-- AsiaInfo Exceeds Net Revenue Guidance for the Fourth Quarter
-- Fourth Quarter Telecom Software Products and Solutions Revenue Grows
41% Year-Over-Year and 9% Sequentially
-- Lenovo-AsiaInfo Fourth Quarter Net Revenue Grows 28% Sequentially
BEIJING and SANTA CLARA, Calif., Jan. 25 /Xinhua-PRNewswire/ -- AsiaInfo Holdings, Inc. (Nasdaq: ASIA), (''AsiaInfo'') a leading provider of
telecom software solutions and IT security products and services in China,
today announced fourth quarter and full year results for the period ended
December 31, 2006.
(Logo: http://www.prnasia.com/sa/200611101947.jpg )
''We're pleased to report that our strategy of focusing on our core
telecom and IT security businesses helped to drive encouraging business
results for the fourth quarter and full year 2006,'' said Steve Zhang,
AsiaInfo's President and Chief Executive Officer. ''Our telecom software
solutions gained market share and customer recognition as we worked to
innovate and drive value for China's telecom carriers.''
During the fourth quarter, AsiaInfo developed software solutions that
helped carriers expand capacity, provide new value-added services to users,
analyze user data, and increase overall operational efficiency. Contracts
signed during the quarter included agreements to upgrade China Telecom's
business support systems, expand Beijing Mobile's business intelligence and
operational CRM systems, and enhance China Mobile's content billing system.
''We are optimistic about the year ahead,'' continued Mr. Zhang. ''Our
focus on R&D and anticipating customer needs well positions us to take
advantage of opportunities created by increasing competition between the
telecom carriers and the growing overall demand for new value-added telecom
services. We will also continue to consider attractive acquisitions in the
telecom software space that allow us to expand market share at a reasonable
cost.''
Fourth Quarter 2006 Results
Exceeding guidance, net revenue (total revenues net of third party
hardware cost) for the fourth quarter was US$25.4 million, an increase of 58%
year-over-year, and an increase of 8% sequentially. Earnings per basic share
for the quarter was US$0.05.
AsiaInfo's core telecom software solutions business continued to perform
well, posting net revenue growth of 32% year-over-year and 5% sequentially.
The Company's Lenovo-AsiaInfo business unit had a strong quarter, with net
revenue up 876% year-over-year, and up 28% sequentially. The large
year-over-year increase in net revenue was primarily due to significantly lower than expected shipment volume for the Lenovo-AsiaInfo business unit in the year ago period. Please refer to the end of the press release for condensed segmented financial results for AsiaInfo's two business units.
During the fourth quarter, the Lenovo-AsiaInfo business unit contributed
approximately 14% to net revenue, including a 16% contribution to software
products and solutions revenue and a 4% contribution to service revenue.
Lenovo-AsiaInfo contributed 12% to net revenue in the previous quarter.
Gross revenue for the fourth quarter was US$32.1 million, an increase of
66% from the year ago period and up 16% sequentially. Gross margins were 42%
in the fourth quarter compared to 25% in the year-ago period and 43% in the
previous quarter.
Revenue from software products and solutions for the fourth quarter was
US$21.6 million, an increase of 73% from the year-ago period and an increase
of 13% sequentially. Service revenue was US$3.5 million, a 1% increase year-
over-year and a 15% sequential decrease. Third-party hardware revenue for
the quarter was US$7.1 million, a 102% increase over the year ago period and an increase of 57% sequentially.
Total operating expenses for the quarter were US$12.2 million, a decrease
of 64% year-over-year and an 11% increase sequentially. The year-over-year
decrease was primarily due to a US$21.2 million non-cash charge for
impairment of goodwill and acquired intangible assets related to the Lenovo-AsiaInfo business unit in the year-ago period. Lenovo-AsiaInfo contributed 20% to total operating expenses before corporate general and administrative charges for the fourth quarter of 2006.
Net income from continuing operations for the fourth quarter was US$1.9
million, or US$0.05 per basic share. Net loss from continuing operations in
the year-ago period was US$27.9 million or US$0.60 per basic share, and net
income from continuing operations in the previous quarter was US$1.8 million
or US$0.04 per basic share.
As announced in early December 2006, AsiaInfo has entered into an
agreement to sell its financial services IT solutions business. The sale of
this business will allow AsiaInfo to concentrate on delivering leading
telecom software solutions and IT security products and services to a growing client base. The transaction is expected to close in the first quarter of 2007.
The Company recorded net income from discontinued operations for the
fourth quarter of US$0.2 million. This compares to a net loss from
discontinued operations of US$11.9 million in the year-ago period, and net
income from discontinued operations of US$0.2 million in the previous quarter.
In the fourth quarter, AsiaInfo recorded total net income of US$2.1
million. This is compared to a net loss of US$39.8 million in the year-ago
period and net income of US$2.0 million in the previous quarter, inclusive of
the impact of discontinued operations during those periods.
Net income excluding share-based compensation expenses, amortization and
impairment charges(1)(Non-GAAP net income) was US$3.1 million in the fourth
quarter of 2006 or US$0.07 per basic share. Non-GAAP net loss in the
year-ago period was US$18.3 million or US$0.40 per basic share. Non-GAAP net income in the previous quarter was US$2.7 million or US$0.06 per basic share.
Operating cash flow for the fourth quarter of 2006 was US$27.6 million.
(1) Non-GAAP net income and Non-GAAP EPS measures exclude share-based
compensation expenses, amortization expenses of acquired intangible
assets and impairment of goodwill and acquired intangible assets.
For further details on non-GAAP measures, please refer to the
reconciliation table and a detailed discussion of management's
use of non-GAAP information below.
2006 Full Year Financial Results
For the full year 2006, the company reported net revenue of US$86.7
million, representing a 16% increase over 2005 net revenue of US$75.0
million. Gross revenue for the full year 2006 was US$109.6 million, up by 21% from US$90.3 million in 2005. Gross margin for the full year 2006 was 40% compared to 41% for the full year 2005.
Full year 2006 revenue from telecom software products and solutions grew
by 32% compared to 2005, leading to an 18% increase in telecom net revenue
for the year.
The Lenovo-AsiaInfo business unit's full year 2006 results contributed 8%
and 8% to the full year gross revenue and gross profit, respectively, and 10%
to 2006 net revenue.
Reflecting AsiaInfo's strategic focus on software products and solutions,
revenue from this area grew 28% for the year to US$72.1 million from US$56.3
million in 2005. Service revenue fell 25% to US$13.4 million from US$17.8
million in 2005, and third party hardware revenue grew 49% to US$24.1 million
from US$16.1 million in 2005. Third party hardware has been generally
decreasing in the past years as we focus on our core software solution
business; however, from time to time we offer hardware for some projects in
response to customer requests.
Net income from continued operations for 2006 was US$5.0 million, or
US$0.11 per basic share compared to a net loss of US$23.8 million, or US$0.53
per basic share, for 2005. Net income from discontinued operations for 2006
was US$0.8 million, or US$0.02 per basic share while net loss from
discontinued operations for 2005 was US$13.4 million, or US$0.30 per basic
share in 2005.
AsiaInfo recorded a total net income of US$5.8 million for the year,
compared to a net loss of US$37.2 million in 2005.
Non-GAAP net income was US$8.1 million for the full year 2006 or US$0.19
per basic share. Non-GAAP net loss in 2005 was US$14.4 million or US$0.32
per basic share.
AsiaInfo's full year net operating cash flow was US$35.8 million.
First Quarter 2007 Guidance
AsiaInfo expects first quarter 2007 net revenue to be US$23 million to
US$24 million, representing 22% to 28% year-over-year growth. Earnings per
basic share from continuing operations for the first quarter of 2007 is
expected to be US$0.03 to US$0.04. This is compared to earnings per basic
share of US$0.01 in the first quarter of 2006.
The Company anticipates that the Lenovo-AsiaInfo business unit will post
a loss of US$0.6 million to US$0.8 million in the first quarter due to
seasonality in the business relating to the long Chinese New Year holiday.
ASIAINFO HOLDINGS, INC.
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (2)
(Amounts in thousands of US$, except share and per share amounts)
Three Months Year
Ended Dec 31 Ended Dec 31
2006 2005 2006 2005
Revenues:
Software products and
solutions 21,565 12,433 72,098 56,343
Service 3,491 3,455 13,432 17,816
Third party hardware 7,055 3,500 24,053 16,125
Total revenues 32,111 19,388 109,583 90,284
Cost of revenues:
Software products and
solutions 9,477 8,339 33,736 27,928
Service 2,336 2,878 8,801 10,460
Third party hardware 6,701 3,325 22,850 15,317
Total cost of revenues 18,514 14,542 65,387 53,705
Gross profit 13,597 4,846 44,196 36,579
Operating expenses:
Sales and marketing 6,464 5,278 20,137 18,473
General and administrative 2,003 3,768 7,960 11,288
Research and development 3,712 3,886 14,230 12,762
Impairment of goodwill
and acquired intangible
assets -- 21,197 -- 21,197
Total operating expenses 12,179 34,129 42,327 63,720
Income (loss) from
operations 1,418 (29,283) 1,869 (27,141)
Other income (expenses):
Interest income 1,097 958 4,246 3,323
Gain (loss) on investments (196) 137 (196) 134
Other income (expense),
net (79) (24) (155) 23
Total other income, net 822 1,071 3,895 3,480
Income (loss) before
income taxes and equity
in loss of an affiliate 2,240 (28,212) 5,764 (23,661)
Income tax (benefit)
expense 304 (318) 768 145
Net income (loss) from
continuing operations 1,936 (27,894) 4,996 (23,806)
Discontinued operations
Gain (loss) from
operations of
discontinued operations 183 (977) 695 (2,439)
Gain (loss) on disposal of
discontinued operations -- (11,163) 140 (11,163)
Income tax benefit -- 239 -- 239
Net income (loss) from
discontinued operations 183 (11,901) 835 (13,363)
Net income (loss) 2,119 (39,795) 5,831 (37,169)
Net income (loss) from
continued operations:
Basic 0.05 (0.60) 0.11 (0.53)
Diluted 0.04 (0.60) 0.11 (0.53)
Net income (loss) from
discontinued operations:
Basic 0.00 (0.26) 0.02 (0.30)
Diluted 0.00 (0.26) 0.02 (0.30)
Shares used in
computation:
Basic 42,838,394 46,144,356 43,630,365 44,983,877
Diluted 43,735,011 46,144,356 44,452,024 44,983,877
Non-GAAP disclosure:
Total revenues net of
third party hardware cost 25,410 16,063 86,733 74,967
Total cost of revenues net
of third party hardware
cost 11,813 11,217 42,537 38,388
(2) Certain comparative figures have been reclassified to conform to
current period's discontinued operation presentation.
ASIAINFO HOLDINGS, INC.
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of US$, except share and per share amounts)
As at
Dec 31, Sept 30, Dec 31,
2006 2006 2005(3)
ASSETS:
Current Assets:
Cash and cash equivalents 104,575 72,095 92,176
Restricted cash 12,645 12,728 13,369
Short term investments 45,882 47,460 43,181
Notes receivable 848 954 3,551
Accounts receivable, trade (net of
allowances of 3,311 and 4,663 at Dec
31, 2006 and 2005, respectively) 35,234 46,859 40,727
Inventories 6,518 5,236 5,211
Current assets held-for-sale 857 -- --
Other current assets 10,026 11,462 9,595
Total current assets 216,585 196,794 207,810
Property, plant and equipment, net 1,857 1,911 2,374
Long term investment 1,787 1,765 1,729
Other assets 23,933 23,830 16,313
Total Assets 244,162 224,300 228,226
LIABILITY AND STOCKHOLDERS EQUITY
Current Liabilities:
Notes payable 4,045 4,608 1,807
Accounts payable 15,537 12,187 9,421
Accrued employee benefit 18,376 13,700 11,849
Deferred revenue 23,169 16,747 18,685
Income taxes payable 927 417 444
Other taxes payable 3,232 2,771 2,415
Current liabilities held-for-sale 227 -- --
Other current liabilities 16,188 17,381 15,981
Total current liabilities 81,701 67,811 60,602
Stockholders' equity:
Common stock, 100,000,000 shares
authorized; 0.01 par value, shares
issued: 43,076,034 and 46,920,714
as at Dec 31, 2006 and 2005
respectively; shares issued and
outstanding: 43,076,034 and
46,144,613 shares as at Dec 31, 2006
and 2005 respectively 431 428 469
Additional paid-in capital 195,881 194,791 215,201
Treasury stock, at cost: Dec 31,
2006: nil; Dec 31, 2005: 776,101 -- -- (4,027)
Accumulated deficit (40,556) (42,675) (46,387)
Accumulated other comprehensive
income 6,705 3,945 2,368
Total stockholders' equity 162,461 156,489 167,624
Total Liabilities and Stockholders'
Equity 244,162 224,300 228,226
(3) December 31, 2005 balances were extracted from audited financial
statements.
ASIAINFO HOLDINGS, INC.
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS AND TOTAL ASSETS FOR
REPORTABLE SEGMENTS
(Amounts in thousands of US$)
Three Months Ended
Dec 31, 2006
AsiaInfo Lenovo-
Technologies AsiaInfo Total
Revenues:
Software products and solutions 18,064 3,501 21,565
Service 3,354 137 3,491
Third party hardware 7,048 7 7,055
Total revenues 28,466 3,645 32,111
Cost of revenues:
Software products and solutions 8,188 1,289 9,477
Service 1,890 446 2,336
Third party hardware 6,695 6 6,701
Total cost of revenues 16,773 1,741 18,514
Gross profit 11,693 1,904 13,597
Business unit expenses:
Sales and marketing 4,637 1,827 6,464
General and administrative (4) 304 (212) 92
Research and development 3,281 431 3,712
Impairment of goodwill and acquired
intangible assets -- -- --
Total business unit expenses 8,222 2,046 10,268
Contribution profit (loss) 3,471 (142) 3,329
Corporate general and administrative 1,911
Income (loss) from operations 1,418
(4) General and administrative expenses reported reflect only the direct
controllable expenses of each business unit and do not include
allocation of corporate general and administrative expenses.
ASIAINFO HOLDINGS, INC.
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS AND TOTAL ASSETS FOR
REPORTABLE SEGMENTS
(Amounts in thousands of US$)
Three Months Ended
Dec 31, 2005
AsiaInfo Lenovo-
Technologies AsiaInfo Total
Revenues:
Software products and solutions 12,824 (391) 12,433
Service 3,551 (96) 3,455
Third party hardware 3,154 346 3,500
Total revenues 19,529 (141) 19,388
Cost of revenues:
Software products and solutions 6,368 1,971 8,339
Service 2,549 329 2,878
Third party hardware 2,997 328 3,325
Total cost of revenues 11,914 2,628 14,542
Gross profit 7,615 (2,769) 4,846
Business unit expenses:
Sales and marketing 3,639 1,639 5,278
General and administrative (4) (149) 1,672 1,523
Research and development 3,074 812 3,886
Impairment of goodwill and acquired
intangible assets -- 21,197 21,197
Total business unit expenses 6,564 25,320 31,884
Contribution profit (loss) 1,051 (28,089) (27,038)
Corporate general and administrative 2,245
Income (loss) from operations (29,283)
(4) General and administrative expenses reported reflect only the direct
controllable expenses of each business unit and do not include
allocation of corporate general and administrative expenses.
ASIAINFO HOLDINGS, INC.
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS AND TOTAL ASSETS FOR
REPORTABLE SEGMENTS
(Amounts in thousands of US$)
Three Months Ended
Sept 30, 2006
AsiaInfo Lenovo-
Technologies AsiaInfo Total
Revenues:
Software products and solutions 16,577 2,588 19,165
Service 3,855 251 4,106
Third party hardware 4,481 22 4,503
Total revenues 24,913 2,861 27,774
Cost of revenues:
Software products and solutions 7,812 1,231 9,043
Service 2,228 314 2,542
Third party hardware 4,257 21 4,278
Total cost of revenues 14,297 1,566 15,863
Gross profit 10,616 1,295 11,911
Business unit expenses:
Sales and marketing 4,035 1,548 5,583
General and administrative (4) -- (266) (266)
Research and development 3,317 499 3,816
Impairment of goodwill and acquired
intangible assets -- -- --
Total business unit expenses 7,352 1,781 9,133
Contribution profit (loss) 3,264 (486) 2,778
Corporate general and administrative 1,792
Income (loss) from operations 986
(4) General and administrative expenses reported reflect only the direct
controllable expenses of each business unit and do not include
allocation of corporate general and administrative expenses.
Fourth Quarter and Year End 2006 Conference Call
The earnings announcement conference call will take place at 4:00pm
Pacific Time/ 7:00pm Eastern Time (Beijing/Hong Kong Time: January 25, 2007
at 8:00am). The management team will be on the call to discuss results and
highlights of the quarter, and answer questions. The dial-in number for U.S.
callers is +1 866-549-1292, and +852 3005-2050 for Hong Kong and
international callers. The passcode for the call is 620250.
A replay will be available from 7:00pm Pacific Time on January 24, 2007
until 7:00pm Pacific Time on February 3, 2007 by dialing +1 866-753-0743 for
U.S. callers, or +852 3005-2020 for Hong Kong and international callers. The
passcode for the replay is 130358.
Additionally, a live and archived web cast of this call will be available
on the Investor Relations section of the AsiaInfo web site at
http://www.asiainfo.com .
Reconciliation of Non-GAAP Measures
This earnings release contains presentations of the following ''Non-GAAP
financial measures'' as defined by the 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. Pursuant to relevant
regulatory requirements, we are providing the following reconciliations of
the Non-GAAP financial measures to the nearest comparable GAAP measures.
(1) AsiaInfo's net revenue 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 revenue to the nearest GAAP financial measure
(total revenue):
2006 Q4 2006 Q3 2005 Q4
(in thousands of US dollars)
Net Revenue 25,410 23,496 16,063
Third Party Hardware Costs 6,701 4,278 3,325
Total Revenues 32,111 27,774 19,388
FY 2006 FY 2005
(in thousands of US dollars)
Net Revenue 86,733 74,967
Third Party Hardware Costs 22,850 15,317
Total Revenues 109,583 90,284
(2) Non-GAAP net income and Non-GAAP basic EPS excludes certain non-cash
expenses, including share-based compensation, amortization of acquired
intangible assets and impairment of goodwill and acquired intangible assets.
We believe that these non-GAAP financial measures provide meaningful
supplemental information regarding our performance and liquidity by excluding
certain non-cash expenses that may not be indicative of our operating
performance from a cash perspective. We believe that both management and
investors benefit from referring to this additional information in assessing
our performance and when planning and forecasting future periods. These non-
GAAP financial measures also facilitate management's internal comparisons to
AsiaInfo's historical performance and liquidity.
Reconciliation of Non-GAAP net income to the nearest GAAP financial
measure (GAAP net income):
2006 Q4 2006 Q3 2005 Q4
(in thousands of US dollars)
GAAP net income 2,119 2,005 (39,795)
Adjustments:
- share-based compensation 393 138 45
- amortization of acquired intangible
assets 575 561 285
- impairment of goodwill and acquired
intangible assets -- -- 21,197
Non-GAAP net income 3,087 2,704 (18,268)
Non-GAAP basic EPS 0.07 0.06 (0.40)
FY 2006 FY 2005
(in thousands of US dollars)
GAAP net income 5,831 (37,169)
Adjustments:
- share-based compensation 803 48
- amortization of acquired intangible
assets 1,506 1,541
- impairment of goodwill and acquired
intangible assets -- 21,197
Non-GAAP net income 8,140 (14,383)
Non-GAAP basic EPS 0.19 (0.32)
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 IT 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 .
The information contained in this document is as of January 24, 2007.
AsiaInfo assumes no obligation to update any forward-looking statements
contained in this document as a result of new information or future events or
developments.
This document contains forward-looking information about AsiaInfo's
operating results and business prospects that involve substantial risks and
uncertainties. You can identify these statements by the fact that they use
words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe,
" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are the following: government telecommunications infrastructure and budgetary policy in China; our ability to maintain our concentrated customer base; the long and variable billing cycles for our products and services that can cause our revenues and operating results to vary significantly from period to period; our ability to meet our working capital requirements; our ability to retain our executive officers; our ability to attract and retain skilled personnel; potential liabilities we are exposed to because we extend warranties to our customers; risks associated with cost overruns and delays; our ability to develop or acquire new products or enhancements to our software products that are marketable on a timely and cost-effective basis; our ability to adequately protect our proprietary rights; the competitive nature of the markets we operate in; political and economic policies of the Chinese government. A further list and description of these risks, uncertainties, and other matters can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and in our periodic reports on Forms 10-Q and 8-K filed with the United States Securities and Exchange Commission and available at http://www.sec.gov .