CAMELOT INFORMATION SYSTEMS INC (ADR) 
By 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:
-- Net revenues were $62.5 million in the second quarter of 2013, as
compared to $62.1 million in the same period in 2012.
-- Net revenues from enterprise application services (EAS) were $42.1
million, as compared to $41.2 million in the same period in 2012.
-- Net revenues from financial industry IT services (FIS) were $20.4
million, as compared to $20.9 million in the same period in 2012.
-- Gross profit was $12.2 million, as compared to $16.2 million in the same
period in 2012.
-- Loss 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.
-- Net 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 Three Months
Ended Ended
June 30, June 30,
2013 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 business acquisition - 2,992
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 marketing(1)(2) (3,223) (3,493) (6,703) (8,102)
General and administrative(1)(2) (11,733) (7,401) (21,326) (15,385)
Research and development costs (2,631) (1,797) (5,290) (3,464)
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 operations (5,414) 3,476 (9,247) 1,863
Interest expense (33) (54) (48) (146)
Interest income 122 210 335 559
(Loss) income before provisions for income tax (5,325) 3,632 (8,960) 2,276
------ ----- ------ -----
Income tax expense (3,218) (758) (3,868) (465)
Net loss of an equity investment, net of tax (6) - (9) -
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) income (6,578) 1,157 (10,695) 162
====== ===== ======= ===
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 compensation expenses $653 $488 $1,305 $2,097
(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 expenses $313 $520 $686 $1,104
(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 intangible amortization 313 520 686 1,104
Changes in fair value of contingent consideration - 50 - 97
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 Six-Month
Periods 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 equipment 237 257 478 522
Amortization of intangible assets 504 818 1,063 1,508
Deferred income taxes (23) (112) 532 370
Provision for account receivable (683) (362) (882) (791)
Provision for other current assets - 633 - 633
Share-based compensation 653 488 1,305 2,097
(Gains)loss on disposal of property and equipment - (7) 25 11
Change in fair value of contingent consideration for acquisition - 50 - 97
Net loss of an equity investment, net of tax 6 - 9 -
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 investment - - 1,286 -
Proceeds from disposal of property and equipment - - 9 4
Purchase of property and equipment (202) (170) (290) (311)
Purchase of intangible assets and other assets - (966) - (1,022)
Purchase of businesses, net of cash acquired - - - (3,500)
Capital injection into a joint venture - - (708) -
Net cash provided by(used in) investing activities 16 (980) 766 8,920
--- ---- --- -----
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 consideration for an acquisition (3,012) (3,151) (3,012) (5,100)
Net cash used in financing activities (206) (3,436) (548) (10,346)
---- ------ ---- ------
Effect of foreign exchange rate changes 519 (11) 427 20
Net decrease in cash and cash equivalents (11,040) (9,626) (30,764) (22,973)
Cash and cash equivalents, beginning of period 74,152 43,781 93,876 57,128
------ ------ ------ ------
Cash and cash equivalents, end of period 63,112 34,155 63,112 34,155
====== ====== ====== ======
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 revenues $50,290 ($38) (a) $50,252 $45,869 ($51) (a) $45,818
Gross profit 12,173 38 (a) 12,211 16,217 51 (a) 16,268
Operating expenses 17,587 (928) (a) 16,659 12,741 (1,007) (a) 11,734
Operating income(loss) (5,414) 966 (a) (4,448) 3,476 1,058 (a) 4,534
Net income(loss) (8,462) 966 (a)(d) (7,496) 2,414 1,058 (a) 3,472
Net gross margin 19.5% 0.1% (b) 19.6% 26.1% 0.1% (b) 26.2%
Net operating margin (8.7%) 1.5% (a) (7.2%) 5.6% 1.7% (a) 7.3%
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 EPADS ($0.18) $0.02 (c) ($0.16) $0.05 $0.02 (c) $0.07
Six Months Ended Six Months Ended
June 30, 2013 June 30, 2012
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
Cost of revenues $98,158 ($76) (a) $98,082 $90,298 ($107) (a) $90,191
Gross profit 23,939 76 (a) 24,015 28,911 107 (a) 29,018
Operating expenses 33,319 (1,915) (a) 31,404 27,048 (3,191) (a) 23,857
Operating income(loss) (9,247) 1,991 (a) (7,256) 1,863 3,298 (a) 5,161
Net income(loss) (12,749) 1,991 (a)(d) (10,758) 1,576 3,298 (a) 4,874
Net gross margin 19.6% 0.1% (b) 19.7% 24.3% 0.1% (b) 24.4%
Net operating margin (7.6%) 1.6% (a) (6.0%) 1.6% 2.7% (a) 4.3%
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 EPADS ($0.28) $0.05 (c) ($0.23) $0.03 $0.07 (c) $0.10
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.
