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HiSoft Reports Fourth Quarter and Full Year 2011 Financial Results
Feb 29, 2012 (03:02 PM EST)


Company exceeds quarterly and full year guidance, achieves full year net revenues of US$219 million

BEIJING, Feb. 29, 2012 /PRNewswire-Asia-FirstCall/ -- HiSoft Technology International Limited ("HiSoft" or the "Company") (NASDAQ: HSFT), a leading China-based provider of outsourced information technology and research and development services headquartered in Dalian, China, today announced its unaudited financial results for the fourth quarter and full year 2011 ended December 31, 2011.

Key Highlights

Fourth Quarter 2011 as compared to Fourth Quarter 2010

  • Net revenues were US$64.9 million, up 52.8%  
  • Gross profit was US$23.5 million, up 53.3%
  • Diluted net income per ADS(1) was US$0.22, compared to US$0.02
  • Non-GAAP(2) diluted net income per ADS was US$0.31, compared to US$0.10

Full Year 2011 as compared to Full Year 2010

  • Net revenues were US$219.0 million, up 49.4%  
  • Gross profit was US$76.6 million, up 42.1%
  • Diluted net income per ADS was US$0.57, compared to US$0.45
  • Non-GAAP diluted net income per ADS was US$0.90, compared to US$0.70
  • Number of significant clients with revenue contribution over US$1 million increased from 27 to 36
  • Total employees as of December 31, 2011 was 7,321, compared to 5,521
  • Revenue realization per employee for the full year 2011 was US$34,105, compared to US$31,387

(1) Each American depositary share ("ADS") represents 19 common shares.
(2) Non-GAAP gross profit, 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, change in fair value of contingent consideration payable for business acquisition, follow-on offering expenses and success fee related to business acquisition. These non-GAAP measures and related reconciliations to GAAP measures are described in the sections "Non-GAAP Financial Measures" and "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" located elsewhere in this press release.

"I am pleased to report another solid quarter of growth capping a year of exceptional progress. We surpassed our targets and finished the year stronger in our financial and operational metrics across all service lines, verticals and geographic markets," said HiSoft Chief Executive Officer Mr. Tiak Koon Loh.

Mr. Loh continued, "2011 was a transformative year for us as we invested to build our services portfolio of higher value-added solutions. Our robust results reflect the initial yield from this strategy as well as the disciplined execution to expand our significant client base, deepen levels of client penetration and accelerate inroads into Greater China, ending the fourth quarter with our domestic China business contributing 20.3% of our total revenues."

"Last year, the number of significant clients with revenue contributions over US$1 million increased by 33% to 36. We are particularly pleased with the full year revenue growth of our Consulting and Packaged Solution services, which climbed over 300% from 2010. Together with developments across the technology and BFSI industries, our revenue realization per employee reached US$34,105," he said.

Loh concluded, "Our strategic efforts in 2011 position us to enter 2012 with great momentum. We will remain focused on the execution of our strategy of expanding our services portfolio with higher value-added solutions and driving profitable and sustainable growth." 

Fourth Quarter 2011 Financial Results

Net Revenues

Net revenues were US$64.9 million for the fourth quarter of 2011, an increase of 52.8% from US$42.5 million for the corresponding period in 2010. The strong year-over-year growth in net revenues was driven by strong demand across all service lines and geographic markets.

Net Revenues by Service Line



Three Months Ended

Three Months Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


IT Services

39,700

61.1%

23,487

55.3%

69.0%

CPS

13,640

21.0%

3,707

8.7%

268.0%

ADM

26,060

40.1%

19,780

46.6%

31.7%

R&D Services

25,236

38.9%

19,007

44.7%

32.8%

Total Net Revenues

64,936

100.0%

42,494

100.0%

52.8%




HiSoft has two principal service lines: IT services and research and development ("R&D") services. The Company 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 US$39.7 million for the fourth quarter of 2011, an increase of 69.0% from US$23.5 million for the corresponding period in 2010. The Company's CPS services recorded year-over-year revenue growth of 268.0% supported by strong demand from customers in Greater China and the United States.

Net revenues from R&D services were US$25.2 million for the fourth quarter of 2011, an increase of 32.8% from US$19.0 million for the corresponding period in 2010.

Net Revenues by Geographic Markets

Net Revenues based on Location of Clients' Headquarters



Three Months Ended

Three Months Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


United States

30,324

46.7%

21,267

50.0%

42.6%

Japan

13,323

20.5%

9,692

22.8%

37.5%

Greater China

13,197

20.3%

5,453

12.8%

142.0%

Europe

4,851

7.5%

3,942

9.3%

23.0%

Asia South

3,241

5.0%

2,140

5.1%

51.5%

Total Net Revenues

64,936

100.0%

42,494

100.0%

52.8%




Based on the location of clients' headquarters, the Company's largest geographic market, the United States accounted for US$30.3 million or 46.7% of net revenues during the fourth quarter of 2011, followed by 20.5% for Japan, 20.3% for Greater China, 7.5% for Europe and 5.0% for Asia South, represented by countries in the Asia Pacific region excluding Japan and Greater China, formerly referred to as "Other."

The Company's efforts to expand its service capabilities with higher value-added solution services continued to drive strong net revenue growth, particularly in Asia. In the quarter, Greater China and Asia South recorded year-over-year net revenue growth of 142.0% and 51.5%, respectively.

Net Revenues based on Location of Contract Signing Entity



Three Months Ended

Three Months Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


Greater China

26,856

41.4%

14,896

35.1%

80.3%

United States

14,836

22.8%

9,791

23.0%

51.5%

Japan

14,191

21.9%

11,292

26.6%

25.7%

Asia South

7,794

11.9%

5,263

12.3%

48.1%

Europe

1,259

2.0%

1,252

3.0%

0.5%

Total Net Revenues

64,936

100.0%

42,494

100.0%

52.8%




Measuring the Company's net revenues based on the location of contract signing entity, Greater China accounted for 41.4% of net revenues in the fourth quarter of 2011, while the United States accounted for 22.8%, Japan accounted for 21.9%, Asia South accounted for 11.9% and Europe accounted for 2.0%.

In the fourth quarter of 2011, the Company achieved across-the-board, year-over-year net revenue growth based on the location of contract signing entity: the United States grew 51.5%, Japan grew 25.7%, Greater China grew 80.3%, Asia South grew 48.1% and Europe grew 0.5%.

Largest Clients as a Percentage of Net Revenues

Revenues from the Company's top three, top five and top ten clients accounted for 21.8%, 31.6% and 45.2% of net revenues, respectively, during the fourth quarter of 2011, compared to 28.4%, 38.2% and 54.1%, respectively, for the corresponding period in 2010.

Gross Profit and Gross Margin

Gross profit was US$23.5 million for the fourth quarter of 2011, an increase of 53.3% from US$15.4 million for the corresponding period in 2010. During the fourth quarter of 2011, gross margin remained relatively stable at 36.2% compared to 36.1% for the corresponding period in 2010.

Non-GAAP gross margin was 36.9% for the fourth quarter of 2011, improved from 36.6% in the corresponding period in 2010.

Operating Expenses

Total operating expenses were US$16.8 million for the fourth quarter of 2011, an increase of 12.2% from US$15.0 million for the corresponding period in 2010. Total operating expenses as percentage of total revenues improved to 25.9%, from 35.3% for the corresponding period in 2010. Excluding the bad debt provision of US$3.5 million recorded in the fourth quarter of 2010, operating expenses increased 46.1% year-over-year and operating expenses as a percentage of total revenues were 27.1% in the fourth quarter of 2010. The year-over-year increase was attributed to expenses linked to strengthening management and sales teams. There was also an increase in expenses associated with non-cash items, including share-based compensation expense for retention and incentive, the amortization of acquired intangible assets and the change in fair value of contingent consideration payable for business acquisition.

Operating Income and Operating Margin

Operating income for the fourth quarter of 2011 was US$6.7 million, an increase of 1,793.2% from US$0.4 million for the corresponding period in 2010. Non-GAAP operating income for the fourth quarter 2011 was US$9.7 million, an increase of 239.1% from US$2.9 million for the corresponding period in 2010. Excluding the bad debt provision of $3.5 million incurred in fourth quarter of 2010, the year-over-year improvements in operating income and non-GAAP operating income were 73.9% and 52.4%, respectively.  

Operating margin expanded to 10.3% for the fourth quarter of 2011, compared to 0.8% for the same period in 2010. Non-GAAP operating margin was 14.9% for the fourth quarter of 2011, compared to 6.7% for the corresponding period in 2010. Excluding the bad debt provision of US$3.5 million incurred in the fourth quarter of 2010, operating margin and non-GAAP operating margin for the fourth quarter of 2010 were 9.1% and 15.0%, respectively.

Provision for Income Taxes

Provision for income taxes was US$0.5 million for the fourth quarter of 2011, compared to a US$0.2 million provision for income taxes in the fourth quarter of 2010.

Net Income and Net Income per ADS

Net income attributable to the Company was US$6.8 million for the fourth quarter of 2011, an increase of 1,192.2% from US$0.5 million for the corresponding period in 2010. Diluted net income per ADS was US$0.22 for the fourth quarter of 2011, compared to US$0.02 in the corresponding period of 2010.

Non-GAAP net income was US$9.8 million for the fourth quarter of 2011, an increase of 223.0% from US$3.0 million for the same period in 2010. Non-GAAP diluted net income per ADS was US$0.31 in the fourth quarter of 2011. Excluding the impact of the US$0.01 per ADS from foreign currency loss, non-GAAP diluted net income per ADS was US$0.32 in the fourth quarter of 2011, compared to US$0.10 in the corresponding period in 2010.

Full Year 2011 Financial Results

Net Revenues

Net revenues were US$219.0 million for the full year 2011, an increase of 49.4% from US$146.6 million in 2010. This increase was primarily the result of expanded service offerings, which attracted new customers, deepened penetration with existing clients and supported the expansion of the Company's business in Greater China and Asia South.

Net Revenues by Service Line



Full Year Ended

Full Year Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


IT Services

126,105

57.6%

76,824

52.4%

64.1%

CPS

37,567

17.2%

9,310

6.4%

303.5%

ADM

88,538

40.4%

67,514

46.0%

31.1%

R&D Services

92,884

42.4%

69,755

47.6%

33.2%

Total Net Revenues

218,989

100.0%

146,579

100.0%

49.4%




Net revenues from IT services were US$126.1 million for the full year 2011, an increase of 64.1% from US$76.8 million for 2010. The Company's CPS services, comprising a portfolio of higher value-added solutions, recorded a 303.5% year-over-year increase.

Net revenues from R&D services were US$92.9 million for the full year 2011, an increase of 33.2% year-over-year from US$69.8 million for 2010.

Net Revenues by Geographic Markets

Net Revenues based on Location of Clients' Headquarters



Full Year Ended

Full Year Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


United States

107,925

49.3%

79,328

54.1%

36.0%

Japan

40,724

18.6%

33,779

23.0%

20.6%

Greater China

39,410

18.0%

12,662

8.6%

211.2%

Europe

18,793

8.6%

13,540

9.3%

38.8%

Asia South

12,137

5.5%

7,270

5.0%

66.9%

Total Net Revenues

218,989

100.0%

146,579

100.0%

49.4%




Based on the location of clients' headquarters, the Company's largest geographic market, the United States, accounted for US$107.9 million or 49.3% of net revenues, during the full year of 2011, followed by 18.6% for Japan, 18.0% for Greater China, 8.6% for Europe and 5.5% for Asia South.

The Company recorded strong growth across all geographies. For the full year 2011, the United States grew 36.0%, Europe grew 38.8%, Japan grew 20.6%, Greater China grew 211.2% and Asia South grew 66.9% year-over-year.

Net Revenues based on Location of Contract Signing Entity



Full Year Ended

Full Year Ended

Year-over-Year


December 31, 2011

December 31, 2010

% Change


(US$ in thousands, except percentages)


Greater China

87,264

39.8%

48,801

33.3%

78.8%

United States 

49,271

22.5%

33,992

23.2%

45.0%

Japan

47,671

21.8%

39,033

26.6%

22.1%

Asia South

29,673

13.6%

20,980

14.3%

41.4%

Europe

5,110

2.3%

3,773

2.6%

35.5%

Total Net Revenues

218,989

100.0%

146,579

100.0%

49.4%




Measuring the Company's net revenues based on the location of contract signing entity, Greater China accounted for 39.8% of net revenues in the full year of 2011, while the United States accounted for 22.5%, Japan accounted for 21.8%, Asia South accounted for 13.6% and Europe accounted for 2.3%.

The Company achieved across-the-board, year-over-year net revenue growth based on the location of contract signing entities for the full year 2011: United States grew 45.0%, Europe grew 35.5%, Japan grew 21.1%, Greater China grew 78.8% and Asia South grew 41.4%.

Largest Clients as a Percentage of Net Revenues

Revenues from the Company's top three, top five and top ten clients accounted for 26.1%, 34.8% and 50.1% of net revenues, respectively, during the full year of 2011, compared to 30.3%, 40.4% and 56.8%, respectively, in 2010. The improvement in client concentration was primarily due to the Company's expanded client base.

The number of significant clients that contribute at least US$1.0 million to the Company's net revenues for the full year 2011 increased to 36 from 27 at the end of 2010.

Gross Profit and Gross Margin

Gross profit was US$76.6 million for the full year 2011, an increase of 42.1% from US$53.9 million for the full year 2010. For full year 2011, gross margin was 35.0%, compared to 36.7% for 2010. Non-GAAP gross margin was 35.4%, compared to 37.3% for 2010. The decrease in gross margin was partly due to wage inflation as well as reduced productivity and lost billings associated with the impact of the earthquake that struck Japan on March 11, 2011, and subsequent tsunami.  This decrease was partially offset by the growth in higher value-added service solutions of CPS services during the year.

Operating Expenses

Total operating expenses were US$59.4 million for the full year 2011, an increase of 44.7% from US$41.0 million in 2010. The year-over-year increase was primarily due to expenses linked to strengthening management and sales teams, including the promotion of key managers. There was also an increase in expenses associated with non-cash items, including share-based compensation expense for retention and incentive, the amortization of acquired intangible assets and the change in fair value of contingent consideration payable for business acquisition. Total operating expenses as a percentage of total revenues were 27.1% in 2011, compared to 28.0% in 2010.

Operating Income and Operating Margin

Operating income for the full year 2011 was US$17.2 million, an increase of 34.0% from US$12.8 million in 2010. Non-GAAP operating income for the full year 2011 came to US$27.8 million, an increase of 43.5% from US$19.4 million in 2010.

Operating margin was 7.9% for full year 2011, compared to 8.8% for 2010, Non-GAAP operating margin was 12.7% for the full year 2011, compared to 13.2% in 2010.

Provision for Income Taxes

Provision for income taxes was US$1.7 million for the full year 2011, compared to a US$1.9 million provision for income taxes for in 2010. The effective tax rate for the full year 2011 was 8.5%.

Net Income and Net Income per ADS

Net income attributable to the Company was US$17.9 million for the full year 2011, an increase of 48.5% from US$12.1 million in 2010. Diluted net income per ADS was US$0.57 for the full year 2011.

Non-GAAP net income was US$28.5 million for the full year 2011, an increase of 53.3% from US$18.6 million in 2010. Non-GAAP diluted net income per ADS was US$0.90 for the full year 2011, compared to US$0.70 in 2010. Excluding the impact of US$0.04 per ADS from foreign currency loss(3), non-GAAP diluted net income per ADS was US$0.94 for full year 2011, compared to US$0.70 in 2010.

In 2011, five board directors of the Company were awarded a total of 237,500 non-vested common shares and 475,000 stock options under the Company's existing remuneration and incentive plans. The weighted average fully diluted ADSs used in the calculation of net income per ADS was 31.5 million for full year 2011, compared to 26.7 million for 2010.

Cash Flow and DSO

As of December 31, 2011, the Company had cash and cash equivalents, restricted cash, and term deposits totaling US$136.8 million. Operating cash flow for full year of 2011 was a net inflow of approximately US$24.3 million.

Days sales outstanding was 92 days for the full year 2011.

(3) Foreign currency gains or losses relate to U.S. dollars transferred into China which is pending conversion to Renminbi as of the end of the relevant period

Outlook for First Quarter and Full Year 2012

For the first quarter 2012, based on current market and operating conditions and current book orders, the Company expects:

  • Net revenues to be at least US$65 million, representing an expected growth rate of at least 46.7% year-over-year
  • Non-GAAP diluted net income per ADS to be in the estimated range of US$0.24 to US$0.25. This represents an expected growth rate of 60.0% to 66.7% year-over-year, based on 31.7 million weighted average ADSs outstanding

For the full year 2012, based on current market and operating conditions and current book orders, the Company expects:

  • Net revenues to be at least US$285 million, representing an expected growth rate of at least 30.1% year-over-year
  • Non-GAAP diluted net income per ADS to be in the estimated range of US$1.14 to US$1.18. This represents an expected growth rate of 26.7% to 31.1% year-over-year, based on 32.0 million weighted average ADSs outstanding

The non-GAAP diluted net income per ADS estimates assume an effective income tax rate of between 13% to 15%.

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.

Fourth Quarter and Full Year 2011 Conference Call Details

HiSoft management will hold an earnings conference call at 6:00 p.m. Eastern Time on Wednesday, February 29, 2012, (7:00 a.m. Beijing/Hong Kong Time on Thursday, March 1, 2012). Management will discuss results and highlights of the quarter and full year and answer questions from investors.

The dial-in numbers for the conference call are as follows:

U.S. Toll Free: +1-800-860-2442

International Dial In: +1-866-605-3852

The conference call will be broadcast live over the Internet and can be accessed by clicking the following link: http://www.mzcan.com/cancast/us/index.php?id=usHSFT_30&version=e.

A telephone replay will be available approximately one hour after the end of the call through March 8, 2012.

The dial-in numbers for the replay are as follows:

U.S. Toll Free: +1-877-344-7529

International Dial In: +1-412-317-0088

Conference Number: 10009249

Additionally, an archived webcast of this call will be available on the Investor Relations section of the HiSoft website at http://www.hisoft.com.

About HiSoft Technology International Limited

HiSoft Technology International Limited (NASDAQ: HSFT) is a leading China-based provider of outsourced information technology and research and development services headquartered in Dalian, China. HiSoft provides its services to leading companies around the world through a combination of onshore and offshore delivery capabilities. HiSoft leverages its skilled technology specialists and client-centric delivery centers to offer customers reliable and high-quality technology solutions.

For more information about HiSoft, please visit http://www.hisoft.com.

For investor and media inquiries please contact:

Ross Warner
HiSoft Technology International Limited
Tel: +86-10-5987-5865
Email: investor_relations@hisoft.com

Safe Harbor Statement

This press 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 HiSoft's control, which may cause HiSoft's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in HiSoft's filings with the U.S. Securities and Exchange Commission. HiSoft 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.

Non-GAAP Financial Measures

To supplement HiSoft's consolidated financial results presented in accordance with GAAP, HiSoft uses the following measures defined as non-GAAP financial measures by the SEC: Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per ADS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets, change in fair value of contingent consideration payable for business acquisition, follow-on offering expenses and success fee related to business acquisition. Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per ADS 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 the financial information prepared and presented in accordance with GAAP.

HiSoft 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 gross margin, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per ADS and related margins is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets 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. The presentation of these measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported of forecasted by other companies. 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.

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Condensed Consolidated Balance Sheets (Unaudited)

(US dollars in thousands, except share data)








December 31,
2011


December 31,
2010

ASSETS





Current assets





Cash and cash equivalents


113,856


169,893

Restricted cash


1,222


359

Term deposits


21,681


-

Account receivable, net


61,413


43,761

Other current assets


7,135


6,885

Total current assets


205,307


220,898






Property, plant and equipment, net


13,774


9,772

Goodwill and intangible assets, net


52,546


23,092

Other long-term assets


1,552


1,330

Total assets


273,179


255,092






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities (including current liabilities of the consolidated variable interest entity without recourse to HiSoft Technology International Limited of $238 and $229 as of December 31, 2011 and December 31, 2010, respectively)


59,207


78,532

Other liabilities


4,082


1,608

Total liabilities


63,289


80,140

Total HiSoft Technology International Limited shareholders' equity


208,484


174,952

Non-controlling interest


1,406


-

Total liabilities and equity


273,179


255,092











Note:
As of December 31, 2011, there were 595,868,033 ordinary shares (equivalent to 31,361,475 ADSs) issued and outstanding.



HISOFT TECHNOLOGY INTERNATIONAL LIMITED

Condensed Consolidated Statements of Operations (Unaudited)

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










Three months ended December 31


Year ended December 31,


2011


2010


2011


2010









Net revenues

64,936


42,494


218,989


146,579

Cost of revenues

(41,402)


(27,143)


(142,427)


(92,718)

Gross profit

23,534


15,351


76,562


53,861









Operating expenses

(16,832)


(14,997)


(59,351)


(41,013)

Income from operations

6,702


354


17,211


12,848









Other income

832


419


2,905


1,143

Net income before income tax expenses

7,534


773


20,116


13,991









Income tax expenses

(459)


(247)


(1,718)


(1,934)

Net income

7,075


526


18,398


12,057









Add: Net income attributable to non-controlling interest

(278)


-


(497)


-

Net income attributable to HiSoft Technology International Limited

6,797


526


17,901


12,057









Net income per share








Basic

0.01


-


0.03


0.03

Diluted

0.01


-


0.03


0.02









Weighted average shares used in calculating net income per common share








Basic

572,171,855


543,177,029


566,247,106


315,964,432

Diluted

599,020,378


591,321,292


599,162,936


507,037,891









Net Income per ADS








Basic

0.23


0.02


0.60


0.49

Diluted

0.22


0.02


0.57


0.45









Weighted average ADS used in calculating net income per ADS








Basic

30,114,308


28,588,265


29,802,479


16,629,707

Diluted

31,527,388


31,122,173


31,534,891


26,686,205







HISOFT TECHNOLOGY INTERNATIONAL LIMITED





Condensed Consolidated Statements Of Cash Flows (Unaudited)





(US dollars in thousands)


















Three months ended 
December 31,



Year ended December 31,





2011


2010



2011


2010



Cash flows from operating activities:













Net income


7,075


526



18,398


12,057




Adjustments to reconcile net income to net cash
provided by operating activities:










(Reversal) provision for doubtful accounts


(163)


3,615



42


3,597





(Gain) loss on disposal of property, plant and equipment


(1)


(1)



37


454





Depreciation


1,317


755



4,400


2,918





Change in fair value of foreign-currency forward contract


(67)


-



(28)


15





Success fee related to business acquisition


-


-



450


-





Amortization of intangible assets


1,044


284



2,677


875





Interest (income) expense


-


(65)



64


(187)





Share-based compensation expenses


1,559


1,120



5,656


4,001





Changes in fair value of contingent consideration


384


630



1,824


1,194




Changes in operating assets and liabilities:














Accounts receivable


627


(4,768)



(12,735)


(18,871)





Other current assets


1,416


339



2,658


184





Income tax receivable


-


402



-


438





Other assets


(66)


(52)



2,170


(481)





Accounts payable


1,981


137



1,325


230





Other liabilities


803


2,309



(2,687)


5,098

















Net cash provided by operating activities


15,909


5,231



24,251


11,522



Cash flows from investing activities:













Term deposits


10,675


-



(21,681)


-




Purchase of property, plant and equipment


(1,785)


(3,003)



(7,691)


(5,782)




Restricted cash


(54)


-



(836)


(8)




Net payments for business acquisitions


(2,109)


(2,500)



(7,716)


(5,296)




Payment on success fee related to business acquisition


-


-



(450)


-

















Net cash provided by (used in) investing activities


6,727


(5,503)



(38,374)


(11,086)



Cash flows from financing activities:













Repayment of Bank loan


-


-



(40,064)


-




Proceeds from short-term borrowing


-


40,000



-


40,000




Cash received from share subscription receivables


-


-



-


1




Cash received from non-controlling interest


-


-



908


-




Proceeds from issuance of common share under employee option plan


634


6



5,292


538




Proceeds from issuance of common stock upon IPO


-


13,077



-


79,454




Deferred and contingent consideration paid for business acquisitions


(2,150)


-



(11,710)


(3,245)




Prepayment of initial public offering expenses


-


(1,422)



-


(3,816)




Payment on capital lease obligations


-


11



-


(174)



Net cash (used in) provided by financing activities


(1,516)


51,672



(45,574)


112,758



Effect of exchange rate changes


1,063


628



3,660


1,857

















Net increase (decrease) in cash and cash equivalents


22,183


52,028



(56,037)


115,051



Cash and cash equivalents at beginning of period


91,673


117,865



169,893


54,842



Cash and cash equivalents at end of period


113,856


169,893



113,856


169,893




















HISOFT 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,



2011


2010



2011


2010












GAAP operating income

6,702


354



17,211


12,848


GAAP operating income margin

10.3%


0.8%



7.9%


8.8%












Adjustments:










- Share-based compensation expenses

1,559


1,120



5,656


4,001


- Amortization of acquired intangible assets

1,044


284



2,677


875


- Change in fair value of contingent consideration payable for business acquisition

384


630



1,824


1,194


- Success fee related to business acquisition

-


-



450


-


- Follow-on offering expenses

-


469



-


469












Non-GAAP operating income

9,689


2,857



27,818


19,387


Non-GAAP operating income margin

14.9%


6.7%



12.7%


13.2%






















GAAP net income

6,797


526



17,901


12,057


GAAP net margin

10.5%


1.2%



8.2%


8.2%












Adjustments:










- Share-based compensation expenses

1,559


1,120



5,656


4,001


- Amortization of acquired intangible assets

1,044


284



2,677


875


- Change in fair value of contingent consideration payable for business acquisition

384


630



1,824


1,194


- Success fee related to business acquisition

-


-



450


-


- Follow-on offering expenses

-


469



-


469












Non-GAAP net income

9,784


3,029



28,508


18,596


Non-GAAP net margin

15.1%


7.1%



13.0%


12.7%






















Non-GAAP net income per ADS










Basic

0.32


0.11



0.96


0.75


Diluted

0.31


0.10



0.90


0.70












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










Basic

30,114,308


28,588,265



29,802,479


16,629,707


Diluted

31,527,388


31,122,173



31,534,891


26,686,205










































GAAP net income per ADS










Basic

0.23


0.02



0.60


0.49


Adjustments:










- Share-based compensation expenses

0.05


0.04



0.19


0.15


- Amortization of acquired intangible assets

0.03


0.01



0.09


0.04


- Follow-on offering expenses

-


0.02



-


0.02


- Change in fair value of contingent consideration payable for business acquisition

0.01


0.02



0.06


0.05


- Success fee related to business acquisition

-


-



0.02


-


Non-GAAP net income per ADS










Basic

0.32


0.11



0.96


0.75






















GAAP net income per ADS










Diluted

0.22


0.02



0.57


0.45


Adjustments:










- Share-based compensation expenses

0.05


0.04



0.18


0.15


- Amortization of acquired intangible assets

0.03


0.01



0.08


0.03


- Follow-on offering expenses

-


0.02



-


0.02


- Change in fair value of contingent consideration payable for business acquisition

0.01


0.01



0.06


0.05


- Success fee related to business acquisition

-


-



0.01


-


Non-GAAP net income per ADS










Diluted

0.31


0.10



0.90


0.70











Note:

Basic and diluted non-GAAP net income per ADS are computed using non-GAAP net income and the same number of ADSs used in calculating basic and diluted GAAP net income per ADS.




SOURCE HiSoft Technology International Limited