Camelot Information Systems Inc. Announces Unaudited First-Quarter 2013 Financial Results

   Camelot Information Systems Inc. Announces Unaudited First-Quarter 2013
                              Financial Results

PR Newswire

BEIJING, June 10, 2013

BEIJING, June 10, 2013 /PRNewswire/ --Camelot Information Systems Inc.
("Camelot" or the "Company") (NYSE: CIS), a leading domestic provider of
enterprise application services and financial industry IT services in China,
today announced unaudited financial results for the first quarter ended March
31, 2013.

First-Quarter Financial and Operating Highlights:

  oNet revenues were $59.6 million in the first quarter of 2013, as compared
    to $57.1 million in the same period in 2012
  oNet revenues from enterprise application services (EAS) were $36.5
    million, as compared to $39.3 million in the same period in 2012
  oNet revenues from financial industry IT services (FIS) were $23.1 million,
    a 29.9% increase year-over-year due to strong demand and solid execution
  oGross profit was $11.8 million, as compared to $12.7 million in the same
    period in 2012
  oLoss from operations was $3.8 million, as compared to a loss from
    operations of $1.6 million in the same period in 2012. Adjusted operating
    loss[1] was $2.8 million, as compared to adjusted operating income of $0.6
    million in the same period in 2012
  oNet loss attributable to Camelot was $4.3 million, as compared to a net
    loss attributable to Camelot of $0.8 million in the same period in 2012.
    Adjusted net loss attributable to Camelot^1 was $3.3 million, as compared
    to adjusted net income attributable to Camelot of $1.4 million in the same
    period in 2012

"Camelot achieved modest revenue growth in the first quarter of 2013, despite
slower customer contract activities with large State-owned customers. Our FIS
segment is running at full capacity and delivered strong growth as compared to
the first quarter of last year. EAS has higher exposure to these large
customers and reported lower revenues and margins," commented Mr. Simon Ma,
Camelot's Chairman and Chief Executive Officer. "We believe our business
remains fundamentally solid, although our customer activity remains slow, and
we are monitoring the contract activity of our large customers."

First-Quarter 2013 Financial Results

Net revenues for the quarter ended March 31, 2013 increased 4.4% to $59.6
million from $57.1 million in the same period in 2012.

Net Revenues by Segment (in thousands, except percentage)
Segment                                Three Months Ended  Three Months Ended
                                       March 31, 2013      March 31, 2012
Enterprise application services (EAS)  $36,496    61.2%    $39,308    68.8%
Financial industry IT services (FIS)   23,138     38.8%    17,815     31.2%
Total net revenues                     $59,634    100.0%   $57,123    100.0%

EAS net revenues decreased 7.2% year-over-year to $36.5 million in the
quarter. The revenue decrease was primarily due to slower order activity among
large customers, primarily State-owned companies. EAS net revenues amounted to
61.2% of total net revenues in the quarter. FIS net revenues increased 29.9%
year-over-year to $23.1 million. FIS net revenues accounted for 38.8% of the
quarter's total net revenues.

Cost of revenues increased 7.7% to $47.9 million from $44.4 million in the
same period in 2012. Adjusted cost of revenues increased 7.8% to $47.8
million from $44.4 million in the same period in 2012. Adjusted cost of
revenues excludes $22,000 of share-based compensation expense and $16,000 of
acquisition-related intangible expense.

Gross profit decreased 7.3% to $11.8 million from $12.7 million in the same
period in 2012. Adjusted gross profit decreased 7.4% to $11.8 million from
$12.8 million in the same period in 2012. The gross margin was 19.7% in the
quarter, as compared to 22.2% in the same period in 2012. The adjusted gross
margin was 19.8% in the quarter, as compared to 22.3% in the same period in
2012. Gross margins declined year over year due to lower utilization in the
EAS segment.

Operating expenses were $15.7 million in the quarter, as compared to $14.3
million in the same period in 2012. Adjusted operating expenses were $14.7
million, as compared to $12.1 million in the same period in 2012. Operating
expenses increased year-over-year primarily due to higher general and
administrative expense from management initiatives to centralize budgeting and
contract issuance and monitoring. Adjusted operating expenses exclude
$630,000 of share-based compensation expense and $357,000 of
acquisition-related intangible expense.

Operating loss was $3.8 million, as compared to an operating loss of $1.6
million in the same period in 2012. Adjusted operating loss was $2.8 million,
as compared to adjusted operating income of $0.6 million in the same period in
2012.

Net loss attributable to Camelot in the first quarter of 2013 was $4.3
million, as compared to a net loss attributable to Camelot of $0.8 million in
the same period in 2012. Adjusted net loss attributable to Camelot for the
first quarter of 2013 was $3.3 million, as compared to adjusted net income
attributable to Camelot of $1.4 million in the same period in 2012.

Balance Sheet and Cash Flow

As of March 31, 2013, the Company had $74.3 million in cash, cash equivalents,
and term deposits, as compared to $95.5 million in cash, cash equivalents,
short-term investments, and term deposits, as of December 31, 2012. The
decrease was mainly due to a $4.3 million net loss, a $9.7 million increase in
accounts receivable, and a $6.9 million decrease in other current liabilities.

Days' sales outstanding[2] ("DSO") were 192 days in the first quarter of 2013,
an increase of 12 days from 180 days in the prior quarter.

Employees

The Company's headcount increased to 6,097 as of March 31, 2013, which
included 5,314 information technology (IT) professionals, versus 6,085 total
employees and 5,343 IT professionals at the end of the fourth quarter. Of the
IT professionals, EAS employee headcount numbered 2,180, and FIS employee
headcount numbered 3,134.

Agreement with Original Tansun Shareholders

As disclosed in our annual report on Form 20-F for the year ended December 31,
2012, in September 2012, the Company and the original selling shareholders of
Tansun (who are current employees of the Camelot Group) signed an agreement
requiring an upcoming negotiation with respect to a performance-based
incentive plan for these employees. In accordance with the agreement, the
Company paid U.S. $2.4 million (RMB 15 million) to the relevant employees as a
temporary deposit to demonstrate a good-faith gesture with regard to the
upcoming negotiations. The deposit is scheduled to be returned upon the
earlier of: (1) the achievement of three negotiation milestones as stipulated
in the agreement, in three equal payments; and (2) by May 31, 2013
unconditionally. In November 2012, both parties mutually agreed that the first
milestone had been reached, and thus, one third (U.S. $0.8 million or RMB 5
million) of the deposit was returned to the Company. The remaining balance of
U.S. $1.6 million (RMB 10 million) was included under Other Current Assets, as
of December 31, 2012. As of the date of this release, the negotiations have
not yet been completed. The Company has agreed to extend the return date of
the remaining balance of the deposit to October 2013, and therefore, the
balance of the deposit is still included under Other Current Assets, as of
March 31, 2013.

Business Outlook

Second Quarter of 2013

Camelot expects net revenues in the second quarter of 2013 of approximately
$62 million, roughly flat with the same period in 2012.

In addition, Camelot expects an adjusted net income attributable to Camelot of
approximately $1.0 million in the second quarter of 2013.

Full-Year 2013

For full-year 2013, Camelot expects net revenues of approximately $260
million, representing a 2.3% increase from the prior year.

Camelot also expects full-year 2013 adjusted net income attributable to
Camelot of approximately $5.0 million, representing a 14.4% decrease from the
prior year.

Conference Call Information

Camelot senior management will host a conference call at 8:00 a.m. (U.S.
Eastern Daylight Time) / 5:00 a.m. (U.S. Pacific Daylight Time) / 8:00 p.m.
(Beijing / Hong Kong time) on Monday, June 10, 2013 to discuss the Company's
first-quarter 2013 financial results.

The conference call may be accessed by calling:
US Toll free:                          (866) 318-8616
US Toll / International:               (617) 399-5135
Hong Kong toll free:                   800.96.3844
HK Toll:                               852.3002.1672
UK toll free:                          08082347616
UK toll:                               44.207.365.8426
South China toll free / China Telecom: 10 800 130 1713
North China toll free / China Netcom:  10 800 713 1756
China toll:                            86 4008811630
Taiwan toll free:                      0809090400

Passcode: 74025977

Please dial in approximately 10 minutes before the scheduled time of the call.

A replay of the conference call may be accessed by phone at the following
numbers until 11:59 p.m. Central China Time on June 17, 2013:

US Toll free:            (888) 286-8010
US Toll / International: (617) 801-6888

Passcode: 49290262

A live webcast of the conference call and recording of the conference call
will be available on the investor relations page of Camelot's website at
www.camelotchina.com.

USE OF NON-GAAP FINANCIAL MEASURES

To supplement the unaudited consolidated financial statements presented in
accordance with U.S. GAAP, Camelot uses the non-GAAP ("adjusted") financial
measures of gross profit and margin, operating expenses, operating income and
margin, net income attributable to Camelot Information Systems Inc. and
margin, and diluted earnings per share and diluted earnings per ADS, which are
adjusted from results based on U.S. GAAP to exclude impairment of intangible
assets, impairment of goodwill, share-based compensation, acquisition-related
intangible amortization, and changes in fair value of contingent
consideration. The non-GAAP financial measures are provided as additional
information to help our investors compare business trends among different
reporting periods on a consistent basis and to enhance investors' overall
understanding of our current financial performance and prospects for the
future. The non-GAAP financial measures should be considered in addition to
results prepared in accordance with U.S. GAAP, but should not be considered a
substitute for or superior to U.S. GAAP results. In addition, our calculation
of the non-GAAP financial measures may differ from the calculations used by
other companies, and therefore comparability may be limited.

STATEMENT REGARDING UNAUDITED FINANCIAL INFORMATION

The unaudited financial information set forth above is subject to adjustments
that may be identified when audit work is performed on the Company's year-end
financial statements, which could result in significant differences from this
unaudited financial information.

ABOUT CAMELOT INFORMATION SYSTEMS INC.

Camelot is a leading domestic provider of enterprise application services and
financial industry information technology ("IT") services in China, focusing
on the high end of the IT value chain. The Company is the largest domestic
provider of SAP-based Enterprise Resource Planning services in China as
measured by 2010 revenue and by the number of SAP consultants as of December
31, 2010. Camelot also ranked as number-one in the banking testing market in
2010, according to IDC. Camelot also operates in other areas of the Asia
Pacific region, including Taiwan and Japan. The Company provides services to a
wide range of industries, including financial services, resources and energy,
manufacturing and automobile, technology, as well as telecommunication, media
and education.

SAFE HARBOR

This press release contains statements that may constitute "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and 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 involve a number of risks and uncertainties
that could cause actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by these forward-looking statements. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the following: the
Company's growth strategies, the Company's ability to attract and retain
skilled professionals, the market of IT services in China, the wages of IT
professionals, the Company's ability to serve, retain, and attract customers.
Further information regarding these and other risks is included in Camelot's
filings with the U.S. Securities and Exchange Commission, including its annual
report on Form 20-F. Camelot 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.

-financial tables follow -



CAMELOT INFORMATION SYSTEMS INC.

Condensed Consolidated Balance Sheets (Unaudited)

(U.S. Dollars in Thousands, Except per Share Data)


                                           March 31,          December 31,
                                           2013               2012
Assets
Current assets
Cash and cash equivalents                  $74,152            $93,876
Term deposits                              109                313
Restricted cash                            1,079              1,137
Short-term investments                     -                  1,284
Billed accounts receivable                 42,210             45,279
Unbilled accounts receivable               117,992            105,240
Other current assets                       24,595             23,395
Total current assets                       260,137            270,524
Property and equipment, net                4,232              4,393
Intangible assets                          11,401             11,949
Long term investment                       704                -
Other long-term assets                     1,954              2,062
Total assets                               278,428            288,928
Liabilities and equity
Current liabilities
Consideration payable in connection with   3,001              2,992
business acquisition
Other current liabilities                  73,025             79,877
Total current liabilities                  76,026             82,869
Other non-current liabilities              2,588              2,786
Total liabilities                          78,614             85,655
Equity ^(a)                                199,814            203,273
Total liabilities and equity               $278,428           $288,928
Note:
(a) As of March 31, 2013, there were 190,926,475 ordinary shares issued and
185,069,020 shares outstanding.





CAMELOT INFORMATION SYSTEMS INC.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(U.S. Dollars in Thousands, Except per Share Data)


                                                      Three Months
                                                      Ended March 31,
                                                      2013         2012
Net revenues                                          $59,634      $57,123
Cost of revenues^(1)(2)                               (47,868)     (44,429)
Gross profit                                          11,766       12,694
Selling and marketing^(1)(2)                          (3,480)      (4,609)
General and administrative^(1)(2)                     (9,593)      (7,984)
Research and development costs                        (2,659)      (1,667)
Changes in fair value of contingent consideration for -            (47)
acquisition
Total operating expense                               (15,732)     (14,307)
Government subsidies                                  133          -
Loss from operations                                  (3,833)      (1,613)
Interest expense                                      (15)         (92)
Interest income                                       213          349
Loss before provisions for income tax                 (3,635)      (1,356)
Income tax (expense) benefit                          (650)        293
Net loss of an equity investment, net of tax          (3)          -
Net Loss                                              (4,288)      (1,063)
Noncontrolling interest                               1            225
Net Loss attributable to Camelot Information Systems  ($4,287)     ($838)
Inc.^(3)
Earnings per share
Basic-ordinary shares                                 ($0.02)      $0.00
Diluted-ordinary shares                               ($0.02)      $0.00
Earnings per ADS
Basic-ADSs                                            ($0.09)      ($0.02)
Diluted-ADSs                                          ($0.09)      ($0.02)
Weighted average shares outstanding
Basic-ordinary shares                                 185,069,020  177,621,367
Diluted-ordinary shares                               185,069,020  177,621,367
Weighted average ADSs outstanding
Basic-ADSs                                            46,267,255   44,405,342
Diluted-ADSs                                          46,267,255   44,405,342
Net Loss                                              (4,288)      (1,063)
Other comprehensive income, net of tax:
 Change in cumulative foreign currency            171          68
translation adjustments
Comprehensive loss                                    ($4,117)     ($995)
Less: comprehensive income attributable to the        (5)          217
noncontrolling interest
Comprehensive loss attributable to Camelot            ($4,122)     ($778)
Information Systems Inc.

(1) Includes the following amounts of share-based compensation expenses for
the periods indicated:

                                        Three Months Ended
                                        March 31,
                                        2013      2013
Cost of revenues                        $22       $24
Selling and marketing                   122       1,087
General and administrative              508       498
Total share-based compensation expenses $652      $1,609

(2) Includes the following amounts of amortization expense related to
intangible assets acquired for business combination for the periods indicated

                                                           Three Months Ended
                                                           March 31,
                                                           2013        2012
Cost of revenues                                           $16         $32
Selling and marketing                                      285         481
General and administrative                                 72          71
Total acquisition-related intangible amortization expenses $373        $584

(3) The following table sets forth the reconciliation of our adjusted net loss
attributable to Camelot Information Systems Inc. to the U.S. GAAP net loss
attributable to Camelot Information Systems Inc.:

                                                            Three Months Ended
                                                            March 31,
                                                            2013        2012
Net loss attributable to Camelot Information Systems Inc.   ($4,287)    ($838)
(U.S. GAAP)
Share-based compensation                                    652         1,609
Acquisition-related intangible amortization                 373         584
Changes in fair value of contingent consideration           -           47
Total adjusted amounts                                      1,025       2,240
Adjusted net (loss) income attributable to Camelot          ($3,262)    $1,402
Information Systems Inc.



CAMELOT INFORMATION SYSTEMS INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(U.S. Dollars in Thousands)


                                                           Three-Month Periods
                                                           Ended March 31,
                                                           2013       2012
Cash flow from operating activities:
Net Loss                                                  ($4,288)   ($1,063)
Adjustments to reconcile net loss to net cash used in
operating activities:
 Depreciation of property and equipment                 241        265
 Amortization of intangible assets                      559        690
 Deferred income taxes                                  555        482
 Provision for account receivable                       (199)      (429)
 Share-based compensation                               652        1,609
 Gains on disposal of property and equipment            25         18
 Change in fair value of contingent consideration for   -          47
acquisition
 Net loss of an equity investment, net of tax           3          -
Changes in operating assets and liabilities:
 Accounts receivable                                   (9,146)    (7,663)
 Other assets                                          (1,724)    (645)
 Accounts payable                                      (3,311)    (2,686)
 Other liabilities                                     (3,407)    (6,993)
Net cash used in operating activities                      (20,040)   (16,368)
Cash flow from investing activities:
 Purchase of term deposits                              (67)       (733)
 Maturity of term deposits                              278        10,768
 Deposit of restricted cash                             40         3,558
 Maturity of short term investment                      1,286      -
 Proceeds from disposal of property and equipment       9          4
 Purchase of property and equipment                     (88)       (141)
 Purchase of intangible assets and other assets         -          (56)
 Purchase of businesses, net of cash acquired           -          (3,500)
 Capital injection into a joint venture                 (708)      -
Net cash provided by investing activities                  750        9,900
Cash flow from financing activities:
 Proceeds from bank borrowing                           282        2,544
 Repayment of bank borrowing                            (624)      (7,505)
 Payment of contingent consideration for an acquisition -          (1,949)
Net cash used in financing activities                      (342)      (6,910)
Effect of foreign exchange rate changes                    (92)       31
Net decrease in cash and cash equivalents                  (19,724)   (13,347)
Cash and cash equivalents, beginning of period             93,876     57,128
Cash and cash equivalents, end of period                   74,152     43,781



CAMELOT INFORMATION SYSTEMS INC.

Reconciliations of Adjusted Financial Measures to Comparable GAAP Measures
(Unaudited)

(US Dollars in Thousands, Except per Share Data and Percentage)


             Three Months Ended                     Three Months Ended
             March 31, 2013                         March 31, 2012
             GAAP     Adjustments         Adjusted  GAAP     Adjustments     Adjusted
Cost of      $47,868  ($38)       (a)     $47,830   $44,429  ($56)       (a) $44,373
revenues
Gross profit 11,766   38          (a)     11,804    12,694   56          (a) 12,750
Operating    15,732   (987)       (a)     14,745    14,307   (2,184)     (a) 12,123
expenses
Operating    (3,833)  1,025       (a)     (2,808)   (1,613)  2,240       (a) 627
income(loss)
Net          (4,287)  1,025       (a)(d)  (3,262)   (838)    2,240       (a) 1,402
income(loss)
Net gross    19.7%    0.1%        (b)     19.8%     22.2%    0.1%        (b) 22.3%
margin
Net
operating    (6.4%)   1.7%        (a)     (4.7%)    (2.8%)   3.9%        (a) 1.1%
margin
Net margin   (7.2%)   1.7%        (a)     (5.5%)    (1.5%)   3.9%        (a) 2.4%
Diluted EPS  ($0.02)  $0.00       (c)     ($0.02)   $0.00    $0.01       (c) $0.01
Diluted      ($0.09)  $0.02       (c)     ($0.07)   ($0.02)  $0.05       (c) $0.03
EPADS
Notes:
(a) The non-GAAP adjustments include share-based compensation expenses, amortization
expense related to intangible assets acquired for business acquisition, changes in
fair value of contingent consideration and impairment of goodwill and intangible
assets, where were presented in the notes (1) and (2) below Condensed Consolidated
Statements of Operations (Unaudited) for the reconciliation process



(b) Adjustments to exclude acquisition-related intangible assets amortization expense
and share-based compensation recorded in cost of sales, $38 and $56 for the
three-month period ended March 31, 2013 and 2012.



(c) Adjusted diluted EPS is computed by dividing adjusted net income attributable to
Camelot Information Systems Inc. by the weighted average number of diluted ordinary
shares outstanding used in computing the GAAP diluted EPS for the respective periods.



(d) Net income refers to net income attributable to Camelot.



[1] For more information about the adjusted (i.e. non-GAAP) financial
measures contained in this press release, please see "Use of Non-GAAP
Financial Measures" below.

[2] Calculated by dividing average accounts receivable, net of deferred
revenue, by rolling gross revenues before business tax and related surcharges,
and multiplying by 360 days. Rolling gross revenues are for the 12 months
ended March 31, 2013.

Company Contacts:                         Investor Relations Contacts:

Camelot Information Systems Inc.          CCG Investor Relations

Mr. Franklin King, Interim Chief          Mr. Crocker Coulson, President
Financial Officer
                                          Tel: +1 (646) 213-1915
Tel: +86 (10) 6441 9980 ext. 8120
                                          E-mail: crocker.coulson@ccgir.com
E-mail: investors@camelotchina.com
                                          

                                          Mr. John Harmon, CFA, Sr. Acct. Mgr.
Ms. Jojo Guo, Investor Relations Manager
                                          Tel: +86 (10) 8573 1014 (Beijing)
Tel: +1 (646) 371-6533
                                          E-mail: john.harmon@ccgir.com
E-mail: investors@camelotchina.com

SOURCE Camelot Information Systems Inc.

Website: http://www.camelotchina.com
 
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