BEIJING, Nov. 5 /PRNewswire-Asia-FirstCall/ -- Yucheng Technologies
Limited (Nasdaq: YTEC), a leading provider of IT Solutions to the banking
industry in China, today announced unaudited financial results for the quarter
ended September 30, 2009.
"Yucheng's core business, Software & Solutions, continued strong growth,
with year to date revenues totaling USD 34.6M, an increase of 60.0% over the
same period in 2008, excluding exchange rate fluctuations," said Weidong Hong,
CEO and Chairman of Yucheng. "We expect our Software & Solutions business
will continue to be the main driver of both revenue and EPS."
Third Quarter 2009 Financial Highlights
-- Software & Solutions net revenue totaled USD 13.8M, a 55.9% increase
year-over-year.
-- Total net revenue grew 24.7% year-over-year to USD 17.0M.
-- With the introduction of tighter expense controls, G&A expenses totaled
USD 3.3M, a sequential decline of 18.9%.
-- Yucheng had USD 21.9M in cash, compared to USD 18.8M in the third
quarter of 2008.
Business Outlook
The third quarter demonstrated high demand across the board for Yucheng's
Software & Solutions. Key growth drivers continue to be loan management, call
center, and e-banking solutions, where Yucheng is a recognized leader. With
confidence in the overall health of the bank IT Solutions market, this trend
is expected to continue into 2010.
Operating expenses showed encouraging stability as a percentage of
revenues due to tighter controls and greater scrutiny. The G&A cost control
initiatives are still taking effect and are expected to be accretive to the
bottom line in 2010.
Weidong Hong, CEO of Yucheng stated, "Given our third quarter execution
and our fourth quarter visibility, we are confirming our 2009 annual guidance
of USD 69M to 72M in net revenue, USD 14.9M in net income and non-GAAP EPS of
USD 0.80."
Third 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 are provided on a net presentation basis.
Summary of Selected Unaudited Financial Results for the
Third Quarter of 2009
(Numbers are in thousands, except shares outstanding,
earnings per share and percentages)
Q3 2009
Total CORE POS
% of % of % of
Amount Revenues Amount Revenues Amount Revenues
Revenues 17,039 100.0% 16,044 100.0% 995 100.0%
Software &
Solutions 13,812 81.1% 13,812 86.1% -- --
POS 995 5.8% -- -- 995 100.0%
Platform &
Maintenance
Services 2,232 13.1% 2,232 13.9% -- 0.0%
Cost of
Revenues 8,328 48.9% 7,779 48.5% 549 55.2%
Gross Profit 8,711 51.1% 8,265 51.5% 446 44.8%
Operating
Expenses 5,939 34.9% 5,156 32.1% 782 78.6%
R&D 502 2.9% 502 3.1% -- --
SG&A 5,437 31.9% 4,655 29.0% 782 78.6%
Income from
Operations 2,773 16.3% 3,109 19.4% -336 -33.8%
Net Income
(GAAP) 2,667 15.7% 2,924 18.2% -257 -25.8%
Amortization
of Intangible
Assets 336 2.0% 336 2.1% -- --
Non-GAAP Net
Income 3,002 17.6% 3,259 20.3% -257 -25.8%
Basic GAAP EPS 0.14 -- 0.16 -- -0.01 --
Diluted GAAP
EPS 0.14 -- 0.16 -- -0.01 --
Basic
Non-GAAP EPS 0.16 -- 0.18 -- -0.01 --
Diluted
Non-GAAP EPS 0.16 -- 0.18 -- -0.01 --
Basic Weighted
Average Common
Shares Out-
standing 18,534,978 -- 18,534,978 -- 18,534,978 --
Diluted
Weighted
Average
Common
Shares Out-
standing 18,602,874 -- 18,602,874 -- 18,602,874 --
Q3 2008
Total CORE POS
% of % of % of
Amount Revenues Amount Revenues Amount Revenues
Revenues 13,661 100.0% 13,034 100.0% 627 100.0%
Software &
Solutions 8,858 64.8% 8,858 68.0% -- --
POS 627 4.6% -- -- 627 100.0%
Platform &
Maintenance
Services 4,176 30.6% 4,176 32.0% -- --
Cost of
Revenues 5,067 37.1% 4,682 35.9% 385 61.3%
Gross Profit 8,594 62.9% 8,351 64.1% 243 38.7%
Operating
Expenses 5,563 40.7% 4,866 37.3% 697 111.2%
R&D 642 4.7% 642 4.9% -- --
SG&A 4,921 36.0% 4,224 32.4% 697 111.2%
Income from
Operations 3,031 22.2% 3,486 26.7% -455 -72.7%
Net Income
(GAAP) 3,708 27.1% 3,943 30.2% -234 -37.3%
Amortization
of Intangible
Assets 336 2.5% 336 2.6% -- --
Non-GAAP Net
Income 4,045 29.6% 4,279 32.8% -234 -37.3%
Basic GAAP EPS 0.21 -- 0.22 -- -0.01 --
Diluted GAAP
EPS 0.21 -- 0.22 -- -0.01 --
Basic Non-GAAP
EPS 0.23 -- 0.24 -- -0.01 --
Diluted
Non-GAAP EPS 0.23 -- 0.24 -- -0.01 --
Basic Weighted
Average
Common
Shares Out-
standing 17,563,685 -- 17,563,685 -- 17,563,685 --
Diluted
Weighted
Average
Common
Shares Out-
standing 17,743,066 -- 17,743,066 -- 17,743,066 --
CORE POS
Y-O-Y Y-O-Y
Change Change
Revenues 23.1% 58.6%
Software & Solutions 55.9% --
POS -- 58.6%
Platform & Maintenance Services -46.6% --
Cost of Revenues 66.1% 42.6%
Gross Profit -1.0% 84.0%
Operating Expenses 6.0% 12.2%
R&D -21.8% --
SG&A 10.2% 12.2%
Income from Operations -10.8% 26.1%
Net Income (GAAP) -25.8% -9.7%
Amortization of
Intangible Assets 0.0% --
Non-GAAP Net Income -23.8% 9.7%
Basic GAAP EPS -29.7% 3.9%
Diluted GAAP EPS -29.3% 4.6%
Basic Non-GAAP EPS -27.8% 3.9%
Diluted Non-GAAP EPS -27.3% 4.6%
Basic Weighted Average Common Shares
Outstanding 5.5% 5.5%
Diluted Weighted Average Common
Shares Outstanding 4.8% 4.8%
Note: Due to rounding the table above may have slight discrepancies. The
United States dollar amounts in the above table are calculated based
on an exchange rate of USD 1.00 = RMB 6.8183 for September 30, 2008
and USD 1.00 = RMB 6.8290 for September 30, 2009.
Revenues: Yucheng's revenues are comprised of three distinct categories.
Software & Solutions includes all revenues from our internally developed
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. POS is comprised of all revenues
generated on our point-of-sale terminals.
Yucheng reported consolidated net revenues of USD 17.0M for the third
quarter 2009, an increase of 24.7% compared to the third quarter of 2008 and
12.6% from the prior quarter of 2009.
-- Software & Solutions: In the third quarter, Software & Solutions
registered USD 13.8M in net revenues, a 55.9% increase compared to the
third quarter of 2008, and an 18.9% increase compared to the second
quarter of 2009. Strong demand for Software & Solutions persisted into
the third quarter, driven by Yucheng's growing presence in SMBs.
Software & Solutions accounted for 81.1% of total net revenue.
-- Platform & Maintenance Services: Net revenues totaled USD 2.2M in the
third quarter or 13.1% of net revenue. Platform & Maintenance net
revenues decreased by 46.6% year over year and 11.9% sequentially. As
previously forecasted, bank demand for third-party hardware remained
weak in the third quarter, with year over year comparisons influenced
by the high base from aggressive Olympic spending in 2008.
-- POS: POS generated revenues of USD 1.0M in the third quarter, which
represented 5.8% of net revenue. Our POS net revenues increased 58.6%
compared to the third quarter of 2008 and 2.2% compared to the second
quarter of 2009. Gross margins in the business were weaker
sequentially because of higher sales and maintenance costs resulting
from regulatory changes.
Comparing customer revenues by segment, year to date SMBs grew by 56.9%,
while Top Four banks continued to grow on an absolute basis. These trends are
in line with management expectations issued on the second quarter call.
Gross Profits: In the third quarter of 2009, Yucheng registered a gross
profit of USD 8.7M, an increase of 1.4% year over year and 3.0% sequentially.
Calculated on a net revenue basis, gross margins for the third quarter were
51.1%, down from 62.9% in the third quarter of 2008 and 55.9% in the second
quarter of 2009. Gross margins were primarily affected by lower license sales
in Software & Solutions, the delay of several higher margin Solution contracts
to the fourth quarter and a one-time charge in Platform & Maintenance.
Sales, General and Administrative Expenses (SG&A): Consolidated SG&A as a
percentage of net revenue was 31.9% in the third quarter, as compared to 36.0%
in the third quarter 2008 and 38.4% in the second quarter of 2009.
-- SG&A as a percentage of net revenue for the Core business was 29.0% as
compared to 32.4% in the third quarter of 2008 and 35.6% in the second
quarter of 2009. The decline is due primarily to strict G&A controls
implemented in the third quarter.
-- In the third quarter POS SG&A as percentage of net revenues was 78.6%
as compared to 111.2% in the third quarter of 2008 and 78.7% in the
second quarter of 2009. Revenues outpaced the expenses as the business
leveraged its established sales network.
Net Income: Yucheng recorded non-GAAP net income of USD 3.0M, a decrease
of 25.8% compared to the third quarter of 2008 and an increase of 3.2%
compared to the second quarter of 2009. GAAP net income was USD 2.7M for the
quarter, a decrease of 28.1% compared to the third quarter of 2008 and an
increase of 3.6% compared to the second quarter of 2009. Operating margins
for the quarter were 16.3% compared to 22.2% in the third quarter of 2008 and
14.3% in the second quarter of 2009. Operating margins are up sequentially,
due to operating expense control initiatives; however, they are down year over
year because of lower gross margins.
Earnings per Share: In the third quarter, Yucheng's EPS for fully diluted
shares on a consolidated basis were USD 0.16 (non-GAAP) and USD 0.14 (GAAP),
compared to USD 0.23 (non-GAAP) and USD 0.21 (GAAP) in the third quarter of
2008. EPS was primarily impacted by the change in our tax situation from
receiving tax credits to becoming a net taxpayer. In the third quarter of
2008, a tax benefit contributed approximately USD 0.04 to both GAAP and non-
GAAP EPS.
-- Core: Fully diluted EPS for the third quarter was USD 0.18 (non-GAAP)
and USD 0.16 (GAAP) compared to USD 0.24 (non-GAAP) and USD 0.22 (GAAP)
in the third quarter of 2008.
-- POS: On both a GAAP and non-GAAP basis, the fully diluted EPS impact of
POS was a loss of USD 0.01 in the current quarter compared to a loss of
USD 0.01 in the third quarter of 2008.
Cash: Yucheng had USD 21.9M in cash compared to USD 18.8M in the third
quarter of 2008 and USD 32.8M in the second quarter of 2009. Cash declined
sequentially due to the repayment of USD 7.1M in short-term loans that were
taken in the second quarter to cover working capital needs.
Accounts Receivable: Accounts receivable totaled USD 33.1M in the current
period compared to USD 37.0M in the third quarter of 2008 and USD 32.4M in the
prior quarter. The stability partially resulted from a policy issued in the
second quarter that made accounts receivable collection a significant
compensation component for sales managers.
Third quarter DSOs totaled 165 days, compared to 154 days in the third
quarter of 2008 and 210 days in the second quarter of 2009. DSOs declined
sequentially because of higher gross revenues in the quarter.
POS: Yucheng's POS business remained focused on revenues per terminal.
Net revenue in the third quarter totaled to USD 1.0M, an increase of 58.6%
year over year and 2.2% over the prior quarter.
-- Terminal Deployment: Our POS installed base grew to 25,600 at the end
of the third quarter compared to 24,100 at the end of the second
quarter. The base is projected to grow to 28,000 terminals by year-end
as we continue to phase out the low performing terminals.
-- Average Monthly Gross Revenue per POS terminal (AMGRP): The AMGRP
across the entire installed base was in line with management
expectations at USD 13.
Taxes: Yucheng paid USD 0.1M in taxes during the third quarter, which was
flat sequentially and a reversal from the third quarter 2008's tax benefit of
USD 0.7M. For 2009, Yucheng expects to be a net taxpayer at an annualized
rate of approximately 4.0%.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 2009 and June 30, 2009
2009.9.30 2009.6.30
USD USD
Assets
Current assets:
Cash and cash equivalent 21,893,313 32,797,932
Trade accounts receivable, net 33,106,616 32,401,146
Costs and estimated earnings in excess
of billings on uncompleted contracts 24,311,219 15,385,414
Amounts due from related companies 623,776 649,596
Inventories 3,058,452 3,243,943
Pre-contract costs 665,396 1,507,676
Other current assets 7,434,529 8,588,954
Total current assets 91,093,301 94,574,661
Investments in and advances to
affiliates 504,041 630,196
Fixed assets 13,710,998 13,277,493
Less: Accumulated depreciation -4,447,620 -3,857,632
Fixed assets, net 9,263,378 9,419,861
Intangible assets, net 4,735,659 5,099,010
Goodwill 27,677,493 27,665,744
Deferred income taxes - Non-current 3,003,404 2,669,282
Total assets 136,277,276 140,058,754
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
September 30, 2009 and June 30, 2009
2009.9.30 2009.6.30
USD USD
Liabilities and stockholders' equity
Current liabilities:
Short term loan 11,714,746 18,814,678
Obligations under capital leases 386,058 414,002
Trade accounts payables 11,414,696 9,704,504
Billings in excess of costs and
estimated earnings on uncompleted
contracts 2,349,567 1,042,701
Employee and payroll accruals 1,724,066 1,738,807
Dividends payable to ex-owners 808,524 808,180
Deemed distribution to ex-owners 2,047,133 6,584,618
Outstanding payment in relation to
business acquisitions 1,109,698 3,452,847
Income taxes payable 2,443,655 1,993,767
Other current liabilities 6,865,867 8,261,739
Deferred income taxes - Current 59,064 130,380
Total current liabilities 40,923,074 52,946,223
Obligations under capital leases 103,054 180,038
Deferred income taxes 424,258 387,639
Total liabilities 41,450,386 53,513,900
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 2,929,858 2,928,515
Additional paid-in capital 56,430,463 50,860,802
Reserves 5,410,409 5,408,113
Retained earnings 29,004,054 26,326,255
Accumulated other comprehensive loss -331,445 -454,088
Minority interests 1,383,551 1,475,257
Total stockholders' equity 94,826,890 86,544,854
Liabilities and stockholders' equity 136,277,276 140,058,754
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income
Three months ended September 30, 2009 and 2008
2009 Q3 2008 Q3
USD USD
Revenues:
Software & Solutions 13,812,024 8,857,605
Platform & Maintenance Services (net) 2,231,617 4,175,967
POS 995,226 627,382
Total revenues (non-GAAP) 17,038,867 13,660,954
Platform pass-through costs 1,270,073 9,911,538
Total revenues 18,308,940 23,572,492
Cost of revenues:
Cost of revenues (net) -8,327,561 -5,066,951
Platform pass-through costs -1,270,073 -9,911,538
Total cost of revenues -9,597,634 -14,978,488
Gross profit 8,711,306 8,594,004
Operating expenses:
Research and development -501,685 -641,577
Selling and marketing -2,171,231 -1,719,204
General and administrative -3,265,701 -3,202,349
Total operating expenses -5,938,617 -5,563,129
Operating income 2,772,689 3,030,874
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Income (continued)
Three months ended September 30, 2009 and 2008
2009 Q3 2008 Q3
USD USD
Other income (expenses):
Interest income 12,761 76,192
Interest expense -107,958 -181,947
Investment gain (loss) -19,848 --
Other income (expense), net 1,053 17,792
Income before income tax and
minority interests 2,658,697 2,942,911
Income tax benefit (expense) -84,410 705,803
Minority interests 92,333 59,542
Net income (GAAP) 2,666,620 3,708,256
Amortization for intangible assets 335,797 336,324
Net income (non-GAAP) 3,002,417 4,044,580
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended September 30, 2009 and 2008
2009 Q3 2008 Q3
USD USD
Cash flows from operating activities:
Net income 2,666,619 3,708,258
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 511,395 352,287
Amortization 698,617 580,996
Loss on disposal fixed assets 1,530 15,501
Minority interests -92,333 -59,542
Share of equity in affiliate company 126,423 --
Decrease (increase) in trade accounts
receivable, net -922,722 5,109,582
Decrease (increase) in costs and
estimated earnings in excess of
billing on uncompleted contracts -8,688,261 -4,646,669
Decrease (increase) in due from
related parties 26,096 -548
Decrease (increase) in inventories 186,868 -826,163
Decrease (increase) in precontract costs 842,920 313,111
Decrease (increase) in other current
assets 602,048 -469,453
Decrease (increase) in deferred income
taxes assets - Current -- -279,592
Decrease (increase) in deferred income
taxes assets - Non-current -332,988 -159,342
Increase (decrease) in trade accounts
payable 1,706,071 -3,356,596
Increase (decrease) in billings in
excess of costs and estimated earnings
on uncompleted contracts 1,306,423 -132,257
Increase (decrease) in employee and
payroll accruals -15,480 -136,590
Increase (decrease) in income taxes
payable 449,041 -210,781
Increase (decrease) in other current
liabilities -1,138,065 734,391
Increase (decrease) in deferred income
taxes liabilities -34,917 -58,859
Net cash provided by (used in)
operating activities -2,100,715 477,734
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Three months ended September 30, 2009 and 2008
2009 Q3 2008 Q3
USD USD
Cash flows from investing activities:
Capital expenditures -1,108,821 -1,792,135
Payment of purchase of subsidiaries -705,183 -3,953,947
New investment of joint venture -- -739,485
Proceeds from disposal of fixed assets 17,060 6,013
Proceeds from disposal of
sharehold of affiliates 615,237 --
Proceeds from disposal of
subsidiary, net of cash disposed 234,295 --
Net cash provided by (used in)
investing activities -947,412 -6,479,554
Cash flows from financing activities:
Deemed distribution -634,120 --
Payment of capital leases -114,450 -53,872
Dividends paid to ex-owners -- -1,283,604
Proceeds from bank borrowings 7,321,716 --
Repayments of bank borrowings -14,429,638 --
Net cash provided by financing
activities -7,856,492 -1,337,476
Net increase in cash and cash
equivalents -10,904,618 -7,339,296
Cash at beginning of period 32,797,932 26,114,646
Cash at end of period 21,893,313 18,775,350
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 September 30, 2009 on Thursday, November 5,
2009 at 8:00AM EST/ 9:00PM 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 33065861.
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 2,200 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; change in products and clients and the expansion into small to
medium-sized bank market; 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; changing tax rates; 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.
Contact:
Rebecca Alexander,
Investor Relations,
Tel: +1 914 613 3648, +86 10 5913 7998
Email: ralexander@yuchengtech.com
