Pactera Announces Fourth Quarter and Full Year 2012 Financial Results
Pactera Announces Fourth Quarter and Full Year 2012 Financial Results
PR Newswire
BEIJING, Feb. 27, 2013
BEIJING, Feb. 27, 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 fourth quarter and full year
2012 ended December 31, 2012.
(Logo: http://photos.prnewswire.com/prnh/20130118/CN37843LOGO )
On November 9, 2012, HiSoft Technology International Limited ("HiSoft") and
VanceInfo Technology Inc. ("VanceInfo") completed the merger of equals to form
Pactera. In the fourth quarter of 2012, Pactera's financial statements
consolidated the operating results and financial position of the former
HiSoft's results for the whole fourth quarter and VanceInfo's results for the
period from November 9, 2012 to December 31, 2012. As a result, the financial
results we reported for the fourth quarter and full year 2012 are not
comparable to those of prior corresponding periods due to the merger.
Fourth Quarter and Full Year 2012 Financial and Operational Highlights
o Net revenues for the fourth quarter of 2012 were $142.2 million.
o Pro forma net revenues[1] for the fourth quarter of 2012 were $179.3
million, an increase of 17.9% from $152.1 million for the corresponding
period in 2011.
o Diluted net loss per ADS for the fourth quarter of 2012 was $0.22.
o Non-GAAP diluted net income per ADS[2] for the fourth quarter of 2012 was
$0.24.
o Net revenues for the full year 2012 were $359.0 million.
o Pro forma net revenues for the full year 2012 were $673.3 million, an
increase of 34.1% from $502.1 million in 2011.
o Diluted net income per ADS for the full year 2012 was $0.05.
o Non-GAAP diluted net income per ADS for the full year 2012 was $0.91.
o Total full-time regular employees as of December 31, 2012 were 23,270
including 20,834 billable professionals.
[1] Pro forma net revenues of the Company for the fourth quarter and full year
2011 and 2012 assume that the merger occurred at the beginning of each 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 each 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.
[2] 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 news release.
"We are pleased with our results for the fourth quarter and full year 2012.
During the quarter, we successfully achieved our revenue target while also
making solid progress with our operational integration and business
reorganization," said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera.
"Pro forma net revenues in 2012 were up 34.1% year over year. Our BFSI
business continued its strong growth momentum with a 62.7% year-over-year
increase in pro forma net revenues, positioning us to become the leading IT
service provider in this vertical in China. Demand in Greater China remains
robust, reflected by our 49.7% growth in pro forma net revenues in the region
during 2012.
"Looking forward to 2013, we will remain focused on completing our integration
efforts to fully realize the targeted synergies. We will continue to deliver
value to our clients and grow our business in a profitable and sustainable
manner," added Mr. Loh.
Fourth Quarter 2012 Financial Results
Net Revenues
Net revenues were $142.2 million for the fourth quarter of 2012 as compared to
$64.9 million for the fourth quarter of 2011.
Pro forma net revenues of the Company for the fourth quarter of 2012 were
$179.3 million, an increase of 17.9% from $152.1 million for the corresponding
period in 2011. The year-over-year growth in pro forma net revenues was driven
by strong demand of IT services and key geographic markets.
Net Revenues by Service Line
Pactera has two service lines: Information Technology ("IT") services and
research and development ("R&D") services. Pactera divides IT services into
two categories: consulting and packaged solution services ("CPS") and
application development, testing and maintenance services ("ADM").
Net revenues from IT services were $87.7 million for the fourth quarter of
2012. Net revenues from R&D services were $54.5 million for the fourth quarter
of 2012.
Net Revenues by Services Line
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
IT Services 87,738 61.7% 39,700 61.1%
CPS 31,849 22.4% 13,640 21.0%
ADM 55,889 39.3% 26,060 40.1%
R&D Services 54,464 38.3% 25,236 38.9%
Total Net Revenues 142,202 100.0% 64,936 100.0%
Pro forma net revenues from IT services were $110.4 million for the fourth
quarter of 2012, an increase of 33.2% from $82.9 million for the corresponding
period in 2011, which is primarily due to our expanded service offerings and
client portfolio.
Pro forma net revenues from R&D services were $68.9 million for the fourth
quarter of 2012, compared to $69.2 million for the corresponding period in
2011.
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended Three Months Ended Year-over-Year %
December 31, 2012 December 31, 2011 Change
($ in thousands, except percentages)
IT Services 110,433 61.6% 82,936 54.5% 33.2%
CPS 36,264 20.2% 29,239 19.2% 24.0%
ADM 74,169 41.4% 53,697 35.3% 38.1%
R&D Services 68,911 38.4% 69,188 45.5% (0.4)%
Total Net Revenues 179,344 100.0% 152,124 100.0% 17.9%
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients
headquartered in the United States were $55.4 million in the fourth quarter of
2012, followed by $53.8 million from clients headquartered in Greater China,
$16.6 million in Japan, $10.3 million in Europe and $6.1 million in Asia
South.
Net Revenues based on Location of Clients' Headquarters
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
United States 55,361 38.9% 30,324 46.7%
Greater China 53,848 37.9% 13,197 20.3%
Japan 16,615 11.7% 13,323 20.5%
Europe 10,262 7.2% 4,851 7.5%
Asia South 6,116 4.3% 3,241 5.0%
Total Net Revenues 142,202 100.0% 64,936 100.0%
Pro forma net revenues from clients headquartered in Greater China were $72.0
million or 40.1% of pro forma net revenues for the fourth quarter of 2012,
followed by 37.5% from the United States, 10.4% from Japan, 7.7% from Europe
and 4.3% from Asia South.
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended Three Months Ended Year-over-Year %
December 31, 2012 December 31, 2011 Change
($ in thousands, except percentages)
Greater China 71,989 40.1% 53,739 35.3% 34.0%
United States 67,264 37.5% 61,712 40.6% 9.0%
Japan 18,611 10.4% 16,200 10.6% 14.9%
Europe 13,721 7.7% 15,837 10.4% (13.4)%
Asia South 7,759 4.3% 4,636 3.1% 67.4%
Total Net Revenues 179,344 100.0% 152,124 100.0% 17.9%
Measuring Pactera's net revenues based on the location of contract signing
entity, Greater China accounted for 57.9% of net revenues in the fourth
quarter of 2012, while the United States accounted for 20.3%, Japan accounted
for 11.1%, Asia South accounted for 9.2% and Europe accounted for 1.5%.
Measuring Pactera's pro forma net revenues based on the location of contract
signing entity, Greater China accounted for 59.8% of pro forma net revenues in
the fourth quarter of 2012, while the United States accounted for 20.7%, Japan
accounted for 9.9%, Asia South accounted for 8.2% and Europe accounted for
1.4%.
Net Revenues by Industry
Pactera classifies its clients into four industry segments: High Technology
("High Tech"), Banking, Financial Services and Insurance ("BFSI"),
Telecommunications ("Telecom"), and other industry segments including
manufacturing, retail, distribution, travel and transportation and public
services ("Others").
Net Revenues by Industry
Three Months Ended Three Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
High Tech 56,463 39.7% 28,941 44.6%
BFSI 39,894 28.1% 18,849 29.0%
Telecom 23,858 16.8% 4,769 7.3%
Others 21,987 15.4% 12,377 19.1%
Total Net Revenues 142,202 100.0% 64,936 100.0%
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release.)
Three Months Ended Three Months Ended Year-over-Year %
December 31, 2012 December 31, 2011 Change
($ in thousands, except percentages)
High Tech 69,066 38.5% 59,531 39.1% 16.0%
BFSI 47,435 26.4% 32,224 21.2% 47.2%
Telecom 35,174 19.6% 36,699 24.1% (4.2)%
Others 27,669 15.5% 23,670 15.6% 16.9%
Total net revenues 179,344 100% 152,124 100.0% 17.9%
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 30.7%
and 39.6% of net revenues, respectively, during the fourth quarter of 2012,
compared to 31.6% and 45.2%, respectively, for the corresponding period in
2011.
Pro forma net revenues from Pactera's top five and top ten clients accounted
for 32.2% and 41.2% of pro forma net revenues, respectively, during the fourth
quarter of 2012, compared to 39.0% and 48.6%, respectively, for the
corresponding period in 2011.
Gross Profit and Gross Margin
Gross profit was $47.6 million for the fourth quarter of 2012, compared to
$23.5 million for the corresponding period in 2011. During the fourth quarter
of 2012, gross margin was 33.5%, as compared to 36.2% for the fourth quarter
of 2011.
Operating Expenses
Total operating expenses were $65.2 million for the fourth quarter of 2012
compared to $16.8 million for the corresponding period in 2011. Operating
expenses in the fourth quarter of 2012 reflect $5.5 million in trademark
intangible asset write-down due to the corporate re-branding and $19.8 million
in other merger related expenses including professional fees, severance costs,
and facilities and system integration expenses.
Operating Income and Operating Margin
Operating loss for the fourth quarter of 2012 was $17.5 million, compared to
an operating income of $6.7 million for the corresponding period in 2011.
Non-GAAP operating income for the fourth quarter in 2012 was $15.3 million, as
compared to $9.7 million in the corresponding period in 2011.
Operating margin was negative 12.3% for the fourth quarter of 2012, compared
to 10.3% for the same period in 2011. Non-GAAP operating margin was 10.8% for
the fourth quarter of 2012, compared to 14.9% for the corresponding period in
2011.
Net Income and Net Income per ADS
Net loss attributable to Pactera was $14.5 million for the fourth quarter of
2012, compared to a net income of $6.8 million for the corresponding period in
2011. Diluted net loss per ADS was $0.22 for the fourth quarter of 2012, as
compared to diluted net income per ADS of $0.16 in the corresponding period of
2011.
Non-GAAP net income was $16.4 million for the fourth quarter of 2012, compared
to $9.8 million for the same period in 2011. Non-GAAP diluted net income per
ADS was $0.24 in the fourth quarter of 2012, compared to $0.23 in the
corresponding period of 2011.
Cash Flow and DSO
As of December 31, 2012, Pactera had cash and cash equivalents, restricted
cash, term deposits and short-term investment totaling $210.1 million.
Operating cash flow for the fourth quarter of 2012 was a net inflow of
approximately $33.3 million. Days sales outstanding ("DSO") was 119 days for
the quarter.
Full Year 2012 Financial Results
Net Revenues
Net revenues were $359.0 million for the full year 2012 as compared to $219.0
million for the full year 2011.
Pro forma net revenues of the Company for the full year 2012 were $673.3
million, an increase of 34.1% from $502.1 million for the corresponding period
in 2011.
Net Revenues by Service Line
Net revenues from IT services were $214.9 million for the full year 2012. Net
revenues from R&D services were $144.2 million for the full year 2012.
Net Revenues by Services Line
Twelve Months Ended Twelve Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
IT Services 214,858 59.8% 126,105 57.6%
CPS 79,605 22.1% 37,567 17.2%
ADM 135,253 37.7% 88,538 40.4%
R&D Services 144,173 40.2% 92,884 42.4%
Total Net Revenues 359,031 100.0% 218,989 100.0%
Pro forma net revenues from IT services were $381.5 million for the full year
2012, an increase of 46.3% from $260.7 million in 2011. Pro forma net revenues
from R&D services were $291.8 million for the full year 2012, compared to
$241.4 million in 2011.
Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended Twelve Months Year-over-Year %
December 31, 2012 Ended Change
December 31, 2011
($ in thousands, except percentages)
IT Services 381,476 56.7% 260,680 51.9% 46.3%
CPS 118,209 17.6% 85,351 17.0% 38.5%
ADM 263,267 39.1% 175,329 34.9% 50.2%
R&D Services 291,790 43.3% 241,446 48.1% 20.9%
Total Net Revenues 673,266 100.0% 502,126 100.0% 34.1%
Net Revenues by Geographic Markets
Based on the location of clients' headquarters, net revenues from clients
headquartered in the United States were $155.0 million in the full year 2012,
followed by $104.2 million from clients headquartered in Greater China, $58.0
million in Japan, $24.4 million in Europe and $17.5 million in Asia South.
Net Revenues based on Location of Clients' Headquarters
Twelve Months Ended Twelve Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
United States 154,969 43.2% 107,925 49.3%
Greater China 104,222 29.0% 39,410 18.0%
Japan 58,010 16.2% 40,724 18.6%
Europe 24,375 6.8% 18,793 8.6%
Asia South 17,455 4.8% 12,137 5.5%
Total Net Revenues 359,031 100.0% 218,989 100.0%
Pro forma net revenues from clients headquartered in the United States were
$261.1 million or 38.8% of pro forma net revenues for the full year 2012,
followed by 38.2% from Greater China, 10.7% from Japan, 8.4% from Europe and
3.9% from Asia South.
Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended Twelve Months Year-over-Year %
December 31, 2012 Ended Change
December 31, 2011
($ in thousands, except percentages)
United States 261,070 38.8% 203,242 40.5% 28.5%
Greater China 257,481 38.2% 172,052 34.3% 49.7%
Japan 72,050 10.7% 50,167 10.0% 43.6%
Europe 56,728 8.4% 61,231 12.2% (7.4)%
Asia South 25,937 3.9% 15,434 3.0% 68.1%
Total Net Revenues 673,266 100.0% 502,126 100.0% 34.1%
Measuring Pactera's net revenues based on the location of contract signing
entity, Greater China accounted for 48.0% of net revenues in thefull year
2012, while the United States accounted for 21.0%, Japan accounted for 16.7%,
Asia South accounted for 12.6% and Europe accounted for 1.7%.
Measuring Pactera's pro forma net revenues based on the location of contract
signing entity, Greater China accounted for 57.1% of pro forma net revenues in
the full year 2012, while the United States accounted for 22.8%, Japan
accounted for 10.3%, Asia South accounted for 8.2% and Europe accounted for
1.6%.
Net Revenues by Industry
Net Revenues by Industry
Twelve Months Ended Twelve Months Ended
December 31, 2012 December 31, 2011
($ in thousands, except percentages)
High Tech 153,099 42.6% 105,447 48.2%
BFSI 102,328 28.5% 60,893 27.8%
Telecom 41,366 11.5% 14,653 6.7%
Others 62,238 17.4% 37,996 17.3%
Total Net Revenues 359,031 100.0% 218,989 100.0%
Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)
Twelve Months Ended Twelve Months Year-over-Year %
December 31, 2012 Ended December 31, Change
2011
($ in thousands, except percentages)
High Tech 259,517 38.5% 200,837 40.0% 29.2%
BFSI 157,592 23.4% 96,886 19.3% 62.7%
Telecom 151,996 22.6% 127,436 25.4% 19.3%
Others 104,161 15.5% 76,967 15.3% 35.3%
Total net revenues 673,266 100.0% 502,126 100.0% 34.1%
Largest Clients
Net revenues from Pactera's top five and top ten clients accounted for 31.0%
and 41.7% of net revenues, respectively, during the full year 2012, compared
to 34.8% and 50.1%, respectively, in 2011.
Pro forma net revenues from Pactera's top five and top ten clients accounted
for 36.1% and 45.5% of pro forma net revenues, respectively, during the full
year 2012, compared to 40.0% and 50.6%, respectively, in 2011.
Gross Profit and Gross Margin
Gross profit was $124.4 million for the full year 2012, compared to $76.6
million in 2011. During the full year 2012, gross margin was 34.7%, as
compared to 35.0% for the full year 2011.
Operating Expenses
Total operating expenses were $123.5million for the full year 2012 compared to
$59.4 million in 2011. Operating expenses in the full year 2012 reflect $5.5
million in trademark intangible asset write-down due to the corporate
re-branding as a result of the merger and $22.2 million in other merger
related expenses including professional fees, severance costs, and facilities
and system integration expenses.
Operating Income and Operating Margin
Operating income for the full year 2012 was $0.9 million, compared to an
operating income of $17.2 million in 2011. Non-GAAP operating income for the
full year 2012 was $45.4 million, as compared to $27.8 million in 2011.
Operating margin was 0.3% for the full year 2012, compared to 7.9% in 2011.
Non-GAAP operating margin was 12.6% for the full year 2012, compared to 12.7%
in 2011.
Provision for Income Taxes
Provision for income taxes was $1.2 million for the full year 2012, compared
to $1.7 million in 2011. The effective income tax rate was 26.8%. Excluding
non-deductible merger related transaction costs for Cayman Island tax
purposes, the effective tax rate would have been 13.0% for the year.
Net Income and Net Income per ADS
Net income attributable to Pactera was $2.6 million for the full year 2012,
compared to $17.9 million for 2011. Diluted net income per ADS was $0.05 for
the full year 2012, as compared to diluted net income per ADS of $0.42 for
2011.
Non-GAAP net income was $45.0 million for the full year 2012, compared to
$28.5 million for 2011. Non-GAAP diluted net income per ADS was $0.91 for the
full year 2012, compared to $0.66 for 2011.
Cash Flow
Operating cash flow for the full year 2012 was a net inflow of approximately
$36.3 million.
Recent Development
Share Repurchase Program
On December 21, 2012, the Company announced that the Board of Directors
approved a share repurchase program, under which Pactera had been authorized,
but is not obligated, to repurchase up to $30 million worth of outstanding
American Depositary Shares (the "ADSs") representing the common shares of
Pactera from time to time over the next 12 months. As of February 26, 2013,
348,535 ADS had been repurchased through open market transactions.
Potential Business Transfer Relating to Our Large Telecom Customer
As previously disclosed, one of the Company's major clients formed two joint
ventures specializing in the software outsourcing business with the Company's
competitors. The customer is now shifting some of its outsourcing business
from various vendors to these joint ventures. Recently in 2013, this customer
informed the Company of its plan to move some business from the Company to
these joint ventures, and the Company intends to fully cooperate in this
process. The details are still being discussed between the parties, which may
include orderly transfer of certain project teams to the joint ventures in the
first half of 2013. In 2012, Pactera and, prior to the completion of the
merger, HiSoft and VanceInfo, generated approximately $96 million of net
revenues from this customer, which was the largest customer as measured by net
revenues. The Company now expects net revenues from this customer to decline
by at least 40% in 2013.
Outlook for Pactera's First Quarter and Full Year 2013
For the first quarter of 2013, based on current market and operating
conditions and current book orders, Pactera expects:
o Net revenues to be at least US$158.0 million, compared to $151.6 million
in the first quarter 2012 on a pro forma basis. Excluding the revenues
from our large telecom customer in both periods, this represents an
increase of at least 10% from the first quarter 2012. Please refer to
Recent Development section of this release for further discussion.
o Non-GAAP diluted net income per ADS to be at least $0.12, estimated based
on 88.3 million weighted average equivalent ADSs outstanding.
For the full year 2013, based on current market and operating conditions,
Pactera expects:
o Excluding the revenues from our large telecom customer for both 2012 and
2013, net revenues to be at least US$675 million, representing an increase
of at least 17% from the 2012 pro forma revenues of $577 million. Based on
our current visibility, we estimate net revenues with our large telecom
customer to be approximately $48 million to $58 million, which would
result in a total net revenue for the Company to be between $723 million
and $733 million in 2013, compared to $673 million in 2012 on a pro forma
basis. Please refer to Recent Development section of this release for
further discussion.
o Non-GAAP diluted net income per ADS to be in the range of $0.75 to $0.80,
estimated based on 89.5 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 7:00 AM Eastern Standard Time (EST) on Wednesday,
February 27, 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: + 1.855.500.8701
- International Dial-in Number: + 65.6723.9385
- Hong Kong Dial-in Number: + 852.3051.2745
Passcode: 96031141
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 March 6, 2013:
- U.S. Toll Free Dial-in Number: + 1.855.452.5696
- International Dial-in Number: + 61.2.8199.0299
Passcode: 96031141
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. 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 costs, change in fair value of contingent consideration
payable for business acquisition, and compensation expenses related to
acquisition. The non-GAAP income from operations, net income and diluted EPS
for prior periods have been reclassified so that the presentations are
consistent. 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 news release.
PACTERA TECHNOLOGY INTERNATIONAL LIMITED
Condensed Consolidated Balance Sheets (Unaudited)
(US dollars in thousands, except share data)
December 31, 2012 December 31, 2011
ASSETS
Current Assets
Cash and cash 143,714 113,856
equivalents
Restricted cash 6,112 1,222
Term deposits 58,485 21,681
Short-term 1,765 -
investment
Accounts 230,693 61,413
receivable, net
Other current 37,435 7,135
assets
Total current 478,204 205,307
assets
Property, plant
and equipment, 67,607 13,774
net
Goodwill and
intangible 157,962 52,546
assets, net
Other long-term 33,833 1,552
assets
Total assets 737,606 273,179
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current 163,152 51,029
liabilities
Other 32,130 12,260
liabilities
Total 195,282 63,289
liabilities
Total
shareholder's 542,324 209,890
equity
Total
liabilities and 737,606 273,179
equity
- -
- -
Note:
As of December 31,2012, there were 88,312,068 ordinary
shares (88,312,068 ADSs) issued and outstanding.
As of December 31,2011, there were 42,720,067 ordinary
shares (42,720,067 ADSs) issued and outstanding,
Effective on November 9, 2012, the Company adjusted the
ratio of its ADSs to ordinary 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 LIMITED
Condensed Consolidated Statements of Operations (Unaudited)
(US dollars in thousands, except for share, per share data)
Three months ended Year ended December
December 31, 31,
2012 2011 2012 2011
Net revenues 142,202 64,936 359,031 218,989
Cost of revenues (94,589) (41,402) (234,602) (142,427)
Gross profit 47,613 23,534 124,429 76,562
Operating expenses (65,152) (16,832) (123,514) (59,351)
(Loss) Income from (17,539) 6,702 915 17,211
operations
Other income 709 832 3,597 2,905
Net (loss) income before (16,830) 7,534 4,512 20,116
income tax expenses
Income tax benefit 2,359 (459) (1,210) (1,718)
(expenses)
(Loss) income before
earning in equity method (14,471) 7,075 3,302 18,398
investment
Earning in equity method 23 - 23 -
investment
(Loss) income after earning (14,448) 7,075 3,325 18,398
in equity method investment
Add: Net profit
attributable to (69) (278) (735) (497)
noncontrolling interest
Net (loss) income
attributable to
PacteraTechnology (14,517) 6,797 2,590 17,901
International Limited
Net (loss) income per share
Basic (0.22) 0.17 0.05 0.44
Diluted (0.22) 0.16 0.05 0.42
Weighted average shares
used in calculating net
income per common share
Basic 66,234,854 41,021,197 47,547,307 40,596,429
Diluted 66,234,854 42,946,070 49,444,160 42,956,291
Net (loss) income per ADS
Basic (0.22) 0.17 0.05 0.44
Diluted (0.22) 0.16 0.05 0.42
Weighted average ADS used
in calculating net
income per ADS
Basic 66,234,854 41,021,197 47,547,307 40,596,429
Diluted 66,234,854 42,946,070 49,444,160 42,956,291
Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to
ordinary 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 LIMITED
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(US dollars in thousands, except for share, per share data)
Three months Year ended
ended December December 31,
31,
2012 2011 2012 2011
Net (loss) income (14,448) 7,075 3,325 18,398
Other comprehensive income, net of tax:
Change in cumulative foreign exchange 946 1,862 2,460 5,738
translation adjustment
Comprehensive (loss) income (13,502) 8,937 5,785 24,136
Less: Comprehensive income attributable to noncontrolling
interest (69) (295) (742) (547)
Comprehensive income attributable to Pactera
Technology International Limited (13,571) 8,642 5,043 23,589
PACTERA TECHNOLOGY INTERNATIONAL LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in U.S. dollars in thousands)
Three months ended Year ended December
December 31, 31,
2012 2011 2012 2011
Cash flows from operating
activities:
Net (loss) income (14,448) 7,075 3,325 18,398
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
(Reversal) Provision for 4,851 (163) 4,821 477
doubtful accounts
(Gain) loss on disposal of 155 (1) 103 37
property, plant and equipment
Depreciation 2,709 1,317 6,850 4,400
Change in fair value of
foreign-currency forward 43 (67) 20 (28)
contract
Amortization of intangible 2,295 1,044 6,058 2,677
assets
Amortization of land use right 71 - 71 -
Impairment of Intangible 5,515 - 5,515 -
Asssets
Non-cash interest income - - - (34)
Share-based compensation 5,841 1,559 11,064 5,656
expenses
Changes in fair value of (776) 384 (659) 1,824
contingent consideration
Earnings in investment (23) - (23) -
Changes in operating assets and
liabilities:
Accounts receivable 10,523 627 (11,946) (12,405)
Other current assets 757 1,416 (1,374) (2,565)
Other assets 237 (66) (697) 2,170
Accounts payable (938) 1,981 (3,459) 216
Other liabilities 16,478 803 16,656 3,500
Net cash provided by operating 33,290 15,909 36,325 24,323
activities
Cash flows from investing
activities:
Term deposits (7,232) 10,675 (1,908) (21,681)
Sort-term investment (1,764) - (1,764) -
Purchase of property, plant and (2,219) (1,785) (5,600) (7,691)
equipment
Purchase of buliding and land use (9,126) - (15,633) -
right
Restricted cash (2,234) (54) (3,022) (836)
Cash received from merger with 31,717 - 31,717 -
VanceInfo
Deferred and contingent
consideration paid for business (2,321) (2,109) (9,554) (7,716)
acquisitions
Payment on success fee related to - - - (450)
business acquisition
Net cash provided by (used in) 6,821 6,727 (5,764) (38,374)
investing activities
Cash flows from financing
activities:
Repayment of bank loan (1) - (477) (40,000)
Cash received from non-controlling - - - 909
Proceeds from issuance of common
share 589 634 1,988 5,291
under employee option plan
Deferred and contingent
consideration paid for business - (2,150) (3,047) (11,710)
acquisitions
Payment of principal amount under - - - (136)
capital lease obligations
Net cash provided by (used in) 588 (1,516) (1,536) (45,646)
financing activities
Effect of exchange rate changes 528 1,063 833 3,660
Net increase (decrease) in cash and 41,227 22,183 29,858 (56,037)
cash equivalents
Cash and cash equivalents at 102,487 91,673 113,856 169,893
beginning of period
Cash and cash equivalents at end of 143,714 113,856 143,714 113,856
period
PACTERA TECHNOLOGY INTERNATIONAL LIMITED
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
(US dollars in thousands, except per share data and percentages)
Three months ended December 31, Year ended December 31,
2012 2011 2012 2011
GAAP operating (17,539) 6,702 915 17,211
(loss) income
GAAP operating -12.3% 10.3% 0.3% 7.9%
(loss) margin
Adjustments:
- Share-based 5,841 1,559 11,064 5,656
compensation
- Amortization of
acquired 2,295 1,044 6,058 2,677
intangible assets
- Write-down of
trademarks due to 5,515 - 5,515 -
re-branding
- Change in fair
value of
contingent (776) 384 (659) 1,824
consideration
payable for M&A
- Success fee
related to - - - 450
business
acquisition
- Compensation
expenses 87 - 174 -
related to
acquisition
- Merger related 19,827 - 22,215 -
costs
- Land use right
amortization 71 - 71 -
expense
Non-GAAP operating 15,321 9,689 45,353 27,818
income
Non-GAAP operating 10.8% 14.9% 12.6% 12.7%
margin
GAAP net (loss) (14,517) 6,797 2,590 17,901
income
GAAP net (loss) -10.2% 10.5% 0.7% 8.2%
margin
Adjustments:
- Share-based 5,841 1,559 11,064 5,656
compensation
- Write-down of
trademarks due to 2,295 1,044 6,058 2,677
re-branding
- Write down of 5,515 - 5,515 -
intangible assets
- Change in fair
value of
contingent (776) 384 (659) 1,824
consideration
payable for M&A
- Success fee
related to - - - 450
business
acquisition
- Compensation
expenses 87 - 174 -
related to
acquisition
- Merger related
costs, net of tax 17,837 - 20,225 -
effect
- Land use right
amortization 71 - 71 -
expense
Non-GAAP net 16,353 9,784 45,038 28,508
income
Non-GAAP net 11.5% 15.1% 12.5% 13.0%
margin
Non-GAAP net
income per ADS
Basic 0.25 0.24 0.95 0.70
Diluted 0.24 0.23 0.91 0.66
Weighted average
ADS used in
calculating
Non-GAAP net
income per ADS
Basic 66,234,854 41,021,197 47,547,307 40,596,429
Diluted 68,514,064 42,946,070 49,444,160 42,956,291
GAAP net (loss)
income per ADS
Basic (0.22) 0.17 0.05 0.44
Adjustments:
- Share-based 0.09 0.04 0.23 0.14
compensation
- Amortization of
acquired 0.04 0.02 0.13 0.07
intangible assets
- Write-down of
trademarks due to 0.08 - 0.12 -
re-branding
- Change in fair
value of
contingent (0.01) 0.01 (0.01) 0.04
consideration
payable for M&A
- Success fee
related to - - - 0.01
business
acquisition
- Compensation
expenses - - - -
related to
acquisition
- Merger related
costs, net of tax 0.27 - 0.43 -
effect
- Land use right - - - -
Non-GAAP net
income per ADS
Basic 0.25 0.24 0.95 0.70
GAAP net (loss)
income per ADS
Diluted (0.22) 0.16 0.05 0.42
Adjustments:
- Share-based 0.09 0.04 0.22 0.13
compensation
- Amortization of
acquired 0.03 0.02 0.13 0.06
intangible assets
- Write-down of
trademarks due to 0.08 - 0.11 -
re-branding
- Change in fair
value of
contingent (0.01) 0.01 (0.01) 0.04
consideration
payable for M&A
- Success fee
related to - - - 0.01
business
acquisition
- Compensation
expenses - - - -
related to
acquisition
- Merger related
costs, net of tax 0.27 - 0.41 -
effect
- Land use right - - - -
Non-GAAP net
income per ADS
Diluted 0.24 0.23 0.91 0.66
Effective on November 9, 2012, the Company adjusted the ratio of its ADSs
to ordinary 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 Unaudited historical Unaudited historical Unaudited historical
consolidated net revenues consolidated net revenues Unaudited Pro forma consolidated net revenues consolidated net revenues Unaudited Pro forma
of Pactera for the three of VanceInfo for the consolidated net revenues of the former HiSoft for of VanceInfo for the consolidated net revenues
months ended December 31, period from October 1, for the three months the three months ended three months ended for the three months
2012 2012 to November 8, ended December 31, 2012 December 31, 2011 December 31, 2011 ended December 31, 2011
2012
Proforma
Net
Revenue
by
Service
Lines
IT 87,738 22,695 110,433 39,700 43,236 82,936
Services
- CPS 31,849 4,415 36,264 13,640 15,599 29,239
- ADM 55,889 18,280 74,169 26,060 27,637 53,697
R&D 54,464 14,447 68,911 25,236 43,952 69,188
Services
Total 142,202 37,142 179,344 64,936 87,188 152,124
Proforma
Net
Revenue
by
Industry
High Tech 56,463 12,603 69,066 28,941 30,590 59,531
BFSI 39,894 7,541 47,435 18,849 13,375 32,224
Telecom 23,858 11,316 35,174 4,769 31,930 36,699
Others 21,987 5,682 27,669 12,377 11,293 23,670
Total 142,202 37,142 179,344 64,936 87,188 152,124
Proforma Net Revenue by Location of
Client's Headquarter
United 55,361 11,903 67,264 30,324 31,388 61,712
States
Europe 10,262 3,459 13,721 4,851 10,986 15,837
Japan 16,615 1,996 18,611 13,323 2,877 16,200
Greater 53,848 18,141 71,989 13,197 40,542 53,739
China
Asia 6,116 1,643 7,759 3,241 1,395 4,636
South
Total 142,202 37,142 179,344 64,936 87,188 152,124
Note:
The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared
based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. 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 December 31, 2012, it combined the unaudited historical consolidated net revenues of Pactera for the three
months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, 2012 (period
prior to the consummation of the merger). The unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 combine the
unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2012 and the unaudited historical consolidated net
revenues of VanceInfo for the period from November 9, 2012 to December 31, 2012.
Unaudited historical Unaudited historical Unaudited historical Unaudited historical
consolidated net consolidated net revenues Unaudited Pro forma consolidated net revenues consolidated net revenues Unaudited Pro forma
revenues of of VanceInfo for the consolidated net revenues of the former HiSoft for of VanceInfo for the consolidated net revenues
Pactera for the year period from January 1, for the year ended the year ended December year ended December 31, for the year ended
December 31, 2012 2012 to November 8, December 31, 2012 31, 2011 2011 December 31, 2011
2012
Proforma
Net
Revenue
by
Service
Lines
IT 214,858 166,618 381,476 126,105 134,575 260,680
Services
- CPS 79,605 38,604 118,209 37,567 47,784 85,351
- ADM 135,253 128,014 263,267 88,538 86,791 175,329
R&D 144,173 147,617 291,790 92,884 148,562 241,446
Services
Total 359,031 314,235 673,266 218,989 283,137 502,126
Proforma
Net
Revenue
by
Industry
High Tech 153,099 106,418 259,517 105,447 95,390 200,837
BFSI 102,328 55,264 157,592 60,893 35,993 96,886
Telecom 41,366 110,630 151,996 14,653 112,783 127,436
Others 62,238 41,923 104,161 37,996 38,971 76,967
Total 359,031 314,235 673,266 218,989 283,137 502,126
Proforma Net Revenue by
Location of Client's
Headquarter
United 154,969 106,101 261,070 107,925 95,317 203,242
States
Europe 24,375 32,353 56,728 18,793 42,438 61,231
Japan 58,010 14,040 72,050 40,724 9,443 50,167
Greater 104,222 153,259 257,481 39,410 132,642 172,052
China
Asia 17,455 8,482 25,937 12,137 3,297 15,434
South
Total 359,031 314,235 673,266 218,989 283,137 502,126
Note:
The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared
based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. 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 December 31, 2012, it combined the unaudited historical consolidated net revenues of Pactera for the
three months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, 2012
(period prior to the consummation of the merger). The unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012
combine the unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2012 and the unaudited historical
consolidated net revenues of VanceInfo for the period from November 9, 2012 to December 31, 2012.
For further information, please contact:
Sheryl Zhang
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-8282-5330
E-mail: ir@pactera.com
------------------------------------------------------------------------------
SOURCE Pactera Technology International Ltd.
Website: http://ir.pactera.com
Website: http://www.pactera.com
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