EX-99.1 2 c96076exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
(LOGO)
LONGTOP FINANCIAL TECHNOLOGIES LIMITED ANNOUNCES UNAUDITED FINANCIAL RESULTS FOR THE
FISCAL QUARTER ENDED DECEMBER 31, 2009
Hong Kong, China, February 10, 2010 — 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, 2009, which is the third quarter of its fiscal year ending March 31, 2010.
FINANCIAL HIGHLIGHTS
•  
Third quarter total revenues of US$54.7 million, an increase of 66.2% Year-on-Year;
 
•  
Third quarter Adjusted1 Operating Income of US$29.3 million, an increase of 69.3% Year-on-Year;
•  
Third quarter Adjusted Net Income of US$29.3 million, which includes an income tax benefit of US$4.0 million. Excluding the income tax benefit of US$4.0 million Adjusted Net Income would have increased 53.1% Year-on-Year;
•  
Third quarter Adjusted Diluted Earnings Per Share of US$0.53, which includes an income tax benefit of US$0.07 per share. Excluding the income tax benefit of US$0.07 Per Share, Adjusted Diluted Earnings Per Share would have been US$0.46, an increase of 43.8% Year-on-Year;
•  
Cash flow from operations was US$39.2 million for the third quarter and US$50.1 million for the first nine months;
•  
Excluding Giantstone, full year 2010 revenue guidance increased to US$166.0 million from previous guidance of US$158.0 million, and Adjusted Diluted Earnings Per Share guidance increased from previous guidance of US$1.29 per share to US$1.39 per share, which includes US$0.07 per share from an income tax benefit recorded in Q3 2010.
“I’m pleased to report that on the back of solid execution from our management and employees, once again our third quarter financial results exceeded our top and bottom line guidance. We see ongoing 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 strong for fiscal 2011. I believe Longtop’s competitive position is strengthening and we are taking market share from our competitors,” commented Weizhou Lian, CEO of Longtop. “Furthermore, this quarter’s results underscore the successful integration of Sysnet with insurance being our fastest growing customer segment. I believe the recent acquisition of Giantstone, a leading core banking solution provider in China will offer us new growth opportunities.”
FISCAL THIRD QUARTER DETAILED FINANCIAL RESULTS
Revenue
2009 Q3 and 2010 Q3 Revenue — US$000s
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Software Development
   $ 28,857     $ 46,397       60.8 %   $ 68,509     $ 108,109       57.8 %
Other Services
   $ 4,041     $ 8,267       104.6 %   $ 11,905     $ 17,882       50.2 %
 
                                    
Total Revenue
   $ 32,898     $ 54,664       66.2 %   $ 80,414     $ 125,991       56.7 %
 
                                        
Total revenues for the quarter ended December 31, 2009, were US$54.7 million, an increase of 66.2% year-on-year (YoY) from US$32.9 million in the corresponding year ago period, and exceeded company guidance of US$48.5 million. Software development revenues of US$46.4 million increased YoY by 60.8% and exceeded Company guidance of US$42.7 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.

 

 

 

Total revenues for the nine months ended December 31, 2009, were US$126.0 million, an increase of 56.7% YoY from US$80.4 million in the corresponding year ago period. Software development revenues, which were 85.8% of total revenues for the nine months ended December 31, 2009, amounted to US$108.1 million, a YoY increase of 57.8%. Excluding revenue from Sysnet, total revenue for the three and nine months ended December 31, 2009, would have increased by 45.5% and 44.9% respectively.
Software Development Revenue by customer type — US$000s
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Big Four Banks
     13,000       18,464       42.0 %     34,028       47,272       38.9 %
Other Banks
     11,177       18,106       62.0 %     25,099       39,980       59.3 %
Insurance
     3,699       8,309       124.6 %     6,868       16,195       135.8 %
Enterprises
     981       1,518       54.7 %     2,514       4,662       85.4 %
 
                                        
Total
     28,857       46,397       60.8 %     68,509       108,109       57.8 %
 
                                        
Software development revenue from the Big Four Banks was US$18.5 million in the third quarter, an increase of 42.0% YoY, and US$47.3 million for the nine months ended December 31, 2009, an increase of 38.9% YoY. Big Four Banks accounted for 43.7% of software development revenues for the nine months ended December 31, 2009, as compared to 49.7% in the corresponding year ago period.
Software development revenue from Other Banks was US$18.1 million in the third quarter, a YoY increase of 62.0%, and US$40.0 million for the nine months ended December 31, 2009, an increase of 59.3% YoY. Other Banks accounted for 37.0% of software development revenues for the nine months ended December 31, 2009, as compared to 36.6% in the corresponding year ago period.
Software development revenue from Insurance was US$8.3 million in the third quarter, a YoY increase of 124.6% and US$16.2 million for the nine months ended December 31, 2009, an increase of 135.8% YoY. Insurance accounted for 15.0% of software development revenues in the nine months ended December 31, 2009. Sysnet, a leading IT insurance services provider acquired by Longtop in Q1 2010, contributed US$5.2 million in software development revenue for the nine months ended December 31, 2009, of which $3.3 million was recorded in Q3 2010.
Software development revenue from Enterprises was US$1.5 million and US$4.7 million for the three and nine months ended December 31, 2009, a YoY increase of 54.7% and 85.4% respectively.
Other services revenue increased by 104.6% YoY in the third quarter to US$8.3 million primarily due to a US$3.1 million contribution from Sysnet’s system integration business. Sysnet’s other services revenue was US$4.2 million from the acquisition date to December 31, 2009.
Gross Margins
                                                 
    Three months ended     Nine months ended  
    December     December     Change     December     December     Change  
    31, 2008     31, 2009     (Decrease)     31, 2008     31, 2009     (Decrease)  
Adjusted Software Development Gross Margin %
     76.4 %     75.1 %     (1.3 %)     74.2 %     73.1 %     (1.1 %)
Adjusted Other Services Gross Margin %
     33.8 %     50.6 %     16.8 %     51.9 %     40.3 %     (11.6 %)
Adjusted Total Gross Margin %
     71.2 %     71.4 %     0.2 %     70.9 %     68.4 %     (2.5 %)
Adjusted Total Gross Margin was 71.4% and 68.4% for the three and nine months ended December 31, 2009, as compared to 71.2% and 70.9% in the corresponding year-ago periods. Approximately one percentage point of the 2.5% YoY decline in Adjusted Total Gross Margin for the nine months ended December 31, 2009, was due to a decline in Adjusted Software Development Gross Margin associated with: (i) the inclusion of Sysnet, which has lower gross margins than Longtop, (ii) Longtop is investing in its software development consulting and professional services business which has lower incremental gross margins than Longtop’s existing Adjusted Software Development Gross Margin, and (iii) in order to meet customer requirements a larger percentage of the workforce are being located in higher cost centers such as Beijing. The remaining 1.5 percentage point decline in Adjusted Total Gross Margin for the nine months ended December 31, 2009 was primarily attributable to a gross margin reduction of ATM maintenance and system integration business lines which are included as Other Services. Full year 2010 Adjusted Total Gross Margin is expected to be approximately 67%, equal to the Company’s previous guidance.

 

 

 

Operating Expenses
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Adjusted Operating Expenses — US$000s
     6,113       9,720       59.0 %     15,119       24,600       62.7 %
Adjusted Operating Expenses — % of revenue
     18.6 %     17.7 %             18.8 %     19.6 %        
Adjusted Operating Expenses were 19.6% of revenue for the nine months ended December 31, 2009, which is in line with full year Company guidance of 20.0%. Adjusted Operating Expenses increased by 62.7% YoY in the nine months ended December 31, 2009, which was slightly higher than the YoY software development revenue growth of 57.8% primarily due to the inclusion of Sysnet, which has lower operating margins than Longtop.
Operating Income and Net Income
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Adjusted Operating Income — US$000s
     17,299       29,288       69.3 %     41,923       61,613       47.0 %
Adjusted Operating Income — % of revenue
     52.6 %     53.6 %             52.1 %     48.9 %        
Adjusted Operating Income of US$29.3 million for the third quarter exceeded company guidance of US$26.0 million and increased YoY by 69.3%. Adjusted Operating Income of US$61.6 million for the nine months ended December 31, 2009, increased 47.0% YoY. Adjusted Operating Margin for the nine months ended December 31, 2009, of 48.9% was lower than the corresponding period in fiscal 2009 due primarily to the decline in Adjusted Total Gross Margin.
Net Income
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Adjusted Net Income — US$000s
     16,532       29,313       77.3 %     40,597       61,431       51.3 %
Adjusted Net income per Diluted Share
     0.32       0.53       65.6 %     0.78       1.14       46.2 %
Adjusted Net Income — % of revenue
     50.3 %     53.6 %             50.5 %     48.8 %        
US GAAP Net Income — US$000s
     14,356       25,807       79.8 %     34,640       53,100       53.3 %
US GAAP Net income per Diluted Share
     0.28       0.46       64.3 %     0.66       0.98       48.5 %
US GAAP Net Income — % of revenue
     43.6 %     47.2 %             43.1 %     42.1 %        

 

 

 

Reconciliation between US GAAP Net Income and Adjusted Net Income
                                                 
    Three months ended     Nine months ended  
    December     December             December     December        
    31, 2008     31, 2009     % Change     31, 2008     31, 2009     % Change  
Adjusted Net Income — US$000s
   $ 16,532     $ 29,313       77.3 %   $ 40,597     $ 61,431       51.3 %
 
                                                
Stock compensation
   $ 1,463     $ 2,196       50.1 %   $ 4,205     $ 5,199       23.6 %
Amortization of acquired intangible assets
   $ 661     $ 960       45.2 %   $ 1,643     $ 2,602       58.4 %
Amortization of acquired deferred compensation
   $ 52     $ 90       73.1 %   $ 109     $ 270       147.7 %
Acquisition related expenses
   $ —     $ 260             $ —     $ 260          
 
                                        
Sub-total
   $ 2,176     $ 3,506       61.1 %   $ 5,957     $ 8,331       39.9 %
 
                                        
 
                                                
US GAAP Net Income
   $ 14,356     $ 25,807       79.8 %   $ 34,640     $ 53,100       53.3 %
 
                                        
US GAAP and Adjusted Net Income for the quarter ended December 31, 2009, includes US$4.0 million (US$0.07 per fully diluted share) for an income tax benefit (“Q3 2010 Income Tax Benefit”) recorded in Q3 2010 associated with Longtop’s qualification as a Key Software Company for the 2009 calendar year. Excluding the US$4.0 million Q3 2010 Income Tax Benefit, Adjusted Net Income would have increased 53.1% as compared to Adjusted Net Income of US$16.5 million in the corresponding year ago period, and exceeded Company guidance of US$23.5 million and US$0.43 per fully diluted share. US GAAP net income for the quarter ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit, would have increased 51.9% as compared to US GAAP net income of US$14.4 million in the corresponding year ago period.
Adjusted Net Income for the nine months ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit (US$0.07 per fully diluted share), would have increased 41.5% as compared to Adjusted Net Income of US$40.6 million in the corresponding year ago period. US GAAP net income for the nine months ended December 31, 2009, excluding the US$4.0 million Q3 2010 Income Tax Benefit (US$0.07 per fully diluted share), would have increased 41.7% as compared to US GAAP net income of US$34.6 million in the corresponding year ago period.
Operating cash flow was US$39.2 million for the Third quarter, and US$50.1 million for the nine months ended December 31, 2009, an increase of 46.8% YoY.
Unrestricted cash balances at December 31, 2009 less short term borrowings, were US$362.5 million.
Commenting on the results, Derek Palaschuk, CFO of Longtop, said: “In the third quarter revenue and Adjusted Net Income once more substantially exceeded guidance. A robust third quarter cash flow from operations of US$39.2 million and US$50.1 million for the first nine months together with the proceeds from the November 2009 secondary offering will allow us to continue to invest intelligently in our existing operations and grasp further consolidation opportunities through acquisitions that will help extend our leading position in China’s financial technology industry.”
BUSINESS OUTLOOK
Longtop anticipates for the quarter and ending March 31, 2010, excluding Giantstone:
i) Total revenues of US$40.0 million, representing an increase of 54.4% YoY from revenues of US$25.9 million in the corresponding year ago period. Software development revenues are expected to be US$34.0 million, a YoY increase of 61.1% from US$21.1 million in the corresponding year ago period.
ii) Adjusted Operating Income of US$16.0 million, representing an increase of 50.9% YoY from Adjusted Operating Income of US$10.6 million in the corresponding year ago period.
iii) Adjusted Net Income of US$15.5 million, representing an increase of40.9% YoY from Adjusted Net Income of US$11.0 million in the corresponding year ago period.
iv) Adjusted Diluted Earnings Per Share of US$0.26, representing an increase of 23.8% YoY from Adjusted Diluted Earnings Per Share of US$0.21 in the corresponding year ago period.

 

 

 

Longtop anticipates for its fiscal year ending March 31, 2010, excluding Giantstone:
i) Total revenues of US$166.0 million, representing an increase of 56.2% YoY from revenues of US$106.3 million in fiscal 2009. Software development revenues are expected to be US$142.0 million, a YoY increase of 58.5% from US$89.6 million in fiscal 2009;
ii) Adjusted Operating Income of US$77.5 million, an increase of 47.6% YoY from Adjusted Operating Income of US$52.5 million in fiscal 2009.
iii) Adjusted Net Income of US$77.0 million, an increase of 49.2% YoY from Adjusted Net Income of US$51.6 million in fiscal 2009. Excluding the Q3 2010 Income Tax Benefit of US$4.0 million, Adjusted Net Income would have increased 41.5% YoY;
iv) Adjusted Diluted Earnings Per Share of US$1.39, an increase of 41.8% from Adjusted Diluted Earnings Per Share of US$0.98 in fiscal 2009. Excluding the Q3 2010 Income Tax Benefit of US$0.07 per fully diluted share, Adjusted Diluted Earnings per Share would have increased 34.7% YoY.
CONFERENCE CALL AND WEBCAST
Longtop’s senior management team will host a conference call and audio web cast at 7:30 PM Eastern Time on February 10, 2010 (or 4:30 PM U.S. Pacific Time on February 10, 2010, and 8:30 AM Beijing/Hong Kong time on February 11, 2010). 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#
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 revenues, cost of revenues, operating expenses, net income and 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 that we believe are 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 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 impairment, (3) acquisition related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties which would have been included as a cost of acquisition under Accounting Standards Codification (ASC) 805, “Business Combinations” (formerly FASB Statement No. 141 (revised 2007), “Business Combinations”; (4) post acquisition adjustments to the fair value of contingent consideration which would have been included as a cost of acquisition under ASC 805 or (5) one-time items.
Adjusted Operating Income is defined as Adjusted Gross Margin less Adjusted Operating Expenses.
Adjusted Net Income is defined as Adjusted Operating Income plus/minus other income/(expenses), less income taxes, 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 the 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, Adjusted Net Income would have been US$5.2 million lower or US$56.2 million for the nine months ended December 31,2009 and our Adjusted Net Income margin would have been 4.0% lower.
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.
Pursuant to ASC 805 which became effective for business combinations made by us whose acquisition date is on or after April 1, 2009, acquisition-related expenses such as fees paid to investment bankers, due diligence and legal costs paid to third parties 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.

 

 

 

Pursuant to ASC 805, as of the acquisition date we are required to estimate and record the fair value of contingent acquisition consideration. Generally contingent consideration is re-measured at fair value in each reporting period with changes in fair value recognized in earnings. If the estimated contingency is settled for a different amount than we have recorded at the time of the acquisition, the difference would be recorded in our Consolidated Statement of Operations. The contingent acquisition consideration is not related to the performance of our business lines, 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 ended December 31, 2009 and the fiscal year ended March 31, 2010, 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 planned 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 year ended September 30, 2009, 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 2008. 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
Email: ir@longtop.com
Phone: +86 10 8421 7758
For Media:
IR Inside BV
Caroline Straathof
Email: caroline.straathof@irinside.com
Phone: +31 6 5462 4301

 

 

 

CONSOLIDATED BALANCE SHEETS
                 
    March 31,     December 31,  
    2009     2009  
    (In U.S. dollar thousands, except share and per share data)  
 
                
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 238,295     $ 389,699  
Restricted cash
     463       3,745  
Accounts receivable, net
     29,861       87,625  
Inventories
     4,982       5,864  
Amounts due from related parties
     682       681  
Deferred tax assets
     979       1,449  
Other current assets
     4,712       12,549  
 
            
 
                
Total current assets
     279,974       501,612  
 
                
Fixed assets, net
     14,858       26,468  
Prepaid land use right
     5,167       5,090  
Intangible assets, net
     11,526       27,041  
Goodwill
     24,837       35,177  
Deferred tax assets
     1,479       1,479  
Other assets
     632       17,933  
 
            
 
                
Total assets
   $ 338,473     $ 614,800  
 
            
 
                
Liabilities and shareholders’ equity
                
Current liabilities:
                
Short-term borrowings
   $ 486     $ 27,183  
Accounts payable
     3,299       22,283  
Deferred revenue
     16,010       37,240  
Amounts due to related parties
     17       110  
Deferred tax liabilities
     867       1,064  
Accrued and other current liabilities
     23,810       37,892  
 
            
 
                
Total current liabilities
     44,489       125,772  
 
                
Long-term liabilities:
                
Obligations under capital leases, net of current portion
     98       —  
Deferred tax liabilities
     1,242       3,943  
Other non-current liabilities
     286       3,872  
 
            
 
                
Total liabilities
     46,115       133,587  
 
            
 
                
 
                
Shareholders’ equity:
                
Ordinary shares $0.01 par value (1,500,000,000 shares authorized, 51,036,816 and 56,164,938 shares issued and outstanding as of March 31, 2009 and December 31, 2009, respectively)
   $ 510     $ 562  
Additional paid-in capital
     243,194       378,583  
Retained earnings
     29,451       82,551  
Accumulated other comprehensive income
     19,203       19,517  
 
            
 
                
Total shareholders’ equity
     292,358       481,213  
 
            
 
                
Total liabilities and shareholders’ equity
   $ 338,473     $ 614,800  
 
            

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS
                                 
    Three Months Ended     Nine Months Ended  
    December     December     December     December  
    31, 2008     31, 2009     31, 2008     31, 2009  
    (In U.S. dollar thousands, except share and per share data)  
 
                                
Revenues:
                                
Software development
   $ 28,857     $ 46,397     $ 68,509     $ 108,109  
Other services
     4,041       8,267       11,905       17,882  
 
                        
Total revenues
     32,898       54,664       80,414       125,991  
 
                        
 
                                
Cost of revenues:
                                
Software development
     7,346       12,756       19,116       31,900  
Other services
     3,134       4,389       6,880       11,530  
 
                        
Total cost of revenues
     10,480       17,145       25,996       43,430  
 
                        
Gross profit
     22,418       37,519       54,418       82,561  
 
                        
 
                                
Operating expenses:
                                
Research and development
     1,318       2,549       3,631       6,028  
Sales and marketing
     3,393       5,549       7,801       14,112  
General and administrative
     2,584       3,639       7,020       9,139  
 
                        
Total operating expenses
     7,295       11,737       18,452       29,279  
 
                        
Income from operations
     15,123       25,782       35,966       53,282  
 
                        
 
                                
Other income (expenses):
                                
Interest income
     922       1,096       4,438       3,096  
Interest expense
     (13 )     (336 )     (305 )     (530 )
Other income (expense), net
     3       8       (292 )     313  
 
                        
 
                                
Total other income
     912       768       3,841       2,879  
 
                        
 
                                
Income before income tax expense
     16,035       26,550       39,807       56,161  
 
                        
Income tax expense
     (1,679 )     (743 )     (5,167 )     (3,061 )
 
                        
 
                                
Net income
     14,356       25,807       34,640       53,100  
 
                        
 
                                
Net income per share:
                                
Basic ordinary share
   $ 0.28     $ 0.48     $ 0.69     $ 1.02  
Diluted
   $ 0.28     $ 0.46     $ 0.66     $ 0.98  
 
                                
Shares used in computation of net income per share:
                                
Basic ordinary share
     50,590,358       53,597,293       50,467,808       52,083,391  
Diluted
     52,073,161       55,597,313       52,328,310       54,070,186  
 
                                
Includes share-based compensation related to:
                                
Cost of revenues software development
   $ 432     $ 740     $ 1,211     $ 1,663  
Cost of revenues other services
     63       146       185       284  
General and administrative expenses
     477       443       1,422       1,302  
Sales and marketing expenses
     389       717       1,102       1,597  
Research and development expenses
     102       150       285       353  

 

 

 

UNAUDITED CONSOLIDATED ADJUSTED STATEMENTS OF OPERATIONS
                                 
    Three Months Ended     Nine Months Ended  
    December     December     December     December  
    31, 2008     31, 2009     31, 2008     31, 2009  
    (In U.S. dollar thousands, except share and per share data)  
 
        
Revenues:
                                
Software development
     28,857       46,397       68,509       108,109  
Other services
     4,041       8,267       11,905       17,882  
 
                        
Total revenues
     32,898       54,664       80,414       125,991  
 
                        
 
                                
Cost of revenues:
                                
Software development
     7,346       12,756       19,116       31,900  
Other services
     3,134       4,389       6,880       11,530  
 
                        
Total cost of revenues
     10,480       17,145       25,996       43,430  
 
                        
 
                                
Cost of revenue adjustments:
                                
Share-based compensation software development
     (432 )     (740 )     (1,211 )     (1,663 )
Share-based compensation other services
     (63 )     (146 )     (185 )     (284 )
Amortization of acquired intangible assets other services
     (363 )     (126 )     (895 )     (470 )
Amortization of acquired intangible assets software development
     (84 )     (387 )     (224 )     (965 )
Amortization of acquired deferred compensation other services
     (34 )     (33 )     (73 )     (99 )
Amortization of acquired deferred compensation software development
     (18 )     (57 )     (36 )     (171 )
 
                                
Adjusted cost of revenues:
                                
Software development
     6,812       11,572       17,645       29,101  
Other services
     2,674       4,084       5,727       10,677  
 
                        
Total adjusted cost of revenues
     9,486       15,656       23,372       39,778  
 
                        
 
                                
Gross profit
     22,418       37,519       54,418       82,561  
 
                        
 
                                
Adjusted gross profit
     23,412       39,008       57,042       86,213  
 
                        
 
                                
Operating expenses:
                                
Research and development
     1,318       2,549       3,631       6,028  
Sales and marketing
     3,393       5,549       7,801       14,112  
General and administrative
     2,584       3,639       7,020       9,139  
 
                        
Total operating expenses
     7,295       11,737       18,452       29,279  
 
                        

 

 

 

                                 
    Three Months Ended     Nine Months Ended  
    December     December     December     December  
    31, 2008     31, 2009     31, 2008     31, 2009  
    (In U.S. dollar thousands, except share and per share data)  
 
        
Operating expense adjustments:
                                
Share-based compensation research and development
     (102 )     (150 )     (285 )     (353 )
Share-based compensation sales and marketing
     (389 )     (717 )     (1,102 )     (1,597 )
Share-based compensation general and administrative
     (477 )     (443 )     (1,422 )     (1,302 )
Amortization of acquired intangible assets sales and markeing
     (152 )     (378 )     (395 )     (968 )
Amortization of acquired intangible assets general and administrative
     (62 )     (69 )     (129 )     (199 )
Acquisition related expenses general and administrative
     —       (260 )     —       (260 )
 
                                
Adjusted operating expenses:
                                
Research and development
     1,216       2,399       3,346       5,675  
Sales and marketing
     2,852       4,454       6,304       11,547  
General and administrative
     2,045       2,867       5,469       7,378  
 
                        
Total adjusted operating expenses
     6,113       9,720       15,119       24,600  
 
                        
 
                                
Income from operations
     15,123       25,782       35,966       53,282  
 
                        
 
                                
Adjusted income from operations
     17,299       29,288       41,923       61,613  
 
                        
 
                                
Other income (expenses):
                                
Interest income
     922       1,096       4,438       3,096  
Interest expense
     (13 )     (336 )     (305 )     (530 )
Other (expenses) income, net
     3       8       (292 )     313  
 
                        
 
                                
Total other income
     912       768       3,841       2,879  
 
                        
 
                                
Income before income tax expense
     16,035       26,550       39,807       56,161  
 
                        
 
                                
Adjusted income before income tax expense
     18,211       30,056       45,764       64,492  
 
                        
 
                                
Income tax expense
     (1,679 )     (743 )     (5,167 )     (3,061 )
 
                        
 
                                
Net income
     14,356       25,807       34,640       53,100  
 
                        
 
                                
Adjusted net income
     16,532       29,313       40,597       61,431  
 
                        
 
                                
Net income per share:
                                
Basic ordinary share
   $ 0.28     $ 0.48     $ 0.69     $ 1.02  
Diluted
   $ 0.28     $ 0.46     $ 0.66     $ 0.98  
 
                                
Adjusted net income per share:
                                
Basic ordinary share
   $ 0.33     $ 0.55     $ 0.80     $ 1.18  
Diluted
   $ 0.32     $ 0.53     $ 0.78     $ 1.14  
 
                                
Shares used in computation of net income and adjusted net income per share:
                                
Basic ordinary share
     50,590,358       53,597,293       50,467,808       52,083,391  
Diluted
     52,073,161       55,597,313       52,328,310       54,070,186  

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 
    Three Months Ended     Nine Months Ended  
    December     December     December     December  
    31, 2008     31, 2009     31, 2008     31, 2009  
    (In U.S. dollar thousands, except share and per share data)  
 
        
Cash flows from operating activities:
                                
Net income
   $ 14,356     $ 25,807     $ 34,640     $ 53,100  
 
                                
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Share-based compensation
     1,463       2,196       4,205       5,198  
Depreciation of fixed assets
     791       1,253       2,109       2,675  
Amortization of intangible assets
     716       1,103       1,789       2,920  
Provision for doubtful accounts
     55       268       101       299  
Loss on disposal of fixed assets
     165       26       207       31  
 
        
Deferred income taxes
     (1,836 )     (433 )     (965 )     (467 )
 
        
Changes in assets and liabilities, net of effects of acquisitions:
                                
Accounts receivable
     3,783       (31,339 )     (10,681 )     (57,595 )
Inventories
     408       (1,343 )     (521 )     (799 )
Other current assets
     1,236       (474 )     (1,118 )     (7,700 )
Amounts due from related parties
     —       587       —       3  
Prepaid land use right
     82       24       (5,193 )     79  
Other non-current assets
     104       91       (575 )     273  
Other non-current liabilities
     6       43       (188 )     104  
Accounts payable
     (9,337 )     14,409       (1,075 )     17,117  
Deferred revenue
     5,011       18,238       12,043       21,214  
Amounts due to related parties
     —       33       —       93  
Accrued and other current liabilities
     1,836       8,671       (654 )     13,535  
 
                        
 
                                
Net cash provided by operating activities
     18,839       39,160       34,124       50,080  
 
                        
 
                                
Cash flows from investing activities:
                                
Change in restricted cash
     9,753       (3,209 )     5,560       (3,282 )
Proceeds from sale of fixed assets
     11       —       225       —  
Purchase of fixed assets
     (1,005 )     (3,066 )     (7,766 )     (11,897 )
Purchase of intangible assets
     —       (280 )     (3 )     (502 )
Long term investment
     —       —       (3,911 )     —  
Acquisitions, net of cash acquired
     (19 )     (548 )     (1,397 )     (17,327 )
Deposit made on acquisition
     —       (17,574 )     —       (17,574 )
 
                        
 
                                
Net cash used in (provided by) investing activities
     8,740       (24,677 )     (7,292 )     (50,582 )
 
                        
 
                                
Cash flows from financing activities:
                                
Proceeds from short-term borrowings
     —       22,556       —       26,947  
Net proceeds from follow-on offering
     —       126,648       —       126,648  
Stock options exercised
     425       522       1,203       3,273  
Repayments of capital leases obligations
     (139 )     (84 )     (721 )     (352 )
Repayment of acquisition related liabilities
     —       (896 )     —       (4,845 )
Amounts due to related parties
     —       —       (54 )     —  
 
                        
 
                                
Net cash provided by financing activities
     286       148,746       428       151,671  
 
                        
 
                                
Effect of exchange rates differences
     (429 )     40       4,646       235  
 
                        
 
                                
Net increase in cash and cash equivalents
     27,436       163,269       31,906       151,404  
 
                                
Cash and cash equivalents, beginning of period
     208,996       226,430       204,526       238,295  
 
                        
Cash and cash equivalents, end of period
   $ 236,432     $ 389,699     $ 236,432     $ 389,699  
 
                        
 
                                
Supplemental disclosure of cash flow information:
                                
Income taxes paid
   $ 3,515     $ 3,760     $ 6,326     $ 3,854  
Interest paid
   $ 13     $ 261     $ 308     $ 336  
Supplemental disclosure of non-cash investing and financing activities:
                                
Fixed assets purchased under capital leases
   $ —     $ —     $ 655     $ —