VanceInfo Reports Strong Growth in Fourth Quarter and Full Year 2008 Results and Announces Share Repurchase Plan
Fourth Quarter and Full Year 2008 Financial and Operating Highlights -- Net revenues for the fourth quarter 2008 increased to$30.1 million , up 56.1 % from the fourth quarter of 2007. -- Net income for the fourth quarter 2008 was$5.2 million , up 67.7% from the fourth quarter of 2007. Non-GAAP net income, which excludes share-based compensation expense, was$5.6 million , compared to$3.4 million a year ago. Diluted earnings per share ("EPS") and non-GAAP diluted EPS for the quarter were$0.13 and$0.14 , respectively. -- Net revenues for the full year 2008 were$102.7 million , up 63.7% from 2007. -- Gross margin for the full year 2008 remained stable at 38.7%, compared to 38.5% in 2007. Operating margin was 14.3% in 2008, compared to 14.1% in 2007. -- Net income for full year 2008 was$16.2 million , up 69.0% from 2007. Non-GAAP net income, which excludes share-based compensation expense, was$17.6 million , up 66.2% from the previous year. Diluted EPS and non-GAAP diluted EPS for 2008 were$0.40 and$0.43 , respectively. -- Employees totaled 5,457, including 4,841 billable professionals, as ofDecember 31, 2008 .
"We are very pleased to deliver these strong quarterly and full year results to
our investors in this increasingly challenging economic environment," said Mr.
Fourth Quarter 2008 Financial Results
Due to the seasonal nature of its business, the Company presents financial analysis on a year-over-year basis between the fourth quarter of 2008 and the fourth quarter of 2007 as in the following paragraphs.
Net Revenues
Net revenues in the fourth quarter of 2008 increased to
Net Revenues by Service Lines
Three Months Ended Three Months Ended
December 31, 2008 December 31, 2007
(US dollars in thousands, except
percentages)
Research & development services $18,019 59.9% $10,524 54.6%
Globalization & localization 1,096 3.7% 950 4.9%
Enterprise solutions 3,845 12.8% 3,138 16.3%
Application development & maintenance 5,029 16.7% 3,351 17.4%
Quality assurance & testing 2,085 6.9% 1,304 6.8%
Total net revenues $30,074 100.0% $19,267 100.0%
Net Revenues by Geographic Markets
Based on the location of our clients' headquarters, net revenues from the
Measuring the revenues by geographic markets based on the location of contract signing
entities,
Largest Clients
The total revenues from the Company's five largest clients accounted for 56.0% of the Company's net revenues in the fourth quarter of 2008, compared to 49.1% in the fourth quarter of 2007. Two of the top five accounts grew significantly in the second half of 2008 as a result of expanded client relationship during the period.
Gross Profit and Gross Margin
Gross profit in the fourth quarter of 2008 was
Operating Income and Operating Margin
Operating income in the fourth quarter of 2008 was
Provision for Income Taxes
For the first three quarters of 2008, the Company applied a 12.5% income tax rate
for its main Chinese operating entity assuming the entity did not qualify as a High
and New Technology Enterprise ("HNTE") due to uncertainties under the new PRC tax
laws. In the fourth quarter, the entity was reaffirmed of the HNTE status. Accordingly,
the entity has used the reduced applicable tax rate of 7.5% in the calculation of
current and deferred tax balances for years 2008 to 2010. As a result, the Company
recorded an income tax reversal of approximately
Net Income and EPS
Net income in the fourth quarter of 2008 was
Diluted EPS was
The non-GAAP measures are described below and reconciled to the corresponding GAAP measures in the section below titled "About Non-GAAP Financial Measures."
Full Year 2008 Financial Results
Net Revenues
Net revenues for the year 2008 were
Net Revenues by Service Lines
Net revenues generated from RDS in 2008 were
Largest Clients
Net revenues from the five largest clients accounted for 53.8% of the Company's net revenues in 2008, compared to 53.7% in 2007.
Gross Profit and Gross Margin
Gross profit for the full year 2008 was
Operating Income and Operating Margin
Operating income in 2008 was
Provision for Income Taxes
For the full year 2008, the Company incurred income tax expenses of
Net Income and EPS
Net income for the full year 2008 was
Recent Developments
Acquisition of Professional Team in Support of
On
Share Repurchase Plan
On
Outlook for the First Quarter and Full Year 2009
Based on current global economic weakness and uncertain outlook, the Company now expects:
-- First quarter 2009 net revenues to be between$27.5 million and$28.5 million , representing a 34% to 39% increase from the corresponding period in 2008. -- First quarter 2009 diluted EPS to be between$0.08 and$0.09 on a GAAP basis, and non-GAAP diluted EPS excluding share-based compensation to be between$0.09 and$0.10 , based on 40.3 million total ADS-equivalent average shares outstanding. -- The first quarter guidance reflects strong seasonality effect from the extendedChinese New Year holiday as the Company's revenue contribution fromChina increased significantly during the past year. -- 2009 net revenues to be at least$123 million , up at least 20% from 2008. -- 2009 diluted EPS to be at least$0.46 on a GAAP basis, and at least$0.49 on a non-GAAP basis, based on 40.6 million total ADS-equivalent average shares outstanding. -- The EPS outlook assumes an effective income tax rate between 8% and 10%.
"We recognize the challenges of providing a credible guidance in light of the unprecedented
uncertainties we all face today," Mr.
Conference Call
The dial-in details for the live conference call are as follows: -- U.S. Toll Free Number: +1 800-901-5231 -- International Dial-in Number: +1 617-786-2961 -- Hong Kong Dial-in Number: +852 3002-1672 Passcode:VanceInfo
The conference call will be available live via webcast on the Investors section
of
A dial-in replay of the conference call will be available until
About
The Company ranked number one among Chinese offshore software development service
providers for the North American and European markets as measured by 2007 revenues,
according to
Safe Harbor
This news release includes statements that may constitute forward-looking statements
made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be identified by terminology
such as will, should, expects, anticipates, future, intends, plans, believes, estimates,
and similar statements. Among other things, the management's quotations and "Outlook
for the First Quarter and Full Year 2009" contain forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual results
to differ materially from those projected. Potential risks and uncertainties include,
but are not limited to, the company's dependence on a limited number of clients
for a significant portion of its revenues, the economic slowdown in its principal
geographic markets, the quality and portfolio of its services lines and industry
expertise, and the availability of a large talent pool in
About Non-GAAP Financial Measures
To supplement
VanceInfo Technologies Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(US dollars in thousands)
December 31 December 31
2008 2007
Assets
Current assets
Cash and cash equivalents $79,963 $76,835
Term deposit 1,466 1,371
Accounts receivable 36,827 24,708
Other current assets 3,369 5,879
Total current assets 121,625 108,793
Property and equipment, net 11,260 7,999
Goodwill and other intangible assets 19,445 11,701
Other long-term assets 2,871 583
Total assets $155,201 $129,076
Liabilities, minority interest, and
shareholders' equity
Current liabilities $23,339 $17,114
Other liabilities 1,886 954
Total liabilities 25,225 18,068
Minority interest -- 630
Shareholders' equity (a) 129,976 110,378
Total liabilities, minority interest,
and shareholders' equity $155,201 $129,076
Note:
(a) As of
December 31, 2008 , there were 37,336,575 ordinary shares
issued and outstanding.
VanceInfo Technologies Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(US dollars in thousands, except per share data)
Three months ended Years ended
December 31, December 31,
2008 2007 2008 2007
Net revenues $30,074 $19,267 $102,663 $62,714
Cost of revenues (1) 18,549 11,839 62,911 38,544
Gross profit 11,525 7,428 39,752 24,170
Selling and marketing expenses (1) 1,152 905 4,280 2,342
General and administrative
expenses (1) 6,416 4,564 21,625 13,838
Other operating income 155 721 858 860
Income from operations 4,112 2,680 14,705 8,850
Interest income 334 386 2,028 1,032
Interest expenses 2 27 69 47
Foreign currency exchange gains 441 185 703 317
Change in fair value of warrants -- -- -- 357
Income before income taxes, earnings
in equity investment and minority
interest 4,885 3,224 17,367 9,795
Provision for income taxes (318) 143 1,298 174
Income before earnings in equity
investment and minority interest 5,203 3,081 16,069 9,621
Minority interest -- 33 84 (52)
Earnings in equity investment 20 -- 20 --
Net income $5,223 $3,114 $16,173 $9,569
Earnings per share
Basic - ordinary shares $0.14 $0.08 $0.43 $0.22
Basic - Series A convertible
redeemable preferred shares N/A 0.12 N/A 0.40
Basic - Series B-1 convertible
redeemable preferred shares N/A 0.12 N/A 0.40
Basic - Series B-2 convertible
redeemable preferred shares N/A 0.16 N/A 0.51
Basic - Series B-3 convertible
redeemable preferred shares N/A 0.08 N/A 0.22
Diluted - ordinary shares 0.13 0.07 0.40 0.19
Weighted average shares outstanding
(in thousands)
Basic - ordinary shares 37,315 15,254 37,276 11,426
Basic - Series A convertible
redeemable preferred shares N/A 5,980 N/A 6,860
Basic - Series B-1 convertible
redeemable preferred shares N/A 2,503 N/A 2,867
Basic - Series B-2 convertible
redeemable preferred shares N/A 5,340 N/A 6,118
Basic - Series B-3 convertible
redeemable preferred shares N/A 308 N/A 78
Diluted - ordinary shares 40,238 18,266 40,680 13,446
Note:
(1) Depreciation and amortization expenses totaled
$1,138 and
$746 for the
three months ended
December 31, 2008 and 2007, respectively, and
$3,917
and
$2,474 for the years ended
December 31, 2008 and 2007, respectively.
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(US dollars in thousands, except per share data and percentages)
Three Months Ended December 31,
2008
GAAP Adjustments Non-GAAP
Net income $5,223 $351 (a) $5,574
Net margin 17.4% 1.1% (a) 18.5%
Average shares (e) 40,238 -- 40,238
Diluted EPS $0.13 $0.01 (f) $0.14
Twelve Months Ended December 31,
2008
GAAP Adjustments Non-GAAP
Net income $16,173 $1,391 (b) $17,564
Net margin 15.8% 1.3% (b) 17.1%
Average shares (e) 40,680 -- 40,680
Diluted EPS $0.40 $0.03 (f) $0.43
Three Months Ended December 31, 2007
GAAP Adjustments Non-GAAP
Net income $3,114 $287 (c) $3,401
Net margin 16.2% 1.5% (c) 17.7%
Average shares (e) 18,266 15,466 33,732
Diluted EPS $0.07 $0.03 (f) $0.10
Twelve Months Ended December 31, 2007
GAAP Adjustments Non-GAAP
Net income $9,569 $996 (d) $10,565
Net margin 15.3% 1.5% (d) 16.8%
Average shares (e) 13,446 17,453 30,899
Diluted EPS $0.19 $0.15 (f) $0.34
Notes:
(a) Adjustment to exclude share-based compensation of
$351 from operations
of which
$76 was reported in cost of revenues,
$39 was reported in selling
and marketing expenses and
$236 was reported in general and administrative
expenses in the unaudited condensed consolidated statements of operations.
(b) Adjustment to exclude share-based compensation of
$1,391 from
operations of which
$265 was reported in cost of revenues,
$176 was
reported in selling and marketing expenses and
$950 was reported in
general and administrative expenses in the unaudited condensed
consolidated statements of operations.
(c) Adjustment to exclude share-based compensation of
$287 from operations
of which
$43 was reported in cost of revenues,
$39 was reported in selling
and marketing expenses and
$205 was reported in general and administrative
expenses in the unaudited condensed consolidated statements of operations.
(d) Adjustment to exclude share-based compensation of
$996 from operations
of which
$111 was reported in cost of revenues,
$76 was reported in
selling and marketing expenses and
$809 was reported in general and
administrative expenses in the unaudited condensed consolidated statements
of operations.
(e) Represent weighted average number of dilutive ordinary shares
outstanding
(f) Non-GAAP diluted EPS is computed by dividing Non-GAAP net income by
the weighted average number of dilutive ordinary shares outstanding for
the respective periods plus the number of ordinary shares resulting from
the assumed conversion of the Series A, B-1, B-2 and B-3 convertible
redeemable preferred shares as of the beginning of the prior year period.
VanceInfo Technologies Inc.
Reconciliations of Forward-Looking Guidance for
Non-GAAP Financial Measures to Comparable GAAP Measures
(US dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, 2009 December 31, 2009
GAAP Adjustments Non-GAAP GAAP Adjustments Non-GAAP
Range of Range of
Estimate Estimate
From To From To
Diluted $0.08 $0.09 $0.01 (B) $0.09 $0.10 $0.46 $0.03 (B) $0.49
EPS(A)
(A) Based on 40.3 million and 40.6 million total ADS-equivalent average
shares outstanding for the first quarter and full year 2009, respectively.
(B) Reflects estimated adjustment for share-based compensation expense of
approximately
$0.3 million for the first quarter 2009 and
$1.3 million for
the full year 2009.
Director, Investor Relations
VanceInfo Technologies Inc.
Tel: +86-10-8282-5330
E-mail: ir@vanceinfo.com
