Exhibit 99.1
SYSWIN INC.
ANNOUNCES FIRST QUARTER 2011 UNAUDITED FINANCIAL RESULTS
Aggregate transaction value and net revenue increased by 34.5% and 35.5% from 1Q2010
BEIJING, June 8, 2011 -- SYSWIN Inc. (NYSE: SYSW; "SYSWIN" or "the Company"), a leading primary real estate service provider in China, today announced its unaudited financial results for the first quarter 2011 ended March 31, 2011.
FIRST QUARTER 2011 FINANCIAL & OPERATION SUMMARY:
| – | Aggregate gross floor area (“GFA”) of properties sold increased 54.8% from 1Q2010 to 927,000 square meters and aggregate transaction value of properties sold increased 34.5% from 1Q2010 to RMB12.1 billion |
| – | Net revenue increased 35.5% from 1Q2010 to RMB166.0 million |
| – | Gross profit increased 26.9% from 1Q2010 to RMB107.6 million |
| – | Operating income decreased 12.6% from 1Q2010 to RMB50.4 million |
| – | Non-GAAP operating income decreased 12.0% from 1Q2010 to RMB 50.7 million |
| – | Net income decreased 4.9% from 1Q2010 to RMB35.0 million |
| – | Non-GAAP net income decreased 4.2% from 1Q2010 to RMB 35.2 million |
| – | Basic and diluted earnings per ADS (EPADS, with 1 ADS representing 4 ordinary shares) was US$0.11, compared to US$0.14 in 1Q2010 |
| – | Non-GAAP EPADS was US$0.11, compared to US$0.14 in 1Q2010 |
| – | Completed strategic investments in Shenzhen Xingyan Real Estate Consulting Co., Ltd. (“Xingyan”) |
BUSINESS HIGHLIGHTS:
| | 1Q 2011 | 1Q 2010 | Change |
| Number of cities entered | 23 | 15 | 8 |
| Aggregate GFA of the properties sold (in thousand square meters) | 927 | 599 | 54.8% |
| Average selling price per square meters (in RMB) | 13,100 | 15,078 | -13.1% |
| Aggregate transaction value (in million RMB) | 12,144 | 9,032 | 34.5% |
| Effective commission rates (%) | 1.3 | 1.3 | |
| Effective base commission rates (%) | 0.8 | 0.9 | -0.1 |
| Number of projects under sales | 110 | 48 | 62 |
In presenting Syswin’s results for its first quarter, company CEO and Director Mr Liangsheng Chen said: “I’m pleased to report that Syswin delivered solid top-line growth for the quarter as net revenue grew 35.5% from 1Q 2010 to RMB166.0 million and as we sold an aggregate transaction value of RMB12.1 billion of properties. We achieved a record result for the first-quarter of 2011 through our growth strategy, which comprises the following objectives: 1) to develop new markets as we build out our network nationwide; 2) to increase our market share in existing markets; 3) to focus on the demands of key clients in order to increase per-client revenues, by winning more projects in existing cities, as well as following them into new cities with signed projects in hand.”
“In the quarter under review, Syswin expanded its presence to Dong Guan, He Fei, Hui Zhou, Qin Huang Dao, Shen Zhen and Xi An, it took our total number of cities entered to 23 from 17 last quarter. We are fully committed to our near-term strategy of building scale. Thus, we are focused on growing the company’s coverage at a faster rate to scale up our operations, increase manpower and widening our geographical footprint to capture greater market share
nationwide. We are also aiming build a path for scalability, raise our service level to distinguish ourselves from potential new competitors and, more importantly, diversify and expand revenue streams,” he added.
Mr Chen continued: “We strongly believe in the decision we made last year to expedite the implementation of our nationwide expansion strategy to capitalize on opportunities from the ongoing industry consolidation and outsourcing trend to drive our mid- to long-term growth. As our pipeline in 1Q shows this strategy helped Syswin drive up our market share nationwide, solidify our leadership in our key markets and expedite our penetration into new markets. The aggregate GFA of properties newly contracted in 1Q2011 reached 8.8 million square meters, up 323% from the level in 1Q2010. Total contract pipeline reached 28.8 million square meters in 1Q2011. Greater Beijing region accounted for 35.6%, while other cities accounted for 64.4%.
“We experienced a decrease in our margins for the first quarter and expect a further decrease in our margins for the second quarter this year, as a result of our increased investment to implement our growth-focused strategy. However, we are optimistic that our investment will further accelerate our revenue growth in the next two years. We believe now is the time to make our investments for future growth. Demand is strong and outsourcing trends continue; and at the same time, the market is experiencing a downturn due to the impact of official tightening measures. This provides opportunities for us to solidify our leadership in our key markets, and accelerate the expansion of our market share in new regions and focus areas,” he said.
In concluding, Mr Chen said: “Looking ahead, we will remain cautious about the pace of demand recovery and any new government policies that may have an adverse impact on market demand and supply. Although uncertainties and challenges remain, we believe Syswin’s leading position, its capabilities and its financial strength will be factors that continue to facilitate our sustainable growth and profitability, as well as continuing to create value for shareholders.”
FIRST QUARTER 2011 FINANCIAL REVIEW:
Net Revenue
Net revenue in 1Q2011 increased 35.5% from 1Q2010 to RMB166.0 million.
Real Estate Sales Agency Services
Net revenue from real estate sales agency services for 1Q2011 increased 33.3% from 1Q2010 to RMB159.4 million. The increase primarily reflected an increase in the aggregate GFA of properties sold, and an increase in bonus commission recognized.
| ● | The aggregate GFA of properties sold in 1Q2011 increased 54.8% from 1Q2010 to 927,000 square meters. The increases primarily reflected a significant increase in aggregate GFA of properties sold in category 2 and category 3 cities including Tianjin, Qingdao, Chengdu and Chongqing. |
| ● | Average selling price per square meters of the projects to which we provided sales agency services was RMB13,100 in 1Q2011 compared to RMB15,078 during the same period in 2010. The decrease was primarily due to contributions to aggregate transaction value from cities other than Beijing has increased from 19.3% in 1Q2010 to 41.5% in 1Q2011, while the average sales price per square meters of those cities are lower than Beijing. |
| ● | Aggregate transaction value attributable to Beijing in 1Q2011 was RMB7.1 billion, a decrease of 2.4% from 1Q2010. Aggregate transaction value of other cities in 1Q2011 increased 188.3% from 1Q2010 to RMB5.0 billion. |
| ● | Overall commission rates in 1Q2011 were 1.3%, compared to 1.3% in 1Q2010. Excluding the Guo’ao project, the overall commission rates would have been 0.9% in 1Q2011 and 1.0% in 1Q2010. |
| ● | Bonus commission recognized in 1Q2011 primarily reflected the revenue recognition of the retention money kept by developer clients, after satisfying the developers’ pre-determined criteria. The bonus commission recognized in 1Q2011 accounted for 37.2% of the net revenue. |
Real estate consultancy services
Net revenues from real estate consultancy services in 1Q2011 increased 126.5% from 1Q2010 to RMB6.6 million, and accounted for 4.0% of our total net revenue in 1Q2011. The improvement was mainly due to the increasing number of the pre-sale consultancy services projects we provided to developers.
Gross Profit and Gross Margin
Gross profit in 1Q2011 increased 26.9% from 1Q2010 to RMB107.6 million.
Cost of revenue in 1Q2011 increased 55.0% from 1Q2010 to RMB58.4 million. The increase was primarily attributable to the salaries, commissions and welfare expenses paid to the new and existing sales forces to pursue future sales growth and to support future projects.
Gross margin was 64.8% in 1Q2011 compared to 69.2% in 1Q2010. The decline in gross margin was primarily due to the increased staff costs in association with the additional and existing sales forces to pursue future sales growth and to support future projects.
Operating Expenses
Operating expenses including selling, marketing and administrative cost in 1Q2011 increased 118.8% from 1Q2010 to RMB59.4 million. The increase of operating expenses represented an increase of staff cost as we recruited additional staffs for our expanded nationwide offices.
Operating Income and Operating margin
Operating income in 1Q2011 decreased 12.6% from 1Q2010 to RMB50.4 million. The decrease was primarily due to the increase in staff cost as the Company continued its expansion.
Non-GAAP operating income in 1Q2011 decreased 12.0% from 1Q2010 to RMB 50.7 million.
Operating margin in 1Q2011 was 30.4% compared to 47.1% in 1Q2010. The decrease of operating margin reflected the increase in staff cost as we recruited additional support staffs to pursue future sales growth and for our expanded nationwide offices.
Net Income from Continuing Operation and Earnings per ADS
Net income from continuing operations in 1Q2011 decreased 17.9% from 1Q2010 to RMB35.0 million. The decrease mainly reflected the decreased operating income as well as foreign exchange loss amounted to RMB 4.0 million incurred in 1Q2011.
Non-GAAP net income from continuing operations in 1Q2011decreased 17.3% from 1Q2010 to RMB35.2 million.
Basic and diluted EPADS was US$0.11 in 1Q2011, compared to US$0.14 in 1Q2010.
Non-GAAP basic and diluted EPADS was US$0.11 in 1Q2011, compared to US$0.14 in 1Q2010.
Cash and Cash Flow
As of March 31, 2011, the total balance of cash and cash equivalents was RMB472.7 million. The net cash used in operating activities in 1Q2011 was RMB100.3 million, primarily attributable to an increase of RMB71.0 million in accounts receivable, and an increase of RMB31.8 million of performance bonds, which are upfront deposits we make to property developers prior to the sales commencement.
SECOND QUARTER 2011 GUIDANCE
SYSWIN anticipates aggregate transaction value in the second quarter of 2011 to be in the range of RMB15.5 billion to RMB16.0 billion, representing an increase of 41% to 45% year over year. Net revenue in the second quarter of 2011 will be in the range of RMB145 million to RMB150 million, representing a decrease of 14% to 11% year over year. This forecast reflects the Company’s current and preliminary view, which is subject to change.
CONFERENCE CALL DETAILS:
Mr. Liangsheng Chen, CEO/ Director, Mr. Hongbing Tao, President/Director and Mr. Kai Li, CFO of SYSWIN will be hosting a conference call on June 9, 2011 at 8:00 am ET. To participate on the conference call, please dial the following numbers:
US (Toll free) – 1.866.362.4829
HK (Toll free) – 800.96.3844
South China (Toll free) – 1080.0130.0399, 1080.0120.2655 and 1080.0152.1490
North China (Toll free) – 1080.0852.1490 and 1080.0712.2655
Other international locations (US Toll) – 1.617.597.5346
An operator will answer your call and please use “SYSWIN” as the verbal passcode to access the call. Replays of the conference call will be available until June 16, 2011 by dialing 888.286.8010 or 617.801.6888 (international) and entering 37083408 as the passcode. A live webcast can also be accessed through the investor relations section of the Company’s website http://ir.syswin.com.
CONTACT:
Sherry Liu
Investor Relations
Email: ir@syswin.com
Tel: 8610-8472-8783
ABOUT SYSWIN
Syswin is a leading primary real estate services provider in China. Its core business is to provide real estate sales agency services to developers with regards to new residential properties. The company currently operates in 23 cities in the Bohai Rim (North China), Western China, Yangtze River Delta region (East China) and Southern China. In Beijing and Northern China, we believe Syswin has the largest market share based on the transaction value of new properties sold. The company works with 14 of China’s top 30 developers, including well-known names such as China Vanke, Poly, Agile, China Merchants Property Development Co., Ltd, Sino-Ocean Land Holdings, Guangzhou R&F Properties and Gemdale Group.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS:
This press release contains forward-looking statements, including statements regarding the quarterly earnings forecast, anticipated performance, general business outlook and projected results of operations. These statements are made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. SYSWIN has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. SYSWIN may also make written or oral forward-looking statements in its reports filed or furnished with the U.S. Securities and Exchange Commission (the "SEC"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about beliefs and expectations, are forward-looking statements and are subject to change, and such change may be material and may have a material adverse effect on SYSWIN's financial condition and results of operations for one or more periods. Forward-looking statements involve inherent risks and uncertainties. All forward-looking statements are subject to various risks and uncertainties including but not limited to regulatory developments, deteriorating economic conditions and unavailability of real estate financing, which could cause actual results to differ materially from expectations. The factors that could affect SYSWIN's future financial results are discussed more fully in SYSWIN's filings with the SEC. Unless otherwise specified, all information provided in this press release is as of the date of this press release, and SYSWIN does not undertake any obligation to update any such information, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement SYSWIN Inc.’s consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), SYSWIN Inc. uses in this press release the following non-GAAP financial measures: (1) net income attributable to SYSWIN Inc., (2) net income, (3) income from operations (4) income from continuing operations (5) net income per shares, basic and diluted, each of which excludes amortization of intangible assets resulting from business acquisitions. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this press release.
SYSWIN Inc. believes that these non-GAAP financial measures provide meaningful supplemental information to investors regarding its operating performance by excluding amortization of intangible assets resulting from business acquisitions, which may not be indicative of SYSWIN Inc.’s operating performance. These non-GAAP financial measures also facilitate management’s internal comparisons to SYSWIN Inc.’s historical performance and assist its financial and operational decision making. A limitation of using these non-GAAP financial measures is that amortization of intangible assets resulting from business acquisitions are recurring expenses that will continue to exist in SYSWIN Inc.’s business for the foreseeable future. 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 reconciliation between non-GAAP financial measures and their most comparable GAAP financial measures.
SYSWIN INC.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except shares and per share data)
| | | Three Months Ended March 31, | |
| | | 2010 RMB | | | 2011 RMB | |
| | | | | | | |
| Net revenue | | | 122,495 | | | | 166,018 | |
| | | | | | | | | |
| Cost of revenues | | | (37,692 | ) | | | (58,425 | ) |
| | | | | | | | | |
| Gross profit | | | 84,803 | | | | 107,593 | |
| | | | | | | | | |
| Selling, marketing and administrative expenses | | | (27,156 | ) | | | (59,420 | ) |
| Other operating income | | | - | | | | 2,229 | |
| | | | | | | | | |
| Income from operations | | | 57,647 | | | | 50,402 | |
| Interest income | | | 451 | | | | 1,731 | |
| Foreign currency exchange loss | | | - | | | | (4,027 | ) |
| Other income – net | | | - | | | | 4,412 | |
| | | | | | | | | |
| Income from continuing operations before income tax | | | 58,098 | | | | 52,518 | |
| Income tax | | | (15,520 | ) | | | (17,561 | ) |
| | | | | | | | | |
| Income from continuing operations | | | 42,578 | | | | 34,957 | |
| Loss from discontinued operations, net | | | (5,802 | ) | | | - | |
| | | | | | | | | |
| Net income | | | 36,776 | | | | 34,957 | |
| | | | | | | | | |
| Net loss attributable to non-controlling interest | | | - | | | | (58 | ) |
| Net income attributable to SYSWIN Inc. | | | 36,776 | | | | 34,899 | |
| | | | | | | | | |
| Amount attributable to SYSWIN Inc. | | | | | | | | |
| Income from continuing operations | | | 42,578 | | | | 34,899 | |
| Loss from discontinued operations, net | | | (5,802 | ) | | | - | |
| Net income attributable to SYSWIN Inc. | | | 36,776 | | | | 34,899 | |
| | | | | | | | | |
| Income per share from continuing operations, basic and diluted | | | 0.28 | | | | 0.18 | |
| Loss per share from discontinued operations, net, basic and diluted | | | (0.04 | ) | | | - | |
| Net income per share, basic and diluted | | | 0.24 | | | | 0.18 | |
Shares used in calculating income per share, basic and diluted (weighted average number of ordinary shares outstanding) | | | 154,875,000 | | | | 193,275,000 | |
SYSWIN INC.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
| | | December 31, | | | March 31, | |
| | | 2010 RMB | | | 2011 RMB | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | | 581,765 | | | | 472,740 | |
| Restricted cash | | | 3,000 | | | | - | |
| Accounts receivable, net | | | 281,374 | | | | 380,687 | |
| Other receivables | | | 16,502 | | | | 50,366 | |
| Deferred tax assets | | | 24,230 | | | | 28,114 | |
| Total current assets | | | 906,871 | | | | 931,907 | |
| | | | | | | | | |
| Non-current assets: | | | | | | | | |
| Property and equipment, net | | | 50,165 | | | | 50,519 | |
| Intangible assets, net | | | 3,507 | | | | 13,643 | |
| Goodwill | | | - | | | | 8,337 | |
| Deferred tax assets | | | 2,954 | | | | 6,657 | |
| Other non-current assets | | | 19,300 | | | | 21,500 | |
| Total assets | | | 982,797 | | | | 1,032,563 | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accrued expenses and other current liabilities | | | 134,256 | | | | 135,989 | |
| Income tax payable | | | 28,109 | | | | 36,832 | |
| Dividend payable | | | 15,197 | | | | 15,197 | |
| Total current liabilities | | | 177,562 | | | | 188,018 | |
| | | | | | | | | |
| Non-current liabilities: | | | | | | | | |
| Deferred revenue | | | 2,434 | | | | 2,206 | |
| Deferred tax liabilities | | | - | | | | 2,581 | |
| Total liabilities | | | 179,996 | | | | 192,805 | |
| | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
| Ordinary shares | | | 1 | | | | 1 | |
| Additional paid-in capital | | | 637,289 | | | | 637,289 | |
| Statutory reserve | | | 37,669 | | | | 42,012 | |
| Retained earnings | | | 127,842 | | | | 158,398 | |
Total shareholders’ equity | | | 802,801 | | | | 837,700 | |
| Non-controlling interest | | | - | | | | 2,058 | |
Total shareholders’ equity | | | 802,801 | | | | 839,758 | |
| | | | | | | | | |
Total liabilities and shareholders’ equity | | | 982,797 | | | | 1,032,563 | |
SYSWIN INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
| | | Three Months Ended March 31, | |
| | | 2010 RMB | | | 2011 RMB | |
| Net cash used in operating activities | | | (507 | ) | | | (100,319 | ) |
| | | | | | | | | |
| Net cash used in investing activities | | | (5,667 | ) | | | (7,713 | ) |
| | | | | | | | | |
| Net cash used in financing activities | | | - | | | | (993 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | | (6,174 | ) | | | (109,025 | ) |
| Cash and cash equivalents at the beginning of the period | | | 194,828 | | | | 581,765 | |
| Cash and cash equivalents at the end of the period | | | 188,654 | | | | 472,740 | |
SYSWIN INC.
Reconciliation of GAAP and Non-GAAP Results
(in thousands, except shares and per share data)
| | | Three Months Ended March 31, | |
| | | 2010 RMB (Unaudited) | | | 2011 RMB (Unaudited) | |
| | | | | | | |
| GAAP income from operations | | | 57,647 | | | | 50,402 | |
| Amortization of intangible assets resulting from business acquisitions | | | - | | | | 344 | |
| Non-GAAP income from operations | | | 57,647 | | | | 50,746 | |
| | | | | | | | | |
| GAAP income from continuing operations | | | 42,578 | | | | 34,957 | |
| Amortization of intangible assets resulting from business acquisitions (net of tax) | | | - | | | | 258 | |
| Non-GAAP income from continuing operations | | | 42,578 | | | | 35,215 | |
| | | | | | | | | |
| GAAP net income | | | 36,776 | | | | 34,957 | |
| Amortization of intangible assets resulting from business acquisitions (net of tax) | | | - | | | | 258 | |
| Non-GAAP net income | | | 36,776 | | | | 35,215 | |
| | | | | | | | | |
| GAAP net income attributable to SYSWIN Inc. | | | 36,776 | | | | 34,899 | |
| Amortization of intangible assets resulting from business acquisitions (net of tax and non-controlling interests) | | | - | | | | 237 | |
| Non-GAAP net income attributable to SYSWIN Inc. | | | 36,776 | | | | 35,136 | |
| | | | | | | | | |
| GAAP net income per share, basic and diluted | | | 0.24 | | | | 0.18 | |
| Non-GAAP net income per share, basic and diluted | | | 0.24 | | | | 0.18 | |
| Shares used in calculating GAAP / Non-GAAP income per share, basic and diluted (weighted average number of ordinary shares outstanding) | | | 154,875,000 | | | | 193,275,000 | |
