BEIJING, May 12 /PRNewswire-Asia/ -- 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, 2009.
First Quarter 2009 Financial Highlights
-- Software & Solutions net revenue totaled USD 9.1M, a 106.7% increase
year-over-year.
-- Total net revenue grew 42.1% year-over-year to USD 11.4M.
-- Fully diluted non-GAAP EPS was USD 0.07, as compared to USD 0.09 in the
first quarter of 2008.
-- Yucheng had USD 22.0M in cash, compared to USD 14.5M in the first
quarter of 2008.
First quarter performance met with Management’s expectations. During the quarter, Yucheng deployed or began preparations for several core banking solutions for small to medium-sized banks (SMBs), including Shanxi Rural Credit Union. These solutions are the key platform that run the banks’ operations and help increase efficiency. Yucheng also began deployment of a credit management information system for Fujian Rural Credit Union, which will integrate inter-branch data and systematize the decision-making process. Previously, the Company has developed similar management information systems for China Citic Bank and Dongguan Bank. During the quarter, Yucheng also announced four customized e-banking solutions, including a Phase II project for Bank of East Asia, and added another banking client to the E-Banking ASP platform. As a total solutions provider, Yucheng is well positioned to expand these existing relationships into cross selling opportunities for our broad range of products.
Business Outlook
Yucheng’s key initiative in 2009 is to continue to increase the percentage of revenues from the sale and deployment of Software & Solutions. We have focused our sales and marketing efforts on generating higher demand for key solutions, such as Loan Management, Business Intelligence, and e-Banking, where Yucheng is a market leader. Loan management is critical in the current environment because it supports merit based decision-making and correlates borrower profiles with loan payment capabilities. With the dramatic increase in loans this year and upcoming regulatory changes, business intelligence solutions are increasingly needed to support banks through the aggregation and interpretation of bank-wide data. Many banks are seeking e-banking solutions to lock-in customers through unique features, while lowering the overall cost of customer service. The demand for these key solutions is particularly strong in the previously underserved SMB market, which has been a focus for Yucheng in the past year and allowed the Company to capitalize on both its experiences with large banks and range of existing technologies.
Mr. Weidong Hong, CEO of Yucheng, stated, “We believe that our customers are continuing to grow and demand is increasing for IT services, so I would like to reiterate our 2009 guidance of USD 0.86 to USD 0.90 EPS, USD 16.0M to USD 16.7M net income and USD 69M to USD 72M non-GAAP revenues (USD 117M to USD122M GAAP revenues).”
The Company also announced that Mr. Remington Hu plans to resign as CFO and become a Senior Advisor on June 1, 2009. At that time, Yucheng will appoint Mr. Steve Dai as CFO. Mr. Dai was previously CFO of Beyondsoft (www.beyondsoft.com), a leading China-based IT outsourcing company, which provides IT consulting, Application Development and Maintenance (ADM), ERP and BPO services to the clients across the globe. During his tenure at Beyondsoft, Mr. Dai was responsible for corporate strategy, finance and accounting, investment, financing and legal affairs, and successfully completed three acquisitions. Prior to Beyondsoft, Mr. Dai was CFO of Airport City Logistics Park Co in Beijing. He also has served as Associate Director of UBS’ Investment Banking Department in New York, VP of SSIF, a US-based private equity fund, and VP of Beijing Great Ocean Investment Group. He has extensive IT expertise, having worked in various management positions for Tivoli System and Zephyr Development Corporation. Mr. Dai holds a B.S. from University of Science and Technology of China, an M.S. from the University of Miami and an M.B.A. from the Wharton School of Business.
Mr. Hong said “I would like to thank Mr. Hu for his past contributions to Yucheng, especially in the areas of internal controls and cash management. We are pleased that he will be staying on as a Senior Advisor to ensure a smooth transition with Mr. Dai and assist with future strategic initiatives. I would also like to extend a warm welcome to Mr. Dai, who brings with him a wealth of industry experience and in-depth knowledge of our markets. I look forward to working with him to drive our strategic initiatives, as well as improve the efficiency of our day-to-day operations.”
First Quarter Financial Results
The table below allows greater insight into our POS business, beyond what is available in our consolidated financial statements. The revenue and cost of revenue numbers below are provided on a net presentation basis.
Summary of Selected Unaudited Financial Results for the First Quarter of 2009
(Numbers are in USD thousands, except shares outstanding, earnings per share
and percentages)
Q1 2009
CORE % of POS % of
Amount Revenues Amount Revenues
Non-GAAP Revenues 10,587 100.0% 860 100.0%
Software & Solutions 9,114 86.1% -- --
POS -- -- 860 100.0%
Platform & Maintenance
Services 1,473 13.9% -- --
Cost of Revenues 4,811 45.4% 489 56.8%
Gross Profit 5,777 54.6% 371 43.2%
Operating Expenses 4,732 44.7% 795 92.3%
R&D 517 4.9% -- --
SG&A 4,214 39.8% 795 92.3%
Income from Operations 1,045 9.9% -423 -49.2%
Net Income (GAAP) 1,161 11.0% -246 -28.6%
Amortization of
Intangible Assets 335 3.2% -- --
Non-GAAP Net Income 1,497 14.1% -246 -28.6%
Basic GAAP EPS 0.07 -- -0.01 --
Diluted GAAP EPS 0.06 -- -0.01 --
Basic Non-GAAP EPS 0.09 -- -0.01 --
Diluted Non-GAAP EPS 0.08 -- -0.01 --
Basic Weighted Average
Common Shares
Outstanding 17,566,898 -- 17,566,898 --
Diluted Weighted
Average Common Shares
Outstanding 18,691,852 -- 18,691,852 --
Q1 2008
CORE % of POS % of
Amount Revenues Amount Revenues
Non-GAAP Revenues 7,736 100.0% 318 100.0%
Software & Solutions 4,410 57.0% -- --
POS -- -- 318 100.0%
Platform & Maintenance
Services 3,326 43.0% -- --
Cost of Revenues 2,751 35.6% 230 72.4%
Gross Profit 4,985 64.4% 88 27.6%
Operating Expenses 3,326 43.0% 699 219.7%
R&D 306 4.0% -- --
SG&A 3,020 39.0% 699 219.7%
Income from Operations 1,659 21.4% -611 -192.1%
Net Income (GAAP) 1,726 22.3% -367 -115.2%
Amortization of
Intangible Assets 327 4.2% -- --
Non-GAAP Net Income 2,053 26.5% -367 -115.2%
Basic GAAP EPS 0.10 -- -0.02 --
Diluted GAAP EPS 0.10 -- -0.02 --
Basic Non-GAAP EPS 0.12 -- -0.02 --
Diluted Non-GAAP EPS 0.12 -- -0.02 --
Basic Weighted Average
Common Shares
Outstanding 16,610,853 -- 16,610,853 --
Diluted Weighted
Average Common Shares
Outstanding 17,807,059 -- 17,807,059 --
CORE POS
Y-O-Y Change Y-O-Y Change
Non-GAAP Revenues 36.9% 170.4%
Software & Solutions 106.7% --
POS -- 170.4%
Platform & Maintenance
Services -55.7% --
Cost of Revenues 74.9% 112.3%
Gross Profit 15.9% 323.2%
Operating Expenses 42.3% 13.7%
R&D 69.2% --
SG&A 39.6% 13.7%
Income from Operations -37.0% 30.8%
Net Income (GAAP) -32.7% 32.9%
Amortization of
Intangible Assets 2.7% --
Non-GAAP Net Income -27.1% 32.9%
Basic GAAP EPS -36.4% 36.6%
Diluted GAAP EPS -35.9% 36.1%
Basic Non-GAAP EPS -31.1% 36.6%
Diluted Non-GAAP EPS -30.6% 36.1%
Basic Weighted Average
Common Shares Outstanding 5.8% 5.8%
Diluted Weighted Average
Common Shares Outstanding 5.0% 5.0%
Note: The United States dollar amounts in the above table are calculated
based on an exchange rate of USD 1.00 = RMB 7.0190 for March 31, 2008 and
USD 1.00 = RMB 6.8359 for March 31, 2009.
Revenues: Yucheng made two significant changes to revenue presentation. First, net revenue (or non-GAAP) presentation has been introduced to better delineate business trends, increase revenue predictability and improve the correlation between revenues and net income. Second, the Company introduced a new revenue categorization method. Software & Solutions includes all revenues created via software and software-related solutions. Platform & Maintenance Services is comprised of the procurement and resale of third-party hardware and software, as well as maintenance and support services. Finally, revenues generated via the POS business are listed under the new sub-heading, POS.
Yucheng reported consolidated non-GAAP revenues of USD 11.4M for the first quarter 2009, an increase of 42.1% compared to the first quarter of 2008 and a 47.3% decrease from our fourth quarter peak. GAAP revenues were USD 14.2M, a decrease 10.8% of year over year and 58.2 % compared to the previous quarter.
-- Software & Solutions: In the first quarter, Software & Solutions
registered USD 9.1M of revenues, a 106.7% increase compared to the
first quarter of 2008, and a 48.9% decrease compared to the seasonal
peak in the fourth quarter of 2008. Software & Solutions accounted for
79.6% of consolidated revenue on a net basis.
-- Platform & Maintenance Services: Non-GAAP revenues totaled USD 1.5M in
the first quarter or 12.9% of consolidated revenue on a net basis.
Platform & Maintenance Services net revenues declined by 55.7% year
over year and 52.4% sequentially. GAAP revenues were USD 4.3M, a
decrease of 62.1% year over year and 72.4% quarter over quarter.
-- POS: POS generated revenues of USD 0.9M in the first quarter,
representing 7.5% of consolidated revenue on a net basis. Our POS
revenues increased 170.4% compared with the first quarter of 2008 and
9.6% compared to the fourth quarter of 2008.
Gross Profits: In the first quarter of 2009, Yucheng registered a gross profit of USD 6.1M, an increase of 21.2% compared to the first quarter of 2008 and an expected decline of 49.5% compared to the fourth quarter of 2008, seasonally the largest quarter of the year. During the first quarter of 2009, Software and Solutions gross margin had remained stable and contributed 79.6% to total gross profit, as compared to 44.1% in the first quarter of 2008. Overall core gross margins are expected to remain stable at these levels throughout 2009, while POS gross margins may show some improvements.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A as a percentage of net revenue was 44.5% in the first quarter, as compared to 33.1% in the first quarter 2008 and 46.2% in the fourth quarter of 2008.
-- SG&A as a percentage of net revenue for the Core business was 39.8% as
compared to 39.0% in the first quarter of 2008 and 28.9% in the fourth
quarter of 2008, which reflected the management’s commitment to
maintain a stable-to-declining SG&A-to-Net Revenue ratio in 2009. In a
year over year comparison, the main cost drivers were headcount
additions, mandatory salary increases (starting in the second quarter
of 2008) and increased lease costs.
-- POS SG&A as a percentage of net revenues was 92.3% in the first quarter
of 2009 as compared to 219.7% in the first quarter of 2008 and 148.0%
in the fourth quarter of 2009. The declining ratio indicates continued
enhancement in our merchant productivity and operating leverage. As a
ratio to net revenue, we expect that POS SG&A will continue to decline
throughout 2009.
Net Income: Yucheng recorded non-GAAP net income of USD 1.3M, a decrease of 25.8% compared to the first quarter of 2008. GAAP net income was USD 0.9M for the quarter, a decrease of 32.7% compared to the first quarter of 2008. This is the seasonal low for the year and is expected to trend upwards throughout the year, as our revenue base increases and our fixed costs remain steady.
Earnings per Share: In the first quarter, Yucheng’s EPS for fully diluted shares on a consolidated basis were USD 0.07 (non-GAAP) and USD 0.05 (GAAP) compared to USD 0.09 (non-GAAP) and USD 0.08 (GAAP) in the first quarter of 2008.
-- Core: Fully diluted EPS for the first quarter grew to USD 0.08 (non-
GAAP) and USD 0.06 (GAAP) compared to USD 0.12 (non-GAAP) and USD 0.10
(GAAP) in the first quarter of 2008.
-- POS: On both a GAAP and non-GAAP basis, the fully diluted EPS impact of
POS was USD -0.01 compared to USD -0.02 in the first quarter of 2008
and USD -0.03 in the fourth quarter of 2008.
Cash: Yucheng’s cash position in the first quarter was USD 22.0M compared to USD 14.5M in the first quarter of 2008 and USD 35.1M in the fourth quarter of 2008. The first quarter cash position was achieved despite a decrease in accounts payable of USD 12.4M, compared to the fourth quarter of 2008.
Accounts Receivable: In the first quarter, accounts receivable totaled USD 38.3M compared to USD 30.8M in the first quarter of 2008 and USD 41.1M in the fourth quarter of 2008. When calculated on a gross basis DSOs increased due to a smaller revenue denominator, while accounts receivable is the average of the current and preceding quarter. This correlates to 251 days for the current quarter, as compared to 165 days in the first quarter 2008. Although trades receivable tend to follow a seasonal trend, and is expected to trend down quarter over quarter until the seasonal low in the fourth quarter.
POS: Yucheng’s POS business, although still nascent, continued to gain momentum in the first quarter as revenues grew to USD 0.9M, a 170.4% increase year over year and 9.6% increase quarter over quarter, despite the traditional decline in spending associated with Chinese Lunar New Year.
-- Terminal Deployment: Our POS installed base grew to 21,600 by the end
of the first quarter compared to 21,300 at year-end. We continue to
focus on growing a highly accretive merchant base both in terms of
transaction volume and revenue. As Yucheng penetrates into high-volume
wholesaler and luxury locations, such as jewelry stores and car
dealerships, capping fees on a per transaction basis will increase
terminal usage and overall POS revenues.
Average Monthly Gross Revenue per POS terminal (AMGRP): Our AMGRP across our entire installed base has held steadily above USD 12, since we started reporting the figure in the second quarter of 2008. The more mature terminals in our base are increasingly accretive and some even show signs of achieving western averages.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2009 and December 31, 2008
Assets 2009.3.31 2008.12.31
USD USD
Current assets:
Cash and cash equivalent 22,020,835 35,079,018
Trade accounts receivable, net 38,306,442 41,063,634
Costs and estimated earnings in excess of
billings on uncompleted contracts 12,050,772 10,068,317
Amounts due from related companies 87,619 229,457
Inventories 95,478 423,546
Pre-contract costs 1,725,962 1,447,592
Other current assets 5,722,467 6,399,374
Total current assets 80,009,575 94,710,938
Investments in and advances to affiliates 427,462 329,240
Fixed assets 11,996,981 11,320,664
Less: Accumulated depreciation (3,325,093) (2,907,970)
Fixed assets, net 8,671,888 8,412,694
Intangible assets, net 5,000,043 5,271,411
Goodwill 27,630,150 27,480,143
Deferred income taxes - Non-current 2,309,514 1,899,850
Total assets 124,048,632 138,104,276
Liabilities and stockholders’ equity
Current liabilities:
Short term loan 8,777,191 8,778,861
Obligations under capital leases 414,146 419,594
Trade accounts payables 8,867,908 21,222,648
Billings in excess of costs and estimated
earnings on uncompleted contracts 998,637 1,465,071
Employee and payroll accruals 1,824,425 1,826,585
Dividends payable to ex-owners 807,708 807,861
Deemed distribution to ex-owners 6,584,618 6,584,618
Outstanding payment in relation to business
acquisitions 3,277,804 3,277,902
Income taxes payable 1,617,376 1,432,909
Other current liabilities 5,995,281 7,789,351
Deferred income taxes - Current 142,223 143,468
Total current liabilities 39,307,317 53,748,868
Obligations under capital leases 283,142 379,983
Deferred income taxes 418,184 494,423
Total liabilities 40,008,643 54,623,274
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 shares issued and
outstanding as of December 31, 2008
and March 31, 2009 2,926,801 2,927,358
Additional paid-in capital 50,798,645 50,808,308
Reserves 5,560,182 5,561,239
Retained earnings 23,738,459 22,827,559
Accumulated other comprehensive loss (532,528) (402,693)
Minority interests 1,548,430 1,759,231
Total Stockholders’ equity 84,039,989 83,481,002
Liabilities and Stockholders’ equity 124,048,632 138,104,276
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended March 31, 2009 and March 31, 2008
2009 Q1 2008 Q1
USD USD
Revenues:
Software & Solutions 9,114,122 4,409,871
Platform & Maintenance Services (net) 1,473,367 3,326,116
POS 860,375 318,173
Total revenues (non-GAAP) 11,447,864 8,054,160
Platform pass-through costs 2,779,078 7,896,461
Total revenues 14,226,942 15,950,621
Cost of revenues:
Cost of revenues (net) (5,299,852) (2,981,686)
Platform pass-through costs (2,779,078) (7,896,461)
Total cost of revenues (8,078,930) (10,878,147)
Gross profit 6,148,012 5,072,474
Operating expenses:
Research and Development (517,468) (305,903)
Selling and marketing (1,706,816) (1,273,931)
General and administrative (3,302,150) (2,445,095)
Total operating expenses (5,526,434) (4,024,929)
Income from Operating 621,578 1,047,545
Other income (expenses):
Interest income 19,315 31,080
Interest expense (22,786) (88,818)
Investment gain (loss) (135,274) --
Other income (expense), net (9,527) 8,347
Income before income tax and minority interests 473,306 998,154
Income tax benefit (expense) 295,665 235,512
Minority interests 146,271 126,049
Net income (GAAP) 915,242 1,359,715
Amortization for intangible assets 335,457 326,707
Net income (non-GAAP) 1,250,699 1,686,422
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2009 and March 31, 2008
2009 Q1 2008 Q1
USD USD
Cash flows from operating activities:
Net income 915,242 1,359,715
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 533,372 333,157
Amortization 533,635 590,158
Loss on disposal fixed assets 94 592
Loss (gain) on disposal of affiliates 1,921 --
Minority interests (146,270) (126,049)
Share of equity in affiliate company 146,719 --
Decrease (increase) in trade accounts
receivable, net 2,749,383 (1,805,442)
Decrease (increase) in costs and estimated
earnings in excess of billing on uncompleted (1,984,370) 96,741
Decrease (increase) in due from related parties 141,795 (6,249,986)
Decrease (increase) in inventories 327,988 26,916
Decrease (increase) in precontract costs (278,645) (1,238,605)
Decrease (increase) in other current assets 435,781 3,701,195
Decrease (increase) in deferred income taxes
assets - Current -- (143,217)
Decrease (increase) in deferred income taxes
assets - Non-current (410,025) (152,752)
Increase (decrease) in trade accounts payable (12,350,704) (4,328,447)
Increase (decrease) in billings in excess of
costs and estimated earnings on
uncompleted contracts (466,156) (674,307)
Increase (decrease) in employee and payroll
accruals (1,813) 873,072
Increase (decrease) in income taxes payable 184,740 (40,072)
Increase (decrease) in other current
liabilities (1,948,612) (2,356,227)
Increase (decrease) in deferred income taxes
liabilities (77,364) (51,562)
Net cash provided by (used in) operating
activities (11,693,289) (10,185,120)
Cash flows from investing activities:
Capital expenditures (1,021,535) (1,131,406)
Payment of purchase of subsidiaries (219,430) (2,141,331)
Long-term investments (245,004) --
Proceeds from disposal of sharehold of
affiliates 27,336 133,560
Proceeds from disposal of subsidiary, net of
cash disposed 210,653 --
Net cash provided by (used in) investing
activities (1,247,980) (3,139,177)
Cash flows from financing activities:
Payment of capital leases (116,914) (67,496)
Proceeds from bank borrowings 8,777,191 --
Repayments of bank borrowings (8,777,191) (2,137,057)
Dividends paid to ex-owners -- (1,709,645)
Net cash provided by financing activities (116,914) (3,914,198)
Net increase in cash and cash equivalents (13,058,183) (17,238,495)
Cash at beginning of period 35,079,018 31,698,795
Cash at end of period 22,020,835 14,460,300
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, 2009 on May 12, 2009 at 8:00AM EDT/ 8:00PM Beijing time.
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 96694864.
US +1 866 242 1388
Canada +1 888 447 3085
China Netcom Users +86 10 800 640 0084
China Telecom Users +86 10 800 264 0084
All Other Participants +61 288 236 760
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 2,000 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
Ms. Rebecca Alexander
Tel: +1 914 613 3648
+86 10 5913 7998
Email: ralexander@yuchengtech.com
