Corporate Business Revenue up 21%, Contributing 81% of Total Revenues
SINGAPORE, May 14 /Xinhua-PRNewswire-FirstCall/ --
First Quarter 2007 Financial Highlights (vs. First Quarter 2006)
-- Record revenues of US$32.4M, up 10%
-- Higher net income of US$1.7M, up 9%
-- Corporate Business customer sales up 21%; 81% of total revenues
-- By product line:
-- Access Services revenue up 8%; Leased Line revenue up 64%
-- IP Services revenue up 17%, contributing to 23% of total sales;
Voice service up 9% and Hosting/Hosted services up 53%
-- Operational efficiency drove revenue per employee up 12%
-- Cash and cash equivalents at US$39.9M at the end of 31 Mar 2007
Pacific Internet Limited (Nasdaq: PCNTF) ("PacNet" or the "Company"), the largest telco-independent Internet communications service provider by geographic reach in the Asia-Pacific, started fiscal year 2007 with record high revenues for the quarter ended 31 March 2007, increasing 10% to US$32.4 million. The Company also reported a net income of US$1.7 million during the quarter, up 9% compared to the same quarter in 2006.
The Company's Corporate Business, which grew 21% during the quarter, is its main growth engine, contributing 81% of total sales in the same period. This revenue growth followed continuing increase in the corporate customer base. During the latest quarter, corporate customer base increased by 3% to 116,648 corporate customers.
The success in the Corporate Business drove the growth in three major product lines, Broadband, IP Services and Leased Line, which grew 3%, 17% and 64% respectively in the first quarter of 2007. Corporate Broadband, which is 76% of total Broadband revenue, grew 8%. More than 95% of IP Services revenues are from Corporate Business.
The monthly average revenue per user (ARPU) for subscribers grew 21% to US$35. This is an average ARPU made of corporate monthly ARPUs of US$76 and consumer monthly ARPUs of $10.
Operational efficiency also contributed to growth in net income. Despite an increase in staff cost, staff cost as a percentage of revenue was down 2% to 28% from the same period last year. On an annualized basis, revenue per employee improved by 6% from about US$135,000 in full-year 2006.
Mr. Phey Teck-Moh, President and CEO of the Company said, "I am pleased to report that we are executing our transformational strategy. We have announced the deployment of a wireless broadband (WiMAX) network in the Philippines; and expanded our IP services portfolio. Voc@l, our voice service, is now available in five markets. Our sales capability has stepped up with the winning of significant contracts. The evidence of this is in the subscriber base and ARPU growth. At the same time, our operational efficiency has improved."
"Asia Pacific is experiencing tremendous growth in broadband. Pacific Internet is transforming at the right time in the right space. We will continue to invest to strengthen our position in this exciting market. Pacific Internet today is a different company from a year ago. There is renewed energy and vigor. Our execution has sharpened. Despite the shareholder changes and actions, the management and employees of Pacific Internet are committed to maximizing shareholder value and remain focused at serving our customers by increasing the value we bring to them," said Mr. Phey.
Summary of Results
Table 1: Selected Financial Data
Three Months Ended
31 March
2007 2006 Variance
(US$'000) (US$'000)
REVENUES:
Access Services: 23,024 21,356 8%
- Broadband 14,145 13,742 3%
- Leased Line 6,339 3,877 64%
- Dial-Up 2,540 3,737 (32%)
IP Services: 7,386 6,335 17%
- Voice 3,110 2,853 9%
- Hosting/Hosted 2,073 1,353 53%
- Security 491 480 2%
- Roaming 335 515 (35%)
- Others 1,377 1,134 21%
Travel (Commission) and
Others: 1,945 1,692 15%
Total Revenues 32,355 29,383 10%
Corporate Business
Revenue 26,230 21,731 21%
Consumer Business
Revenue 6,125 7,652 (20%)
Cost of Sales 17,096 14,454 18%
Operating Expenses 14,255 13,372 7%
Net Income 1,681 1,538 9%
Table 2: Customer Base
Corporate Business Base Consumer
Total
Country (Broadband,
Operations Leased IP Corporate Dial-Up &
Broadband Lines Dial-Up Services Business IP Grand
Total Services) Total
Singapore 7,849 611 6,853 919 16,232 83,532 99,764
Australia 11,680 298 177 24,556 36,711 36,350 73,061
Hong Kong 13,277 190 41,890 4,045 59,402 24,030 83,432
Philippines 175 199 206 2,018 2,598 51,477 54,075
Malaysia 2 63 5 25 95 -- 95
Thailand 481 535 152 163 1,331 2,182 3,513
India -- 145 -- 134 279 3 282
Group's Customer Base (As at 31 March 2007)
Grand
Total 33,464 2,041 49,283 31,860 116,648 197,574 314,222
Group's Customer Base (As at 31 March 2006)
Grand
Total 31,699 1,851 53,516 26,312 113,378 256,175 369,553
Variance 6% 10% (8%) 21% 3% (23%) --
Notes:
-- Corporate Business subscriber base continues to grow in line with the
Group's focus in this segment. In Q1 2007, Corporate Business
subscriber base grew 3% over the same quarter in the previous year.
Total subscriber base reduction was primarily due to decline in the
Dial-Up segment, which is in line with Consumer market trend.
-- Corporate customers with multi-site access deployment are counted as
one single subscriber.
Revenues
The three months ended 31 March 2007 recorded net revenues of US$32.4 million, a 10% or US$3.0 million increase compared to the same period in 2006. The higher revenues reported were primarily contributed by higher sales from Leased Line, Corporate Broadband and IP Services, and the consolidation of financial results from the Company's Thailand operations (consolidated from the third quarter of 2006). This growth is partially offset by lower Dial-up revenue.
The Corporate Business segment increased revenue by 21% from the same quarter last year. This contributed 81% of total revenues, compared to 74% in the first quarter of 2006.
Access Services: The Access Services business remains a dominant revenue-driving segment, contributing 71% of total revenues during the quarter. With the exception of the Dial-Up segment, which declined 32% during the quarter, Broadband and Leased Line both experienced growth (3% and 64% respectively). Broadband is the largest revenue contributor at 44% of total revenues, of which 76% are contributed by the Corporate business segment.
IP Services: The IP Services grew 17% from the same quarter in 2006. Its share of the total revenues also increased to 23%. The Corporate Business segment contributed 95% of the IP Services revenues during the quarter in line with the Company's focus in the Corporate Business. Voice revenue contributed 42% of total IP Services revenues; Hosted Services contributed 28%; Security Services contributed 7% and Roaming contributed 5%. Other services contributed the remaining 18% of IP Services revenues.
Operating Costs and Expenses
Total operating expenses, excluding cost of sales were US$14.3 million, reflecting an increase of 7% compared to the same quarter last year. The increase was due to an increased in staff cost and general and administrative expenses.
Cost of sales for the quarter increased 18% to US$17.1 million compared to last year as the Company provides more higher-bandwidth Internet access services in line with market demand and development.
Staff cost for the quarter increased 4% to US$9.0 million compared to the same period last year. Staff cost as a percentage of revenues was 28% for this quarter compared to 30% for the same quarter last year. Revenue per employee for the quarter increased to US$35,752 from US$31,904, a 12% improvement compared to the corresponding period last year. On an annualized basis, revenue per employee improved by 6% from about US$135,000 in full-year 2006.
Other General and Administrative (G&A) Expenses, consisting mainly of traveling expenses, office expenses, and professional fees increased by 27% to US$3.3 million from the same quarter last year. The increase was mainly due to increased expenses as a result of the consolidation of the Company's operations in Thailand.
Earnings
Higher revenues and the Group's cost efficiencies contributed to the earnings growth during the quarter. Net income for the quarter was US$1.7 million, a 9% increase compared to the same period last year.
Cash Position
The Group's cash position remained strong with cash and cash equivalents and fixed deposits of US$39.9 million. Cash generated by operating activities was US$1.6 million. This was offset by the outflow of US$0.8 million in investing activities, primarily for the acquisition of fixed assets. Cash inflow from financing activities amounted to US$0.2 million.
Business Highlights for First-Quarter 2007
-- Million-dollar accounts -- Won million-dollar accounts in Singapore as
sales capabilities increased. This is the first wins of such scale in
the Company's history.
-- Government tender -- Won a tender by the Australian Victorian State
Government to provide Government-wide Internet services. The win gives
the Company exclusive opportunity to seek new contracts in the
provision of Internet services with a number of Victorian Departments
for the rest of 2007. PacNet was also named one of four Internet
service providers to have Victorian Government preferred supplier
status for the next three years.
-- WiMAX in the Philippines -- The Company announced a plan to roll out
WiMAX services in Philippines. This is a US$12M investment that will
provide WiMAX compliant access services initially in Metro Manila.
-- Launch of Voice Service, PacNet Voc@l -- Launched commercial voice
service in India, Singapore, the Philippines and Thailand, and trials
in Hong Kong. The Company is on track to roll out the service on a
regional basis.
-- Industry award -- The Company's Australian subsidiary won the 2007
Australian Telecommunications User Group (ATUG) award for 'Best
Communications Solution -- Small Business'. This award recognized
Pacific Internet's IP private network solution incorporating the
Company's flagship product, SecureSite. This is the fourth industry
award the Australian operations has received during the past two years
for products and services purpose-built for the Small and Medium sized
Businesses market.
Conference Call and Web Cast
PacNet will host a conference call to discuss the results:
-- US Eastern Time: 14 May 2007 @ 8.30 a.m.
-- Singapore Time: 14 May 2007 @ 8.30 p.m.
Dial-in numbers: US: (800) 289-0529 (US Toll Free)
International: +1-913-981-5523 (International)
Replay telephone nos.: US: 888-203-1112
International: +1-719-457-0820
The pass code is 4054286
The call will also be webcast "live" at: www.pacnet.com/investor/
This press release should be read in conjunction with the Company's Management Discussion & Analysis and 6-K financial documents.
The financial statement amounts in this report are in conformity with US GAAP.
For convenience, the Company's functional currency, the Singapore dollar, has been translated into US dollar amounts at the exchange rate of S$1.5314 to US$1.00. (Conversion rate as at 31 March 2007 from the Federal Reserve Bank of New York.)
About Pacific Internet Limited
Pacific Internet Limited or PacNet (Nasdaq: PCNTF) is the largest telco-independent Internet Communications Service Provider by geographic reach in the Asia Pacific region. The Company has direct presence in Singapore, Hong Kong, the Philippines, Australia, India, Thailand and Malaysia. PacNet delivers a comprehensive suite of data and voice services to both corporate business and consumer customers. For more information, visit www.pacnet.com .
Caution Concerning Forward-Looking Statements
Included in this report are various forward-looking statements which are made pursuant to the safe harbor provisions of the "Private Securities Litigation Reform Act of 1995," some of these may be identified by the use of words such
as "seek," "expect," "anticipate," "estimate," "believe," "intend," "project," "plan," "strategy," "forecast" and similar expressions or future or conditional verbs such as "will," "would," "should," "could," "may" and "might." The Group has made forward-looking statements with respect to the following, among others:
-- Projected capital expenditures, expansion plans and liquidity;
-- Development and growth of additional revenue sources;
-- Development and maintenance of profitable pricing programs; and
-- Outcome of potential litigation.
These statements are forward-looking which reflect the Group's current expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including but not limited to, (1) continued decline in economic conditions; (2) increasing maturity of the market for Internet access and fluctuations in the use of the Internet that may adversely impact the Group's subscriber growth rates and revenues; (3) changes in technology and the Internet marketplace; (4) the Group's continued ability to develop and win acceptance of its products and services, which are offered in highly competitive markets, more particularly, changes in the assumptions of the effectiveness of business strategies or initiatives carried out or to be carried out by the Group; (5) the success of its business partnerships and alliances; (6) exchange rates, particularly between the Singapore dollar, the US dollar and other currencies in which the Group makes significant sales or in which its assets and liabilities are denominated; (7) deterioration of the financial position of debtors; (8) changes in estimates of network service costs accruals due to delayed or late billing by telecommunication companies; (9) changes in economic environment, churn rate of subscribers or assessment of future operations resulting in an impairment in goodwill and other intangible assets; (10) changes in assumptions of the effectiveness of strategies related to legal proceedings generally and more particularly changes in assumptions of costs of maintaining such proceedings; (11) changes in assumptions of the effectiveness of tax planning strategies generally and more particularly (i) changes in operations that may affect the assumptions relating to deferred tax assets; and (ii) changes in factors affecting the interpretation of certain withholding tax laws which may significantly impact the Group's cash resources; (12) obtaining the requisite funding support and the challenge of keeping expense growth at manageable levels while increasing revenues; (13) changes in the economic, regulatory and political environment in the countries where the Group operates, or may in the future operate, including but not limited to (i) changes in tax, telecommunications, licensing and other relevant laws and regulations; (ii) changes in political stability; and (14) the outcome of contingencies. In addition to the foregoing factors, a description of certain other risks and uncertainties which could cause actual results to differ materially can be found in the section captioned "Risk Factors" in our latest Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission. In light of the many risks and uncertainties surrounding the Group and the Internet marketplace, actual results could differ materially from those discussed in this report. Given these concerns, undue reliance should not be placed on these statements. The Group assumes no obligation to update any such statements.
Responsibility Statement
The Directors of PacNet have taken all reasonable care to ensure that the facts stated and opinions express in this press release are fair and accurate, and that no material facts have been omitted and they jointly and severally accept responsibility accordingly. Where any information has been extracted from published or otherwise publicly available sources, the sole responsibility of the Directors of PacNet has been to ensure through reasonably enquiries that such information is accurately and correctly extracted from such sources or, as the case may be, accurately reflected or reproduced in this press release.
-- Tables to follow -
Pacific Internet Limited
Unaudited Consolidated Balance Sheets as of March 31, 2007
With Comparative Amounts from December 31, 2006
Dec 31, 2006 Mar 31, 2007 Mar 31, 2007
S$'000 S$'000 US$'000
Cash and cash equivalents 57,786 59,381 38,776
Fixed deposit with financial
institution 2,447 1,758 1,148
Accounts receivable - net 38,333 31,000 20,243
Other receivables 7,330 9,724 6,350
Inventories 503 366 239
Total current assets 106,399 102,229 66,756
Investments 39 39 25
Fixed assets and website development
costs- net 19,007 19,090 12,466
Goodwill and intangible assets - net 36,671 36,778 24,016
Other non-current assets 4,476 2,897 1,892
Total non-current assets 60,193 58,804 38,399
TOTAL ASSETS 166,592 161,033 105,155
Bank borrowings 20 18 12
Accounts payable 16,279 13,082 8,543
Other payables 38,051 32,495 21,219
Current portion of capital lease
obligations 196 165 108
Total current liabilities 54,546 45,760 29,882
Capital lease obligations, less
current portion 102 73 48
Other non-current and deferred
liabilities 2,035 1,902 1,242
Total non-current liabilities 2,137 1,975 1,290
Minority interest 1,141 1,208 789
Shareholders' equity
Ordinary shares 114,143 114,526 74,785
Additional paid-in capital and
deferred compensation 16,093 16,115 10,523
Accumulated deficit and other
comprehensive income (21,468) (18,551) (12,114)
Total shareholders' equity 108,768 112,090 73,194
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 166,592 161,033 105,155
Pacific Internet Limited
Unaudited Consolidated Statement of Operations
(In US Dollars)
Quarter Ended Year To date Mar 31,
Mar 31, 2006 Mar 31, 2007 2006 2007
US$'000 US$'000 US$'000 US$'000
Revenues
Dial up access 3,737 2,540 3,737 2,540
Broadband access 13,742 14,145 13,742 14,145
Leased line access 3,877 6,339 3,877 6,339
IP services/Value
added services 6,335 7,386 6,335 7,386
Commission revenues 1,187 1,413 1,187 1,413
Other revenues 505 532 505 532
Total net revenues 29,383 32,355 29,383 32,355
Cost of sales 14,454 17,096 14,454 17,096
Gross profit 14,929 15,259 14,929 15,259
Other operating costs
and expenses
Staff costs 8,672 8,984 8,672 8,984
Sales & marketing 733 624 733 624
Other general &
administrative 2,579 3,268 2,579 3,268
Depreciation &
amortization 1,243 1,340 1,243 1,340
Allowance for
doubtful accounts
receivable 145 39 145 39
Total other
operating costs and
expenses 13,372 14,255 13,372 14,255
Operating income 1,557 1,004 1,557 1,004
Other income
(expenses)
Net interest income 279 314 279 314
Net gain (loss) on
foreign currency (201) 210 (201) 210
(Loss) Gain on
disposal of fixed
assets 5 3 5 3
Equity in gain of
unconsolidated
affiliates 250 221 250 221
Others 61 389 61 389
Total other income 394 1137 394 1137
Income before income
taxes and minority
interest 1,951 2,141 1,951 2,141
Provision for income
taxes (408) (429) (408) (429)
1,543 1,712 1,543 1,712
Minority interest in
loss (gain) of
consolidated
subsidiaries (18) (31) (18) (31)
Income before
extraordinary item 1,525 1,681 1,525 1,681
Extraordinary item 13 -- 13 --
Net income 1,538 1,681 1,538 1,681
Net income from
continuing operations
per share - basic $0.1143 $0.1216 $0.1143 $0.1216
Net income per share -
basic $0.1143 $0.1216 $0.1143 $0.1216
Net income from
continuing operations
per share -
diluted(1) $0.1111 $0.1182 $0.1111 $0.1182
Net income per share -
diluted (1) $0.1111 $0.1182 $0.1111 $0.1182
Weighted average
number of shares
outstanding - basic 13,451,416 13,829,003 13,451,416 13,829,003
Weighted average
number of shares
outstanding
- diluted (1) 13,830,430 14,227,161 13,830,430 14,227,161
(1) Includes all outstanding options under the Company's Share Option
Plans to the extent the outstanding options are dilutive.
(2) For convenience, Singapore dollar amounts have been translated
into U.S dollar amounts at the exchange rate as of Dec 31, 2006, which
was S$1.5314 to US$1.00.
Pacific Internet Limited
Unaudited Consolidated Statement of Cash Flows for Quarter Ended March
31, 2007
With Comparative Amounts from March 31, 2006
Quarter Ended Mar 31,
2006 2007 2007
S$'000 S$'000 US$'000
OPERATING ACTIVITIES
Net income for the period 2,354 2,577 1,681
Items not involving cash and other
adjustments to reconcile net
income to cash from operating
activities:
Equity in gain of unconsolidated
subsidiaries and affiliated (383) (338) (221)
Depreciation and amortization 1,904 2,052 1,340
Gain on disposal of fixed assets (7) (5) (3)
Allowance for doubtful accounts
receivable 198 26 17
Bad Debts written off 24 33 22
Minority interest 28 47 31
Deferred income tax (benefit)
provision (36) 268 175
Amortization of deferred
compensation 427 22 14
Extraordinary item (20) -- --
Changes in non-cash working capital
items:
Accounts receivable 1,961 7,273 4,749
Prepaid expenses and other assets (432) (817) (533)
Inventories (154) 137 89
Accounts payable 1,944 (3,217) (2,101)
Other payables / receivables (6,412) (5,666) (3,700)
Cash provided by operating
activities 1,396 2,392 1,560
INVESTING ACTIVITIES
Acquisition of fixed assets (2,482) (1,917) (1,252)
Proceeds from sale of fixed assets 13 4 3
Fixed deposit with maturity more
than 90 days (250) 689 450
Additional interest acquired in a
subsidiary (972) -- --
Cash used in investing activities (3,691) (1,224) (799)
FINANCING ACTIVITIES
Bank repayments (1,566) (2) (1)
Capital lease obligations (91) (60) (39)
Proceeds from issuance of ordinary
shares 730 383 250
Additional capital injection from
minority interest -- 20 13
Cash (used in)/provided by financing
activities (927) 341 223
(Decrease)/Increase in cash and cash
equivalents (3,222) 1,509 984
Cash and cash equivalents at
beginning of period 58,421 57,786 37,734
Effect of exchange rate changes on
cash and cash equivalents (209) 86 58
Cash and cash equivalents at end of
period 54,990 59,381 38,776
Investors/Analysts Contact
Mervin Wang
Investor Relations
Mobile: +65-9798-6077
Email: mervin.wang@pacific.net.sg
Media Contact
Bernard Ho
Corporate Communications
Mobile: +65-9782-3393
Email: bernard.ho@pacific.net.sg
