Pactera Announces Third Quarter 2013 Financial Results
BEIJING, Nov. 21, 2013 /PRNewswire/ -- Pactera Technology International Ltd. (Nasdaq: PACT) ("Pactera" or the "Company"), a global consulting and technology services provider strategically headquartered in China, today reported its unaudited financial results for the third quarter of 2013 ended September 30, 2013.
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On November 9, 2012, HiSoft Technology International Limited ("HiSoft") and VanceInfo Technologies Inc. ("VanceInfo") announced the completion of merger of equals to form Pactera. HiSoft and VanceInfo's financial results were consolidated into Pactera from the date of the completion of the merger.
Third Quarter 2013 Financial and Operational Highlights
- Net revenues for the third quarter of 2013 were $173.1 million,as compared to $79.6 million for the third quarter of 2012.
- GAAP diluted net income per ADS for the third quarter of 2013 was $0.03. Non-GAAP diluted net income per ADS[1] for the third quarter of 2013 was $0.18.
- Total full-time employees as of September 30, 2013 were 21,119, including 19,017 billable professionals.
| [1] Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP basic and diluted net income per ADS and corresponding margins presented in this press release exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE and change in fair value of contingent consideration payable for business acquisition and compensation expenses related to acquisition. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying section of "About Non-GAAP Financial Measures" and the accompanying tables of "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of the earnings release. |
"We see continuous improvement in the third quarter of 2013," said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera. "Net revenue is in line with our guidance, and excluding the impact from our major telecom customer and the adverse effect of Japanese currency depreciation, we're seeing slow recovery in our top line growth as the gross margin held steady. Following the announcement on October 17th regarding signing of definitive merger agreement for our potential privatization, we are working towards bringing this to an expeditious closure. However, our top priority continues to remain on improving our key financial KPIs and driving sustainable growth in our business."
Third Quarter 2013 Financial Results
Net Revenues
Net revenues were $173.1 million for the third quarter of 2013 as compared to $79.6 million for the third quarter of 2012, reflecting a decrease of 1.5% from $175.8 million of the pro forma net revenues[2] for the corresponding period in 2012. Excluding the company's major telecom customer, net revenues for the third quarter of 2013 would have increased 7.2% from the pro forma net revenues for the corresponding period in 2012.
Net Revenues by Service Line
Pactera has three service lines: Information Technology ("IT") services, research and development ("R&D") services and business process outsourcing ("BPO"). Pactera divides IT services into two categories: consulting and packaged solution ("CPS") services and application development, testing and maintenance ("ADM") services.
Net revenues from IT services were $104.7 million for the third quarter of 2013, which increased 9.7% from $95.4 million of pro forma net revenues for the corresponding period in 2012. The increase was primarily due to the increasing demand for and the expanded offerings by our CPS services.
Net revenues from R&D services were $65.9 million for the third quarter of 2013, compared to $76.6 million of the pro forma net revenues for the corresponding period in 2012. The decline in net revenues from R&D services was mainly due to a decrease in the revenue derived from our major telecom customer. Excluding the company's major telecom customer, net revenues for the third quarter of 2013 would have increased approximately 9.5% from the pro forma net revenues for the corresponding period in 2012.
| [2] Pro forma net revenues of the Company for the third quarter of 2012 assume that the merger occurred at the beginning of such period. The pro forma financial information is provided for information purpose only and does not purport to present what the actual results of operations would have been had the transaction actually occurred at the beginning of such period indicated nor does it purport to present the actual results of operations for any future period or financial position for any future date. Please refer to the accompanying tables at the end of the earnings release. |
Net Revenues by Service Line
| Three Months Ended |
Three Months Ended |
|||
| ($ in thousands, except percentages) |
||||
| IT Services |
104,717 |
60.5% |
46,242 |
58.1% |
| CPS Services |
39,484 |
22.8% |
17,380 |
21.8% |
| ADM Services |
65,233 |
37.7% |
28,862 |
36.3% |
| R&D Services |
65,866 |
38.0% |
33,330 |
41.9% |
| BPO |
2,536 |
1.5% |
- |
- |
| Total Net Revenues |
173,119 |
100.0% |
79,572 |
100.0% |
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)
| Three Months Ended September 30, 2013 |
Three Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| IT Services |
104,717 |
60.5% |
95,421 |
54.2% |
9.7% |
| CPS Services |
39,484 |
22.8% |
30,128 |
17.1% |
31.1% |
| ADM Services |
65,233 |
37.7% |
65,293 |
37.1% |
(0.1)% |
| R&D Services |
65,866 |
38.0% |
76,585 |
43.6% |
(14.0)% |
| BPO |
2,536 |
1.5% |
3,806 |
2.2% |
(33.4)% |
| Total Net Revenues |
173,119 |
100.0% |
175,812 |
100.0% |
(1.5)% |
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $67.8 million or 39.1% of the net revenues for the third quarter of 2013, followed by 38.9% from Greater China, 9.8% from Europe, 7.0% from Japan and 5.2% from Asia South.
Net Revenues based on Location of Clients' Headquarters
| Three Months Ended |
Three Months Ended September 30, 2012 |
|||
| ($ in thousands, except percentages) |
||||
| United States |
67,756 |
39.1% |
36,359 |
45.7% |
| Greater China |
67,414 |
38.9% |
18,169 |
22.8% |
| Europe |
16,862 |
9.8% |
4,728 |
5.9% |
| Japan |
12,195 |
7.0% |
14,235 |
17.9% |
| Asia South |
8,892 |
5.2% |
6,081 |
7.7% |
| Total Net Revenues |
173,119 |
100.0% |
79,572 |
100.0% |
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)
| Three Months Ended September 30, 2013 |
Three Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| United States |
67,756 |
39.1% |
67,620 |
38.5% |
0.2% |
| Greater China |
67,414 |
38.9% |
67,487 |
38.4% |
(0.1)% |
| Europe |
16,862 |
9.8% |
13,367 |
7.6% |
26.1% |
| Japan |
12,195 |
7.0% |
18,503 |
10.5% |
(34.1)% |
| Asia South |
8,892 |
5.2% |
8,835 |
5.0% |
0.6% |
| Total Net Revenues |
173,119 |
100.0% |
175,812 |
100.0% |
(1.5)% |
Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 60.6% of net revenues in the third quarter of 2013, while the United States accounted for 19.6%, Asia South accounted for 10.7%, Japan accounted for 6.9% and Europe accounted for 2.2%.
Net Revenues by Industry
Pactera classifies its clients into four industry segments: High Technology ("High Tech"), Banking, Financial Services and Insurance ("BFSI"), Manufacturing, and Other Industry Segments including Retail, Distribution, Travel and Transportation and Public Services ("Others").
Net Revenues by Industry
| Three Months Ended September 30, 2013 |
Three Months Ended September 30, 2012 |
|||
| ($ in thousands, except percentages) |
||||
| High Tech |
98,355 |
56.8% |
42,723 |
53.7% |
| BFSI |
47,902 |
27.7% |
22,069 |
27.7% |
| Manufacturing |
23,255 |
13.4% |
11,828 |
14.9% |
| Others |
3,607 |
2.1% |
2,952 |
3.7% |
| Total Net Revenues |
173,119 |
100.0% |
79,572 |
100.0% |
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)
| Three Months Ended September 30, 2013 |
Three Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| High Tech |
98,355 |
56.8% |
107,161 |
61.0% |
(8.2)% |
| BFSI |
47,902 |
27.7% |
40,503 |
23.0% |
18.3% |
| Manufacturing |
23,255 |
13.4% |
22,984 |
13.1% |
1.2% |
| Others |
3,607 |
2.1% |
5,164 |
2.9% |
(30.2)% |
| Total net revenues |
173,119 |
100.0% |
175,812 |
100.0% |
(1.5)% |
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 29.1% and 39.4% of net revenues, respectively, during the third quarter of 2013, compared to 35.4% and 44.1% respectively, on a pro forma basis for the corresponding period in 2012. The major telecom client is still shifting its outsourcing business to the joint ventures it formed, and the Company is cooperating with this process. Further details are still being discussed between the parties.
Gross Profit and Gross Margin
Gross profit was $50.8 million for the third quarter of 2013, compared to $28.3 million for the corresponding period in 2012. Gross margin was 29.3% for the third quarter of 2013.
Operating Expenses
Total operating expenses were $48.4 million for the third quarter of 2013 compared to $22.8 million for the corresponding period in 2012. Operating expenses in the third quarter of 2013 reflected $4.3 million of privatization-related costs and $0.6 million of merger-related expenses.
Operating Income (Loss) and Operating Margin
Operating income for the third quarter of 2013 was $2.4 million, compared to an operating income of $5.5 million for the corresponding period in 2012. Non-GAAP operating income for the third quarter in 2013 was $15.7 million, as compared to $11.4 million in the corresponding period in 2012.
Operating margin was 1.4% for the third quarter of 2013, compared to 6.9% for the same period in 2012. Non-GAAP operating margin was 9.1% for the third quarter of 2013.
Net Income (Loss) and Net Income (Loss) per ADS
Net income attributable to Pactera was $2.7 million for the third quarter of 2013, compared to a net income of $4.7 million for the corresponding period in 2012. Non-GAAP net income was $15.5 million for the third quarter of 2013, compared to $10.6 million for the same period in 2012. Non-GAAP diluted net income per ADS was $0.18 in the third quarter of 2013, compared to $0.25 in the corresponding period of 2012.
Cash Flow and DSO
As of September 30, 2013, Pactera had cash and cash equivalents, restricted cash, term deposits and short-term investment totaling $131.8 million. Operating cash flow for the third quarter of 2013 was a net inflow of approximately $23.4 million. Days sales outstanding ("DSO") was 138 days for this quarter and 135 days for the last 12 months on a pro forma basis.
First Nine Months of 2013 Financial Results
Net Revenues
Net revenues were $488.5 million for the nine months ended September 30, 2013 as compared to $216.8 million for the nine months ended September 30, 2012 and $493.9 million of the pro forma net revenues for the corresponding period in 2012.
Net Revenues by Service Line
Net Revenues by Services Line
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
|||
| ($ in thousands, except percentages) |
||||
| IT Services |
281,236 |
57.5% |
127,120 |
58.6% |
| CPS Services |
99,849 |
20.4% |
47,756 |
22.0% |
| ADM Services |
181,387 |
37.1% |
79,364 |
36.6% |
| R&D Services |
199,088 |
40.8% |
89,709 |
41.4% |
| BPO |
8,165 |
1.7% |
- |
- |
| Total Net Revenues |
488,489 |
100.0% |
216,829 |
100.0% |
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| IT Services |
281,236 |
57.5% |
261,089 |
52.9% |
7.7% |
| CPS Services |
99,849 |
20.4% |
81,945 |
16.6% |
21.8% |
| ADM Services |
181,387 |
37.1% |
179,144 |
36.3% |
1.3% |
| R&D Services |
199,088 |
40.8% |
222,878 |
45.1% |
(10.7)% |
| BPO |
8,165 |
1.7% |
9,955 |
2.0% |
(18.0)% |
| Total Net Revenues |
488,489 |
100.0% |
493,922 |
100.0% |
(1.1)% |
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $194.1 million in the nine months ended September 30, 2013, followed by $186.0 million from Greater China, $46.1 million from Europe, $37.7 million from Japan and $24.5 million from Asia South.
Net Revenues based on Location of Clients' Headquarters
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
|||
| ($ in thousands, except percentages) |
||||
| United States |
194,106 |
39.7% |
99,608 |
45.9% |
| Greater China |
186,045 |
38.1% |
50,374 |
23.2% |
| Europe |
46,145 |
9.4% |
14,112 |
6.5% |
| Japan |
37,687 |
7.7% |
41,395 |
19.1% |
| Asia South |
24,506 |
5.1% |
11,340 |
5.3% |
| Total Net Revenues |
488,489 |
100.0% |
216,829 |
100.0% |
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| United States |
194,106 |
39.7% |
193,806 |
39.2% |
0.2% |
| Greater China |
186,045 |
38.1% |
185,492 |
37.6% |
0.3% |
| Europe |
46,145 |
9.4% |
43,007 |
8.7% |
7.3% |
| Japan |
37,687 |
7.7% |
53,439 |
10.8% |
(29.5)% |
| Asia South |
24,506 |
5.1% |
18,178 |
3.7% |
34.8% |
| Total Net Revenues |
488,489 |
100.0% |
493,922 |
100.0% |
(1.1)% |
Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 59.4% of net revenues in the nine months ended September 30, 2013, while the United States accounted for 20.7%, Asia South accounted for 10.4%, Japan accounted for 7.7% and Europe accounted for 1.8%.
Net Revenues by Industry
Net Revenues by Industry
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
|||
| ($ in thousands, except percentages) |
||||
| High Tech |
292,419 |
59.9% |
114,144 |
52.6% |
| BFSI |
123,047 |
25.2% |
62,434 |
28.8% |
| Manufacturing |
60,706 |
12.4% |
28,285 |
13.0% |
| Others |
12,317 |
2.5% |
11,966 |
5.6% |
| Total Net Revenues |
488,489 |
100.0% |
216,829 |
100.0% |
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)
| Nine Months Ended September 30, 2013 |
Nine Months Ended September 30, 2012 |
Year-over-Year % Change |
|||
| ($ in thousands, except percentages) |
|||||
| High Tech |
292,419 |
59.9% |
307,273 |
62.2% |
(4.8)% |
| BFSI |
123,047 |
25.2% |
110,157 |
22.3% |
11.7% |
| Manufacturing |
60,706 |
12.4% |
57,612 |
11.7% |
5.4% |
| Others |
12,317 |
2.5% |
18,880 |
3.8% |
(34.8)% |
| Total net revenues |
488,489 |
100.0% |
493,922 |
100.0% |
(1.1)% |
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 31.4% and 40.9% of net revenues, respectively, during the nine months ended September 30, 2013, compared to 38.0% and 47.3% respectively, on a pro forma basis for the corresponding period in 2012.
Gross Profit and Gross Margin
Gross profit was $135.1 million for the nine months ended September 30, 2013, compared to $76.8 million for the nine months ended September 30, 2012. Gross margin was 27.7% during the nine months ended September 30, 2013.
Operating Expenses
Total operating expenses were $138.1 million for the nine months ended September 30, 2013 compared to $58.1 million for the corresponding period in 2012. Operating expenses in the nine months ended September 30, 2013 reflected $7.0 million of merger-related costs, mainly including professional fees, severance costs, facilities and system integration expenses, and $4.3 million of privatization-related costs, mainly including professional fees.
Operating Income and Operating Margin
Operating loss for the nine months ended September 30, 2013 was $3.0 million, compared to an operating income of $18.7 million for the corresponding period in 2012. Non-GAAP operating income for the nine months ended September 30, 2013 was $35.3 million, as compared to $30.3 million for the corresponding period in 2012.
Operating margin was negative 0.6% for the nine months ended September 30, 2013, and non-GAAP operating margin was 7.2% for the nine months ended September 30, 2013.
Net Income (Loss) and Net Income (Loss) per ADS
Pactera was at break-even level for the nine months ended September 30, 2013, compared to net income $17.1 million for the corresponding period in 2012. Non-GAAP net income was $37.1 million for the nine months ended September 30, 2013, compared to $28.7 million for the corresponding period in 2012. Non-GAAP diluted net income per ADS was $0.44 for the nine months ended September 30, 2013, compared to $0.67 for the corresponding period in 2012.
Recent Development
Upon the unanimous recommendation of a special committee of the Company's board of directors consisting of independent directors and the approval of the Company's board of directors, on October 17, 2013, the Company announced that it entered into a definitive merger agreement ("Merger Agreement") with a Consortium led by funds managed or advised by Blackstone (as defined below), including (i) Blackstone, (ii) certain members of the Company's management comprising of Chris Chen, the Company's non-executive chairman and Tiak Koon Loh, the Company's chief executive officer and several other senior managers (the "Management") and (iii) GGV Capital and its affiliates ("GGV") (collectively, the "Buyer Consortium").
The Merger Agreement provides that at the completion of the acquisition, the shareholders of the Company will receive US$7.30 per common share (a "Share") or US$7.30 per American depositary share (an "ADS") of the Company (the "Transaction"). The price per Share and per ADS represents a premium of 39% over the Company's closing price of US$5.26 per ADS on May 17, 2013, the last trading day prior to the Company's announcement on May 20, 2013 that it had received a "going private" proposal from a consortium led by Blackstone, and a premium of 35% to the volume-weighted average closing price of the ADSs during the 30 trading days prior to May 20, 2013.
If the Merger closes pursuant to the Merger Agreement, the Company will become a privately-held company and its ADSs would cease to be listed on the Nasdaq Global Select Market. The Transaction is subject to various closing conditions, including a condition that the Merger Agreement be approved by an affirmative vote of shareholders representing two-thirds or more of the Shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders convened to consider the approval of the Merger Agreement and the Transaction and a condition that the parties obtain antitrust approvals for the Transaction.
The Company will prepare and file with the U.S. Securities and Exchange Commission (the "SEC") a transaction statement on Schedule 13E-3, which will include a proxy statement of the Company. The Schedule 13E-3 will include a description of the Merger Agreement and contain other important information about the Transaction, the Company and the other participants in the Transaction.
Outlook for the Full Year 2013
For the full year 2013, based on current market and operating conditions, Pactera expects:
- Net revenues to be at least $668 million, compared to $673 million in 2012 on a pro-forma basis.
- Non-GAAP diluted net income per ADS to be at least $0.64, estimated based on 85.0 million weighted average equivalent ADSs outstanding.
These estimates are based on current market and operating conditions, are subject to change, and may be influenced positively or negatively by factors outside the Company's control, including but not limited to macroeconomic events in the markets in which the Company operates. See "Safe Harbor Statement" below for additional information regarding forward-looking statements.
Conference Call
The Company will host a corresponding conference call and live webcast to discuss the results at 7:00 AM Eastern Standard Time (EST) on Thursday, November 21, 2013 (8:00 PM Beijing/Hong Kong time). Please dial-in five minutes prior to the call to register and receive further instruction.
The dial-in details for the live conference call are as below:
- U.S. Toll Free Dial-in Number: +1.866.519.4004
- International Dial-in Number: +65.6723.9381
- Hong Kong Dial-in Number: +852.2475.0994
Passcode: 92003432
The conference call will be available live via webcast on the Investors section of Pactera's website at http://ir.pactera.com. The archive replay will be available on Pactera's website shortly after the call.
A dial-in replay of the conference call will be available until November 29, 2013:
- U.S. Toll Free Dial-in Number: +1.855.452.5696
- International Dial-in Number: + 61.2.8199.0299
Passcode: 92003432
About Pactera
Pactera Technology International Ltd. (NASDAQ: PACT), formed by a merger of equals between HiSoft Technology International Limited and VanceInfo Technologies Inc., is a global consulting and technology services provider strategically headquartered in China. Pactera provides world-class business / IT consulting, solutions, and outsourcing services to a wide range of leading multinational firms through a globally integrated network of onsite and offsite delivery locations in China, the United States, Europe, Australia, Japan, Singapore and Malaysia. Pactera's comprehensive services include business and technology advisory, enterprise application services, business intelligence, application development & maintenance, mobility, cloud computing, infrastructure management, software product engineering & globalization, and business process outsourcing.
For more information about Pactera, please visit www.pactera.com.
About Blackstone
The Blackstone Group L.P. (together with its affiliates, "Blackstone") is one of the world's leading investment and advisory firms, with 25 offices around the world. Through its different investment businesses, as of June 30, 2013, Blackstone had total assets under management of approximately US$229.6 billion, including US$53.3 billion in private equity funds. Through June 30, 2013, Blackstone's private equity funds have invested over US$43 billion in 175 transactions in a variety of industries and geographies in pursuit of Blackstone's investment objectives. Blackstone's private equity funds currently manage a global portfolio of investments in 75 companies, which in aggregate combine to represent approximately US$109 billion of revenues and over 734,000 employees. Our current global investment fund, Blackstone Capital Partners VI, is one of the largest private equity funds in the world with committed capital of US$16.2 billion.
Safe Harbor Statement
This news release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements, as well as the consideration of the going private proposal and the impact on the Company resulting from the success or failure of that proposal. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Pactera's control, which may cause Pactera's actual results, performance or achievements to differ materially from those in the forward-looking statements. 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, uncertainty relating to its clients' forming or plan to form joint venture with the Company's competitors, the economic slowdown in its principal geographic markets, the quality and portfolio of its service lines and industry expertise, and the availability of a large talent pool in China and inflation of qualified professionals' wages, as well as the PRC government's investment in infrastructure construction and adoption of various incentives in the IT service industry. Further information regarding these and other risks, uncertainties or factors is included in Pactera's filings with the U.S. Securities and Exchange Commission. All information provided in this news release is as of the date of this news release, and Pactera does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement Pactera's consolidated financial results presented in accordance with GAAP, Pactera uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE, change in fair value of contingent consideration payable for business acquisition, and compensation expenses related to acquisition. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP or as being comparable to results reported or forecasted by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for non-GAAP Financial Measures to Comparable GAAP Measures" set forth at the end of this earnings release.
Pactera believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. A limitation of using non-GAAP net income and non-GAAP diluted EPS is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE and change in fair value of contingent consideration payable for business acquisition and compensation expenses related to acquisition that have been and will continue to be, for the foreseeable future, a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures. The reconciliations of the forward-looking guidance for non-GAAP financial measures to the most directly comparable GAAP financial measures in the accompanying table include all information reasonably available to Pactera at the date of this earnings release.
For further information, please contact:
Tracy Zhou
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-5987-5138
E-mail: [email protected]
| PACTERA TECHNOLOGY INTERNATIONAL LTD. |
||||
| Condensed Consolidated Balance Sheets (Unaudited) |
||||
| (US dollars in thousands, except share data) |
||||
| September 30, 2013 |
December 31, 2012 |
|||
| ASSETS |
||||
| Current Assets |
||||
| Cash |
83,025 |
143,714 |
||
| Restricted cash |
1,322 |
6,112 |
||
| Term deposits |
31,141 |
58,485 |
||
| Short-term investment |
16,339 |
1,765 |
||
| Accounts receivable, net |
271,269 |
230,693 |
||
| Other current assets |
23,727 |
37,435 |
||
| Total current assets |
426,823 |
478,204 |
||
| Property, plant and equipment, net |
72,435 |
67,607 |
||
| Goodwill and intangible assets, net |
149,465 |
157,962 |
||
| Other long-term assets |
56,905 |
33,833 |
||
| Total assets |
705,628 |
737,606 |
||
| LIABILITIES AND EQUITY |
||||
| Current liabilities |
157,793 |
163,152 |
||
| Other liabilities |
16,254 |
32,130 |
||
| Total liabilities |
174,047 |
195,282 |
||
| Total shareholder's equity |
531,581 |
542,324 |
||
| Total liabilities and equity |
705,628 |
737,606 |
||
| Note: |
||||
| As of September 30,2013, there were 85,566,165 common shares (85,566,165 ADSs) issued and outstanding. |
||||
| As of December 31,2012, there were 88,312,068 common shares (88,312,068 ADSs) issued and outstanding. |
||||
| Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change. |
||||
| PACTERA TECHNOLOGY INTERNATIONAL LTD. |
|||||||
| Condensed Consolidated Statements of Operations (Unaudited) |
|||||||
| (US dollars in thousands, except for share, per share data) |
|||||||
| Three months ended September 30, |
Nine months ended September 30, |
||||||
| 2013 |
2012 |
2013 |
2012 |
||||
| Net revenues |
173,119 |
79,572 |
488,489 |
216,829 |
|||
| Cost of revenues |
(122,325) |
(51,270) |
(353,370) |
(140,013) |
|||
| Gross profit |
50,794 |
28,302 |
135,119 |
76,816 |
|||
| Operating expenses |
(48,410) |
(22,835) |
(138,091) |
(58,108) |
|||
| Income (Loss) from operations |
2,384 |
5,467 |
(2,972) |
18,708 |
|||
| Other (expenses)/ income |
(114) |
833 |
1,131 |
2,888 |
|||
| Gain on disposal of variable interest entity |
305 |
- |
305 |
- |
|||
| Exchange difference |
408 |
(173) |
(793) |
(254) |
|||
| Net income (loss) before income tax expenses |
2,983 |
6,127 |
(2,329) |
21,342 |
|||
| Income tax (expenses) benefit |
(341) |
(1,287) |
2,260 |
(3,569) |
|||
| Income (Loss) before earning in equity method investment |
2,642 |
4,840 |
(69) |
17,773 |
|||
| Earning in equity method investment |
15 |
- |
68 |
- |
|||
| Income (Loss) after earning in equity method investment |
2,657 |
4,840 |
(1) |
17,773 |
|||
| Add: Net profit attributable to noncontrolling interest |
- |
(174) |
- |
(666) |
|||
| Net income (loss) attributable to PacteraTechnology International Ltd. |
|||||||
| 2,657 |
4,666 |
(1) |
17,107 |
||||
| Net income (loss) per share |
|||||||
| Basic |
0.03 |
0.11 |
- |
0.41 |
|||
| Diluted |
0.03 |
0.11 |
- |
0.40 |
|||
| Weighted average shares used in calculating net income per common share |
|||||||
| Basic |
81,099,376 |
41,477,370 |
81,997,863 |
41,318,124 |
|||
| Diluted |
84,304,263 |
43,039,716 |
81,997,863 |
43,087,525 |
|||
| Net income (loss) per ADS |
|||||||
| Basic |
0.03 |
0.11 |
- |
0.41 |
|||
| Diluted |
0.03 |
0.11 |
- |
0.40 |
|||
| Weighted average ADS used in calculating net income per ADS |
|||||||
| Basic |
81,099,376 |
41,477,370 |
81,997,863 |
41,318,124 |
|||
| Diluted |
84,304,263 |
43,039,716 |
81,997,863 |
43,087,525 |
|||
| Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change. |
|||||||
| PACTERA TECHNOLOGY INTERNATIONAL LTD. |
||||||||
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) |
||||||||
| (US dollars in thousands) |
||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||
| 2013 |
2012 |
2013 |
2012 |
|||||
| Net income (loss) |
2,657 |
4,840 |
(1) |
17,773 |
||||
| Other comprehensive income, net of tax: |
||||||||
| Change in cumulative foreign exchange translation adjustment |
4,111 |
2,491 |
3,384 |
1,513 |
||||
| Comprehensive income |
6,768 |
7,331 |
3,383 |
19,286 |
||||
| Less: Comprehensive income attributable to noncontrolling interest |
||||||||
| - |
(195) |
- |
(673) |
|||||
| Comprehensive income attributable to Pactera Technology International Ltd. |
||||||||
| 6,768 |
7,136 |
3,383 |
18,613 |
|||||
| PACTERA TECHNOLOGY INTERNATIONAL LTD. |
||||||||||
| Condensed Consolidated Statements of Cash flows (Unaudited) |
||||||||||
| (In U.S. dollars in thousands) |
||||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||
| 2013 |
2012 |
2013 |
2012 |
|||||||
| Cash flows from operating activities: |
||||||||||
| Net income (loss) |
$ |
2,657 |
$ |
4,840 |
(1) |
17,773 |
||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||
| Provision(reverse) for doubtful accounts |
190 |
(119) |
209 |
(30) |
||||||
| Loss(gain) on disposal of property, plant and equipment |
938 |
(8) |
4,495 |
(52) |
||||||
| Depreciation |
3,601 |
1,343 |
10,120 |
4,141 |
||||||
| Change in fair value of foreign-currency forward contract |
114 |
(68) |
(32) |
(23) |
||||||
| Amortization of intangible assets |
2,549 |
1,555 |
7,906 |
3,763 |
||||||
| Amortization of land use right |
128 |
- |
381 |
- |
||||||
| Gain on disposal of VIE |
(305) |
- |
(305) |
- |
||||||
| Share-based compensation expenses |
5,292 |
1,417 |
17,613 |
5,223 |
||||||
| Changes in fair value of contingent consideration payable for M&A |
414 |
463 |
940 |
117 |
||||||
| Earnings in equity method investment |
(15) |
- |
(68) |
- |
||||||
| Changes in operating assets and liabilities: |
||||||||||
| Accounts receivable |
(1,370) |
(2,737) |
(38,614) |
(22,469) |
||||||
| Other current assets |
3,547 |
(552) |
(1,747) |
(2,131) |
||||||
| Other assets |
632 |
(696) |
(62) |
(934) |
||||||
| Accounts payable |
(2,333) |
(1,245) |
2,085 |
(2,521) |
||||||
| Other liabilities |
7,332 |
862 |
(8,596) |
178 |
||||||
| Net cash provided by (used in) operating activities |
23,371 |
5,055 |
- |
(5,676) |
3,035 |
|||||
| Cash flows from investing activities: |
||||||||||
| Term deposits |
(3,069) |
20,036 |
27,344 |
5,324 |
||||||
| Short-term investment |
(14,725) |
- |
(14,575) |
- |
||||||
| Purchase of property, plant and equipment |
(2,437) |
(1,052) |
(6,638) |
(3,381) |
||||||
| Purchase of buliding |
(13,542) |
(6,507) |
(14,975) |
(6,507) |
||||||
| Restricted cash |
181 |
(582) |
4,790 |
(788) |
||||||
| Deferred and contingent consideration paid for business acquisitions |
- |
(5,145) |
(2,746) |
(7,233) |
||||||
| Net cash (used in) provided by investing activities |
(33,592) |
6,750 |
- |
(6,800) |
(12,585) |
|||||
| Cash flows from financing activities: |
||||||||||
| Repayment of bank loan |
- |
(293) |
- |
(476) |
||||||
| Proceeds from issuance of common share |
497 |
129 |
3,089 |
1,399 |
||||||
| Deferred and contingent consideration paid for business acquisitions |
(2,616) |
(150) |
(21,334) |
(3,047) |
||||||
| Repurchase of common share |
- |
- |
(30,000) |
- |
||||||
| Net cash used in financing activities |
(2,119) |
(314) |
- |
(48,245) |
(2,124) |
|||||
| Effect of exchange rate changes |
265 |
571 |
32 |
305 |
||||||
| Net (decrease) increase in cash |
(12,075) |
12,062 |
- |
(60,689) |
(11,369) |
|||||
| Cash at beginning of period |
95,100 |
90,425 |
143,714 |
113,856 |
||||||
| Cash at end of period |
$ |
83,025 |
$ |
102,487 |
83,025 |
102,487 |
||||
| PACTERA TECHNOLOGY INTERNATIONAL LTD. |
||||||||
| Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures |
||||||||
| (US dollars in thousands, except per share data and percentages) |
||||||||
| Three months ended September 30, |
Nine months ended September 30, |
|||||||
| 2013 |
2012 |
2013 |
2012 |
|||||
| GAAP operating income (loss) |
2,384 |
5,467 |
(2,972) |
18,708 |
||||
| GAAP operating margin (loss) |
1.4% |
6.9% |
(0.6)% |
8.6% |
||||
| Adjustments: |
||||||||
| - Share-based compensation |
5,292 |
1,417 |
17,613 |
5,223 |
||||
| - Amortization of acquired intangible assets |
2,549 |
1,555 |
7,906 |
3,763 |
||||
| - Change in fair value of contingent consideration payable for M&A |
414 |
463 |
940 |
117 |
||||
| - Compensation expenses |
76 |
87 |
245 |
87 |
||||
| - Merger-related transaction and integration costs |
579 |
2,388 |
6,954 |
2,388 |
||||
| - Privatization-related costs |
4,251 |
- |
4,251 |
- |
||||
| - Land use right amortization expense |
128 |
- |
381 |
- |
||||
| Non-GAAP operating income |
15,673 |
11,377 |
35,318 |
30,286 |
||||
| Non-GAAP operating margin |
9.1% |
14.3% |
7.2% |
14.0% |
||||
| GAAP net income (loss) |
2,657 |
4,666 |
(1) |
17,107 |
||||
| GAAP net margin (loss) |
1.5% |
5.9% |
- |
7.9% |
||||
| Adjustments: |
||||||||
| - Share-based compensation |
5,292 |
1,417 |
17,613 |
5,223 |
||||
| - Amortization of acquired intangible assets |
2,549 |
1,555 |
7,906 |
3,763 |
||||
| - Change in fair value of contingent consideration payable for M&A |
414 |
463 |
940 |
117 |
||||
| - Compensation expenses |
76 |
87 |
245 |
87 |
||||
| - Merger-related transaction and integration costs, net of tax effect |
446 |
2,388 |
6,039 |
2,388 |
||||
| - Privatization-related costs |
4,251 |
- |
4,251 |
- |
||||
| - Gain on disposal of variable interest entity |
(305) |
- |
(305) |
- |
||||
| - Land use right amortization expense |
128 |
- |
381 |
- |
||||
| Non-GAAP net income |
15,508 |
10,576 |
37,069 |
28,685 |
||||
| Non-GAAP net margin |
9.0% |
13.3% |
7.6% |
13.2% |
||||
| Non-GAAP net income per ADS |
||||||||
| Basic |
0.19 |
0.25 |
0.45 |
0.69 |
||||
| Diluted |
0.18 |
0.25 |
0.44 |
0.67 |
||||
| Weighted average ADS used in calculating Non-GAAP net income per ADS |
||||||||
| Basic |
81,099,376 |
41,477,370 |
81,997,863 |
41,318,124 |
||||
| Diluted |
84,304,263 |
43,039,716 |
84,842,322 |
43,087,525 |
||||
| GAAP net income (loss) per ADS |
||||||||
| Basic |
0.03 |
0.11 |
- |
0.41 |
||||
| Adjustments: |
||||||||
| - Share-based compensation |
0.06 |
0.03 |
0.22 |
0.13 |
||||
| - Amortization of acquired intangible assets |
0.03 |
0.04 |
0.10 |
0.09 |
||||
| - Change in fair value of contingent consideration payable for M&A |
0.01 |
0.01 |
0.01 |
- |
||||
| - Merger-related transaction and integration costs, net of tax effect |
0.01 |
0.06 |
0.07 |
0.06 |
||||
| - Privatization-related costs |
0.05 |
- |
0.05 |
- |
||||
| - Gain on disposal of variable interest entity |
- |
- |
- |
- |
||||
| - Land use right amortization expense |
- |
- |
- |
- |
||||
| Non-GAAP net income per ADS |
||||||||
| Basic |
0.19 |
0.25 |
0.45 |
0.69 |
||||
| GAAP net income (loss) per ADS |
||||||||
| Diluted |
0.03 |
0.11 |
- |
0.40 |
||||
| Adjustments: |
||||||||
| - Share-based compensation |
0.06 |
0.03 |
0.21 |
0.12 |
||||
| - Amortization of acquired intangible assets |
0.03 |
0.04 |
0.10 |
0.09 |
||||
| - Change in fair value of contingent consideration payable for M&A |
- |
0.01 |
0.01 |
- |
||||
| - Merger-related transaction and integration costs, net of tax effect |
0.01 |
0.06 |
0.07 |
0.06 |
||||
| - Privatization-related costs |
0.05 |
- |
0.05 |
- |
||||
| - Gain on disposal of variable interest entity |
- |
- |
- |
- |
||||
| - Land use right amortization expense |
- |
- |
- |
- |
||||
| Non-GAAP net income per ADS |
||||||||
| Diluted |
0.18 |
0.25 |
0.44 |
0.67 |
||||
| Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change. |
||||||||
| Unaudited historical consolidated net revenues of Pactera for the three months ended September 30, 2013 |
Unaudited historical consolidated net revenues of Hisoft for the three months ended September 30, 2012 |
Unaudited historical consolidated net revenues of VanceInfo for the three months ended September 30, 2012 |
Unaudited Pro forma consolidated net revenues for the three months ended September 30, 2012 |
||
| Proforma Net Revenue by Service Lines |
|||||
| IT Services |
104,717 |
46,242 |
49,179 |
95,421 |
|
| - CPS |
39,484 |
17,380 |
12,748 |
30,128 |
|
| - ADM |
65,233 |
28,862 |
36,431 |
65,293 |
|
| R&D Services |
65,866 |
33,330 |
43,255 |
76,585 |
|
| BPO |
2,536 |
- |
3,806 |
3,806 |
|
| Total |
173,119 |
79,572 |
96,240 |
175,812 |
|
| - |
|||||
| Proforma Net Revenue by Industry |
|||||
| High Tech |
98,355 |
42,723 |
64,438 |
107,161 |
|
| BFSI |
47,902 |
22,069 |
18,434 |
40,503 |
|
| Manufacturing |
23,255 |
11,828 |
11,156 |
22,984 |
|
| Others |
3,607 |
2,952 |
2,212 |
5,164 |
|
| Total |
173,119 |
79,572 |
96,240 |
175,812 |
|
| Proforma Net Revenue by Location of Client's Headquarter |
|||||
| United States |
67,756 |
36,359 |
31,261 |
67,620 |
|
| Greater China |
67,414 |
18,169 |
49,318 |
67,487 |
|
| Europe |
16,862 |
4,728 |
8,639 |
13,367 |
|
| Japan |
12,195 |
14,235 |
4,268 |
18,503 |
|
| Asia South |
8,892 |
6,081 |
2,754 |
8,835 |
|
| Total |
173,119 |
79,572 |
96,240 |
175,812 |
|
| Note: |
|||||
| The accompanying unaudited pro forma net revenues for the three months ended September 30, 2012 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations. |
|||||
| Unaudited historical consolidated net revenues of Pactera for the nine months ended September 30, 2013 |
Unaudited historical consolidated net revenues of Hisoft for the nine months ended September 30, 2012 |
Unaudited historical consolidated net revenues of VanceInfo for the nine months ended September 30, 2012 |
Unaudited Pro forma consolidated net revenues for the nine months ended September 30, 2012 |
||
| Proforma Net Revenue by Service Lines |
|||||
| IT Services |
281,236 |
127,120 |
133,969 |
261,089 |
|
| - CPS |
99,849 |
47,756 |
34,189 |
81,945 |
|
| - ADM |
181,387 |
79,364 |
99,780 |
179,144 |
|
| R&D Services |
199,088 |
89,709 |
133,169 |
222,878 |
|
| BPO |
8,165 |
- |
9,955 |
9,955 |
|
| Total |
488,489 |
216,829 |
277,093 |
493,922 |
|
| Proforma Net Revenue by Industry |
|||||
| High Tech |
292,419 |
114,144 |
193,129 |
307,273 |
|
| BFSI |
123,047 |
62,434 |
47,723 |
110,157 |
|
| Manufacturing |
60,706 |
28,285 |
29,327 |
57,612 |
|
| Others |
12,317 |
11,966 |
6,914 |
18,880 |
|
| Total |
488,489 |
216,829 |
277,093 |
493,922 |
|
| Proforma Net Revenue by Location of Client's Headquarter |
|||||
| United States |
194,106 |
99,608 |
94,198 |
193,806 |
|
| Greater China |
186,045 |
50,374 |
135,118 |
185,492 |
|
| Europe |
46,145 |
14,112 |
28,895 |
43,007 |
|
| Japan |
37,687 |
41,395 |
12,044 |
53,439 |
|
| Asia South |
24,506 |
11,340 |
6,838 |
18,178 |
|
| Total |
488,489 |
216,829 |
277,093 |
493,922 |
|
| Note: |
|||||
| The accompanying unaudited pro forma net revenues for the nine months ended September 30, 2012 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations. |
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SOURCE Pactera Technology International Ltd.
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