Yucheng Technologies Reports Second Quarter Financial Results
BEIJING, Aug. 10 /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 June 30, 2010.
"In the second quarter, Yucheng began seeing in our financial results the impact of our restructuring initiatives. Along with the seasonality that has been a consistent factor in the second half of the year, we are expecting a better financial performance for the remainder of the year," said Mr. Hong Weidong, CEO of Yucheng Technologies.
"We closed the transaction to establish the joint venture with NTT Data on June 30, 2010, which is part of our continuous effort to divest non-core assets to refocus on Software & Solutions for the banking industry. We also are looking to divest our POS business in the near future, which we also expect will improve our bottom line," added Mr. Hong.
Second Quarter 2010 Financial Highlights
-- Fully diluted non-GAAP EPS was USD 0.09, as compared to USD 0.16 in the
second quarter of 2009 and loss of USD 0.03 in the first quarter of
2010.
-- Total net revenue declined 11.0% year-over-year to USD 13.5M, but
increased 42.4% compared with previous quarter.
-- SG&A expenses totaled USD 5.6M, a 2.6% decrease year-over-year
Business Outlook
Yucheng has continued to see strong demand for its Software & Solutions business during the second quarter of 2010 across all its solution lines, including Channel Solutions, Business Solutions and Management Solutions. More foreign banks are entering the Chinese market, and those that are already in the Chinese market are seeing their business growing rapidly. This has led to more immediate opportunities for our traditionally strong products, such as online banking, and potentially for other products in the future. As a result of the government stimulus package, banks in China also are offering more financial products to their customers, especially in the consumer market, such as personal finance loans and auto finance loans. Our leading loan management solutions are capitalizing on these evolving trends. The growing reputation of our loan management solutions also has led to several wins at two of our more significant customers, including a joint stock bank and a national policy bank.
We continued to focus on improving our business development methods during the second quarter. The number of RFPs in which we participated during the second quarter of 2010 increased by 44.4% compared with the same period of a year ago, and the number of RFPs that we won increased by 47.4%. The number of RFP in which we participated for our traditionally strong solutions, including e-banking, loan management, risk management, and business intelligence, remained the same as last year, but the number of RFPs won increased 36.4% in the second quarter year over year because we have become more careful in the selection of the potential projects on which we bid and on which we want to work.
In terms of client composition, we are continuing to develop and to grow new significant clients that are beyond our historical major customer base. Yucheng's strategy is to expand its IT capabilities and position itself as the trusted partner for the big four banks and the total solutions provider to SMBs in China. We are further segmenting the SMBs so that we can provide appropriate products to different customer segments. For the immediate term, we will allocate more resources to the tier two banks, large city commercial banks and large rural credit banks.
"We are seeing our financial results reflecting the impact of the restructuring initiatives we have been undertaking for the last few quarters. In addition, we are continuing our good practice on cost and expense control. 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.
Second 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 Second Quarter of 2010
(Numbers are in USD thousands, except shares outstanding, earnings per share
and percentages)
Q2 2010
CORE POS
% of % of
Amount Revenues Amount Revenues
Revenues 12,334 100.0% 1,132 100.0%
Software & Solutions 10,575 85.7% -- --%
POS -- --% 1,132 100%
Platform & Maintenance Services 1,759 14.3% -- --%
Cost of Revenues 6,114 49.6% 532 47%
Gross Profit 6,219 50.4% 601 53%
Operating Expenses 5,401 43.8% 705 62.2%
R&D 455 3.7% -- --%
SG&A 4,945 40.1% 705 62.2%
Income from Operations 819 6.6% (104) -9.2%
Net Income (GAAP) 1,706 13.8% (113) -10.0%
Amortization of Intangible Assets 43 0.3% -- --%
Non-GAAP Net Income 1,748 14.2% (113) -10.0%
Basic GAAP EPS 0.09 (0.01)
Diluted GAAP EPS 0.09 (0.01)
Basic Non-GAAP EPS 0.09 (0.01)
Diluted Non-GAAP EPS 0.09 (0.01)
Basic Weighted Average Common
Shares Outstanding 18,560,014 18,560,014
Diluted Weighted Average Common
Shares Outstanding 18,560,014 18,560,014
Q2 2009
CORE POS CORE POS
% of % of Y-O-Y Y-O-Y
Amount Revenues Amount Revenues Change Change
Revenues 14,153 100.0% 974 100.0% -12.9% 16.2%
Software &
Solutions 11,620 82.1% -- --% -9.0%
POS -- --% 974 100.0% 16.2%
Platform &
Maintenance Services 2,534 17.9% -- --% -30.6%
Cost of Revenues 6,205 43.8% 468 48.0% -1.5% 13.7%
Gross Profit 7,949 56.2% 507 52.0% -21.8% 18.5%
Operating Expenses 5,522 39.0% 767 78.7% -2.2% -8.1%
R&D 487 3.4% -- --% -6.4%
SG&A 5,035 35.6% 767 78.7% -1.8% -8.1%
Income from
Operations 2,427 17.1% (260) -26.7% -66.3% 60.0%
Net Income (GAAP) 2,774 19.6% (201) -20.6% -38.5% 43.4%
Amortization of
Intangible Assets 336 2.4% -- --% -87.3%
Non-GAAP Net Income 3,110 22.0% (201) -20.6% -43.8% 43.4%
Basic GAAP EPS 0.16 (0.01) -42.1% 46.7%
Diluted GAAP EPS 0.15 (0.01) -38.8% 43.6%
Basic Non-GAAP EPS 0.18 (0.01) -47.1% 46.7%
Diluted Non-GAAP EPS 0.17 (0.01) -44.0% 43.6%
Basic Weighted
Average
Common Shares
Outstanding 17,577,647 17,577,647 5.6% 5.6%
Diluted Weighted
Average Common
Shares
Outstanding 18,589,166 18,589,166 -0.2% -0.2%
Note: The United States dollar amounts in the above table are calculated
based on an exchange rate of USD 1.00 = RMB 6.8319 for June 30, 2009
and USD 1.00 = RMB 6.7909 for June 30, 2010.
Revenues: Yucheng reported consolidated net revenues of USD 13.5M for the second quarter 2010, a decrease of 11.0% compared to the second quarter of 2009 and a 36.9% increase from the first quarter of 2010.
-- Software & Solutions: In the second quarter, Software & Solutions
registered USD 10.6M of revenues, a 9.0% decrease compared to the
second quarter of 2009, and a 42.4% increase compared to the first
quarter of 2010. Software & Solutions accounted for 78.5% of total net
revenues.
-- Platform & Maintenance Services: Net revenues totaled USD 1.8M in the
second quarter or 13.1% of total net revenues. Platform & Maintenance
Services revenues decreased by 30.6% year over year and increased 10.2%
sequentially.
-- POS: POS generated revenues of USD 1.1M in the second quarter,
representing 8.4% of total net revenues. Our POS revenues increased
16.2% compared with the second quarter of 2009 and increased 39.0%
compared to the first quarter of 2010.
Gross Profits: In the second quarter of 2010, Yucheng registered a gross profit of USD 6.8M, a decrease of 19.3% compared to the second quarter of 2009 and an increase of 45.5% compared to the first quarter of 2010. Calculated on a net revenue basis gross margins for the second quarter were 50.6%, down from 55.9% in the second quarter of 2009 and up from 47.7% in the first quarter of 2010 The year over year decline in gross margins is mainly attributable to a decline in the underlying Platform & Maintenance Services gross margin and lower licensing fees.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A expenses decreased 2.6% from 5.8M in the second quarter of 2009 to 5.6M in the same quarter of 2010. Consolidated SG&A as a percentage of total net revenue was 42.0% in the second quarter, as compared to 38.4% in the second quarter 2009 and 47.4% in the first quarter of 2010.
-- SG&A as a percentage of net revenue for the Core business was 40.1% as
compared to 35.6% in the second quarter of 2009 and 43.2% in the first
quarter of 2010.
-- POS SG&A as a percentage of net revenues was 62.2% in the second
quarter of 2010 as compared to 78.7% in the second quarter of 2009 and
93.7% in the first quarter of 2010.
Net Income: Yucheng recorded non-GAAP net income of USD 1.6M in the second quarter 2010, a decrease of 43.8% compared to the second quarter of 2009 and an increase of 384.6% compared to the first quarter of 2010. GAAP net income was USD 1.6M for the current quarter, a decrease of 38.1% compared to the second quarter of 2009 and an increase of 358.2% compared to the first quarter of 2010. Operating margins for the quarter were 5.3% compared to 14.3% in the second quarter of 2009. The year over year decline in operating margins is attributable mainly to declining revenues and gross margins in Platform & Maintenance Services.
Earnings per Share: In the second quarter 2010, Yucheng's EPS for fully diluted shares on a consolidated basis were USD 0.09 (non-GAAP) and USD 0.09 (GAAP) compared to USD 0.16 (non-GAAP) and USD 0.14 (GAAP) in the second quarter of 2009.
-- Core: Fully diluted EPS for the second quarter 2010 were USD 0.09 (non-
GAAP) and USD 0.09 (GAAP) compared to USD 0.17 (non-GAAP) and USD 0.15
(GAAP) in the second quarter of 2009. Excluding the gain of USD 0.06
from the asset transfer to the Yuxin Data, our joint venture with NTT
Data for e-Banking ASP business, we would have made USD 0.03 in the
quarter on both a GAAP and non-GAAP basis.
-- POS: On both a GAAP and non-GAAP basis, the fully diluted 2010 EPS
impact of POS was USD 0.01 (loss) compared to USD0.01 (loss) in the
second quarter of 2009
Cash: Yucheng's cash position in the second quarter 2010 was USD 13.0M compared to USD 32.8M in the second quarter of 2009 and USD 19.8M in the first quarter of 2010.
Accounts Receivable: In the second quarter 2010, accounts receivable totaled USD 29.8M compared to USD 32.4M in the second quarter of 2009 and USD 27.5M in the first quarter of 2010. The gross basis DSOs was 179 days for the current quarter, as compared to 212 days in the second quarter 2009 and 225 days in the first quarter of 2010. When calculated on a pro forma basis, which accounts for the complete impact of agency services contracts, DSOs totaled 123 days in the second quarter, compared to 143 days in the same period last year and 171 days in the first quarter of 2010.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2010 and March 31, 2010
2010.6.30 2010.03.31
USD USD
Assets
Current assets:
Cash and cash equivalent 12,965,241 19,811,872
Trade accounts receivable, net 29,808,060 27,468,907
(including bad debt provision of
US$ 2,687,160 on December 31, 2009)
Costs and estimated earnings in
excess of billings on uncompleted
contracts 16,153,615 14,847,873
Amounts due from related companies 2,406,138 429,382
Inventories 2,003,973 5,144,164
Pre-contract costs 4,736,122 3,399,440
Other current assets 7,449,961 5,772,951
Total current assets 75,523,110 76,874,589
Investments in and advances to
affiliates 4,310,204 1,108,967
Fixed assets 14,769,309 14,388,062
Less: Accumulated depreciation (6,003,030) (5,564,190)
Fixed assets, net 8,766,279 8,823,872
Intangible assets, net 4,807,313 4,601,650
Goodwill 27,832,776 27,688,440
Deferred income taxes - Non-current 3,235,287 3,176,990
Total assets 124,474,969 122,274,508
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
(continued)
June 30, 2010 and March 31, 2010
2010.6.30 2010.03.31
USD USD
Liabilities and stockholders' equity
Current liabilities:
Short term loan 14,725,589 11,719,379
Obligations under capital leases 181,125 264,556
Trade accounts payables 7,329,359 8,950,666
Billings in excess of costs and
estimated earnings on uncompleted
contracts 1,591,776 3,738,683
Employee and payroll accruals 2,167,879 1,881,760
Dividends payable to ex-owners 583,191 580,167
Deemed distribution to ex-owners 0 0
Outstanding payment in relation to
business acquisitions 17,725 17,633
Income taxes payable 1,674,162 1,715,435
Other current liabilities 6,344,890 5,535,245
Deferred income taxes - Current 410,389 325,601
Total current liabilities 35,026,085 34,729,125
Obligations under capital leases 0 18,984
Deferred income taxes 174,554 195,446
Total liabilities 35,200,639 34,943,555
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;
17,580,935 and 18,560,014 shares
issued and outstanding as of June
30, 2009 and September 30, 2009 2,946,296 2,931,017
Additional paid-in capital 56,798,609 56,504,062
Reserves 6,351,936 6,318,996
Retained earnings 22,573,296 20,872,390
Accumulated other comprehensive loss (369,756) (327,508)
Minority interests 973,950 1,031,996
Total stockholders' equity 89,274,331 87,330,953
Liabilities and stockholders' equity 124,474,970 122,274,508
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended June 30, 2010 and 2009
2010 Q2 2009 Q2
USD USD
Revenues:
Software & solutions 10,574,884 11,619,684
Platform & maintenance services (net) 1,758,620 2,533,765
POS 1,132,341 974,262
Total revenues (non-GAAP) 13,465,845 15,127,711
Platform pass-through costs 1,085,193 43,221
Total revenues 14,551,038 15,170,932
Cost of revenues:
Cost of revenues (net) (6,646,105) (6,672,408)
Platform pass-through costs (1,085,193) (43,221)
Total cost of revenues (7,731,298) (6,715,629)
Gross profit 6,819,740 8,455,303
Operating expenses:
Research and development (455,228) (486,571)
Selling and marketing (1,627,078) (1,775,175)
General and administrative (4,022,827) (4,027,008)
Total operating expenses (6,105,133) (6,288,754)
Operating income 714,607 2,166,549
Other income (expenses):
Interest income 9,875 12,585
Interest expense (190,200) (135,451)
Investment gain (loss) (69,609) 564,852
Other income (expense), net 1,101,607 (11,649)
Income (loss) before income tax and
minority interests 1,566,280 2,596,886
Income tax benefit (expense) (37,609) (97,067)
Minority interests 63,426 74,080
Net income (loss)(GAAP) 1,592,097 2,573,899
Amortization for intangible assets 42,545 335,654
Net income (loss)(non-GAAP) 1,634,642 2,909,553
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended June 30, 2010 and 2009
2010 Q2 2009 Q2
USD USD
Cash flows from operating activities:
Net income (loss) 1,592,100 2,573,898
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 669,306 451,050
Amortization 393,542 525,583
Bad debt provision 0 0
Loss on disposal fixed assets 383,433 10,247
Loss (gain) on disposal of affiliates 2,142 (410,572)
Minority interests (63,426) (74,080)
Share of equity in
affiliate company 67,467 (78,075)
Income from short-term investment 0 0
Shares issued to independent directors 0 0
Decrease (increase) in trade accounts
receivable, net (2,195,961) 5,927,723
Decrease (increase) in costs and
estimated earnings in excess of
billing on uncompleted contracts (1,228,342) (3,327,586)
Decrease (increase) in due from
related parties (1,974,518) (561,926)
Decrease (increase) in inventories 3,167,006 (3,148,409)
Decrease (increase) in
precontract costs (1,318,962) 219,296
Decrease (increase) in
other current assets (962,356) (2,218,787)
Decrease (increase) in
deferred income taxes
assets - Current 1,112 0
Decrease (increase) in deferred
income taxes assets - Non-current (41,736) (358,416)
Increase (decrease) in
trade accounts payable (1,667,965) 831,404
Increase (decrease) in billings in
excess of costs and estimated
earnings on uncompleted contracts (2,166,397) 43,480
Increase (decrease) in employee and
payroll accruals 276,310 (86,686)
Increase (decrease) in
income taxes payable (50,215) 375,444
Increase (decrease) in
other current liabilities 616,352 3,003,748
Increase (decrease) in
deferred income taxes liabilities 61,179 (42,715)
Net cash provided by
(used in) operating activities (4,439,929) 3,687,036
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(continued)
Three months ended June 30, 2010 and 2009
2010 Q2 2009 Q2
USD USD
Cash flows from investing activities:
Capital expenditures (1,425,906) (1,901,342)
Payment of purchase of subsidiaries 0 0
Advances to affiliates 0 0
New investment of joint venture (4,329,323) (943,676)
Proceeds from disposal of fixed assets 339 11,478
Collection of advances to investments under
equity method 0 0
Proceeds from disposal of investments under
equity method 381,527 0
Net cash provided by (used in)
investing activities (5,373,363) (2,833,540)
Cash flows from financing activities:
Deemed distribution 0 0
Payment of capital leases (81,734) (108,748)
Dividends paid to ex-owners 0 0
Proceeds from bank borrowings 2,945,118 10,032,348
Repayments of bank borrowings 0 0
Net cash provided by financing activities 2,863,384 9,923,600
Net increase in cash and cash equivalents (6,949,908) 10,777,096
Cash at beginning of period 19,811,872 22,020,835
Cash at end of period 12,861,964 32,797,931
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 earnings 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 June 30, 2010 on Tuesday, August 10, 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.
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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