Camelot Information Systems Inc. Announces Unaudited Second Quarter 2013 Financial Results

   Camelot Information Systems Inc. Announces Unaudited Second Quarter 2013
                              Financial Results

PR Newswire

BEIJING, Aug. 22, 2013

BEIJING, Aug. 22, 2013 /PRNewswire/ -- Camelot Information Systems Inc. (NYSE:
CIS), a leading domestic provider of enterprise application services and
financial industry IT services in China ("Camelot" or the "Company"), today
announced unaudited financial results for the second quarter ended June 30,
2013.

Second-Quarter Financial and Operating Highlights:

  oNet revenues were $62.5 million in the second quarter of 2013, as compared
    to $62.1 million in the same period in 2012.
  oNet revenues from enterprise application services (EAS) were $42.1
    million, as compared to $41.2 million in the same period in 2012.
  oNet revenues from financial industry IT services (FIS) were $20.4 million,
    as compared to $20.9 million in the same period in 2012.
  oGross profit was $12.2 million, as compared to $16.2 million in the same
    period in 2012.
  oLoss from operations was $5.4 million, as compared to income from
    operations of $3.5 million in the same period in 2012. Adjusted operating
    loss^1 was $4.4 million, as compared to adjusted operating income of $4.5
    million in the same period in 2012.
  oNet loss attributable to Camelot was $8.5 million, as compared to net
    income attributable to Camelot of $2.4 million in the same period in 2012.
    Adjusted net loss attributable to Camelot^1 was $7.5 million, as compared
    to adjusted net income attributable to Camelot of $3.5 million in the same
    period in 2012.

[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. 

"We managed to maintain our revenues in the second quarter of 2013 comparable
with the same period last year in a challenging business environment, and our
top-line performance met our expectations. At this point in 2013, we continue
to experience slow economic growth and a higher rate of annual wage
increases," commented Mr. Simon Ma, Camelot's Chairman and Chief Executive
Officer. "Throughout the remainder of this year, we will continue to build our
new FIS subsidiary, improve the effectiveness of our organization, and invest
in new product categories such as solutions."

Second-Quarter 2013 Financial Results

Net revenues in the quarter ended June 30, 2013 increased 0.6% to $62.5
million from $62.1 million in the same period in 2012.

Net Revenues by Segment (in thousands, except percentage)
Segment                                Three Months Ended  Three Months Ended
                                       June 30, 2013       June 30, 2012
Enterprise application services (EAS)  $42,105    67.4%    $41,213    66.4%
Financial industry IT services (FIS)   20,358     32.6%    20,873     33.6%
Total net revenues                     $62,463    100.0%   $62,086    100.0%

EAS net revenues increased 2.2% year-over-year to $42.1 million in the
quarter. EAS net revenues amounted to 67.4% of total net revenues in the
quarter. FIS net revenues decreased 2.5% year-over-year to $20.4 million. FIS
net revenues accounted for 32.6% of the quarter's total net revenues.

Cost of revenues increased 9.6% to $50.3 million from $45.9 million in the
same period in 2012. Adjusted cost of revenues increased 9.7% to $50.3 million
from $45.8 million in the same period in 2012. Adjusted cost of revenues
excludes $22,000 of share-based compensation expense and $16,000 of
amortization expense for acquisition-related intangible assets.

Gross profit decreased 24.9% to $12.2 million from $16.2 million in the same
period in 2012. Adjusted gross profit decreased 24.9% to $12.2 million from
$16.3 million in the same period in 2012. The gross margin was 19.5% in the
quarter, as compared to 26.1% in the same period in 2012. The adjusted gross
margin was 19.6% in the quarter, as compared to 26.2% in the same period in
2012.

Operating expenses were $17.6 million in the quarter, as compared to $12.7
million in the same period in 2012. Adjusted operating expenses were $16.7
million, as compared to $11.7 million in the same period in 2012. Operating
expenses increased year-over-year primarily due to higher general and
administrative expenses primarily attributable to management initiatives to
centralize budgeting and contract issuance and monitoring, and from higher
research and development expenses due to headcount increases. Adjusted
operating expenses exclude $631,000 of share-based compensation expense and
$297,000 of amortization expense for acquisition-related intangible assets.

Operating loss was $5.4 million, as compared to operating income of $3.5
million in the same period in 2012. Adjusted operating loss was $4.4 million,
as compared to adjusted operating income of $4.5 million in the same period in
2012.

Income tax expense was $3.2 million, as compared to $758,000 in the year-ago
period, representing a tax rate of negative 60.4%.

Net loss attributable to Camelot in the second quarter of 2013 was $8.5
million, as compared to net income attributable to Camelot of $2.4 million in
the same period in 2012. Adjusted net loss attributable to Camelot for the
second quarter of 2013 was $7.5 million, as compared to adjusted net income
attributable to Camelot of $3.5 million in the same period in 2012.

Six-Month 2013 Financial Results

In the first six months of 2013, net revenues increased 2.4% to $122.1 million
from $119.2 million in the first six months of 2012. Revenues in the EAS
business were $78.6 million, a decrease of 2.4% from $80.5 million in the same
period of 2012. Revenues in the FIS business line were $43.5 million, an
increase of 12.4% from $38.7 million the same period of 2012. Gross profit was
$23.9 million, as compared to $28.9 million in the same period of 2012. The
gross margin was 19.6%, as compared to 24.3% in the same period of 2012. The
adjusted gross margin was 19.7%, as compared to 24.4% in the same period of
2012.

Operating loss was $9.2 million in the first six months of 2013, as compared
to operating income of $1.9 million in the same period of 2012. The operating
margin was negative 7.6%, as compared to positive 1.6% in the same period of
2012. Adjusted operating loss was $7.3 million, as compared to operating
income of $5.2 million in the same period of 2012. The non-GAAP operating
margin was negative 6.0%, as compared to positive 4.3% in the same period of
2012.

Income tax expense was $3.9 million, as compared to $465,000 in the same
period of 2012.

Net loss attributable to Camelot was $12.7 million in the first six months of
2013, as compared to net income of $1.6 million in the same period of 2012, or
a loss of $0.28 per diluted ADS as compared to net income of $0.03 per ADS in
the same period of 2012. Adjusted net loss attributable to Camelot was $10.8
million, or $0.23 per ADS in the first six months of 2013, as compared to
adjusted net income of $4.9 million, or $0.10 per ADS in the same period of
2012.

Balance Sheet and Cash Flow

As of June 30, 2013, the Company had $63.1 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 primarily due to a $12.8 million net loss, a $19.1 million
increase in accounts receivable, and a $3.0 million payment of contingent
consideration for an acquisition, offset by $3.3 million received from bank
borrowing.

Days' sales outstanding^2 ("DSO") were 211 days in the second quarter of 2013,
an increase of six days from 205 days in the same period of 2012.

[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.

Employees

The Company's headcount increased to 6,198 as of June 30, 2013, which included
5,408 information technology (IT) professionals, as compared to 6,097 total
employees and 5,314 IT professionals at the end of the first quarter. Of the
IT professionals, EAS employee headcount numbered 2,224, and FIS employee
headcount numbered 3,184.

Business Outlook

Third Quarter of 2013

Camelot expects net revenues in the third quarter of 2013 of approximately $65
million, representing a 4.7% increase from revenues of $62.1 million in the
third quarter of 2012.

In addition, the Company expects adjusted net income attributable to Camelot
of approximately $2 million in the third 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.

The Company now expects a full-year 2013 adjusted net loss attributable to
Camelot of approximately $4.0 million, as compared to adjusted net income of
$6.2 million in 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 Thursday, August 22, 2013 to discuss the
Company's second-quarter 2013 financial results.

The conference call may be accessed by calling:

US Toll free:                          (877) 415-3183
US Toll / International:               (857) 244-7326
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: 56453421

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 August 29, 2013:

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

Passcode: 70295289

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, amortization expense
for acquisition-related intangible assets, 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 its 2010 revenues and the number of SAP consultants as of December
31, 2010, according to International Data Corporation ("IDC"). IDC also ranked
Camelot the number-one service provider in the banking testing market in 2010.
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
automobiles, technology, as well as telecommunications, 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)
                                            June 30,          December 31,
                                            2013              2012
Assets
Current assets
Cash and cash equivalents                   $63,112           $93,876
Term deposits                               -                 313
Restricted cash                             970               1,137
Short-term investments                      -                 1,284
Billed accounts receivable                  49,298            45,279
Unbilled accounts receivable                123,447           105,240
Other current assets                        25,901            23,395
Total current assets                        262,728           270,524
Property and equipment, net                 4,245             4,393
Intangible assets                           11,012            11,949
Long term investment                        707               -
Other long-term assets                      2,005             2,062
Total assets                                280,697           288,928
Liabilities and equity
Current liabilities
Consideration payable in connection with    -                 2,992
business acquisition
Other current liabilities                   84,392            79,877
Total current liabilities                   84,392            82,869
Other non-current liabilities               2,416             2,786
Total liabilities                           86,808            85,655
Equity ^(a)                                 193,889           203,273
Total liabilities and equity                280,697           288,928
Note:
(a) As of June 30, 2013, there were 190,926,475 ordinary shares issued and
185,269,020 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              Six Months
                           Ended June 30,            Ended June 30,
                           2013         2012         2013         2012
Net revenues               $62,463      $62,086      $122,097     $119,209
Cost of revenues^(1)(2)    (50,290)     (45,869)     (98,158)     (90,298)
Gross profit               12,173       16,217       23,939       28,911
Selling and                (3,223)      (3,493)      (6,703)      (8,102)
marketing^(1)(2)
General and                (11,733)     (7,401)      (21,326)     (15,385)
administrative^(1)(2)
Research and development   (2,631)      (1,797)      (5,290)      (3,464)
costs
Changes in fair value of
contingent consideration
for                        –            (50)         –            (97)

acquisition
Total operating expense    (17,587)     (12,741)     (33,319)     (27,048)
Government subsidies       –            –            133          –
(Loss) income from         (5,414)      3,476        (9,247)      1,863
operations
Interest expense           (33)         (54)         (48)         (146)
Interest income            122          210          335          559
(Loss) income before       (5,325)      3,632        (8,960)      2,276
provisions for income tax
Income tax expense         (3,218)      (758)        (3,868)      (465)
Net loss of an equity      (6)          –            (9)          –
investment, net of tax
Net (Loss) income          (8,549)      2,874        (12,837)     1,811
Noncontrolling interest    87           (460)        88           (235)
Net (Loss) income
attributable to Camelot
Information                (8,462)      2,414        (12,749)     1,576

Systems Inc.^(3)
Earnings per share
Basic-ordinary shares      (0.05)       0.01         (0.07)       0.01
Diluted-ordinary shares    (0.05)       0.01         (0.07)       0.01
Earnings per ADS
Basic-ADSs                 (0.18)       0.05         (0.28)       0.04
Diluted-ADSs               (0.18)       0.05         (0.28)       0.03
Weighted average shares
outstanding
Basic-ordinary shares      185,264,624  177,621,367  185,167,362  177,621,367
Diluted-ordinary shares    185,264,624  186,288,689  185,167,362  186,302,302
Weighted average ADSs
outstanding
Basic-ADSs                 46,316,156   44,405,342   46,291,841   44,405,342
Diluted-ADSs               46,316,156   46,572,172   46,291,841   46,575,576
Net (Loss) income          (8,549)      2,874        (12,837)     1,811
Other comprehensive (loss)
income, net of tax:
Change in
cumulative foreign
currency translation       1,971        (1,717)      2,142        (1,649)

adjustments
Comprehensive (loss)       (6,578)      1,157        (10,695)     162
income
Less: comprehensive
loss(income) attributable
to the                     33           (447)        28           (230)

noncontrolling
interest
Comprehensive (loss)
income attributable to
Camelot                    (6,545)      710          (10,667)     (68)

Information Systems Inc.
(1) Includes the following amounts of share-based compensation expenses for
the periods indicated:
                           Three Months Ended        Six Months Ended
                           June 30,                  June 30,
                           2013         2012         2013         2012
Cost of revenues           $22          $19          $44          $43
Selling and marketing      122          430          244          1,517
General and administrative 509          39           1,017        537
Total share-based          $653         $488         $1,305       $2,097
compensation expenses
(2) Includes the following amounts of amortization expense related to
intangible assets acquired for business

combination for the periods indicated
                           Three Months Ended        Six Months Ended
                           June 30,                  June 30,
                           2013         2012         2013         2012
Cost of revenues           $16          $32          $32          $64
Selling and marketing      224          417          509          898
General and administrative 73           71           145          142
Total acquisition-related
intangible amortization    $313         $520         $686         $1,104
expenses
(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        Six Months Ended
                           June 30,                  June 30,
                           2013         2012         2013         2012
Net loss attributable to
Camelot Information
Systems Inc.               ($8,462)     $2,414       ($12,749)    $1,576

(U.S. GAAP)
Share-based compensation   653          488          1,305        2,097
Acquisition-related        313          520          686          1,104
intangible amortization
Changes in fair value of   -            50           -            97
contingent consideration
Total adjusted amounts     966          1,058        1,991        3,298
Adjusted net (loss) income
attributable to Camelot
                           ($7,496)     $3,472       ($10,758)    $4,874
Information
Systems Inc.



CAMELOT INFORMATION SYSTEMS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(U.S. Dollars in Thousands)
                                      Three-Month Periods  Six-Month Periods
                                      Ended June 30,       Ended June 30,
                                      2013       2012      2013       2012
Cash flow from operating activities:
Net (Loss)income                   ($8,549)   $2,874    ($12,837)  $1,811
Adjustments to reconcile net
(loss) income to net cash used in
operating
activities:
 Depreciation of property and 237        257       478        522
equipment
 Amortization of intangible   504        818       1,063      1,508
assets
 Deferred income taxes        (23)       (112)     532        370
 Provision for account        (683)      (362)     (882)      (791)
receivable
 Provision for other current  –          633       –          633
assets
 Share-based compensation     653        488       1,305      2,097
 (Gains)loss on disposal of   –          (7)       25         11
property and equipment
 Change in fair value of
contingent consideration for          –          50        –          97
acquisition
 Net loss of an equity        6          –         9          –
investment, net of tax
Changes in operating assets and
liabilities:
Accounts receivable          (9,989)    (19,409)  (19,135)   (27,072)
 Other assets                 (1,099)    193       (2,727)    (452)
 Accounts payable             936        4,430     (2,375)    1,744
 Other liabilities            6,638      4,948     3,135      (2,045)
Net cash used in operating activities (11,369)   (5,199)   (31,409)   (21,567)
Cash flow from investing activities:
 Purchase of term deposits    –          (330)     (67)       (1,063)
 Maturity of term deposits    109        316       387        11,084
 Deposit of restricted cash   109        170       149        3,728
 Maturity of short term       –          –         1,286      –
investment
 Proceeds from disposal of    –          –         9          4
property and equipment
 Purchase of property and     (202)      (170)     (290)      (311)
equipment
 Purchase of intangible       –          (966)     –          (1,022)
assets and other assets
 Purchase of businesses, net  –          –         –          (3,500)
of cash acquired
 Capital injection into a     –          –         (708)      –
joint venture
Net cash provided by(used in)         16         (980)     766        8,920
investing activities
Cash flow from financing activities:
 Proceeds from bank borrowing 3,061      337       3,343      2,881
 Repayment of bank borrowing  (255)      (622)     (879)      (8,127)
 Payment of contingent        (3,012)    (3,151)   (3,012)    (5,100)
consideration for an acquisition
Net cash used in financing activities (206)      (3,436)   (548)      (10,346)
Effect of foreign exchange rate       519        (11)      427        20
changes
Net decrease in cash and cash         (11,040)   (9,626)   (30,764)   (22,973)
equivalents
Cash and cash equivalents, beginning  74,152     43,781    93,876     57,128
of period
Cash and cash equivalents, end of     63,112     34,155    63,112     34,155
period



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
             June 30, 2013                        June 30, 2012
             GAAP     Adjustments        Adjusted GAAP    Adjustments     Adjusted
Cost of      $50,290  ($38)       (a)    $50,252  $45,869 ($51)       (a) $45,818
revenues
Gross profit 12,173   38          (a)    12,211   16,217  51          (a) 16,268
Operating    17,587   (928)       (a)    16,659   12,741  (1,007)     (a) 11,734
expenses
Operating    (5,414)  966         (a)    (4,448)  3,476   1,058       (a) 4,534
income(loss)
Net          (8,462)  966         (a)(d) (7,496)  2,414   1,058       (a) 3,472
income(loss)
Net gross    19.5%    0.1%        (b)    19.6%    26.1%   0.1%        (b) 26.2%
margin
Net
operating    (8.7%)   1.5%        (a)    (7.2%)   5.6%    1.7%        (a) 7.3%
margin
Net margin   (13.5%)  1.5%        (a)    (12.0%)  3.9%    1.7%        (a) 5.6%
Diluted EPS  ($0.05)  $0.01       (c)    ($0.04)  $0.01   $0.01       (c) $0.02
Diluted      ($0.18)  $0.02       (c)    ($0.16)  $0.05   $0.02       (c) $0.07
EPADS
             Six Months Ended                     Six Months Ended
             June 30, 2013                        June 30, 2012
             GAAP     Adjustments        Adjusted GAAP    Adjustments     Adjusted
Cost of      $98,158  ($76)       (a)    $98,082  $90,298 ($107)      (a) $90,191
revenues
Gross profit 23,939   76          (a)    24,015   28,911  107         (a) 29,018
Operating    33,319   (1,915)     (a)    31,404   27,048  (3,191)     (a) 23,857
expenses
Operating    (9,247)  1,991       (a)    (7,256)  1,863   3,298       (a) 5,161
income(loss)
Net          (12,749) 1,991       (a)(d) (10,758) 1,576   3,298       (a) 4,874
income(loss)
Net gross    19.6%    0.1%        (b)    19.7%    24.3%   0.1%        (b) 24.4%
margin
Net
operating    (7.6%)   1.6%        (a)    (6.0%)   1.6%    2.7%        (a) 4.3%
margin
Net margin   (10.4%)  1.6%        (a)    (8.8%)   1.3%    2.8%        (a) 4.1%
Diluted EPS  ($0.07)  $0.01       (c)    ($0.06)  $0.01   $0.02       (c) $0.03
Diluted      ($0.28)  $0.05       (c)    ($0.23)  $0.03   $0.07       (c) $0.10
EPADS



Notes:
(a) The non-GAAP adjustments include share-based compensation expense,
amortization expense related to intangible assets acquired for business
acquisition and changes in fair value of contingent consideration, which are
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-asset amortization
expense and share-based compensation recorded in cost of sales of $38, $51,
$76 and $107 for the three-month periods ended June 30, 2013 and 2012, and the
six-month periods ended June 30, 2013 and 2012, respectively.
(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.

SOURCE Camelot Information Systems Inc.

Website: http://www.camelotchina.com
 
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