EX-99.1 2 a11-13022_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Global Partner for Success

GRAPHIC

 

HiSoft Reports First Quarter 2011 Financial Results

 

Company exceeds top-line guidance for the first quarter of 2011

 

BEIJING, May 23, 2011 — HiSoft Technology International Limited, (“HiSoft” or the “Company”) (NASDAQ: HSFT), a leading China-based provider of outsourced information technology and research and development services headquartered in Dalian, China, today announced its unaudited financial results for the first quarter 2011 ended March 31, 2011.

 

First Quarter 2011 Financial and Operating Highlights

 

·                  First quarter 2011 net revenues increased 45.1% year-over-year to US$44.3 million from US$30.5 million for the corresponding period in 2010

·                  First quarter 2011 gross profit increased 26.9% year-over-year to US$14.1 million from US$11.1 million for the corresponding period in 2010

·                  First quarter 2011 GAAP diluted earnings per ADS was US$0.09 compared to US$0.13 in the corresponding period in 2010

·                  First quarter 2011 non-GAAP(1) diluted earnings per ADS was US$0.15 compared to US$0.17 in the corresponding period in 2010

·                  Total employee headcount as of March 31, 2011 was 5,946

 

“We are pleased to deliver continued growth momentum in our business,” said HiSoft Chief Executive Officer Mr. Tiak Koon Loh “In the first quarter, we saw strong revenue growth across service lines and geographical markets resulting in a year-over-year growth of 45%. At the end of the first quarter, our China business comprised approximately 17% of our total net revenues, which puts us on track to achieve our target of having 20% of our total revenue generated from China-headquartered companies by the end of the fourth quarter of 2011. Demand across sectors remains robust, and in particular, our banking, financial services and insurance business and SAP practices are growing nicely.”

 

Mr. Loh added, “We expect to see improved margins in the quarters ahead as we continue our strategy of investing to grow our higher value-added service offerings and enhance our sales and marketing effort.”

 

First Quarter 2011 Financial Results

 

Net Revenues

 

Net revenues were US$44.3 million for the first quarter of 2011, an increase of 45.1% year-over-year from US$30.5 million for the corresponding period in 2010. The year-over-year increase in net revenues was primarily driven by increased client demand for HiSoft’s outsourcing services, including strong momentum from domestic clients in China.

 

Net Revenues by Service Line

 

The Company’s two service lines consist of IT services, which includes consulting and packaged software services (“CPS”) and application development, testing and maintenance services (“ADM”), and research and development (“R&D”) services.

 

Net revenues from IT services were US$25.3 million for the first quarter of 2011, an increase

 


(1)  Non-GAAP net income, non-GAAP operating income, non-GAAP diluted earnings per ADS and related margins exclude share-based compensation expense, amortization of acquired intangible assets and change in fair value of contingent consideration payable for business acquisition. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying sections of “Non-GAAP Financial Measures” and “Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures” at the end of this press release.

 

www.hisoft.com ~ +86.411.8455-6666

 



 

of 62.3% year-over-year from US$15.6 million for the corresponding period in 2010. Net revenues from R&D services were US$19.0 million for the first quarter of 2011, an increase of 27.1% year-over-year from US$14.9 million for the corresponding period in 2010. The growth in IT services in the first quarter was fueled by increasing demand for the Company’s CPS services, for which revenues increased 421.5% year-over-year.

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

 

 

(US$ in thousands, except percentages)

 

IT Services

 

25,328

 

57.2

%

15,605

 

51.1

%

CPS

 

5,591

 

12.6

%

1,072

 

3.5

%

ADM

 

19,737

 

44.6

%

14,533

 

47.6

%

R&D Services

 

18,984

 

42.8

%

14,932

 

48.9

%

Total Net Revenues

 

44,312

 

100.0

%

30,537

 

100.0

%

 

Net Revenues by Geographic Markets

 

Based on the location of clients’ headquarters, the Company’s largest geographic market, the United States and Europe accounted for US$26.0 million or 58.7% of net revenues during the first quarter of 2011, followed by 19.1% in Japan, 17.1% in Greater China and 5.1% in Others.

 

Measuring the Company’s revenues by geographic markets based on the location of the contract signing entities, Greater China accounted for 39.3% of net revenues in the first quarter of 2011, while Japan accounted for 24.6%, the United States and Europe accounted for 22.6% and Others accounted for 13.5%.

 

Largest Clients as a Percentage of Net Revenues

 

Revenues from the Company’s top three clients, top five clients and top ten clients accounted for 27.2%, 38.1% and 55.3% of net revenues, respectively, during the first quarter of 2011, compared to 30.4%, 42.0% and 60.7% respectively, for the corresponding period in 2010.

 

Gross Profit and Gross Margin

 

Gross profit was US$14.1 million for the first quarter of 2011, an increase of 26.9% year-over-year from US$11.1 million for the corresponding period in 2010. During the first quarter of 2011, gross margin was 31.8% compared to 36.4% for the corresponding period in 2010. The year-over-year decrease in gross margin was primarily due to three factors: the impact of the Japan earthquake, which negatively impacted the gross margin by approximate 160 basis points; the negative impact to gross margin of approximate 160 basis points resulting from project costs to wind down the relationship with the previously disclosed financially challenged client in Japan, and the Company’s continued reinvestment in higher value-added service offerings and sales and marketing.

 

Operating Expenses

 

Total operating expenses, which include general and administrative expenses, sales and marketing expenses and change in fair value of contingent consideration payable for M&A, were US$11.5 million for the first quarter of 2011, an increase of 46.5% year-over-year from US$7.9 million for the corresponding period in 2010. The year-over-year increase was primarily due to increases in salary and compensation expenses, including building management capacity, and research and development activities. The increase was also partially due to relocation expenses incurred in the first quarter of 2011 of approximate US$0.7 million associated with the relocation of the Company’s Japan-based employees and

 



 

their families as a result of the Japan earthquake on March 11, 2011, and a foreign currency exchange loss of US$0.6 million.

 

Operating Income and Operating Margin

 

Operating income for the first quarter of 2011 was US$2.6 million, a decrease of 20.2% year-over-year from US$3.3 million for the corresponding period in 2010. Non-GAAP operating income for the first quarter 2011 was US$4.5 million, an increase of 9.1% year-over-year from US$4.2 million for the corresponding period in 2010.

 

Operating margin decreased to 5.9% for the first quarter of 2011, compared to 10.7% for the corresponding period in 2010. Non-GAAP operating margin decreased to 10.3% for the first quarter of 2011, compared to 13.6% for the corresponding period in 2010. The decline in operating income and margin was primarily due to the factors cited above in Gross Profit and Margin.

 

Provision for Income Taxes

 

The provision for income taxes was US$0.3 million for the first quarter of 2011, compared to US$0.4 million provision for income taxes in the first quarter of 2010. The effective tax rate was 11.0% in the first quarter of 2011, compared to 12.6% in the first quarter of 2010.

 

Net Income and Earnings per ADS

 

Net income attributable to HiSoft Technology International Limited was US$2.8 million for the first quarter of 2011, a decrease of 6.8% year-over-year from US$3.0 million for the corresponding period in 2010. Diluted earnings per ADS was US$0.09 for the first quarter of 2011, compared to US$0.13 for the corresponding period in 2010.

 

Non-GAAP net income was US$4.7 million for the first quarter of 2011, an increase of 21.8% year-over-year from US$3.9 million for the corresponding period in 2010. Non-GAAP diluted earnings per ADS was US$0.15 in the first quarter of 2011, compared to US$0.17 in the corresponding period in 2010.

 

Cash and Cash Flow

 

As of March 31, 2011, HiSoft had cash and cash equivalents and restricted cash totaling US$128.6 million. Operating cash flow for the first quarter of 2011 was an inflow of approximate US$0.2 million, impacted by US$4.0 million paid in year-end bonuses.

 

Days sales outstanding was 91 days for the first quarter of 2011.

 

Outlook for the Second Quarter and Full Year 2011

 

For the second quarter 2011, based on current market and operating conditions the Company expects:

 

·                  Second quarter 2011 net revenues to be at least $47.0 million dollars, representing an expected growth rate of at least 35.5% year-over-year

·                  Second quarter 2011 non-GAAP diluted earnings per ADS to be in the range of $0.17 to $0.18, representing a negative growth rate of between 25.0% and 29.2% year-over-year, based on approximately 32.5 million weighted average ADSs outstanding

 

For the full year 2011, based on current market and operating conditions, the Company re-confirms its previous guidance as:

 



 

·                  Full year 2011 net revenues expected to be at least $194.5 million dollars, representing a growth rate of at least 32.7% year-over-year

·                  Full year 2011 non-GAAP diluted earnings per ADS to be in the range of $0.76 to $0.80, representing an expected year-over-year growth rate to be in the range of 8.6% to 14.3%, based on 32.8 million weighted average ADSs outstanding

 

Due to continued volatility in the currency markets, the non-GAAP diluted earnings per ADS outlook excludes any future foreign currency exchange gains or losses. In addition, non-GAAP diluted earnings per ADS outlook assumes an effective income tax rate of between 11.0% and 13.0% in 2011.

 

First Quarter 2011 Conference Call Details

 

HiSoft management will hold an earnings conference call at 6:0p.m. Eastern Time on Monday, May 23, 2011, (6:0a.m. Beijing/Hong Kong Time on Tuesday, May 24, 2011). Management will discuss results and highlights of the quarter and answer questions from investors.

 

The dial-in numbers for the conference call are as follows:

 

U.S. Toll Free: +1.800.860.2442

International Dial In: +1.412.858.4600

 

The conference call will be broadcast live over the Internet and can be accessed by clicking the following link:

http://www.mzcan.com/cancast/us/index.php?id=usHSFT_21&version=e

 

Additionally, an archived webcast of this call will be available on the Investor Relations section of the HiSoft website at http://www.hisoft.com

 

About HiSoft Technology International Limited

 

HiSoft Technology International Limited (NASDAQ: HSFT) is a leading China-based provider of outsourced information technology and research and development services headquartered in Dalian, China. HiSoft provides its services to leading companies around the world through a combination of onshore and offshore delivery capabilities. HiSoft leverages its skilled technology specialists and client-centric delivery centers to offer customers reliable and high-quality technology solutions. For more information about HiSoft, please visit http://www.hisoft.com

 

Safe Harbor Statement

 

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “going forward,” “outlook” and similar statements. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond HiSoft’s control, which may cause HiSoft’s actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in HiSoft’s filings with the U.S. Securities and Exchange Commission. HiSoft does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

 



 

Non-GAAP Financial Measures

 

To supplement HiSoft’s consolidated financial results presented in accordance with GAAP, HiSoft uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP operating income, non-GAAP operating margin, net income and non-GAAP diluted earnings per ADS all of which exclude share-based compensation expense, amortization of acquired intangible assets, follow-on offering expense and change in fair value of contingent consideration payable for business acquisition. Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per ADS for prior periods have been reclassified so that the presentations are consistent. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

 

HiSoft believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s performance and when planning and forecasting future periods. A limitation of using non-GAAP net income and diluted earnings per ADS is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets, follow-on offering expense and change in fair value of contingent consideration payable for business acquisition that have been and will continue to be for the foreseeable future a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures.

 

For investor and media inquiries please contact:

 

In China:

 

 

 

Ross Warner

 

HiSoft Technology International Limited

 

Tel: +86-10-5987-5865

 

Email: investor_relations@hisoft.com

 

 

 

Agustin Bautista

 

Ogilvy Financial, Beijing

 

Tel: +86-10-8520-6166

 

Email: hsft@ogilvy.com

 

 

 

In the U.S.:

 

 

 

Jessica Barist Cohen

 

Ogilvy Financial, New York

 

Phone: +1-646-460-9989

 

Email: hsft@ogilvy.com

 

 



 

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Condensed Consolidated Balance Sheets (Unaudited)

(US dollars in thousands, except share data)

 

 

 

March 31, 2011

 

December 31, 2010

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

128,244

 

169,893

 

Restricted cash

 

379

 

359

 

Account receivable, net

 

44,657

 

43,761

 

Other current assets

 

9,448

 

6,885

 

Total current assets

 

182,728

 

220,898

 

 

 

 

 

 

 

Property, plant and equipment, net

 

10,380

 

9,772

 

Goodwill and intangible assets, net

 

27,427

 

23,092

 

Other long-term assets

 

1,597

 

1,330

 

Total assets

 

222,132

 

255,092

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities (including current liabilities of the consolidated variable interest entity without recourse to HiSoft Technology International Limited of $230 and $229 as of March 31, 2011 and December 31, 2010, respectively)

 

38,234

 

78,532

 

Other liabilities

 

1,646

 

1,608

 

Total liabilities

 

39,880

 

80,140

 

Total HiSoft Technology International Limited shareholder’s Equity

 

181,292

 

174,952

 

Non-controlling interest

 

960

 

 

 

 

 

 

 

 

Total liabilities and Equity

 

222,132

 

255,092

 

 

Note:

As of March 31,2011, there were 580,225,948 ordinary shares (30,538,208 ADSs) issued and outstanding.

 



 

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Condensed Consolidated Statements of Operations (Unaudited)

(US dollars in thousands, except share and per share data)

 

 

 

Three months ended Mar 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net revenues

 

44,312

 

30,537

 

Cost of revenues

 

(30,203

)

(19,418

)

Gross profit

 

14,109

 

11,119

 

 

 

 

 

 

 

Operating expenses

 

(11,501

)

(7,850

)

Income from operations

 

2,608

 

3,269

 

 

 

 

 

 

 

Other income

 

557

 

126

 

Net income before income tax expenses

 

3,165

 

3,395

 

 

 

 

 

 

 

Income tax expenses

 

(348

)

(428

)

Net income

 

2,817

 

2,967

 

 

 

 

 

 

 

Add: Net loss attributable to non-controlling interest

 

(51

)

 

Net income attributable to HiSoft Technology International Limited

 

2,766

 

2,967

 

 

 

 

 

 

 

Net Income per ADS

 

 

 

 

 

Basic

 

0.09

 

0.14

 

Diluted

 

0.09

 

0.13

 

 

 

 

 

 

 

Weighted average ADS used in calculating net income per ADS

 

 

 

 

 

Basic

 

30,492,536

 

4,733,330

 

Diluted

 

31,773,135

 

22,340,906

 

 



 

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures

(US dollars in thousands, except per share data and percentages)

 

 

 

Three months ended Mar 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

GAAP operating income

 

2,608

 

3,269

 

GAAP operating income%

 

5.9

%

10.7

%

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

- Share-based compensation

 

1,177

 

589

 

- Amortization of acquired intangible assets

 

411

 

163

 

- Change in fair value of contingent consideration payable for M&A

 

350

 

144

 

 

 

 

 

 

 

Non-GAAP operating income

 

4,546

 

4,165

 

Non-GAAP operating income%

 

10.3

%

13.6

%

 

 

 

 

 

 

GAAP net income

 

2,766

 

2,967

 

GAAP net margin

 

6.2

%

9.7

%

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

- Share-based compensation

 

1,177

 

589

 

- Amortization of acquired intangible assets

 

411

 

163

 

- Change in fair value of contingent consideration payable for M&A

 

350

 

144

 

 

 

 

 

 

 

Non-GAAP net income

 

4,704

 

3,863

 

Non-GAAP net margin

 

10.6

%

12.7

%

 

 

 

 

 

 

Non-GAAP net income per ADS

 

 

 

 

 

Basic

 

0.15

 

0.18

 

Diluted

 

0.15

 

0.17

 

 

 

 

 

 

 

Weighted average ADS used in calculating Non-GAAP net income per ADS

 

 

 

 

 

Basic

 

30,492,536

 

4,733,330

 

Diluted

 

31,773,135

 

22,340,906

 

 



 

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures

(US dollars in thousands, except per share data and percentages)

 

 

 

Three months ended Mar 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

GAAP net income per ADS

 

 

 

 

 

Basic

 

0.09

 

0.14

 

Adjustments:

 

 

 

 

 

- Share-based compensation

 

0.04

 

0.02

 

- Amortization of acquired intangible assets

 

0.01

 

0.01

 

- Change in fair value of contingent consideration payable for M&A

 

0.01

 

0.01

 

Non-GAAP net income per ADS

 

 

 

 

 

Basic

 

0.15

 

0.18

 

 

 

 

 

 

 

GAAP net income per ADS

 

 

 

 

 

Diluted

 

0.09

 

0.13

 

Adjustments:

 

 

 

 

 

- Share-based compensation

 

0.04

 

0.02

 

- Amortization of acquired intangible assets

 

0.01

 

0.01

 

- Change in fair value of contingent consideration payable for M&A

 

0.01

 

0.01

 

Non-GAAP net income per ADS

 

 

 

 

 

Diluted

 

0.15

 

0.17

 

 

Note:

The Non-GAAP adjusted net income per share and per ADS are computed using Non-GAAP adjusted net income and the same number of shares and ADSs used in GAAP basic and diluted EPS calculation