iSoftStone Reports Higher Revenues and Net Income for The Year 2011

BEIJING, March 5, 2012 /PRNewswire-FirstCall/ -- iSoftStone Holdings Limited ("iSoftStone," or "the Company,"NYSE: ISS), a leading China-based IT services provider, today reported higher revenues, net income, and diluted earnings per ADS in its unaudited financial results for the fourth quarter and year ended December 31, 2011.

Fourth quarter 2011 financial and operating results

• Net revenues increased 38.9% to $85.8 million in the fourth quarter 2011 from $61.8 million in the fourth quarter 2010.
• Gross profit increased 30.3% to $30.5 million in the fourth quarter 2011 from $23.4 million in the fourth quarter 2010.
• Net income was $2.3 million in the fourth quarter 2011 compared with a net loss of $3.9 million in the fourth quarter 2010.
• Non-GAAP net income (note 1) increased 26.2% to $11.2 million in the fourth quarter 2011 from $8.9 million in the fourth quarter 2010.
• Diluted earnings per American Depositary Share ("ADS") were an income of $0.04 in the fourth quarter 2011 compared with a loss of $0.25 in the fourth quarter 2010. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.19 in the fourth quarter 2011 and $0.18 in the fourth quarter 2010.
• Total number of employees increased 34.7% to 12,510 as of December 31, 2011 from 9,285 as of December 31, 2010.

Year 2011 financial and operating results

• Net revenues increased 43.9% to $283.4 million in 2011 from $197.0 million in 2010.
• Gross profit increased 43.5% to $102.3 million in 2011 from $71.3 million in 2010.
• Net income increased to $19.0 million in 2011 from a net loss of $3.6 million in 2010.
• Non-GAAP net income (note 1) increased 75.1% to $34.3 million in 2011 from $19.6 million in 2010.
• Diluted earnings per ADS were an income of $0.32 in 2011 and a loss of $0.46 in 2010. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.57 in 2011 and $0.43 in 2010.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "I am very pleased with our results for both the fourth quarter and the year 2011. In the fourth quarter, we continued to grow our business in most measures, improve our operations, and optimize our cost structure. We executed our business strategy very well during the year. Net revenues in 2011 were up 44%, mostly on organic growth, non-GAAP net income was up 75% to $34.3 million from $19.6 million in 2010, and non-GAAP diluted earnings per ADS were up 33% to 57 cents from 43 cents in 2010, all clearly going in the right direction.

"Looking forward, I am confident we will continue our strong business momentum by sustaining client satisfaction, focusing on operating excellence, building new growth drivers, moving up the value chain, and deepening our penetration in key verticals. Despite facing continued global economic uncertainty and possible slower economic growth in China, plus cost inflation, we believe we can continue to achieve high business growth while improving our margin in 2012."

Results of operations for the fourth quarter 2011

Net revenues

Net revenues increased $24.1 million or 38.9% to $85.8 million in the fourth quarter 2011 from $61.8 million in the fourth quarter 2010. The increase reflects mainly organic growth from existing and new clients.

Net revenues by service line

We derive net revenues by providing an integrated suite of IT services and solutions, including: (a) IT Services, which primarily includes application development and maintenance, or ADM, as well as R&D services, and infrastructure and software services; (b) Consulting & Solutions; and (c) Business Process Outsourcing ("BPO") services. The following table shows our net revenues by service line.

Net revenues from IT Services increased $13.5 million or 30.7% to $57.6 million in the fourth quarter 2011 from $44.1 million in the fourth quarter 2010. Net revenues from Consulting & Solutions increased $10.3 million or 70.8% to $24.9 million in the fourth quarter 2011 from $14.6 million in the fourth quarter 2010. Net revenues from BPO services increased 7.6% to $3.4 million in the fourth quarter 2011 from $3.1 million in the fourth quarter 2010. The below-than-average growth rate of net revenues from BPO services resulted from the completion of a significant project with a China bank which was partially offset by the increased revenues from an overseas bank. The increase of net revenues in each of other service lines was primarily a result of deepening and broadening our engagements with existing clients and the addition of new clients.

Net revenues by geographic markets

We classify our net revenues into the following geographic markets: Greater China (which includes China, Taiwan, Hong Kong and Macau) and Global (which includes the United States, Europe, Japan and others) based on the headquarters locations of our clients. The following table shows our net revenues by geographic markets.

We have experienced balanced growth across our geographic markets. Our net revenues from Greater China clients increased $17.4 million or 49.8% to $52.4 million in the fourth quarter 2011 from $35.0 million in the fourth quarter 2010. Net revenues from Global clients increased $6.6 million or 24.8% to $33.4 million in the fourth quarter 2011 from $26.8 million in the fourth quarter 2010 among which the net revenues from Japan clients had a slight decrease as a result of certain projects postponed from 2011 to 2012.

Net revenues by client industry

We focus on serving clients in four target industry verticals, each with large and growing demand for IT services and solutions: technology; communications; banking, financial services and insurance, or BFSI; and energy, transportation and public sector. The following table shows our net revenues by client industry.

Net revenues from technology clients increased $7.7 million or 41.0% to $26.3 million in the fourth quarter 2011 from $18.6 million in the fourth quarter 2010. Net revenues from communications clients increased $8.4 million or 36.2% to $31.4 million in the fourth quarter 2011 from $23.1 million in the fourth quarter 2010. Net revenues from BFSI clients increased $4.2 million or 30.5% to $17.9 million in the fourth quarter 2011 from $13.7 million in the fourth quarter 2010. Net revenues from energy, transportation and public sector clients increased $2.9 million or 94.8% to $5.9 million in the fourth quarter 2011 from $3.0 million in the fourth quarter 2010. Net revenues from Other industries increased $1.0 million to $4.3 million in the fourth quarter 2011 from $3.3 million in the fourth quarter 2010.

Net revenues by five largest clients

Net revenues from our five largest clients totaled $37.1 million or 43.2% of total net revenues in the fourth quarter 2011 compared with $27.8 million or 44.9% in the fourth quarter 2010. The reduced concentration in the five largest clients reflected increased revenues from a broader client base.

Net revenues by pricing method

We provide our services on a time-and-expense basis, a fixed-price basis, or for certain BPO services, on the basis of volume of work processed for our clients. The following table shows our net revenues by pricing method.

Net revenues from time-and-expenses basis projects increased $7.4 million or 32.7% to $29.9 million in the fourth quarter 2011 from $22.6 million in the fourth quarter 2010. Net revenues from fixed-price basis projects increased $15.8 million or 40.4% to $55.0 million in the fourth quarter 2011 from $39.2 million in the fourth quarter 2010. Net revenues from volume basis increased $0.8 million or 3500.0% to $0.9 million in the fourth quarter 2011 from $24,000 in the fourth quarter 2010.

Cost of revenues, gross profit, and gross profit margin

Cost of revenues increased $17.0 million or 44.2% to $55.3 million in the fourth quarter 2011 from $38.4 million in the fourth quarter 2010 primarily due to service delivery employees added to enable and match the growth of our business.

Gross profit increased $7.1 million or 30.3% to $30.5 million in the fourth quarter 2011 from $23.4 million in the fourth quarter 2010. Gross profit margin decreased to 35.5% in the fourth quarter 2011 from 37.9% in the fourth quarter 2010 primarily due to (a) general salary increase, (b) increase of subcontracting costs, and (c) additional amortization of intangible asset derived from acquisition of Adventier in August 2011, (d) partially offset by favorable business mix and efficiency improvements and more government subsidies recognized as a percentage of net revenues in the fourth quarter 2011.

Operating expenses

Operating expenses increased $5.6 million or 30.1% to $24.2 million in the fourth quarter 2011 from $18.6 million in the fourth quarter 2010 primarily due to higher salary and compensation expenses, including share-based compensation expenses, and rental expenses. The salary and compensation expenses increased as a result of our continuous investment in management capacity, sales force, and marketing efforts to support our revenue growth.

Excluding share-based compensation and amortization of intangible assets from acquisitions, the non-GAAP operating expenses (note 1) were $20.7 million or 24.1% of net revenues in the fourth quarter 2011 compared with $15.5 million or 25.0% of net revenues in the fourth quarter 2010. The decrease of operating expenses as a percentage of net revenues reflected the benefit of scalability from our earlier investments in management teams, sales and delivery network, and infrastructure.

Change in fair value of contingent consideration in connection with business combination

The total amount of change in fair value of contingent consideration in connection with business combination was an unfavorable change of $4.8 million in the fourth quarter 2011 compared with an unfavorable change of $0.2 million in the fourth quarter 2010. The $4.8 million in the fourth quarter 2011 mainly included $2.9 million and $1.8 million related to our acquisition of Ascend Technologies, Inc. ("Ascend") and Adventier Consulting Group, Inc. ("Adventier"), respectively. Those two acquisition transactions contained contingent consideration arrangements based primarily on the performance of the acquired business for the periods ended September 30, 2011 and December 31, 2011, respectively. The fair value of contingent consideration was reassessed at each reporting date until it was settled and the change in fair value was charged to the statement of operations.

Income from operations

Income from operations was $1.6 million in the fourth quarter 2011 and $5.2 million in the fourth quarter 2010 due to the factors explained above.

Non-GAAP income from operations (note 1) increased $1.7 million or 19.3% to $10.5 million in the fourth quarter 2011 from $8.8 million in the fourth quarter 2010.

Interest expense

Interest expense was $18,000 in the fourth quarter 2011 and $2.2 million in the fourth quarter 2010. The interest expense in the fourth quarter 2011 was the interest accrued on short-term bank borrowings. The interest expense in the fourth quarter 2010 was mainly the interest of $1.7 million accrued for our convertible notes, and $0.4 million on short-term bank borrowings. By March 3, 2011, all our convertible notes, together with accrued interest thereon, were converted into our ordinary shares.

Change in fair value of convertible notes derivatives

In December 2009 and April 2010, the company issued $38.0 million of Series C convertible notes to various holders. Certain terms of our issued convertible notes were determined as embedded derivatives and were carried at fair value at each period end. Upon the closing of our initial public offering in December 2010, $18.0 million of our convertible notes, together with interest thereon, were converted into our ordinary shares. On March 3, 2011, the remaining $20.0 million of our convertible notes, together with interest thereon, were converted into ordinary shares. As a result of the conversion of all convertible notes by March 3, 2011, we had no change in fair value of convertible notes derivatives in the fourth quarter 2011 compared with a loss of $7.4 million in the fourth quarter 2010.

Income taxes benefit

Income tax benefit was $0.7 million in the fourth quarter 2011 compared with $0.5 million in the fourth quarter 2010 primarily as a result of increased deferred income tax benefit from losses generated by certain China entities, which losses we expect can be carried forward and be deducted against the future taxable income.

Net income (loss)

Net income was $2.3 million in the fourth quarter 2011 and a net loss of $3.9 million in the fourth quarter 2010. The improvement was due to the factors explained above.

Non-GAAP net income (note 1) increased $2.3 million or 26.2% to $11.2 million in the fourth quarter 2011 from $8.9 million in the fourth quarter 2010.

Earnings per ADS

Basic earnings per ADS were an income of $0.04 in the fourth quarter 2011 and a loss of $0.25 in the fourth quarter 2010.

Diluted earnings per ADS were an income of $0.04 in the fourth quarter 2011 and a loss of $0.25 in the fourth quarter 2010.

Non-GAAP diluted earnings per ADS (note 1) were an income of $0.19 in the fourth quarter 2011 and an income of $0.18 in the fourth quarter 2010.

Each ADS represents 10 ordinary shares.

Cash and Cash Flow

As of December 31, 2011, we had a cash balance of $101.2 million. Our net cash provided by operating activities in the fourth quarter 2011 was $13.6 million. Our net cash used in investing activities in the fourth quarter 2011 was $4.8 million including capital expenditures of $5.1 million. Within the capital expenditures, $1.8 million was related to the acquisition of the new office in Wuxi in July 2011.

To support our near future business growth, build additional source of capital funding to maintain a safe level of cash, we established credit facilities with various local  banks for a total credit lines of $27.0 million in the fourth quarter 2011. The annual interest rates were in the range from 7.22% to 7.87%. We had drawn $15.1 million from the credit lines as of December 31, 2011.

Days sales outstanding ("DSO") was 143 days for the fourth quarter 2011 and 135 days for the fourth quarter 2010. The higher DSO for the fourth quarter 2011 was mainly due to higher revenues from domestic China customers and fixed price projects. DSO is calculated by dividing average accounts receivable, net of deferred revenues, by the period's gross revenues, and multiplying by the number of days in the period.

Results of operations for 2011

Net revenues

Net revenues increased $86.4 million or 43.9% to $283.4 million in 2011 from $197.0 million in 2010. The increase reflects mainly organic growth from existing and new clients.

Net revenues by service line

The following table shows our net revenues by service line.

Net revenues from IT Services increased $60.3 million or 44.7% to $195.1 million in 2011 from $134.9 million in 2010. Net revenues from Consulting & Solutions increased $21.7 million or 40.0% to $76.0 million in 2011 from $54.3 million in 2010. Net revenues from BPO services increased 57.4% to $12.2 million in 2011 from $7.8 million in 2010. The increase of net revenues in each service line was primarily a result of deepening and broadening our engagements with existing clients and addition of new clients.

Net revenues by geographic markets

The following table shows our net revenues by geographic markets.

We have experienced balanced growth across our geographic markets. Our net revenues from Greater China clients increased $55.4 million or 50.4% to $165.5 million in 2011 from $110.1 million in 2010. Net revenues from Global clients increased $31.0 million or 35.7% to $117.9 million in 2011 from $86.9 million in 2010 among which the growth rate of net revenues from Japan clients was below than average as a result of certain projects postponed from 2011 to 2012.

Net revenues by client industry

The following table shows our net revenues by client industry.

Net revenues from technology clients increased $20.4 million or 31.3% to $85.6 million in 2011 from $65.2 million in 2010. Net revenues from communications clients increased $32.9 million or 43.5% to $108.6 million in 2011 from $75.7 million in 2010. Net revenues from BFSI clients increased $24.3 million or 72.4% to $57.9 million in 2011 from $33.6 million in 2010 resulting from our deeper penetration into the clients in BFSI industry in 2011. Net revenues from energy, transportation and public sector clients increased $2.3 million or 18.4% to $14.8 million in 2011 from $12.5 million in 2010 primarily as a result of the increased net revenues from some smart city projects in which area we made significant breakthrough in 2011 partially offset by the completion of a major project in 2010. Net revenues from Other industries increased $6.5 million to $16.5 million in 2011 from $10.0 million in 2010.

Net revenues by five largest clients

Net revenues from our five largest clients totaled $122.4 million or 43.2% of total net revenues in 2011 compared with $90.8 million or 46.1% in 2010. The reduced concentration in the five largest clients reflected increased revenues from a broader client base.

Net revenues by pricing method

The following table shows our net revenues by pricing method.

Net revenues from time-and-expenses basis projects increased $27.9 million or 35.1% to $107.3 million in 2011 from $79.4 million in 2010. Net revenues from fixed-price basis projects increased $56.9 million or 49.1% to $172.7 million in 2011 from $115.8 million in 2010. Net revenues from volume basis projects increased $1.7 million or 95.1% to $3.5 million in 2011 from $1.8 million in 2010.

Cost of revenues, gross profit, and gross profit margin

Cost of revenues increased $55.4 million or 44.1% to $181.1 million in 2011 from $125.7 million in 2010 primarily due to service delivery employees added and subcontracting cost increases to enable and match the growth of our business.

Gross profit increased $31.0 million or 43.5% to $102.3 million in 2011 from $71.3 million in 2010. Gross profit margin remained essentially even at 36.1% in 2011 and 36.2% in 2010. In 2011, we managed to improve operation efficiency, optimize our service mix, favorably adjust pricing with certain clients, and leverage government support to offset the pressure from labor cost inflation.

Operating expenses

Operating expenses increased $16.5 million or 25.2% to $82.1 million in 2011 from $65.6 million in 2010 primarily due to: (a) increase of salary and compensation expenses, including share-based compensation expenses, as a result of our continuous investment in management capacity, sales force and marketing efforts to support our revenue growth as we expanded operations into Xi'an, Chengdu, Zhenjiang and Yancheng in 2011, (b) increase of rental expenses resulting from increased rental prices at certain offices, new rents of offices as we extended operation footprints in China and relocation of our US office, and (c) increase of professional service expenses including audit fees, legal counsel fees, and financial advisory fees as a public company.

Excluding share-based compensation and amortization of intangible assets from acquisitions, non-GAAP operating expenses (note 1) were $70.9 million or 25.0% of net revenues in 2011 compared with $55.6 million or 28.3% of net revenues in 2010. The decrease of operating expenses as a percentage of net revenues reflected the benefit of scalability from our earlier investments in management teams, sales and delivery network, and infrastructure.

Change in fair value of contingent consideration in connection with business combination

The total amount of change in fair value of contingent consideration in connection with business combination was an unfavorable change in fair value of $5.0 million in 2011, compared with a favorable change in fair value of $28,000 in 2010. The amount of $5.0 million in 2011 mainly included $3.0 million and $1.8 million related to our acquisition of Ascend and Adventier, respectively.

Income from operations

Income from operations was $17.4 million in 2011 and $10.3 million in 2010 due to the factors explained above.

Our non-GAAP income from operations (note 1) increased $14.2 million or 68.4% to $34.9 million in 2011 from $20.7 million in 2010.

Interest expense

Interest expense was $1.4 million in 2011 and $5.7 million in 2010. Interest expense in 2011 included imputed interest of $0.7 million accrued for our convertible notes, and $0.7 million of interest on short-term bank borrowings. The interest expense in 2010 was mainly the interest of $4.4 million accrued for our convertible notes, and $1.3 million on short-term bank borrowings. By March 3, 2011, all our convertible notes, together with accrued interest thereon, were converted into our ordinary shares.

Change in fair value of convertible notes derivatives

The change in fair value of convertible notes derivatives was recognized as a gain of $2.8 million in 2011 in our consolidated statement of operations compared with a loss of $8.4 million in 2010.

Income taxes benefit (expense)

Income tax expense was $0.3 million in 2011 compared with a benefit of $0.3 million in 2010 primarily as a result of increased profit or reduced loss in certain China entities and one overseas entity.

Net income (loss)

Net income was $19.0 million in 2011 and a net loss of $3.6 million in 2010. The improvement was due to the factors explained above.

Non-GAAP net income (note 1) increased $14.7 million or 75.1% to $34.3 million in 2011 from $19.6 million in 2010.

Earnings per ADS

Basic earnings per ADS were an income of $0.34 in 2011 and a loss of $0.46 in 2010.

Diluted earnings per ADS were an income of $0.32 in 2011 and a loss of $0.46 in 2010.

Non-GAAP diluted earnings per ADS (note 1) were an income of $0.57 in 2011 and an income of $0.43 in 2010.

Each ADS represents 10 ordinary shares.

Cash and Cash Flow

As of December 31, 2011, we had a cash balance of $101.2 million. Our net cash provided by operating activities in 2011 was $2.8 million. Our net cash used in investing activities in 2011 was $63.1 million including capital expenditures of $47.6 million. Within the capital expenditures, $36.0 million was related to the acquisition of the new office in Wuxi in July 2011.

Our balance of short-term borrowing was $37.3 million as of December 31, 2010, which we repaid all of them by June 30, 2011. To support our near future business growth, build additional source of capital funding to maintain a safe level of cash, we established credit facilities with various local banks for a total credit lines of $27.0 million in the fourth quarter 2011. The annual interest rates were in the range from 7.22% to 7.87%. We had drawn $15.1 million from the credit lines as of December 31, 2011.

Days sales outstanding was 150 days for 2011 and 145 days for 2010.

Outlook for the first quarter of 2012 and year 2012

For the first quarter 2012, iSoftStone expects to achieve the following targets:

• Net revenues for the first quarter 2012 to be at least $79.0 million.
• Net income for the first quarter 2012 to be at least $3.8 million.
• Non-GAAP net income for the first quarter 2012 to be at least $7.0 million.
• Non-GAAP diluted earnings per ADS for the first quarter 2012 to be at least $0.12, assuming 59.7 million average ADSs will be outstanding in the first quarter 2012. One ADS represents 10 ordinary shares.

For the year 2012, iSoftStone expects the following targets:

• Net revenues in 2012 to be at least $375.0 million.
• Net income in 2012 to be at least $31.0 million.
• Non-GAAP net income in 2012 to be at least $45.0 million.
• Non-GAAP diluted earnings per ADS in 2012 to be at least $0.73 assuming 61.5 million average ADSs will be outstanding in 2012. One ADS represents 10 ordinary shares.

The above quarterly and annual outlook of net income reflects an estimated income tax rate of 17.5% to 20.0% and the quarterly and annual outlook of non-GAAP net income reflects an estimated income tax rate of 12.5% to 15.0% which is higher than 2011 resulting from the expiration of the tax exemption or reduction holidays in certain entities in China by the end of 2011.

Non-GAAP measures

To supplement our financial results presented in accordance with U.S. generally accepted accounting principles ("GAAP"), we use various non-GAAP financial measures, which are adjusted from results based on U.S. GAAP to exclude share-based compensation, amortization of intangible assets from acquisitions, interest expense of convertible notes, changes in fair value of convertible notes derivatives, and changes in fair value of contingent consideration in business combinations. Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are shown in tables at the end of this earnings release, which provide more details about the non-GAAP financial measures.

Our non-GAAP financial information is provided as additional information to help our investors compare business trends among different reporting periods on a consistent basis and to enhance investors' overall understanding of the historical and current financial performance of our continuing operations and our prospects for the future. Our non-GAAP financial information should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for or superior to U.S. GAAP results. In addition, our calculation of this non-GAAP financial information may be different from the calculation used by other companies, and therefore comparability may be limited.

Note 1

Our non-GAAP information (including non-GAAP operating expenses, income from operations, net income, and diluted earnings per ADS) excluded share-based compensation, interest expense of convertible notes, change in fair value of convertible notes derivatives, changes in fair value of contingent consideration in connection with business combination, and amortization of intangible assets from acquisitions. For a reconciliation of our non-GAAP measures to our U.S. GAAP measures, please see the reconciliation tables at the end of this earnings release.

Conference Call on March 5, 2012

iSoftStone will host an earnings conference call and live webcast covering its fourth quarter and year 2011 financial results at 8:00 a.m. Eastern Standard Time (New York) on March 5, 2012 (which is also 9:00 p.m. in Beijing and Hong Kong on March 5).

The dial-in details for the live conference call are:

A live and archived webcast of the conference call will be available in the investors section of iSoftStone's website at www.isoftstone.com. To join the webcast, please go to iSoftStone's website at least 15 minutes prior to the start of the call to register and download and install any necessary audio software.

A telephone replay of the call will be available two hours after the conclusion of the conference call through 11:59 p.m. Eastern Daylight Time on March 12, 2012. The dial-in details for the replay are as follows:  U.S. toll-free at 1 866 214 5335, international dial-in at +61 2 8235 5000, and the replay pass code is 5047 2886.

Safe harbor statement

This news release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include our preliminary unaudited results for the fourth quarter 2011 and year 2011, our financial outlook for the first quarter and year 2012, our assessment of the business environment in greater China and globally (including expectations as to inflation rates in China), our ability to achieve continued operational and delivery efficiencies and a diversified revenue base and our expectations regarding continued strong client demand for, and related purchasing patterns for, our service offerings both with respect to existing contracts and new contracts.

Our forward-looking statements are not historical facts but instead represent only our belief regarding expected results and events, many of which, by their nature, are inherently uncertain and outside of our control. Our actual results and other circumstances may differ, possibly materially, from the anticipated results and events indicated in these forward-looking statements. Announced results for the fourth quarter and year 2011 are preliminary, unaudited and subject to audit adjustment. In addition, we may not meet our financial outlook for the first quarter and year 2012, continue to realize operational and delivery efficiencies and continued strong client demand or achieve a diversified revenue base, effectively capitalize on our growth opportunities and strategies, enter targeted markets, or otherwise grow our business in the manner planned, successfully complete planned acquisitions or strategic investments or recognize the anticipated benefits of our acquisitions and strategic investments, on a timely basis or at all. Our customers may vary their purchasing patterns in response to the economic environment in Greater China and globally. In addition, other risks and uncertainties that could cause our actual results to differ from what we currently anticipate include: our ability to effectively manage our rapid growth; intense competition from China-based and international IT services companies; our ability to attract and retain sufficiently trained professionals to support our operations; and our ability to anticipate and develop new services and enhance existing services to keep pace with rapid changes in technology and in our selected industries. For additional information on these and other important factors that could adversely affect our business, financial condition, results of operations, and prospects, please see "Risk Factors" that begins on page 6 of our 2010 Annual Report on Form 20-F that we filed with the U.S. Securities and Exchange Commission on May 31, 2011, which can be found on our website at www.isoftstone.com and at www.sec.gov.

All projections (including our first quarter 2012 and year 2012 financial outlook) in this release are based on limited information currently available to us, which is subject to change. Although these projections and the factors influencing them will likely change, we undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Such information speaks only as of the date of this release.

About iSoftStone Holdings Limited

Founded in 2001, iSoftStone is a leading China-based IT services provider serving both Greater China and global clients. iSoftStone provides an integrated suite of IT services and solutions including consulting & solutions, IT services, and business process outsourcing services. The company focuses on industry verticals that include technology, communications, banking, financial services, insurance, energy, transportation, and public sectors.

iSoftStone's American depositary shares began trading on the New York Stock Exchange on December 14, 2010.

For more information, please visit www.isoftstone.com.

iSoftStone Holdings Limited
Mr. Jonathan Zhang
Chief Financial Officer
[email protected]

Christensen

Mr. Tom Myers, +86-139-1141-3520
[email protected]

www.isoftstone.com

SOURCE iSoftStone Holdings Limited

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