LONGTOP FINANCIAL TECHNOLOGIES LTD (ADR) 
By HONG KONG, Jan. 31, 2011 /PRNewswire-Asia/ -- Longtop Financial Technologies Limited ("Longtop") (NYSE: "LFT"), a leading software developer and solutions provider targeting the financial services industry in China, announced today unaudited financial results for the quarter ended December 31, 2010, which is the third quarter of its fiscal year ending March 31, 2011.
FINANCIAL HIGHLIGHTS
-- Third quarter software development revenues of US$72.5 million, an
increase of 56.3% Year-on-Year (YoY);
-- Third quarter total revenues of US$76.9 million, an increase of 40.7%
YoY;
-- Third quarter Adjusted(1) Operating Income of US$40.2 million, an
increase of 37.1% YoY;
-- Third quarter Adjusted Net Income of US$35.6 million, an increase of
21.5% YoY. Included in Q3 2010 Adjusted Net Income was an income tax
benefit of US$4.0 million (Q3 2011: nil). Excluding the income tax
benefit, Adjusted Net Income would have increased by 40.7%;
-- Third quarter Adjusted Diluted Earnings Per Share of US$0.61, five cents
ahead of Company guidance;
-- Cash Flow From Operations in Q3 2011 was a record US$43.9 million and
US$75.0 million for the first nine months of fiscal 2011, an increase of
49.8% YoY;
-- Full Year Revenue Guidance increased from US$242.5 million to US$249.0
million and Adjusted Operating Income Guidance Increased from US$110.0
million to US$113.0 million
(1) Explanation of the Company's Adjusted (i.e. non-GAAP) financial measures and the related reconciliations to GAAP financial measures are included in the accompanying "Non-GAAP Disclosure" and the "Consolidated Adjusted Statements of Operations".
"I am very pleased to report that we have delivered the strongest cash flow from operations to date since our IPO in 2007 on the back of outstanding execution from our management and employees. The momentum has accelerated during fiscal 2011 with our organic growth rate for software development revenue of approximately 40% in the first nine months significantly higher than the 30% guidance we gave at the outset of the year while maintaining a relatively stable organic operating margin. With this momentum, we are once again raising guidance for the fiscal fourth quarter of 2011," commented Weizhou Lian, CEO of Longtop. "For fiscal 2012 we continue to see strong demand from our customers that execute on their long-term IT development plans irrespective of short-term changes in macroeconomic factors. Based on our sales pipeline and ongoing discussions with customers about their IT spending plans, Longtop's growth prospects remain bright for fiscal 2012. I believe Longtop's competitive position is stronger than ever and we continue to take market share from our competitors."
FISCAL THIRD QUARTER DETAILED FINANCIAL RESULTS
Revenue
2010 Q3 and 2011 Q3 Revenue-US$000s
Three months ended
December December % Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Software Development $46,397 $72,498 56.3%
Other Services $8,267 $4,429 (46.4%)
Total Revenue $54,664 $76,927 40.7%
======= =======
Nine months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Software Development $108,109 $166,719 54.2%
Other Services $17,882 $19,558 9.4%
Total Revenue $125,991 $186,277 47.8%
======== ========
Software development revenues of US$72.5 million in the third quarter were US$5.1 million more than Company guidance of US$67.4 million representing an increase of 56.3% YoY and contributing 94.2% of total revenues. Giantstone, a leading core banking solution provider in China acquired by Longtop in the fourth quarter of fiscal 2010, contributed US$5.3 million in software revenues in the quarter ended December 31, 2010. Excluding Giantstone, software development revenues for the third quarter would have increased by 44.9%. Software development revenues, which were 89.5% of total revenues for the nine months ended December 31, 2010, amounted to US$166.7 million, a YoY increase of 54.2%. Giantstone contributed US$14.6 million in software development revenues in the nine months ended December 31, 2010. Excluding Giantstone, software development revenues in the nine months ended December 31, 2010 would have increased by 40.7%.
Revenues from other services in the third quarter were US$4.4 million, a decrease of 46.4% YoY. The YoY decrease in Other Service revenue is due to a decline in system integration and ATM maintenance services and the deconsolidation of the Non Financial Services IT Outsourcing Services Division on July 17, 2010, which went from being a wholly owned subsidiary to an equity-method investee. The 9.4% YoY increase in other services revenues for the nine months ended December 31, 2010 was primarily due to US$2.9 million in revenue from the IT outsourcing business of Shenzhen Zhongbokechuang Information Technology Co., Ltd., or Zhongbo, which was acquired by Longtop in April 2010 and included within the Non Financial Services IT Outsourcing Services Division.
Software Development Revenue by Customer Type-US$000s
Three months
ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Big Four Banks $18,464 $27,348 48.1%
Other Banks $18,106 $31,205 72.3%
Insurance $8,309 $9,638 16.0%
Enterprises $1,518 $4,307 183.7%
Total $46,397 $72,498 56.3%
======= =======
Nine months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Big Four Banks $47,272 $65,910 39.4%
Other Banks $39,980 $71,835 79.7%
Insurance $16,195 $20,856 28.8%
Enterprises $4,662 $8,118 74.1%
Total $108,109 $166,719 54.2%
======== ========
Software development revenues from the Big Four Banks in the third quarter were US$27.3 million, an increase of 48.1% YoY and US$65.9 million for the nine months ended December 31, 2010, an increase of 39.4% YoY which is almost double the guidance of 20% given at the beginning of the fiscal year. Big Four Banks accounted for 39.5% of software development revenues for the nine months ended December 31, 2010, as compared to 43.7% in the corresponding year ago period.
Software development revenues from Other Banks in the third quarter were US$31.2 million, a YoY increase of 72.3%, and US$71.8 million in the nine months ended December 31, 2010, an increase of 79.7% YoY. Excluding Giantstone, software development revenue from Other Banks would have increased by 43.3% and 43.2% YoY for the three and nine months ended December 31, 2010. Other Banks accounted for 43.1% of software development revenues for the nine months ended December 31, 2010, as compared to 37.0% in the corresponding year ago period.
Software development revenues from Insurance in the third quarter were US$9.6 million, a YoY increase of 16.0%, and US$20.9 million for the nine months ended December 31, 2010, a YoY increase of 28.8%. Insurance accounted for 12.5% of software development revenues in the nine months ended December 31, 2010, as compared to 15.0% in the corresponding year ago period.
Gross Margins
Three months ended
December December Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Software Development Gross Margin % 75.1% 71.3% (3.8%)
Adjusted Other Services Gross Margin % 50.6% 28.0% (22.6%)
Adjusted Total Gross Margin % 71.4% 68.8% (2.6%)
US GAAP Software Development Gross Margin % 72.5% 68.4% (4.1%)
US GAAP Other Services Gross Margin % 46.9% 25.2% (21.7%)
US GAAP Total Gross Margin % 68.6% 66.0% (2.6%)
Nine months ended
December December Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Software Development Gross Margin % 73.1% 68.6% (4.5%)
Adjusted Other Services Gross Margin % 40.3% 30.6% (9.7%)
Adjusted Total Gross Margin % 68.4% 64.6% (3.8%)
US GAAP Software Development Gross Margin % 70.5% 58.8% (11.7%)
US GAAP Other Services Gross Margin % 35.5% (19.2%) (54.7%)
US GAAP Total Gross Margin % 65.5% 50.6% (14.9%)
Adjusted Total Gross Margin of 68.8% for the three months ended December 31, 2010, was in line with guidance. Adjusted Software Gross Margin was 71.3% and 68.6% for the three and nine months ended December 31, 2010, as compared to 75.1% and 73.1% in the corresponding year ago period. The YoY decline in Adjusted Software Gross Margin was primarily due to: i) the inclusion of newly acquired companies including Giantstone, which have lower gross margins than Longtop; (ii) in order to meet customer requirements, a larger percentage of the workforce are being located in Beijing where costs per employee are higher; and (iii) additional headcount investments in delivery capabilities for Longtop's expanded solution offerings.
Operating Expenses
Three months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Adjusted Operating Expenses - US$000s $9,720 $12,760 31.3%
Adjusted Operating Expenses - % of revenue 17.7% 16.5%
US GAAP Operating Expenses - US$000s $11,737 $16,174 37.8%
US GAAP Operating Expenses - % of revenue 21.6% 21.0%
Nine months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Adjusted Operating Expenses - US$000s $24,600 $32,279 31.2%
Adjusted Operating Expenses - % of revenue 19.6% 17.4%
US GAAP Operating Expenses - US$000s $29,279 $110,844 278.6%
US GAAP Operating Expenses - % of revenue 23.3% 59.5%
Adjusted Operating Expenses were 17.4% of revenue for the nine months ended December 31, 2010, as compared to 19.6% in the corresponding year ago period. Adjusted Operating Expenses increased by 31.2% YoY in the nine months ended December 31, 2010, which was lower than the YoY total revenue growth of 47.8% during the period.
Operating and Net Income
Three months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Adjusted Operating Income - US$000s $29,288 $40,150 37.1%
Adjusted Operating Income - % of revenue 53.6% 52.2%
US GAAP Operating Income (Loss) - US$000s $25,782 $34,564 34.1%
US GAAP Operating Income (Loss) -% of
revenue 47.2% 44.9%
Nine months ended
December December % Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Operating Income - US$000s $61,613 $88,021 42.9%
Adjusted Operating Income - % of revenue 48.9% 47.3%
US GAAP Operating Income (Loss) - US$000s $53,282 $(16,597) (131.1%)
US GAAP Operating Income (Loss) -% of
revenue 42.3% (8.9%)
Adjusted Operating Income of US$40.2 million in the third quarter represented an increase of 37.1% YoY and exceeded Company guidance of US$38.0 million. Adjusted Operating Income of US$88.0 million for the nine months ended December 31, 2010, increased 42.9% YoY. Adjusted Operating Margin for the nine months ended December 31, 2010, of 47.3% was in line with guidance and lower than the corresponding year ago period by 1.6% due primarily to the impact of acquired companies which have lower Adjusted Operating Margins than Longtop's organic business.
Three months ended
December December %
31, 2009 31, 2010 Change
-------- -------- ------
Adjusted Net Income - US$000s $29,313 $35,606 21.5%
Adjusted Net Income per Diluted Share $0.53 $0.61 15.1%
Adjusted Net Income - % of revenue 53.6% 46.3%
US GAAP Net Income (Loss) - US$000s $25,807 $29,756 15.3%
US GAAP Net Income (Loss) per Diluted Share $0.46 $0.51 10.9%
US GAAP Net Income (Loss) - % of revenue 47.2% 38.7%
Nine months ended
December December % Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Net Income - US$000s $61,431 $79,163 28.9%
Adjusted Net Income per Diluted Share $1.14 $1.35 18.4%
Adjusted Net Income - % of revenue 48.8% 42.5%
US GAAP Net Income (Loss) - US$000s $53,100 $(25,851) (148.7%)
US GAAP Net Income (Loss) per Diluted
Share $0.98 $(0.46) (146.9%)
US GAAP Net Income (Loss) -% of
revenue 42.1% (13.9%)
Reconciliation between US GAAP Net Income/Loss and Adjusted Net Income
Three months ended
December December % Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Net Income $29,313 $35,606 21.5%
Stock compensation $2,196 $2,649 20.6%
Amortization of acquired intangible
assets $960 $1,783 85.7%
Amortisation of acquired deferred
compensation from acquisitions $90 $892 891.1%
Acquisition related expenses $260 $18 (93.1%)
Changes in fair value of purchase
consideration liability $- $551
Loss from investment in an associate $- $198
Loss (gain) on partial disposal of
subsidiary $- $(241)
Sub-total $3,506 $5,850 66.9%
------ ------
US GAAP Net Income (Loss) $25,807 $29,756 15.3%
======= =======
Nine months ended
December December % Change
31, 2009 31, 2010 (Decrease)
-------- -------- ----------
Adjusted Net Income $61,431 $79,163 28.9%
Stock compensation $5,199 $94,191 1,711.7%
Amortization of acquired intangible
assets $2,602 $6,134 135.7%
Amortisation of acquired deferred
compensation from acquisitions $270 $2,202 715.6%
Acquisition related expenses $260 $59 (77.3%)
Changes in fair value of purchase
consideration liability $- $1,613
Loss from investment in an associate $- $198
Loss (gain) on partial disposal of
subsidiary $- $617
Sub-total $8,331 $105,014 1,160.5%
------ --------
US GAAP Net Income (Loss) $53,100 $(25,851) (148.7%)
======= ========
Adjusted Net Income in the third quarter of $35.6 million or US$0.61 per fully diluted share represented a YoY increase of 21.5% and exceeded Company guidance of US$33.1 million or US$0.56 per fully diluted share. The YoY Adjusted Net Income growth of 21.5% in the third quarter of fiscal 2011 was less than the YoY Adjusted Operating Income growth of 37.1% primarily because Adjusted Net Income in the third quarter of fiscal 2010 included US$4.0 million (Q3 2011: nil) for a tax benefit related to qualification as a Key Software Company. Excluding the impact of a US$4.0 million (US$0.07 per fully diluted share) tax benefit recorded in Q3 2010, Adjusted Net Income YoY would have increased 40.7%, and 32.6% per fully diluted share. Prior to May 31, 2011, Longtop expects to receive its qualification as a Key Software Company for the calendar year 2010 and would record the estimated corresponding tax benefit of approximately US$5.2 million in the period when it receives the notification.
Adjusted Net Income for the nine months ended December 31, 2010 was US$79.2 million, a YoY increase of 28.9%. The YoY Adjusted Net Income growth of 28.9% in the first nine months of fiscal 2011 was lower than the YoY Adjusted Operating Income growth of 42.9%, primarily because Adjusted Net Income in the first nine months of fiscal 2010 included US$7.0 million (Q1-Q3 2011: nil) in income tax benefits associated with Longtop's qualification as a Key Software Company. Excluding the impact of the US$7.0 million (US$0.13 per fully diluted share) tax benefit recorded in the nine months ended December 2009, Adjusted Net Income YoY would have increased 45.6%, and 33.7% per fully diluted share.
Operating cash flow was US$43.9 million for the third quarter, and US$75.0 million for the nine months ended December 31, 2010, an increase of 49.8% YoY. Unrestricted cash balances at December 31, 2010 less short term borrowings, were US$412.6 million giving the Company significant resources for potential acquisitions in the still fragmented financial IT services sector in China.
"Improving our accounts receivable management was an important objective for us this year. I am particularly pleased to see record high operating cash flow of US$43.9 million in the third quarter and US$75.0 million for the first nine months which further underscores the solidity of business demand and overall management execution at Longtop. During the fiscal third quarter order intake continued to be very strong, the Company was once again able to report higher-than-guided top and bottom line results and our industry leading margins give us significant room for additional investments in our business." commented Derek Palaschuk, CFO of Longtop.
BUSINESS OUTLOOK
Longtop anticipates, for the quarter ending March 31, 2011:
Total revenues of US$62.7 million and Adjusted Operating Income of US$25.0 million. Giantstone is expected to contribute US$3.5 million of software development revenues.
Excluding the impact of new acquisitions, US GAAP operating income is expected to be approximately US$18.5 million which is US$6.5 million less than Adjusted Operating Income due to Non GAAP adjustments normally made.
For its fiscal year ending March 31, 2011:
Total revenues of US$249.0 million and Adjusted Operating Income of US$113.0 million. Giantstone is expected to contribute US$18.0 million of software development revenues.
Excluding the impact of new acquisitions, US GAAP operating income is expected to be approximately US$2.0 million, or US$111.0 million less than Adjusted Operating Income which includes the US$79.5 million share gift as well as the other Non GAAP adjustments normally made.
CONFERENCE CALL AND WEBCAST
Longtop's senior management team will host a conference call and audio web cast at 7:00 PM U.S. Eastern Time on January 31, 2011. (or 4:00 PM U.S. Pacific Time on January 31st, 2011, and 8:00 AM Beijing/Hong Kong time on February 1, 2011.) The conference call will last for approximately one hour.
The dial-in numbers for the conference call are as follows:
U.S. Toll Free: 1866 549 1292 (back-up number: +852 3005 2050)
China Toll Free: 400 681 6949 (back-up number: +852 3005 2050)
Hong Kong and International: +852 3005 2050.
Passcode: 765115#
Additionally, a live and archived web cast of this call will be available on Longtop's website at http://en.longtop.com/
NON-GAAP DISCLOSURE ("ADJUSTED")
To supplement the unaudited consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Longtop's management reports and uses non-GAAP ("Adjusted") measures of cost of revenues, operating expenses, net income and fully diluted net income per share, which are adjusted from results based on GAAP. To supplement our financial results presented on a GAAP basis, we use the non-GAAP measures to exclude certain business combination accounting entries and expenses related to acquisitions, as well as other significant expenses including stock-based compensation, exclusion of which we believe is helpful in understanding our past financial performance and our future results. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. Management believes these non-GAAP financial measures enhance the user's overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP financial measures provide useful information to both management and investors by excluding certain items that we believe are not indicative of our core operating results. The presentation of this additional information is not meant to be considered superior to, in isolation from or as a substitute for results prepared in accordance with US GAAP. We encourage investors to examine the reconciling adjustments between the GAAP and non-GAAP measures contained in this release and which we discuss below. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies.
Definitions of Non-GAAP Measures
Adjusted Cost of Revenue is defined as cost of revenue excluding, if applicable: (1) non-cash compensation expense and (2) amortization and charges for impairment of acquired intangibles.
Adjusted Gross Margin is defined as Total Revenue less Adjusted Cost of Revenue.
Adjusted Operating Expenses is defined as operating expenses excluding, if applicable: (1) non-cash compensation expense, (2) amortization of acquired intangibles, deferred compensation arising on acquisition and goodwill and intangible asset impairment, (3) acquisition related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties, (4) post acquisition adjustments to the fair value of contingent consideration, or (5) gains or losses on the disposal of businesses or (6) one-time items.
Adjusted Operating Income is defined as Adjusted Gross Margin less Adjusted Operating Expenses.
Adjusted Loss From Investment in an Associate is defined as loss from investment in an associate excluding (1) non-cash compensation expense and (2) amortization and charges for impairment of acquired intangibles.
Adjusted Net Income is defined as Adjusted Operating Income plus/minus other income/(expenses), less income taxes and adjusted loss from investment in an associate, excluding if applicable: (1) one-time items and (2) discontinued operations.
Adjusted EPS is defined as Adjusted Net Income divided by diluted shares.
One-Time Items, if applicable, are excluded from Adjusted Operating Income and Adjusted Net Income. These items are one-time in nature and non-recurring, infrequent or unusual, and have not occurred in the past two years or are not expected to recur in the next two years. GAAP results include one-time items.
Expenses That Are Excluded From Our Non-GAAP Measures
Non-cash compensation expense consists principally of expense associated with grants, including unvested grants assumed in acquisitions, of restricted stock, restricted stock units and stock options. These expenses are not paid in cash, and we include the related shares in our fully diluted shares outstanding which, for restricted stock units and stock options, are included on a treasury method basis. Longtop's management believes excluding the share-based compensation expense from its non-GAAP financial measure is useful for itself and investors. Although share-based compensation is a key incentive offered to our employees and especially our senior management, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, as share-based compensation expense does not involve any upfront or subsequent cash outflow, Longtop does not factor this in when evaluating and approving expenditures or when determining the allocation of its resources to its business segments. As a result, the monthly financial results for internal reporting and any performance measure for commission and bonus are based on non-GAAP financial measures that exclude share-based compensation expense. If we had included share-based compensation expenses in our Non-GAAP Adjusted Net Income in Q3 2011, Adjusted Net Income would have been US$2.6 million lower or US$33.0 million for the three months ended December 31, 2010, and our Adjusted Net Income margin would have been 42.8%. If we had included share-based compensation expenses in our Non-GAAP Adjusted Net Income for the nine months ended December 31,2010, Adjusted Net Income would have been US$94.2 million lower or Adjusted Net Loss of US$15.0 million for the nine months ended December 31, 2010, and our Adjusted Net Income margin would have been negative.
Goodwill and intangible asset impairment and amortization of acquired intangibles is a non-cash expense relating to acquisitions. At the time of an acquisition, the intangible assets of the acquired company, such as backlog, customer relationships, and intellectual property, are valued and amortized over their estimated lives. While it is likely that we will have significant intangible amortization expense as we continue to acquire companies, we have excluded the effect of amortization of intangible assets from our non-GAAP financial measures. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to revenues earned during the periods presented and will contribute to future period revenues as well.
Acquisition proceeds allocated to deferred compensation arises where a portion of the purchase price paid to shareholders is considered compensation expense rather than purchase price under US GAAP. Deferred compensation arising on acquisition is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of deferred compensation arising on acquisition contributed to revenues earned during the periods presented and will contribute to future period revenues as well.
Prior to April 1, 2009, acquisition-related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties, were capitalized as part of the cost of the acquisition. Subsequent to April 1, 2009, such costs are required to be recorded as an operating expense when incurred. These acquisition-related expenses are not related to the performance of our business lines, are inconsistent in amount and frequency and are significantly affected by the timing and size of our acquisitions.
Prior to April 1, 2009, contingent consideration was generally recorded as an additional purchase price when the contingencies resolved and the consideration became payable. Subsequent to April 1, 2009, we are required to estimate and record the fair value of contingent acquisition consideration as of the acquisition date. Contingent consideration is re-measured at fair value in each reporting period with changes in fair value recognized in earnings. The contingent acquisition consideration is inconsistent in amount and frequency, and is significantly affected by the timing and size of our acquisitions.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
It is currently expected that the Business Outlook will not be updated until the release of Longtop's next quarterly earnings announcement; however, Longtop reserves the right to update its Business Outlook at any time for any reason.
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including those with respect to our anticipated operating results for the quarter ending March 31, 2010 and fiscal year ending March 31, 2011, efforts taken to improve efficiency, strengthen management, manage the Company's growth and the Company's competitive position. In some cases, you can identify forward-looking statements by such terms as ''believes,'' ''expects,'' ''anticipates,'' ''intends,'' ''estimates,'' the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include the growth of the financial services industry in China; the amount and seasonality of IT spending by banks and other financial services companies; competition and potential pricing pressures; our revenue growth and solution and service mix; our ability to successfully develop, introduce and market new solutions and services; our ability to effectively manage our operating costs and expenses; our reliance on a limited number of customers that account for a high percentage of our revenues; a possible future shortage or limited availability of employees; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified senior management personnel and research and development staff; the outbreak of health epidemics; the relocation of our headquarters; People's Republic of China, or PRC, regulatory changes and interpretations; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. Our actual results of operations for the quarter and nine month ended December 31, 2010, are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to us, which is subject to change.
About Longtop Financial Technologies Limited
Longtop is a leading software development and solutions provider targeting the financial services industry in China. Longtop develops and delivers a comprehensive range of software applications and solutions with a focus on meeting the rapidly growing IT needs of the financial services institutions in China. Longtop is the highest ranked Chinese financial technology provider on the Global FinTech 100 survey of top technology partners to the financial services industry. Independent research firm IDC has also named Longtop the No.1 market share leader in China's Banking IT solution market and the No.2 market share leader in China's Insurance IT solution market in calendar year 2009. Headquartered in Beijing, Longtop has six solution delivery centers, three research and development centers and 95 ATM service centers located in 27 out of 31 provinces in China. For more information, please visit: http://en.longtop.com/.
Contact us
For Investors:
Longtop Financial Technologies Limited
Charles Zhang, CFA, Investor Relations Director
Email: ir@longtop.com
Phone: +86 10 8421 7758
For Media:
IR Inside
Caroline Straathof
Email: caroline.straathof@irinside.com
Phone: +31 6 5462 4301
UNAUDITED CONSOLIDATED BALANCE SHEET
March 31, December 31,
2010 2010
(In U.S. dollar thousands, except
share and per share data)
Assets
Current assets:
Cash and cash equivalents $331,889 $423,219
Restricted cash 8,904 3,663
Accounts receivable, net 65,581 97,145
Inventories 6,381 6,165
Amounts due from related
parties 1,029 564
Deferred tax assets 250 773
Other current assets 13,967 13,063
------ ------
Total current assets 428,001 544,592
Fixed assets, net 26,343 27,893
Prepaid land use right 5,064 5,135
Intangible assets, net 45,676 45,040
Goodwill 96,323 106,451
Investment in an associate - 4,639
Deferred tax assets 1,443 1,234
Other assets 3,334 1,929
----- -----
Total assets $606,184 $736,913
======== ========
Liabilities and equity
Current liabilities:
Short-term borrowings $169 $10,570
Accounts payable 14,963 14,302
Deferred revenue 25,725 38,869
Amounts due to related
parties 156 2,458
Deferred tax liabilities 1,430 1,642
Accrued and other current
liabilities 44,380 64,092
------ ------
Total current liabilities 86,823 131,933
Long-term liabilities:
Deferred tax liabilities 6,842 7,389
Other non-current
liabilities 22,517 21,503
------ ------
Total liabilities 116,182 160,825
------- -------
Equity:
Ordinary shares $0.01 par
value (1,500,000,000 shares
authorized, 56,231,188 and
57,074,036 shares issued and
outstanding as of March 31,
2010 and December 31, 2010,
respectively) $562 $571
Additional paid-in capital 381,262 478,061
Retained earnings 88,542 62,691
Accumulated other
comprehensive income 19,636 34,765
------ ------
Total equity 490,002 576,088
------- -------
Total liabilities and equity $606,184 $736,913
======== ========
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
------------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands, except
share and per share data)
Revenues:
Software development $46,397 $72,498
Other services 8,267 4,429
----- -----
Total revenues 54,664 76,927
------ ------
Cost of revenues:
Software development 12,756 22,877
Other services 4,389 3,312
----- -----
Total cost of revenues 17,145 26,189
------ ------
Gross profit 37,519 50,738
------ ------
Operating expenses:
Research and development 2,549 2,519
Sales and marketing 5,549 8,553
General and administrative 3,639 5,102
----- -----
Total operating expenses 11,737 16,174
------ ------
Income (loss) from operations 25,782 34,564
------ ------
Other income (expenses):
Interest income 1,096 1,802
Interest expense (336) (270)
Other income, net 8 239
--- ---
Total other income 768 1,771
--- -----
Income (loss) before income tax
expense 26,550 36,335
Income tax expense (743) (6,239)
Loss from investment in an associate - (340)
Net income (loss) 25,807 29,756
====== ======
Net income (loss) per share:
Basic ordinary share $0.48 $0.52
Diluted $0.46 $0.51
Shares used in computation of net
income (loss) per share:
Basic ordinary share 53,597,293 57,014,619
Diluted 55,597,313 58,826,842
Includes share-based compensation
related to:
Cost of revenues software development $740 $1,018
Cost of revenues other services 146 92
General and administrative expenses 443 502
Sales and marketing expenses 717 856
Research and development expenses 150 181
Nine Months Ended
-----------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands, except
share and per share data)
Revenues:
Software development $108,109 $166,719
Other services 17,882 19,558
------ ------
Total revenues 125,991 186,277
------- -------
Cost of revenues:
Software development 31,900 68,724
Other services 11,530 23,306
------ ------
Total cost of revenues 43,430 92,030
------ ------
Gross profit 82,561 94,247
------ ------
Operating expenses:
Research and development 6,028 12,019
Sales and marketing 14,112 39,197
General and administrative 9,139 59,628
----- ------
Total operating expenses 29,279 110,844
------ -------
Income (loss) from operations 53,282 (16,597)
------ -------
Other income (expenses):
Interest income 3,096 4,744
Interest expense (530) (523)
Other income, net 313 301
--- ---
Total other income 2,879 4,522
----- -----
Income (loss) before income tax
expense 56,161 (12,075)
Income tax expense (3,061) (13,388)
Loss from investment in an
associate - (388)
Net income (loss) 53,100 (25,851)
====== =======
Net income (loss) per share:
Basic ordinary share $1.02 $(0.46)
Diluted $0.98 $(0.46)
Shares used in computation of net
income (loss) per share:
Basic ordinary share 52,083,391 56,677,929
Diluted 54,070,186 56,677,929
Includes share-based compensation
related to:
Cost of revenues software
development $1,663 $13,769
Cost of revenues other services 284 9,627
General and administrative
expenses 1,302 46,595
Sales and marketing expenses 1,597 18,611
Research and development expenses 353 5,589
UNAUDITED CONSOLIDATED ADJUSTED STATEMENTS OF OPERATIONS
Three Months Ended
------------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands, except
share and per share data)
Revenues:
Software development 46,397 72,498
Other services 8,267 4,429
Total revenues 54,664 76,927
------ ------
Cost of revenues:
Software development 12,756 22,877
Other services 4,389 3,312
Total cost of revenues 17,145 26,189
------ ------
Cost of revenue adjustments:
Share-based compensation
software development (740) (1,018)
Share-based compensation
other services (146) (92)
Amortization of acquired
intangible assets other
services (126) -
Amortization of acquired
intangible assets software
development (387) (419)
Amortization of acquisition
related deferred
compensation other services (33) (33)
Amortization of acquisition
related deferred
compensation software
development (57) (610)
Adjusted cost of revenues:
Software development 11,572 20,830
Other services 4,084 3,187
----- -----
Total adjusted cost of
revenues 15,656 24,017
---------------------- ------ ------
Gross profit 37,519 50,738
------ ------
Adjusted gross profit 39,008 52,910
--------------------- ------ ------
Operating expenses:
Research and development 2,549 2,519
Sales and marketing 5,549 8,553
General and administrative 3,639 5,102
Total operating expenses 11,737 16,174
------ ------
Operating expense
adjustments:
Share-based compensation
research and development (150) (181)
Share-based compensation
sales and marketing (717) (856)
Share-based compensation
general and administrative (443) (502)
Amortization of acquired
intangible assets sales and
marketing (378) (1,253)
Amortization of acquired
intangible assets general
and administrative (69) (111)
Acquisition related expenses
general and administrative (260) (18)
Amortization of acquisition
related deferred
compensation sales and
marketing - (98)
Amortization of acquisition
related deferred
compensation general and
administrative - (151)
Changes in fair value of
purchase consideration
liability - (485)
Loss (gain) on partial
disposal of subsidiary - 241
Adjusted operating expenses:
Research and development 2,399 2,338
Sales and marketing 4,454 6,346
General and administrative 2,867 4,076
Total adjusted operating
expenses 9,720 12,760
------------------------ ----- ------
Income (loss) from operations 25,782 34,564
------ ------
Adjusted income from
operations 29,288 40,150
-------------------- ------ ------
Other income (expenses):
Interest income 1,096 1,802
Interest expense (336) (270)
Other income, net 8 239
Total other income 768 1,771
--- -----
Other income (expenses)
adjustments:
Changes in fair value of
purchase consideration
liability - 66
Adjusted other income
(expenses):
Interest income 1,096 1,802
Interest expense (336) (204)
Other income , net 8 239
--- ---
Total adjusted other income 768 1,837
--------------------------- --- -----
Income (loss) before income
tax expense 26,550 36,335
------ ------
Adjusted income before income
tax expense 30,056 41,987
----------------------------- ------ ------
Income tax expense (743) (6,239)
Loss from investment in an
associate - (340)
Loss from investment in an
associate adjustment:
Share-based compensation - 148
Amortization of acquired
intangible assets - 50
Adjusted loss from investment
in an associate - (142)
----------------------------- --- ----
Net income (loss) 25,807 29,756
====== ======
Adjusted net income 29,313 35,606
------------------- ------ ------
Net income (loss) per share:
Basic ordinary share $0.48 $0.52
Diluted $0.46 $0.51
Adjusted net income per
share:
Basic ordinary share $0.55 $0.62
Diluted $0.53 $0.61
------- ----- -----
Shares used in computation of
net income (loss) per share:
Basic ordinary share 53,597,293 57,014,619
Diluted 55,597,313 58,826,842
Shares used in computation of
adjusted net income per
share:
Basic ordinary share 53,597,293 57,014,619
Diluted 55,597,313 58,826,842
Nine Months Ended
-----------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands, except
share and per share data)
Revenues:
Software development 108,109 166,719
Other services 17,882 19,558
Total revenues 125,991 186,277
------- -------
Cost of revenues:
Software development 31,900 68,724
Other services 11,530 23,306
Total cost of revenues 43,430 92,030
------ ------
Cost of revenue adjustments:
Share-based compensation
software development (1,663) (13,769)
Share-based compensation
other services (284) (9,627)
Amortization of acquired
intangible assets other
services (470) (15)
Amortization of acquired
intangible assets software
development (965) (1,029)
Amortization of acquisition
related deferred
compensation other services (99) (99)
Amortization of acquisition
related deferred
compensation software
development (171) (1,514)
Adjusted cost of revenues:
Software development 29,101 52,412
Other services 10,677 13,565
Total adjusted cost of
revenues 39,778 65,977
---------------------- ------ ------
Gross profit 82,561 94,247
------ ------
Adjusted gross profit 86,213 120,300
--------------------- ------ -------
Operating expenses:
Research and development 6,028 12,019
Sales and marketing 14,112 39,197
General and administrative 9,139 59,628
Total operating expenses 29,279 110,844
------ -------
Operating expense
adjustments:
Share-based compensation
research and development (353) (5,589)
Share-based compensation
sales and marketing (1,597) (18,611)
Share-based compensation
general and administrative (1,302) (46,595)
Amortization of acquired
intangible assets sales and
marketing (968) (4,791)
Amortization of acquired
intangible assets general
and administrative (199) (299)
Acquisition related expenses
general and administrative (260) (59)
Amortization of acquisition
related deferred
compensation sales and
marketing - (216)
Amortization of acquisition
related deferred
compensation general and
administrative - (373)
Changes in fair value of
purchase consideration
liability - (1,415)
Loss (gain) on partial
disposal of subsidiary - (617)
Adjusted operating expenses:
Research and development 5,675 6,430
Sales and marketing 11,547 15,579
General and administrative 7,378 10,270
Total adjusted operating
expenses 24,600 32,279
------------------------ ------ ------
Income (loss) from operations 53,282 (16,597)
------ -------
Adjusted income from
operations 61,613 88,021
-------------------- ------ ------
Other income (expenses):
Interest income 3,096 4,744
Interest expense (530) (523)
Other income, net 313 301
Total other income 2,879 4,522
----- -----
Other income (expenses)
adjustments:
Changes in fair value of
purchase consideration
liability - 198
Adjusted other income
(expenses):
Interest income 3,096 4,744
Interest expense (530) (325)
Other income , net 313 301
Total adjusted other income 2,879 4,720
--------------------------- ----- -----
Income (loss) before income
tax expense 56,161 (12,075)
------ -------
Adjusted income before income
tax expense 64,492 92,741
----------------------------- ------ ------
Income tax expense (3,061) (13,388)
Loss from investment in an
associate - (388)
Loss from investment in an
associate adjustment:
Share-based compensation - 148
Amortization of acquired
intangible assets - 50
Adjusted loss from investment
in an associate - (190)
----------------------------- --- ----
Net income (loss) 53,100 (25,851)
====== =======
Adjusted net income 61,431 79,163
------------------- ------ ------
Net income (loss) per share:
Basic ordinary share $1.02 $(0.46)
Diluted $0.98 $(0.46)
Adjusted net income per
share:
Basic ordinary share $1.18 $1.40
Diluted $1.14 $1.35
------- ----- -----
Shares used in computation of
net income (loss) per share:
Basic ordinary share 52,083,391 56,677,929
Diluted 54,070,186 56,677,929
Shares used in computation of
adjusted net income per
share:
Basic ordinary share 52,083,391 56,677,929
Diluted 54,070,186 58,522,007
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
------------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands)
Cash flows from operating activities:
Net income (loss) $25,807 $29,756
Adjustments to reconcile net income to net
cash provided by operating activities:
Share-based compensation 2,196 2,649
Depreciation of fixed assets 1,253 998
Amortization of intangible assets 1,103 1,906
Loss (gain) on partial disposal of
subsidiary - (241)
Loss from investment in an associate - 340
Provision for doubtful accounts 268 150
Change in fair value of contingent
consideration - 485
Loss (gain) on disposal of fixed assets and
intangible assets 26 (2)
-
Deferred income taxes (433) (685)
-
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable (31,339) (9,204)
Inventories (1,343) (278)
Other current assets (474) (741)
Amounts due from related parties 587 (3)
Prepaid land use right 24 27
Other non-current assets 91 313
Other non-current liabilities 43 (880)
Accounts payable 14,409 (2,069)
Deferred revenue 18,238 16,148
Amounts due to related parties 33 -
Accrued and other current liabilities 8,671 5,231
----- -----
Net cash provided by operating activities 39,160 43,900
------ ------
Cash flows from investing activities:
Change in restricted cash (3,209) (1,711)
Proceeds from sale of fixed assets - 59
Purchase of fixed assets (3,066) (1,758)
Purchase of intangible assets (280) (436)
Acquisitions, net of cash acquired (548) -
Deposit made on acquisition (17,574) -
Proceeds from partial disposal of
subsidiary, net of cash divested - 301
Amounts due from related parties - 4,501
--- -----
Net cash provided by (used in) investing
activities (24,677) 956
------- ---
Cash flows from financing activities:
Proceeds from short-term borrowings 22,556 -
Repayment of short-term borrowings - (5,580)
Proceeds from sale of ordinary shares 132,969 -
payment of share issuance costs (6,321) -
Stock options exercised 522 674
Payment of capital lease obligations (84) -
Payment of acquisition consideration (896) -
---- ---
Net cash provided by (used in) financing
activities 148,746 (4,906)
------- ------
Effect of exchange rates differences 40 4,309
--- -----
Net increase in cash and cash equivalents 163,269 44,259
Cash and cash equivalents, beginning of
period 226,430 378,960
Cash and cash equivalents, end of period $389,699 $423,219
======== ========
Supplemental disclosure of cash flow
information:
Income taxes paid $3,760 $4,133
Interest paid $261 $221
Nine Months Ended
-----------------
December December
31,2009 31,2010
------- -------
(In U.S. dollar thousands)
Cash flows from operating
activities:
Net income (loss) $53,100 $(25,851)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Share-based compensation 5,198 94,191
Depreciation of fixed assets 2,675 2,729
Amortization of intangible assets 2,920 6,484
Loss (gain) on partial disposal of
subsidiary - 617
Loss from investment in an associate - 388
Provision for doubtful accounts 299 (246)
Change in fair value of contingent
consideration - 1,415
Loss (gain) on disposal of fixed
assets and intangible assets 31 289
- -
Deferred income taxes (467) (138)
- -
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable (57,595) (31,024)
Inventories (799) 373
Other current assets (7,700) 1,301
Amounts due from related parties 3 535
Prepaid land use right 79 83
Other non-current assets 273 705
Other non-current liabilities 104 (3,403)
Accounts payable 17,117 (1,444)
Deferred revenue 21,214 12,239
Amounts due to related parties 93 47
Accrued and other current
liabilities 13,535 15,717
------ ------
Net cash provided by operating
activities 50,080 75,007
------ ------
Cash flows from investing
activities:
Change in restricted cash (3,282) 5,241
Proceeds from sale of fixed assets - 59
Purchase of fixed assets (11,897) (4,222)
Purchase of intangible assets (502) (582)
Acquisitions, net of cash acquired (17,327) (10,288)
Deposit made on acquisition (17,574) (2,708)
Proceeds from partial disposal of
subsidiary, net of cash divested - 3,970
Amounts due from related parties - 2,787
--- -----
Net cash provided by (used in)
investing activities (50,582) (5,743)
------- ------
Cash flows from financing
activities:
Proceeds from short-term borrowings 26,947 24,745
Repayment of short-term borrowings - (14,534)
Proceeds from sale of ordinary
shares 132,969 -
payment of share issuance costs (6,321) -
Stock options exercised 3,273 2,469
Payment of capital lease obligations (352) (169)
Payment of acquisition consideration (4,845) (564)
------ ----
Net cash provided by (used in)
financing activities 151,671 11,947
------- ------
Effect of exchange rates differences 235 10,119
--- ------
Net increase in cash and cash
equivalents 151,404 91,330
Cash and cash equivalents, beginning
of period 238,295 331,889
Cash and cash equivalents, end of
period $389,699 $423,219
======== ========
Supplemental disclosure of cash flow
information:
Income taxes paid $3,854 $4,854
Interest paid $336 $332
SOURCE Longtop Financial Technologies Limited
