BEIJING, February 27, 2013 /PRNewswire/ — Pactera Technology International Ltd. (Nasdaq: PACT) (“Pactera” or the “Company”), a global consulting and technology services provider strategically headquartered in China, today reported its unaudited financial results for the fourth quarter and full year 2012 ended December 31, 2012.

On November 9, 2012, HiSoft Technology International Limited (“HiSoft”) and VanceInfo Technology Inc. (“VanceInfo”) completed the merger of equals to form Pactera. In the fourth quarter of 2012, Pactera’s financial statements consolidated the operating results and financial position of the former HiSoft’s results for the whole fourth quarter and VanceInfo’s results for the period from November 9, 2012 to December 31, 2012. As a result, the financial results we reported for the fourth quarter and full year 2012 are not comparable to those of prior corresponding periods due to the merger.

Fourth Quarter and Full Year 2012 Financial and Operational Highlights

  • et revenues for the fourth quarter of 2012 were $142.2 million.
  • Pro forma net revenues[1] for the fourth quarter of 2012 were $179.3 million, an increase of 17.9% from $152.1 million for the corresponding period in 2011.
  • Diluted net loss per ADS for the fourth quarter of 2012 was $0.22.
  • Non-GAAP diluted net income per ADS[2] for the fourth quarter of 2012 was $0.24.
  • Net revenues for the full year 2012 were $359.0 million.
  • Pro forma net revenues for the full year 2012 were $673.3 million, an increase of 34.1% from $502.1 million in 2011.
  • Diluted net income per ADS for the full year 2012 was $0.05.
  • Non-GAAP diluted net income per ADS for the full year 2012 was $0.91.
  • Total full-time regular employees as of December 31, 2012 were 23,270 including 20,834 billable professionals.

 

[1] Pro forma net revenues of the Company for the fourth quarter and full year 2011 and 2012 assume that the merger occurred at the beginning of each such period. The pro forma financial information is provided for information purpose only and does not purport to present what the actual results of operations would have been had the transaction actually occurred at the beginning of each period indicated nor does it purport to present the actual results of operations for any future period or financial position for any future date. Please refer to the accompanying tables at the end of the earnings release.

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

 

“We are pleased with our results for the fourth quarter and full year 2012. During the quarter, we successfully achieved our revenue target while also making solid progress with our operational integration and business reorganization,” said Mr. Tiak Koon Loh, Chief Executive Officer of Pactera. “Pro forma net revenues in 2012 were up 34.1% year over year. Our BFSI business continued its strong growth momentum with a 62.7% year-over-year increase in pro forma net revenues, positioning us to become the leading IT service provider in this vertical in China. Demand in Greater China remains robust, reflected by our 49.7% growth in pro forma net revenues in the region during 2012.

 

“Looking forward to 2013, we will remain focused on completing our integration efforts to fully realize the targeted synergies. We will continue to deliver value to our clients and grow our business in a profitable and sustainable manner,” added Mr. Loh.

Fourth Quarter 2012 Financial Results

Net Revenues

Net revenues were $142.2 million for the fourth quarter of 2012 as compared to $64.9 million for the fourth quarter of 2011.

Pro forma net revenues of the Company for the fourth quarter of 2012 were $179.3 million, an increase of 17.9% from $152.1 million for the corresponding period in 2011. The year-over-year growth in pro forma net revenues was driven by strong demand of IT services and key geographic markets.

Net Revenues by Service Line

Pactera has two service lines: Information Technology (“IT”) services and research and development (“R&D”) services. Pactera divides IT services into two categories: consulting and packaged solution services (“CPS”) and application development, testing and maintenance services (“ADM”).

Net revenues from IT services were $87.7 million for the fourth quarter of 2012. Net revenues from R&D services were $54.5 million for the fourth quarter of 2012.

Net Revenues by Services Line

- Three Months Ended December 31, 2012($ in thousands, except percentages) Three Months Ended December 31, 2011
IT Services 87,738 61.7% 39,700 61.1%
CPS 31,849 22.4% 13,640 21.0%
ADM 55,889 39.3% 26,060 40.1%
R&D Services 54,464 38.3% 25,236 38.9%
Total Net Revenues 142,202 100.0% 64,936 100.0%

Pro forma net revenues from IT services were $110.4 million for the fourth quarter of 2012, an increase of 33.2% from $82.9 million for the corresponding period in 2011, which is primarily due to our expanded service offerings and client portfolio.

Pro forma net revenues from R&D services were $68.9 million for the fourth quarter of 2012, compared to $69.2 million for the corresponding period in 2011.

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

- Three Months EndedDecember 31, 2012($ in thousands, except percentages) Three Months EndedDecember 31, 2011 Year-over-Year % Change
IT Services 110,433 61.6% 82,936 54.5% 33.2%
CPS 36,264 20.2% 29,239 19.2% 24.0%
ADM 74,169 41.4% 53,697 35.3% 38.1%
R&D Services 68,911 38.4% 69,188 45.5% (0.4)%
Total Net Revenues 179,344 100.0% 152,124 100.0% 17.9%

Net Revenues by Geographic Markets

Based on the location of clients’ headquarters, net revenues from clients headquartered in the United States were $55.4 million in the fourth quarter of 2012, followed by $53.8 million from clients headquartered in Greater China, $16.6 million in Japan, $10.3 million in Europe and $6.1 million in Asia South.

Net Revenues based on Location of Clients’ Headquarters

- Three Months Ended December 31, 2012 ($ in thousands, except percentages) Three Months Ended December 31, 2011
United States 55,361 38.9% 30,324 46.7%
Greater China 53,848 37.9% 13,197 20.3%
Japan 16,615 11.7% 13,323 20.5%
Europe 10,262 7.2% 4,851 7.5%
Asia South 6,116 4.3% 3,241 5.0%
Total Net Revenues 142,202 100.0% 64,936 100.0%

Pro forma net revenues from clients headquartered in Greater China were $72.0 million or 40.1% of pro forma net revenues for the fourth quarter of 2012, followed by 37.5% from the United States, 10.4% from Japan, 7.7% from Europe and 4.3% from Asia South.

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

- Three Months EndedDecember 31, 2012($ in thousands, except percentages) Three Months EndedDecember 31, 2011 Year-over-Year % Change
Greater China 71,989 40.1% 53,739 35.3% 34.0%
United States 67,264 37.5% 61,712 40.6% 9.0%
Japan 18,611 10.4% 16,200 10.6% 14.9%
Europe 13,721 7.7% 15,837 10.4% (13.4)%
Asia South 7,759 4.3% 4,636 3.1% 67.4%
Total Net Revenues 179,344 100.0% 152,124 100.0% 17.9%

Measuring Pactera’s net revenues based on the location of contract signing entity, Greater China accounted for 57.9% of net revenues in the fourth quarter of 2012, while the United States accounted for 20.3%, Japan accounted for 11.1%, Asia South accounted for 9.2% and Europe accounted for 1.5%.

Measuring Pactera’s pro forma net revenues based on the location of contract signing entity, Greater China accounted for 59.8% of pro forma net revenues in the fourth quarter of 2012, while the United States accounted for 20.7%, Japan accounted for 9.9%, Asia South accounted for 8.2% and Europe accounted for 1.4%.

Net Revenues by Industry

Pactera classifies its clients into four industry segments: High Technology (“High Tech”), Banking, Financial Services and Insurance (“BFSI”), Telecommunications (“Telecom”), and other industry segments including manufacturing, retail, distribution, travel and transportation and public services (“Others”).

Net Revenues by Industry

- Three Months Ended December 31, 2012($ in thousands, except percentages) Three Months Ended December 31, 2011
High Tech 56,463 39.7% 28,941 44.6%
BFSI 39,894 28.1% 18,849 29.0%
Telecom 23,858 16.8% 4,769 7.3%
Others 21,987 15.4% 12,377 19.1%
Total Net Revenues 142,202 100.0% 64,936 100.0%

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

- Three Months EndedDecember 31, 2012($ in thousands, except percentages) Three Months EndedDecember 31, 2011 Year-over-Year % Change
High Tech 69,066 38.5% 59,531 39.1% 16.0%
BFSI 47,435 26.4% 32,224 21.2% 47.2%
Telecom 35,174 19.6% 36,699 24.1% (4.2)%
Others 27,669 15.5% 23,670 15.6% 16.9%
Total net revenues 179,344 100% 152,124 100.0% 17.9%

Largest Clients

Net revenues from Pactera’s top five and top ten clients accounted for 30.7% and 39.6% of net revenues, respectively, during the fourth quarter of 2012, compared to 31.6% and 45.2%, respectively, for the corresponding period in 2011.

Pro forma net revenues from Pactera’s top five and top ten clients accounted for 32.2% and 41.2% of pro forma net revenues, respectively, during the fourth quarter of 2012, compared to 39.0% and 48.6%, respectively, for the corresponding period in 2011.

Gross Profit and Gross Margin

Gross profit was $47.6 million for the fourth quarter of 2012, compared to $23.5 million for the corresponding period in 2011. During the fourth quarter of 2012, gross margin was 33.5%, as compared to 36.2% for the fourth quarter of 2011.

Operating Expenses

Total operating expenses were $65.2 million for the fourth quarter of 2012 compared to $16.8 million for the corresponding period in 2011. Operating expenses in the fourth quarter of 2012 reflect $5.5 million in trademark intangible asset write-down due to the corporate re-branding and $19.8 million in other merger related expenses including professional fees, severance costs, and facilities and system integration expenses.

Operating Income and Operating Margin

Operating loss for the fourth quarter of 2012 was $17.5 million, compared to an operating income of $6.7 million for the corresponding period in 2011. Non-GAAP operating income for the fourth quarter in 2012 was $15.3 million, as compared to $9.7 million in the corresponding period in 2011.

Operating margin was negative 12.3% for the fourth quarter of 2012, compared to 10.3% for the same period in 2011. Non-GAAP operating margin was 10.8% for the fourth quarter of 2012, compared to 14.9% for the corresponding period in 2011.

Net Income and Net Income per ADS

Net loss attributable to Pactera was $14.5 million for the fourth quarter of 2012, compared to a net income of $6.8 million for the corresponding period in 2011. Diluted net loss per ADS was $0.22 for the fourth quarter of 2012, as compared to diluted net income per ADS of $0.16 in the corresponding period of 2011.

Non-GAAP net income was $16.4 million for the fourth quarter of 2012, compared to $9.8 million for the same period in 2011. Non-GAAP diluted net income per ADS was $0.24 in the fourth quarter of 2012, compared to $0.23 in the corresponding period of 2011.

Cash Flow and DSO

As of December 31, 2012, Pactera had cash and cash equivalents, restricted cash, term deposits and short-term investment totaling $210.1 million. Operating cash flow for the fourth quarter of 2012 was a net inflow of approximately $33.3 million. Days sales outstanding (“DSO”) was 119 days for the quarter.

Full Year 2012 Financial Results

Net Revenues

Net revenues were $359.0 million for the full year 2012 as compared to $219.0 million for the full year 2011.

Pro forma net revenues of the Company for the full year 2012 were $673.3 million, an increase of 34.1% from $502.1 million for the corresponding period in 2011.

Net Revenues by Service Line

Net revenues from IT services were $214.9 million for the full year 2012. Net revenues from R&D services were $144.2 million for the full year 2012.

Net Revenues by Services Line

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011
IT Services 214,858 59.8% 126,105 57.6%
CPS 79,605 22.1% 37,567 17.2%
ADM 135,253 37.7% 88,538 40.4%
R&D Services 144,173 40.2% 92,884 42.4%
Total Net Revenues 359,031 100.0% 218,989 100.0%

Pro forma net revenues from IT services were $381.5 million for the full year 2012, an increase of 46.3% from $260.7 million in 2011. Pro forma net revenues from R&D services were $291.8 million for the full year 2012, compared to $241.4 million in 2011.

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

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011 Year-over-Year % Change
IT Services 381,476 56.7% 260,680 51.9% 46.3%
CPS 118,209 17.6% 85,351 17.0% 38.5%
ADM 263,267 39.1% 175,329 34.9% 50.2%
R&D Services 291,790 43.3% 241,446 48.1% 20.9%
Total Net Revenues 673,266 100.0% 502,126 100.0% 34.1%

Net Revenues by Geographic Markets

Based on the location of clients’ headquarters, net revenues from clients headquartered in the United States were $155.0 million in the full year 2012, followed by $104.2 million from clients headquartered in Greater China, $58.0 million in Japan, $24.4 million in Europe and $17.5 million in Asia South.

Net Revenues based on Location of Clients’ Headquarters

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011
United States 154,969 43.2% 107,925 49.3%
Greater China 104,222 29.0% 39,410 18.0%
Japan 58,010 16.2% 40,724 18.6%
Europe 24,375 6.8% 18,793 8.6%
Asia South 17,455 4.8% 12,137 5.5%
Total Net Revenues 359,031 100.0% 218,989 100.0%

Pro forma net revenues from clients headquartered in the United States were $261.1 million or 38.8% of pro forma net revenues for the full year 2012, followed by 38.2% from Greater China, 10.7% from Japan, 8.4% from Europe and 3.9% from Asia South.

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

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011 Year-over-Year % Change
United States 261,070 38.8% 203,242 40.5% 28.5%
Greater China 257,481 38.2% 172,052 34.3% 49.7%
Japan 72,050 10.7% 50,167 10.0% 43.6%
Europe 56,728 8.4% 61,231 12.2% (7.4)%
Asia South 25,937 3.9% 15,434 3.0% 68.1%
Total Net Revenues 673,266 100.0% 502,126 100.0% 34.1%

Measuring Pactera’s net revenues based on the location of contract signing entity, Greater China accounted for 48.0% of net revenues in thefull year 2012, while the United States accounted for 21.0%, Japan accounted for 16.7%, Asia South accounted for 12.6% and Europe accounted for 1.7%.

Measuring Pactera’s pro forma net revenues based on the location of contract signing entity, Greater China accounted for 57.1% of pro forma net revenues in the full year 2012, while the United States accounted for 22.8%, Japan accounted for 10.3%, Asia South accounted for 8.2% and Europe accounted for 1.6%.

Net Revenues by Industry

Net Revenues by Industry

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011
High Tech 153,099 42.6% 105,447 48.2%
BFSI 102,328 28.5% 60,893 27.8%
Telecom 41,366 11.5% 14,653 6.7%
Others 62,238 17.4% 37,996 17.3%
Total Net Revenues 359,031 100.0% 218,989 100.0%

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

- Twelve Months Ended December 31, 2012($ in thousands, except percentages) Twelve Months Ended December 31, 2011 Year-over-Year % Change
High Tech 259,517 38.5% 200,837 40.0% 29.2%
BFSI 157,592 23.4% 96,886 19.3% 62.7%
Telecom 151,996 22.6% 127,436 25.4% 19.3%
Others 104,161 15.5% 76,967 15.3% 35.3%
Total net revenues 673,266 100.0% 502,126 100.0% 34.1%

Largest Clients

Net revenues from Pactera’s top five and top ten clients accounted for 31.0% and 41.7% of net revenues, respectively, during the full year 2012, compared to 34.8% and 50.1%, respectively, in 2011.

Pro forma net revenues from Pactera’s top five and top ten clients accounted for 36.1% and 45.5% of pro forma net revenues, respectively, during the full year 2012, compared to 40.0% and 50.6%, respectively, in 2011.

Gross Profit and Gross Margin

Gross profit was $124.4 million for the full year 2012, compared to $76.6 million in 2011. During the full year 2012, gross margin was 34.7%, as compared to 35.0% for the full year 2011.

Operating Expenses

Total operating expenses were $123.5million for the full year 2012 compared to $59.4 million in 2011. Operating expenses in the full year 2012 reflect $5.5 million in trademark intangible asset write-down due to the corporate re-branding as a result of the merger and $22.2 million in other merger related expenses including professional fees, severance costs, and facilities and system integration expenses.

Operating Income and Operating Margin

Operating income for the full year 2012 was $0.9 million, compared to an operating income of $17.2 million in 2011. Non-GAAP operating income for the full year 2012 was $45.4 million, as compared to $27.8 million in 2011.

Operating margin was 0.3% for the full year 2012, compared to 7.9% in 2011. Non-GAAP operating margin was 12.6% for the full year 2012, compared to 12.7% in 2011.

Provision for Income Taxes

Provision for income taxes was $1.2 million for the full year 2012, compared to $1.7 million in 2011. The effective income tax rate was 26.8%. Excluding non-deductible merger related transaction costs for Cayman Island tax purposes, the effective tax rate would have been 13.0% for the year.

Net Income and Net Income per ADS

Net income attributable to Pactera was $2.6 million for the full year 2012, compared to $17.9 million for 2011. Diluted net income per ADS was $0.05 for the full year 2012, as compared to diluted net income per ADS of $0.42 for 2011.

Non-GAAP net income was $45.0 million for the full year 2012, compared to $28.5 million for 2011. Non-GAAP diluted net income per ADS was $0.91 for the full year 2012, compared to $0.66 for 2011.

Cash Flow

Operating cash flow for the full year 2012 was a net inflow of approximately $36.3 million.

Recent Development

Share Repurchase Program

On December 21, 2012, the Company announced that the Board of Directors approved a share repurchase program, under which Pactera had been authorized, but is not obligated, to repurchase up to $30 million worth of outstanding American Depositary Shares (the “ADSs”) representing the common shares of Pactera from time to time over the next 12 months. As of February 26, 2013, 348,535 ADS had been repurchased through open market transactions.

Potential Business Transfer Relating to Our Large Telecom Customer

As previously disclosed, one of the Company’s major clients formed two joint ventures specializing in the software outsourcing business with the Company’s competitors. The customer is now shifting some of its outsourcing business from various vendors to these joint ventures. Recently in 2013, this customer informed the Company of its plan to move some business from the Company to these joint ventures, and the Company intends to fully cooperate in this process. The details are still being discussed between the parties, which may include orderly transfer of certain project teams to the joint ventures in the first half of 2013. In 2012, Pactera and, prior to the completion of the merger, HiSoft and VanceInfo, generated approximately $96 million of net revenues from this customer, which was the largest customer as measured by net revenues. The Company now expects net revenues from this customer to decline by at least 40% in 2013.

Outlook for Pactera’s First Quarter and Full Year 2013

For the first quarter of 2013, based on current market and operating conditions and current book orders, Pactera expects:

  • Net revenues to be at least US$158.0 million, compared to $151.6 million in the first quarter 2012 on a pro forma basis. Excluding the revenues from our large telecom customer in both periods, this represents an increase of at least 10% from the first quarter 2012. Please refer to Recent Development section of this release for further discussion.
  • Non-GAAP diluted net income per ADS to be at least $0.12, estimated based on 88.3 million weighted average equivalent ADSs outstanding.

 

For the full year 2013, based on current market and operating conditions, Pactera expects:

  • Excluding the revenues from our large telecom customer for both 2012 and 2013, net revenues to be at least US$675 million, representing an increase of at least 17% from the 2012 pro forma revenues of $577 million. Based on our current visibility, we estimate net revenues with our large telecom customer to be approximately $48 million to $58 million, which would result in a total net revenue for the Company to be between $723 million and $733 million in 2013, compared to $673 million in 2012 on a pro forma basis. Please refer to Recent Development section of this release for further discussion.
  • Non-GAAP diluted net income per ADS to be in the range of $0.75 to $0.80, estimated based on 89.5 million weighted average equivalent ADSs outstanding.

 

These estimates are based on current market and operating conditions, are subject to change, and may be influenced positively or negatively by factors outside the Company’s control, including but not limited to macroeconomic events in the markets in which the Company operates. See “Safe Harbor Statement” below for additional information regarding forward-looking statements.

Conference Call

The Company will host a corresponding conference call and live webcast to discuss the results at 7:00 AM Eastern Standard Time (EST) on Wednesday, February 27, 2013 (8:00 PM Beijing/Hong Kong time). Please dial-in five minutes prior to the call to register and receive further instruction.

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

– U.S. Toll Free Dial-in Number: + 1.855.500.8701
– International Dial-in Number: + 65.6723.9385
– Hong Kong Dial-in Number: + 852.3051.2745
Passcode: 96031141

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

A dial-in replay of the conference call will be available until March 6, 2013:
– U.S. Toll Free Dial-in Number: + 1.855.452.5696
– International Dial-in Number: + 61.2.8199.0299
Passcode: 96031141

About Pactera

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

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

Safe Harbor Statement

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

About Non-GAAP Financial Measures

To supplement Pactera’s consolidated financial results presented in accordance with GAAP, Pactera uses the following measures defined as non-GAAP financial measures by the SEC: non-GAAP income from operations, non-GAAP net income and non-GAAP diluted EPS and related margins which exclude share-based compensation expense, amortization of acquired intangible assets and land use right, merger-related costs, change in fair value of contingent consideration payable for business acquisition, and compensation expenses related to acquisition. The non-GAAP income from operations, net income and diluted EPS for prior periods have been reclassified so that the presentations are consistent. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP or as being comparable to results reported or forecasted by other companies. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP Financial Measures to Comparable GAAP Measures” and “Reconciliations of Forward-Looking Guidance for non-GAAP Financial Measures to Comparable GAAP Measures” set forth at the end of this news release.

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

PACTERA TECHNOLOGY INTERNATIONAL LIMITED Condensed Consolidated Balance Sheets (Unaudited)(US dollars in thousands, except share data)

ASSETS December 31, 2012 December 31, 2011
Current Assets
Cash and cash equivalents 143,714 113,856
Restricted cash 6,112 1,222
Term deposits 58,485 21,681
Short-term investment 1,765 -
Accounts receivable, net 230,693 61,413
Other current assets 37,435 7,135
Total current assets 478,204 205,307
Property, plant and equipment, net 67,607 13,774
Goodwill and intangible assets, net 157,962 52,546
Other long-term assets 33,833 1,552
Total assets 737,606 273,179
LIABILITIES AND STOCKHOLDERS’ EQUITY December 31, 2012 December 31, 2011
Current liabilities 163,152 51,029
Other liabilities 32,130 12,260
Total liabilities 195,282 63,289
Total shareholder’s equity 542,324 209,890
Total liabilities and equity 737,606 273,179

Note:

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

As of December 31,2011, there were 42,720,067 ordinary shares (42,720,067 ADSs) issued and outstanding,

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

PACTERA TECHNOLOGY INTERNATIONAL LIMITED Condensed Consolidated Statements of Operations (Unaudited)(US dollars in thousands, except for share, per share data)

- Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Net revenues 142,202 64,936 359,031 218,989
Cost of revenues (94,589) (41,402) (234,602) (142,427)
Gross profit 47,613 23,534 124,429 76,562
Operating expenses (65,152) (16,832) (123,514) (59,351)
(Loss) Income from operations (17,539) 6,702 915 17,211
Other income 709 832 3,597 2,905
Net (loss) income before income tax expenses (16,830) 7,534 4,512 20,116
Income tax benefit (expenses) 2,359 (459) (1,210) (1,718)
(Loss) income before earning in equity method investment (14,471) 7,075 3,302 18,398
Earning in equity method investment 23 - 23 -
(Loss) income after earning in equity method investment (14,448) 7,075 3,325 18,398
Add: Net profit attributable to noncontrolling interest (69) (278) (735) (497)
Net (loss) income attributable to PacteraTechnology International Limited (14,517) 6,797 (735) 17,901
Net (loss) income per share Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic (0.22) 0.17 0.05 0.44
Diluted (0.22) 0.16 0.05 0.42
Weighted average shares used in calculating net income per common share Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic 66,234,854 41,021,197 47,547,307 42,956,291
Diluted 66,234,854 42,946,070 49,444,160 42,956,291
Net (loss) income per ADS Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic (0.22) 0.17 0.05 0.44
Diluted (0.22) 0.16 0.05 0.42
Weighted average ADS used in calculating net income per ADS Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic 66,234,854 41,021,197 47,547,307 40,596,429
Diluted 66,234,854 42,946,070 49,444,160 42,956,291

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

PACTERA TECHNOLOGY INTERNATIONAL LIMITED Condensed Consolidated Statements of Comprehensive Income (Unaudited)(US dollars in thousands, except for share, per share data)

- Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Net (loss) income (14,448) 7,075 3,325 18,398
Other comprehensive income, net of tax: Change in cumulative foreign exchange translation adjustment 946 1,862 2,460 5,738
Comprehensive (loss) income (13,502) 8,937 5,785 24,136
Less: Comprehensive income attributable to noncontrolling interest (69) (295) (742) (547)
Comprehensive income attributable to Pactera Technology International Limited (13,571) 8,642 5,043 23,589

PACTERA TECHNOLOGY INTERNATIONAL LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in U.S. dollars in thousands)

Cash flows from operating activities: Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Net (loss) income (14,448) 7,075 3,325 18,398
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
(Reversal) Provision for doubtful accounts 4,851 (163) 4,821 477
(Gain) loss on disposal of property, plant and equipment 155 (1) 103 37
Depreciation 2,709 1,317 6,850 4,400
Change in fair value of foreign-currency forward contract 43 (67) 20 (28)
Amortization of intangible assets 2,295 1,044 6,058 2,677
Amortization of land use right 71 - 71 -
Impairment of Intangible Asssets 5,515 - 5,515 -
Non-cash interest income - - - (34)
Share-based compensation expenses 5,841 1,559 11,064 5,656
Changes in fair value of contingent consideration (776) 384 (659) 1,824
Earnings in investment (23) - (23) -
Changes in operating assets and liabilities:
Accounts receivable 10,523 627 (11,946) (12,405)
Other current assets 757 1,416 (1,374) (2,565)
Other assets 237 (66) (697) 2,170
Accounts payable (938) 1,981 (3,459) 216
Other liabilities 16,478 803 16,656 3,500
Net cash provided by operating activities 33,290 15,909 36,325 24,323
Cash flows from investing activities: Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Term deposits (7,232) 10,675 (1,908) (21,681)
Sort-term investment (1,764) - (1,764) -
Purchase of property, plant and equipment (2,219) (1,785) (5,600) (7,691)
Purchase of buliding and land use right (9,126) - (15,633) -
Restricted cash (2,234) (54) (3,022) (836)
Cash received from merger with VanceInfo 31,717 - 31,717 -
Deferred and contingent consideration paid for business acquisitions (2,321) (2,109) (9,554) (7,716)
Payment on success fee related to business acquisition - - - (450)
Net cash provided by (used in) investing activities 6,821 6,727 (5,764) (38,374)
Cash flows from financing activities: Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Repayment of bank loan (1) - (477) (40,000)
Cash received from non-controlling - - - 909
Proceeds from issuance of common share under employee option plan 589 634 1,988 5,291
Deferred and contingent consideration paid for business acquisitions - (2,150) (3,047) (11,710)
Payment of principal amount under capital lease obligations - - - (136)
Net cash provided by (used in) financing activities 588 (1,516) (1,536) (45,646)
Effect of exchange rate changes 528 1,063 833 3,660
Net increase (decrease) in cash and cash equivalents 41,227 22,183 29,858 (56,037)
Cash and cash equivalents at beginning of period 102,487 91,673 113,856 169,893
Cash and cash equivalents at end of period 143,714 113,856 143,714 113,856

PACTERA TECHNOLOGY INTERNATIONAL LIMITED Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures(US dollars in thousands, except per share data and percentages)

- Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
GAAP operating (loss) income (17,539) 6,702 915 17,211
GAAP operating (loss) margin -12.3% 10.3% 0.3% 7.9%
Adjustments:
- Share-based compensation 5,841 1,559 11,064 5,656
- Amortization of acquired intangible assets 2,295 1,044 6,058 2,677
- Write-down of trademarks due to re-branding 5,515 - 5,515 -
- Change in fair value of contingent consideration payable for M&A (776) 384 (659) 1,824
- Success fee related to business acquisition - - - 450
- Compensation expenses related to acquisition 87 - 174 -
- Merger related costs 19,827 - 22,215 -
- Land use right amortization expense 71 - 71 -
Non-GAAP operating income 15,321 9,689 45,353 27,818
Non-GAAP operating margin 10.8% 14.9% 12.6% 12.7%
GAAP net (loss) income (14,517) 6,797 2,590 17,901
GAAP net (loss) margin -10.2% 10.5% 0.7% 8.2%
Adjustments:
- Share-based compensation 5,841 1,559 11,064 5,656
- Write-down of trademarks due to re-branding 2,295 1,044 6,058 2,677
- Write down of intangible assets 5,515 - 5,515 -
- Change in fair value of contingent consideration payable for M&A (776) 384 (659) 1,824
- Success fee related to business acquisition - - - 450
- Compensation expenses related to acquisition 87 - 174 -
- Merger related costs, net of tax effect 17,837 -
- Land use right amortization expense 71 -
Non-GAAP net income 16,353 9,784
Non-GAAP net margin 11.5% 15.1%
Non-GAAP net income per ADS
Basic 0.25 0.24 0.95 0.70
Diluted 0.24 0.243 0.91 0.66
Weighted average ADS used in calculating Non-GAAP net income per ADS
Basic 66,234,854 41,021,197 47,547,307 40,596,429
Diluted 68,514,064 42,946,070 49,444,160 42,956,291
GAAP net (loss) income per ADS Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic (0.22) 0.17 0.05 0.44
Adjustments:
- Share-based compensation 0.09 0.04 0.23 0.14
- Amortization of acquired intangible assets 0.04 0.02 0.13 0.07
- Write-down of trademarks due to re-branding 0.08 - 0.12 -
- Change in fair value of contingent consideration payable for M&A (0.01) 0.01 (0.01) 0.04
- Success fee related to business acquisition - - - 0.01
- Compensation expenses related to acquisition - - - -
- Merger related costs, net of tax effect 0.27 - 0.43 -
- Land use right - - - -
Non-GAAP net income per ADS Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Basic 0.25 0.24 0.95 0.70
GAAP net (loss) income per ADS Three months ended December 31, 2012 Three months ended December 31, 2011 Year ended December 31, 2012 Year ended December 31, 2011
Diluted (0.22) 0.16 0.05 0.42
Adjustments:
- Share-based compensation 0.09 0.04 0.22 0.13
- Amortization of acquired intangible assets 0.03 0.02 0.13 0.06
- Write-down of trademarks due to re-branding 0.08 - 0.11 -
- Change in fair value of contingent consideration payable for M&A (0.01) 0.01 (0.01) 0.04
- Success fee related to business acquisition - - - 0.01
- Compensation expenses related to acquisition - - - -
- Merger related costs, net of tax effect 0.27 - 0.41 -
- Land use right - - - -

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

- Unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 Unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, 2012 Unaudited Pro forma consolidated net revenues for the three months ended December 31, 2012 Unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2011 Unaudited historical consolidated net revenues of VanceInfo for the three months ended December 31, 2011 Unaudited Pro forma consolidated net revenues for the three months ended December 31, 2011
Proforma Net Revenue by Service Lines
IT Services 87,738 22,695 110,433 39,700 43,236 82,936
- CPS 31,849 4,415 36,264 13,640 15,599 29,239
- ADM 55,889 18,280 74,169 26,060 27,637 53,697
R&D Services 54,464 14,447 68,911 25,236 43,952 69,188
Total 142,202 37,142 179,344 64,936 87,188 152,124
Proforma Net Revenue by Industry
High Tech 56,463 12,603 69,066 28,941 30,590 59,531
BFSI 39,894 7,541 47,435 18,849 13,375 32,224
Telecom 23,858 11,316 35,174 4,769 31,930 36,699
Others 21,987 5,682 27,669 12,377 11,293 23,670
Total 142,202 37,142 179,344 64,936 87,188 152,124
Proforma Net Revenue by Location of Client’s Headquarter
United States 55,361 11,903 67,264 30,324 31,388 61,712
Europe 10,262 3,459 13,721 4,851 10,986 15,837
Japan 16,615 1,996 18,611 13,323 2,877 16,200
Greater China 53,848 18,141 71,989 13,197 40,542 53,739
Asia South 6,116 1,643 7,759 3,241 1,395 4,636
Total 142,202 37,142 179,344 64,936 87,188 152,124

Note:

The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company’s future consolidated results of operations.
For the pro forma net revenues for the three months ended December 31, 2012, it combined the unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, 2012 (period prior to the consummation of the merger). The unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 combine the unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from November 9, 2012 to December 31, 2012.

Unaudited historical consolidated net revenues of Pactera for the year December 31, 2012 Unaudited historical consolidated net revenues of VanceInfo for the period from January 1, 2012 to November 8, 2012 Unaudited Pro forma consolidated net revenues for the year ended December 31, 2012 Unaudited historical consolidated net revenues of the former HiSoft for the year ended December 31, 2011 Unaudited historical consolidated net revenues of VanceInfo for the year ended December 31, 2011 Unaudited Pro forma consolidated net revenues for the year ended December 31, 2011
Proforma Net Revenue by Service Lines
IT Services 214,858 166,618 381,476 126,105 134,575 260,680
- CPS 79,605 38,604 118,209 37,567 47,784 85,351
- ADM 135,253 128,014 263,267 88,538 86,791 175,329
R&D Services 144,173 147,617 291,790 92,884 148,562 241,446
Total 359,031 314,235 673,266 218,989 283,137 502,126
Proforma Net Revenue by Industry
High Tech 153,099 106,418 259,517 105,447 95,390 200,837
BFSI 102,328 55,264 157,592 60,893 35,993 96,886
Telecom 41,366 110,630 151,996 14,653 112,783 127,436
Others 62,238 41,923 104,161 37,996 38,971 76,967
Total 359,031 314,235 673,266 218,989 283,137 502,126
Proforma Net Revenue by Location of Client’s Headquarter
United States 154,969 106,101 261,070 107,925 95,317 203,242
Europe 24,375 32,353 56,728 18,793 42,438 61,231
Japan 58,010 14,040 72,050 40,724 9,443 50,167
Greater China 104,222 153,259 257,481 39,410 132,642 172,052
Asia South 17,455 8,482 25,937 12,137 3,297 15,434
Total 359,031 314,235 673,266 218,989 283,137 502,126

Note:

The accompanying unaudited pro forma net revenues for the three months ended December 31, 2012 and 2011 and the year ended December 31, 2012 and 2011 is prepared based on the assumption that the merger of HiSoft and VanceInfo was consummated on January 1, 2011. No adjustment has been made to unaudited historical consolidated net revenues to give effect to such pro forma event. The unaudited pro forma net revenues are being provided for information purposes only as Pactera believes that such data provide meaningful supplemental information for investors to compare the performance of Pactera with the pre-merger HiSoft and VanceInfo for the corresponding periods. Such data do not purport to represent what the actual consolidated results of operations or the consolidated balance sheet of the combined company would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of the combined company’s future consolidated results of operations.
For the pro forma net revenues for the three months ended December 31, 2012, it combined the unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from October 1, 2012 to November 8, 2012 (period prior to the consummation of the merger). The unaudited historical consolidated net revenues of Pactera for the three months ended December 31, 2012 combine the unaudited historical consolidated net revenues of the former HiSoft for the three months ended December 31, 2012 and the unaudited historical consolidated net revenues of VanceInfo for the period from November 9, 2012 to December 31, 2012.

For further information, please contact:

Sheryl Zhang
Investor Relations
Pactera Technology International Ltd.
Tel: +86-10-8282-5330
E-mail: ir@pactera.com