Pactera Announces Second Quarter 2013 Financial Results

BEIJING, Aug. 19, 2013 /PRNewswire/ -- Pactera Technology International Ltd. (Nasdaq: PACT) ("Pactera" or the "Company"), a global consulting and technology services provider strategically headquartered in China, today reported its unaudited financial results for the second quarter of 2013 ended June 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20130118/CN37843LOGO )

On November 9, 2012, HiSoft Technology International Limited ("HiSoft") and VanceInfo Technologies Inc. ("VanceInfo") announced the completion of merger of equals to form Pactera. HiSoft and VanceInfo's financial results were consolidated into Pactera from the date of the completion of the merger.

Second Quarter 2013 Financial and Operational Highlights

  • Net revenues for the second quarter of 2013 were $163.1 million,as compared to $71.8 million for the second quarter of 2012.
  • GAAP diluted net loss per ADS for the second quarter of 2013 was $0.01. Non-GAAP diluted net income per ADS[1] for the second quarter of 2013 was $0.14.
  • Total full-time employees as of June 30, 2013 were 20,019, including 17,945 billable professionals.

[1] Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP basic and diluted net income per ADS and corresponding margins presented in this press release exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, and change in fair value of contingent consideration payable for business acquisition and compensation expenses related to acquisition. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying section of "About Non-GAAP Financial Measures" and the accompanying tables of "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of the earnings release.

"The second quarter of 2013 was a challenging but improving quarter for Pactera," said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera. "Our topline momentum was impacted by continued headwinds from our major telecom customer, the adverse effect of Japanese currency depreciation, and some client specific business challenges. However, both gross margin and operating efficiency improved towards our targeted direction.  The MOE integration remains on track and we expect our business to resume a more stable growth trajectory in the coming quarters."

Second Quarter 2013 Financial Results

Net Revenues

Net revenues were $163.1 million for the second quarter of 2013 as compared to $71.8 million for the second quarter of 2012, reflecting a decrease of 2.1% from $166.5 million of the pro forma net revenues[2] for the corresponding period in 2012. Excluding the company's major telecom customer, net revenues for the second quarter of 2013 would have increased 6.6% from the pro forma net revenues for the corresponding period in 2012.

[2] Pro forma net revenues of the Company for the second quarter of 2012 assume that the merger occurred at the beginning of such period. The pro forma financial information is provided for information purpose only and does not purport to present what the actual results of operations would have been had the transaction actually occurred at the beginning of such period indicated nor does it purport to present the actual results of operations for any future period or financial position for any future date. Please refer to the accompanying tables at the end of the earnings release.

Net Revenues by Service Line

Pactera has three service lines: Information Technology ("IT") services, research and development ("R&D") services and business process outsourcing ("BPO"). Pactera divides IT services into two categories: consulting and packaged solution ("CPS") services and application development, testing and maintenance ("ADM") services.

Net revenues from IT services were $95.0 million for the second quarter of 2013, which increased 10.0% from $86.4 million of pro forma net revenues for the corresponding period in 2012. The increase was primarily due to the increasing demand and the expanded offerings from both of our ADM and CPS services.

Net revenues from R&D services were $65.2 million for the second quarter of 2013, compared to $76.6 million of the pro forma net revenues for the corresponding period in 2012. The decline in net revenues from R&D services was mainly due to a decrease in the revenue derived from our major telecom customer. Excluding the company's major telecom customer, net revenues for the second quarter of 2013 would have increased 7.4% from the pro forma net revenues for the corresponding period in 2012.

Net Revenues by Service Line


Three Months Ended       
June 30
, 2013

Three Months Ended    
 June 30
, 2012

($ in thousands, except percentages)

IT Services

94,990

58.2%

41,594

58.0%

CPS Services

31,166

19.1%

16,763

23.4%

ADM Services

63,824

39.1%

24,831

34.6%

R&D Services

65,165

40.0%

30,175

42.0%

BPO

2,895

1.8%

-

-

Total Net Revenues

163,050

100.0%

71,769

100.0%

Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
June 30
, 2013

Three Months Ended
June 30
, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

IT Services

94,990

58.2%

86,362

51.9%

10.0%

CPS Services

31,166

19.1%

28,444

17.1%

9.6%

ADM Services

63,824

39.1%

57,918

34.8%

10.2%

R&D Services

65,165

40.0%

76,611

46.0%

(14.9)%

BPO

2,895

1.8%

3,539

2.1%

(18.2)%

Total Net Revenues

163,050

100.0%

166,512

100.0%

(2.1)%

Net Revenues by Geographic Markets

Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $66.0 million or 40.5% of the net revenues for the second quarter of 2013, followed by 37.7% from Greater China, 9.2% from Europe, 7.5% from Japan and 5.1% from Asia South.

Net Revenues based on Location of Clients' Headquarters


Three Months Ended        
June 30
, 2013

Three Months Ended        
 June 30
, 2012

($ in thousands, except percentages)

United States

65,999

40.5%

33,387

46.5%

Greater China

61,513

37.7%

17,442

24.3%

Europe

15,066

9.2%

4,846

6.8%

Japan

12,209

7.5%

13,749

19.2%

Asia South

8,263

5.1%

2,345

3.2%

Total Net Revenues

163,050

100.0%

71,769

100.0%

Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
June 30, 2013

Three Months Ended
June 30, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

United States

65,999

40.5%

66,013

39.6%

(0.0)%

Greater China

61,513

37.7%

63,042

37.9%

(2.4)%

Europe

15,066

9.2%

14,424

8.7%

4.5%

Japan

12,209

7.5%

18,167

10.9%

(32.8)%

Asia South

8,263

5.1%

4,866

2.9%

69.8%

Total Net Revenues

163,050

100.0%

166,512

100.0%

(2.1)%

Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 59.2% of net revenues in the second quarter of 2013, while the United States accounted for 20.8%, Asia South accounted for 10.5%, Japan accounted for 7.6% and Europe accounted for 1.9%.

Net Revenues by Industry

Pactera classifies its clients into four industry segments: High Technology ("High Tech"), Banking, Financial Services and Insurance ("BFSI"), Manufacturing, and Other Industry Segments including Retail, Distribution, Travel and Transportation and Public Services ("Others").

Net Revenues by Industry


Three Months Ended
      June 30, 2013

Three Months Ended
        June 30, 2012

($ in thousands, except percentages)

High Tech

96,773

59.4%

36,407

50.7%

BFSI

40,934

25.1%

21,932

30.6%

Manufacturing

21,455

13.2%

10,887

15.2%

Others

3,888

2.3%

2,543

3.5%

Total Net Revenues

163,050

100.0%

71,769

100.0%

Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
June 30, 2013

Three Months Ended
June 30
, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

High Tech

96,773

59.4%

103,878

62.4%

(6.8)%

BFSI

40,934

25.1%

37,345

22.4%

9.6%

Manufacturing

21,455

13.2%

20,598

12.4%

4.2%

Others

3,888

2.3%

4,691

2.8%

(17.1)%

Total net revenues

163,050

100.0%

166,512

100.0%

(2.1)%

Largest Clients

Net revenues from Pactera's top five and top ten clients accounted for 31.1% and 40.6% of net revenues, respectively, during the second quarter of 2013, compared to 38.7% and 48.1% respectively, on a pro forma basis for the corresponding period in 2012.

Gross Profit and Gross Margin

Gross profit was $44.9 million for the second quarter of 2013, compared to $25.6 million for the corresponding period in 2012.  Gross margin was 27.5% for the second quarter of 2013.

Operating Expenses

Total operating expenses were $46.5 million for the second quarter of 2013 compared to $18.9 million for the corresponding period in 2012. Operating expenses in the second quarter of 2013 reflected $4.0 million of merger-related transaction and integration costs, mainly including facilities and system integration expenses.

Operating Income (Loss) and Operating Margin

Operating loss for the second quarter of 2013 was $1.6 million, compared to an operating income of $6.7 million for the corresponding period in 2012. Non-GAAP operating income for the second quarter in 2013 was $11.3 million, as compared to $9.8 million in the corresponding period in 2012.

Operating margin was negative 1.0% for the second quarter of 2013, compared to 9.3% for the same period in 2012. Non-GAAP operating margin was 6.9% for the second quarter of 2013.

Net Income (Loss) and Net Income (Loss) per ADS

Net loss attributable to Pactera was $1.0 million for the second quarter of 2013, compared to a net income of $6.4 million for the corresponding period in 2012. Non-GAAP net income was$11.5 million for the second quarter of 2013, compared to $9.4 million for the same period in 2012. Non-GAAP diluted net income per ADS was $0.14 in the second quarter of 2013, compared to $0.22 in the corresponding period of 2012.

Cash Flow and DSO

As of June 30, 2013, Pactera had cash and cash equivalents, restricted cash, term deposits and short-term investment totaling $126.3 million. Operating cash flow for the second quarter of 2013 was a net inflow of approximately $2.6 million. Days sales outstanding ("DSO") was 141 days for the quarter and 131 days for the last 12 months on a pro forma basis.

First Half 2013 Financial Results

Net Revenues

Net revenues were $315.4 million for the first half of 2013 as compared to $137.3 million for the first half of 2012 and $318.1 million of the pro forma net revenues for the corresponding period in 2012.

Net Revenues by Service Line

Net Revenues by Services Line



Six Months Ended
June 30, 2013

Six Months Ended
June 30, 2012

($ in thousands, except percentages)

IT Services

176,519

55.9%

80,878

58.9%

CPS Services

60,365

19.1%

30,376

22.1%

ADM Services

116,154

36.8%

50,502

36.8%

R&D Services

133,222

42.3%

56,379

41.1%

BPO

5,629

1.8%

-

-

Total Net Revenues

315,370

100.0%

137,257

100.0%

Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)


Six Months Ended
June
30, 2013

Six Months Ended   
June
30, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

IT Services

176,519

55.9%

165,668

52.1%

6.5%

CPS Services

60,365

19.1%

51,817

16.3%

16.5%

ADM Services

116,154

36.8%

113,851

35.8%

2.0%

R&D Services

133,222

42.3%

146,294

46.0%

(8.9)%

BPO

5,629

1.8%

6,148

1.9%

(8.4)%

Total Net Revenues

315,370

100.0%

318,110

100.0%

(0.9)%

Net Revenues by Geographic Markets

Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $126.3 million in the first half of 2013, followed by $118.6 million from Greater China, $29.3 million from Europe, $25.5 million from Japan and $15.6 million from Asia South.

Net Revenues based on Location of Clients' Headquarters


Six Months Ended
June 30, 2013

Six Months Ended
June 30, 2012

($ in thousands, except percentages)

United States

126,349

40.1%

63,249

46.1%

Greater China

118,630

37.6%

32,205

23.5%

Europe

29,283

9.3%

9,384

6.8%

Japan

25,492

8.1%

27,160

19.8%

Asia South

15,616

4.9%

5,259

3.8%

Total Net Revenues

315,370

100.0%

137,257

100.0%

Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)


Six Months Ended
June 30, 2013

Six Months Ended   
June 30
, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

United States

126,349

40.1%

126,186

39.7%

0.1%

Greater China

118,630

37.6%

118,005

37.1%

0.5%

Europe

29,283

9.3%

29,640

9.3%

(1.2)%

Japan

25,492

8.1%

34,936

11.0%

(27.0)%

Asia South

15,616

4.9%

9,343

2.9%

67.1%

Total Net Revenues

315,370

100.0%

318,110

100.0%

(0.9)%

Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 58.8% of net revenues in the first half of 2013, while the United States accounted for 21.3%, Asia South accounted for 10.2%, Japan accounted for 8.1% and Europe accounted for 1.6%.

Net Revenues by Industry

Net Revenues by Industry


Six Months Ended
June 30, 2013

Six Months Ended
June 30, 2012

($ in thousands, except percentages)

High Tech

194,064

61.5%

71,421

52.0%

BFSI

75,145

23.8%

40,365

29.4%

Manufacturing

37,451

11.9%

20,857

15.2%

Others

8,710

2.8%

4,614

3.4%

Total Net Revenues

315,370

100.0%

137,257

100.0%

Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)


Six Months Ended
June 30
, 2013

Six Months Ended  
June 30
, 2012

Year-over-Year %
Change

($ in thousands, except percentages)

High Tech

194,064

61.5%

200,112

62.9%

(3.0)%

BFSI

75,145

23.8%

69,654

21.9%

7.9%

Manufacturing

37,451

11.9%

39,028

12.3%

(4.0)%

Others

8,710

2.8%

9,316

2.9%

(6.5)%

Total net revenues

315,370

100.0%

318,110

100.0%

(0.9)%

Largest Clients

Net revenues from Pactera's top five and top ten clients accounted for 32.6% and 41.9% of net revenues, respectively, during the first half of 2013, compared to 39.3% and 49.0% respectively, on a pro forma basis for the corresponding period in 2012.

Gross Profit and Gross Margin

Gross profit was $84.3 million for the first half of 2013, compared to $48.5 million in the first half of 2012.  Gross margin was 26.7% during the first half of 2013.

Operating Expenses

Total operating expenses were $89.7 million for the first half of 2013 compared to $35.3 million for the corresponding period in 2012. Operating expenses in the first half of 2013 reflected $6.4 million of merger-related transaction and integration costs including professional fees, severance costs, and facilities and system integration expenses.

Operating Income and Operating Margin

Operating loss for the first half of 2013 was $5.4 million, compared to an operating income of $13.2 million for the corresponding period in 2012. Non-GAAP operating income for the first half of 2013 was $19.6 million, as compared to $18.9 million for the corresponding period in 2012.

Operating margin was negative 1.7% for the first half of 2013, and non-GAAP operating margin was 6.2% for the first half of 2013.

Net Income(Loss) and Net Income(Loss) per ADS

Net loss attributable to Pactera was $2.7 million for the first year of 2013, compared to net income $12.4 million for the corresponding period in 2012. Non-GAAP net income was $21.6 million for the first half of 2013, compared to $18.1 million for the corresponding period in 2012. Non-GAAP diluted net income per ADS was $0.25 for the first half year of 2013, compared to $0.42 for the corresponding period in 2012.

Recent Development

Announced Receipt of "Going Private" Proposal

On May 20, 2013, the Company announced that its Board of Directors had received a non-binding proposal letter, dated May 20, 2013, from an affiliate of funds managed or advised by Blackstone, the Company's non-executive Chairman, Chris Chen, its Chief Executive Officer, Tiak Koon Loh, and its Executive Committee members, David Chen, Sidney Huang and Jun Su (collectively, the "Buyer Consortium") to acquire all of the outstanding shares of Pactera not currently owned by the Buyer Consortium in a going private transaction (the "Transaction") for US$7.50 per American Depositary Share ("ADS", each ADS representing one common share of the Company) in cash, subject to certain conditions. According to the proposal letter, the Buyer Consortium intends to form an acquisition vehicle for the purpose of implementing the Transaction, and the Transaction is intended to be financed with a combination of equity capital funded by the Buyer Consortium and third-party debt.

The Company's Board of Directors has formed a committee of independent directors (the "Independent Committee") to consider the proposed transaction. No decisions have been made by the Independent Committee with respect to the Company's response to the Transaction. There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated. The Company does not undertake any obligation to provide any updates with respect to this or any other transaction, except as required under applicable law.

Outlook for Pactera's Third Quarter and Full Year 2013

For the third quarter of 2013, based on current market and operating conditions and current book orders, Pactera expects:

  • Net revenues to be at least $173.0 million, compared to $175.8 million in the third quarter of 2012 on a pro-forma basis. Excluding the revenues from our major telecom customer in both periods, this represents an increase of at least approximately 7.8% from the third quarter 2012.
  • Non-GAAP diluted net income per ADS to be at least $0.17, estimated based on 84.5 million weighted average equivalent ADSs outstanding.

For the full year 2013, based on current market and operating conditions, Pactera expects:

  • Excluding the revenues from our major telecom customer for both 2012 and 2013, net revenues to be between $620 million and $625 million, representing an increase between 7% and 8% from the 2012 pro forma revenues of $577 million. Based on our current visibility, we estimate net revenues from our major telecom customer to be approximately $45 million, which would result in a total net revenue for the Company to be between $665 million and $670 million in 2013, compared to $673 million in 2012 on a pro forma basis.
  • Non-GAAP diluted net income per ADS to be in the range of $0.63 to $0.68, estimated based on 85.0 million weighted average equivalent ADSs outstanding.

These estimates are based on current market and operating conditions, are subject to change, and may be influenced positively or negatively by factors outside the Company's control, including but not limited to macroeconomic events in the markets in which the Company operates. See "Safe Harbor Statement" below for additional information regarding forward-looking statements.

Conference Call

The Company will host a corresponding conference call and live webcast to discuss the results at 8:00 AM Eastern Standard Time (EST) on Monday, August 19, 2013 (8:00 PM Beijing/Hong Kong time). Please dial-in five minutes prior to the call to register and receive further instruction.

The dial-in details for the live conference call are as below:

U.S. Toll Free Dial-in Number:

+1.866.519.4004

International Dial-in Number:

+65.6723.9381

Hong Kong Dial-in Number:

+852.2475.0994

Passcode:

23897532

The conference call will be available live via webcast on the Investors section of Pactera's website at http://ir.pactera.com. The archive replay will be available on Pactera's website shortly after the call.

A dial-in replay of the conference call will be available until August 27, 2013:

U.S. Toll Free Dial-in Number:

+1.855.452.5696

International Dial-in Number:

+ 61.2.8199.0299

Passcode:

23897532

About Pactera

Pactera Technology International Ltd. (NASDAQ: PACT), formed by a merger of equals between HiSoft Technology International Limited and VanceInfo Technologies Inc., is a global consulting and technology services provider strategically headquartered in China. Pactera provides world-class business / IT consulting, solutions, and outsourcing services to a wide range of leading multinational firms through a globally integrated network of onsite and offsite delivery locations in China, the United States, Europe, Australia, Japan, Singapore and Malaysia. Pactera's comprehensive services include business and technology advisory, enterprise application services, business intelligence, application development & maintenance, mobility, cloud computing, infrastructure management, software product engineering & globalization, and business process outsourcing.

For more information about Pactera, please visit www.pactera.com.

Safe Harbor Statement

This news release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements, as well as the consideration of the going private proposal and the impact on the Company resulting from the success or failure of that proposal. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Pactera's control, which may cause Pactera's actual results, performance or achievements to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, the Company's dependence on a limited number of clients for a significant portion of its revenues, uncertainty relating to its clients' forming or plan to form joint venture with the Company's competitors, the economic slowdown in its principal geographic markets, the quality and portfolio of its service lines and industry expertise, and the availability of a large talent pool in China and inflation of qualified professionals' wages, as well as the PRC government's investment in infrastructure construction and adoption of various incentives in the IT service industry. Further information regarding these and other risks, uncertainties or factors is included in Pactera's filings with the U.S. Securities and Exchange Commission. All information provided in this news release is as of the date of this news release, and Pactera does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. 

About Non-GAAP Financial Measures

To supplement Pactera's consolidated financial results presented in accordance with GAAP, Pactera uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, change in fair value of contingent consideration payable for business acquisition, and compensation expenses related to acquisition. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP or as being comparable to results reported or forecasted by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for non-GAAP Financial Measures to Comparable GAAP Measures" set forth at the end of this news release.

Pactera believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. A limitation of using non-GAAP net income and non-GAAP diluted EPS is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, and change in fair value of contingent consideration payable for business acquisition that have been and will continue to be, for the foreseeable future, a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures. The reconciliations of the forward-looking guidance for non-GAAP financial measures to the most directly comparable GAAP financial measures in the accompanying table include all information reasonably available to Pactera at the date of this earnings release.



PACTERA TECHNOLOGY INTERNATIONAL LTD.

Condensed Consolidated Balance Sheets (Unaudited)

(US dollars in thousands, except share data)








June 30, 2013


December 31, 2012






ASSETS





Current Assets





Cash


95,100


143,714

Restricted cash


1,484


6,112

Term deposits


28,072


58,485

Short-term investment


1,615


1,765

Accounts receivable, net


267,121


230,693

Other current assets


40,393


37,435

Total current assets


433,785


478,204






Property, plant and equipment, net


69,364


67,607

Goodwill and intangible assets, net


151,495


157,962

Other long-term assets


35,121


33,833

Total assets


689,765


737,606






LIABILITIES AND EQUITY





Current liabilities


151,610


163,152

Other liabilities


21,002


32,130

Total liabilities


172,612


195,282

Total shareholder's equity


517,153


542,324

Total liabilities and equity


689,765


737,606






Note:





 As of June 30,2013, there were 85,649,706 common shares (85,649,706 ADSs) issued and outstanding. 

 As of December 31,2012, there were 88,312,068 common shares (88,312,068 ADSs) issued and outstanding.






Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.

 

PACTERA TECHNOLOGY INTERNATIONAL LTD.

Condensed Consolidated Statements of Operations (Unaudited)

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










Three months ended June 30,


Six months ended June 30,


2013


2012


2013


2012









Net revenues

163,050


71,769


315,370


137,257

Cost of revenues

(118,195)


(46,132)


(231,045)


(88,743)

Gross profit

44,855


25,637


84,325


48,514

Operating expenses

(46,482)


(18,929)


(89,681)


(35,273)

(Loss) income from operations

(1,627)


6,708


(5,356)


13,241

Other income

687


1,010


1,245


2,055

Exchange difference

(308)


399


(1,201)


(81)

Net (loss) income before income tax expenses

(1,248)


8,117


(5,312)


15,215









 Income tax benefit (expenses) 

218


(1,395)


2,601


(2,282)

(Loss) income before earning in equity method investment

(1,030)


6,722


(2,711)


12,933









Earning in equity method investment

44


-


53


-

(Loss) income after earning in equity method investment

(986)


6,722


(2,658)


12,933









Add: Net profit attributable to noncontrolling interest

-


(357)


-


(492)

Net (loss) income attributable to Pactera Technology International Ltd.








(986)


6,365


(2,658)


12,441









Net (loss) income per share








Basic

(0.01)


0.15


(0.03)


0.30

Diluted

(0.01)


0.15


(0.03)


0.29









Weighted average shares used in calculating net income per
common share








Basic

80,735,486


41,313,257


82,447,106


41,238,501

Diluted

80,735,486


43,274,913


82,447,106


43,111,429









Net (loss) income per ADS








Basic

(0.01)


0.15


(0.03)


0.30

Diluted

(0.01)


0.15


(0.03)


0.29









Weighted average ADS used in calculating net income per ADS








Basic

80,735,486


41,313,257


82,447,106


41,238,501

Diluted

80,735,486


43,274,913


82,447,106


43,111,429









Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.

 


 

 

PACTERA TECHNOLOGY INTERNATIONAL LTD.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(US dollars in thousands)




Three months ended June 30,


Six months ended June 30,



2013


2012


2013


2012










Net (loss) income

(986)


6,722


(2,658)


12,933

Other comprehensive income, net of tax:









Change in cumulative foreign exchange translation adjustment

(801)


(1,383)


(727)


(978)

Comprehensive (loss) income

(1,787)


5,339


(3,385)


11,955










Less: Comprehensive income attributable to noncontrolling interest








-


(339)


-


(478)

Comprehensive (loss) income attributable to Pactera Technology International Ltd.








(1,787)


5,000


(3,385)


11,477

 

 

PACTERA TECHNOLOGY INTERNATIONAL LTD.

Condensed Consolidated Statements of Cash flowsUnaudited 

(In U.S. dollars in thousands)
















Three months ended June 30,


Six months ended June 30,



2013


2012


2013


2012

Cash flows from operating activities:










Net (loss) income 


(986)


6,722


(2,658)


12,933


Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:







Provision for doubtful accounts


(377)


58


19


89



Loss(gain) on disposal of property, plant and equipment


3,128


-


3,557


(44)



Depreciation


3,188


1,406


6,519


2,798



Change in fair value of foreign-currency forward contract


(159)


36


(146)


45



Amortization of intangible assets


2,653


1,165


5,357


2,208



Amortization of land use right


127


-


253


-



Share-based compensation expenses


5,338


1,849


12,321


3,806



Changes in fair value of contingent consideration payable for M&A

734


35


526


(346)



Earnings in equity method investment


(44)


-


(53)


-


Changes in operating assets and liabilities:











Accounts receivable


(20,864)


(11,331)


(37,244)


(19,732)



Other current assets


(1,244)


(1,543)


(5,294)


(1,579)



Other assets


(724)


(173)


(694)


(238)



Accounts payable


2,812


(533)


4,418


(1,276)



Other liabilities


9,016


2,858


(15,928)


(684)

Net cash provided by (used in) operating activities


2,598


549


(29,047)


(2,020)












Cash flows from investing activities:










Term deposits


8,005


(13,442)


30,413


(14,712)


Short-term investment


17,381


-


150


-


Purchase of property, plant and equipment


(2,160)


(1,293)


(4,201)


(2,329)


Purchase of buliding


(1,024)


-


(1,433)


-


Restricted cash


(79)


(288)


4,609


(206)


Deferred and contingent consideration paid for business acquisitions


-


(1,306)


(2,746)


(2,088)

Net cash provided by (used in) investing activities


22,123


(16,329)


26,792


(19,335)












Cash flows from financing activities:










Repayment of bank loan


-


(183)


-


(183)


Proceeds from issuance of common share
under employee option plan


1,622


213


2,592


1,270


Deferred and contingent consideration paid for business acquisitions


(5,759)


-


(18,718)


(2,897)


Repurchase of common share 


(13,861)


-


(30,000)


-

Net cash (used in) provided by financing activities


(17,998)


30


(46,126)


(1,810)












Effect of exchange rate changes 


32


(883)


(233)


(266)












Net increase (decrease) in cash


6,755


(16,633)


(48,614)


(23,431)

Cash at beginning of period


88,345


107,058


143,714


113,856












Cash at end of period


95,100


90,425


95,100


90,425


 

 

 

PACTERA TECHNOLOGY INTERNATIONAL LTD.


Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures


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

































Three months ended June 30,


Six months ended June 30,



2013


2012



2013


2012












GAAP operating (loss) income

(1,627)


6,708



(5,356)


13,241


GAAP operating (loss) margin 

(1.0)%


9.3%



(1.7)%


9.6%












Adjustments: 










 - Share-based compensation

5,338


1,849



12,321


3,806


 - Amortization of acquired intangible assets

2,653


1,165



5,357


2,208


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

734


35



526


(346)


 - Compensation expenses
related to acquisition

82


-



169


-


 - Merger-related transaction and integration costs

4,024


-



6,375


-


 - Land use right amortization expense

127


-



253


-












Non-GAAP operating income

11,331


9,757



19,645


18,909


Non-GAAP operating margin 

6.9%


13.6%



6.2%


13.8%






















GAAP net (loss) income

(986)


6,365



(2,658)


12,441


GAAP net (loss) margin

(0.6)%


8.9%



(0.8)%


9.1%












Adjustments: 










 - Share-based compensation

5,338


1,849



12,321


3,806


 - Amortization of acquired intangible assets

2,653


1,165



5,357


2,208


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

734


35



526


(346)


 - Compensation expenses
 related to acquisition

82


-



169


-


 - Merger-related transaction and integration
costs, net of tax effect

3,527


-



5,593


-


 - Land use right amortization expense

127


-



253


-












Non-GAAP net income

11,475


9,414



21,561


18,109


Non-GAAP net margin

7.0%


13.1%



6.8%


13.2%






















Non-GAAP net income per ADS










Basic

0.14


0.23



0.26


0.44


Diluted

0.14


0.22



0.25


0.42












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










Basic

80,735,486


41,313,257



82,447,106


41,238,501


Diluted

83,195,404


43,274,913



85,111,351


43,111,429












GAAP net (loss) income per ADS










Basic

(0.01)


0.15



(0.03)


0.30


Adjustments: 










 - Share-based compensation

0.06


0.05



0.15


0.09


 - Amortization of acquired intangible assets

0.04


0.03



0.06


0.06


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

0.01


-



0.01


(0.01)


 - Merger-related transaction and integration costs, net of tax effect

0.04


-



0.07


-


Non-GAAP net income per ADS










Basic

0.14


0.23



0.26


0.44












GAAP net (loss) income per ADS










Diluted

(0.01)


0.15



(0.03)


0.29


Adjustments: 










 - Share-based compensation

0.06


0.04



0.14


0.09


 - Amortization of acquired intangible assets

0.04


0.03



0.06


0.05


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

0.01


-



0.01


(0.01)


 - Merger-related transaction and integration costs, net of tax effect

0.04


-



0.07


-


Non-GAAP net income per ADS










Diluted

0.14


0.22



0.25


0.42











Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.

 



Unaudited historical
consolidated net revenues
of Pactera for the three
months ended June
30, 2013

Unaudited historical
consolidated net revenues
of Hisoft for the three
months ended June
30, 2012

Unaudited historical
consolidated net revenues
of VanceInfo for the three
months ended June
30, 2012

Unaudited Pro forma
consolidated net revenues
for the three months
ended June 30, 2012













Proforma Net Revenue by Service Lines






IT Services


94,990

41,594

44,768

86,362

CPS Services


31,166

16,763

11,681

28,444

ADM Services


63,824

24,831

33,087

57,918

R&D Services


65,165

30,175

46,436

76,611

BPO


2,895

-

3,539

3,539

Total


163,050

71,769

94,743

166,512







Proforma Net Revenue by Industry






High Tech


96,773

36,407

67,471

103,878

BFSI


40,934

21,932

15,413

37,345

Manufacturing


21,455

10,887

9,711

20,598

Others


3,888

2,543

2,148

4,691

Total


163,050

71,769

94,743

166,512







Proforma Net Revenue by Location of Client's Headquarter




United States


65,999

33,387

32,626

66,013

Greater China


61,513

17,442

45,600

63,042

Europe


15,066

4,846

9,578

14,424

Japan


12,209

13,749

4,418

18,167

Asia South


8,263

2,345

2,521

4,866

Total


163,050

71,769

94,743

166,512







Note: 






The accompanying unaudited pro forma net revenues for the three months ended June 30, 2013  is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012.  No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event.  The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods.  Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations.

For the pro forma net revenues for the three months ended June 30, 2012, it combined the unaudited historical consolidated net revenues of the former Hisoft and former VanceInfo for the three months ended June 30, 2012. 



























Unaudited historical
consolidated net revenues
of Pactera for the six
months ended June
30, 2013

Unaudited historical consolidated net revenues
of Hisoft for the six
months ended June
30, 2012

Unaudited historical consolidated net revenues
of  VanceInfo for the six months ended June
30, 2012

Unaudited Pro forma consolidated net revenues
for the six months ended June 30, 2012







Proforma  Net Revenue by Service Lines






IT Services


176,519

80,878

84,790

165,668

CPS Services


60,365

30,376

21,441

51,817

ADM Services


116,154

50,502

63,349

113,851

R&D Services


133,222

56,379

89,915

146,294

BPO


5,629

-

6,148

6,148

Total


315,370

137,257

180,853

318,110







Proforma  Net Revenue by Industry






High Tech


194,064

71,421

128,691

200,112

BFSI


75,145

40,365

29,289

69,654

Manufacturing


37,451

20,857

18,171

39,028

Others


8,710

4,614

4,702

9,316

Total


315,370

137,257

180,853

318,110







Proforma  Net Revenue by Location of Client's Headquarter




United States


126,349

63,249

62,937

126,186

Greater China


118,630

32,205

85,800

118,005

Europe


29,283

9,384

20,256

29,640

Japan


25,492

27,160

7,776

34,936

Asia South


15,616

5,259

4,084

9,343

Total


315,370

137,257

180,853

318,110







Note: 






The accompanying unaudited pro forma net revenues for the six months ended June 30, 2012  is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012.  No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event.  The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods.  Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations.
 
For the pro forma net revenues for the six months ended June 30, 2012, it combined the unaudited historical consolidated net revenues of the former Hisoft and former VanceInfo for the six months ended June 30, 2012. 

For further information, please contact:

Tracy Zhou
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-5987-5138
E-mail: ir@pactera.com

SOURCE Pactera Technology International Ltd.



RELATED LINKS
http://ir.pactera.com
http://www.pactera.com

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