Longtop Financial Technologies Limited F4Q10 (Qtr End 03/31/2010) Earnings Call Transcript

Longtop Financial Technologies Limited F4Q10 (Qtr End 03/31/2010) Earnings Call Transcript
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Longtop Financial Technologies Limited (LFT)

F4Q10 (Qtr End 03/31/2010) Earnings Call Transcript

May 24, 2010 8:00 a.m. ET

Executives

Charles Zhang - IR Director

Weizhou Lian - CEO

Derek Palaschuk - CFO

Analysts

Glenn Greene - Oppenheimer

Jon Maietta - Needham & Company

Joseph Vafi - Jefferies & Company

Donald Lu - Goldman Sachs

Jeff Rossetti - Janney Montgomery Scott

Tim Fox - Deutsche Bank

Carl Keirstead - Kaufman Brothers

Presentation

Operator

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Welcome to today's Longtop fourth quarter and full year fiscal year 2009 results announcement. Today, I am very pleased to present our first speaker, Mr. Charles Zhang, Investor Relations Director at Longtop.

Mr. Zhang, please go ahead.

Charles Zhang

Good morning, everyone, and welcome to our fourth quarter and fiscal year 2010 earnings conference call. Joining me on the call today are Weizhou Lian, Chief Executive Officer; and Derek Palaschuk, Chief Financial Officer.

For today's agenda, management will discuss highlights of the quarter. This will be followed by a Q&A session. Before we continue, I refer you to our Safe Harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements.

Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in U.S. dollars.

I would now like to turn the call over to our CEO, Weizhou Lian, and I will translate Mr. Lian's comments.

Weizhou Lian

(Interpreted)

Thank you for joining us for Longtop's fourth quarter and fiscal year 2010 earnings conference call. I'm very pleased to report that we have concluded fiscal 2010 with another quarter of solid results.

I believe Longtop key accomplishments in fiscal 2010 were: firstly, in 2010, we grew our software business organically by 54 year-on-year and added organically year-on-year $48.1 million of software development revenue, which is proof we are gaining market share and strengthening our competitive position. Customer demand for Longtop solutions remained strong, and we did it irrespective of global financial turmoil which is what we had predicted.

Secondly, as many of you have heard, we say one of our biggest challenges has been my management team and I could effectively manage [ph] a fast growing enterprise like Longtop, which ended the year with 4,258 employees, up from 2,602 a year ago. Three years ago, we only had 402 software development employees. And at the end of March 2010, this number was 2,492.

I believe in 2010, we took some very solid steps in this area by improving processes and policies. Our efforts were rewarded with the CMMI Level 5 certification, which further strengthened our senior management team, which I think is one of the strongest in the industry in China to grow our expanding business line, while we will continue to seek improvement.

Thirdly, the Sysnet and Giantstone acquisitions which strengthened our insurance and the core banking capabilities. At the back of our 2010 performance, I am highly confident that Longtop can achieve our fiscal 2011 revenue guidance of $225 million in revenue and $1.64 in adjusted earnings per share.

Let me now give you some insight into our fiscal 2011 strategies and objectives as regards customers, products and acquisitions.

With regard to customers, we expect healthy growth in all of our customer segments in fiscal 2011 and have guided for organic year-on-year software development revenue growth of 30%. We see no pricing pressure on our customers, looking specifically at our customer segments.

We have always said [ph] the Big Four Banks on our past calls [ph] (inaudible) long-term growth in this segment of at least 20% year-over-year in the next five years. For 2011, we would expect the year-on-year growth of at least 20% and Big Four Banks to be around 38% of our full year software development revenue.

In fiscal 2011, we also hope to sign our first meaningful [ph] software development contract from the Big Four Banks that is still not our customer and have laid the groundwork in 2010 to achieve that goal. While we do not expect material revenue, it will be strategically important for us.

Growth from other banks continued to be strong. They still invest heavily in IT to improve their competitiveness and catch up with Big Four Banks. We will continue to drive product penetration and the revenue per customer through cross-selling in this customer segment.

In our fiscal 2008, we recorded revenue from about 30 other banks, and now we have over 50 other banks customers. We also began to push down into the small and middle-size bank segment, as well as foreign banks doing business in Greater China. We expect other banks to grow organically year-on-year at, at least 30%, and including Giantstone, to grow around 60% year-on-year and to be 42% of our software revenue.

As for the insurance sector, demand will be strong, and we expect the insurance sector revenue to grow by over 30% and be around 14% of our software revenue. I am pleased how our insurance customer segment has grown from only four customers in fiscal 2008 to over 40 customers in 2010.

With our successful acquisition and integration of Sysnet, we are well positioned to take advantage of the insurance company heavy investment in hardware infrastructure, which will be succeeded by aggressive investment cycle for software and IT services.

In the Enterprise sector financial company, we remain optimistic about demand for our treasury management and cost solutions for financial subsidiaries. And this segment will be our fastest growing organic segment with year-on-year growth expected of over 90% and be somewhere around 6% of our software development revenue.

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