HONG KONG, Feb. 11 /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, 2009, which is the third quarter of its fiscal year ending March 31, 2010.
FINANCIAL HIGHLIGHTS
-- Third quarter total revenues of US$54.7 million, an increase of 66.2%
Year-on-Year;
-- Third quarter Adjusted(1) Operating Income of US$29.3 million, an
increase of 69.3% Year-on-Year;
-- Third quarter Adjusted Net Income of US$29.3 million, which includes an
income tax benefit of US$4.0 million. Excluding the income tax benefit
of US$4.0 million Adjusted Net Income would have increased 53.1%
Year-on-Year;
-- Third quarter Adjusted Diluted Earnings Per Share of US$0.53, which
includes an income tax benefit of US$0.07 per share. Excluding the
income tax benefit of US$0.07 Per Share, Adjusted Diluted Earnings Per
Share would have been US$0.46, an increase of 43.8% Year-on-Year;
-- Cash flow from operations was US$39.2 million for the third quarter
and US$50.1 million for the first nine months;
-- Excluding Giantstone, full year 2010 revenue guidance increased to
US$166.0 million from previous guidance of US$158.0 million, and
Adjusted Diluted Earnings Per Share guidance increased from previous
guidance of US$1.29 per share to US$1.39 per share, which includes
US$0.07 per share from an income tax benefit recorded in Q3 2010.
(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.
"I'm pleased to report that on the back of solid execution from our management and employees, once again our third quarter financial results exceeded our top and bottom line guidance. We see ongoing strong demand from our customers that execute on their long-term IT development plans irrespective of short-term changes in macroeconomic factors. Based on our sales pipeline and ongoing discussions with customers about their IT spending plans, Longtop's growth prospects remain strong for fiscal 2011. I believe Longtop's competitive position is strengthening and we are taking market share from our competitors," commented Weizhou Lian, CEO of Longtop. "Furthermore, this quarter's results underscore the successful integration of Sysnet with insurance being our fastest growing customer segment. I believe the recent acquisition of Giantstone, a leading core banking solution provider in China will offer us new growth opportunities."
FISCAL THIRD QUARTER DETAILED FINANCIAL RESULTS
Revenue
2009 Q3 and 2010 Q3 Revenue - US$000s
Three months ended Nine months ended
December December % Change December December % Change
31, 2008 31, 2009 31, 2008 31, 2009
Software
Development $28,857 $46,397 60.8% $68,509 $108,109 57.8%
Other Services
$4,041 $8,267 104.6% $11,905 $17,882 50.2%
Total Revenue $32,898 $54,664 66.2% $80,414 $125,991 56.7%
Total revenues for the quarter ended December 31, 2009, were US$54.7 million, an increase of 66.2% year-on-year (YoY) from US$32.9 million in the corresponding year ago period, and exceeded company guidance of US$48.5 million. Software development revenues of US$46.4 million increased YoY by 60.8% and exceeded Company guidance of US$42.7 million.
Total revenues for the nine months ended December 31, 2009, were US$126.0 million, an increase of 56.7% YoY from US$80.4 million in the corresponding year ago period. Software development revenues, which were 85.8% of total revenues for the nine months ended December 31, 2009, amounted to US$108.1 million, a YoY increase of 57.8%. Excluding revenue from Sysnet, total revenue for the three and nine months ended December 31, 2009, would have increased by 45.5% and 44.9 % respectively.
Software Development Revenue by customer type - US$000s
Three months ended Nine months ended
December December % Change December December % Change
31, 2008 31, 2009 31, 2008 31, 2009
Big Four Banks 13,000 18,464 42.0% 34,028 47,272 38.9%
Other Banks 11,177 18,106 62.0% 25,099 39,980 59.3%
Insurance 3,699 8,309 124.6% 6,868 16,195 135.8%
Enterprises 981 1,518 54.7% 2,514 4,662 85.4%
Total 28,857 46,397 60.8% 68,509 108,109 57.8%
Software development revenue from the Big Four Banks was US$18.5 million in the third quarter, an increase of 42.0% YoY, and US$47.3 million for the nine months ended December 31, 2009, an increase of 38.9% YoY. Big Four Banks accounted for 43.7% of software development revenues for the nine months ended December 31, 2009, as compared to 49.7% in the corresponding year ago period.
Software development revenue from Other Banks was US$18.1 million in the third quarter, a YoY increase of 62.0%, and US$40.0 million for the nine months ended December 31, 2009, an increase of 59.3% YoY. Other Banks accounted for 37.0% of software development revenues for the nine months ended December 31, 2009, as compared to 36.6% in the corresponding year ago period.
Software development revenue from Insurance was US$8.3 million in the third quarter, a YoY increase of 124.6% and US$16.2 million for the nine months ended December 31, 2009, an increase of 135.8% YoY. Insurance accounted for 15.0% of software development revenues in the nine months ended December 31, 2009. Sysnet, a leading IT insurance services provider acquired by Longtop in Q1 2010, contributed US$5.2 million in software development revenue for the nine months ended December 31, 2009, of which $3.3 million was recorded in Q3 2010.
Software development revenue from Enterprises was US$1.5 million and US$4.7 million for the three and nine months ended December 31, 2009, a YoY increase of 54.7% and 85.4% respectively.
Other services revenue increased by 104.6% YoY in the third quarter to US$8.3 million primarily due to a US$3.1 million contribution from Sysnet's system integration business. Sysnet's other services revenue was US$4.2 million from the acquisition date to December 31, 2009.
Gross Margins
Three months ended Nine months ended
December December Change December December Change
(Decrease) (Decrease)
31, 2008 31, 2009 31, 2008 31, 2009
Adjusted Software
Development 76.4% 75.1% (1.3%) 74.2% 73.1% (1.1%)
Gross Margin %
Adjusted Other
Services Gross 33.8% 50.6% 16.8% 51.9% 40.3% (11.6%)
Margin %
Adjusted Total Gross
Margin % 71.2% 71.4% 0.2% 70.9% 68.4% (2.5%)
Adjusted Total Gross Margin was 71.4% and 68.4% for the three and nine months ended December 31, 2009, as compared to 71.2% and 70.9% in the corresponding year-ago periods. Approximately one percentage point of the 2.5% YoY decline in Adjusted Total Gross Margin for the nine months ended December 31, 2009, was due to a decline in Adjusted Software Development Gross Margin associated with: (i) the inclusion of Sysnet, which has lower gross margins than Longtop, (ii) Longtop is investing in its software development consulting and professional services business which has lower incremental gross margins than Longtop's existing Adjusted Software Development Gross Margin, and (iii) in order to meet customer requirements a larger percentage of the workforce are being located in higher cost centers such as Beijing. The remaining 1.5 percentage point decline in Adjusted Total Gross Margin for the nine months ended December 31, 2009 was primarily attributable to a gross margin reduction of ATM maintenance and system integration business lines which are included as Other Services. Full year 2010 Adjusted Total Gross Margin is expected to be approximately 67%, equal to the Company's previous guidance.
Operating Expenses
Three months ended Nine months ended
December December % December December %
31, 2008 31, 2009 Change 31, 2008 31, 2009 Change
Adjusted Operating
Expenses - US$000s 6,113 9,720 59.0% 15,119 24,600 62.7%
Adjusted Operating
Expenses -
% of revenue 18.6% 17.7% 18.8% 19.6%
Adjusted Operating Expenses were 19.6% of revenue for the nine months ended December 31, 2009, which is in line with full year Company guidance of 20.0%. Adjusted Operating Expenses increased by 62.7% YoY in the nine months ended December 31, 2009, which was slightly higher than the YoY software development revenue growth of 57.8% primarily due to the inclusion of Sysnet, which has lower operating margins than Longtop.
Operating Income and Net Income
Three months ended Nine months ended
December December % December December %
Change Change
31, 2008 31, 2009 31, 2008 31, 2009
Adjusted Operating
Income - US$000s 17,299 29,288 69.3% 41,923 61,613 47.0%
Adjusted Operating
Income - % of revenue 52.6% 53.6% 52.1% 48.9%
Adjusted Operating Income of US$29.3 million for the third quarter exceeded company guidance of US$26.0 million and increased YoY by 69.3%. Adjusted Operating Income of US$61.6 million for the nine months ended December 31, 2009, increased 47.0% YoY. Adjusted Operating Margin for the nine months ended December 31, 2009, of 48.9% was lower than the corresponding period in fiscal 2009 due primarily to the decline in Adjusted Total Gross Margin.
Net Income
Three months ended Nine months ended
December December % Change December December % Change
31, 2008 31, 2009 31, 2008 31, 2009
Adjusted Net
Income - US$000s 16,532 29,313 77.3% 40,597 61,431 51.3%
Adjusted Net
income per
Diluted Share 0.32 0.53 65.6% 0.78 1.14 46.2%
Adjusted Net
Income - % of
revenue 50.3% 53.6% 50.5% 48.8%
US GAAP Net
Income - US$000s 14,356 25,807 79.8% 34,640 53,100 53.3%
US GAAP Net income
per Diluted Share 0.28 0.46 64.3% 0.66 0.98 48.5%
US GAAP Net Income
- % of revenue 43.6% 47.2% 43.1% 42.1%
Reconciliation between US GAAP Net Income and Adjusted Net Income
Three months ended Nine months ended
December December % Change December December % Change
31, 2008 31, 2009 31, 2008 31, 2009
Adjusted Net
Income - US$000s $16,532 $29,313 77.3% $40,597 $61,431 51.3%
Stock compensation $1,463 $2,196 50.1% $4,205 $5,199 23.6%
Amortization of
acquired intangible
assets $661 $960 45.2% $1,643 $2,602 58.4%
Amortization of
acquired deferred
compensation $52 $90 73.1% $109 $270 147.7%
Acquisition related
expenses $-- $260 $-- $260
Sub-total $2,176 $3,506 61.1% $5,957 $8,331 39.9%
US GAAP Net Income $14,356 $25,807 79.8% $34,640 $53,100 53.3%
US GAAP and Adjusted Net Income for the quarter ended December 31, 2009, includes US$4.0 million (US$0.07 per fully diluted share)for an income tax benefit ("Q3 2010 Income Tax Benefit") recorded in Q3 2010 associated with Longtop's qualification as a Key Software Company for the 2009 calendar year. Excluding the US$4.0 million Q3 2010 Income Tax Benefit, Adjusted Net Income would have increased 53.1% as compared to Adjusted Net Income of US$16.5 million in the corresponding year ago period, and exceeded Company guidance of US$23.5 million and US$0.43 per fully diluted share. US GAAP net income for the quarter ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit, would have increased 51.9% as compared to US GAAP net income of US$14.4 million in the corresponding year ago period.
Adjusted Net Income for the nine months ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit (US$0.07 per fully diluted share), would have increased 41.5% as compared to Adjusted Net Income of US$40.6 million in the corresponding year ago period. US GAAP net income for the nine months ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit (US$0.07 per fully diluted share), would have increased 41.7% as compared to US GAAP net income of US$34.6 million in the corresponding year ago period.
Operating cash flow was US$39.2 million for the Third quarter, and US$50.1 million for the nine months ended December 31, 2009, an increase of 46.8% YoY.
Unrestricted cash balances at December 31, 2009 less short-term borrowings, were US$362.5 million.
Commenting on the results, Derek Palaschuk, CFO of Longtop, said: "In the third quarter revenue and Adjusted Net Income once more substantially exceeded guidance. A robust third quarter cash flow from operations of US$39.2 million and US$50.1 million for the first nine months together with the proceeds from the November 2009 secondary offering will allow us to continue to invest intelligently in our existing operations and grasp further consolidation opportunities through acquisitions that will help extend our leading position in China's financial technology industry."
BUSINESS OUTLOOK
Longtop anticipates for the quarter and ending March 31, 2010, excluding Giantstone:
i) Total revenues of US$40.0 million, representing an increase of 54.4% YoY from revenues of US$25.9 million in the corresponding year ago period. Software development revenues are expected to be US$34.0 million, a YoY increase of 61.1% from US$21.1 million in the corresponding year ago period.
ii) Adjusted Operating Income of US$16.0 million, representing an increase of 50.9% YoY from Adjusted Operating Income of US$10.6 million in the corresponding year ago period.
iii) Adjusted Net Income of US$15.5 million, representing an increase of40.9% YoY from Adjusted Net Income of US$11.0 million in the corresponding year ago period.
iv) Adjusted Diluted Earnings Per Share of US$0.26, representing an increase of 23.8% YoY from Adjusted Diluted Earnings Per Share of US$0.21 in the corresponding year ago period. .
Longtop anticipates for its fiscal year ending March 31, 2010, excluding Giantstone:
i) Total revenues of US$166.0 million, representing an increase of 56.2% YoY from revenues of US$106.3 million in fiscal 2009. Software development revenues are expected to be US$142.0 million, a YoY increase of 58.5% from US$89.6 million in fiscal 2009;
ii) Adjusted Operating Income of US$77.5 million, an increase of 47.6% YoY from Adjusted Operating Income of US$52.5 million in fiscal 2009.
iii) Adjusted Net Income of US$77.0 million, an increase of 49.2% YoY from Adjusted Net Income of US$51.6 million in fiscal 2009. Excluding the Q3 2010 Income Tax Benefit of US$4.0 million, Adjusted Net Income would have increased 41.5% YoY;
iv) Adjusted Diluted Earnings Per Share of US$1.39, an increase of 41.8% from Adjusted Diluted Earnings Per Share of US$0.98 in fiscal 2009. Excluding the Q3 2010 Income Tax Benefit of US$0.07 per fully diluted share, Adjusted Diluted Earnings per Share would have increased 34.7% YoY.
CONFERENCE CALL AND WEBCAST
Longtop's senior management team will host a conference call and audio web cast at 7:30 PM Eastern Time on February 10, 2010 (or 4:30 PM U.S. Pacific Time on February 10, 2010, and 8:30 AM Beijing/Hong Kong time on February 11, 2010). The conference call will last for approximately one hour.
The dial-in numbers for the conference call are as follows:
U.S. Toll Free: 1866 549 1292 (back-up number: +852 3005 2050)
China Toll Free: 400 681 6949 (back-up number: +852 3005 2050)
Hong Kong and International: +852 3005 2050.
Passcode: 765115#
A live and archived web cast of this call will be available on Longtop's website at http://en.longtop.com/ .
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 stock-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 Total 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, (3) acquisition related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties which would have been included as a cost of acquisition under Accounting Standards Codification (ASC) 805, "Business Combinations" (formerly FASB Statement No. 141 (revised 2007), "Business Combinations"; (4) post acquisition adjustments to the fair value of contingent consideration which would have been included as a cost of acquisition under ASC 805 or (5) 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 if applicable: (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. Although share-based compensation is a key incentive offered to our employees and especially our senior management, 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, 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. If we had included share-based compensation expenses in our Non-GAAP Adjusted Net Income, Adjusted Net Income would have been US$5.2 million lower or US$56.2 million for the nine months ended December 31,2009 and our Adjusted Net Income margin would have been 4.0% lower.
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.
Pursuant to ASC 805 which became effective for business combinations made by us whose acquisition date is on or after April 1, 2009, acquisition-related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties are required to be recorded as an operating expense when incurred. These acquisition-related expenses are not related to the performance of our business lines, are inconsistent in amount and frequency and are significantly affected by the timing and size of our acquisitions
Pursuant to ASC 805, as of the acquisition date we are required to estimate and record the fair value of contingent acquisition consideration. Generally contingent consideration is re-measured at fair value in each reporting period with changes in fair value recognized in earnings. If the estimated contingency is settled for a different amount than we have recorded at the time of the acquisition, the difference would be recorded in our Consolidated Statement of Operations. The contingent acquisition consideration is not related to the performance of our business lines, is inconsistent in amount and frequency, and is significantly affected by the timing and size of our acquisitions.
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, including those with respect to our anticipated operating results for the quarter ended December 31, 2009 and the fiscal year ended March 31, 2010, efforts taken to improve efficiency, strengthen management, manage the Company's growth and the Company's competitive position. 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 growth of the financial services industry in China; the amount and seasonality of IT spending by banks and other financial services companies; competition and potential pricing pressures; our revenue growth and solution and service mix; our ability to successfully develop, introduce and market new solutions and services; our ability to effectively manage our operating costs and expenses; our reliance on a limited number of customers that account for a high percentage of our revenues; a possible future shortage or limited availability of employees; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; the outbreak of health epidemics; the planned relocation of our headquarters; People's Republic of China, or PRC, regulatory changes and interpretations; 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 and year ended September 30, 2009, 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 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 the financial services institutions in China. Longtop is the highest ranked Chinese financial technology provider on the Global FinTech 100 survey of top technology partners to the financial services industry. Independent research firm IDC has also named Longtop the No.1 market share leader in China's Banking IT solution market and the No.2 market share leader in China's Insurance IT solution market in calendar year 2008. Headquartered in Beijing, Longtop has six solution delivery centers, three research and development centers and 95 ATM service centers located in 27 out of 31 provinces in China.
For more information, please visit: http://en.longtop.com/ .
For more information, please contact:
For Investors:
Longtop Financial Technologies Limited
Charles Zhang, CFA
Email: ir@longtop.com
Phone: +86-10-8421-7758
For Media:
IR Inside BV
Caroline Straathof
Email: caroline.straathof@irinside.com
Phone: +31-6-5462-4301
CONSOLIDATED BALANCE SHEETS
March 31, 2009 December 31, 2009
(In U.S. dollar thousands, except
share and per share data)
Assets
Current assets:
Cash and cash equivalents $238,295 $389,699
Restricted cash 463 3,745
Accounts receivable, net 29,861 87,625
Inventories 4,982 5,864
Amounts due from related parties 682 681
Deferred tax assets 979 1,449
Other current assets 4,712 12,549
Total current assets 279,974 501,612
Fixed assets, net 14,858 26,468
Prepaid land use right 5,167 5,090
Intangible assets, net 11,526 27,041
Goodwill 24,837 35,177
Deferred tax assets 1,479 1,479
Other assets 632 17,933
Total assets $338,473 $614,800
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $486 $27,183
Accounts payable 3,299 22,283
Deferred revenue 16,010 37,240
Amounts due to related parties 17 110
Deferred tax liabilities 867 1,064
Accrued and other current
liabilities 23,810 37,892
Total current liabilities 44,489 125,772
Long-term liabilities:
Obligations under capital leases,
net of current portion 98 --
Deferred tax liabilities 1,242 3,943
Other non-current liabilities 286 3,872
Total liabilities 46,115 133,587
Shareholders' equity:
Ordinary shares $0.01 par value
(1,500,000,000 shares authorized,
51,036,816 and 56,164,938 shares
issued and outstanding as of March
31, 2009 and December 31, 2009,
respectively) $510 $562
Additional paid-in capital 243,194 378,583
Retained earnings 29,451 82,551
Accumulated other comprehensive
income 19,203 19,517
Total shareholders' equity 292,358 481,213
Total liabilities and shareholders'
equity $338,473 $614,800
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
December December December December
31, 2008 31, 2009 31, 2008 31, 2009
(In U.S. dollar thousands, except share and
per share data)
Revenues:
Software development $28,857 $46,397 $68,509 $108,109
Other services 4,041 8,267 11,905 17,882
Total revenues 32,898 54,664 80,414 125,991
Cost of revenues:
Software development 7,346 12,756 19,116 31,900
Other services 3,134 4,389 6,880 11,530
Total cost of revenues 10,480 17,145 25,996 43,430
Gross profit 22,418 37,519 54,418 82,561
Operating expenses:
Research and development 1,318 2,549 3,631 6,028
Sales and marketing 3,393 5,549 7,801 14,112
General and administrative 2,584 3,639 7,020 9,139
Total operating expenses 7,295 11,737 18,452 29,279
Income from operations 15,123 25,782 35,966 53,282
Other income (expenses):
Interest income 922 1,096 4,438 3,096
Interest expense (13) (336) (305) (530)
Other income (expense), net 3 8 (292) 313
Total other income 912 768 3,841 2,879
Income before income tax
expense 16,035 26,550 39,807 56,161
Income tax expense (1,679) (743) (5,167) (3,061)
Net income 14,356 25,807 34,640 53,100
Net income per share:
Basic ordinary share $0.28 $0.48 $0.69 $1.02
Diluted $0.28 $0.46 $0.66 $0.98
Shares used in computation
of net income per share:
Basic ordinary share 50,590,358 53,597,293 50,467,808 52,083,391
Diluted 52,073,161 55,597,313 52,328,310 54,070,186
Includes share-based
compensation related to:
Cost of revenues software
development $432 $740 $1,211 $1,663
Cost of revenues other
services 63 146 185 284
General and administrative
expenses 477 443 1,422 1,302
Sales and marketing
expenses 389 717 1,102 1,597
Research and development
expenses 102 150 285 353
UNAUDITED CONSOLIDATED ADJUSTED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
December December December December
31, 2008 31, 2009 31, 2008 31, 2009
(In U.S. dollar thousands, except share and per
share data)
Revenues:
Software development 28,857 46,397 68,509 108,109
Other services 4,041 8,267 11,905 17,882
Total revenues 32,898 54,664 80,414 125,991
Cost of revenues:
Software development 7,346 12,756 19,116 31,900
Other services 3,134 4,389 6,880 11,530
Total cost of
revenues 10,480 17,145 25,996 43,430
Cost of revenue adjustments:
Share-based compensation
software development (432) (740) (1,211) (1,663)
Share-based compensation
other services (63) (146) (185) (284)
Amortization of acquired
intangible assets other
services (363) (126) (895) (470)
Amortization of acquired
intangible assets software
development (84) (387) (224) (965)
Amortization of acquired
deferred compensation
other services (34) (33) (73) (99)
Amortization of acquired
deferred compensation
software development (18) (57) (36) (171)
Adjusted cost of revenues:
Software development 6,812 11,572 17,645 29,101
Other services 2,674 4,084 5,727 10,677
Total adjusted cost
of revenues 9,486 15,656 23,372 39,778
Gross profit 22,418 37,519 54,418 82,561
Adjusted gross profit 23,412 39,008 57,042 86,213
Operating expenses:
Research and development 1,318 2,549 3,631 6,028
Sales and marketing 3,393 5,549 7,801 14,112
General and administrative 2,584 3,639 7,020 9,139
Total operating expenses 7,295 11,737 18,452 29,279
Operating expense adjustments:
Share-based compensation
research and development (102) (150) (285) (353)
Share-based compensation
sales and marketing (389) (717) (1,102) (1,597)
Share-based compensation
general and administrative (477) (443) (1,422) (1,302)
Amortization of acquired
intangible assets sales and
marketing (152) (378) (395) (968)
Amortization of acquired
intangible assets general
and administrative (62) (69) (129) (199)
Acquisition related expenses
general and administrative -- (260) -- (260)
Adjusted operating expenses:
Research and development 1,216 2,399 3,346 5,675
Sales and marketing 2,852 4,454 6,304 11,547
General and administrative 2,045 2,867 5,469 7,378
Total adjusted
operating expenses 6,113 9,720 15,119 24,600
Income from operations 15,123 25,782 35,966 53,282
Adjusted income from
operations 17,299 29,288 41,923 61,613
Other income (expenses):
Interest income 922 1,096 4,438 3,096
Interest expense (13) (336) (305) (530)
Other (expenses)
income, net 3 8 (292) 313
Total other income 912 768 3,841 2,879
Income before income tax
expense 16,035 26,550 39,807 56,161
Adjusted income before
income tax expense 18,211 30,056 45,764 64,492
Income tax expense (1,679) (743) (5,167) (3,061)
Net income 14,356 25,807 34,640 53,100
Adjusted net income 16,532 29,313 40,597 61,431
Net income per share:
Basic ordinary share $0.28 $0.48 $0.69 $1.02
Diluted $0.28 $0.46 $0.66 $0.98
Adjusted net income per
share:
Basic ordinary share $0.33 $0.55 $0.80 $1.18
Diluted $0.32 $0.53 $0.78 $1.14
Shares used in computation
of net income and
adjusted net income
per share:
Basic ordinary share 50,590,358 53,597,293 50,467,808 52,083,391
Diluted 52,073,161 55,597,313 52,328,310 54,070,186
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended
December December December December
31, 2008 31, 2009 31, 2008 31, 2009
(In U.S. dollar thousands, except share
and per share data)
Cash flows from operating
activities:
Net income $14,356 $25,807 $34,640 $53,100
Adjustments to reconcile net
income to net cash provided by
operating activities:
Share-based compensation 1,463 2,196 4,205 5,198
Depreciation of fixed assets 791 1,253 2,109 2,675
Amortization of intangible assets 716 1,103 1,789 2,920
Provision for doubtful accounts 55 268 101 299
Loss on disposal of fixed assets 165 26 207 31
Deferred income taxes (1,836) (433) (965) (467)
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable 3,783 (31,339) (10,681) (57,595)
Inventories 408 (1,343) (521) (799)
Other current assets 1,236 (474) (1,118) (7,700)
Amounts due from related parties -- 587 -- 3
Prepaid land use right 82 24 (5,193) 79
Other non-current assets 104 91 (575) 273
Other non-current liabilities 6 43 (188) 104
Accounts payable (9,337) 14,409 (1,075) 17,117
Deferred revenue 5,011 18,238 12,043 21,214
Amounts due to related parties -- 33 -- 93
Accrued and other current
liabilities 1,836 8,671 (654) 13,535
Net cash provided by operating
activities 18,839 39,160 34,124 50,080
Cash flows from investing
activities:
Change in restricted cash 9,753 (3,209) 5,560 (3,282)
Proceeds from sale of fixed
assets 11 -- 225 --
Purchase of fixed assets (1,005) (3,066) (7,766) (11,897)
Purchase of intangible assets -- (280) (3) (502)
Long term investment -- -- (3,911) --
Acquisitions, net of cash acquired (19) (548) (1,397) (17,327)
Deposit made on acquisition -- (17,574) -- (17,574)
Net cash used in (provided by)
investing activities 8,740 (24,677) (7,292) (50,582)
Cash flows from financing
activities:
Proceeds from short-term
borrowings -- 22,556 -- 26,947
Net proceeds from follow-on
offering -- 126,648 -- 126,648
Stock options exercised 425 522 1,203 3,273
Repayments of capital leases
obligations (139) (84) (721) (352)
Repayment of acquisition related
liabilities -- (896) -- (4,845)
Amounts due to related parties -- -- (54) --
Net cash provided by financing
activities 286 148,746 428 151,671
Effect of exchange rates
differences (429) 40 4,646 235
Net increase in cash and cash
equivalents 27,436 163,269 31,906 151,404
Cash and cash equivalents,
beginning of period 208,996 226,430 204,526 238,295
Cash and cash equivalents, end of
period $236,432 $389,699 $236,432 $389,699
Supplemental disclosure of cash
flow information:
Income taxes paid $3,515 $3,760 $6,326 $3,854
Interest paid $13 $261 $308 $336
Supplemental disclosure of non-
cash investing and financing
activities:
Fixed assets purchased under
capital leases $-- $-- $655 $--
