Quarterly Revenue Up 17% Compared to Second Quarter 2006
2007 Revenue Expected to Increase by More than 16 to 17% Compared to 2006
Company to Launch Vertical Search Engine Service for Both International Trade and China Domestic B2B Markets
NEW YORK, Aug. 9 /Xinhua-PRNewswire-FirstCall/ -- Global Sources Ltd. (Nasdaq: GSOL) reported financial results for the second quarter and six months ended June 30, 2007. Full year 2007 guidance was also reported; revenue is expected to be in the range of $182.0 million to $183.5 million.
(Logo: http://www.prnasia.com/sa/200703271450.JPG )
Highlights: Second Quarter 2007 Compared to Second Quarter 2006
* Revenue was $52.5 million, up 17% from $44.8 million.
-- Online revenue was $18.5 million, up 18% from $15.7 million.
-- Print revenue was $12.0 million, down 3% from $12.4 million.
-- Exhibitions revenue was $20.9 million, up 28% from $16.4 million.
* Revenue from China was $32.6 million, up 37% from $23.8 million.
* GAAP net income was $4.2 million and non-GAAP net income was
$6.0 million, up 4% and 50%, respectively, from GAAP and non-GAAP net
income of $4.0 million in the second quarter 2006.
* GAAP earnings were $0.10 per diluted share and non-GAAP earnings were
$0.14 per diluted share, even with and up 40% respectively, from GAAP
and non-GAAP earnings per share of $0.10 in the second quarter 2006.
* Deferred income and customer prepayments were $72.9 million as at June
30th, up 23% from $59.2 million last year at June 30th.
During the second quarter, the company recorded a significant non-operating entry in accordance with GAAP: an impairment charge of $1.8 million on its HC International investment. Management defines non-GAAP net income as net income excluding the impairment charge on its HC International investment. Non-GAAP net income per diluted common share is defined as non-GAAP net income divided by the weighted average of diluted common shares outstanding. Management believes non-GAAP net income and non-GAAP net income per diluted common share are useful measures. Tables reconciling GAAP and non-GAAP measures follow in this press release.
Chairman and CEO Merle A. Hinrichs said: "Second quarter results were largely driven by online services and our export-focused China Sourcing Fairs. For 2008, we plan to expand our overall trade show schedule to 28 events, up by seven shows over 2007. Following on from our tremendous trade show growth in 2007, we are extending our geographic scope and the number of verticals we serve, and increasing booth capacity in our Dubai and Shanghai venues."
"As we announced earlier this week, early in the fourth quarter we plan to launch two important online vertical search initiatives. The first initiative is the scheduled launch of Global Sources Online 2.0, our flagship site for international trade. Powered by a new proprietary vertical search engine and content aggregation technology, the site aims to deliver results from across the web, while also providing greatly expanded functionality and services to help buyers qualify suppliers.
"The second initiative is the scheduled launch of a Chinese-language site to serve China's domestic B2B market. With much of the same functionality as our English-language site, this service is aimed at volume buyers in China.
"We believe these exciting new services and programs will be catalysts for amplifying the long-term growth and profitability for the online segment of our business -- and also for developing new print and tradeshow opportunities, both in China and overseas."
Highlights: Six Months Ended June 30, 2007
For the six-month period ended June 30, 2007, revenue was $87.5 million, compared to $74.9 million in the six-month period ended June 30, 2006. GAAP net income for the six months ended June 30, 2007 was $10.7 million, or $0.25 per diluted share. Non-GAAP net income was $12.6 million, or $0.29 per diluted share. This compares to net income, GAAP and non-GAAP, for the six-months ended June 30, 2006 of $8.4 million or $0.20 per diluted share.
CFO Eddie Heng said: "Our solid second quarter revenue of $52.5 million was within our expectations. While we expect growth from print services for the year, we had an unexpected year-over-year decline in the quarter due to soft sales from several of our Chinese-language magazines. In addition, we are beginning to see increasing leverage in our China Sourcing Fairs model and anticipate this to continue. As a result of the anticipated growth in each of our revenue lines, we are guiding full year revenue for 2007 of
16 to 17 percent growth over 2006."
Financial Expectations: Third Quarter Revenue Increase -- Up 14 to 16 Percent
Third quarter 2007 revenue is expected to grow by 14 to 16 percent to be in the range of $33.5 million to $34.0 million. Third quarter 2007 earnings per diluted share are expected to be between $0.11 and $0.12.
For the full year 2007, management expects revenue to be in the range of $182.0 million to $183.5 million. GAAP earnings per diluted share for the year are expected to be in the range of $0.62 to $0.65. Non-GAAP earnings per diluted share for the year are expected to be in the range of $0.66 to $0.69.
Recent Corporate Highlights: Held First-Ever China Sourcing Fair in Dubai; International IC-China Show Expanding to Fourth Location; Launching Online Sites and Monthly Magazines for Elegant Living and Sports & Leisure
-- Attracted over 75,000 buyers from more than 150 countries at the April
China Sourcing Fairs in Hong Kong. Booths sold increased to 6,200.
-- Launched China Sourcing Fair: Underwear & Swimwear effective with the
April trade shows in Hong Kong.
-- Held first-ever Dubai China Sourcing Fair in June 2007. With over
500 booths, the Fair was the largest exhibition of China suppliers
ever held in Dubai.
-- Announced plans to expand International IC-China Conference &
Exhibition (IIC-China), to include a fourth location, Chengdu,
scheduled to start in February 2008.
-- Announced plans for a second half launch of Sports & Leisure, an
online marketplace and monthly magazine.
-- Announced the September launch of Elegant Living website and magazine
targeting China's growing affluent class.
-- Increased Global Sources' independently certified community of active
buyers to more than 635,000 at the end of the second quarter,
a 20% increase compared to the same quarter last year.
-- Grew lead generation through Global Sources Online, which is measured
as requests for information from buyers to suppliers, to over
18.7 million for the 12 months ended June 30, 2007. This is
a 162% increase over the same period last year.
-- Appointed Robert Lees as an additional director of Global Sources,
effective as of July 30 through the next Annual General Meeting, at
which time shareholders may vote to re-appoint him.
Conference Call for Global Sources Second Quarter 2007 Earnings
Global Sources plans to conduct a conference call at 8:00 a.m. EDT on August 9, 2007 (8:00 p.m. on August 9, 2007 in Hong Kong) to review these results in more detail. Investors in the United States may participate in the call by dialing (888) 212-8315, and international participants may dial (1-706) 643-0144. Investors in Hong Kong may call (852) 3011-4522. A live webcast of the conference call is scheduled to be available on Global Sources' corporate site at http://www.investor.globalsources.com .
A webcast replay of the call is scheduled to be available on the company's corporate site for at least 30 days. A telephone replay of the call is also scheduled to be available through August 13, 2007. To listen to the telephone replay, dial (800) 642-1687, or dial (1-706) 645-9291 outside the United States, and enter pass code 5994229#. For those in the Hong Kong area, the replay dial-in number is (852) 3011-4541, and enter pass code 5994229#.
About Global Sources
Global Sources is a leading business-to-business (B2B) media company and a primary facilitator of two-way trade with Greater China. The core business is facilitating trade from Greater China to the world, using a wide range of English-language media. The other key business segment facilitates trade from the world to Greater China using Chinese-language media.
The company provides sourcing information to volume buyers and integrated marketing services to suppliers. It helps a community of over 635,000 active buyers source more profitably from complex overseas supply markets. With the goal of providing the most effective ways possible to advertise, market and sell, Global Sources enables suppliers to sell to hard-to-reach buyers in over 230 countries.
The company offers the most extensive range of media and export marketing services in the industries it serves. It delivers information on 1.8 million products and more than 150,000 suppliers annually through 13 online marketplaces, 12 monthly magazines, over 100 sourcing research reports and nine specialized trade shows which run 22 times a year across seven cities.
Suppliers receive more than 18 million sales leads annually from buyers through Global Sources Online ( http://www.globalsources.com ) alone.
Global Sources has been facilitating global trade for 36 years. In mainland China it has over 1,700 team members in 44 locations, and a community of over 1 million registered online users and magazine readers for
Chinese-language media.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended and Section 21-E of the Securities Exchange Act of 1934, as amended. The company's actual results could differ materially from those set forth in the forward-looking statements as a result of the risks associated with the company's business, changes in general economic conditions, and changes in the assumptions used in making such forward-looking statements.
-- Tables to Follow --
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
At At
June 30 December 31
2007 2006
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $32,148 $25,192
Available-for-sale securities 141,367 130,603
Accounts receivable, net 5,547 6,468
Receivables from sales representatives 9,906 13,238
Inventory 1,165 889
Prepaid expenses and other current assets 13,728 14,174
Total Current Assets 203,861 190,564
Property and equipment, net 34,851 28,374
Long term investments 100 100
Bonds held to maturity, at amortized cost 297 289
Other assets 3,250 1,562
Total Assets $242,359 $220,889
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $6,166 $6,804
Deferred income and customer prepayments 68,394 62,036
Accrued liabilities 11,579 12,427
Income taxes payable 1,135 751
Total Current Liabilities 87,274 82,018
Liabilities for incentive and bonus plans 102 102
Deferred income and customer prepayments
-- long term 4,495 1,802
Deferred tax liability 295 403
Total Liabilities 92,166 84,325
Minority interest 4,238 2,913
Shareholders' equity:
Common shares, US$0.01 par value;
75,000,000 shares authorized;
42,337,568 (2006: 42,271,568) shares issued
and outstanding 423 423
Additional paid in capital 129,545 125,832
Retained earnings 15,548 4,830
Accumulated other comprehensive income 439 2,566
Total Shareholders' Equity 145,955 133,651
Total Liabilities and Shareholders'
Equity $242,359 $220,889
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenue:
Online and other media
services (Note 3) $30,534 $28,078 $59,579 $54,168
Exhibitions 20,883 16,367 25,699 20,079
Miscellaneous 1,128 381 2,214 610
52,545 44,826 87,492 74,857
Operating Expenses:
Sales (Note 4) 17,666 14,345 28,802 24,254
Event production 9,464 8,497 10,077 9,116
Community (Note 4) 7,435 7,557 12,708 12,231
General and administrative
(Note 4) 11,492 9,828 21,445 19,207
Online services development
(Note 4) 1,300 1,068 2,586 2,122
Amortization of software costs 40 305 80 607
Total Operating Expenses 47,397 41,600 75,698 67,537
Income from Operations 5,148 3,226 11,794 7,320
Interest and dividend income 1,724 1,318 3,116 2,348
Gain on sale of
available-for-sale securities -- 227 -- 300
Loss on investment, net (1,846) -- (1,846) --
Foreign exchange gains
(losses), net (190) (201) (464) (228)
Income before Income Taxes 4,836 4,570 12,600 9,740
Income Tax Expense (338) (220) (557) (423)
Net Income before Minority
Interest $4,498 $4,350 $12,043 $9,317
Minority interest (308) (322) (1,325) (1,133)
Net Income before cumulative
effect of change in
accounting principle $4,190 $4,028 $10,718 $8,184
Cumulative effect of change in
accounting principle (Note5) -- -- -- 251
Net Income $4,190 $4,028 $10,718 $8,435
Diluted net income per share $0.10 $0.10 $0.25 $0.20
Total shares used in
diluted net income
per share
calculations 42,828,613 42,340,666 42,631,899 42,300,614
Note: 3. Online and other media services consists of:
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Online services $18,492 $15,685 $35,762 $30,779
Print services 12,042 12,393 23,817 23,389
$30,534 $28,078 $59,579 $54,168
Note: 4. Non-cash compensation expenses associated with the several
employee equity compensation plans and Directors Purchase Plan
included under various categories of expenses are as follows:
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Sales $1,519 $186 $1,386 $383
Community 17 21 102 53
General administrative 1,135 292 1,645 821
Online services development 98 39 160 98
$2,769 $538 $3,293 $1,355
Note: 5. Represents the cumulative effect of change in accounting
principle, resulting from the adoption of SFAS No. 123(R) with
effect from January 1, 2006.
GLOBAL SOURCES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
Six months ended June 30
2007 2006
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $10,718 $8,435
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 2,154 2,191
Accretion of U.S. Treasury strips zero %
coupons (8) (14)
Unrealised dividend income on
available-for-sale securities -- (280)
Unrealised interest income on
available-for-sale securities (829) (36)
Impairment of investment 2,301 --
Profit on sale of equipment - (32)
Bad debt expense 100 130
Non-cash compensation expense 3,293 1,355
Income attributable to minority shareholder 1,325 1,133
Equipment written off 4 1
Cumulative effect of change in
accounting principle -- (251)
19,058 12,632
Changes in assets and liabilities:
Accounts receivables 821 (451)
Receivables from sales representatives 3,332 (2,988)
Inventory (276) (155)
Prepaid expenses and other current assets 445 (1,444)
Long term assets (1,688) (657)
Accounts payable (638) 1,972
Accrued liabilities and liabilities for
incentive and bonus plans (848) 3,538
Deferred income and customer prepayments 9,051 6,194
Tax liability 276 197
Net cash provided by operating
activities 29,533 18,838
Cash flows from investing activities:
Purchase of property and equipment (8,636) (1,789)
Proceeds from sale of equipment -- 32
Purchase of available-for-sale securities (229,953) (225,766)
Proceeds from sale of available-for-sale
securities 215,590 210,558
Net cash used in investing activities (22,999) (16,965)
Cash flows from financing activities:
Amount received towards directors
purchase plan 422 359
Net cash generated from financing
activities 422 359
Net increase in cash and cash equivalents 6,956 2,232
Cash and cash equivalents, beginning
of the period 25,192 94,321
Cash and cash equivalents, end of the period $32,148 $96,553
Supplemental cash flow disclosures:
Income tax paid $281 $226
GLOBAL SOURCES LTD. AND SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATION
(In U.S. Dollars Thousands, Except Number of Shares and Per Share Data)
Three months ended Six months ended
June 30 June 30
2007 2006 2007 2006
Net Income $4,190 $4,028 $10,718 $8,435
Less:
Loss on investment, net 1,846 0 1,846 0
Non-GAAP Net Income $6,036 $4,028 $12,564 $8,435
Non-GAAP diluted net income
per share $0.14 $0.10 $0.29 $0.20
Total shares used in non-GAAP
diluted net income
per share calculations 42,828,613 42,340,666 42,631,899 42,300,614
Non-GAAP Net Income:
Non-GAAP net income is defined as Net Income adjusted for the following:
An impairment charge of approximately $2.3 million on the company's HC
International investment, net of $0.5 million received pursuant to
indemnification obligations of the vendor under the purchase agreement
for HC International investment.
For financial matrix, please visit: http://xprnnews.xfn.info/GSOL/20070809/HKTH001.pdf
Global Sources Press Contact in Asia:
Camellia So
Tel: +852-2555-5021
Email: cso@globalsources.com
Global Sources Investor Contact in Asia:
Eddie Heng
Tel: +65-6547-2850
Email: eheng@globalsources.com
Global Sources Press Contact in U.S.:
James W.W. Strachan
Tel: +1-480-664-8309
Email: strachan@globalsources.com
Global Sources Investor Contacts in U.S.:
Christiane Pelz & Moriah Shilton
Lippert/Heilshorn & Associates, Inc.
Tel: +1-415-433-3777
Email: cpelz@lhai.com
