Yucheng Technologies Reports First Quarter Financial Results
BEIJING, May 19 /PRNewswire-Asia-FirstCall/ -- Yucheng Technologies Limited (Nasdaq: YTEC), a leading provider of IT Solutions to the financial services industry in China, today announced unaudited financial results for the three-month period ended March 31, 2010.
"In the first quarter, Yucheng continued its initiative to improve its internal operations and execution capability. We are starting to see the initial results of this initiative, including a decline in operating expenses and a higher winning ratio on project RFPs in the first quarter compared with the same period last year, especially for our traditionally strong products such as e-banking, loan management, business intelligence, and risk management." said Mr. Hong Weidong, CEO of Yucheng Technologies.
"Despite the improvements, we are still facing the same challenges we had experienced late last year, and we believe it will take another couple of quarters to complete our ongoing restructuring to see the full benefits of our current restructuring initiatives." Added Mr. Hong.
First Quarter 2010 Financial Highlights
-- Software & Solutions net revenue totaled USD 7.4M, an 18.5% decrease
year-over-year.
-- Total net revenue declined 14.1% year-over-year to USD 9.8M.
-- SG&A expenses totaled USD 4.7M, a 6.9% decrease year-over-year
-- Fully diluted non-GAAP EPS was loss of USD 0.03, as compared to USD
0.07 in the first quarter of 2009.
Business Outlook
Yucheng has seen strong demand for its Software & Solutions business during the first quarter of 2010 across its solution lines including, Channel Solutions, Business Solutions and Management Solutions. Through the recent internal restructuring, Yucheng has demonstrated its ability to re-solidify its leading position in e-banking, call center, loan management and risk management solutions. Increasing demand from banking customers for more features for the existing software system such as e-banking and loan management solutions, coupled with more international banks are entering China or expanding their presence in China, has led more opportunities for Yucheng's e-banking and call center solutions. Increasing awareness of the risk exposure on loan origination and expanding loan product lines has generated a boom for Yucheng's leading loan management solutions. To further improve the exact risk exposure and in turn improve the capital efficiency, many banks are spending more on business intelligence and risk management solutions as a key IT investment.
As a demonstration of the progress we made in the first quarter on the business development front, the number of RFPs we participated in the first quarter of 2010 increased by 46.4% year over year while the winning RFPs increased by 53.3% indicating our winning ratio is also improving. The trend is even better for our traditionally strong solutions including e-banking, loan management, risk management, and business intelligence, where RFP participation increase was 55.6% and winning RFP increase was 150% indicating over 70% winning ratio in the first quarter of 2010.
In terms of client composition, we are continuing to develop and grow new significant clients beyond our historical major customer base. Yucheng's strategy is to expand its IT capabilities and position itself as the trusted partner for big four banks and total solutions provider to SMBs in China.
"Although our first quarter financial results fell short of management expectation, we have been seeing strong demand for our software solutions business in the first quarter. On the other hand, we continue to do a good job on better controlling our operating expenses. As a result, we are reaffirming our financial guidance for the whole year, with revenues in the range of USD 65.0 million and USD 68.4 million and Non-GAAP EPS range of USD 0.30 and USD 0.36." said Mr. Steve Dai, CFO of Yucheng.
First Quarter Financial Results
The table below is provided to give greater insight into our POS business, beyond what is available in our consolidated financial statements. The revenue and cost of revenue numbers on the following page are provided on a net presentation basis.
Summary of Selected Unaudited Financial Results for the First Quarter of 2010
(Numbers are in USD thousands, except shares outstanding, earnings per share
and percentages)
Q1 2010
CORE POS
% of % of
Amount Revenues Amount Revenues
Revenues 9,020 100% 814 100%
Software & Solutions 7,424 82.3% 0 --%
POS 0 --% 814 100%
Platform & Maintenance
Services 1,596 17.7% 0 --%
Cost of Revenues 4,617 51.2% 531 65.2%
Gross Profit 4,403 48.8% 284 34.8%
Operating Expenses 4,408 48.9% 763 93.7%
R&D 508 5.6% 0 --%
SG&A 3,900 43.2% 763 93.7%
Income from Operations (5) -0.1% (480) -58.9%
Net Income (GAAP) (138) -1.5% (479) -58.8%
Amortization of
Intangible Assets 42 0.5% 0 --%
Non-GAAP Net Income (95) -1.1% (479) -58.8%
Basic GAAP EPS (0.01) (0.03)
Diluted GAAP EPS (0.01) (0.03)
Basic Non-GAAP EPS (0.01) (0.03)
Diluted
Non-GAAP EPS (0.01) (0.03)
Basic Weighted
Average Common
Shares
Outstanding 18,560,014 18,560,014
Diluted Weighted
Average Common
Shares
Outstanding 18,560,014 18,560,014
Q1 2009
CORE POS CORE POS
% of % of Y-O-Y Y-O-Y
Amount Revenues Amount Revenues Change Change
Revenues 10,587 100% 860 100% -14.8% -5.3%
Software &
Solutions 9,114 86.1% 0 0% -18.5%
POS 0 0% 860 100% -5.3%
Platform &
Maintenance
Services 1,473 13.9% 0 0% 8.3%
Cost of
Revenues 4,811 45.4% 489 56.8% -4.0% 8.5%
Gross Profit 5,777 54.6% 371 43.2% -23.8% -23.6%
Operating
Expenses 4,732 44.7% 795 92.3% -6.8% -4.0%
R&D 517 4.9% 0 0% -1.8%
SG&A 4,214 39.8% 795 92.3% -7.4% -4.0%
Income from
Operations 1,045 9.9% (423) 49.2% -100.5% -13.4%
Net
Income(GAAP) 1,161 11% (246) 28.6% -111.8% -94.8%
Amortization of
Intangible
Assets 335 3.2% 0 0% -87.4%
Non-GAAP
Net Income 1,497 14.1% (246) 28.6% -106.4% -94.8%
Basic
GAAP EPS 0.07 (0.01) -107.3% -158.2%
Diluted
GAAP EPS 0.06 (0.01) -108.5% -158.2%
Basic
Non-GAAP EPS 0.09 (0.01) -108.2% -158.2%
Diluted
Non-GAAP EPS 0.08 (0.01) -109.3% -158.2%
Basic Weighted
Average Common
Shares
Outstanding 17,566,898 17,566,898 5.7% 5.7%
Diluted Weighted
Average Common
Shares
Outstanding 18,691,852 18,691,852 -0.7% -0.7%
Note: The United States dollar amounts in the above table are calculated
based on an exchange rate of USD 1.00 = RMB 6.8359 for March 31,
2009 and USD 1.00 = RMB 6.8263 for March 31, 2010.
Revenues: Yucheng reported consolidated non-GAAP revenues of USD 9.8M for the first quarter 2010, a decrease of 14.1% compared to the first quarter of 2009 and a 6.6% decrease from the fourth quarter of 2009.
-- Software & Solutions: In the first quarter, Software & Solutions
registered USD 7.4M of revenues, a 18.5% decrease compared to the first
quarter of 2009, and a 0.4% decrease compared to the fourth quarter of
2009. Software & Solutions accounted for 75.5% of consolidated revenue.
-- Platform & Maintenance Services: revenues totaled USD 1.6M in the
first quarter or 16.2% of consolidated revenue. Platform & Maintenance
Services revenues increased by 8.3% year over year and declined 24.5%
sequentially.
-- POS: POS generated revenues of USD 0.8M in the first quarter,
representing 8.3% of consolidated revenue. Our POS revenues decreased
5.3% compared with the first quarter of 2009 and 15.2% compared to the
fourth quarter of 2009.
Gross Profits: In the first quarter of 2010, Yucheng registered a gross profit of USD 4.7M, a decrease of 23.8% compared to the first quarter of 2009 and an increase 98.7% compared to the fourth quarter of 2009. During the first quarter of 2010, Software and Solutions gross margin had remained stable and contributed 80.9% to total gross profit, as compared to 79.6% in the first quarter of 2009.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A expenses decreased 6.9% from 5.0M in the first quarter of 2009 to 4.7M in the same quarter of 2010. Consolidated SG&A as a percentage of revenue was 47.4% in the first quarter, as compared to 43.8% in the first quarter 2009 and 96.4% in the fourth quarter of 2009.
-- SG&A as a percentage of revenue for the Core business was 43.2% as
compared to 39.8% in the first quarter of 2009 and 97.0% in the fourth
quarter of 2009.
-- POS SG&A as a percentage of net revenues was 93.7% in the first quarter
of 2010 as compared to 92.3% in the first quarter of 2009 and 90.9% in
the fourth quarter of 2009.
Net Income: Yucheng recorded non-GAAP net income of USD -0.6M in the first quarter 2010, a decrease of 145.9% compared to the first quarter of 2009. GAAP net income was USD -0.6M for the quarter, a decrease of 167.4% compared to the first quarter of 2009.
Earnings per Share: In the first quarter 2010, Yucheng's EPS for fully diluted shares on a consolidated basis were USD -0.03 (non-GAAP) and USD -0.03 (GAAP) compared to USD 0.07 (non-GAAP) and USD 0.05 (GAAP) in the first quarter of 2009.
-- Core: Fully diluted EPS for the first quarter 2010 grew to USD -0.01
(non-GAAP) and USD -0.01 (GAAP) compared to USD 0.08 (non-GAAP) and USD
0.06 (GAAP) in the first quarter of 2009.
-- POS: On both a GAAP and non-GAAP basis, the fully diluted 2010 EPS
impact of POS was USD -0.03 compared to USD -0.01 in the first quarter
of 2009
Cash: Yucheng's cash position in the first quarter 2010 was USD 19.8M compared to USD 22.0M in the first quarter of 2009 and USD 36.1M in the fourth quarter of 2009.
Accounts Receivable: In the first quarter 2010, accounts receivable totaled USD 27.5M compared to USD 38.3M in the first quarter of 2009 and USD 21.7M in the fourth quarter of 2009. The gross basis DSOs was 225 days for the current quarter, as compared to 251 days in the first quarter 2009. When calculated on a pro forma basis, which accounts for the complete impact of agency services contracts, DSOs totaled 171 days in the first quarter, compared to 231 days in the same period last year.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2010 and December 31, 2009
Assets 2010.3.31 2009.12.31
USD USD
Current assets:
Cash and cash equivalent 19,811,872 36,111,587
Trade accounts receivable, net 27,468,907 21,671,700
Costs and estimated earnings in
excess of billings on uncompleted
contracts 14,847,873 15,477,595
Amounts due from related companies 429,382 248,659
Inventories 5,144,164 496,943
Pre-contract costs 3,399,440 1,739,711
Other current assets 5,772,949 5,609,220
Total current assets 76,874,587 81,355,415
Investments in and advances to
affiliates 1,108,967 1,108,659
Fixed assets 14,388,062 14,333,310
Less: Accumulated depreciation (5,564,190) (4,938,874)
Fixed assets, net 8,823,872 9,394,435
Intangible assets, net 4,601,650 4,429,924
Goodwill 27,688,440 27,680,735
Deferred income taxes - Non-current 3,176,990 3,212,122
Total assets 122,274,507 127,181,291
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets(Continued)
March 31, 2010 and December 31, 2009
2010.3.31 2009.12.31
USD USD
Liabilities and stockholders' equity
Current liabilities:
Short term loan 11,719,379 11,716,118
Obligations under capital leases 264,556 334,275
Trade accounts payables 8,950,666 13,767,228
Billings in excess of costs and
estimated earnings on uncompleted
contracts 3,738,683 2,059,891
Employee and payroll accruals 1,881,760 523,288
Dividends payable to ex-owners 580,167 580,005
Deemed distribution to ex-owners 0 0
Outstanding payment in relation to
business acquisitions 17,633 253,004
Income taxes payable 1,715,435 1,703,762
Other current liabilities 5,535,245 7,734,131
Deferred income taxes - Current 325,601 203,352
Total current liabilities 34,729,125 38,875,056
Obligations under capital leases 18,984 46,064
Deferred income taxes 195,446 215,392
Total liabilities 34,943,555 39,136,512
Stockholders' equity
Preferred stock, $0.0001 par value,
authorized 2,000,000 shares and none
issued; Common stock, $0.0001 par
value, authorized 60,000,000 shares;
17,575,685 and 18,560,014 shares
issued and outstanding as of
December 31, 2009 and March 31, 2010 2,931,017 2,930,201
Additional paid-in capital 56,504,062 56,488,339
Reserves 6,318,996 6,317,238
Retained earnings 20,872,390 21,483,132
Accumulated other comprehensive loss (327,508) (326,639)
Minority interests 1,031,996 1,152,509
Total Stockholders' equity 87,330,953 88,044,779
Liabilities and Stockholders' equity 122,274,507 127,181,291
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended March 31, 2010 and March 31, 2009
2010 Q1 2009 Q1
USD USD
Revenues:
Software & Solutions 7,423,677 9,114,122
Platform & Maintenance Services (net) 1,595,918 1,473,367
POS 814,361 860,375
Total revenues (non-GAAP) 9,833,957 11,447,864
Platform pass-through costs 0 2,779,078
Total revenues 9,833,957 14,226,942
Cost of revenues:
Cost of revenues (net) (5,147,893) (5,299,852)
Platform pass-through costs 0 (2,779,078)
Total cost of revenues (5,147,893) (8,078,930)
Gross profit 4,686,064 6,148,012
Operating expenses:
Research and Development (507,825) (517,468)
Selling and marketing (1,487,368) (1,706,816)
General and administrative (3,175,975) (3,302,150)
Total operating expenses (5,171,169) (5,526,434)
Income from Operating (485,105) 621,578
Other income (expenses):
Interest income 13,204 19,315
Interest expense (62,030) (22,786)
Investment gain (loss) 0 (135,274)
Other income (expense), net (102) (9,527)
Income before income tax and minority
interests (534,033) 473,306
Income tax benefit (expense) (203,521) 295,665
Minority interests 120,833 146,271
Net income (GAAP) (616,721) 915,242
Amortization for intangible assets 42,325 335,457
Net income (non-GAAP) (574,396) 1,250,699
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2009 and 2010
2010 Q1 2009 Q1
USD USD
Cash flows from operating activities:
Net income adjustments to reconcile net
income to net cash provided by (used in)
operating activities: (616,721) 915,242
Depreciation 553,119 533,372
Amortization 282,415 533,635
Loss on disposal fixed assets 956 94
Loss (gain) on disposal of affiliates 0 1,921
Minority interests (120,833) (146,270)
Share of equity in affiliate company 0 146,719
Decrease (increase) in trade accounts
receivable, net (5,791,174) 2,749,383
Decrease (increase) in costs and estimated
earnings in excess of billing on
uncompleted contracts 634,030 (1,984,370)
Decrease (increase) in due from related
parties (180,654) 141,795
Decrease (increase) in inventories (4,647,082) 327,988
Decrease (increase) in precontract costs (1,659,244) (278,645)
Decrease (increase) in other current assets (153,224) 435,781
Decrease (increase) in deferred income taxes
assets - Current 1,106 0
Decrease (increase) in deferred income taxes
assets - Non-current 36,026 (410,025)
Increase (decrease) in trade accounts
payable (4,820,394) (12,350,704)
Increase (decrease) in billings in excess of
costs and estimated earnings on uncompleted
contracts 1,678,219 (466,156)
Increase (decrease) in employee and payroll
accruals 1,358,326 (1,813)
Increase (decrease) in income taxes payable 11,199 184,740
Increase (decrease) in other current
liabilities (1,956,286) (1,948,612)
Increase (decrease) in deferred income taxes
liabilities 102,187 (77,364)
Net cash provided by (used in) operating
activities (15,288,032) (11,693,289)
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Three months ended March 31, 2009 and 2010
2010 Q1 2009 Q1
USD USD
Cash flows from investing activities:
Capital expenditures (660,429) (1,021,535)
Payment of purchase of subsidiaries (235,442) (219,430)
Long-term investments 0 (245,004)
Proceeds from disposal of fixed
assets 53 0
Proceeds from disposal of sharehold
of affiliates 0 27,336
Proceeds from disposal of subsidiary,
net of cash disposed 0 210,653
Net cash provided by (used in)
investing activities (895,818) (1,247,980)
Cash flows from financing activities:
Payment of capital leases (115,865) (116,914)
Proceeds from bank borrowings 8,789,535 8,777,191
Repayments of bank borrowings (8,789,535) (8,777,191)
Dividends paid to ex-owners 0
Net cash provided by financing
activities (115,865) (116,914)
Net increase in cash and cash
equivalents (16,299,715) (13,058,183)
Cash at beginning of period 36,111,587 35,079,018
Cash at end of period 19,811,872 22,020,835
Non-GAAP Disclosure
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Yucheng's management has reported revenues, net income and earning per share on a non-GAAP basis. Each of the terms as used by Yucheng is defined as follows:
Non-GAAP revenue, or revenues recognized on a net basis, is revenue from the resale of third-party hardware and software recognized net of the associated cost of revenue.
Non-GAAP net income represents net income reported in accordance with GAAP, adjusted for amortization of intangible assets resulting from the accounting treatment of the acquisition of Beijing e-Channels Century Technology Co., Ltd.
Non-GAAP earnings per share represents non-GAAP net income divided by the number of shares used in computing basic and diluted earnings per share in accordance with GAAP.
Management of Yucheng believes that these non-GAAP revenue, net income and earnings per share measures are useful for understanding and assessing Yucheng's underlying business performance and operating trends, and expects to report net income on a non-GAAP basis using a consistent method on a quarterly basis going forward. These non-GAAP financial measures also facilitate management's internal comparisons to Yucheng's historical performance and liquidity. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
Management of Yucheng notes that these measures may not be calculated on the same basis as similar measures used by other companies. Please find a reconciliation of non-GAAP figures to GAAP figures in the summary of financial information presented above.
Conference Call and Replay Information
Management will conduct a conference call to discuss the financial results for the three-month period ended March 31, 2010 on Wednesday, May 19, 2010 at 8:00AM EDT/ 8:00PM BJT.
To participate, please dial one of the local access numbers, listed below, ten minutes prior to the scheduled start of the call. The conference call identification number is 437257.
US +1 866 652 5200
China Toll Free Number: 800 888 0221
China Toll Number: 400 810 0025
Hong Kong Toll Number: +852 8306 5051
All Other Participants: +86 10 5851 1520
A recording of the call will be accessible within 48 hours via Yucheng's website at http://www.yuchengtech.com/english/success.php?classid=41 .
About Yucheng Technologies Limited
Yucheng Technologies Limited (NASDAQ: YTEC) is a leading IT service provider to the Chinese financial service providers. Headquartered in Beijing, China, Yucheng services clients from its nationwide network in 23 cities and approximately 2,200 employees. Yucheng provides a comprehensive suite of IT solutions to Chinese Banks including: (i) Channel Solutions, such as e-banking and call centers; (ii) Business Solutions, such as core banking systems and loan management; and (iii) Management Solutions, such as risk analytics and business intelligence. Yucheng is also a leading third-party provider of POS Merchant Acquiring Services in partnership with banks in China.
Safe Harbor Statement
This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward looking statements are statements that are not historical facts. Forward-looking statements generally can be identified by the use of forward looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project" or "continue" or the negative thereof or other similar words. Such forward-looking statements, based upon the current beliefs and expectations of Yucheng's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: current dependence on the PRC banking industry demand for the products and services of Yucheng; competition from other service providers in the PRC and international consulting firms; the ability to update and expand product and service offerings; retention and hiring of qualified employees; protection of intellectual property; creating and maintaining quality product offerings; operating a business in the PRC with its changing economic and regulatory environment; and the other relevant risks detailed in Yucheng filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Yucheng assumes no obligation to update the information contained in this press release.
For Further Information
Steve Dai
Tel: +86-10-5913-7889
Email: [email protected]
SOURCE Yucheng Technologies Limited
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