Financial Results for the Three-Month Period Ended September 30, 2007 Highlights: -- Unaudited revenue is US$15.0 million, increasing 44% quarter-over-
quarter and 20% year-over-year
-- Unaudited net income, excluding e-Channels related acquisition
amortization, is US$2.9 million, an increase of 39% quarter-over-
quarter and an increase of 51% year-over-year
-- Management provided its 2007 non-GAAP net income estimate of US$9.3
million, above its management incentive plan target of US$8.5 million
-- Unaudited gross margin is 39% for the period compared to 28% for the
same period of 2006, and compared to the prior three month period
ended June 30, 2007 which was 36%
-- Successfully expanded into the small to medium sized banking segment
by winning contracts for online banking and risk management with
Hangzhou City Commercial Bank, Huishang Bank, and Bank of Beijing
-- Further deepened our working relationship with existing customers,
notably China Construction Bank
-- Increased our POS merchant-acquiring network installation to 5,000 and
our sales offices to nine by September 30, 2007
-- Acquired Recency Technology Limited, a leading provider of business
intelligence solution and consulting services to banks in China BEIJING, Nov. 7 /Xinhua-PRNewswire-FirstCall/ -- Yucheng Technologies Limited (NASDAQ:YTEC), a leading local IT and outsourced service provider to the Chinese banking industry, today announced company prepared, unaudited financial results for the three month period ended September 30, 2007.
The company reported unaudited revenue of US$15.0 million for the three month period ended September 30, 2007, representing a 44% quarterly increase compared to US$10.4 million in the three month period ended June 30, 2007, and an increase of 20% over the same period in 2006. The increase in revenue reflects strong growth in all of the company's main product offerings.
Excluding amortization expense related to the e-Channels acquisition, the unaudited net income for the three month period ended September 30, 2007, was US$2.9 million representing a 39% quarterly increase compared to US$2.1 million in the three month period ended June 30, 2007, and an increase of 51% from US$1.9 million for the same period in 2006. Unaudited net income including the e-Channels amortization charge for the three-month period ended September 30, 2007 was US$2.6 million. The unaudited earnings per share for the three month period ended September 30, 2007, was US$0.18, excluding the e- Channels amortization charge, and US$0.16, including it.
"The past three month period of Yucheng is marked by strong performance in our IT solutions and services business, with the revenue increasing 94% sequentially, compared to the three month period ended June 30, 2007," stated Mr. Weidong Hong, Yucheng's CEO. "Our IT solution, software and consulting businesses once again led the company's performance with continued growth in revenue, net profit and margin expansion. We continue to strengthen our commitment to higher margin businesses such as risk management, online banking and call center solutions, which we believe will continue to see robust growth. We continue to deepen our working relationships with our existing customers, such as China Construction Bank. We successfully migrated our market-leading products and services, such as online banking and risk management solutions, to small and medium sized banking customers, which are becoming aggressive adaptors of IT upgrades. We also completed the acquisition of Recency Technology Limited, a leading provider of business intelligence solutions and consulting services to banks in China. This acquisition further broadened Yucheng's overall risk management and performance management solution offering. Additionally, we have made good progress in the POS merchant acquiring business and have increased our total installed base to 5,000 nationwide and sales office presence to nine cities. We remain on track to achieve our operating targets of 7,000 POS installed base and ten sales offices by the end of 2007." Key Unaudited Financial Indicators: The difference between the unaudited non-GAAP net income amounts and GAAP net income amounts set forth is the effect of the amortization expense of intangible assets resulting from the accounting treatment of the acquisition of Beijing e-Channels Century Technology Co., Ltd.
(All numbers in US$ thousands, except per-share amounts) Q3 of 2007 Q3 of 2006 Change (%)
Consolidated Revenue $14,981 $12,445 20%
Cost of Revenue $9,145 $9,001 2%
Gross Profit $5,836 $3,444 69%
Total Operating Expenses $2,888 $1,264 128%
Income from Operations $2,948 $2,180 35%
Non-GAAP Net Income $2,872 $1,901 51%
Amortization of Intangible Assets $305 Nil N/A
GAAP Net Income $2,567 $1,901 35%
Non-GAAP EPS $0.18 $0.51 (65)%
GAAP EPS $0.16 $0.51 (69)%
Weighted average common shares
outstanding 16,394,806 3,754,484 337% Note: The United States dollar amounts in the above table are calculated
based on the US$: RMB conversion rate of 7.5108 as of September 30,
2007 and 7.9087 as of September 30, 2006.
Unaudited Financial Results:
Unaudited revenue for the three month period ended September 30, 2007, was US$15.0 million, a 44% quarterly increase compared to US$10.4 million in the three month period ended June 30, 2007, and an increase of 20% compared to the US$12.4 million for the same period last year. The breakdown is as follows: approximately 39% of total unaudited revenue was from system integration; and 61% of total unaudited revenue was from IT solution and services.
Unaudited cost of revenues was US$9.1 million compared to US$6.7 million during the three month period ended June 30, 2007, and US$9.0 million during the three month period ended June 30, 2006, representing an increase of 37% quarter-over-quarter and 2% year-over-year. The unaudited gross profit for the three month period ended September 30, 2007 was US$5.8 million, up 56% compared to the three month period ended June 30, 2007, and up 69% compared to the US$3.4 million in the same period of 2006.
The overall gross margin was 39% for the three month period ended September 30, 2007, compared to 28% during the same period of 2006, and to 36% for the three month period ended June 30, 2007. The increase was mainly due to the revenue mix shifting favorably to high-margin and fast-growth IT solution and services businesses.
Unaudited selling, marketing and general administrative expenses totaled to US$2.3 million, a 16% increase quarter-over-quarter and a 108% increase from US$1.1 million year-over-year. The increase was attributable to operating expense inclusion of newly acquired companies and the expenses incurred from POS merchant acquiring business. Unaudited research and development expenses increased by 277% to US$0.6 million compared to that in the three month period ended September 30 2006, due to inclusion of research and development expense of newly acquired companies. Research and development expenses were mainly related to investment in developing software products and solutions.
Unaudited income from operations was US$2.9 million, which increased by 56% as compared to US$1.9 million for the three month period ended June 30, 2007, and increased by 35% as compared to US$2.2 million for the three month period ended September 30, 2006. The operating margin for the three month period ended September 30, 2007 was 20%, versus 18% for the same period in the previous year, and 18% for the three month period ended June 30, 2007. The effective tax rate for the same period of 2007 was negative 0.2%, compared to negative 4% for the three month period ended June 30, 2007, and 11% for the same period in the previous year, due to deferred tax recognized in the POS business unit.
Excluding amortization charge related to the e-Channels acquisition, the net income for the three month period ended September 30, 2007 was US$2.9 million, representing EPS of US$0.18 compared to a net income of US$1.9 million or EPS US$0.51 in the same period of 2006. Including the amortization charge, the net income is US$2.6 million and EPS is US$0.16 for the three month period ended September 30, 2007. The weighted average number of shares used in the calculation of EPS was 16,394,806 for the three month period ended September 30, 2007 compared to 3,754,484 in the same period of 2006.
Business Outlook: "We see Chinese banks continue to invest in IT infrastructure in order to further improve their operational efficiency and profitability, especially in our core service areas such as electronic customer service channels like web- banking and call centers, and risk management/performance solutions. We also see that small to medium sized banks are becoming more aggressive in IT investment as they prepare for public listing and increase their competitiveness in the industry. Since the acquisition of Easycon that was completed last quarter, we see great opportunity to penetrating this niche market, and we will expect greater contribution to our revenue and profit from the small and medium sized banks," commented Weidong Hong, CEO of Yucheng. "All in all, Yucheng's business has been experiencing healthy growth and the management, despite the losses in the POS business unit, believes we can achieve US$9.3 million in net income, excluding e-Channels related acquisition amortization, for 2007." Teleconference Information: Management will conduct a conference call to discuss its financial results for the three month period ended September 30, 2007 at 8:00 p.m. EST on Wednesday, November 7, 2007.
To participate, please call the following numbers ten minutes before the scheduled start of the call and provide the conference call identification 22490023 to join: +1-866-519-4004 (USA)
+1-800-407-1908 (Canada)
0-808-234-6646 (UK.)
10-800-650-0419 (NetCom Users in China)
10-800-265-0432 (Telecom Users in China)
+65-6735-7955 (Other countries) The record of this call will be accessible and downloaded at for 48 hours starting 2 hours after the end of the call. The record will also be accessible on Yucheng's website at http://www.yuchengtech.com/english/front/main17.jsp?path=1766>1770.
About Yucheng Technologies Limited Yucheng Technologies Limited (YTEC) is a leading IT and outsourced service provider to the Chinese banking industry. Headquartered in Beijing, China, Yucheng has more than 1,500 employees and has established an extensive footprint to serve its banking clients nationwide with nine subsidiaries and representative offices located in Shanghai, Guangzhou, Xi'an, Xiamen, Zhengzhou, Kunming, Nanjing, Changsha, and Chengdu. Yucheng provides a comprehensive suite of IT solutions and services to Chinese banks including 1) IT consulting, solutions and software platform, 2) system integration, and 3) outsourced operations. Yucheng counts 13 out of the 15 top banks in China as its customers, and is especially strong in 1) banking channel management IT solutions and services, such as web banking and call centers, 2) business processing solutions, such as core banking systems, foreign exchange, treasury, and intermediary business solutions, and 3) risk/performance management solution consulting and implementation service. It is also rapidly becoming the leading third party provider of POS merchant acquiring services in partnership with banks.
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.
YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
Sep 30, 2007 and Dec 31, 2006
Assets 2007.9.30 2007.9.30 2006.12.31
USD RMB RMB Current assets:
Cash 13,113,003 98,489,140 98,357,657
Trust monies placed with a
financial institution 6,657,080 50,000,000 --
Trade accounts receivable, net 24,964,303 187,501,886 116,606,333
Costs and estimated earnings in
excess of billings on
uncompleted contracts 6,431,116 48,302,826 17,022,985
Amounts due from related
companies 2,014 15,130 386,867
Inventories 1,206,945 9,065,124 5,655,156
Pre-contract costs 849,831 6,382,908 1,605,795
Deposit for acquisition of
Businesses 6,657,080 50,000,000 44,750,000
Other current assets 6,672,326 50,114,509 21,035,434
Deferred income taxes 60,977 457,979 427,601 Total current assets 66,614,675 500,329,502 305,847,828 Investments in and advances to
Affiliates 420,911 3,161,376 3,161,376
Office equipment, furniture
and motor vehicles 4,125,157 30,983,231 13,420,353
Less: accumulated depreciation (1,364,563) (10,248,960) (6,958,874) Net office equipment, furniture
and motor vehicles 2,760,594 20,734,271 6,461,479
Intangible assets, net 4,538,900 34,090,771 36,207,527
Other non-current assets 170,533 1,280,840 45,383
Deferred income taxes 324,993 2,440,958 143,426
Goodwill 13,504,904 101,432,630 37,273,607 Total assets 88,335,510 663,470,348 389,140,626 YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets (continued)
Sep 30, 2007 and Dec 31, 2006
Liabilities and owners' equity 2007.9.30 2007.9.30 2006.12.31
USD RMB RMB
Current liabilities
Short-term loan 4,659,956 35,000,000 32,000,000
Current instalment of
long-term loan 465,996 3,500,000 3,500,000
Trade accounts payable 5,033,974 37,809,168 36,742,492
Billings in excess of costs
and estimated earnings on
uncompleted contracts 33,402 250,877 978,248
Employee and payroll accruals 1,243,573 9,340,228 2,671,365
Dividends payable to owners 3,498,084 26,273,407 38,000,000
Income taxes payable 745,187 5,596,952 4,240,717
Due to related parties 120,886 907,948 907,948
Other current liabilities 4,814,233 36,158,745 22,177,691 Total current liabilities 20,615,291 154,837,325 141,218,461
Deferred income taxes 609,947 4,581,192 5,292,707
Other long term liabilities 102,519 770,000 -- Total liabilities 21,327,757 160,188,517 146,511,168 Minority interests 320,300 2,405,708 -- Owners' equity
Preferred stock, $0.0001 par
value, authorised
2,000,000 shares and none
issued;
Common stock, $0.0001 par
value, authorised 60,000,000
shares; 9,528,320 shares and
none Issued and outstanding
as of December 31, 2006 and
both of December 31, 2005
and 2004 2,663,667 20,006,274 20,001,229
Additional paid-in capital 52,926,205 397,518,137 176,450,960
Reserves 2,527,713 18,985,144 18,985,144
Retained earnings 8,762,196 65,811,099 27,331,325
Accumulated other
comprehensive loss (192,328) (1,444,531) (139,200) Total owners' equity 66,687,453 500,876,123 242,629,458 Total liabilities and
owners' equity 88,335,510 663,470,348 389,140,626 YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
Three months ended Sep 30, 2007 and 2006
2007 Q3 2007 Q3 2006 Q3
USD RMB RMB Revenues:
IT solutions and services 9,071,798 68,136,457 30,855,582
System integration 5,909,407 44,384,377 67,571,492
Total revenues 14,981,205 112,520,834 98,427,074
Cost of revenues (9,145,305) (68,688,554) (71,186,193) Gross profit 5,835,900 43,832,280 27,240,881 Operating expenses:
Research and development (612,039) (4,596,901) (1,285,449)
Selling and marketing (910,680) (6,839,938) (4,557,920)
General and administrative (1,417,584) (10,647,190) (4,303,163)
Subsidies and value-added tax
Refunds 52,618 395,203 148,675 Total operating expenses (2,887,685) (21,688,826) (9,997,857) Other income (expenses):
Interest income 67,666 508,227 3,106
Interest expense (85,918) (645,313) (293,346)
Equity in loss of affiliates -- -- (18,343)
Other income (expense), net 17,628 132,398 (30,103)
Income before income taxes 2,947,591 22,138,766 16,904,338
Minority interests (80,155) (602,022) --
Income tax expense 4,643 34,871 (1,867,415)
Amortization for intangible
assets (305,314) (2,293,155) -- Net income 2,566,765 19,278,460 15,036,923 For further information, please contact: In the U.S.A. Mr. Jim Preissler
Advisor, Investor Relations
Tel: +1-646-383-4832
Email: In Beijing, China
Ms. Wei Peng
Investor Relations
Tel: +86-10-6442-0533
Email: DATASOURCE: Yucheng Technologies Limited CONTACT: Mr. Jim Preissler, Advisor in Investor Relations for Yucheng Technologies Limited, +1-646-383-4832, or ; Ms. Wei Peng, Investor Relations for Yucheng Technologies Limited, +86-10-6442-0533, or
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