Isoftstone Holdings (NYSE:ISS)

First quarter 2013 Financial results

• Net revenues increased 11.0% to $95.9 million in the first quarter 2013 from $86.3 million in the first quarter 2012.
• Gross profit increased 11.1% to $30.9 million in the first quarter 2013 from $27.8 million in the first quarter 2012.
• Net income decreased 9.9% to $3.0 million in the first quarter 2013 from $3.3 million in the first quarter 2012.
• Non-GAAP net income (note 1) decreased 23.8% to $5.6 million in the first quarter 2013 from $7.3 million in the first quarter 2012.
• Diluted earnings per American Depositary Share ("ADS") were $0.05 in the first quarter 2013 compared with $0.06 in the first quarter 2012. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.10 in the first quarter 2013 compared with $0.12 in the first quarter 2012.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "We are pleased with the financial results we achieved during the first quarter of 2013. Net revenues for the quarter were $96 million, up 11% from the same quarter last year. Both revenues and net income were in line with our expectation.

"During the next three quarters of 2013, we will continue to expand our business drivers, work aggressively to increase margins and cash flow, and invest in emerging technologies, like mobile, big data, and cloud computing, to help clients accelerate their business transformations.

"Although the market continues to be challenging, our strategy remains focused on opportunities that should create long-term growth and value. We expect to create satisfied clients, higher employee performance, and greater value for shareholders in 2013 and in the years ahead."

Outlook for the second quarter 2013 and year 2013

For the second quarter 2013, iSoftStone expects to achieve the following targets:

• Net revenues for the second quarter 2013 to be at least $108 million.
• Net income for the second quarter 2013 to be at least $4.8 million.
• Non-GAAP net income for the second quarter 2013 to be at least $8 million.
• Non-GAAP diluted earnings per ADS for the second quarter 2013 to be at least $0.14, assuming 59 million average ADSs will be outstanding in the second quarter 2013. One ADS represents 10 ordinary shares.

For the year 2013, iSoftStone expects to achieve the following targets:

• Net revenues in 2013 to be at least $467 million.
• Net income in 2013 to be at least $28 million.
• Non-GAAP net income in 2013 to be at least $41 million.
• Non-GAAP diluted earnings per ADS in 2013 to be at least $0.68, assuming 60 million average ADSs will be outstanding in 2013. One ADS represents 10 ordinary shares.

The above quarterly and annual outlook for net income reflects an estimated effective income tax rate of 15% and the contractual allocation of all ISST profits to iSoftStone in 2013.

BEIJING, April 23, 2013 /PRNewswire/ -- iSoftStone Holdings Limited ("iSoftStone," NYSE: ISS), a leading China-based IT services and solutions provider, and Jiangxi Ganyue Expressway Co., Ltd. ("Ganyue Expressway") today announced a collaboration to build a smart transportation system for China's Jiangxi Province. Huang Zheng, President of Ganyue Expressway, General Manager Tan Shengguang, Deputy General Manager Qi Zhiping, and Huang Li, Executive Vice President of iSoftStone officially launched the Ganyue Expressway IT infrastructure development program on March 25th at the project launching ceremony.

Ganyue Expressway is principally engaged in the operation of expressways and large scale engineering construction projects in China, and is the only publicly listed company in the highway industry in Jiangxi. The smart transportation system that iSoftStone and Ganyue Expressway will build includes a data center, five internal control management systems, five operation management systems, and internal and external web portals. This smart system will help Ganyue Expressway increase competitiveness by achieving business innovation, optimizing system architecture, improving efficiency, and reducing operation costs.

"It is a pleasure to work with iSoftStone, a pioneer in the IT services industry, and hit the ground running with the development of our IT infrastructure program," said Huang Zheng, Chairman of Ganyue Expressway. "We believe the opportunities and experiences afforded by this program are immense for both Ganyue Expressway and iSoftStone."

iSoftStone provides consultation and technical support for government-led construction and smart city development projects. Its integrated smart city solution delivers an environmentally friendly and economically efficient development strategy for the modern Chinese city.

Huang Li, Executive Vice President of iSoftStone said, "iSoftStone has already accumulated a wealth of experience in smart city solutions, and through diligent practice and exploration we have formed a highly intelligent, tailored solution for smart transportation." Mr. Huang added, "Jiangxi is experiencing rapid rates of urbanization, and a rising population, currently standing at over 40 million people. Streaming the province's transportation system is imperative to ease pressure on the road network. We will endeavor to assist Ganyue Expressway with our most-advanced technology and know-how for their IT infrastructure development program to help Jiangxi form a smarter transportation system."

"At iSoftStone, we believe China's future growth will be closely linked to the development of information and communication technologies. With an ambition to create a better mode of living for the Chinese people, we are committed to investing in R&D and continue to offer our strong support in the development of IT infrastructure for governments, enterprises and the transportation sector. Our ultimate goal is to help build more smart cities in China to fully realize our smart city vision, one that harnesses the latest technological advancements as they become embedded into the physical spaces of cities.

Fourth Quarter 2012

• Net revenues increased 21.4% to $104.2 million in the fourth quarter 2012 from $85.8 million in the fourth quarter 2011.
• Gross profit increased 21.0% to $36.9 million in the fourth quarter 2012 from $30.5 million in the fourth quarter 2011.
• Net income in the fourth quarter 2012 increased 235.1% to $7.7 million from $2.3 million in the fourth quarter 2011.
• Non-GAAP net income (note 1) was $11.2 million both in the fourth quarter 2012 and in the fourth quarter 2011.
• Diluted earnings per American Depositary Share ("ADS") were $0.13 in the fourth quarter 2012 compared with$0.04 in the fourth quarter 2011. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.19 both in the fourth quarter 2012 and in the fourth quarter 2011.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "I am very delighted with the solid results we achieved during the fourth quarter and full year of 2012. The quarter met our expectation with stabilized margins and improved operating cash flow.

"Overall, 2012 was a solid year. Despite of the challenges for our business and the industry, we managed to respond effectively, by securing major partnerships such as Huawei JV, optimizing business mix, expanding key verticals, improving operational efficiencies, and boosting capabilities in emerging technologies and domain expertise.

"Going forward, although facing challenges of weakening overseas markets, constant cost pressure, and demand shift in emerging technologies, we will continue to execute our strategy, including expanding our business drivers, focusing on cash flow and margin improvement, and investing in technical competencies and domain expertise to support future growth. With the sound foundation strengthened in 2012, we are confident that our growth momentum will continue, and business quality will further improve in 2013."

Outlook for the first quarter of 2013 and year 2013

For the first quarter 2013, iSoftStone expects to achieve the following targets:

• Net revenues for the first quarter 2013 to be at least $93.8 million.
  
• Net income for the first quarter 2013 to be at least $2.4 million.
  
• Non-GAAP net income for the first quarter 2013 to be at least $5.4 million.
  
• Non-GAAP diluted earnings per ADS for the first quarter 2013 to be at least $0.09, assuming 58.5 million average ADSs will be outstanding in the first quarter 2013. One ADS represents 10 ordinary shares.

For the year 2013, iSoftStone expects to achieve the following targets:

• Net revenues in 2013 to be at least $465 million.
  
• Net income in 2013 to be at least $28 million.
  
• Non-GAAP net income in 2013 to be at least $41 million.
  
• Non-GAAP diluted earnings per ADS in 2013 to be at least $0.68, assuming 60 million average ADSs will be outstanding in 2013. One ADS represents 10 ordinary shares.

Third quarter 2012 results

• Net revenues increased 33.7% to $98.6 million in the third quarter 2012 from $73.7 million in the third quarter 2011.
• Gross profit increased 30.9% to $34.7 million in the third quarter 2012 from $26.5 million in the third quarter 2011.
• Net income in the third quarter 2012 increased 31.9% to $7.5 million from $5.7 million in the third quarter 2011.
• Non-GAAP net income (note 1) increased 14.0% to $10.4 million in the third quarter 2012 from $9.1 million in the third quarter 2011.
• Diluted earnings per American Depositary Share ("ADS") were $0.13 in the third quarter 2012 compared with$0.09 in the third quarter 2011. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.18 in the third quarter 2012 and $0.15 in the third quarter 2011.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "Although continually facing a global economic slowdown and geopolitical uncertainties, we have achieved another solid result for this quarter. Our net revenue grew at a healthy rate from last year's third quarter, and our profit margin and operating cash flow have continued to improve sequentially since our first quarter this year. All these achievements are the direct results of our successful execution of our key business strategy launched earlier this year.

"Looking forward, even though facing more challenges in the economic and geopolitical environment, such as potential escalation of the China-Japan standoff, slower economic growth in China, and deterioration of the European debt crisis, we strongly believe that if we stick to our current business strategy and execute well, we can be resilient to short-term pressure and achieve healthy long-term growth."

Outlook for the fourth quarter of 2012 and year 2012

For the fourth quarter 2012, iSoftStone expects to achieve the following targets:

• Net revenues for the fourth quarter 2012 to be at least $102.0 million.
• Net income for the fourth quarter 2012 to be at least $7.5 million.
• Non-GAAP net income for the fourth quarter 2012 to be at least $11.0 million.
• Non-GAAP diluted earnings per ADS for the fourth quarter 2012 to be at least $0.19, assuming 58.0 million average ADSs will be outstanding in the fourth quarter 2012. One ADS represents 10 ordinary shares.

For the year 2012, iSoftStone expects to achieve the following targets:

• Net revenues in 2012 to be at least $379.0 million.
• Net income in 2012 to be at least $22.0 million.
• Non-GAAP net income in 2012 to be at least $37.0 million.
• Non-GAAP diluted earnings per ADS in 2012 to be at least $0.63, assuming 58.5 million average ADSs will be outstanding in 2012. One ADS represents 10 ordinary shares.

Second Quarter 2012 Results

• Net revenues increased 37.4% to $92.0 million in the second quarter 2012 from $67.0 million in the second quarter 2011.
• Gross profit increased 22.2% to $30.2 million in the second quarter 2012 from $24.7 million in the second quarter 2011.
• Diluted earnings per American Depositary Share ("ADS") were $0.06 in the second quarter 2012 compared with $0.10 in the second quarter 2011. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.14 in the second quarter 2012 and $0.13 in the second quarter 2011.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "iSoftStone achieved solid business growth in the second quarter 2012. The vast majority of our growth was organic.

"We continued to execute our business strategies well during the quarter, including optimizing our business mix, balancing our geographic markets, focusing on our key verticals, and improving our operational efficiency.

"Importantly, our Consulting and Solutions business increased 66.8%, second quarter over second quarter. Our major markets, China and the U.S., grew well, as did our major verticals, BFSI and ETP. In some of our newly won and renewed projects, we increased contract values and billing rates and shortened payment cycles.

"We will continue to strive to improve our operating and financial efficiency to respond to the challenges of cost pressures, market competition, and global economic slowing. We believe we can achieve better performance in second half of 2012 and in the years ahead.

"As the IT outsourcing industry continues to evolve globally and consolidate in China, we continue to seek ways to grow our business and deepen our most significant client relationships. For example, we are currently in negotiations about a possible joint venture with Huawei Technologies Co., Ltd. ("Huawei"). Because the negotiations with Huawei are ongoing, no details about the possible joint venture can be disclosed. There can be no assurance that a joint venture will be consummated between iSoftStone and Huawei in the near term or at all."

Outlook for the third quarter of 2012 and full year 2012

For the third quarter 2012, iSoftStone expects to achieve the following targets:

• Net revenues for the third quarter 2012 to be at least $98.0 million.
• Net income for the third quarter 2012 to be at least $6.3 million.
• Non-GAAP net income for the third quarter 2012 to be at least $10.0 million.
• Non-GAAP diluted earnings per ADS for the third quarter 2012 to be at least $0.17, assuming 58.5 million average ADSs will be outstanding in the third quarter 2012. One ADS represents 10 ordinary shares.

For the full year 2012, iSoftStone expects to achieve the following targets:

• Net revenues in 2012 to be at least $386.5 million.
• Net income in 2012 to be at least $23.0 million.
• Non-GAAP net income in 2012 to be at least $39.0 million.
• Non-GAAP diluted earnings per ADS in 2012 to be at least $0.65, assuming 60.0 million average ADSs will be outstanding in 2012. One ADS represents 10 ordinary shares.

The above quarterly and annual outlook of net income reflects an estimated income tax rate of 14.5%.

First Quarter 2012 Results

• Net revenues increased 51.7% to $86.3 million in the first quarter 2012 from $56.9 million in the first quarter 2011.
• Gross profit increased 35.2% to $27.8 million in the first quarter 2012 from $20.5 million in the first quarter 2011.
• Net income was $3.3 million in the first quarter 2012 compared with $5.2 million in the first quarter 2011.
• Non-GAAP net income (note 1) increased 19.0% to $7.3 million in the first quarter 2012 from $6.2 million in the first quarter 2011.
• Diluted earnings per American Depositary Share ("ADS") were $0.06 in the first quarter 2012 compared with $0.09 in the first quarter 2011. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.12 in the first quarter 2012 and $0.10 in the first quarter 2011.
• Total number of employees increased 42.3% to 12,661 as of March 31, 2012 from 8,900 as of March 31, 2011.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "I am pleased to report that we have delivered another quarter of strong growth despite a challenging global economic environment.

"This is a validation of our strategy of continuously enhancing our end-to-end services capabilities, especially around Consulting and Solutions, focusing on targeted industry verticals, and maintaining geographically balanced market growth.

"For the remainder of the year, we are still seeing strong business demand and a solid sales pipeline. However, we remain vigilant about the global economic uncertainties and the slowdown of China's economic growth. We are putting greater focus on improving service quality, operation efficiency, and financial strength while continuing to invest for long-term growth."

Outlook for the second quarter of 2012 and year 2012

For the second quarter 2012, iSoftStone expects to achieve the following targets:

• Net revenues for the second quarter 2012 to be at least $90.0 million.
• Net income for the second quarter 2012 to be at least $4.3 million.
• Non-GAAP net income for the second quarter 2012 to be at least $8.2 million.
• Non-GAAP diluted earnings per ADS for the second quarter 2012 to be at least $0.14, assuming 60.0 million average ADSs will be outstanding in the second quarter 2012. One ADS represents 10 ordinary shares.

For the year 2012, iSoftStone expects the following targets:

• Net revenues in 2012 to be at least $382.0 million.
• Net income in 2012 to be at least $31.0 million.
• Non-GAAP net income in 2012 to be at least $45.0 million.
• Non-GAAP diluted earnings per ADS in 2012 to be at least $0.73, assuming 61.5 million average ADSs will be outstanding in 2012. One ADS represents 10 ordinary shares.

The above quarterly and annual outlook of net income reflects an estimated income tax rate of 17.5%.

Fourth quarter 2011 financial and operating results

• Net revenues increased 38.9% to $85.8 million in the fourth quarter 2011 from $61.8 million in the fourth quarter 2010.
• Gross profit increased 30.3% to $30.5 million in the fourth quarter 2011 from $23.4 million in the fourth quarter 2010.
• Net income was $2.3 million in the fourth quarter 2011 compared with a net loss of $3.9 million in the fourth quarter 2010.
• Non-GAAP net income (note 1) increased 26.2% to $11.2 million in the fourth quarter 2011 from $8.9 millionin the fourth quarter 2010.
• Diluted earnings per American Depositary Share ("ADS") were an income of $0.04 in the fourth quarter 2011 compared with a loss of $0.25 in the fourth quarter 2010. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS (note 1) were $0.19 in the fourth quarter 2011 and $0.18 in the fourth quarter 2010.
• Total number of employees increased 34.7% to 12,510 as of December 31, 2011 from 9,285 as ofDecember 31, 2010.

Mr. T.W. Liu, iSoftStone's Chairman and Chief Executive Officer, said, "I am very pleased with our results for both the fourth quarter and the year 2011. In the fourth quarter, we continued to grow our business in most measures, improve our operations, and optimize our cost structure. We executed our business strategy very well during the year. Net revenues in 2011 were up 44%, mostly on organic growth, non-GAAP net income was up 75% to $34.3 million from $19.6 million in 2010, and non-GAAP diluted earnings per ADS were up 33% to 57 cents from 43 cents in 2010, all clearly going in the right direction.

"Looking forward, I am confident we will continue our strong business momentum by sustaining client satisfaction, focusing on operating excellence, building new growth drivers, moving up the value chain, and deepening our penetration in key verticals. Despite facing continued global economic uncertainty and possible slower economic growth in China, plus cost inflation, we believe we can continue to achieve high business growth while improving our margin in 2012

Third Quarter 2011 Results

Second Quarter 2011 Results

First Quarter Results:

• Net revenues increased 45.0% to $56.9 million in the first quarter 2011 from $39.3 million in the first quarter 2010.
• Gross profit increased 49.2% to $20.5 million in the first quarter 2011 from $13.8 million in the first quarter 2010, representing an improved gross profit margin of 36.1% in the first quarter 2011 from 35.1% in the first quarter 2010.
• Net income in the first quarter 2011 was $5.2 million compared with $0.8 million in the first quarter 2010.
• Non-GAAP net income(1) increased 141.3% to $6.2 million in the first quarter 2011 from $2.6 million in the first quarter 2010.
• Diluted earnings per American Depositary Share ("ADS") were $0.09 in the first quarter 2011 and nil in the first quarter 2010. Each ADS represents 10 ordinary shares.
• Non-GAAP diluted earnings per ADS were $0.10 in the first quarter 2011 and $0.06 in the first quarter 2010.

Mr. Tianwen Liu, Chairman and CEO of iSoftStone, said, "We are delighted to report strong growth and solid operating results for the first quarter 2011. Revenue came in at $56.9 million, ahead of the top end of our guidance. The 45 percent year-on-year quarterly growth in net revenues was mainly organic, as we successfully increased our services to existing clients. We are particularly pleased with our increase in gross margin which came on the back of improvements in efficiency despite ongoing inflationary pressures and the seasonal slowdown in productivity due to the Chinese New Year Holiday.

For the second quarter 2011, iSoftStone expects the following measures to be within the ranges shown.

• Net revenues for the second quarter 2011: $61.0 million to $62.0 million.
• Net income for the second quarter 2011: $4.5 million to $5.0 million.
• Non-GAAP net income for the second quarter 2011: $7.0 million to $7.5 million.
• Non-GAAP diluted earnings per ADS for the second quarter 2011 to be approximately $0.11, assuming 61.1 million average ADSs will be outstanding in the second quarter 2011. One ADS represents 10 ordinary shares.

For the full year 2011, iSoftStone is revising upwards its prior guidance as shown below. We are also providing for the first time non-GAAP diluted earnings per ADS.

For the year 2011, iSoftStone expects the following measures to be within the ranges shown.

• Net revenues in 2011: $262.0 million to $277.0 million.
• Net income in 2011: $19.5 million to $21.5 million.
• Non-GAAP net income in 2011: $33.0 million to $35.0 million.
• Non-GAAP diluted earnings per ADS in 2011: $0.53 to $0.56 assuming 62.1 million average ADSs will be outstanding in 2011. One ADS represents 10 ordinary shares.

BEIJING, April 4, 2011 /PRNewswire-Asia/ -- iSoftStone Holdings Limited today announced estimated effects on its revenues from the March 11, 2011 earthquake, tsunami, and damaged nuclear power plants in Japan. iSoftStone reconfirmed its previous guidance.

Mr. Tianwen Liu, Chairman and CEO of iSoftStone, said, "Our estimated revenue from clients headquartered in Japan represents approximately 10% of our estimated 2011 total revenues. After studying the likely effects on iSoftStone from the currently known consequences of the disasters in Japan, we have determined that 2011 total revenues are likely to be reduced by less than 1% as a result of the disasters. We anticipate that the reduction would likely be absorbed by business growth from China and U.S. We are reconfirming our previous guidance for the first quarter 2011 and the year 2011.

"There are two broad reasons why the estimated reductions are relatively small. First, about 80% of the delivery work we do for companies headquartered in Japan (many of which serve global markets) is performed in China, with the balance done onsite in Japan. Therefore, we have a relatively small team in Japan, with about half of our employees located in Osaka in west Japan, and half in Tokyo. At this moment, it appears there is relatively low risk for our employees and operating locations in Japan.

"Secondly, we have received increased orders from certain technology and manufacturing customers in Japan for work to be performed in China, which is expected to partly offset the slowing in customer orders we have already seen from Japan-based clients in the financial services sector, especially at insurance companies. In some cases, the work had already been put on hold by certain customers.

"Therefore, the effect on our total revenues in first quarter 2011 is estimated to be minimal. An important unknown are the effects that the difficult problems at the damaged nuclear power plants could have in Japan. Today, those risks cannot be estimated with precision, and our customers are still assessing their outlook and possible changes in their strategies for the rest of 2011. Assuming that the situation in Japan has stabilized and does not worsen, the negative effect from currently known and unknown consequences on iSoftStone's overall operations in 2011 is estimated to be limited."

"As a global IT services provider headquartered in China, we have many links with Japan, both human and business. We extend to every citizen of Japan and everyone directly and indirectly affected by the consequences of the natural disasters our heartfelt sympathy, thoughts, and hopes for the future as the country continues the long and difficult process of recovery. Our hearts, minds, and support continue to be with you."

Fourth Quarter Highlights:

• Net revenues increased 39.3% to $61.8 million in the fourth quarter 2010 from $44.4 million in the fourth quarter 2009.
• Gross profit increased 50.6% to $23.4 million in the fourth quarter 2010 from $15.5 million in the fourth quarter 2009, representing an improved gross margin of 37.9% in the fourth quarter 2010 from 35.1% in the fourth quarter 2009.
• Non-GAAP net income(1) increased 61.2% to $8.9 million in the fourth quarter 2010 from $5.5 million in the fourth quarter 2009.
• Non-GAAP diluted EPS(1) was $0.02 per diluted share in the fourth quarter 2010 compared to $0.01 per diluted share in the fourth quarter 2009.

Mr. Tianwen Liu, Chairman and CEO of iSoftStone, said, "We are very pleased with our strong operating results and financial performance for the fourth quarter and full year 2010. Our Global+China dual market and multiple service offering strategies yielded positive responses from our clients. Almost all of our top line growth in the year was organic in our targeted industries that include Technology, Communications, BFSI and Energy, and Transportation & Public Sector. Also, our significant historical investments in sales and marketing, delivery platform, service quality and capability, management team, and employees helped drive a remarkable improvement in the quality of our revenues and margins.

For the first quarter 2011, iSoftStone expects the following measures to be within the ranges shown.

• Net revenues for the first quarter 2011: $54 million to $55 million.
• Net income for the first quarter 2011 to be approximately $1 million.
• Non-GAAP Net income for the first quarter 2011 to be approximately $5 million.
• Non-GAAP diluted EPS for the first quarter 2011 to be approximately $0.01, assuming 605 million total average shares will be outstanding in the first quarter.

For the year 2011, iSoftstone expects the following measures to be within the ranges shown.

• Net revenues for 2011: $260 million to $275 million.
• Net income for 2011: $15.5 million to $17.5 million.
• Non-GAAP net income for 2011: $32.5 million to $34.5 million.
• Non-GAAP diluted EPS for 2011: $0.05 to $0.06, assuming 621 million total average shares will be outstanding in 2011.