HONG KONG, May 24 /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 fiscal fourth quarter and fiscal year ended March 31, 2010.
FINANCIAL HIGHLIGHTS
-- Fourth quarter total revenues of US$43.1 million, an increase of 66.4%
Year-on-Year;
-- Fourth quarter Adjusted(1) Operating Income of US$17.5 million, an
increase of 65.2% Year-on-Year;
-- Fourth quarter Adjusted Net Income of US$16.3 million, an increase of
48.2% Year-on-Year;
-- Fourth quarter Adjusted Diluted Earnings Per Share of US$0.28, an
increase of 33.3% Year-on-Year;
-- Fourth quarter US GAAP net income per diluted share of US$0.10, a
decrease of 41.2% Year-on-Year;
-- Full year total revenues of US$169.1 million, up 59.0% Year-on-Year;
-- Full year Adjusted Operating Income of US$79.1 million, up 50.6% Year-
on-Year;
-- Full year Adjusted Net Income of US$77.7 million, which includes an
income tax benefit of US$3.8 million. Excluding the tax benefit,
Adjusted Net Income would have increased 43.2%;
-- Full year Adjusted Diluted Earnings Per Share of US$1.41, which
includes an income tax benefit of US$0.07 per share. Excluding the tax
benefit, Adjusted Diluted Earnings Per Share would have increased 36.7%;
-- Full year US GAAP net income per diluted share of US$1.07, an increase
of 28.9% Year-on-Year;
-- Cash flow from operations was US$13.2 million for the fourth quarter
and US$62.9 million for the fiscal year 2010.
"I am very pleased to report that we have concluded fiscal 2010 with another quarter of solid results. We look back at a year in which our business flourished due to significant organic business expansion in the financial IT industry, and the synergies of the Sysnet acquisition that further boost our presence in the insurance IT solution market. This quarter's results once more indicate that Longtop's business is based on the indispensable and recurring nature of our software and solutions," commented Weizhou Lian, CEO of Longtop. "Our outlook for 2011 is strong based on our sound business fundamentals and feedback from our customers. With the acquisition of Giantstone, we feel we are better positioned to capitalize on the long-term growth opportunity in China's financial technology market."
(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".
FISCAL FOURTH QUARTER AND FULL YEAR DETAILED FINANCIAL RESULTS
Revenue
Q4 and Fiscal Year 2010 Revenue - US$000s
Three months ended Twelve months ended
March 31, March 31, % Change March 31, March 31, % Change
--------- --------- -------- --------- --------- --------
2009 2010 2009 2010
---- ---- ---- ----
Software
Development $21,050 $37,091 76.2% $89,559 $145,200 62.1%
Other Services $4,832 $5,975 23.7% $16,737 $23,857 42.5%
------ ------ ------- -------
Total Revenue $25,882 $43,066 66.4% $106,296 $169,057 59.0%
------- ------- -------- --------
Total revenues for the quarter ended March 31, 2010, were US$43.1 million, an increase of 66.4% year-on-year (YoY) from US$25.9 million in the corresponding year ago period, and exceeded Company guidance of US$40.0 million. Excluding revenue from Sysnet, a leading IT insurance services provider acquired by Longtop in Q1 2010, total revenues for the fourth quarter would have increased by 56.1%. Software development revenues of US$37.1 million contributed 86.1% of total revenues, a YoY increase of 76.2%, and exceeded Company guidance of US$34.0 million. Excluding software development revenue from Sysnet, total software development revenues for the fourth quarter would have increased by 65.2%.
Total revenues for the fiscal year ended March 31, 2010, were US$169.1 million, an increase of 59.0% YoY from US$106.3 million in the corresponding year ago period. Excluding revenue from Sysnet, total revenues for the fiscal year ended March 31, 2010, would have increased by 46.9%. Software development revenues, which were 85.9% of total revenues for the fiscal year ended March 31, 2010, amounted to US$145.2 million, a YoY increase of 62.1%. Excluding software development revenue from Sysnet, total software development revenues for the fiscal year ended March 31, 2010, would have increased by 53.7%. Revenue for the quarter and fiscal year ended March 31, 2010, from Giantstone, a leading provider of core banking solutions, which was acquired in January 2010 was nil. The Company expects a revenue contribution from Giantstone of US$4.0 million in the first quarter of fiscal 2011 and US$15 million for fiscal 2011.
Software Development Revenue by customer type - US$000s
Three months ended Twelve months ended
March 31, March 31, % Change March 31, March 31, % Change
2009 2010 -------- 2009 2010 --------
---- ---- ---- ----
Big Four
Banks $7,974 $15,820 98.4% $42,002 $63,092 50.2%
Other Banks $9,464 $14,188 49.9% $34,563 $54,168 56.7%
Insurance $2,986 $5,635 88.7% $9,854 $21,830 121.5%
Enterprises $626 $1,448 131.3% $3,140 $6,110 94.6%
---- ------ ------ ------
Total $21,050 $37,091 76.2% $89,559 $145,200 62.1%
------- ------- ------- --------
Software development revenue from the Big Four Banks in the fourth quarter was US$15.8 million, an increase of 98.4% YoY. Software development revenue from the Big Four Banks for the fiscal year ended March 31, 2010, was US$63.1 million, an increase of 50.2% YoY due to strong demand from the Big Four customers. Big Four Banks accounted for 43.5% of software development revenues for the year ended March 31, 2010, as compared to 46.9% in the corresponding year ago period.
Software development revenue from Other Banks in the fourth quarter was US$14.2 million, a YoY increase of 49.9%. Software development revenue from Other Banks for the fiscal year ended March 31, 2010, was US$54.2 million, an increase of 56.7% YoY due largely to more revenue per existing Other Bank customer. Other Banks accounted for 37.3% of software development revenues for the fiscal year ended March 31, 2010, as compared to 38.6% in the corresponding year ago period.
Software development revenue from Insurance was US$5.6 million in the fourth quarter, a YoY increase of 88.7% and US$21.8 million for the fiscal year ended March 31, 2010, an increase of 121.5% YoY. Insurance accounted for 15.0% of software development revenues for the fiscal year ended March 31, 2010. Sysnet contributed US$7.5 million in software development revenue for the fiscal year ended March 31, 2010, of which $2.3 million was recorded in Q4 2010. Excluding insurance related software development revenue from Sysnet, insurance revenue for the fourth quarter and fiscal year ended March 31, 2010, would have increased by 23.7% and 59.9% respectively.
Software development revenue from Enterprises was US$1.4 million and US$6.1 million for the three and twelve months ended March 31, 2010, a YoY increase of 131.3% and 94.6% respectively.
Gross Margins
Gross Margin percentage
Three months ended Twelve months ended
March March Change March March Change
31, 31, (Decrease) 31, 31, (Decrease)
2009 2010 ---------- 2009 2010 ----------
---- ---- ---- ----
US GAAP Software
Development
Gross 65.9% 62.3% (3.6%) 70.6% 68.4% (2.2%)
Margin %
US GAAP Other
Services Gross 32.9% 0.7% (32.2%) 39.5% 26.8% (12.7%)
Margin %
US GAAP Total
Gross Margin % 59.7% 53.8% (5.9%) 65.7% 62.5% (3.2%)
Adjusted
Software
Development
Gross 68.6% 66.4% (2.2%) 72.9% 71.4% (1.5%)
Margin %
Adjusted Other
Services Gross
Margin % 42.0% 31.1% (10.9%) 49.0% 38.0% (11.0%)
Adjusted Total
Gross Margin % 63.6% 61.5% (2.1%) 69.2% 66.7% (2.5%)
Adjusted Software Development Gross Margin for fiscal 2010 declined 150 basis points from fiscal 2009 to 71.4%. This slight decline was primarily due to the following factors: (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 historical Adjusted Software Development Gross Margin, (iii) in order to meet customer requirements a larger percentage of the workforce are being located in higher cost centers such as Beijing and (iv) cost of revenue associated with the Giantstone acquisition which closed in January 2010 without any corresponding revenue from Giantstone. Customized software solutions as a percentage of Software Development revenue was 64.2% in fiscal 2010 and basically unchanged from 65.1% in fiscal 2009. At March 31, 2010, Longtop had 2,492 software delivery staff including Giantstone, as compared to 1,310 at March 31, 2009.
Adjusted Other Services Gross Margin for fiscal 2010 declined to 38.0% from 49.0% in 2009 due primarily to a gross margin reduction from the ATM physical maintenance business.
Full year 2010 Adjusted Total Gross Margin of 66.7% was equal to the Company's previous guidance.
Operating Expenses
Operating Expenses
Three months ended
March 31, March 31, % Change
2009 2010 --------
---- ----
US GAAP Operating Expenses -
US$000s $7,040 $15,871 125.4%
US GAAP Operating Expenses -
% of revenue 27.2% 36.8%
Adjusted Operating Expenses -
US$000s $5,895 $9,025 53.1%
Adjusted Operating Expenses -
% of revenue 22.8% 20.9%
Twelve months ended
March 31, March 31, % Change
2009 2010 --------
---- ----
US GAAP Operating Expenses -
US$000s $25,492 $45,150 77.1%
US GAAP Operating Expenses -
% of revenue 24.0% 26.8%
Adjusted Operating Expenses -
US$000s $21,014 $33,625 60.0%
Adjusted Operating Expenses -
% of revenue 19.8% 19.9%
Adjusted Operating Expenses were 19.9% of revenue for the fiscal year ended March 31, 2010, which is in line with full year Company guidance of 20.0%. Adjusted Operating Expenses increased by 60.0% YoY in the fiscal year ended March 31, 2010, which was slightly lower than the YoY software development revenue growth of 62.1%.
Operating Income
Operating Income
Three months ended
% Change
March 31, March 31, (Decrease)
2009 2010 ----------
---- ----
US GAAP Operating Income -
US$000s $8,421 $7,280 (13.5%)
US GAAP Operating Income -%
of revenue 32.5% 16.9%
Adjusted Operating Income -
US$000s $10,572 $17,460 65.2%
Adjusted Operating Income -
% of revenue 40.8% 40.5%
Twelve months ended
March 31, March 31, % Change
2009 2010 --------
---- ----
US GAAP Operating Income -
US$000s $44,387 $60,562 36.4%
US GAAP Operating Income -%
of revenue 41.8% 35.8%
Adjusted Operating Income -
US$000s $52,495 $79,073 50.6%
Adjusted Operating Income -
% of revenue 49.4% 46.8%
Even with the inclusion of $1.1 million in operating losses from consolidating Giantstone, Adjusted Operating Income of US$17.5 million for the fourth quarter exceeded company guidance of US$16.0 million and increased YoY by 65.2%. Adjusted Operating Income of US$79.1 million for the fiscal year ended March 31, 2010, increased 50.6% YoY. Giantstone is expected to be accretive to operating income for fiscal year 2011.
Adjusted Operating Margin for the fiscal year ended March 31, 2010, of 46.8% was equal to Company guidance and lower than 49.4% in fiscal 2009 due to the decline in Adjusted Total Gross Margin.
Net Income
Net Income
Three months ended
% Change
March 31, March 31, (Decrease)
2009 2010 ----------
---- ----
US GAAP Net Income -
US$000s $8,832 $5,991 (32.2%)
US GAAP Net income per
Diluted Share $0.17 $0.10 (41.2%)
US GAAP Net Income -% of
revenue 34.1% 13.9%
Adjusted Net Income -
US$000s $10,983 $16,278 48.2%
Adjusted Net Income per
Diluted Share $0.21 $0.28 33.3%
Adjusted Net Income -% of
revenue 42.4% 37.8%
Twelve months ended
March 31, March 31, % Change
2009 2010 --------
---- ----
US GAAP Net Income -
US$000s $43,472 $59,091 35.9%
US GAAP Net income per
Diluted Share $0.83 $1.07 28.9%
US GAAP Net Income -% of
revenue 40.9% 35.0%
Adjusted Net Income -
US$000s $51,580 $77,709 50.7%
Adjusted Net Income per
Diluted Share $0.98 $1.41 43.9%
Adjusted Net Income -% of
revenue 48.5% 46.0%
Reconciliation between US GAAP Net Income and Adjusted Net Income
Three months ended Twelve months ended
March March % Change March March
31, 31, (Decrease) 31, 31, % Change
2009 2010 ---------- 2009 2010 --------
---- ---- ---- ----
Adjusted Net
Income $10,983 $16,278 48.2% $51,580 $77,709 50.7%
Stock
compensation $1,443 $2,482 72.0% $5,648 $7,681 36.0%
Amortization
of acquired
intangible $644 $1,590 146.9% $2,287 $4,192 83.3%
assets
Amortization
of acquired
deferred $64 $442 590.6% $173 $712 311.6%
compensation
from
acquisitions
Acquisition
related
expenses $- $743 $- $1,003
Impairment
of
Intangible
assets $- $2,494 $- $2,494
Impairment
of Goodwill $- $1,982 $- $1,982
Changes in
fair value
of purchase $- $554 $- $554
consideration
liability
Sub-total $2,151 $10,287 378.2% $8,108 $18,618 129.6%
------ ------- ------ -------
US GAAP Net
Income $8,832 $5,991 (32.2%) $43,472 $59,091 35.9%
------ ------ ------- -------
Adjusted Net Income for the quarter ended March 31, 2010, of US$16.3 million or US$0.28 per fully diluted share increased by 48.2% as compared to Adjusted Net Income of US$11.0 million in the corresponding year ago period, and exceeded Company Guidance for Adjusted Net Income of US$15.5 million and US$0.26 for Adjusted Diluted Earnings Per Share.
During the fourth quarter, Longtop recorded a total of $4.5 million for intangible assets and goodwill impairment charges related to an Other Services business acquired in fiscal 2009. US GAAP and Adjusted Net Income for the fiscal year ended March 31, 2010, includes US$3.8 million (US$0.07 per fully diluted share) for an income tax benefit recorded in Q3 2010 ("Q3 2010 Income Tax Benefit") associated with Longtop's qualification as a Key Software Company for the 2009 calendar year. Excluding the Q3 2010 Income Tax Benefit, Adjusted Net Income for the fiscal year ended March 31, 2010, would have increased 43.2% as compared to Adjusted Net Income of US$51.6 million in fiscal 2009. US GAAP net income for the fiscal year ended March 31, 2010, excluding the US$3.8 million Q3 2010 Income Tax Benefit, would have increased 27.1% as compared to US GAAP net income of US$43.5 million in the corresponding year ago period.
Operating cash flow was US$13.2 million and US$62.9 million for fourth quarter and fiscal year ended March 31, 2010.
Unrestricted cash balances at March 31, 2010, were US$331.9 million.
Commenting on the results, Derek Palaschuk, CFO of Longtop, said: "In the fourth quarter revenue once more substantially exceeded our previous guidance, demonstrating the continuing strong demand for Longtop solutions. Even with the inclusion of $1.1 million in operating losses from consolidating Giantstone, our operating and net income was still well above guidance. Our continuous efforts to further improve overall business execution were underscored by a strong cash flow from operations of $62.9 million for fiscal 2010. Looking ahead, our positive business momentum, stable margin structure and strong cash balance form a solid foundation to consolidate our leadership position in China's financial technology industry in fiscal 2011."
BUSINESS OUTLOOK
Longtop anticipates for the quarter ending June 30, 2010:
Total revenues of US$44.5 million, Adjusted Operating Income of US$18.0 million, Adjusted Net Income of US$16.1 million and Adjusted Diluted Earnings Per Share of US$0.28. Giantstone is expected to contribute $4.0 million of software development revenues, $1.4 million in Adjusted Operating Income, $1.1 million in Adjusted Net Income or $0.02 per diluted share.
Longtop anticipates for its fiscal year ending March 31, 2011:
Total revenues of US$225 million, Adjusted Operating Income of US$103.5 million, Adjusted Net Income of US$96.5 million and Adjusted Diluted Earnings Per Share of US$1.64. Giantstone is expected to contribute $15.0 million of software development revenues, $4.5 million in Adjusted Operating Income, $3.75 million in Adjusted Net Income or $0.06 per diluted share.
CONFERENCE CALL AND WEBCAST
Longtop's senior management team will host a conference call and audio web cast at 8:00 am US Eastern Time/ 5:00 am U.S. Pacific Time/ 8:00 pm Beijing/Hong Kong time on May 24, 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: 1 866 549 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 cost of revenues, operating expenses, net income and fully diluted 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 and charges for impairment 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 and intangible asset impairment, (3) acquisition related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties which would have, prior to April 1, 2009, been included as a cost of acquisition under GAAP; (4) post acquisition adjustments to the fair value of contingent consideration which would have, prior to April 1, 2009, been included as a cost of acquisition under GAAP 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 in fiscal 2010, Adjusted Net Income would have been US$7.7 million lower or US$70.0 million for the twelve months ended March 31, 2010, and our Adjusted Net Income margin would have been 4.5% lower.
Goodwill and intangible asset impairment and 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.
Prior to April 1, 2009, acquisition-related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties were capitalized as part of the cost of the acquisition. Subsequent to April 1, 2009, such costs 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.
Prior to April 1, 2009, contingent consideration was generally recorded as a additional purchase price when the contingencies resolved and the consideration became payable. Subsequent to April 1, 2009, we are required to estimate and record the fair value of contingent acquisition consideration as of the acquisition date. Contingent consideration is re-measured at fair value in each reporting period with changes in fair value recognized in earnings. The contingent acquisition consideration, 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 ending June 30, 2010 and fiscal year ending March 31, 2011, 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 March 31, 2010, 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/.
Contact us
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
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, March 31,
2009 2010
---- ----
(In U.S. dollar
thousands, except share
and per share data)
Assets
Current assets:
Cash and cash equivalents $238,295 $331,889
Restricted cash 463 8,904
Accounts receivable, net 29,861 65,581
Inventories 4,982 6,381
Amounts due from related parties 682 1,029
Deferred tax assets 979 250
Other current assets 4,712 11,066
----- ------
Total current assets 279,974 425,100
Fixed assets, net 14,858 26,343
Prepaid land use right 5,167 5,064
Intangible assets, net 11,526 45,676
Goodwill 24,837 98,789
Deferred tax assets 1,479 1,443
Other assets 632 3,334
--- -----
Total assets $338,473 $605,749
======== ========
Liabilities and shareholders' equity
Current liabilities:
Short-term borrowings $486 $169
Accounts payable 3,299 14,963
Deferred revenue 16,010 25,725
Amounts due to related parties 17 156
Deferred tax liabilities 867 995
Accrued and other current liabilities 23,810 44,380
------ ------
Total current liabilities 44,489 86,388
Long-term liabilities:
Obligations under capital leases, net of
current portion 98 -
Deferred tax liabilities 1,242 6,842
Other non-current liabilities 286 22,517
--- ------
Total liabilities 46,115 115,747
------ -------
Shareholders' equity:
Ordinary shares $0.01 par value
(1,500,000,000 shares authorized,
51,036,816 and 56,231,188 shares issued
and outstanding as of March 31, 2009 and
March 31, 2010, respectively) $510 $562
Additional paid-in capital 243,194 381,262
Retained earnings 29,451 88,542
Accumulated other comprehensive income 19,203 19,636
------ ------
Total shareholders' equity 292,358 490,002
------- -------
Total liabilities and shareholders'
equity $338,473 $605,749
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March March
31,2009 31,2010
-------- --------
(In U.S. dollar thousands, except share
and per share data)
----------------------------------------
Revenues:
Software
development $21,050 $37,091
Other services 4,832 5,975
----- -----
Total revenues 25,882 43,066
------
Cost of revenues:
Software
development 7,178 13,980
Other services 3,243 5,935
----- -----
Total cost of
revenues 10,421 19,915
------ ------
Gross profit 15,461 23,151
------ ------
Operating expenses:
Research and
development 1,541 2,191
Sales and marketing 3,160 6,854
General and
administrative 2,339 4,844
Impairment of
Goodwill - 1,982
--- -----
Total operating
expenses 7,040 15,871
----- ------
Income from
operations 8,421 7,280
----- -----
Other income
(expenses):
Interest income 1,206 1,219
Interest expense (247)
Other income
(expense), net 123 377
--- ---
Total other income 1,329 1,349
Income before
income tax 9,750 8,629
expense
Income tax expense (918) (2,638)
---- ------
Net income 8,832 5,991
===== =====
Net income per
share:
Basic ordinary
share $0.17 $0.11
Diluted $0.17 $0.10
Shares used in
computation
of net income per
share:
Basic ordinary
share 50,777,180 56,207,916
Diluted 52,488,337 58,201,217
Year Ended
March March
31,2009 31,2010
-------- --------
(In U.S. dollar thousands, except share
and per share data)
----------------------------------------
Revenues:
Software
development $89,559 $145,200
Other services 16,737 23,857
------ ------
Total revenues 106,296 169,057
------- -------
Cost of revenues:
Software
development 26,294 45,880
Other services 10,123 17,465
------ ------
Total cost of
revenues 36,417 63,345
------ ------
Gross profit 69,879 105,712
------ -------
Operating expenses:
Research and
development 5,172 8,219
Sales and marketing 10,961 20,966
General and
administrative 9,359 13,983
Impairment of
Goodwill - 1,982
--- -----
Total operating
expenses 25,492 45,150
------ ------
Income from
operations 44,387 60,562
------ ------
Other income
(expenses):
Interest income 5,644 4,315
Interest expense (305) (777)
Other income
(expense), net (169) 690
---- ---
Total other income 5,170 4,228
Income before
income tax 49,557 64,790
expense
Income tax expense (6,085) (5,699)
------ ------
Net income 43,472 59,091
====== ======
Net income per
share:
Basic ordinary
share $0.86 $1.11
Diluted $0.83 $1.07
Shares used in
computation
of net income per
share:
Basic ordinary
share 50,545,151 53,102,841
Diluted 52,368,317 55,174,468
The accompanying notes are an integral part of these consolidated
financial statements.
UNAUDITED CONSOLIDATED ADJUSTED STATEMENTS OF OPERATIONS
Three Three
Months Months
Ended Ended
------ ------
March 31, March 31,
--------- ---------
2009 2010
---- ----
(In U.S. dollar thousands, except share and
per share data)
--------------------------------------------
Revenues:
Software
development 21,050 37,091
Other services 4,832 5,975
Total revenues 25,882 43,066
------ ------
Cost of
revenues:
Software
development 7,178 13,980
Other services 3,243 5,935
Total cost of
revenues 10,421 19,915
------ ------
Cost of revenue
adjustments:
Share-based
compensation
software (438) (791)
development
Share-based
compensation
other (67) (144)
services
Amortization of
acquired
intangible (341) (87)
assets other
services
Amortization of
acquired
intangible (96) (391)
assets software
development
Amortization of
deferred
compensation (33) (33)
other services
Amortization of
deferred
compensation (31) (335)
software
development
Impairment of
Intangible
assets other - (1,553)
services
Adjusted cost
of revenues:
Software
development 6,613 12,463
Other services 2,802 4,118
----- -----
Total adjusted
cost of
revenues 9,415 16,581
-------------- ----- ------
Gross profit 15,461 23,151
------ ------
Adjusted gross
profit 16,467 26,485
-------------- ------ ------
Operating
expenses:
Research and
development 1,541 2,191
Sales and
marketing 3,160 6,854
General and
administrative 2,339 4,844
Impairment of
Goodwill - 1,982
---
Total operating
expenses 7,040 15,871
----- ------
Operating
expense
adjustments:
Share-based
compensation
research (100) (150)
and development
Share-based
compensation
sales and (389) (755)
marketing
Share-based
compensation
general and (449) (642)
administrative
Amortization of
acquired
intangible (150) (1,035)
assets sales
and marketing
Amortization of
acquired
intangible (57) (77)
assets general
and
administrative
Acquisition
related
expenses
general and - (743)
administrative
Amortization of
deferred
compensation - (37)
sales and
marketing
Amortization of
deferred
compensation - (37)
general and
administrative
Impairment of
Goodwill - (1,982)
Impairment of
intangible
assets general - (277)
and
administrative
Impairment of
intangible
assets sales - (664)
and marketing
Changes in fair
value of
purchase - (447)
consideration
liability
Adjusted
operating
expenses:
Research and
development 1,441 2,041
Sales and
marketing 2,621 4,363
General and
administrative 1,833 2,621
Impairment of
Goodwill - -
--- ---
Total adjusted
operating
expenses 5,895 9,025
-------------- ----- -----
Income from
operations 8,421 7,280
----- -----
Adjusted income
from
operations 10,572 17,460
--------------- ------ ------
Other income
(expenses):
Interest income 1,206 1,219
Interest
expense - (247)
Other
(expenses)
income, net 123 377
Total other
income 1,329 1,349
----- -----
Other income
adjustments:
Changes in fair
value of
purchase - 107
consideration
liability
Adjusted other
income
(expenses):
Interest income 1,206 1,219
Interest
expense - (140)
Other
(expenses)
income, net 123 377
--- ---
Total adjusted
other income 1,329 1,456
-------------- ----- -----
Income before
income tax
expense 9,750 8,629
----- -----
Adjusted income
before income
tax 11,901 18,916
expense ------ ------
-------
Income tax
expense (918) (2,638)
Net income 8,832 5,991
===== =====
Adjusted net
income 10,983 16,278
------------ ------ ------
Net income per
share:
Basic ordinary
share $0.17 $0.11
Diluted $0.17 $0.10
Adjusted net
income per
share:
Basic ordinary
share $0.22 $0.29
Diluted $0.21 $0.28
------- ----- -----
Shares used in
computation of
net income
and adjusted
net income per
share:
Basic ordinary
share 50,777,180 56,207,916
Diluted 52,488,337 58,201,217
Year Ended
----------
March 31, March 31,
--------- ---------
2009 2010
---- ----
(In U.S. dollar thousands, except share and
per share data)
--------------------------------------------
Revenues:
Software
development 89,559 145,200
Other services 16,737 23,857
Total revenues 106,296 169,057
------- -------
Cost of
revenues:
Software
development 26,294 45,880
Other services 10,123 17,465
Total cost of
revenues 36,417 63,345
------ ------
Cost of revenue
adjustments:
Share-based
compensation
software (1,649) (2,454)
development
Share-based
compensation
other (252) (428)
services
Amortization of
acquired
intangible (1,236) (557)
assets other
services
Amortization of
acquired
intangible (320) (1,356)
assets software
development
Amortization of
deferred
compensation (106) (132)
other services
Amortization of
deferred
compensation (67) (506)
software
development
Impairment of
Intangible
assets other - (1,553)
services
Adjusted cost
of revenues:
Software
development 24,258 41,564
Other services 8,529 14,795
----- ------
Total adjusted
cost of
revenues 32,787 56,359
-------------- ------ ------
Gross profit 69,879 105,712
------ -------
Adjusted gross
profit 73,509 112,698
-------------- ------ -------
Operating
expenses:
Research and
development 5,172 8,219
Sales and
marketing 10,961 20,966
General and
administrative 9,359 13,983
Impairment of
Goodwill - 1,982
---
Total operating
expenses 25,492 45,150
------ ------
Operating
expense
adjustments:
Share-based
compensation
research (385) (503)
and development
Share-based
compensation
sales and (1,491) (2,352)
marketing
Share-based
compensation
general and (1,871) (1,944)
administrative
Amortization of
acquired
intangible (545) (2,003)
assets sales
and marketing
Amortization of
acquired
intangible (186) (276)
assets general
and
administrative
Acquisition
related
expenses
general and - (1,003)
administrative
Amortization of
deferred
compensation - (37)
sales and
marketing
Amortization of
deferred
compensation - (37)
general and
administrative
Impairment of
Goodwill - (1,982)
Impairment of
intangible
assets general - (277)
and
administrative
Impairment of
intangible
assets sales - (664)
and marketing
Changes in fair
value of
purchase - (447)
consideration
liability
Adjusted
operating
expenses:
Research and
development 4,787 7,716
Sales and
marketing 8,925 15,910
General and
administrative 7,302 9,999
Impairment of
Goodwill - -
--- ---
Total adjusted
operating
expenses 21,014 33,625
-------------- ------ ------
Income from
operations 44,387 60,562
------ ------
Adjusted income
from
operations 52,495 79,073
--------------- ------ ------
Other income
(expenses):
Interest income 5,644 4,315
Interest
expense (305) (777)
Other
(expenses)
income, net (169) 690
Total other
income 5,170 4,228
----- -----
Other income
adjustments:
Changes in fair
value of
purchase - 107
consideration
liability
Adjusted other
income
(expenses):
Interest income 5,644 4,315
Interest
expense (305) (670)
Other
(expenses)
income, net (169) 690
---- ---
Total adjusted
other income 5,170 4,335
-------------- ----- -----
Income before
income tax
expense 49,557 64,790
------ ------
Adjusted income
before income
tax 57,665 83,408
expense ------ ------
-------
Income tax
expense (6,085) (5,699)
Net income 43,472 59,091
====== ======
Adjusted net
income 51,580 77,709
------------ ------ ------
Net income per
share:
Basic ordinary
share $0.86 $1.11
Diluted $0.83 $1.07
Adjusted net
income per
share:
Basic ordinary
share $1.02 $1.46
Diluted $0.98 $1.41
------- ----- -----
Shares used in
computation of
net income
and adjusted
net income per
share:
Basic ordinary
share 50,545,151 53,102,841
Diluted 52,368,317 55,174,468
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Year Ended
------------------ ----------
March 31, March 31, March 31, March 31,
--------- --------- --------- ---------
2009 2010 2009 2010
---- ---- ---- ----
(In U.S. dollar thousands)
Cash flows from
operating
activities:
Net income $8,832 $5,991 $43,472 $59,091
Adjustments to
reconcile net income
to net cash
provided by operating
activities:
Share-based
compensation 1,443 2,482 5,648 7,681
Depreciation of fixed
assets 699 915 2,808 3,193
Amortization of
intangible assets 724 1,703 2,513 4,624
Provision for
doubtful accounts 33 335 134 627
Impairment of
intangible assets - 2,494 - 2,494
Impairment of
Goodwill - 1,982 - 1,982
Accrued interest
expense - 107 - 306
Change in fair value
of contingent
consideration - 447 - 447
Loss on disposal of
fixed assets 61 54 268 85
- -
Deferred income taxes (389) 525 (1,354) 58
- -
Changes in assets and
liabilities, net of
effects of
acquisitions:
Accounts receivable 3,751 22,501 (6,930) (35,080)
Inventories (1,505) (515) (2,026) (1,314)
Other current assets 1,283 1,613 165 (6,012)
Amounts due from
related parties (682) (347) (682) (344)
Prepaid land use
right 28 28 (5,165) 110
Other non-current
assets (180) 51 (755) 324
Other non-current
liabilities (65) 109 (253) 213
Accounts payable (398) (6,805) (1,473) 10,312
Deferred revenue (5,994) (11,521) 6,049 9,693
Amounts due to
related parties 17 46 17 139
Accrued and other
current liabilities 72 (9,038) (582) 4,298
--- ------ ---- -----
Net cash provided by
operating activities 7,730 13,157 41,854 62,927
----- ------ ------ ------
Cash flows from
investing
activities:
Change in restricted
cash 710 (5,159) 6,270 (8,441)
Proceeds from sale of
fixed assets - - 225 -
Purchase of fixed
assets (2,370) (1,073) (10,136) (12,970)
Purchase of
intangible assets (46) (1) (49) (503)
Acquisitions, net of
cash acquired (5,577) (34,972) (10,885) (69,873)
Deposit made on
acquisition - (3,027) - (3,027)
--- ------ --- ------
Net cash used in
investing activities (7,283) (44,232) (14,575) (94,814)
------ ------- ------- -------
Cash flows from
financing
activities:
Proceeds from short-
term borrowings - - - 26,947
Repayment of short-
term borrowings - (26,950) - (26,950)
Proceeds from sale of
ordinary shares - - - 132,969
Payment of issue
costs - (23) - (6,344)
Stock options
exercised 1,580 220 2,783 3,815
Repayments of capital
leases obligations (116) (64) (837) (416)
Repayment of
acquisition related
liabilities - - - (4,845)
Amounts due to
related parties - - (54) -
--- --- --- ---
Net cash provided by
(used in) financing
activities 1,464 (26,817) 1,892 125,176
----- ------- ----- -------
Effect of exchange
rates differences (48) 82 4,598 305
--- --- ----- ---
Net increase
(decrease) in cash
and cash 1,863 (57,810) 33,769 93,594
equivalents
Cash and cash
equivalents,
beginning of period 236,432 389,699 204,526 238,295
------- ------- ------- -------
Cash and cash
equivalents, end of
period $238,295 $331,889 $238,295 $331,889
-------- -------- -------- --------
