SYS-CON MEDIA Authors: Roberto Medrano, Dmitriy Stepanov, Gilad Parann-Nissany, Srinivasan Sundara Rajan, Sean Houghton

News Feed Item

Pactera Announces Fourth Quarter and Full Year 2013 Financial Results

BEIJING, Feb. 27, 2014 /PRNewswire/ -- Pactera Technology International Ltd. (Nasdaq: PACT) ("Pactera" or the "Company"), a global consulting and technology services provider strategically headquartered in China, today reported its unaudited financial results for the fourth quarter and full year 2013 ended December 31, 2013.

(Photo: http://photos.prnewswire.com/prnh/20130118/CN37843LOGO )

On November 9, 2012, HiSoft Technology International Limited ("HiSoft") and VanceInfo Technologies Inc. ("VanceInfo") announced the completion of merger of equals to form Pactera. HiSoft and VanceInfo's financial results were consolidated into Pactera from the date of the completion of the merger.

Fourth Quarter and Full Year 2013 Financial and Operational Highlights

  • Net revenues for thefourth quarter of 2013 were $181.5 million.
  • Net revenues for the fourth quarter of 2013 represented an increase of 1.2% from the pro forma net revenues[1] of $179.3 million for the fourth quarter of 2012.
  • GAAP diluted net income per ADS for the fourth quarter of 2013 was $0.09. Non-GAAP diluted net income per ADS[2] for the fourth quarter of 2013 was $0.20.
  • Net revenues for the full year 2013 were $670.0 million.
  • Net revenues for the full year 2013 represented a decrease of 0.5% from the pro forma net revenues of $673.3 million for the full year 2012.
  • GAAP diluted net income per ADS for the full year 2013 was $0.09. Non-GAAP diluted net income per ADS for the full year 2013 was $0.64.
  • Total full-time employees as of December 31, 2013 were 22,068, including 19,971 billable professionals.

[1] Pro forma net revenues of the Company for the fourth quarter and full year 2012 assume that the merger with VanceInfo occurred at the beginning of each such period. The pro forma financial information is provided for information purpose only and does not purport to present what the actual results of operations would have been had the transaction actually occurred at the beginning of each period indicated nor does it purport to present the actual results of operations for any future period or financial position for any future date. Please refer to the accompanying tables at the end of the earnings release.

 

[2] Non-GAAP operating income, non-GAAP net income, non-GAAP basic and diluted net income per ADS and corresponding margins presented in this press release exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE and change in fair value of contingent consideration payable for business acquisition and compensation expenses related to acquisition, impairment of assets held for sale. The non-GAAP measures and related reconciliations to GAAP measures are described in the accompanying section of "About Non-GAAP Financial Measures" and the accompanying tables of "Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for Non-GAAP Financial Measures to Comparable GAAP Measures" at the end of the earnings release.

"The 2013 result is in line with our guidance, in both top line and bottom line," said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera.  "We see slow recovery in our top line growth despite the impact from our major telecom customer and adverse effect of Japanese currency depreciation.  Margin is improving over the last few quarters, with the impact from integration of merger of equals diminishing over time. While the privatization process keeps going on as per planned, we'll remain focused on executing the right strategy to support quality growth and maintaining a high level of customer satisfaction."

Fourth Quarter 2013 Financial Results

Net Revenues

Net revenues were $181.5 million for thefourth quarter of 2013, as compared to $142.2 million for the fourth quarter of 2012. Net revenues for the fourth quarter of 2013 represented an increase of 1.2% from the pro forma net revenues of $179.3 million for the fourth quarter of 2012. Excluding the company's major telecom customer, net revenues for the fourth quarter of 2013 would have increased 9.5% from the pro forma net revenues for the fourth quarter of 2012.

Net Revenues by Service Line

Pactera has three service lines: Information Technology ("IT") services, research and development ("R&D") services and business process outsourcing ("BPO"). Pactera divides IT services into two categories: consulting and packaged solution ("CPS") services and application development, testing and maintenance ("ADM") services.

Net revenues from IT services were $117.7 million for the fourth quarter of 2013, which increased 10.8% from $106.2 million of pro forma net revenues for the corresponding period in 2012. The increase was primarily due to the increasing demand for and the expanded offerings by our CPS services.

Net revenues from R&D services were $60.5 million for the fourth quarter of 2013, compared to $68.9 million of the pro forma net revenues for the corresponding period in 2012. The decrease in net revenues from R&D services was mainly due to a decrease in therevenues derived from our major telecom customer. Excluding the company's major telecom customer, net revenues from R&D services for the fourth quarter of 2013 would have increased approximately 10.3% from the pro forma net revenues from R&D services for the corresponding period in 2012.

Net Revenues by Service Line


Three Months Ended
December 31, 2013

Three Months Ended
December 31, 2012

($ in thousands, except percentages)

IT Services

117,679

64.8%

85,328

60.0%

CPS Services

48,010

26.4%

31,849

22.4%

ADM Services

69,669

38.4%

53,479

37.6%

R&D Services

60,518

33.3%

54,464

38.3%

BPO

3,333

1.9%

2,410

1.7%

Total Net Revenues

181,530

100.0%

142,202

100.0%

Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
December 31
, 2013

Three Months Ended
December 31
, 2012

Year-over-Year
% Change

($ in thousands, except percentages)

IT Services

117,679

64.8%

106,170

59.2%

10.8%

CPS Services

48,010

26.4%

36,264

20.2%

32.4%

ADM Services

69,669

38.4%

69,906

39.0%

(0.3)%

R&D Services

60,518

33.3%

68,911

38.4%

(12.2)%

BPO

3,333

1.9%

4,263

2.4%

(21.8)%

Total Net Revenues

181,530

100.0%

179,344

100.0%

1.2%

Net Revenues by Geographic Markets

Based on the location of clients' headquarters, net revenues from clients headquartered in the Greater China were $73.4 million or 40.5% of the net revenues for the fourth quarter of 2013, followed by 38.0% from the United States, 9.4% from Europe, 7.1% from Japan, and 5.0% from Asia South.

Net Revenues based on Location of Clients' Headquarters


Three Months Ended
December 31, 2013

Three Months Ended
December 31, 2012

($ in thousands, except percentages)

Greater China

73,444

40.5%

53,848

37.9%

United States

68,953

38.0%

55,361

38.9%

Europe

17,006

9.4%

10,262

7.2%

Japan

13,040

7.1%

16,615

11.7%

Asia South

9,087

5.0%

6,116

4.3%

Total Net Revenues

181,530

100.0%

142,202

100.0%

Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
December 31, 2013

Three Months Ended
December 31, 2012

Year-over-Year
% Change

($ in thousands, except percentages)

Greater China

73,444

40.5%

71,989

40.1%

2.0%

United States

68,953

38.0%

67,264

37.5%

2.5%

Europe

17,006

9.4%

13,721

7.7%

23.9%

Japan

13,040

7.1%

18,611

10.4%

(29.9)%

Asia South

9,087

5.0%

7,759

4.3%

17.1%

Total Net Revenues

181,530

100.0%

179,344

100.0%

1.2%







Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 61.6% of net revenues in thefourth quarter of 2013, while the United States accounted for 19.0%, Asia South accounted for 10.5%, Japan accounted for 6.7%, and Europe accounted for 2.2%.

Net Revenues by Industry

Pactera classifies its clients into four industry segments: High Technology ("High Tech"), Banking, Financial Services and Insurance ("BFSI"), Manufacturing, and Other Industry Segments including Retail, Distribution, Travel and Transportation and Public Services ("Others").

Net Revenues by Industry


Three Months Ended
December 31, 2013

Three Months Ended
December 31, 2012

($ in thousands, except percentages)

High Tech

96,255

53.0%

80,321

56.5%

BFSI

58,685

32.3%

39,894

28.1%

Manufacturing

21,928

12.1%

21,624

15.2%

Others

4,662

2.6%

363

0.2%

Total Net Revenues

181,530

100.0%

142,202

100.0%

Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)


Three Months Ended
December 31, 2013

Three Months Ended
December 31, 2012

Year-over-Year
% Change

($ in thousands, except percentages)

High Tech

96,255

53.0%

104,240

58.1%

(7.7)%

BFSI

58,685

32.3%

47,435

26.4%

23.7%

Manufacturing

21,928

12.1%

26,989

15.1%

(18.8)%

Others

4,662

2.6%

680

0.4%

585.6%

Total net revenues

181,530

100.0%

179,344

100.0%

1.2%

Largest Clients

Net revenues from Pactera's top five and top ten clients accounted for 25.0% and 35.2% of net revenues, respectively, during the fourth quarter of 2013, compared to 32.2% and 41.2% respectively, on a pro forma basis for the corresponding period in 2012. As previously disclosed, we entered into several agreements, or Transfer Agreements, with ChinaSoft International Limited (SEHK: 354), or ChinaSoft, and its affiliates, under which we have sold and transferred certain of our outsourcing business with the Company's major telecom client to ChinaSoft and its affiliates.  The business transfer contemplated by the Transfer Agreements has been completed in the first quarter of 2014. The total number of our full-time employees as of December 31, 2013 was 22,068, excluding employees that worked for our major telecom client.

Gross Profit and Gross Margin

Gross profit was $58.4 million for the fourth quarter of 2013, compared to $47.6 millionfor the corresponding period in 2012. Gross margin was 32.2% for the fourth quarter of 2013.

Operating Expenses

Total operating expenses were $44.6 million for the fourth quarter of 2013 compared to $64.4 million for the corresponding period in 2012. Operating expenses in the fourth quarter of 2013 included $3.1 million of privatization-related costs.

Operating Income (Loss) and Operating Margin

Operating income for the fourth quarter of 2013 was $13.8 million, compared to an operating loss of $16.8 million for the corresponding period in 2012. Non-GAAP operating income for the fourth quarter in 2013 was $23.1 million, as compared to $16.1 million in the corresponding period in 2012.

Operating margin was 7.6% for the fourth quarter of 2013, comparedto negative 11.8% for the same period in 2012. Non-GAAP operating margin was 12.7% for the fourth quarter of 2013.

Net Income (Loss) and Net Income (Loss) per ADS

Net income attributable to Pactera was $7.8 million for the fourth quarter of 2013, compared to a net loss of $14.5 million for the corresponding period in 2012. Non-GAAP net income was$17.1 million for the fourth quarter of 2013, compared to $16.4 million for the same period in 2012. Non-GAAP diluted net income per ADS was $0.20 in the fourth quarter of 2013, compared to $0.24 in the corresponding period of 2012.

Cash Flow and DSO

As of December 31, 2013, Pactera had cash and cash equivalents, restricted cash, term deposits and short-term investment totaling $191.3 million. Operating cash flow for the fourth quarter of 2013 was a net inflow of approximately $66.5 million. Days sales outstanding ("DSO") was 128 days for this quarter and 134 days for the last 12 months on a pro forma basis.

Full year 2013 Financial Results  

Net Revenues

Net revenues were $670.0 million for the full year ended December 31, 2013 as compared to $359.0 million for the full year ended December 31, 2012. Net revenues for the full year 2013 represented a decrease of 0.5% from the pro forma net revenues of $673.3 million for the full year 2012.

Net Revenues by Service Line

Net Revenues by Services Line


Twelve Months Ended
December 31,
2013

Twelve Months Ended
December 31,
2012

($ in thousands, except percentages)

IT Services

398,915

59.6%

212,448

59.2%

CPS Services

147,859

22.1%

79,605

22.1%

ADM Services

251,056

37.5%

132,843

37.1%

R&D Services

259,606

38.7%

144,173

40.2%

BPO

11,498

1.7%

2,410

0.6%

Total Net Revenues

670,019

100.0%

359,031

100.0%

Pro forma Net Revenues by Service Line
(Please refer to the reconciliation table at the end of the earnings release)


Twelve Months Ended
December 31, 2013

Twelve Months Ended
December 31,
2012

Year-over-Year
% Change

($ in thousands, except percentages)

IT Services

398,915

59.6%

367,258

54.6%

8.6%

CPS Services

147,859

22.1%

118,209

17.6%

25.1%

ADM Services

251,056

37.5%

249,049

37.0%

0.8%

R&D Services

259,606

38.7%

291,790

43.3%

(11.0)%

BPO

11,498

1.7%

14,218

2.1%

(19.1)%

Total Net Revenues

670,019

100.0%

673,266

100.0%

(0.5)%

Net Revenues by Geographic Markets

Based on the location of clients' headquarters, net revenues from clients headquartered in the United States were $263.1 million for the full year ended December 31, 2013, followed by $259.5 million from Greater China, $63.2 million from Europe, $50.7 million from Japan, and $33.6 million from Asia South.

Net Revenues based on Location of Clients' Headquarters


Twelve Months Ended
December 31, 2013

Twelve Months Ended
December 31,
2012

($ in thousands, except percentages)

United States

263,059

39.3%

154,969

43.2%

Greater China

259,489

38.7%

104,222

29.0%

Europe

63,151

9.4%

24,375

6.8%

Japan

50,727

7.6%

58,010

16.2%

Asia South

33,593

5.0%

17,455

4.8%

Total Net Revenues

670,019

100.0%

359,031

100.0%

Pro Forma Net Revenues based on Location of Clients' Headquarters
(Please refer to the reconciliation table at the end of the earnings release)


Twelve Months Ended
December 31, 2013

Twelve Months Ended
December 31,
2012

Year-over-Year
% Change

($ in thousands, except percentages)

United States

263,059

39.3%

261,070

38.8%

0.8%

Greater China

259,489

38.7%

257,481

38.2%

0.8%

Europe

63,151

9.4%

56,728

8.4%

11.3%

Japan

50,727

7.6%

72,050

10.7%

(29.6)%

Asia South

33,593

5.0%

25,937

3.9%

29.5%

Total Net Revenues

670,019

100.0%

673,266

100.0%

(0.5)%

Measuring Pactera's net revenues based on the location of contract signing entity, Greater China accounted for 60.0% of net revenues for the full year ended December 31, 2013, while the United States accounted for 20.2%, Asia South accounted for 10.4%, Japan accounted for 7.4%, and Europe accounted for 2.0%.

Net Revenues by Industry

Net Revenues by Industry


Twelve Months Ended
December 31, 2013

Twelve Months Ended
December 31, 2012

($ in thousands, except percentages)

High Tech

388,674

58.0%

194,465

54.2%

BFSI

181,732

27.1%

102,328

28.5%

Manufacturing

82,634

12.3%

49,909

13.9%

Others

16,979

2.6%

12,329

3.4%

Total Net Revenues

670,019

100.0%

359,031

100.0%

Pro Forma Net Revenues by Industry
(Please refer to the reconciliation table at the end of the earnings release)


Twelve Months Ended
December 31, 2013

Twelve Months Ended
December 31, 2012

Year-over-Year
% Change

($ in thousands, except percentages)

High Tech

388,674

58.0%

411,513

61.1%

(5.6)%

BFSI

181,732

27.1%

157,592

23.4%

15.3%

Manufacturing

82,634

12.3%

84,601

12.6%

(2.3)%

Others

16,979

2.6%

19,560

2.9%

(13.2)%

Total net revenues

670,019

100.0%

673,266

100.0%

(0.5)%

Largest Clients

Net revenues from Pactera's top five and top ten clients accounted for 29.5% and 39.1% of net revenues, respectively, during the year ended December 31, 2013, compared to 36.1% and 45.5% respectively, on a pro forma basis in 2012.

Gross Profit and Gross Margin

Gross profit was $193.5 million for the year ended December 31, 2013, compared to $124.4 million for the full year 2012. Gross margin was 28.9% during the year ended December 31, 2013.

Operating Expenses

Total operating expenses were $182.7 million for the year ended December 31, 2013 compared to $122.5 million for the full year 2012. Operating expenses for the full year ended December 31, 2013 included $7.0 million ofmerger and integration related costs, mainly including professional fees, severance costs, facilities and system integration expenses, and $7.4 million of privatization-related costs, mainly including professional fees.

Operating Income and Operating Margin

Operating income for the full year ended December 31, 2013 was $10.9 million, compared to an operating income of $2.0 million for the full year 2012. Non-GAAP operating income for the full year ended December 31, 2013 was $58.4 million, as compared to $46.4 million for the full year 2012.

Operating margin was 1.6% for the full year ended December 31, 2013, and non-GAAP operating margin was 8.7% for the full year ended December 31, 2013.

Net Income and Net Income per ADS

Net income was $7.8 million for the full year ended December 31, 2013, compared to net income $2.6 million for the full year 2012. Non-GAAP net income was $54.2 million for the full year ended December 31, 2013, compared to $45.0 million for the full year 2012. Non-GAAP diluted net income per ADS was $0.64 for the full year ended December 31, 2013, compared to $0.91 for the full year 2012.

Recent Development

Upon the unanimous recommendation of a special committee of the Company's board of directors consisting of independent directors and the approval of the Company's board of directors, on October 17, 2013, the Company announcedthat it entered into a definitive merger agreement ("Merger Agreement") with a Consortium led by funds managed or advised by Blackstone (as defined below), including (i) Blackstone, (ii) certain members of the Company's management comprising of Chris Chen, the Company's non-executive chairman and Tiak Koon Loh, the Company's chief executive officer and several other senior managers (the "Management") and (iii) GGV Capital and its affiliates ("GGV") (collectively, the "Buyer Consortium").

The Merger Agreement provides that at the completion of the acquisition, the shareholders of the Company will receive US$7.30 per common share (a "Share") or US$7.30 per American depositary share (an "ADS") of the Company (the "Transaction"). The price per Share and per ADS represents a premium of 39% over the Company's closing price of US$5.26 per ADS on May 17, 2013, the last trading day prior to the Company's announcement on May 20, 2013 that it had received a "going private" proposal from a consortium led by Blackstone, and a premium of 35% to the volume-weighted average closing price of the ADSs during the 30 trading days prior to May 20, 2013.

If the Merger closes pursuant to the Merger Agreement, the Company will become a privately-held company and its ADSs would cease to be listed on the Nasdaq Global Select Market. The Transaction is subject to various closing conditions, including a condition that the Merger Agreement be approved by an affirmative vote of shareholders representing two-thirds or more of the Shares present and voting in person or by proxy as a single class at a meeting of the Company's shareholders convened to consider the approval of the Merger Agreement and the Transaction.  

The Company has prepared and filed with the U.S. Securities and Exchange Commission (the "SEC") a transaction statement on Schedule 13E-3 and amendments thereto, which included a proxy statement of the Company. The Schedule 13E-3 and its amendments included a description of the Merger Agreement and contained other important information about the Transaction, the Company and other participants in the Transaction.

On January 30, 2014, the Company announced that it has called an extraordinary general meeting of shareholders, to be held at 10:00 a.m. (Beijing Time) on Thursday, March 6, 2014, at the Company's offices at Building C-4, No. 66 Xixiaokou Road, Haidian District, Beijing 100192, the People's Republic of China, to consider and vote on, among other things, the proposal to authorize and approve the Merger Agreement, the plan of merger and the transactions contemplated thereby. Shareholders of record as of the close of business in the Cayman Islands on Wednesday, February 12, 2014 will be entitled to vote at the extraordinary general meeting.

Conference Call

The Company will host a corresponding conference call and live webcast to discuss the results at 8:00 PM Eastern Standard Time (EST) on Thursday, February 27, 2014 (9:00 AM Beijing/Hong Kong time, Friday, February 28, 2014). Please dial-in five minutes prior to the call to register and receive further instruction.

The dial-in details for the live conference call are as below:

- U.S. Toll Free Dial-in Number: +1.866.519.4004
- International Dial-in Number: +65.6723.9381
- Hong Kong Dial-in Number: +852.2475.0994
Passcode: 99091909

The conference call will be available live via webcast on the Investors section of Pactera's website at http://ir.pactera.com. The archive replay will be available on Pactera's website shortly after the call.

A dial-in replay of the conference call will be available until March 06, 2014:

- U.S. Toll Free Dial-in Number: +1.855.452.5696
- International Dial-in Number: + 61.2.8199.0299
Passcode: 99091909

About Pactera

Pactera Technology International Ltd. (NASDAQ: PACT), formed by a merger of equals between HiSoft Technology International Limited and VanceInfo Technologies Inc., is a global consulting and technology services provider strategically headquartered in China. Pactera provides world-class business / IT consulting, solutions, and outsourcing services to a wide range of leading multinational firms through a globally integrated network of onsite and offsite delivery locations in China, the United States, Europe, Australia, Japan, Singapore, Malaysia, Mauritius and Switzerland. Pactera's comprehensive services include business and technology advisory, enterprise application services, business intelligence, application development & maintenance, mobility, cloud computing, infrastructure management, software product engineering & globalization, and business process outsourcing.

For more information about Pactera, please visit www.pactera.com.

About Blackstone

The Blackstone Group L.P. (together with its affiliates, "Blackstone") is one of the world's leading investment and advisory firms, with 25 offices around the world. Through its different investment businesses, as of December 31, 2013, Blackstone had total assets under management of approximately US$266 billion, including US$65.7 billion in private equity funds. Through December 31, 2013, Blackstone's private equity funds have invested approximately US$41 billion in 177 transactions in a variety of industries and geographies. Blackstone's private equity funds currently manage a global portfolio of investments in 72 companies, which in aggregate combine to represent over US$86 billion of revenues and over 595,000 employees. Our current global investment fund, Blackstone Capital Partners VI, is one of the largest private equity funds in the world with committed capital of US$16.2 billion.

Safe Harbor Statement

This news release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements, as well as the consideration of the going private proposal and the impact on the Company resulting from the success or failure of that proposal. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Pactera's control, which may cause Pactera's actual results, performance or achievements to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, but are not limited to, the Company's dependence on a limited number of clients for a significant portion of its revenues, uncertainty relating to its clients' forming or plan to form joint venture with the Company's competitors, the economic slowdown in its principal geographic markets, the quality and portfolio of its service lines and industry expertise, the availability of a large talent pool in China and inflation of qualified professionals' wages, the PRC government's investment in infrastructure construction and adoption of various incentives in the IT service industry, the uncertainties as to how the Company's shareholders will vote at the meeting of shareholders, the possibility that competing offers will be made, the possibility that debt financing may not be available, the possibility that various closing conditions for the proposed going-private transaction may not be satisfied or waived, and other risks and uncertainties discussed in the Schedule 13E-3 transaction statement and the proxy statement filed by the Company.Further information regarding these and other risks, uncertainties or factors is included in Pactera's filings with the U.S. Securities and Exchange Commission. All information provided in this news release is as of the date of this news release, and Pactera does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. 

About Non-GAAP Financial Measures

To supplement Pactera's consolidated financial results presented in accordance with GAAP, Pactera uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE, change in fair value of contingent consideration payable for business acquisition, compensation expenses related to acquisition and impairment of assets held for sale. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP or as being comparable to results reported or forecasted by other companies. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP Financial Measures to Comparable GAAP Measures" and "Reconciliations of Forward-Looking Guidance for non-GAAP Financial Measures to Comparable GAAP Measures" set forth at the end of this earnings release.

Pactera believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance by excluding certain expenses and expenditures that may not be indicative of its operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance and when planning and forecasting future periods. A limitation of using non-GAAP net income and non-GAAP diluted EPS is that these non-GAAP measures exclude the share-based compensation charges, amortization of acquired intangible assets and land use right, merger-related transaction and integration costs, privatization-related costs, gain on disposal of VIE and change in fair value of contingent consideration payable for business acquisition, compensation expenses related to acquisition and impairment of assets held for sale that have been and will continue to be, for the foreseeable future, a significant recurring expense in the business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are comparable to non-GAAP financial measures. The reconciliations of the forward-looking guidance for non-GAAP financial measures to the most directly comparable GAAP financial measures in the accompanying table include all information reasonably available to Pactera at the date of this earnings release.


PACTERA TECHNOLOGY INTERNATIONAL LTD.

Condensed Consolidated Balance Sheets (Unaudited)

(US dollars in thousands, except share data)








December 31, 2013


December 31, 2012






ASSETS





Current Assets





Cash and cash equivalents


148,518


143,714

Restricted cash


1,067


6,112

Term deposits


41,724


58,485

Short-term investment


-


1,765

Accounts receivable, net


246,450


230,693

Assets held for sale


2,589


-

Other current assets


26,448


37,435

Total current assets


466,796


478,204






Property, plant and equipment, net


95,831


67,607

Goodwill and intangible assets, net


146,834


157,962

Other long-term assets


35,416


33,833

Total assets


744,877


737,606






LIABILITIES AND EQUITY





Current liabilities


180,151


163,152

Other liabilities


14,453


32,130

Total liabilities


194,604


195,282

Total shareholder's equity


550,273


542,324

Total liabilities and equity


744,877


737,606






Note:





 As of December 31,2013, there were 85,503,321 common shares (85,503,321 ADSs) issued and outstanding. 

 As of December 31,2012, there were 88,312,068 common shares (88,312,068 ADSs) issued and outstanding.






Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.

 


PACTERA TECHNOLOGY INTERNATIONAL LTD.

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,


2013


2012


2013


2012









Net revenues

181,530


142,202


670,019


359,031

Cost of revenues

(123,126)


(94,589)


(476,496)


(234,602)

Gross profit

58,404


47,613


193,523


124,429









Operating expenses

(44,580)


(64,364)


(182,671)


(122,472)

Income (Loss) from operations

13,824


(16,751)


10,852


1,957









Other net income

1,065


709


2,196


3,597

Gain on disposal of variable interest entity

-


-


305


-

Exchange difference

177


(788)


(616)


(1,042)

Net income (loss) before income tax benefit (expenses)

15,066


(16,830)


12,737


4,512









Income tax (expenses) benefit  

(7,228)


2,359


(4,968)


(1,210)

Income (loss) before earnings in equity method investment

7,838


(14,471)


7,769


3,302









Earnings in equity method investment

-


23


68


23

Income (Loss) after earning in equity method investment

7,838


(14,448)


7,837


3,325









Add: Net profit attributable to noncontrolling interest

-


(69)


-


(735)

Net income (loss) attributable to PacteraTechnology International Ltd.








7,838


(14,517)


7,837


2,590









Net income (loss) per share








Basic

0.10


(0.22)


0.10


0.05

Diluted

0.09


(0.22)


0.09


0.05









Weighted average shares used in calculating net income per
common share








Basic

81,777,592


66,234,854


81,942,795


47,547,307

Diluted

85,285,218


66,234,854


84,953,046


49,444,160









Net income (loss) per ADS








Basic

0.10


(0.22)


0.10


0.05

Diluted

0.09


(0.22)


0.09


0.05









Weighted average ADS used in calculating net income per ADS








Basic

81,777,592


66,234,854


81,942,795


47,547,307

Diluted

85,285,218


66,234,854


84,953,046


49,444,160









Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.




PACTERA TECHNOLOGY INTERNATIONAL LTD.


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


(US dollars in thousands)












Three months ended December 31,


Year ended December 31,



2013


2012


2013


2012










Net income (loss)

7,838


(14,448)


7,837


3,325

Other comprehensive income, net of tax:









Change in cumulative foreign exchange translation adjustment

2,462


946


5,846


2,460

Comprehensive income

10,300


(13,502)


13,683


5,785










Less: Comprehensive income attributable to noncontrolling interest








-


(69)


-


(742)

Comprehensive income attributable to Pactera Technology International Ltd.








10,300


(13,571)


13,683


5,043

 


PACTERA TECHNOLOGY INTERNATIONAL LTD.



Condensed Consolidated Statements of Cash flowsUnaudited 



(In U.S. dollars in thousands)


















Three months ended December 31,


Year ended Dercemer 31,




2013


2012


2013


2012

Cash flows from operating activities:











Net income (loss)



7,838


(14,448)


7,837


3,325


Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:







Allowance for doubtful accounts



134


4,851


343


5,153



Loss on disposal of property, plant and equipment



293


155


4,788


103



Depreciation



3,550


2,709


13,670


6,850



Change in fair value of foreign-currency forward contract



29


43


(3)


18



Amortization of intangible assets



2,528


2,295


10,434


6,058



Amortization of land use right



128


71


509


71



Impairment of intangible assets



-


5,515


-


5,515



Impairment of assets held for sale



266


-


266


-



Gain on disposal of VIE



-


-


(305)


-



Share-based compensation expenses



5,245


5,841


22,858


11,064



Changes in fair value of contingent consideration payable for M&A

(2,104)


(776)


(1,164)


(659)



Earnings in equity method investment



-


(23)


(68)


(23)


Changes in operating assets and liabilities:












Accounts receivable



25,979


10,523


(12,635)


(12,278)



Other current assets



(1,338)


757


(3,085)


(1,374)



Other assets



557


237


495


(697)



Accounts payable



657


(938)


2,742


(3,459)



Other liabilities



22,746


16,478


14,150


16,658

Net cash provided by operating activities



66,508


33,290


60,832


36,325













Cash flows from investing activities:











Term deposits



(10,582)


(7,232)


16,762


(1,908)


Short-term investment



16,340


(1,764)


1,765


(1,764)


Purchase of property, plant and equipment



(2,776)


(2,219)


(9,414)


(5,600)


Purchase of buliding and land use right



(3,323)


(9,126)


(18,298)


(15,633)


Restricted cash



258


(2,234)


5,048


(3,022)


Cash received from merger with VanceInfo



-


31,717


-


31,717


Deferred and contingent consideration paid for business acquisitions



(1,175)


(2,321)


(3,921)


(9,554)

Net cash (used in) provided by investing activities



(1,258)


6,821


(8,058)


(5,764)













Cash flows from financing activities:











Repayment of bank loan



-


(1)


-


(477)


Proceeds from issuance of common share
    under employee option plan



1,325


589


4,414


1,988


Deferred and contingent consideration paid for business acquisitions



(1,327)


-


(22,661)


(3,047)


Repurchase of common share 



-




(30,000)



Net cash (used in) provided by financing activities



(2)


588

-

(48,247)


(1,536)













Effect of exchange rate changes 



245


528


277


833













Net  increase  in cash and cash equivalents



65,493


41,227

-

4,804


29,858

Cash and cash equivalens at beginning of period



83,025


102,487


143,714


113,856













Cash and cash equivalents at end of period



148,518


143,714


148,518


143,714

 


PACTERA TECHNOLOGY INTERNATIONAL LTD.



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,




2013


2012



2013


2012














GAAP operating income (loss) 

13,824


(16,751)



10,852


1,957



GAAP operating margin (loss) 

7.6%


(11.8)%



1.6%


0.6%














Adjustments: 











 - Share-based compensation

5,245


5,841



22,858


11,064



 - Amortization of acquired intangible assets

2,528


2,295



10,434


6,058



 - Write-down of trademarks due to re-branding

-


5,515



-


5,515



 - Change in fair value of contingent
consideration payable for M&A

(2,104)


(776)



(1,164)


(659)



 - Compensation expenses
related to acquisition

78


87



323


174



 - Merger-related transaction and integration costs

-


19,827



6,954


22,215



 - Privatization-related costs

3,108


-



7,359


-



 - Impairment of assets held for sale

266


-



266


-



 - Land use right amortization expense

128


71



509


71














Non-GAAP operating income

23,073


16,109



58,391


46,395



Non-GAAP operating margin 

12.7%


11.3%



8.7%


12.9%

























GAAP net income (loss) 

7,838


(14,517)



7,837


2,590



GAAP net margin (loss) 

4.3%


(10.2)%



1.2%


0.7%














Adjustments: 











 - Share-based compensation

5,245


5,841



22,858


11,064



 - Amortization of acquired intangible assets

2,528


2,295



10,434


6,058



 - Write-down of trademarks due to re-branding

-


5,515



-


5,515



 - Change in fair value of contingent consideration payable for M&A

(2,104)


(776)



(1,164)


(659)



 - Compensation expenses
 related to acquisition

78


87



323


174



 - Merger-related transaction and integration costs, net of tax effect

-


17,837



6,039


20,225



 - Privatization-related costs

3,108


-



7,359


-



 - Gain on disposal of variable interest entity

-


-



(305)


-



 - Impairment of assets held for sale

266


-



266





 - Land use right amortization expense

128


71



509


71














Non-GAAP net income

17,087


16,353



54,156


45,038



Non-GAAP net margin

9.4%


11.5%



8.1%


12.5%

























Non-GAAP net income per ADS











Basic

0.21


0.25



0.66


0.95



Diluted

0.20


0.24



0.64


0.91














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











Basic

81,777,592


66,234,854



81,942,795


47,547,307



Diluted

85,285,218


68,514,064



84,953,046


49,444,160














GAAP net income (loss) per ADS











Basic

0.10


(0.22)



0.10


0.05



Adjustments: 











 - Share-based compensation

0.07


0.09



0.27


0.23



 - Amortization of acquired intangible assets

0.03


0.04



0.13


0.13



 - Write-down of trademarks due to re-branding

-


0.08



-


0.12



 - Change in fair value of contingent consideration payable for M&A

(0.03)


(0.01)



(0.01)


(0.01)



 - Merger-related transaction and integration costs, net of tax effect

-


0.27



0.07


0.43



 - Privatization-related costs

0.04


-



0.09


-



 - Gain on disposal of variable interest entity

-


-



-


-



 - Impairment of assets held for sale

-


-



-


-



 - Land use right amortization expense

-


-



0.01


-



Non-GAAP net income per ADS











Basic

0.21


0.25



0.66


0.95














GAAP net income (loss) per ADS











Diluted

0.09


(0.22)



0.09


0.05



Adjustments: 











 - Share-based compensation

0.06


0.09



0.27


0.22



 - Amortization of acquired intangible assets

0.03


0.03



0.12


0.13



 - Write-down of trademarks due to re-branding

-


0.08



-


0.11



 - Change in fair value of contingent consideration payable for M&A

(0.02)


(0.01)



(0.01)


(0.01)



 - Merger-related transaction and integration costs, net of tax effect

-


0.27



0.07


0.41



 - Privatization-related costs

0.04


-



0.09


-



 - Gain on disposal of variable interest entity

-


-



-


-



 - Impairment of assets held for sale

-


-



-





 - Land use right amortization expense

-


-



0.01


-



Non-GAAP net income per ADS











Diluted

0.20


0.24



0.64


0.91













Effective on November 9, 2012, the Company adjusted the ratio of its ADSs to common shares that effectively resulted in a 1:1.3622 split for its ADSs. All number of shares and earnings per ADS figures in this announcement give effect to the forgoing ADS to share ratio change.



Unaudited historical
consolidated net revenues
of Pactera for the three
months ended December
31, 2013

Unaudited historical
consolidated net revenues
of Pactera for the three
months ended December
31, 2012

Unaudited historical
consolidated net revenues
of  VanceInfo for the
period from October
1, 2012 to November
8, 2012

Unaudited Pro forma
consolidated net revenues
for the three months
ended December 31, 2012













Proforma  Net Revenue by Service Lines






IT Services


117,679

85,328

20,842

106,170

 - CPS


48,010

31,849

4,415

36,264

 - ADM


69,669

53,479

16,427

69,906

R&D Services


60,518

54,464

14,447

68,911

BPO


3,333

2,410

1,853

4,263

Total


181,530

142,202

37,142

179,344




-



Proforma  Net Revenue by Industry






High Tech


96,255

80,321

23,919

104,240

BFSI


58,685

39,894

7,541

47,435

Manufacturing


21,928

21,624

5,365

26,989

Others


4,662

363

317

680

Total


181,530

142,202

37,142

179,344







Proforma  Net Revenue by Location of Client's Headquarter




United States


68,953

55,361

11,903

67,264

Greater China


73,444

53,848

18,141

71,989

Europe


17,006

10,262

3,459

13,721

Japan


13,040

16,615

1,996

18,611

Asia South


9,087

6,116

1,643

7,759

Total


181,530

142,202

37,142

179,344







Note: 






The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012  is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012.  No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event.  The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods.  Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations.

For the pro forma net revenues for the three months ended December 31, 2012, it combined the unaudited historical consolidated net revenues of the former Hisoft and former VanceInfo for the three months ended December 31, 2012. 









Unaudited historical
consolidated net revenues
of Pactera for the year
ended December 31, 2013

Unaudited historical
consolidated net revenues
of Pactera for the year
ended December 31, 2012

Unaudited historical
consolidated net revenues
of  VanceInfo for the p
eriod from January
1, 2012 to November
8, 2012

Unaudited Pro forma
consolidated net revenues
for the year ended
December 31, 2012







Proforma  Net Revenue by Service Lines






IT Services


398,915

212,448

154,810

367,258

 - CPS


147,859

79,605

38,604

118,209

 - ADM


251,056

132,843

116,206

249,049

R&D Services


259,606

144,173

147,617

291,790

BPO


11,498

2,410

11,808

14,218

Total


670,019

359,031

314,235

673,266







Proforma  Net Revenue by Industry






High Tech


388,674

194,465

217,048

411,513

BFSI


181,732

102,328

55,264

157,592

Manufacturing


82,634

49,909

34,692

84,601

Others


16,979

12,329

7,231

19,560

Total


670,019

359,031

314,235

673,266







Proforma  Net Revenue by Location of Client's Headquarter




United States


263,059

154,969

106,101

261,070

Greater China


259,489

104,222

153,259

257,481

Europe


63,151

24,375

32,353

56,728

Japan


50,727

58,010

14,040

72,050

Asia South


33,593

17,455

8,482

25,937

Total


670,019

359,031

314,235

673,266







Note: 






The accompanying unaudited pro forma net revenues for the twelve months ended December 31, 2012  is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2012.  No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event.  The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods.  Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company's future consolidated results of operations.
 
For the pro forma net revenues for the twelve months ended December 31, 2012, it combined the unaudited historical consolidated net revenues of the former Hisoft and former VanceInfo for the twelve months ended December 31, 2012. 

For further information, please contact:

Tracy Zhou
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-5987-5138
E-mail: [email protected]

SOURCE Pactera Technology International Ltd.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
DevOps Summit 2015 New York, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long development cycles that produce software that is obsolete...
WebRTC defines no default signaling protocol, causing fragmentation between WebRTC silos. SIP and XMPP provide possibilities, but come with considerable complexity and are not designed for use in a web environment. In his session at @ThingsExpo, Matthew Hodgson, technical co-founder of the Matrix.org, discussed how Matrix is a new non-profit Open Source Project that defines both a new HTTP-based standard for VoIP & IM signaling and provides reference implementations.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
SYS-CON Events announced today Isomorphic Software, the global leader in high-end, web-based business applications, will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Isomorphic Software is the global leader in high-end, web-based business applications. We develop, market, and support the SmartClient & Smart GWT HTML5/Ajax platform, combining the productivity and performance of traditional desktop software ...
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from ha...
"SAP had made a big transition into the cloud as we believe it has significant value for our customers, drives innovation and is easy to consume. When you look at the SAP portfolio, SAP HANA is the underlying platform and it powers all of our platforms and all of our analytics," explained Thorsten Leiduck, VP ISVs & Digital Commerce at SAP, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
SAP is delivering break-through innovation combined with fantastic user experience powered by the market-leading in-memory technology, SAP HANA. In his General Session at 15th Cloud Expo, Thorsten Leiduck, VP ISVs & Digital Commerce, SAP, discussed how SAP and partners provide cloud and hybrid cloud solutions as well as real-time Big Data offerings that help companies of all sizes and industries run better. SAP launched an application challenge to award the most innovative SAP HANA and SAP HANA...
Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and asse...
SYS-CON Events announced today that Gridstore™, the leader in hyper-converged infrastructure purpose-built to optimize Microsoft workloads, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Gridstore™ is the leader in hyper-converged infrastructure purpose-built for Microsoft workloads and designed to accelerate applications in virtualized environments. Gridstore’s hyper-converged infrastructure is the ...
What do a firewall and a fortress have in common? They are no longer strong enough to protect the valuables housed inside. Like the walls of an old fortress, the cracks in the firewall are allowing the bad guys to slip in - unannounced and unnoticed. By the time these thieves get in, the damage is already done and the network is already compromised. Intellectual property is easily slipped out the back door leaving no trace of forced entry. If we want to reign in on these cybercriminals, it's hig...
SYS-CON Events announced today that Cloudian, Inc., the leading provider of hybrid cloud storage solutions, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Cloudian, Inc., is a Foster City, California - based software company specializing in cloud storage software. The main product is Cloudian, an Amazon S3-compliant cloud object storage platform, the bedrock of cloud computing systems, that enables c...