omniture

AsiaInfo Reports First Quarter 2007 Results

2007-04-25 18:23 1141

* AsiaInfo Exceeds EPS Guidance for the First Quarter

* Net Revenue of Telecom Software Solutions Business Grows 19% Year-Over-

Year

* Lenovo-AsiaInfo Net Revenue Grows 144% Year-Over-Year

* Company Announces Appointment of New Director

BEIJING and SANTA CLARA, Calif., April 26 /Xinhua-PRNewswire-FirstCall/ -- AsiaInfo Holdings, Inc. (Nasdaq: ASIA), (“AsiaInfo”) a leading provider of telecom software solutions and IT security products and services in China, today announced first quarter results for the period ended March 31, 2007.

(Logo: http://www.prnasia.com/sa/200611101947.jpg )

“Healthy growth in our core telecom software solution business led to guidance-beating earnings in the first quarter,” said Steve Zhang, AsiaInfo’s President and Chief Executive Officer. “We saw strong uptake of our industry leading BOSS and BI software and we continued to develop innovative solutions that help telecom operators introduce new services and differentiate their offerings.”

Mr. Zhang noted that during the quarter, AsiaInfo expanded its BI market share by signing contracts with Yunnan Mobile and Tibet Mobile, developed China’s first Mobile Device management system, delivered a pioneering push mail system for China Unicom, and won a bid to develop 3G BOSS for China Mobile’s entire provincial extended TD-SCDMA trial covering four provinces and three municipalities. AsiaInfo was also awarded the CMMI Level 5 Certification, the highest achievable CMMI ranking, which certifies the maturity of AsiaInfo’s software development processes.

“As competition in the telecom industry intensifies, operators will increasingly rely on sophisticated software solutions to differentiate their services,” continued Mr. Zhang. “With our focused strategy and strong commitment to research and development, we are well positioned to benefit from this industry trend and extend our market leadership.”

First Quarter 2007 Financial Results

Meeting guidance, net revenue (total revenues net of third party hardware cost) for the first quarter of 2007 was US$23.5 million, an increase of 25% year-over-year, and a decrease of 7% sequentially.

Net income from continuing operations for the first quarter of 2007 was US$5.0 million, or US$0.12 per basic share. This compares to US$0.1 million in the year-ago period, and US$1.9 million or US$0.05 per basic share in the previous quarter.

Net income from continuing operations included US$2.7 million other operating income. This income relates to a Settlement Agreement that AsiaInfo entered into with Lenovo Group Limited to resolve certain matters arising out of the Acquisition Agreement dated July 27, 2004 and an Escrow Agreement dated October 19, 2004 between the Company and Lenovo. For further information please refer to the Company’s Current Report on Form 8-K dated January 30, 2007.

The US$2.7 million other operating income had a positive impact of US$0.07 on net income from continuing operations per basic share. Excluding the impact, net income from continuing operations per basic share exceeded previously stated guidance for the quarter.

AsiaInfo’s telecom software solution business continued to perform well, with net revenue up 19% year-over-year, and down 2% sequentially. Net revenue for the Lenovo-AsiaInfo business unit increased 144% year-over-year, and decreased 40% sequentially. The sequential net revenue decline was due to the seasonal impact of the long Chinese New Year holiday. Please refer to the end of this press release for condensed segmented financial results for AsiaInfo’s two business units.

Gross revenue for the first quarter of 2007 was US$30.1 million, 13% higher than the year ago period and down 6% sequentially. Gross margins were 43% in the first quarter of 2007 compared to 36% in the year-ago period and 42% in the previous quarter. Gross margin of net revenue (gross profit divided by net revenue) was 55% compared to 51% in the year-ago period and 54% in the previous quarter.

Revenue from software products and solutions for the first quarter of 2007 was US$19.6 million, an increase of 29% from the year-ago period and a decrease of 9% sequentially. Service revenue was US$3.6 million, a 13% increase year-over-year and a 2% sequential increase. Third-party hardware revenue was US$6.9 million, a 16% decrease from the year ago period and a decrease of 2% sequentially.

During the first quarter of 2007, the Lenovo-AsiaInfo business unit contributed approximately 9% to net revenue, including an 11% contribution to software products and solutions revenue and a 3% contribution to service revenue. Lenovo-AsiaInfo contributed 5% to the Company’s net revenue in the year-ago period and 14% in the previous quarter.

Total operating expenses for the first quarter of 2007 were US$12.1 million, an increase of 17% year-over-year and a 1% decrease sequentially. Lenovo-AsiaInfo contributed 21% to total operating expenses before corporate general and administrative charges for the first quarter of 2007. Of the total operating expenses, R&D expenses for the first quarter of 2007 were US$4.1 million, an increase of 28% from the year-ago period and 10% from the previous quarter.

In the first quarter of 2007, AsiaInfo closed a transaction to sell its financial services IT solutions business. The Company recorded a gain from the sale of discontinued operations for the first quarter of US$1.4 million.

In the first quarter, AsiaInfo recorded a total net income of US$6.4 million. This is compared to net income of US$0.4 million in the year-ago period and US$2.1 million in the previous quarter, inclusive of the impact of discontinued operations during those periods.

Net income excluding share-based compensation expense, amortization and impairment charges, and other operating income (non-GAAP net income(1)) was US$5.2 million in the first quarter of 2007 or US$0.12 per basic share. Non-GAAP net income in the year-ago period was US$0.6 million or US$0.01 per basic share. Non-GAAP net income in the previous quarter was US$3.1 million or US$0.07 per basic share.

As of March 31, 2007, AsiaInfo had total cash and cash equivalents including restricted cash and short-term investment of US$166.3 million, an increase of approximately US$3.2 million from December 31, 2006. Accounts receivable increased to US$42.2 million from US$35.2 million at the end of 2006. Operating cash flow in the first quarter of 2007 was a net outflow of approximately US$3 million, primarily due to strong cash collection in previous quarter.

(1) Non-GAAP net income and non-GAAP EPS measures exclude share-based

compensation expenses, amortization expenses of acquired intangible

assets, and other operating income. A reconciliation of the non-GAAP

measures to the most comparable GAAP measures is provided below.

Appointment of New Director

AsiaInfo also announced that Mr. Zhang Yichen has been appointed to the AsiaInfo board of directors, effective as of April 24, 2007.

“I am pleased to welcome Mr. Zhang to AsiaInfo’s board,” said James Ding, Chairman of AsiaInfo. “Mr. Zhang’s expertise in corporate growth strategies will be an asset to us.”

Mr. Zhang is the founder and Chief Executive Officer of CITIC Capital Holdings Limited, a China-focused investment management and advisory firm. He is a graduate of the Massachusetts Institute of Technology.

Second Quarter 2007 Guidance

AsiaInfo expects second quarter 2007 net revenue to be US$25 million to US$27 million and net income from continuing operations per basic share to be US$0.06 to US$0.07.

ASIAINFO HOLDINGS, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands of US$)

Three Months Three Months

Ended Mar 31 Ended Dec 31

2007 2006 2006(1)

Revenues:

Software products and solutions $19,600 $15,221 $21,565

Service 3,569 3,155 3,491

Third party hardware 6,886 8,188 7,055

Total revenues 30,055 26,564 32,111

Cost of revenues:

Software products and solutions 8,973 7,275 9,477

Service 1,696 1,912 2,336

Third party hardware 6,542 7,779 6,701

Total cost of revenues 17,211 16,966 18,514

Gross profit 12,844 9,598 13,597

Operating expenses:

Sales and marketing 6,070 3,950 6,464

General and administrative 1,948 3,156 2,003

Research and development 4,086 3,204 3,712

Total operating expenses 12,104 10,310 12,179

Other operating income 2,734 -- --

Income (loss) from operations 3,474 (712) 1,418

Other income (expenses):

Interest income 1,557 968 1,097

Gain (loss) on investment 25 -- (196)

Other expense, net (72) (58) (79)

Total other income, net 1,510 910 822

Income from continuing operations

before income taxes 4,984 198 2,240

Income tax expense 33 61 304

Net income from continuing

operations 4,951 137 1,936

Income from discontinued

operations, net of taxes 1,445 223 183

Net income 6,396 360 2,119

Net income per share from

continuing operations:

Basic 0.12 0.00 0.05

Diluted 0.11 0.00 0.05

Net income per share from

discontinued operations:

Basic 0.03 0.01 0.00

Diluted 0.03 0.01 0.00

Net income per share

Basic 0.15 0.01 0.05

Diluted 0.14 0.01 0.05

Shares used in computation:

Basic 43,150,828 45,453,267 42,838,394

Diluted 44,688,122 46,361,596 43,735,011

Non-GAAP disclosure

Total revenues net of third party

hardware cost 23,513 18,785 25,410

Total cost of revenues net of

third party hardware cost 10,699 9,187 11,813

(1) Certain reclassifications have been made to prior period data due to

2006 discontinued operations.

ASIAINFO HOLDINGS, INC.

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of US$, except share and per share amounts)

As at

Mar 31, Dec 31,

2007 2006(1)

ASSETS:

Current Assets:

Cash and cash equivalents $90,427 $104,575

Restricted cash 13,056 12,645

Short term investments 62,806 45,882

Trade notes receivable 608 848

Accounts receivable, trade (net of

allowances of $2,987 and $3,311

as of March 31, 2007 and December

31, 2006, respectively) 42,217 35,234

Inventories 6,989 6,518

Other receivables 3,746 4,288

Deferred income tax asset-current -- 124

Prepaid expenses and other current assets 5,973 5,614

Assets held for sale -- 857

Total current assets 225,822 216,585

Long term investment 1,804 1,787

Property and equipment- net 1,851 1,857

Goodwill 18,039 17,993

Other acquired intangible assets-net 4,247 4,765

Non-current income tax liabilities 1,175 1,175

Total Assets $252,938 $244,162

LIABILITY AND STOCKHOLDERS EQUITY

Current Liabilities:

Trade notes payable $2,976 $4,045

Accounts payable 16,985 15,537

Accrued expenses 11,625 11,738

Deferred revenue 21,874 23,169

Accrued employee benefits 18,627 18,376

Other payables 4,651 4,450

Income taxes payable -- 927

Other taxes payable 4,500 3,232

Deferred income tax liability-current 64 --

Liabilities held for sale -- 227

Total current liabilities $81,302 $81,701

Income taxes payable - non-current 687 --

Total liabilities $81,989 $81,701

Stockholders’ equity:

Common stock (100,000,000 shares authorized;

$0.01 par value, shares issued 43,130,140

and 43,076,034 at March 31, 2007 and

Dec 31, 2006, respectively; 43,130,140 and

43,076,034 shares issued and outstanding

as of March 31, 2007 and Dec 31, 2006,

respectively) 431 431

Additional paid-in capital 196,272 195,881

Accumulated deficit (34,376) (40,556)

Accumulated other comprehensive income 8,622 6,705

Total stockholders’ equity 170,949 162,461

Total Liabilities and Stockholders’ Equity $252,938 $244,162

(1) December 31, 2006 balances were extracted from audited financial

statements.

ASIAINFO HOLDINGS, INC.

CONDENSED UNAUDITED STATEMENTS OF OPERATIONS FOR REPORTABLE SEGMENTS

(Amounts in thousands of US$)

Three Months Ended

Mar 31, 2007

AsiaInfo Lenovo-

Technologies AsiaInfo Total

Revenues:

Software products and solutions $17,513 $2,087 $19,600

Service 3,465 104 3,569

Third party hardware 6,884 2 6,886

Total revenues 27,862 2,193 30,055

Cost of revenues:

Software products and solutions 8,256 717 8,973

Service 1,562 134 1,696

Third party hardware 6,540 2 6,542

Total cost of revenues 16,358 853 17,211

Gross profit 11,504 1,340 12,844

Business unit expenses:

Sales and marketing 4,386 1,684 6,070

General and administrative(1) (91) 10 (81)

Research and development 3,673 413 4,086

Total business unit expenses 7,968 2,107 10,075

Other operating income -- 2,734 2,734

Contribution profit (loss) $3,536 $1,967 $5,503

Corporate General and administration 2,029

Operating profit 3,474

(1) 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 FOR REPORTABLE SEGMENTS

(Amounts in thousands of US$)

Three Months Ended

Mar 31, 2006

AsiaInfo Lenovo-

Technologies AsiaInfo Total

Revenues:

Software products and solutions $14,455 $766 $15,221

Service 3,023 132 3,155

Third party hardware 8,176 12 8,188

Total revenues 25,654 910 26,564

Cost of revenues:

Software products and solutions 6,797 478 7,275

Service 1,666 246 1,912

Third party hardware 7,768 11 7,779

Total cost of revenues 16,231 735 16,966

Gross profit 9,423 175 9,598

Business unit expenses:

Sales and marketing 2,632 1,318 3,950

General and administrative(1) 350 491 841

Research and development 2,742 462 3,204

Total business unit expenses 5,724 2,271 7,995

Other operating income

Contribution profit (loss) $3,699 ($2,096) $1,603

Corporate General and administration 2,315

Operating profit (712)

(1) 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 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(1) 304 (212) 92

Research and development 3,281 431 3,712

Total business unit expenses 8,222 2,046 10,268

Other operating income

Contribution profit (loss) $3,471 ($142) $3,329

Corporate General and administration 1,911

Operating profit 1,418

(1) 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.

First Quarter 2007 Conference Call

The earnings announcement conference call will take place on April 25, 2007 at 5:00pm Pacific Time/ 8:00pm Eastern Time (Beijing/Hong Kong Time: April 26, 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 numbers for the conference call are as follows:

U.S.: +1-866-549-1292

Hong Kong and International: +852 3005-2050

China - CNC: 10800-852-1179

China - CTC: 10800-152-1179

The passcode for the call is 506839.

A replay will be available from 8:00pm Pacific Time on April 25, 2007 until 8:00pm Pacific Time on May 5, 2007 by dialing one of the following numbers:

U.S.: +1-866-753-0743

Hong Kong and International: +852 3005-2020

China - CNC: 10800-852-1213

China - CTC: 10800-152-1213

The passcode for the replay is 130943.

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):

2007 Q1 2006 Q1 2006 Q4

(in thousands of US$)

Net Revenue 23,513 18,785 25,410

Third Party Hardware Costs 6,542 7,779 6,701

Total Revenues 30,055 26,564 32,111

(2) Non-GAAP net income and non-GAAP basic EPS exclude certain non-cash expenses, including share-based compensation expenses, amortization of acquired intangible assets, and other operating income. 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 GAAP net income

2007 Q1 2006 Q1 2006 Q4

(in thousand of US dollars

except for earning

per basic share)

GAAP net income 6,396 360 2,119

Adjustments:

- Share-based compensation 939 135 393

- Amortization of acquired intangible

assets 552 153 575

- Other operating income (2,734) -- --

Non-GAAP net income 5,153 648 3,087

Non-GAAP basic EPS (US$) 0.12 0.01 0.07

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 .

The information contained in this document is as of April 25, 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; and 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, 2006, 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 .

For more information, please contact:

Charles Zhang

AsiaInfo Technologies (China), Inc.

Tel: +86-10-8216-6039

Email: ir@asiainfo.com

Rory Macpherson

Ogilvy Public Relations Worldwide

Tel: +86-10-8520-6553

Email: rory.macpherson@ogilvy.com

Source: AsiaInfo Holdings, Inc.
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