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Yucheng Reports Unaudited Fourth Quarter and Full Year 2011 Financial Results

February 15, 2012

BEIJING, Feb. 15, 2012 /PRNewswire-Asia-FirstCall / — Yucheng Technologies Limited (Nasdaq: YTEC) (“Yucheng,” the “Company,” “we,” “us” and “our”), a leading provider of IT solutions to the financial services industry in China, today announced unaudited financial results for the fourth quarter and full year ended December 31, 2011.

  • Fourth quarter software & solutions revenues of US$27.0 million, an increase of 43.9% year over year;
  • Fourth quarter net revenue of US$29.6 million, an increase of 35.1% year over year, and fourth quarter net revenue (Non-GAAP)(1) of US$29.7 million, an increase of 35.7% year over year;
  • Fourth quarter operating income of US3.9 million, an increase of 38.9% year over year, and fourth quarter operating income(Non-GAAP)(4) of US$4.3million, an increase of 20.0% year over year;
  • Fourth quarter operating margin of revenue of 13.1%, as compared to 12.7% in the prior year period, and fourth quarter operating margin of net revenue (Non-GAAP)(5) of 14.5%, as compared to 16.4% in the prior year period;
  • Fourth quarter net income of US$3.5 million, or US$0.17, as compared to net loss of US$1.6 million, or loss of US$0.08 per share in the prior year period, and fourth quarter net income (Non-GAAP)(6) of US$3.9 million, or US$0.20 per share, as compared to net loss of US$0.8 million, or loss of US$0.04 per share in the prior year period;
  • Full year total revenue (Non-GAAP) guidance for FY 2012 of US$90.0-92.0 million and EPS (Non-GAAP) of US$0.50.

“We concluded the fiscal year 2011 with another quarter of solid results. We achieved better revenue growth in 2011 than we originally forecasted at the beginning of the year. Looking back over the past two years, we have made steady improvements in management of our operations and turned the company towards positive growth, which is demonstrated by the excellent execution of our operations for eight consecutive quarters,” said Mr. Weidong Hong, CEO of Yucheng. “Building upon the No. 1 position in the industry, we are committed to further improving our operations and expanding the market share. We look forward to continuing the quarter over quarter of excellent execution to deliver solid and sustainable financial results.”

Fourth Quarter 2011 Financial Results

Total revenues for the fourth quarter of 2011 were US$29.6 million, an increase of 35.1% year over year and an increase of 55.1% sequentially. Net revenues (non-GAAP)( )for the fourth quarter of 2011 were US$29.7 million, an increase of 35.7% year over year and an increase of 57.1% sequentially. The year over year increase in revenues was primarily due to the strong demand for our software solutions from our customers.

Gross margin for the fourth quarter of 2011 was 42.8%, compared to 50.7% in the prior year period and 49.7% in the previous quarter. Gross margin of net revenues (non-GAAP)(2) for the fourth quarter of 2011 was 42.7%, compared to 50.9% in the prior year period and 50.2% in the previous quarter. The decrease in gross margin year over year was due mainly to the increase in labor costs, project bonus, the decrease of resale services and increased subcontracting to our strategic partner where our margin is significantly lower.

Software & solutions revenues for the fourth quarter of 2011 were US$27.0 million, an increase of 43.9% year over year and an increase of 50.2% sequentially, the latter reflecting both the inherent seasonality and buoyant demand for our software solutions.

Gross margin of the software & solutions business for the fourth quarter of 2011 was 43.0%, compared to 49.0% in the prior year period and 46.2% in the previous quarter. The decrease in the gross margin was primarily due to the increase in labor costs including additional project bonus this year and increased subcontracting to our strategic partner where our margin is significantly lower.

Platform & maintenance services revenues for the fourth quarter of 2011 were US$2.7 million, compared to US$3.2 million in the prior year period and US$1.1 million in the previous quarter. Net revenues of platform & maintenance services (non-GAAP) for the fourth quarter of 2011 were US$2.7 million, compared to US$3.1 million in the prior year period and US$0.9 million in the previous quarter.

Gross margin of platform & maintenance services business for the fourth quarter of 2011 was 40.1%, compared to 60.6% in the prior year period and 104.2% in the previous quarter. Gross margin of net revenues (non-GAAP) for platform maintenance services in fourth quarter of 2011 was 39.5%, compared to 61.8% in the prior year period. The decrease in gross margin (non-GAAP) was due mainly to the decrease of resale services.

Total operating expenses for the fourth quarter of 2011 increased 5.6% year over year and increased 21.1% sequentially to US$8.8 million. Total operating expenses (non-GAAP)(3) for the fourth quarter of 2011 increased 11.0% year over year and increased 27.3% sequentially to US$8.4 million. The year-over-year increase was attributable mainly to the increase of labor costs and the increase of research and development expenses for enhancing our research and development capability.

Income from continuing operations for the fourth quarter of 2011 was US$3.9 million, compared to US$2.8 million in the prior year period and US$2.2 million in the previous quarter. Income from continuing operations (non-GAAP) for the fourth quarter of 2011 was US$4.3 million, compared to US$3.6 million in the prior year period and US$2.9 million in the previous quarter.

Operating margin of total revenue was 13.1% for the fourth quarter of 2011, compared to 12.7% in the prior year period and 11.7% in the previous quarter. Operating margin of net revenues (non-GAAP) was 14.5% for the fourth quarter of 2011, compared to 16.4% in the prior year period and 15.4% in the previous quarter.

In the fourth quarter of 2011, net income from continuing operations was US$3.5 million, or US$0.17 per diluted share, compared to US$2.3 million, or US$0.12 per diluted share in the prior year period and US$1.9 million, or US$0.10 per diluted share in the previous quarter.

Net income from continuing operations (non-GAAP) was US$3.9 million in the fourth quarter of 2011 or US$0.20 per diluted share. Net income (non-GAAP) in the prior year period was US$3.1 million or US$0.16 per diluted share. Net income from continuing operations (non-GAAP) in the previous quarter was US$2.6 million or US$0.14 per diluted share.

In the fourth quarter of 2011, the Company recorded net income of US$3.5 million, or US$0.17 per diluted share, compared to US$-1.6 million, or US$-0.08 per diluted share in the prior year period and US$1.9 million, or US$0.10 per diluted share in the previous quarter.

Net income (non-GAAP) was US$3.9 million in the fourth quarter of 2011 or US$0.20 per diluted share. Net income (non-GAAP) in the prior year period was US$-0.8 million or US$-0.04 per diluted share. Net income (non-GAAP) in the previous quarter was US$2.6 million or US$0.14 per diluted share.

As of December 31, 2011, Yucheng had cash and cash equivalents and restricted cash totaling US$32.5 million, compared to US$18.7 million as of September 30, 2011 and US$24.5 million as of December 31, 2010. Operating cash flow in the fourth quarter of 2011 was a net inflow of US$13.3 million.

2011 Financial Results

Total revenues in 2011 were US$77.1million, an increase of 26.5% year over year. Net revenues (non-GAAP) in 2011 were US$76.9 million, an increase of 28.7% year over year. The year over year increase in revenues was primarily due to the strong demand for our software solutions from our customers.

Gross margin in 2011 was 47.0%, compared to 48.8% in 2010. Gross margin of net revenues (non-GAAP) in 2011 was 47.1%, compared to 49.8% in 2010. The decrease in gross margin year over year was due mainly to the increase in labor costs, project bonus, the decrease of resale services and increased subcontracting to our strategic partner where our margin is significant lower.

Software & solutions revenues in 2011 were US$69.2 million, an increase of 34.7% year over year. The year over year increase in software & solutions revenues was primarily due to higher demand for our software solutions. Gross margin of the software & solutions business in 2011 was 45.2%, compared to 49.8% in 2010. The decrease in the gross margin was primarily due to the increase in labor costs including additional project bonus this year and increased subcontracting to our strategic partner where our margin is significantly lower.

Platform & maintenance services revenues in 2011 were US$7.9 million, compared to US$9.6 million in 2010. Net revenues of platform & maintenance services (non-GAAP) in 2011 were US$7.7 million, compared to US$8.4 million in 2010. Gross margin of platform & maintenance services business in 2011 was 62.9%, compared to 43.3% in 2010. Gross margin of net revenues (non-GAAP) for platform maintenance services in 2011 was 64.3%, compared to 49.3% in 2010. The increase in gross margin (non-GAAP) was due mainly to the adjustment of the accrued service fee to China Financial Certification Authority (CFCA), our partner in the e-banking ASP business.

Total operating expenses in 2011 increased 15.9% year over year to US$27.9 million. Total operating expenses (non-GAAP) in 2011 increased 15.7% year over year to US$ 26.3 million. The year-over-year increase was attributable mainly to the increase of labor costs and the increase of research and development expenses for enhancing our research and development capability.

Income from operations in2011 was US$8.3 million, compared to US$5.6 million in 2010. Income from operations (non-GAAP) in 2011 was US$10.0 million, compared to US$7.0 million in 2010.Operating margin of total revenue was 10.8% in 2011, compared to 9.2% in 2010. Operating margin of net revenues (non-GAAP) was 13.0% in 2011, compared to 11.8% in 2010.

In 2011, net income from continuing operations was US$7.1 million, or US$0.36 per diluted share, compared to US$5.2 million, or US$0.27 per diluted share in 2010.Net income from continuing operations (non-GAAP) was US$8.7 million in 2011 or US$0.45 per diluted share. Net income (non-GAAP) in 2010 was US$6.6 million or US$0.35 per diluted share.

In 2011, the Company recorded net income of US$7.1 million, or US$0.36per diluted share, compared to US$0.3 million, or US$0.02 per diluted share in 2010.

Net income (non-GAAP) was US$8.7 million in 2011 or US$0.45 per diluted share. Net income (non-GAAP) in 2010 was US$1.7 million or US$0.09 per diluted share.

Operating cash flow in 2011 was a net inflow of US$6.6 million.

Business Outlook

We expect our software & solution revenues to grow 20-25% in 2012 and our platform & maintenance services revenue to decline about 10%. The gross margin of the software & solution also is anticipated to decline to 43% while the non-GAAP operating margin will be maintained at the level of 13.0%, mostly due to the fact that wage inflation pressure remains high for 2012.

For the quarter ending March 31, 2012, Yucheng expects net revenue (non-GAAP) to be approximately US$14.5 million and net income (non-GAAP) per share of US$0.01.

For the full year of 2012, Yucheng expects net revenue (non-GAAP) to be approximately US$90.0-92.0 million and net income (non-GAAP) per share of US$0.50.

                                                                            YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                               Consolidated Balance Sheets(Unaudited)
                                                                                    Dec 31, 2011 and Dec 31, 2010

                                                                                                                          2011.12.31             2010.12.31
                                                                                                                              USD                    USD

    Assets
    Current assets:
    Cash and cash equivalent                                                                                                         32,503,354             24,542,295
    Trade accounts receivable, net                                                                                                   24,977,642             29,631,881
    Costs and estimated earnings in excess of billings on uncompleted contracts                                                      28,656,123             20,030,554
    Due from related parties                                                                                                          1,261,459                894,806
    Inventories                                                                                                                         170,952                104,971
    Pre-contract costs                                                                                                                3,937,775              3,663,791
    Other current assets                                                                                                             10,899,141             10,247,008
                                                                                                                                     ----------             ----------

    Total current assets                                                                                                            102,406,446             89,115,306

    Investments under equity method                                                                                                   5,271,122              3,751,655
    Properties and equipment                                                                                                          8,800,683              7,911,764
    Less: Accumulated depreciation                                                                                                   (4,188,825)            (3,320,121)
                                                                                                                                     ----------             ----------
    Properties and equipment, net                                                                                                     4,611,858              4,591,643
    Intangible assets, net                                                                                                            4,311,542              3,761,043
    Goodwill                                                                                                                         31,130,863             28,539,659
    Deferred tax assets                                                                                                               1,513,451              1,601,666
                                                                                                                                      ---------              ---------

    Total assets                                                                                                                    149,245,282            131,360,972
                                                                                                                                    ===========            ===========

                                                                          YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                        Consolidated Balance Sheets (Unaudited continued)
                                                                                  Dec 31, 2011 and Dec 31, 2010

                                                                                                                          2011.12.31             2010.12.31
                                                                                                                              USD                    USD

    Liabilities and stockholders' equity
    Current liabilities:
    Short term loan                                                                                                                  19,037,556             12,230,661
    Obligations under capital leases                                                                                                          0                 47,493
    Trade accounts payables                                                                                                          10,143,115             11,719,297
    Billings in excess of costs and estimated earnings on uncompleted contracts                                                       6,011,312              3,359,694
    Employee and payroll accruals                                                                                                     3,101,855              2,769,520
    Dividends payable to ex-owners                                                                                                       12,218                 11,624
    Due to related parties                                                                                                              392,828                594,008
    Outstanding payment in relation to business acquisitions                                                                                  0                 18,175
    Income taxes payable                                                                                                              1,244,301              1,676,507
    Other current liabilities                                                                                                         4,349,544              6,752,550
    Deferred tax liabilities                                                                                                             77,020                125,218
                                                                                                                                         ------                -------

    Total current liabilities                                                                                                        44,369,749             39,304,747

    Deferred tax liabilities                                                                                                            487,222                269,314
                                                                                                                                        -------                -------

    Total liabilities                                                                                                                44,856,971             39,574,061

    Stockholders' equity
    Preferred stock, $0.0001 par value, authorized                                                                                    3,175,459              3,021,124
    2,000,000 shares and none issued;
    Common stock, $0.0001 par value, authorized
    60,000,000 shares; 18,560,014 shares and
    18,949,217 shares issued and outstanding as of Dec 31, 2010 and Dec 31, 2011
    Additional paid-in capital                                                                                                       64,035,200             59,482,750
    Reserves                                                                                                                          8,198,738              7,614,418
    Retained earnings                                                                                                                29,312,723             21,345,252
    Accumulated other comprehensive loss                                                                                               (505,693)              (451,892)

    Total YTEC stockholders' equity                                                                                                 104,216,427             91,011,652
                                                                                                                                    -----------             ----------

    Non-controlling interests                                                                                                           171,884                775,259
                                                                                                                                        -------                -------

    Total  stockholders' equity                                                                                                     104,388,311             91,786,911

    Liabilities and stockholders' equity                                                                                            149,245,282            131,360,972
                                                                                                                                    ===========            ===========

                                                                                       YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                                        Consolidated Statements of Income(Unaudited)

                                                                                                                                                  Three months                  Twelve months
                                                                                                                                                  Ended Dec. 31                 Ended Dec. 31
                                                                                                                                                  2011          2010          2011          2010
                                                                                                              USD                              USD           USD           USD

    Revenues:
                                               Software & solutions                                                                         26,977,082    18,743,295    69,223,079    51,383,145
                                                Platform services                                                                                    0        91,046       325,775     1,277,499
                                               Maintenance services                                                                          2,653,839     3,091,552     7,562,045     8,287,939

    Total revenues                                                                                                                          29,630,921    21,925,893    77,110,899    60,948,583

    Cost of revenues:
                                               Software & solutions                                                                       (15,371,586)    (9,550,521) (37,908,557)  (25,780,508)
                                                Platform services                                                                               41,264       (63,314)     (174,466)   (1,160,778)
                                               Maintenance services                                                                         (1,631,679)   (1,191,142)   (2,753,153)   (4,261,552)

    Total cost of revenues                                                                                                                (16,962,001)  (10,804,977)  (40,836,176)  (31,202,838)

    Gross profit                                                                                                                            12,668,920    11,120,916    36,274,723    29,745,745

    Operating expenses:
                                               Research and development                                                                       (447,672)     (367,404)   (2,455,282)   (1,590,079)
                                               Selling and marketing                                                                        (2,717,421)   (2,903,509)   (7,208,637)   (6,758,844)
                                               General and administrative                                                                   (5,625,940)   (5,057,712) (18,282,877)  (15,773,851)

    Total operating expenses                                                                                                                (8,791,033)   (8,328,625) (27,946,796)  (24,122,774)
                                                                                                                                            ----------    ----------   -----------   -----------

    Income from continuing operations                                                                                                        3,877,887     2,792,291     8,327,927     5,622,971

                                                                                       YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                                  Consolidated Statements of Income (Unaudited continued)

                                                                                                                                                Three months               Twelve months
                                                                                                                                                Ended Dec. 31              Ended Dec. 31
                                                                                                                                                  2011          2010          2011          2010
                                                                                                              USD                              USD           USD           USD

    Other income (expenses):
                                               Interest income                                                                                  23,919        16,707        68,044        48,241
                                               Interest expense                                                                               (335,288)     (205,828)     (984,653)     (683,501)
                                               Loss from equity method investees                                                              (423,904)     (162,350)     (616,304)      (84,054)
                                               Gain (loss) on  disposal of intangible assets and fixed assets                                  (14,383)      125,992       (26,560)      651,497
                                               Other income (expense), net                                                                     344,113        59,466       380,087       (14,423)
                                                                                                                                               -------        ------        ------       -------

    Income (loss) before income tax and minority interests                                                                                   3,472,344     2,626,278     7,148,541     5,540,731

                                               Income tax expense                                                                             (163,075)     (391,121)     (718,751)     (794,121)
                                               Non-controlling interests                                                                       146,467       109,265       642,969       413,012
                                                                                                                                               -------       -------       -------       -------

    Net income (loss) from continued operations                                                                                              3,455,736     2,344,422     7,072,759     5,159,622

    Discontinued operations:
                                               Loss from discontinued operations, net of tax                                                         0    (3,975,113)            0    (4,862,957)

    Net income                                                                                                                               3,455,736    (1,630,691)    7,072,759       296,665
                                                                                                                                             =========    ==========     =========       =======

    Weighted average shares used outstanding:
    Basic                                                                                                                                   18,949,217    18,560,014    18,946,965    18,560,014
    Diluted                                                                                                                                 19,813,967    19,501,146    19,590,898    18,949,359

    Earnings  per share
    Basic                                                                                                                                         0.18         (0.09)         0.37          0.02
    Diluted                                                                                                                                       0.17         (0.08)         0.36          0.02

                                                                                   YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                                 Consolidated Statements of Cash Flows(Unaudited)
                                                                                             Three Months Ended Dec 31

                                                                                                                                            2011        2010
                                                                                                                                         USD         USD

    Cash flows from operating activities:
    Net income (loss)                                                                                                                  3,455,736  (1,630,690)
    Adjustments to reconcile net income to net cash provided by (used in) operating activities:

    Depreciation                                                                                                                         265,647     649,606
    Amortization                                                                                                                         404,396     424,668
    Loss (Gain) on disposal intangible assets and fixed assets                                                                            14,383  (1,414,483)
    Loss on disposal of subsidiary                                                                                                             0   3,838,215
    Non-controlling interests                                                                                                           (146,467)   (109,265)
    Loss (Gain) from equity method investees                                                                                             423,904    (463,892)
    Decrease (Increase) in trade accounts receivable, net                                                                              4,379,985  (7,029,518)
    Decrease in costs and estimated earnings in excess of billing on uncompleted contracts                                             2,415,464   1,079,443
    (Increase) Decrease in due from related parties                                                                                     (171,997)  1,095,880
    Decrease in inventories                                                                                                              585,470   1,236,902
    Decrease in pre-contract costs                                                                                                     2,237,534   1,200,459
    Increase in other current assets                                                                                                  (2,033,288) (3,390,697)
    Decrease in deferred tax assets - Current                                                                                                  0     862,563
    Increase in deferred tax assets - Non-current                                                                                         (2,077)   (532,545)
    Increase in trade accounts payable                                                                                                   456,902   5,114,636
    Increase in billings in excess of costs and estimated earnings on uncompleted contracts                                            3,823,628     753,580
    (Decrease) Increase in employee and payroll accruals                                                                                (314,866)  2,576,961
    Increase (Decrease) in income taxes payable                                                                                          149,611    (222,585)
    (Decrease) Increase  in due to related parties                                                                                    (1,066,863)    234,471
    (Decrease) Increase in other current liabilities                                                                                  (1,995,658)  8,971,388
    Increase (Decrease) in deferred tax liabilities                                                                                       44,452    (133,719)
    Stock based compensation to independent directors                                                                                      8,620      25,656
    Stock based compensation to employees                                                                                                360,480     723,808
                                                                                                                                         -------     -------

    Net cash provided by operating activities                                                                                         13,294,996  13,860,842
                                                                                                                                      ----------  ----------

                                                                                 YUCHENG TECHNOLOGIES LIMITED AND SUBSIDIARIES
                                                                          Consolidated Statements of Cash Flows (Unaudited continued)
                                                                                           Three Months Ended Dec 31

                                                                                                                                            2011        2010
                                                                                                                                         USD         USD

    Cash flows from investing activities:
    Capital expenditures                                                                                                                (831,099)   (361,705)
    Payment of purchase of subsidiaries                                                                                               (1,133,625) (1,352,888)
    Advances to investments under equity method                                                                                          704,334    (828,836)
    Proceeds from disposal of fixed assets                                                                                                 3,851   2,055,449
    Collection of advances to investments under equity method                                                                                  0     101,295
    Proceeds from disposal of investments under equity method                                                                            198,384           0

    Net cash used in investing activities                                                                                             (1,058,155)   (386,685)

    Cash flows from financing activities:
    Payment of capital leases                                                                                                                  0     (65,925)
    Dividends paid to ex-owners                                                                                                                0    (586,378)
    Proceeds from bank borrowings                                                                                                      1,587,075           0
    Repayments of bank borrowings                                                                                                              0  (3,019,916)
                                                                                                                                             ---  ----------

    Net cash provided (used in) by financing activities                                                                                1,587,075  (3,672,219)

    Net increase in cash and cash equivalents                                                                                         13,823,916   9,801,938

    Cash and cash equivalents at beginning of period                                                                                  18,679,438  14,740,357
                                                                                                                                      ----------  ----------
    Cash and cash equivalents at the end of period                                                                                    32,503,354  24,542,295
                                                                                                                                      ==========  ==========

Fourth quarter 2011 Conference Call Details

Yucheng Management will conduct a conference call to discuss the financial results of the three-month period and fiscal year period ended December 31, 2011 on February 15, 2012 at 8:00AM EST/ 9:00PM BJT.

To participate, please dial one of the local access numbers, listed below, ten minutes prior to the scheduled start of the call. The conference call identification number is 5050.

    US                                 +1 866 636 3243
    China Toll Free Number:               800 888 0221
    China Toll Number:                    400 818 1262
    Hong Kong Toll Number:              +852 3005 1322
    All Other Participants:           +86 10 5851 1520

A recording of the call will be accessible within 48 hours on the Investor Relations section of the Yucheng’s website at http://www.yuchengtech.com/english/success.php?classid=41.

About Yucheng Technologies Limited

Yucheng Technologies Limited (NASDAQ:YTEC – News) is a leading IT service provider to the Chinese financial service providers. Headquartered in Beijing, China, Yucheng services clients from its nationwide network with approximately 2,600 employees. Yucheng provides a comprehensive suite of IT solutions to Chinese Banks including: (i) Channel Solutions, such as e-banking and call centers; (ii) Business Solutions, such as core banking systems and loan management; and (iii) Management Solutions, such as risk analytics and business intelligence. Yucheng has been ranked in the Global FinTech 100 survey of top technology partners to the financial services industry for in 2007, 2008, and 2009. The independent research firm IDC also has named Yucheng the No. 1 market share leader in China’s Banking IT solution market in 2010. For more information about Yucheng Technologies Limited, please visit www.yuchengtech.com.

Reconciliation of non-GAAP Measures

This earnings release presents the following “non-GAAP financial measures” as defined by applicable U.S. securities regulations. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. The non-GAAP financial measures are provided as additional information to help both management and investors compare business trends among different reporting periods on a consistent and more meaningful basis and enhance investors’ overall understanding of the Company’s current financial performance and prospects for the future. These non-GAAP measures have limitations, however, because they do not include all items of income and expenses that impact the Company’s operations. Management compensates for these limitations by also considering the Company’s GAAP results. The non-GAAP financial measures the Company uses are not prepared in accordance with, and should not be considered an alternative to measurements required by GAAP and should not be considered measures of the Company’s liquidity. Pursuant to relevant regulatory requirements, we are providing the following reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures.

(1) Net revenue (non-GAAP)

Yucheng’s net revenue (non-GAAP) represents total revenue net of third party hardware and software costs that are passed through to our customers. We believe total revenues net of third party hardware and software costs more accurately reflects our core business, which is the provision of software solutions and services, and provides transparency to our investors. It is also the same measure used by our management to evaluate the competitiveness and development of our business.

                             Reconciliation of net revenues (non-GAAP) to GAAP total revenues
                             ----------------------------------------------------------------
                                                 2011 Q4               2010 Q4               2011 Q3            2011    2010
                                                 -------               -------               -------            ----    ----
                                                    (in US dollar thousands)
                                                     -----------------------
    Total Revenues (GAAP)                               29,631                21,926                19,106    77,111  60,949
    --------------------                                ------                ------                ------    ------  ------
    Third Party Hardware
     Costs                                                 -41                    63                   214       174   1,161
    --------------------                                   ---                   ---                   ---       ---   -----
    Net Revenue (non-
     GAAP)                                              29,672                21,863                18,892    76,936  59,788
    -----------------                                   ------                ------                ------    ------  ------

    Reconciliation of net revenues of platform & maintenance services (non-GAAP) to GAAP total revenues of platform &
                                                 maintenance services
    -----------------------------------------------------------------------------------------------------------------
                                                 2011 Q4               2010 Q4               2011 Q3            2011    2010
                                                 -------               -------               -------            ----    ----
                                                  (in US dollar thousands)
                                                   -----------------------
    Total Revenues of
     platform &
     maintenance
     services(GAAP)                                      2,654                 3,183                 1,144     7,888   9,565
    -----------------                                    -----                 -----                 -----     -----   -----
    Third Party Hardware
     Costs                                                 -41                    63                   214       174   1,161
    --------------------                                   ---                   ---                   ---       ---   -----
    Net Revenue of
     platform &
     maintenance
     services(non-GAAP)                                  2,695                 3,119                   930     7,713   8,405
    -------------------                                  -----                 -----                   ---     -----   -----

(2) Gross margin of net revenue (non-GAAP)

Gross margin of net revenues (non-GAAP) is calculated by dividing gross profit by net revenue (non-GAAP). We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance. Management uses the gross margin of net revenue (non-GAAP) measure to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis of planning and forecasting future periods. Management believes this non-GAAP measure, when read in conjunction with the Company’s GAAP gross margin and other GAAP financial metrics, provides useful information to investors by offering: a) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results; b) the ability to better identify trends in the Company’s underlying business and perform related trend analysis; c) a better understanding of how management plans and measures the Company’s underlying business; and d) an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

                          Reconciliation of Gross margin (non-GAAP) to GAAP Gross margin
                          --------------------------------------------------------------
                                        2011 Q4              2010 Q4                2011 Q3             2011      2010
                                        -------              -------                                    ----      ----
    Gross margin
     (GAAP)                                      42.8%                50.7%                   49.7%     47.0%     48.8%
    ------------                                 ----                 ----                    ----      ----      ----
    Third Party
     Hardware
     Costs                                       -0.1%                 0.2%                    0.5%      0.1%      1.0%
    -----------                                  ----                  ---                     ---       ---       ---
    Gross margin
     (non-GAAP)                                  42.7%                50.9%                   50.2%     47.1%     49.8%
    ------------                                 ----                 ----                    ----      ----      ----

    Reconciliation of Gross margin (non-GAAP) for platform & maintenance services to GAAP Gross margin for platform &
                                             maintenance services
    -----------------------------------------------------------------------------------------------------------------
                                        2011 Q4              2010 Q4                2011 Q3             2011      2010
                                        -------              -------                                    ----      ----
    Gross margin
     (GAAP)                                      40.1%                60.6%                  104.2%     62.9%     43.3%
    ------------                                 ----                 ----                   -----      ----      ----
    Third Party
     Hardware
     Costs                                       -0.6%                 1.2%                   24.0%      1.4%      6.0%
    -----------                                  ----                  ---                    ----       ---       ---
    Gross margin
     (non-GAAP)                                  39.5%                61.8%                  128.2%     64.3%     49.3%
    ------------                                 ----                 ----                   -----      ----      ----

(3) perating expenses (non-GAAP)

Operating expenses (non-GAAP) excludes stock-based compensation and amortization of acquired intangible assets related to previous acquisitions. We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and income that may not be indicative of our operating performance. Management uses the operating expenses (non-GAAP) measure to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis of planning and forecasting future periods. Management believes this non-GAAP measure, when read in conjunction with the Company’s GAAP operating expenses and other GAAP financial metrics, provides useful information to investors by offering: a) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results; b) the ability to better identify trends in the Company’s underlying business and perform related trend analysis; c) a better understanding of how management plans and measures the Company’s underlying business; and d) an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

                     Reconciliation of Operating expenses (non-GAAP) to GAAP Operating expenses
                     --------------------------------------------------------------------------
                                                  2011 Q4            2010 Q4            2011 Q3        2011   2010
                                                  -------            -------            -------        ----   ----
                                                    (in US dollar thousands)
                                                     -----------------------
    Operating expenses
     (GAAP)                                              8,791              8,329              7,257 27,947 24,123
    ------------------                                   -----              -----              ----- ------ ------
    Stock based compensation                               378                749                639  1,490  1,242
    ------------------------                               ---                ---                ---  -----  -----
    Amortization of acquired
     intangible assets                                      46                 44                 45    183    175
    ------------------------                               ---                ---                ---    ---    ---
    Operating expenses (non-
     GAAP)                                               8,367              7,536              6,573 26,273 22,707
    ------------------------                             -----              -----              ----- ------ ------

(4) perating income (non-GAAP)

Operating income (non-GAAP) excludes stock-based compensation and amortization of acquired intangible assets related to previous acquisitions. We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and income that may not be indicative of our operating performance. Management uses the operating income (non-GAAP) measure to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis of planning and forecasting future periods. Management believes this non-GAAP measure, when read in conjunction with the Company’s GAAP operating income and other GAAP financial metrics, provides useful information to investors by offering: a) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results; b) the ability to better identify trends in the Company’s underlying business and perform related trend analysis; c) a better understanding of how management plans and measures the Company’s underlying business; and d) an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

                        Reconciliation of Operating income (non-GAAP) to GAAP Operating income
                        ----------------------------------------------------------------------
                                                  2011 Q4            2010 Q4            2011 Q3        2011  2010
                                                  -------            -------            -------        ----  ----
                                                    (in US dollar thousands)
                                                     -----------------------
    Operating income (GAAP)                              3,878              2,792              2,233  8,328 5,623
    ----------------------                               -----              -----              -----  ----- -----
    Stock based compensation                               378                749                639  1,490 1,242
    ------------------------                               ---                ---                ---  ----- -----
    Amortization of acquired
     intangible assets                                      46                 44                 45    183   175
    ------------------------                               ---                ---                ---    ---   ---
    Operating income (non-
     GAAP)                                               4,301              3,585              2,918 10,002 7,039
    ----------------------                               -----              -----              ----- ------ -----

(5) Operating margin of net revenue (non-GAAP)

Operating margin of net revenue (non-GAAP) is calculated by dividing operating income, excluding amortization of acquired intangible assets and stock-based compensation expenses, divided by net revenue (non-GAAP). We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and income that may not be indicative of our operating performance. Management uses the operating margin of net revenue (non-GAAP) measure to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis of planning and forecasting future periods. Management believes this non-GAAP measure, when read in conjunction with the Company’s GAAP operating margin and other GAAP financial metrics, provides useful information to investors by offering: a) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results; b) the ability to better identify trends in the Company’s underlying business and perform related trend analysis; c) a better understanding of how management plans and measures the Company’s underlying business; and d) an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

                          Reconciliation of Operating margin (non-GAAP) to GAAP Operating margin
                          ----------------------------------------------------------------------
                                                   2011 Q4              2010 Q4              2011 Q3       2011  2010
                                                   -------              -------                            ----  ----
    Operating margin (GAAP)                                 13.1%                12.7%               11.7% 10.8%  9.2%
    ----------------------                                  ----                 ----                ----  ----   ---
    Stock based compensation                                 1.3%                 3.4%                3.3%  1.9%  2.0%
    ------------------------                                 ---                  ---                 ---   ---   ---
    Amortization of acquired
     intangible assets                                       0.2%                 0.2%                0.2%  0.2%  0.3%
    ------------------------                                 ---                  ---                 ---   ---   ---
    Third Party Hardware
     Costs                                                   0.0%                 0.0%                0.2%  0.0%  0.2%
    --------------------                                     ---                  ---                 ---   ---   ---
    Operating margin (non-
     GAAP)                                                  14.5%                16.4%               15.4% 13.0% 11.8%
    ----------------------                                  ----                 ----                ----  ----  ----

(6) Net income (non-GAAP)

Net income(non-GAAP) excludes stock-based compensation and amortization of acquired intangible assets related to the previous acquisitions. We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance by excluding certain expenses and income that may not be indicative of our operating performance. Management uses the net income (non-GAAP) measure to gain a better understanding of the Company’s comparative operating performance from period-to-period and as a basis of planning and forecasting future periods. Management believes the Company’s net income (non-GAAP) measure, when read in conjunction with the Company’s GAAP net income measure and other GAAP financial metrics, provides useful information to investors by offering: a) the ability to make more meaningful period-to-period comparisons of the Company’s on-going operating results; b) the ability to better identify trends in the Company’s underlying business and perform related trend analysis; c) a better understanding of how management plans and measures the Company’s underlying business; and d) an easier way to compare the Company’s most recent results of operations against investor and analyst financial models.

    Reconciliation of net income from continuing operations attributable to Yucheng (non-GAAP) to GAAP net income
                                             from continuing operations
    -------------------------------------------------------------------------------------------------------------
                                                  2011 Q4            2010 Q4            2011 Q3          2011     2010
                                                  -------            -------            -------          ----     ----
                                                    (in US dollar thousands)
                                                     -----------------------
    Net Income from
     continuing
     operations(GAAP)                                    3,456              2,344              1,944    7,073    5,160
    -----------------                                    -----              -----              -----    -----    -----
     -Stock based
      compensation                                         378                749                639    1,490    1,242
     -------------                                         ---                ---                ---    -----    -----
     -Amortization of
      acquired intangible
      assets                                                46                 44                 45      183      175
     --------------------                                  ---                ---                ---      ---      ---
    Net Income from
     continuing
     operations(non-GAAP)                                3,879              3,138              2,629    8,746    6,576
    ---------------------                                -----              -----              -----    -----    -----

              Reconciliation of net income attributable to Yucheng (non-GAAP) to GAAP net income
              ----------------------------------------------------------------------------------
                                                  2011 Q4            2010 Q4            2011 Q3          2011     2010
                                                  -------            -------            -------          ----     ----
                                                  (in US dollar thousands)
                                                   -----------------------
    Net Income (GAAP)                                    3,456             -1,631              1,944    7,073      297
    ----------------                                     -----             ------              -----    -----      ---
     -Stock based
      compensation                                         378                749                639    1,490    1,242
     -------------                                         ---                ---                ---    -----    -----
     -Amortization of
      acquired intangible
      assets                                                46                 44                 45      183      175
     --------------------                                  ---                ---                ---      ---      ---
    Net Income (non-GAAP)                                3,879               -838              2,629    8,746    1,713
    --------------------                                 -----               ----              -----    -----    -----

(7) Net income (non-GAAP)per diluted share

Net income (non-GAAP) per diluted share is calculated by dividing net income (non-GAAP) (which as discussed above excludes stock-based compensation expenses and amortization of acquired intangible assets) by the same number of weighted average shares outstanding used in the computation of net income per diluted share. Management believes that net income (non-GAAP) per diluted share, when used in conjunction with the Company’s GAAP net income per diluted share, provides useful information to investors for the same reasons discussed above regarding net income (non-GAAP). In addition, net income (non-GAAP) per diluted share allows investors to evaluate the Company’s operating performance from period to period on a per share basis, thus providing a useful basis for assessing the Company’s value on a per share basis.

    Reconciliation of net income from continuing operations (non-GAAP) per diluted share to GAAP net income
                                  from continuing operations per diluted share
    -------------------------------------------------------------------------------------------------------
                                                  2011 Q4           2010 Q4           2011 Q3        2011   2010
                                                  -------           -------           -------        ----   ----
                                                        (in US dollar)
                                                         -------------
    GAAP net income from
     continuing operations
     Per diluted Share                                   0.17              0.12              0.10    0.36   0.27
    ----------------------                               ----              ----              ----    ----   ----
     -Stock based
      compensation                                       0.02              0.04              0.03    0.08   0.07
     -------------                                       ----              ----              ----    ----   ----
     -Amortization of
      acquired intangible
      assets                                             0.00              0.00              0.00    0.01   0.01
     --------------------                                ----              ----              ----    ----   ----
    Non-GAAP net income
     from continuing
     operations Per diluted
     Share                                               0.20              0.16              0.14    0.45   0.35
    -----------------------                              ----              ----              ----    ----   ----

      Reconciliation of net income (non-GAAP) per diluted share to GAAP net income per diluted share
      ----------------------------------------------------------------------------------------------
                                                  2011 Q4           2010 Q4           2011 Q3        2011   2010
                                                  -------           -------           -------        ----   ----
                                                      (in US dollar)
                                                       -------------
    GAAP net income Per
     diluted Share                                       0.17             -0.08              0.10    0.36   0.02
    -------------------                                  ----             -----              ----    ----   ----
     -Stock based
      compensation                                       0.02              0.04              0.03    0.08   0.07
     -------------                                       ----              ----              ----    ----   ----
     -Amortization of
      acquired intangible
      assets                                             0.00              0.00              0.00    0.01   0.01
     --------------------                                ----              ----              ----    ----   ----
    Non-GAAP net income Per
     diluted Share                                       0.20             -0.04              0.14    0.45   0.09
    -----------------------                              ----             -----              ----    ----   ----

Cautionary Note Regarding Forward-Looking Statements

The information contained in this document is as of February 15, 2012. Yucheng assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments.

This press release includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward looking statements are statements that are not historical facts. Forward-looking statements generally can be identified by the use of forward looking terminology, such as ”may,” ”will,” ”expect,” ”intend,” ”estimate,” ”anticipate,” ”believe,” ”project” or ”continue” or the negative thereof or other similar words. Such forward-looking statements, based upon the current beliefs and expectations of Yucheng’s management, are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: current dependence on the PRC banking industry demand for the products and services of Yucheng; competition from other service providers in the PRC and international consulting firms; the ability to update and expand product and service offerings; retention and hiring of qualified employees; protection of intellectual property; creating and maintaining quality product offerings; and operating a business in the PRC with its changing economic and regulatory environment. A further list and description of these risks, uncertainties, and other matters can be found in our Annual Report on Form 20-F for the fiscal year ended December 31, 2010, and in our interim current reports on Form 6-K filed with the United States Securities and Exchange Commission and available at www.sec.gov.

For more information about Yucheng, please visit www.yuchengtech.com.

    For investor and media inquiries, please contact:

    In China:

    Mr. Steve Dai
    Yucheng Technologies Limited
    Tel: +86-10-5913-7889
    Email: investors@yuchengtech.com
    --------------------------------

    (1) Net revenue (non-GAAP) measures used in this press release
     represents total revenue net of third-party hardware and
     software costs.
    (2) Gross margin of net revenue (non-GAAP) is calculated by
     dividing gross profit by net revenue (non-GAAP).
    (3) Operating expenses (non-GAAP) is calculated by excluding
     stock-based compensation expenses and amortization of acquired
     intangible assets.
    (4) Income from operations (non-GAAP) is calculated by subtract
     operating expenses (non-GAAP) from gross profits.
    (5) Operating margin of net revenue (non-GAAP) is calculated by
     dividing operating income, excluding amortization of acquired
     intangibles and stock-based compensation expenses, divided by
     net revenue (non-GAAP)
    (6) Net income (non-GAAP) measures exclude stock-based
     compensation expenses, amortization of acquired intangible
     assets, impairment loss on investment, after-tax dividend
     income and non-recurring merger related expenses

SOURCE Yucheng Technologies Limited


Source: PR Newswire