | |||||||||
The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations. | |||||||||
Unaudited historical consolidated net revenues of Pactera for the year December 31, 2012 | Unaudited historical consolidated net revenues of VanceInfo for the period from January 1, 2012 to November 8, | Unaudited Pro forma consolidated net revenues for the year ended December 31, 2012 | Unaudited historical consolidated net revenues of the former HiSoft for the year ended December 31, 2011 | Unaudited historical consolidated net revenues of VanceInfo for the year ended December 31, 2011 | Unaudited Pro forma consolidated net revenues for the year ended December 31, 2011 | ||||
Proforma Net Revenue by Service Lines | |||||||||
IT Services | 214,858 | 166,618 | 381,476 | 126,105 | 134,575 | 260,680 | |||
- CPS | 79,605 | 38,604 | 118,209 | 37,567 | 47,784 | 85,351 | |||
- ADM | 135,253 | 128,014 | 263,267 | 88,538 | 86,791 | 175,329 | |||
R&D Services | 144,173 | 147,617 | 291,790 | 92,884 | 148,562 | 241,446 | |||
Total | 359,031 | 314,235 | 673,266 | 218,989 | 283,137 | 502,126 | |||
Proforma Net Revenue by Industry | |||||||||
High Tech | 153,099 | 106,418 | 259,517 | 105,447 | 95,390 | 200,837 | |||
BFSI | 102,328 | 55,264 | 157,592 | 60,893 | 35,993 | 96,886 | |||
Telecom | 41,366 | 110,630 | 151,996 | 14,653 | 112,783 | 127,436 | |||
Others | 62,238 | 41,923 | 104,161 | 37,996 | 38,971 | 76,967 | |||
Total | 359,031 | 314,235 | 673,266 | 218,989 | 283,137 | 502,126 | |||
Proforma Net Revenue by Location of Client's Headquarter | |||||||||
United States | 154,969 | 106,101 | 261,070 | 107,925 | 95,317 | 203,242 | |||
Europe | 24,375 | 32,353 | 56,728 | 18,793 | 42,438 | 61,231 | |||
Japan | 58,010 | 14,040 | 72,050 | 40,724 | 9,443 | 50,167 | |||
Greater China | 104,222 | 153,259 | 257,481 | 39,410 | 132,642 | 172,052 | |||
Asia South | 17,455 | 8,482 | 25,937 | 12,137 | 3,297 | 15,434 | |||
Total | 359,031 | 314,235 | 673,266 | 218,989 | 283,137 | 502,126 | |||
Note: | |||||||||
The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations. | |||||||||
For further information, please contact:
Sheryl Zhang
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-8282-5330
E-mail: ir@pactera.com
