Yucheng Technologies Reports Fourth Quarter and Fiscal Year 2009 Financial Results

Jan 29, 2010, 06:00 ET from Yucheng Technologies Limited

BEIJING, Jan. 29 /PRNewswire-Asia-FirstCall/ -- Yucheng Technologies Limited (Nasdaq: YTEC), a leading provider of IT solutions to China's banking industry, today announced financial results for the fourth quarter and the fiscal year 2009.

"2009 has been a time of great achievements and challenges for Yucheng.  We have solidified our foundations by installing CRM and ERP systems to gain better control over our business pipeline and our expenses.  In addition, Yucheng spun-off two ancillary businesses to our core Software & Solutions strategy by forming a joint-venture with NTT Data, to further develop Yucheng's market leading E-Banking ASP and by divesting the Elegon Infotech joint-venture," stated Weidong Hong, Chairman and CEO of Yucheng.

"We believe that the prospective reserve ratio increase by the People's Bank of China (PBOC) and the possibility that non-performing loans (NPLs) may increase in the near future, which would adversely affect the profits of Chinese banks, caused Chinese banks to reevaluate their spending and contract signings ahead of the New Year.  As a result, contracts that management had been negotiating in the fourth quarter 2009 have slipped into 2010, and as negotiations progress may become more limited in scope or provide lower margins. We anticipate banks to remain cautious initiating new projects in the near term.  Overall, the shifts in the banking market caused us to experience a revenue shortfall in the fourth quarter of 2009."

2009 Financial Highlights

  • Software & Solutions net revenue totaled USD 43.5M, a 10.4% increase year over year.
  • Total net revenues for 2009 were USD 54.8M compared to USD 54.8M in 2008.
  • Yucheng had a year-end cash position of USD 36.3M compared to USD 35.1M for the same period last year.

Business Outlook

Given the uncertain market situation and mounting gross margin pressures, Yucheng is issuing 2010 guidance based on approximately 25% growth on the top-line and 10% to 15% growth on the bottom-line.  Our 2010 annual guidance expectations are revenues of USD 65.0M to USD 68.0M and non-GAAP EPS of USD 0.30 to USD 0.36.  This will translate to first quarter 2010 expectations of revenues of USD 11.6M to USD 12.2M and non-GAAP EPS of USD 0.08 to USD 0.10.  The net impact from the new joint venture with NTT Data (including a one-time gain of USD 0.06 per share in the first quarter) will be approximately USD -0.06 in 2010.

Fourth Quarter Financial Results

Revenues: The changes in the fourth quarter banking environment had unforeseen consequences on Yucheng's fourth quarter sales.  Yucheng anticipates reporting consolidated net revenues of USD 11.2M for the fourth quarter 2009, as compared to fourth quarter 2008 revenues of USD 21.7M and third quarter 2009 revenues of USD 17.0M.  

  • Software & Solutions: Software & Solutions revenue in the fourth quarter of 2009 totaled USD 9.0M, a decline of 49.6% compared to the fourth quarter 2008 and 35.0% compared to the third quarter of 2009.  Due to the higher expected sales, costs increased during the quarter and the gross margin declined to 36.5% as compared to 54.0% in the fourth quarter of 2008.  
  • The Platform & Maintenance business recorded net revenues of USD 1.2M compared to USD 3.1M in fourth quarter 2008 and USD 2.2M in the third quarter 2009.  In addition, the mix skewed heavily towards maintenance versus third-party product resales, which compressed gross margins to 22.4% compared to 71.8% in the fourth quarter of the prior year.  
  • The POS business was moderately impacted by certain new regulations, which were introduced in the third quarter of 2009.  In the fourth quarter, the POS business generated revenues of USD 1.0M compared to USD 0.8M in the fourth quarter of 2008 and USD 1.0M in the third quarter of 2009.  The gross margin also increased to 45.6% from 39.6% in the same period last year due to our focus on higher yielding terminals.  

Gross Profits: Yucheng's gross profit was USD 4.0M as compared to USD 12.2M in the fourth quarter of 2008 and USD 8.7M in the third quarter of 2009, caused by the reduction in revenues for the period.  

Sales, General and Administrative Expenses (SG&A): Consolidated SG&A, excluding a one-time bad debt charge of USD 1.8M remained flat in the fourth quarter at USD 7.8M, as compared to USD 7.5M in the fourth quarter 2008.  This was the result of strict SG&A controls that were implemented in the third quarter of 2009.

Net Income and Earnings Per Share:  Including a one-time bad debt expense of USD 1.8M or USD -0.10 per share, non-GAAP net income totaled USD -4.9M, compared to USD 4.7M in the same period of 2008 and on a GAAP basis USD -5.2M and USD 4.4M for the same periods, respectively.  This translates to EPS for fully diluted shares on a consolidated basis of USD -0.26 (non-GAAP) and USD -0.28 (GAAP), compared to USD 0.25 (non-GAAP) and USD 0.24 (GAAP) in the fourth quarter of 2008.  Although expense controls did positively impact the fourth quarter financials, the costs related to unsigned contracts and lower revenues caused Yucheng to generate a loss.

Cash: Yucheng had USD 36.3M in cash at year end compared to USD 35.1M at the year end 2008 and USD 21.9M at the end of the third quarter of 2009.  Cash increased due to improved collections.

Accounts Receivable: Accounts receivable totaled USD 24.7M in the current period compared to USD 41.1M in the fourth quarter of 2008 and USD 33.1M in the prior quarter.  During the fourth quarter it became apparent that approximately USD 1.8M of accounts receivable were no longer collectible and will be taken as a one-time write-off.  DSOs in the quarter were 275 days, compared to 105 days in the fourth quarter of 2008.  When calculated to include the complete impact of agency services contracts, DSOs totaled 117 days in the fourth quarter, compared to 89 days in the same period last year.  

POS: The table below is provided to give greater insight into our POS business, beyond what is available in our consolidated financial statements. The revenue and cost of revenue numbers are provided on a net presentation basis.

    
    
    
    
             Summary of Selected Unaudited Financial Results for the 
                              Fourth Quarter of 2009
             (Numbers are in thousands, except shares outstanding, 
                       earnings per share and percentages) 
    
    
                                                 Q4 2009
                            --------------------------------------------------
                                Total              CORE             POS
                            ---------------   ---------------  ---------------
                                     % of              % of             % of
                            Amount Revenues   Amount Revenues  Amount Revenues
                            ------ --------   ------ --------  ------ --------
    Revenues                 11,180 100.0%     10,219 100.0%        961 100.0%
      Software & Solutions    8,982  80.3%      8,982  87.9%          -
      POS                       961   8.6%          -     -         961 100.0%
      Platform & Maintenance
       Services               1,237  11.1%      1,237  12.1%          -   0.0%
    Cost of Revenues          7,184  64.3%      6,693  65.5%        492  51.2%
    Gross Profit              3,995  35.7%      3,526  34.5%        469  48.8%
    Operating Expenses        9,973  89.2%      9,128  89.3%        844  87.8%
      R&D                       372   3.3%        372   3.6%          -     -
      SG&A                    9,600  85.9%      8,756  85.7%        844  87.8%
    Income from Operations   -5,977 -53.5%     -5,602 -54.8%       -375 -39.0%
    Net Income (GAAP)        -5,227 -46.8%     -4,955 -48.5%       -272 -28.3%
    Amortization of
     Intangible Assets          336   3.0%        336   3.3%
    Non-GAAP Net Income      -4,891 -43.7%     -4,619 -45.2%       -272 -28.3%
    Basic GAAP EPS            -0.28             -0.27             -0.01
    Diluted GAAP EPS          -0.28     -       -0.27     -       -0.01     -
    Basic Non-GAAP EPS        -0.26     -       -0.25     -       -0.01     -
    Diluted Non-GAAP EPS      -0.26     -       -0.25     -       -0.01     -
    Basic Weighted 
     Average Common
     Shares Outstanding  18,560,014     -  18,560,014     -  18,560,014     -
    Diluted Weighted
     Average Common
     Shares Outstanding  18,625,932     -  18,625,932     -  18,625,932     -
    
    
    
                                                 Q4 2008
                            --------------------------------------------------
                                Total              CORE             POS
                            ---------------   ---------------  ---------------
                                     % of              % of             % of
                            Amount Revenues   Amount Revenues  Amount Revenues
                            ------ --------   ------ --------  ------ --------
    
    Revenues               21,713 100.0%     20,928 100.0%        785  100.0%
      Software & Solutions 17,834  82.1%     17,834  85.2%          -
      POS                     785   3.6%                          785  100.0%
      Platform & Maintenance
       Services             3,093  14.2%      3,093  14.8%          -
    Cost of Revenues        9,544  44.0%      9,070  43.3%        475   60.5%
    Gross Profit           12,169  56.0%     11,858  56.7%        311   39.6%
    Operating Expenses      7,570  34.9%      6,408  30.6%      1,162  148.0%
      R&D                      91   0.4%         91   0.4%
      SG&A                  7,480  34.4%      6,318  30.2%      1,162  148.0%
    Income from Operations  4,598  21.2%      5,450  26.0%       -851 -108.4%
    Net Income (GAAP)       4,388  20.2%      4,898  23.4%       -510  -65.0%
    Amortization of
     Intangible Assets        336   1.5%        336   1.6%
    Non-GAAP Net Income     4,723  21.8%      5,233  25.0%       -510  -65.0%
    Basic GAAP EPS           0.25              0.28             -0.03
    Diluted GAAP EPS         0.24     -        0.26     -       -0.03      -
    Basic Non-GAAP EPS       0.27     -        0.30     -       -0.03      -
    Diluted Non-GAAP EPS     0.25     -        0.28     -       -0.03      -
    Basic Weighted Average
     Common Shares
     Outstanding       17,575,685     -  17,575,685     -  17,575,685      -
    Diluted Weighted
     Average Common Shares
     Outstanding       18,567,375     -  18,567,375     -  18,567,375      -
    
    
    
                                                         CORE         POS
                                                         ----         ---
                                                         Y-O-Y       Y-O-Y
                                                         Change      Change
                                                         ------      ------
    Revenues                                             -51.2%       22.4%
      Software & Solutions                               -49.6%
      POS                                                             22.4%
      Platform & Maintenance Services                    -60.0%
    Cost of Revenues                                     -26.2%        3.6%
    Gross Profit                                         -70.3%       51.1%
    Operating Expenses                                    42.4%      -27.4%
      R&D                                                310.1%
      SG&A                                                38.6%      -27.4%
    Income from Operations                              -202.8%      -55.9%
    Net Income (GAAP)                                   -201.2%      -46.7%
    Amortization of Intangible Assets                      0.0%
    Non-GAAP Net Income                                 -188.3%      -46.7%
    Basic GAAP EPS                                      -196.4%       66.7%
    Diluted GAAP EPS                                    -203.8%       66.7%
    Basic Non-GAAP EPS                                  -183.3%       66.7%
    Diluted Non-GAAP EPS                                -189.3%       66.7%
    Basic Weighted Average Common Shares Outstanding       5.6%        5.6%
    Diluted Weighted Average Common Shares Outstanding     0.3%        0.3%
    
    Note: Due to rounding the table above may have slight discrepancies. 
    The United States dollar amounts in the above table are calculated based
    on an exchange rate of USD 1.00 = RMB 6.8282 for December 31, 2009 and
    USD 1.00 = RMB 6.8346 for December 31, 2008.

About Yucheng Technologies Limited

Yucheng Technologies Limited (Nasdaq: YTEC) is a leading IT service provider to the Chinese banking industry. Headquartered in Beijing, China, Yucheng has approximately 2,200 employees and has established an extensive network for serving its banking clients nationwide, with subsidiaries and representative offices in 23 cities. Yucheng provides a comprehensive suite of IT solutions and services to Chinese banks including: (i) Channel Solutions, such as web banking and call centers; (ii) Business Solutions, such as core banking systems, foreign exchange and treasury management; and (iii) Management Solutions, such as risk analytics and business intelligence. Yucheng is also a leading third-party provider of POS merchant acquiring services in partnership with banks in China.

   For Further Information

   Steve Dai

   Tel:   +86 10 5913 7889

   Email: sdai@yuchengtech.com

Safe Harbor Statement

This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties.  Forward-looking statements are statements that are not historical facts.  Forward-looking statements generally can be identified by the use of forward-looking terminology, such as ''may,'' ''will,'' ''expect,'' ''intend,'' ''estimate,'' ''anticipate,'' ''believe,'' ''project'' or ''continue'' or the negative thereof or other similar words.  Such forward-looking statements, based upon the current beliefs and expectations of Yucheng's management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements.  The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: current dependence on the PRC banking industry demand for the products and services of Yucheng; competition from other service providers in the PRC and international consulting firms; the ability to update and expand product and service offerings; retention and hiring of qualified employees; protection of intellectual property; creating and maintaining quality product offerings; operating a business in the PRC with its changing economic and regulatory environment; and the other relevant risks detailed in Yucheng filings with the Securities and Exchange Commission.  The information set forth herein should be read in light of such risks.  Yucheng assumes no obligation to update the information contained in this press release.

    
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                              Consolidated Balance Sheets
                       December 31, 2009 and September 30, 2009
    
                                                      2009.12.31    2009.9.30
                                                             USD          USD
    
    Assets
    Current assets:
    Cash and cash equivalent                          36,258,689   21,893,313
    Trade accounts receivable, net (Includes bad debt
     write-offs of USD 1,839,755 in the fourth 
     quarter 2009 and 0 in the fourth quarter 2008)   24,679,515   33,106,616
    Costs and estimated earnings in excess of
     billings on uncompleted contracts                16,173,044   24,311,219
    Amounts due from related companies                   248,659      623,776
    Inventories                                          496,943    3,058,452
    Pre-contract costs                                 1,318,379      665,396
    Other current assets                               5,809,149    7,434,529
                                                       ---------    ---------
    
    Total current assets                              84,984,378   91,093,301
    
    Investments in and advances to affiliates          1,108,659      504,041
    Fixed assets                                      14,005,736   13,710,998
    Less: Accumulated depreciation                    (4,928,501)  (4,447,620)
                                                      ----------   ----------
    Fixed assets, net                                  9,077,235    9,263,378
    Intangible assets, net                             4,429,924    4,735,659
    Goodwill                                          27,680,735   27,677,493
    Deferred income taxes - Non-current                3,263,811    3,003,404
                                                       ---------    ---------
    
    Total assets                                     130,544,742  136,277,276
                                                     ===========  ===========
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                        Consolidated Balance Sheets (continued)
                       December 31, 2009 and September 30, 2009
    
                                                      2009.12.31    2009.9.30
                                                             USD          USD
    
    Liabilities and stockholders' equity
    Current liabilities:
    Short term loan                                   11,716,118   11,714,746
    Obligations under capital leases                     334,275      386,058
    Trade accounts payables                           14,111,275   11,414,696
    Billings in excess of costs and estimated
     earnings on uncompleted contracts                 2,647,307    2,349,567
    Employee and payroll accruals                         25,353    1,724,066
    Dividends payable to ex-owners                       580,005      808,524
    Deemed distribution to ex-owners                                2,047,133
    Outstanding payment in relation to
     business acquisitions                               253,004    1,109,698
    Income taxes payable                               2,079,227    2,443,655
    Other current liabilities                          8,813,575    6,865,867
    Deferred income taxes - Current                      135,791       59,064
                                                         -------       ------
    
    Total current liabilities                         40,695,930   40,923,074
    
    Obligations under capital leases                      46,065      103,054
    Deferred income taxes                                251,353      424,258
                                                         -------      -------
    
    Total liabilities                                 40,993,348   41,450,386
    
    
    Stockholders' equity
    Preferred stock, $0.0001 par value, authorized
     2,000,000 shares and none issued; Common stock,
     $0.0001 par value, authorized 60,000,000 shares;
     17,580,935 and 18,560,014 shares issued and
     outstanding as of  June 30, 2009 and
     September 30, 2009                                2,930,201    2,929,858
    Additional paid-in capital                        56,437,075   56,430,463
    Reserves                                           5,994,414    5,410,409
    Retained earnings                                 23,196,945   29,004,054
    Accumulated other comprehensive loss                (326,639)    (331,445)
    Minority interests                                 1,319,398    1,383,551
                                                       ---------    ---------
    
    Total stockholders' equity                        89,551,394   94,826,890
                                                      ----------   ----------
    
    Liabilities and stockholders' equity             130,544,742  136,277,276
                                                     ===========  ===========
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                           Consolidated Statements of Income
                     Three months ended December 31, 2009 and 2008
    
                                                        2009 Q4       2008 Q4
                                                            USD           USD
    
    Revenues:
      Software & solutions                            8,982,193    17,834,222
      Platform & maintenance services (net)           1,236,804     3,093,337
      POS                                               960,845       785,285
                                                        -------       -------
      Total revenues (non-GAAP)                      11,179,842    21,712,844
      Platform pass-through costs                    (1,496,219)   12,334,488
    
    Total revenues                                    9,683,623    34,047,332
    
    Cost of revenues:
      Cost of revenues (net)                         (7,184,486)   (9,544,269)
      Platform pass-through costs                     1,496,219   (12,334,488)
    
    Total cost of revenues                           (5,688,267)  (21,878,757)
    
    Gross profit                                      3,995,356    12,168,575
    
    Operating expenses:
      Research and development                         (372,105)      (90,729)
      Selling and marketing                          (2,225,860)   (2,339,304)
      General and administrative (Includes bad
       debt write-offs of USD 1,839,755 in the
       fourth quarter 2009 and 0 in the fourth
       quarter 2008)                                 (7,374,641)   (5,140,325)
    
    
    
    Total operating expenses                         (9,972,606)   (7,570,358)
                                                     ----------    ----------
    
    Operating income                                 (5,977,250)    4,598,217
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                     Consolidated Statements of Income (continued)
                     Three months ended December 31, 2009 and 2008
    
                                                           2009 Q4    2008 Q4
                                                               USD        USD
    
    Other income (expenses):
      Interest income                                       17,570     36,084
      Interest expense                                    (152,669)  (161,471)
      Investment gain (loss)                               126,904   (492,821)
      Other income (expense), net                          (32,340)    74,276
                                                           -------     ------
    
    Income (loss) before income tax and minority
     interests                                          (6,017,785) 4,054,285
    
      Income tax benefit (expense)                         726,333    275,683
      Minority interests                                    64,315     57,614
                                                            ------     ------
    
    Net income (loss)(GAAP)                             (5,227,137) 4,387,582
    
    Amortization for intangible assets                     335,836    335,521
                                                           -------    -------
    
    Net income (loss)(non-GAAP)                         (4,891,301) 4,723,103
                                                        ==========  =========
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                         Consolidated Statements of Cash Flows
                     Three months ended December 31, 2009 and 2008
    
                                                          2009 Q4     2008 Q4
                                                              USD         USD
    
    Cash flows from operating activities:
    Net income (loss)                                  (5,227,137)  4,387,582
    Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
    
    Depreciation                                          522,273   3,277,798
    Amortization                                          661,456  (1,752,721)
    Bad debt provision                                  1,839,755           -
    Loss on disposal fixed assets                          23,778     (12,029)
    Loss (gain) on disposal of affiliates                       -       9,639
    Minority interests                                    (64,315)    (57,614)
    Share of equity in affiliate company                 (146,898)    408,481
    Shares issued to independent directors                      -     142,376
    Decrease (increase) in trade accounts
     receivable, net                                    6,822,263  (4,242,987)
    Decrease (increase) in costs and estimated
     earnings in excess of billing on
     uncompleted contracts                              7,909,985   1,479,249
    Decrease (increase) in due from related parties       375,190   1,020,911
    Decrease (increase) in inventories                  2,561,867   3,797,431
    Decrease (increase) in precontract costs             (652,905)  1,166,183
    Decrease (increase) in other current assets         1,632,917   1,365,056
    Decrease (increase) in deferred income taxes
     assets - Current                                           -     776,550
    Decrease (increase) in deferred income
     taxes assets - Non-current                          (260,055) (1,095,635)
    Increase (decrease) in trade accounts payable       2,695,242   6,620,144
    Increase (decrease) in billings in excess
     of costs and estimated earnings on
     uncompleted contracts                                297,465     876,891
    Increase (decrease) in employee and
     payroll accruals                                  (1,698,915)    102,273
    Increase (decrease) in income taxes payable          (364,715)     23,905
    Increase (decrease) in other current
     liabilities                                        2,104,543   2,831,609
    Increase (decrease) in deferred income
     taxes liabilities                                    (96,234)   (130,888)
                                                          -------    --------
    
    Net cash provided by (used in) operating
     activities                                        18,935,560  20,994,204
                                                       ----------  ----------
    
    
    
                     YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                   Consolidated Statements of Cash Flows (continued)
                     Three months ended December 31, 2009 and 2008
    
                                                         2009 Q4      2008 Q4
                                                             USD          USD
    
    Cash flows from investing activities:
    Capital expenditures                                (880,883)  (1,099,800)
    Payment of purchase of subsidiaries                 (856,682)  (2,120,855)
    New investment of joint venture                     (457,661)           -
    Proceeds from disposal of fixed assets                  (293)      22,834
    Proceeds from disposal of investments
     under equity method                                       -     (342,181)
                                                             ---     --------
    
    Net cash provided by (used in) investing
     activities                                       (2,195,519)  (3,540,002)
    
    Cash flows from financing activities:
    Deemed distribution                               (2,043,172)    (845,494)
    Payment of capital leases                            (96,318)    (305,040)
    Dividends paid to ex-owners                         (228,613)           -
    Proceeds from bank borrowings                      4,393,544    2,926,287
    Repayments of bank borrowings                     (4,393,544)  (2,926,287)
                                                      ----------   ----------
    
    Net cash provided by financing activities         (2,368,103)  (1,150,534)
    
    Net increase in cash and cash equivalents         14,371,938   16,303,668
    
    Cash at beginning of period                       21,893,313   18,775,350
                                                      ----------   ----------
    Cash at end of period                             36,265,251   35,079,018
                                                      ==========   ==========
    

For Further Information

Steve Dai

+86 10 5913 7889

sdai@yuchengtech.com

SOURCE Yucheng Technologies Limited



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