AsiaInfo Reports Third Quarter 2009 Financial Results
-- Total revenue grows 42% year-over-year
-- Meeting guidance, net revenue (non-GAAP) increases to US$61 million, growing 42% year-over-year
-- Exceeding guidance, income from continuing operations per basic share is US$0.20
BEIJING/SANTA CLARA, Calif. - October 28, 2009 - AsiaInfo Holdings, Inc. (Nasdaq: ASIA) ("AsiaInfo" or the "Company"), a leading provider of telecom software solutions and IT security products and services in China, today announced financial results for the third quarter of 2009.
"This past quarter marks another period of strong growth in which we met net revenue and exceeded EPS guidance," said Steve Zhang, AsiaInfo's president and chief executive officer. "This is especially notable as it comes on top of nearly 45% net revenue growth in the third quarter of 2008. During the quarter, we also took our first step into Southeast Asia by establishing a joint venture in Singapore, which will contribute sales and marketing expertise and help us cultivate strong partnerships in the region. In addition, in early October, we announced our acquisition of SmartCall, which provides us with the resources and expertise to fully execute end-to-end, targeted marketing campaigns. Building off of our leading base of business intelligence installations and consulting services, our SmartCall business has strong potential to quickly expand from solely operating in Sichuan province to a number of provinces in China.
Mr. Zhang concluded, "Looking forward, we are confident we will finish 2009 on a strong note and see abundant opportunities across all three of China's telecom operators in the coming year. In addition, our focus on delivering robust organic growth while remaining disciplined in our overseas expansion strategy will help us to deliver long-term sustainable growth."
Third Quarter 2009 Financial Results
Total revenues for the third quarter of 2009 were US$63.5 million, an increase of 41.8% year-over-year and 8.5% sequentially. Meeting guidance, net revenue (non-GAAP) for the third quarter of 2009 was US$60.9 million, an increase of 42.4% year-over-year and 14.1% sequentially. The year-over-year and sequential increases were primarily driven by strong performance among all three major customers in the telecom business.
During the quarter, AsiaInfo announced contracts with four China Mobile subsidiaries to upgrade BOSS Systems to NG-BOSS, six China Mobile subsidiaries to upgrade China Mobile Business Intelligence Systems to NG-BASS and a tender win to build P2P SMS Settlement System for China Mobile headquarters. The Company also signed a contract with China Unicom to build out a Device Management System that will allow China Unicom to remotely diagnose and manage mobile devices and contracts to integrate mobile and fixed-line Business Support Systems ("BSS") for China Telecom in Heilongjiang and Henan provinces. During the quarter, AsiaInfo also established a JV with Singapore-based Alpha Growth International and at the beginning of October, acquired a majority stake in an outbound calling services company called SmartCall Holdings, Ltd.
Gross margin for the quarter was 54.6%, compared to 51.8% in the year-ago period and 49.1% in the previous quarter. The year-over-year and sequential increases in gross margin were primarily due to a strong contribution from higher-margin software solutions and services. Gross profit as a percentage of net revenue (non-GAAP) was 57.0% in the third quarter of 2009, compared to 54.2% in the year-ago period and 53.9% in the previous quarter. The Company noted that gross profit as a percentage of net revenue (non-GAAP) has remained relatively stable, near 55% for the last several quarters.
In the third quarter of 2009, the AsiaInfo Technologies business unit, which focuses on telecommunications software and services, contributed 82.7% and 84.5% to total revenue and net revenue (non-GAAP), respectively. Total revenue for the AsiaInfo Technologies business unit increased 44.8% year-over-year and slightly decreased 0.3% sequentially to US$52.6 million. Net revenue (non-GAAP) for the AsiaInfo Technologies business unit increased 47.0% year-over-year and 7.3% sequentially to US$51.4 million. The increases in net revenue (non-GAAP) mainly reflect an increase in demand for the Company's software and service solutions among the three major telecom customers in a highly competitive market and an increasing number of contracts to upgrade and maintain existing installations.
In the third quarter of 2009, the Lenovo-AsiaInfo business unit, which focuses on IT security products and services, contributed 17.3% to total revenue and 15.5% to net revenue (non-GAAP). Total revenue for the Lenovo-AsiaInfo business unit increased 29.0% year-over-year and 87.0% sequentially to US$11.0 million. Net revenue (non-GAAP) for the Lenovo-AsiaInfo business unit increased 21.7% year-over-year and 73.3% sequentially to US$9.4 million. The year-over-year increase was mainly due to several major high-margin contracts signed with government agencies and the sequential increase was partially due to seasonality, as sales in the Lenovo-AsiaInfo business unit are typically weakest in the first half of each year. Please refer to the end of this press release for condensed segmented financial results for AsiaInfo's two business units.
Total operating expenses increased 36.9% year-over-year and 9.5% sequentially to US$24.5 million. Sales and marketing expenses increased 17.4% year-over-year and 13.0% sequentially to US$11.2 million. The year-over-year and sequential increases were mainly due to higher sales commission expenses incurred upon signing new contracts. General and administrative expenses increased 81.0% year-over-year and 3.3% sequentially to US$3.8 million. The year-over-year increase was largely the result of increases in share-based compensation related to the performance stock unit awards granted to key employees on March 16, 2009. Research and development expenses increased 73.4% year-over-year and 23.3% sequentially to US$10.8 million. The Company noted that the increase in R&D expenses is in line with its strategy of investing in the research and development of world-class products.
Income from operations for the third quarter of 2009 was US$10.2 million, an increase of 92.7% year-over-year and 59.1% sequentially. Operating margin of total revenue2 was 16.0% for the third quarter of 2009, compared to 11.8% in the year-ago period and 10.9% in the previous quarter. Operating margin of net revenue (non-GAAP)3 was 16.8% for the third quarter of 2009, compared to 12.4% in the year-ago period and 12.0% in the previous quarter. The year-over-year margin improvement was mainly the result of improving economies of scale and the Company's continued efforts to improve operational efficiency.
Other income for the third quarter of 2009 was US$527 thousand, a decrease of 77.0% from US$2.3 million in the year-ago period and a decrease of 70.0% from US$1.8 million in the previous quarter. The year-over-year decrease was largely the result of lower investment gains as well as lower interest rates in the third quarter of 2009, which resulted in lower interest income. The sequential decrease was the result of the sale of certain short-term investments during the second quarter of 2009, which realized a gain on investments of US$1.2 million.
In the third quarter of 2009, AsiaInfo recorded net income attributable to AsiaInfo Holdings, Inc. of US$9.1 million, or US$0.20 per basic share, compared to US$6.1 million, or US$0.13 per basic share, in the year-ago period and US$7.2 million, or US$0.16 per basic share, in the previous quarter.
Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) was US$13.0 million in the third quarter of 2009 or US$0.29 per basic share. Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) in the year-ago period was US$7.6 million or US$0.16 per basic share. Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) in the previous quarter was US$11.4 million or US$0.26 per basic share. Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) increased 71.6% year-over-year and 14.0% sequentially.
As of September 30, 2009, AsiaInfo had cash and cash equivalents and restricted cash totaling US$195.8 million and short-term investments totaling US$40.0 million. Operating cash flow in the third quarter of 2009 was a net inflow of US$9.5 million.
Fourth Quarter 2009 Guidance
AsiaInfo expects fourth quarter 2009 net income from continuing operations per basic share to be in the range of US$0.28 to US$0.29, an increase of 460% to 480% year-over-year. Please note that in the fourth quarter of 2008, there was a US$0.15 per basic share of impairment loss on investment. The Company expects net revenue (non-GAAP) to be in the range of US$70 million to US$72 million, an increase of 37% to 40% year-over-year.
ASIAINFO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS（UNAUDITED） |
| (Amounts in thousands of US$, except shares and per share amounts) |
| |
| |
Three Months
Ended September 30, |
Nine Months
Ended September 30, |
| |
2009 |
2008 |
2009 |
2008 |
| Revenues: |
|
|
|
| Software products and solutions |
$54,882 |
$37,479 |
$144,470 |
$94,631 |
| Service |
5,848 |
4,754 |
16,778 |
12,304 |
| Third party hardware |
2,803 |
2,562 |
11,829 |
14,924 |
| Total revenues |
63,533 |
44,795 |
173,077 |
121,859 |
| |
|
|
|
|
| Cost of revenues: |
|
|
|
|
| Software products and solutions |
24,006 |
17,890 |
64,829 |
42,706 |
| Service |
2,161 |
1,667 |
6,058 |
5,085 |
| Third party hardware |
2,673 |
2,052 |
11,199 |
13,992 |
| Total cost of revenues |
28,840 |
21,609 |
82,086 |
61,783 |
| Gross profit |
34,693 |
23,186 |
90,991 |
60,076 |
| |
|
|
|
|
| Operating expenses: |
|
|
|
|
| Sales and marketing |
11,223 |
9,556 |
31,689 |
25,663 |
| General and administrative |
3,773 |
2,084 |
10,991 |
6,941 |
| Research and development |
10,842 |
6,253 |
26,849 |
15,940 |
| Government grant |
(1,342) |
- |
(1,342) |
- |
| Total operating expenses |
24,496 |
17,893 |
68,187 |
48,544 |
| |
|
|
|
|
| Income from operations |
10,197 |
5,293 |
22,804 |
11,532 |
| |
|
|
|
|
| Other income: |
|
|
|
|
| Interest income |
540 |
1,151 |
1,698 |
3,433 |
| Dividend income |
4 |
230 |
178 |
533 |
| Gain from sales of short-term investments |
- |
954 |
1,210 |
4,587 |
| Other expenses, net |
(17) |
(43) |
(31) |
(573) |
| Total other income, net |
527 |
2,292 |
3,055 |
7,880 |
| |
|
|
|
|
| Income before provision for income taxes and discontinued operations |
10,724 |
7,585 |
25,859 |
19,412 |
| Income taxes expense |
1,646 |
1,490 |
3,793 |
3,817 |
| Income from continuing operations |
9,078 |
6,095 |
22,066 |
15,595 |
Income from discontinued operations |
- |
- |
- |
980 |
| Net income |
9,078 |
6,095 |
22,066 |
16,575 |
| Less: Net income (loss) attributable to the noncontrolling interests |
13 |
(4) |
6 |
(4) |
| Net income attributable to Asiainfo Holdings, Inc. |
$9,065 |
6,099 |
22,060 |
16,579 |
| Earnings Per Share: |
|
|
|
|
| Income from continuing operations attributable to AsiaInfo Holdings, Inc. common stockholders: |
|
|
|
|
| Basic |
$0.20 |
$0.13 |
$0.49 |
$0.35 |
| Diluted |
$0.19 |
$0.13 |
$0.48 |
$0.33 |
| |
|
|
|
|
| Income from discontinued operations attributable to AsiaInfo Holdings, Inc. common stockholders: |
|
|
|
|
| Basic |
- |
- |
- |
$0.02 |
| Diluted |
- |
- |
- |
$0.02 |
| |
|
|
|
|
| Net income attributable to AsiaInfo Holdings, Inc. common stockholders |
|
|
|
|
| Basic |
$0.20 |
$0.13 |
$0.49 |
$0.37 |
| Diluted |
$0.19 |
$0.13 |
$0.48 |
$0.35 |
| |
|
|
|
|
| Weighted average shares used in computation: |
|
|
|
|
| Basic |
45,772,678 |
45,731,067 |
44,629,386 |
45,208,453 |
| Diluted |
46,627,469 |
47,850,187 |
45,918,502 |
47,095,515 |
| ASIAINFO HOLDINGS, INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) |
| (Amounts in thousands of US$, except share and per share amounts) |
| |
As of |
| |
Sept 30, 2009 |
Dec 31, 2008(1) |
ASSETS: |
|
|
Current Assets: |
|
|
| Cash and cash equivalents |
$184,219 |
$172,119 |
| Restricted cash |
11,551 |
12,510 |
| Short term investments |
40,021 |
28,633 |
| Accounts receivable, net (net of allowances of $2,703 and $2,605 as of September 30, 2009 and December 31, 2008, respectively) |
100,144 |
52,011 |
| Inventories |
8,572 |
12,322 |
| Other receivable |
3,423 |
2,813 |
| Deferred income taxes-current |
3,244 |
3,334 |
| Prepaid expenses and other current assets |
7,649 |
5,425 |
| Total current assets |
$358,823 |
$289,167 |
| |
|
|
| Long term investment |
4,696 |
4,696 |
| Property and equipment, net |
2,992 |
2,887 |
| Other acquired intangible assets, net |
2,314 |
3,008 |
| Deferred income tax assets- non-current |
2,630 |
2,671 |
| Goodwill |
21,141 |
20,725 |
Total Assets |
$392,596 |
$323,154 |
| |
|
|
LIABILITY AND STOCKHOLDERS' EQUITY |
|
|
Current Liabilities: |
|
|
| Accounts payable |
35,873 |
13,835 |
| Accrued expenses |
16,436 |
14,235 |
| Deferred revenue |
36,582 |
44,414 |
| Accrued employee benefits |
32,308 |
27,570 |
| Other payables |
6,111 |
5,288 |
| Income taxes payable |
2,734 |
646 |
| Other taxes payable |
6,234 |
6,311 |
| Deferred income tax liability-current |
742 |
934 |
| Total current liabilities |
$137,020 |
$113,233 |
| |
|
|
| Unrecognized tax benefits - non-current |
2,159 |
1,326 |
| Other long term liabilities |
135 |
135 |
| Total liabilities |
$139,314 |
$114,694 |
| |
|
|
Stockholders' equity: |
|
|
| Common stock |
496 |
464 |
| Additional paid-in capital |
237,337 |
215,948 |
| Treasury stock, at cost |
(27,749) |
(27,749) |
| Statutory reserve |
17,212 |
17,212 |
| Retained earnings (Accumulated deficit) |
6,494 |
(15,566) |
| Accumulated other comprehensive income |
19,428 |
18,093 |
Total Asiainfo holding stockholders' equity |
$253,218 |
$208,402 |
Non controlling interest(2) |
64 |
58 |
Total stockholders' equity |
253,282 |
208,460 |
Total Liabilities and Stockholders' Equity |
$392,596 |
$323,154 |
(1)December 31, 2008 balances were extracted from audited financial statements.
(2)Amount in relation to noncontrolling interest, formerly named minority interest, as of December 31, 2008 is reclassified in accordance with FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, which was adopted by the Company on January 1, 2009.
ASIAINFO HOLDINGS, INC.
CONDENSED INFORMATION FOR REPORTABLE SEGMENTS (UNAUDITED) |
| |
(Amounts in thousands of US$) |
| |
Three Months Ended |
| |
Sept 30, 2009 |
Sept 30, 2008 |
Jun 30, 2009 |
| |
AsiaInfo Technologies |
Lenovo -AsiaInfo |
Total |
AsiaInfo Technologies |
Lenovo -AsiaInfo |
Total |
AsiaInfo Technologies |
Lenovo -AsiaInfo |
Total |
| Revenues: |
|
|
|
|
|
|
|
|
|
| Software products and solutions |
$45,660 |
$9,222 |
$54,882 |
$30,297 |
$7,182 |
$37,479 |
$41,776 |
$5,375 |
$47,151 |
| Service |
5,703 |
145 |
5,848 |
4,624 |
130 |
4,754 |
5,883 |
48 |
5,931 |
| Third party hardware |
1,193 |
1,610 |
2,803 |
1,367 |
1,195 |
2,562 |
5,039 |
447 |
5,486 |
| Total revenues |
52,556 |
10,977 |
63,533 |
36,288 |
8,507 |
44,795 |
52,698 |
5,870 |
58,568 |
| |
|
|
|
|
|
|
|
|
|
| Cost of revenues: |
|
|
|
|
|
|
|
|
|
| Software products and solutions |
21,217 |
2,789 |
24,006 |
15,223 |
2,667 |
17,890 |
20,275 |
2,334 |
22,609 |
| Service |
2,074 |
87 |
2,161 |
1,629 |
38 |
1,667 |
1,892 |
75 |
1,967 |
| Third party hardware |
1,133 |
1,540 |
2,673 |
1,298 |
754 |
2,052 |
4,786 |
424 |
5,210 |
| Total cost of revenues |
24,424 |
4,416 |
28,840 |
18,150 |
3,459 |
21,609 |
26,953 |
2,833 |
29,786 |
| |
|
|
|
|
|
|
|
|
|
| Gross profit |
28,132 |
6,561 |
34,693 |
18,138 |
5,048 |
23,186 |
25,745 |
3,037 |
28,782 |
| |
|
|
|
|
|
|
|
|
|
| Business unit expenses: |
|
|
|
|
|
|
|
|
|
| Sales and marketing |
8,531 |
2,692 |
11,223 |
6,224 |
3,332 |
9,556 |
7,569 |
2,360 |
9,929 |
| General and administrative |
614 |
-143 |
471 |
(265) |
119 |
(146) |
727 |
(78) |
649 |
| Research and development |
8,162 |
2,680 |
10,842 |
5,351 |
902 |
6,253 |
7,787 |
1,005 |
8,792 |
| Government grant |
(1,342) |
- |
(1,342) |
- |
- |
- |
- |
- |
- |
| Total business unit expenses |
15,965 |
5,229 |
21,194 |
11,310 |
4,353 |
15,663 |
16,083 |
3,287 |
19,370 |
| |
|
|
|
|
|
|
|
|
|
| Contribution profit (loss) |
$12,167 |
$1,332 |
$13,499 |
$6,828 |
$695 |
$7,523 |
$9,662 |
($250) |
$9,412 |
| Corporate general and administration |
|
|
3,302 |
|
|
2,230 |
|
|
3,003 |
| Operating profit |
|
|
$10,197 |
|
|
$5,293 |
|
|
$6,409 |
Third Quarter 2009 Conference Call Details
AsiaInfo management will hold an earnings conference call at 5:00 p.m. Pacific Time / 8:00 p.m. Eastern Time on October 28, 2009 (8:00 a.m. Beijing/Hong Kong Time on October 29, 2009). Management will discuss results and highlights of the quarter and answer questions from investors.
The dial-in numbers for the conference call are as follows:
U.S. Toll Free: +1-866-549-1292
China Local Number: 400-681-6949
Hong Kong and International: +852-3005-2050
The passcode for the call is 408313#.
A replay of the call will be available until 7:00 p.m. Eastern Time on November 29, 2009 by dialing one of the following numbers:
U.S Toll Free: +1-866-753-0743
China Toll Free: 800-869-7680
Hong Kong and International: +852-3005-2020
The passcode for the replay is 134936#.
Additionally, a live and archived webcast of this call will be available on the Investor Relations section of the AsiaInfo website at www.asiainfo.com.
About AsiaInfo Holdings, Inc.
AsiaInfo Holdings, Inc. (Nasdaq: ASIA) is a leading provider of high-quality software and customer solutions to many of China's largest enterprises. In addition to providing software and customer solutions to China's telecom carriers, the Company also offers a wide range of security products and services to small, medium and large sized Chinese enterprises across multiple vertical industries.
Organized as a Delaware corporation, AsiaInfo began operations in the United States in 1993. The Company moved its major operations to China in 1995 and played a significant role in the construction of the national Internet backbones and provincial access networks for all of China's major national telecom carriers, including China Telecom, China Mobile, China Unicom and China Netcom. Since 1998, AsiaInfo has continued to diversify its product offerings and is now a major provider of enterprise software solutions in China.
For more information about AsiaInfo, please visit http://www.asiainfo.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)
AsiaInfo's net revenue (non-GAAP) represents total revenue net of hardware costs that are passed through to our customers. We believe total revenues net of hardware 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
(2) Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP)
Net income (non-GAAP) excludes share-based compensation expenses, amortization of acquired intangible assets, impairment loss on investment, after-tax dividend income and gain on discontinued operations. 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 attributable to AsiaInfo Holdings, Inc. (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 attributable to AsiaInfo Holdings, Inc. (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 attributable to AsiaInfo Holdings, Inc. (non-GAAP) to GAAP net income attributable to AsiaInfo Holdings, Inc.
(3) Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) per basic share
Net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) is calculated based on net income attributable to AsiaInfo Holdings, Inc.. Like net income attributable to AsiaInfo Holdings, Inc. (non-GAAP), net income attributable to AsiaInfo Holdings, Inc.(non-GAAP) per share excludes share-based compensation expenses, amortization of acquired intangible assets, impairment loss on investment, after-tax dividend income and gain on discontinued operations. Shares outstanding used in the computation of net income per share were the same as those used in the computation of net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) per share. Management believes that net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) per share, when used in conjunction with the Company's GAAP net income attributable to AsiaInfo Holdings, Inc. per share, provides useful information to investors for the same reasons discussed above regarding net income attributable to AsiaInfo Holdings, Inc (non-GAAP). In addition, net income attributable to AsiaInfo Holdings, Inc. (non-GAAP) per 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 attributable to AsiaInfo Holdings, Inc. (non-GAAP) per share to GAAP net income attributable to AsiaInfo Holdings, Inc per share
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