BEIJING, Feb. 12 /PRNewswire-Asia/ -- Yucheng Technologies Limited (Nasdaq: YTEC), a leading provider of IT solutions and services to China’s banking industry, today announced unaudited financial results for the three-month period ended December 31, 2008 and the fiscal year 2008.
2008 Financial Highlights
-- For the fiscal year 2008, non-GAAP net income was USD 13.6M, a 30.4%
increase year-over-year.
-- Fully diluted non-GAAP EPS was USD 0.76 for fiscal year 2008
compared to USD 0.68 for fiscal year 2007, an 11.8% increase
year-over-year.
-- Yucheng had a fourth quarter and year-end cash position of USD 35.1M
compared to USD 30.5M for the same period last year.
-- Cash from operations was USD 21.3M in the fourth quarter 2008, which
resulted in net operating cash of USD 15.8M for the fiscal year 2008,
compared to a loss of USD 4.6M for the fiscal year 2007.
-- Days of sales outstanding were 106 days in the fourth quarter 2008
compared to 154 days in the third quarter 2008.
Fiscal 2008 and fourth quarter results were achieved despite significant capital and operating investments in 2008, which will allow Yucheng to expand into the insurance sector via the Elegon JV, further penetrate into SMBs with our E-banking ASP, and capitalize on consumer spending patterns through our POS initiative. These investments lay new foundations to ensure long-term profitability and growth; however, at a cost of USD 0.11 per share for 2008. In 2009, Yucheng’s management team expects to execute on these initiatives to broaden revenue streams and continue double-digit top and bottom line growth.
Yucheng’s net income of USD 13.6M is higher than the original net income performance target established as part of the 2006 merger, which means that the selling shareholders from that transaction will be entitled to receive an additional 0.95M common shares after the financial statements are fully audited. However, the strong 30.4% annual net income growth fell short of management’s original target, due to the product mix skewing more heavily than expected towards System Integration in the last six weeks of 2008. In light of this shortfall, the executive management team, Mr. Weidong, Chairman and CEO, and Mr. Shuo Zeng, COO, will defer 125,000 shares or 55% of their 2008 performance target share allocation as selling shareholders until January 1, 2010, contingent on meeting the company’s net income guidance for 2009. Mr. Weidong and Mr. Shuo Zeng have also requested that the Board not to pay them any additional monetary reward for 2008 performance beyond their base salary of USD 50,000 each.
Mr. Hong said, “Since 2006, we have demonstrated year after year our ability to grow Yucheng and to move into higher margin solutions. We hold ourselves to a high standard, which is partly why we decided to list on the NASDAQ. Executive management is forgoing our 2008 bonuses and postponing a major portion of the performance-based shares due to us as selling shareholders to reflect our commitment to our existing shareholders and our confidence in the 2009 guidance despite challenging market conditions.”
The Company also announced changes to the Board. Mr. Chih Cheung will become Chairman Emeritus of Yucheng’s board of directors, and Mr. Hong will replace him as Chairman, as agreed during the 2006 merger. Mr. Cheung will continue to play a formal role and will be more active in shaping Yucheng’s strategic initiatives beyond its core business of IT Solutions and Services. Mr. Lawrence Yeung will be retiring from the board to move back to Australia. In his place, Mr. Jeffrey R. Williams will join the board as an independent director and serve on the audit committee of the board of directors.
“I would like to thank Mr. Yeung for his contributions as an independent director and look forward to Mr. Williams’ active involvement in corporate governance, investor communications, and strategic initiatives, working closely with Mr. Cheung,” said Mr. Hong.
Mr. Williams has over 25 years of experience in China, Hong Kong and Taiwan in the financial services industry. He currently serves as an independent director and risk management committee chair of China Universal Asset Management Co. Prior to that, Mr. Williams was the President of Shenzhen Development Bank, where he served as the first foreign president of a Chinese commercial bank. Prior to that, he held a number of senior executive positions at Citibank, American Express and Standard Chartered within Greater China. Mr. Williams received his AB, magna cum laude, from Harvard College and a MBA from Harvard Business School.
Business Outlook
Despite the current global financial and economic challenges and the general negative outlook for the Chinese economy, we believe that our growth will continue at a healthy rate of 18% to 23% in 2009. We are committed to growing our IT Solutions and Services business through our market leading products, which allow banks to serve customers more effectively and conveniently, and to manage their operations across multiple locations more efficiently.
We remain positive about our market prospects for another reason. Banks are continuing to consolidate, which requires IT investments to integrate disparate, legacy systems and to enjoy greater economies of scale. Banks are increasingly working with only the strongest IT players that have the breadth of skills and the high caliber products to ensure long-term success. For Yucheng, this means that we are in a position to benefit from industry consolidation.
Mr. Hong stated, “In 2009, we believe our core business will continue to grow, and we will begin to reap the rewards from our E-banking ASP, POS business, and our 3i Elegon JV investments in 2008 through recurring revenue models. We continue to see robust demand for our services across all of our business lines.”
Based on our operating results for 2008, we project our 2009 revenues to be in the range of USD 117M to USD 122M. We expect our 2009 non-GAAP net income to be in the range of USD 16.0M to USD 16.7M, which will translate into net income per share of USD 0.86 to USD 0.90, based on expected 18.5 million diluted shares outstanding.
In addition to providing complete unaudited financial results on a consolidated basis, the table below allows greater insight into our POS business.
Summary of Selected Unaudited Financial Results for the
Fourth Quarter of 2008
(Numbers are in USD thousands, except shares outstanding,
earnings per share and percentages)
Q4 2008 Q4 2007
CONSOLIDATED
% of % of Y-O-Y
Amount Revenues Amount Revenues % Change
Revenues $34,204 100.0 % $23,486 100.0 % 45.6 %
IT Solutions
and
Services $19,480 57.0 % $13,640 58.1 % 42.8 %
System
Integration $13,939 40.7 % $9,846 41.9 % 41.6 %
POS $785 2.3 % -- -- --
Cost of
Revenues $21,879 64.0 % $14,694 62.6 % 48.9 %
Gross Profit $12,325 36.0 % $8,792 37.4 % 40.2 %
Total
Operating
Expenses $7,339 21.5 % $4,595 19.6 % 59.7 %
R&D $91 0.3 % $99 0.4 % -8.1 %
SG&A $7,249 21.2 % $4,496 19.1 % 61.2 %
Income from
Operations $4,986 14.6 % $4,197 17.9 % 18.8 %
Net Income
(GAAP) $4,745 13.9 % $3,865 16.5 % 22.8 %
Amortization of
Intangible
Assets $336 1.0 % $314 1.3 % 7.0 %
Non-GAAP Net
Income $5,080 14.9 % $4,179 17.8 % 21.6 %
Basic GAAP EPS $0.27 -- $0.23 -- 17.4 %
Diluted GAAP
EPS $0.27 -- $0.22 -- 22.7 %
Basic Non-GAAP
EPS $0.29 -- $0.25 -- 16.0 %
Diluted Non-
GAAP EPS $0.29 -- $0.24 -- 20.8 %
Basic Weighted
Average Common
Shares Out-
standing 17,575,685 -- 16,563,370 -- 6.1 %
Diluted
Weighted
Average
Common
Shares Out-
Standing 17,614,543 -- 17,778,250 -- -0.9 %
Q4 2008
CORE POS
% of % of
Amount Revenues Amount Revenues
Revenues $33,419 100.0 % $785 100.0 %
IT Solutions and
Services $19,480 58.3 % -- --
System Integration $13,939 41.7 % -- --
POS -- -- $785 100.0 %
Cost of Revenues $21,386 64.0 % $493 62.8 %
Gross Profit $12,033 36.0 % $292 37.2 %
Total Operating
Expenses $6,177 18.5 % $1,162 148.0 %
R&D $91 0.3 % -- --
SG&A $6,087 18.2 % $1,162 148.0 %
Income from Operations $5,856 17.5 % ($870) -110.8 %
Net Income (GAAP) $5,274 15.8 % ($529) -67.3 %
Amortization of
Intangible Assets $336 1.0 % -- --
Non-GAAP Net Income $5,609 16.8 % ($529) -67.3 %
Basic GAAP EPS $0.30 -- ($0.03) --
Diluted GAAP EPS $0.30 -- ($0.03) --
Basic Non-GAAP EPS $0.32 -- ($0.03) --
Diluted Non-GAAP EPS $0.32 -- ($0.03) --
Basic Weighted
Average Common
Shares Outstanding 17,575,685 -- 17,575,685 --
Diluted Weighted
Average Common Shares
Outstanding 17,614,543 -- 17,614,543 --
Note: The United States dollar amounts in the above table are
calculated based on an exchange rate of USD 1.00 = RMB 6.8346 for
December 31, 2008 and USD 1.00 = RMB 7.3046 for December 31, 2007.
Revenues: Yucheng reported consolidated revenues for the fourth quarter 2008 of USD 34.2M, a 45.6% increase compared to the fourth quarter of 2007 and a 45.1% increase compared to the third quarter of 2008.
-- IT Solutions and Services: In the fourth quarter, IT Solutions and
Services recorded revenues of USD 19.5M, a 42.8% increase compared
to the fourth quarter of 2007, and a 73.4% increase compared to the
third quarter of 2008. IT Solutions and Services accounted for
57.0% of consolidated revenues.
-- System Integration: System Integration revenues totaled USD 13.9M in
the fourth quarter or 40.7% of consolidated revenues. System
Integration revenues grew by 41.6% compared to the fourth quarter of
2007 and 19.0% compared to the third quarter of 2008.
-- POS: POS generated revenues of USD 0.8M in the fourth quarter,
representing 2.3% of consolidated revenue. Our POS revenues
increased 25.2% compared with the third quarter of 2008.
Gross Profits: In the fourth quarter of 2008, Yucheng registered a gross profit of USD 12.3M, representing an increase of 40.2% compared to the fourth quarter of 2007 and 43.4% compared to the third quarter of 2008.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A was USD 7.2M in the fourth quarter of 2008, an increase of 61.2% compared to the fourth quarter of 2007 and 47.3% compared to the third quarter of 2008.
-- Core: In the fourth quarter, IT Solutions and Services and System
Integration SG&A expenses totaled USD 6.1M, an increase of 35.4%
compared to the fourth quarter of 2007 and 44.1% compared to the
third quarter of 2008. As expected, our SG&A increased in the
fourth quarter due to annual auditing and legal fees as well as the
other expenses related to being a public company.
-- POS: SG&A was USD 1.2M, an increase of 66.6% compared to the third
quarter of 2008. The increase is a one-time charge, due to the
reclassification of a sales expense.
Net Income: Yucheng recorded non-GAAP net income of USD 5.1M, an increase of 21.6% compared to the fourth quarter of 2007 and 25.6% compared to the third quarter of 2008. GAAP net income was USD 4.7M for the quarter, an increase of 22.8% compared to the fourth quarter of 2007 and 28.0% compared to the third quarter of 2008.
Earnings per Share: In the fourth quarter, Yucheng’s EPS for fully diluted shares on a consolidated basis was USD 0.29 (non-GAAP) and USD 0.27 (GAAP) compared to USD 0.24 (non-GAAP) and USD 0.22 (GAAP) in the fourth quarter of 2007.
-- Core: Fully diluted EPS for the fourth quarter grew to USD 0.32
(non-GAAP) and USD 0.30 (GAAP) compared to USD 0.24 (non-GAAP) and
USD 0.22 (GAAP) in the fourth quarter of 2007.
-- POS: On both a GAAP and non-GAAP basis, the fully diluted EPS impact
of POS in the fourth quarter was USD -0.03 compared to USD -0.01 in
the third quarter of 2008.
Cash: Yucheng’s cash position in the fourth quarter was USD 35.1M compared to USD 30.5M in the fourth quarter of 2007 and USD 18.8M in the third quarter of 2008. Yucheng’s operating cash flow peaked cyclically in the fourth quarter, generating USD 21.3M compared to USD 5.7M in the fourth quarter of 2007 and USD 0.5M in the third quarter of 2008.
Accounts Receivable: In the fourth quarter, accounts receivable totaled USD 42.0M compared to USD 27.9M in the fourth quarter of 2007 and USD 37.0M in the third quarter of 2008. Management continues to emphasize and regularly monitor the timely receipt of payments. Our days of sales outstanding declined to 106 days compared to 154 days in the third quarter of 2008.
POS: Yucheng’s POS business, although still nascent, has shown steady growth during 2008.
-- Terminal Deployment: Our POS installed base grew to 21,300 by
year-end compared to 17,600 in the third quarter of 2008, a 21.0%
increase. We continue to focus on growing a highly accretive
merchant base both in terms of transaction volume and revenue.
-- Average Monthly Gross Revenue per POS terminal (AMGRP): Our AMGRP
across our entire installed base, which has held steadily above USD
12, since we started reporting the figure in the second quarter of
2008. As we look at the more mature terminals in our base, the
results are promising and show some signs of achieving western
averages.
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), Yucheng’s management has reported net income and earnings per share on a non-GAAP basis. Each of the terms as used by Yucheng is defined as follows:
Non-GAAP net income represents net income reported in accordance with GAAP, adjusted for amortization of intangible assets resulting from the accounting treatment of the acquisition of Beijing e-Channels Century Technology Co., Ltd.
Non-GAAP earnings per share represents non-GAAP net income divided by the number of shares used in computing basic and diluted earnings per share in accordance with GAAP.
Management of Yucheng believes that these non-GAAP net income and earnings per share measures are useful for understanding and assessing Yucheng’s underlying business performance and operating trends, and expects to report net income on a non-GAAP basis using a consistent method on a quarterly basis going forward. These non-GAAP financial measures also facilitate management’s internal comparisons to Yucheng’s historical performance and liquidity. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
Management of Yucheng notes that these measures may not be calculated on the same basis as similar measures used by other companies. Please find a reconciliation of non-GAAP figures to GAAP figures in the summary of financial information presented above.
Conference Call and Replay Information
Management will conduct a conference call to discuss the financial results for the three-month period ended December 31, 2008 and the fiscal year 2008 on Thursday, February 12, 2009 at 8:00AM EST/ 9:00PM BJT.
To participate, please dial one of the local access numbers, listed below, ten minutes prior to the scheduled start of the call. The conference call identification number is 80168828.
US +1 866 242 1388
Canada +1 888 447 3085
UK +44 808 234 7860
China Netcom Users +86 10 800 640 0084
China Telecom Users +86 10 800 264 0084
All Other Participants +61 288 236 760
A recording of the call will be accessible within 48 hours via Yucheng’s website at http://www.yuchengtech.com/english/success.php?classid=41 .
About Yucheng Technologies Limited
Yucheng Technologies Limited (Nasdaq: YTEC) is a leading IT service provider to the Chinese banking industry. Headquartered in Beijing, China, Yucheng services clients from its nationwide network in 23 cities and approximately 2,000 employees. Yucheng provides a comprehensive suite of IT solutions and services to Chinese banks including: (i) Channel Solutions, such as e-banking and call centers; (ii) Business Solutions, such as core banking systems and loan management; and (iii) Management Solutions, such as risk analytics and business intelligence. Yucheng is also a leading third-party provider of POS Merchant Acquiring Services in partnership with banks in China.
Safe Harbor Statement
This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward looking statements are statements that are not historical facts. Forward-looking statements generally can be identified by the use of forward looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project" or "continue" or the negative thereof or other similar words. Such forward-looking statements, based upon the current beliefs and expectations of Yucheng’s management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: current dependence on the PRC banking industry demand for the products and services of Yucheng; competition from other service providers in the PRC and international consulting firms; the ability to update and expand product and service offerings; retention and hiring of qualified employees; protection of intellectual property; creating and maintaining quality product offerings; operating a business in the PRC with its changing economic and regulatory environment; and the other relevant risks detailed in Yucheng filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Yucheng assumes no obligation to update the information contained in this press release.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
December 31 and September 30, 2008 and December 31, 2007
Assets 2008.12.31 2008.9.30 2007.12.31
USD USD USD
Current assets:
Cash and cash equivalent 35,079,018 18,775,350 30,459,414
Trade accounts receivable, net 41,977,921 36,963,475 27,852,428
Costs and estimated earnings in
excess of billings on
uncompleted contracts 9,981,878 11,575,171 6,374,655
Amounts due from related companies 229,457 1,253,336 128,337
Inventories 141,673 4,231,068 1,212,413
Pre-contract costs 1,447,592 2,727,804 501,098
Other current assets 6,424,447 7,128,390 11,820,122
Deferred income taxes assets -
Current 28,717 778,407 --
Total current assets 95,310,703 83,433,001 78,348,467
Investments in and advances to
affiliates 329,240 739,484 308,738
Fixed assets 11,320,664 11,081,954 6,067,353
Less: Accumulated depreciation (2,907,970) (2,558,758) (1,505,239)
Fixed assets, net 8,412,694 8,523,196 4,562,114
Intangible assets, net 5,271,411 5,591,979 5,641,331
Goodwill 27,592,840 25,105,254 23,185,596
Deferred income taxes -
Non-current 1,871,133 806,138 354,052
Other non-current assets -- 284,123 96,930
Total assets 138,788,021 124,483,175 112,497,228
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
December 31 and September 30, 2008 and December 31, 2007
Liabilities and stockholders’
equity 2008.12.31 2008.9.30 2007.12.31
USD USD USD
Current liabilities:
Short term loan 8,778,861 8,799,847 4,791,501
Obligations under capital leases 419,594 412,567 198,620
Trade accounts payables 20,989,563 14,637,413 12,835,711
Billings in excess of costs and
estimated earnings on
uncompleted contracts 2,109,956 590,577 948,521
Employee and payroll accruals 1,826,585 1,769,377 1,189,201
Dividends payable to ex-owners 807,861 809,792 3,596,830
Deemed distribution to
ex-owners(1) 6,853,156 3,522,890 5,587,458
Outstanding payment in relation
to business acquisitions(1) 3,390,497 2,210,431 7,577,819
Income taxes payable 1,463,046 1,428,325 1,501,643
Other current liabilities 7,861,246 6,012,959 4,995,741
Deferred income taxes - Current 143,468 257,038 --
Total current liabilities 54,643,833 40,451,216 43,223,045
Obligations under capital leases 379,983 489,880 329,993
Deferred income taxes 494,423 540,525 727,260
Total liabilities 55,518,239 41,481,621 44,280,298
Minority interests 1,759,231 2,149,007 711,786
Stockholders’ equity
Preferred stock, $0.0001 par value,
authorized 2,000,000 shares and
none issued; Common stock,
$0.0001 par value, authorized
60,000,000 shares; 16,610,853,
17,575,685 shares issued and
outstanding as of December 31,
2007; September 30, 2008 and
December 31, 2008 2,927,358 2,934,355 2,738,906
Additional paid-in capital 50,239,872 54,405,612 49,506,395
Reserves 5,561,239 3,647,365 3,404,544
Retained earnings 23,184,775 20,411,229 12,069,390
Accumulated other
comprehensive loss (402,693) (546,014) (214,091)
Total Stockholders’ equity 81,510,551 80,852,547 67,505,144
Liabilities and Stockholders’
equity 138,788,021 124,483,175 112,497,228
(1) In the fourth quarter, Yucheng successfully achieved its net income
target and has allocated 0.95M shares to the selling shareholders
of our 2006 merger companies. These accruals can be seen in the
balance sheet under “Payment of purchase of subsidiaries” and
“Dividends paid to ex-owners.” The accounts will return to their
former level when the shares are issued pending the final audit, as
stipulated in our 20F.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income (continued)
Three months ended December 31, 2008 and 2007
2008 Q4 2007 Q4
USD USD
Revenues:
IT Solutions and Services 20,265,066 13,639,780
System Integration 13,938,646 9,846,215
Total revenues 34,203,712 23,485,995
Cost of revenues: (21,878,757) (14,694,272)
Gross profit 12,324,955 8,791,723
Operating expenses:
Research and Development (90,729) (98,895)
Selling and marketing (2,339,304) (1,731,422)
General and administrative (4,909,353) (2,764,432)
Total operating expenses(2) (7,339,386) (4,594,749)
Income from Operating 4,985,569 4,196,974
Other income (expenses):
Interest income 36,084 75,919
Interest expense (161,471) (117,920)
Investment gain (loss) (492,821) 597,465
Other income (expense), net 74,277 (3,974)
Income before income tax and minority
interests 4,441,638 4,748,464
Income tax benefit (expense) 245,546 (717,336)
Minority interests 57,614 (165,802)
Net income (GAAP) 4,744,798 3,865,326
Amortization for intangible assets 335,522 313,933
Net income (non-GAAP) 5,080,320 4,179,259
(2) Operating Expenses stated above are from our 2007 audited results
and include an additional USD 314,000 in costs.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended December 31, 2008
2008 Q4
USD
Cash flows from operating activities:
Net income adjustments to reconcile net
income to net cash provided by (used in)
operating activities: 4,744,798
Depreciation 1,018,819
Amortization 682,794
Loss on disposal fixed assets (12,029)
Loss (gain) on disposal of affiliates 9,639
Minority interests (57,614)
Share of equity in affiliate company 408,481
Loss from trust investment 77,406
Shares issued to independent directors 142,376
Decrease (increase) in trade accounts
receivable, net (5,157,275)
Decrease (increase) in costs and estimated
earnings in excess of billing on
uncompleted contracts 1,565,688
Decrease (increase) in due from related parties 1,020,890
Decrease (increase) in inventories 4,079,305
Decrease (increase) in precontract costs 1,166,183
Decrease (increase) in other current assets 913,852
Decrease (increase) in deferred income taxes
assets - Current 747,833
Decrease (increase) in deferred income taxes
assets - Non-current (1,066,918)
Increase (decrease) in trade accounts payable 6,387,059
Increase (decrease) in billings in excess of
costs and estimated earnings on
uncompleted contracts 1,521,775
Increase (decrease) in employee and payroll
accruals 102,273
Increase (decrease) in income taxes payable 54,042
Increase (decrease) in other current liabilities 2,570,659
Increase (decrease) in deferred income taxes
liabilities (130,888)
Payments of capital leases 464,704
Net cash provided by (used in) operating activities 21,253,852
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended December 31, 2008
2008 Q4
USD
Cash flows from investing activities:
Capital expenditures (1,654,279)
Loss from trust investment (77,406)
Payment of purchase of subsidiaries (1,386,033)
Proceeds from disposal of fixed assets 13,696
Payments from disposal of a subsidiary (296,344)
Net cash provided by (used in)
investing activities (3,400,366)
Cash flows from financing activities:
Payment of capital leases (305,040)
Proceeds from bank borrowings 2,926,287
Repayments of bank borrowings (2,926,287)
Dividends paid to ex-owners (1,200,000)
Net cash provided by financing activities (1,505,040)
Net increase in cash and cash equivalents 16,348,446
Cash at beginning of period 18,730,572
Cash at end of period 35,079,018
For more information, please contact:
Ms. Rebecca Alexander
Tel. +1-914-613-3648
+86-10-5913-7998
Email: ralexander@yuchengtech.com
