Vsource(R) Announces Results for First Quarter Ending April 30,
2004 LA JOLLA, Calif., June 14 /PRNewswire-FirstCall/ -- Vsource,
Inc. (OTC:VSCE) (BULLETIN BOARD: VSCE) , an innovative leader in
providing customized global business process outsourcing (BPO)
services to clients worldwide, today announced its financial
results for its first quarter ending April 30, 2004. (Logo:
http://www.newscom.com/cgi-bin/prnh/20030910/VSCELOGO) Revenue for
Q1 2004 totaled $4.82 million, compared to $4.71 million for Q1
2003. The company reported a net profit available to common
shareholders of $2.48 million or $1.22 per basic share for Q1 2004.
Net profit available to common shareholders during the period
included a gain of $7.5 million on disposal of a partial interest
in a formerly wholly owned subsidiary, Vsource Asia, and non-cash
charges of $3.41 million from deemed non-cash dividends to
preferred shareholders. Excluding the deemed dividend, Vsource's
net profit was $5.89 million in Q1 2004, or $2.91 per basic share
in Q1 2004. The company recorded a deemed dividend of $2.78 million
in Q1 2003, when it reported a net loss available to common
shareholders of $4.21 million or $2.29 per basic share. The
company's earnings before interest, taxes, depreciation and
amortization, adjusted to exclude deemed non-cash dividends to
preferred shareholders of $3.41 million ("Adjusted EBITDA") was a
profit of $6.53 million for Q1 2004, compared with Adjusted EBITDA
loss of $0.8 million, adjusted to exclude non-cash stock
compensation charges of $0.06 million and deemed non-cash dividends
to preferred shareholders of $2.78 million for Q1 2003. Adjusted
EBITDA represents a non-GAAP (Generally Accepted Accounting
Principles) financial measure. A table reconciling this measure to
the appropriate GAAP measure is included in the notes to the
consolidated financial statements included in this release. Net
cash at the end of Q1 2004 totaled $6.18 million, compared to
$10.51 million as of the same period a year ago, but showing the
addition of proceeds of approximately $9.5 million from the
disposal of 39% of the equity interest in Vsource Asia to Symphony
House Berhad and other investors and the cash used in operations in
Q1 2004 as compared to the $1.45 million as of the end of the last
fiscal year. Vsource Chairman and Chief Executive Officer, Phil
Kelly commented: "Results for the first quarter of the new
financial year 2004 reflect positive momentum arising from new
client acquisition, improvements stemming from cost control
measures and, of course, the gain attributable to the Symphony
transaction." Mr. Kelly continued, "For the past year, we have
focused on the development of four industry concentrations: banking
and finance, insurance, technology and transportation, and feel
that we have made good progress in each of these sectors over the
past two quarters. During Q1 2004 we added four new multinational
clients, all of whom became operational. Specifically, we entered
into contracts with three major insurance companies, including PCA
Life Assurance Co., Ltd. in Taiwan, which is an operation of
Prudential Corporation Asia (PCA). We also entered into an
agreement with Lexmark, a leading developer, manufacturer and
supplier of printing solutions. In addition, we concluded
agreements to expand the scope of our services to an existing
insurance customer, Allianz Insurance, and with a large global
technology company, which was also already a customer. Overall,
this activity resulted in a 19% sequential improvement in revenue
during the quarter when compared to Q4 2003. Improved top line,
combined with lower operating costs resulted in a continuous
improvement in operating results. Looking forward, we intend to
pursue cost cutting measures in Q2 2004 while growing revenues."
Vsource Vice-Chairman and Chief Financial Officer, Dennis Smith
noted: "The Symphony transaction had a material positive impact on
the Company's cash position and balance sheet. The gain from the
sale of a 39% interest in Vsource Asia offset operating losses
during the quarter, such that we recorded a net profit before
non-cash deemed dividends to preferred shareholders of $5.89
million, compared with a net loss of $1.43 million in the same
period last year." Vsource, Inc. Consolidated Statements of Income
(in thousands, except per share data) Three months ending April 30,
2004 2003 Revenues $4,815 $4,708 Operating Expenses Cost of revenue
3,626 2,469 Selling, general and administrative 2,822 3,625
Amortization of stock-based compensation expense -- 56 Total
expenses 6,448 6,150 Operating loss (1,633) (1,442) Non-cash
beneficial conversion feature expense (1) -- -- Other interest
income/ (expense) (2) 16 Gain on disposal of partial interest in a
subsidiary 7,489 -- Minority interest in loss of a subsidiary 35 --
Net profit/(loss) $5,889 $(1,426) Non-cash deemed dividend to
preferred shareholders (2) (3,411) (2,779) Net profit/(loss)
available to common shareholders $2,478 $(4,205) Basic net
profit/(loss) per share available to common shareholders $1.22
$(2.29) Diluted net profit/(loss) per share available to common
shareholders $0.26 -- Weighted average number of common shares
outstanding Basic 2,026 1,838 Diluted 22,464 -- Earnings before
interest, taxes, depreciation & amortization excluding non-cash
stock compensation expense (4) $6,528 (796) Adjusted EBITDA margin
(5) 135.6% -16.9% (1) Non-cash beneficial conversion feature
charges associated with the issuance of convertible debt (2)
Non-cash deemed dividend for preferred shareholders associated with
the exchange of Series 2-A convertible preferred stock and warrants
for Series 4-A convertible preferred stock; and amortization of
beneficial conversion feature and accretion of redemption value of
Series 4-A convertible preferred stock (3) Post reverse stock-split
and includes common shares outstanding on an "as converted basis"
totaling 20.4 million in aggregate associated with preferred stock,
warrants and vested employee options outstanding. (4)
Reconciliation of Net loss to Adjusted EBITDA Three months ended
April 30, 2004 2003 Net profit/(loss) $5,889 $(1,426) Add: Non-cash
beneficial conversion feature expense -- -- Other interest expense
2 (16) Depreciation and amortization 516 590 Amortization of
stock-based compensation expense -- 56 Taxes 121 -- Adjusted EBITDA
$6,528 $(796) (5) Adjusted EBITDA margin is Adjusted EBITDA divided
by Revenues Vsource, Inc. Consolidated Balance Sheets (in
thousands) April 30, 2004 January 31, 2004 Assets Current assets:
Cash $6,176 $1,452 Restricted cash 619 473 Accounts receivable, net
2,004 1,062 Inventories 176 207 Prepaid expenses 209 475 Other
current assets 1,977 2,148 Total current assets 11,161 5,817
Property and equipment, net 4,151 4,418 Restricted cash,
non-current 599 599 Total assets $15,911 $10,834 Liabilities,
Preferred stock and Shareholders' equity (deficit) Current
liabilities: Accounts payable $1,751 $2,318 Accrued expenses 3,727
5,326 Advance from customers 626 906 Total current liabilities
6,104 8,550 Advance from customer, non-current -- -- Minority
interest 1,614 -- Preferred stock 22,286 18,875 Shareholders'
equity (deficit) (14,093) (16,591) Total Liabilities, Preferred
stock and Shareholders' equity (deficit) $15,911 $10,834 Non-GAAP
Financial Measures This release contains non-GAAP financial
measures. Pursuant to the requirements of Regulation G, Vsource has
provided reconciliation within this release of the non-GAAP
financial measures to the most directly comparable GAAP financial
measures. Adjusted EBITDA has been presented in this release in
order to assist in the analysis of the operating profitability of
the company because the company believes this form of measurement
eliminates the effects of non-operating expenses and non-cash
charges such as beneficial conversion feature expense, stock-based
compensation and depreciation and amortization. Management reviews
this form of measurement monthly. Vsource has consistently provided
this measurement in previous releases and therefore has provided a
consistent basis for comparison between quarters, which the company
believes is useful to investors and other interested persons. About
Vsource Vsource, Inc., headquartered in La Jolla, Calif., provides
customized global business process outsourcing (BPO) services to
clients worldwide. Under Vsource Client Outsourcing Solutions
(COS), Vsource delivers superior BPO solutions to Fortune 500 and
Global 500 organizations. Vsource COS include: Human Resource
Solutions, Warranty Solutions, Sales Solutions, and Vsource
Foundation Solutions(TM), which include Customer Relationship
Management (CRM), Financial Services, Travel and Expense Claims,
and Supply Chain Management (SCM). Under Vsource Human Capital
Management (HCM) Solutions, Vsource delivers Fortune 500
reliability to small and medium-sized businesses in the U.S. HCM
solutions include: Human Resource Management, Health & Welfare,
Administrative Services, and Risk Management. Vsource solutions are
currently utilized by some of the world's most admired companies,
including: ABN-AMRO, Agilent Technologies, EMC2, FedEx, Network
Appliance, Haworth, and Gateway. For more information, log on to:
http://www.vsource.com/. Forward Looking Statements: Some of the
statements in this release and other oral and written statements
made by us from time to time to the public constitute
forward-looking statements. These forward-looking statements are
based on management's current expectations or beliefs and are
subject to a number of factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements. These forward-looking statements
include, without limitation, statements with respect to anticipated
future operating and financial performance, introduction of
services and growth opportunities expected or anticipated to be
realized by management. Vsource disclaims any obligation to update
or revise any forward-looking statements based on the occurrence of
future events, the receipt of new information, or otherwise.
Factors that could cause or contribute to such differences include,
but are not limited to, heavy reliance on a small number of major
clients, a potential requirement to redeem our Series 4-A
convertible preferred stock if we fail to meet certain conditions
by March 31, 2006, our limited experience in providing human
capital management solutions, the new and unproven market for
business process outsourcing services internationally, long cycles
for sales of our solutions, complexities involved in implementing
and integrating our services, fluctuations in revenues and
operating results, economic and infrastructure disruptions,
dependence on a small number of vendors and service providers,
management of acquisitions, litigation and competition. Other
factors that may affect these statements are identified in our
previous filings with the Securities and Exchange Commission.
Vsource is a registered trademark of Vsource, Inc. Vsource
Foundation Solutions is a trademark of Vsource, Inc. Fortune,
Fortune 500 and Global 500 are registered trademarks of Time Inc.
Vsource disclaims any proprietary interest in the marks and names
of others. For further information, please contact Cindy Kim,
Vsource Media Relations, +1-858-456-4871, or fax, +1-858-456-4878,
. CONTACT: Cindy Kim, Vsource Media Relations, +1-858-456-4871, or
fax, +1-858-456-4878, Cindy_Kim@vsource.com Photo: Newscom:
http://www.newscom.com/cgi-bin/prnh/20030910/VSCELOGO AP Archive:
http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com
DATASOURCE: Vsource, Inc. Web site: http://www.vsource.com/
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