Camelot Information Systems Inc (CIS)
Q3 2012 Earnings Call
December 13, 2012 8:00 pm ET
John Harmon - CFA, Sr. Account Manager
Simon Ma - Chief Executive Officer
Franklin King - Interim Chief Financial Officer
Donald Madigan - Garden State Securities
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Now, I would like to turn the presentation over to your host for today's call, Mr. John Harmon, Account Manager at CCG, Investor Relations. Please proceed, sir.
Thank you, Denise. Good evening to everyone and the U.S. and good morning to everyone in Asia. Welcome to Camelot Information Systems' third quarter 2012 earnings conference call.
With us today are Camelot's Chairman and CEO, Mr. Simon Ma and Franklin King, Interim Chief Financial Officer.
Before I turn the call over to Mr. Ma, I would like to remind our listeners that management's remarks in this call contains certain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.
Actual results may differ from those discussed today due to such risk, but not limited to future products and plans, customer relationships, competitive pressures, the IT spending environment and general economic conditions and other information detailed from time-to-time in the company's filings future filings with the United States Securities and Exchange Commission.
Although the company believes that the expectations of such forward looking statements are reasonable, there is no assurance that such expectations will prove to be correct.
As a reminder, GAAP-based measurements are described in the earnings release and used in preparing the company's financial statements. In the following discussion, we will refer to adjusted figures as they more accurately represents the company's business activities without the non-operational impact from acquisition and share-based compensation and amortization of intangibles.
Specifically, adjusted figures exclude amortization expense of acquired intangible assets, changes in fair value of contingent consideration for acquisition, goodwill and impairment charges and non-cash share-based compensation expense. In addition, any projections as for the company's future performance represent management's estimates as of today Thursday, December 13, 2012.
Camelot assumes no obligation to update these projections in the future as market conditions change. For those of you who are unable to listen to the entire call at this time, there will be a replay of the call available for the next week and the details are available in the earnings release that was issued this evening.
Now, it's my pleasure to turn the call over to Camelot's Chairman and CEO, Simon Ma. Simon?
Thank you, John. Hello, everyone and thank you for joining us on our third quarter 2012 earnings conference call. I would like to offer some comments on our performance in the third quarter and I will offer comments on business opportunities for Camelot.
Although we missed our financial targets for the third quarter, the revenue shortfall was largely caused by external conditions. Camelot's business remains relatively solid in a soft economical environment.
We believe, we have not lost our market share rather we have fared better than competitors as we are a market leader. First, I would like to discuss our revenue performance for the quarter. I am sure that most of you are aware of the once-a-decade leadership change in China, in which a new generation of leaders assume power has also had an effect on managed date on the companies, which also experienced a management transition and many of these companies are our customers.
Although we anticipated this transition in general, one FIS business unit experienced delays in contract signing due to the leadership transition and we expect the delay to continue through the fourth quarter, therefore revenues came in lighter than our guidance, which flowed through our income statement leading to a lower than expected adjusted net income. The good news is that work on this project have been completed and we expect the contract to be signed in the fourth or first quarter next year. Despite the revenue shortfall, FIS revenues were up nearly 59% year-over-year and up slightly from the second quarter.
Second, I would like to discuss the impact of the slowing China economy on our business. Although, many economists and pundits have announced the bottom out of the Chinese economy, we continue to see softness in our customer base. This is evidenced the modest 1.8% growth in revenue in our EAS business line. Part of the slowness is due lower revenue in the resources energy sector, which was also influenced by the political transition and growth was also much more modest among our manufacturing and automotive customers.
Halfway through the fourth quarter, we continue to see a soft economic environment which we expect to persist entering next year. We believe our business remains fundamentally solid as we continue to strengthen our market position and market leadership and we expect to sign the delayed FIS contract in the fourth or first quarter next year.
We continue to make adjustment to our organization to streamline the entire process of service delivery. Our third quarter results show the early benefits of our actions taken early this year to focus the company on integration of our business. This year, we have completed building the backend functions of our new FIS subsidiary and we look forward to transferring the customer facing function early next year.