Quarterly Revenue Up 15% Compared to the Third Quarter 2006
EPS up 20% Compared to the Third Quarter 2006
NEW YORK, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- Global Sources Ltd. (Nasdaq: GSOL) reported financial results for the third quarter and nine months ended Sept. 30, 2007.
(Logo: http://www.prnasia.com/sa/200708071747.jpg )
Highlights: Third Quarter 2007 Compared to Third Quarter 2006
-- Revenue was $33.8 million, up 15% from $29.3 million.
-- Online revenue was $19.7 million, up 18% from $16.7 million.
-- Print revenue was $12.6 million, up 6% from $11.9 million.
-- Revenue from mainland China was $19.9 million, up 28% from
$15.5 million.
-- EPS was $0.12 per diluted share, up 20% from $0.10.
-- Total deferred income and customer prepayments were $88.1 million
as at Sept. 30, 2007, up 28% from $68.7 million as at Sept. 30, 2006.
Chairman and CEO Merle A. Hinrichs said: "Our strong third quarter results reflect the growth of our online services and increased revenues from mainland China. Early in the fourth quarter, we launched Global Sources Online 2.0, which provides buyers with the leading search experience in our industry, delivering comprehensive search results, plus the capability to identify verified suppliers. Global Sources Online 2.0 is also very important to our future online growth, as it should enable us to generate revenue from new services and pricing programs we expect to begin rolling out in 2008.
"We are extremely pleased with our position in the market, with our prospects for long-term growth and success, and with our clear differentiation. Our supplier customers have three primary objectives: lead generation, branding and differentiation from their competitors, and opportunities to get face-to-face with buyers to negotiate and win orders. With our integrated offering of online marketplaces, magazines and trade shows, we are able to deliver all three, in sharp contrast to our online-only competitors who really only provide lead generation.
"In addition, it is increasingly recognized by suppliers that we have the leadership position serving the larger and more professional buyers, who account for the majority of import volume, in contrast with competitors who focus more on the SME part of the market."
Highlights: Nine Months Ended Sept. 30, 2007
For the nine-month period ended Sept. 30, 2007, revenue was $121.3 million, compared to $104.2 million for the nine-month period ended Sept. 30, 2006. GAAP net income for the period was $15.8 million and included an impairment charge of $1.8 million on the company’s HC International, Inc. investment taken during the second quarter of 2007. GAAP EPS was $0.37 per diluted share. Non-GAAP net income excluding this charge was $17.7 million, or $0.41 per diluted share. This is as compared to net income for the nine months ended Sept. 30, 2006, GAAP and Non-GAAP, of $12.6 million or $0.30 per diluted share.
CFO Eddie Heng, said: "We had a solid third quarter, with revenue of $33.8 million and EPS of $0.12 within guidance. Cash from operations for the quarter totaled $15.5 million, bringing our nine months ended Sept. 30th figure to $45.0 million. We are beginning to see increasing leverage from our China Sourcing Fairs, which were profitable in Hong Kong for the first time this past October, and we anticipate this to continue. In addition, we are reaffirming our guidance for 2007 full year revenue of 16 to 17% growth over 2006."
Financial Expectations: Fourth Quarter Revenue Increase -- Up 17 to 19%
Fourth quarter 2007 revenue is expected to grow by 17 to 19% to be in the range of $61 million to $62 million, as compared to $52.3 million for the same period in 2006. Fourth quarter 2007 earnings per diluted share are expected to be in the range of $0.25 to $0.28, as compared to $0.36 in the fourth quarter of 2006, when the company recorded an extraordinary gain of $7.9 million. Excluding this extraordinary gain, Non-GAAP earnings per diluted share were $0.19.
For the full year 2007, management still expects revenue to be up 16 to 17% as compared to 2006, and is narrowing the full year revenue range to now be in the range of $182.3 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 full year 2007, which exclude an impairment charge recorded in the second quarter of 2007 of $1.8 million on the HC International, Inc. investment, are expected to be in the range of $0.66 to $0.69. This range represents growth of between 35 and 41% as compared to Non-GAAP earnings of $0.49 in 2006, which excluded the aforementioned extraordinary gain recorded in the fourth quarter of 2006.
Recent Corporate Highlights
-- Launched Global Sources Online 2.0 ( http://www.globalsources.com ),
a unique new vertical search engine and marketplace, which delivers
comprehensive search results and verified suppliers. It also
provides new functionality and services to help buyers qualify
suppliers.
-- Scheduled the fourth quarter launch of a new Chinese-language search
engine and online marketplace called China Global Sources Online
( http://www.globalsources.com.cn ). The site aims to enable both
global and Chinese companies to market to volume buyers in mainland
China’s domestic B2B market.
-- Acquired the assets of Beijing-based Blue Bamboo China Ventures, or
"Blue Bamboo," as part of Global Sources’ online expansion in China.
Blue Bamboo’s experienced personnel also joined the Global Sources
team.
-- Increased Global Sources’ independently certified community of
active buyers to more than 647,000 at the end of the third quarter, a
19% increase compared to the same quarter last year.
-- Grew lead generation, which is measured as requests for information
from buyers to suppliers through Global Sources Online, to over
23 million for the 12 months ended Sept. 30, 2007. This is up more
than 220% compared to the same period last year.
-- Announced two China Sourcing Fairs in India: Electronics and
Hardware & DIY. They are scheduled for November 2008 at
the Bombay Exhibition Center in Mumbai and Pico Event Management has
been licensed to manage the events.
-- Held four successful China Sourcing Fairs in October:
-- Electronics & Components, sold out with more than 2,770 booths,
including over 1,900 from mainland China alone;
-- Fashion Accessories, Asia’s largest specialized fashion
accessories trade show, hosted 800 booths;
-- Underwear & Swimwear, Asia’s only underwear and swimwear sourcing
event, hosted 250 booths; and
-- Gifts & Home Products, Global Sources’ single largest specialized
fair, featured over 3,700 booths.
-- Joined forces with three companies for verification and qualification-
related services:
-- Verify Limited for online credit reports;
-- Bureau Veritas for supplier capability and related assessments;
and
-- PIERS to help exporters qualify buyers based on import activity
reports.
-- Merle A. Hinrichs, chairman and CEO of Global Sources, rang the
NASDAQ Stock Market Opening Bell on Sept. 7, 2007.
Conference Call for Global Sources Third Quarter 2007 Earnings
Global Sources is scheduled to conduct a conference call at 8:00 a.m. ET on Nov. 15, 2007 (9:00 p.m. on Nov. 15, 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 .
For those who cannot listen to the live broadcast, a webcast replay of the call is scheduled to be available on the company’s corporate site
( http://www.corporate.globalsources.com ) for at least 30 days. A telephone replay of the call is also scheduled to be available through Nov.19, 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 20130665#. For those in the Hong Kong area, the replay dial-in number is (852) 3011-4541 and enter pass code 20130665#.
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 647,000 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 2 million products and more than 160,000 suppliers annually through 14 online marketplaces, 13 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 23 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 2,000 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
September 30 December 31
2007 2006
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $31,393 $25,192
Available-for-sale securities 153,475 130,603
Accounts receivable, net 6,362 6,468
Receivables from sales representatives 9,742 13,238
Inventory 937 889
Prepaid expenses and other current assets 20,433 14,174
Total Current Assets 222,342 190,564
Property and equipment, net 35,293 28,374
Intangible assets 3,000 --
Long term investments 100 100
Bonds held to maturity, at amortized cost 301 289
Other assets 3,582 1,562
Total Assets $264,618 $220,889
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $6,500 $6,804
Deferred income and customer prepayments 80,545 62,036
Accrued liabilities 11,413 12,427
Income taxes payable 959 751
Total Current Liabilities 99,417 82,018
Liabilities for incentive and bonus plans 102 102
Deferred income and customer prepayments
-- long term 7,554 1,802
Deferred tax liability 293 403
Total Liabilities 107,366 84,325
Minority interest 4,583 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 130,460 125,832
Retained earnings 20,681 4,830
Accumulated other comprehensive income 1,105 2,566
Total Shareholders’ Equity 152,669 133,651
Total Liabilities and Shareholders’
Equity $264,618 $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 Nine months ended
September 30 September 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Revenue:
Online and other media
services (Note 1) $32,270 $28,594 $91,849 $82,762
Exhibitions 454 435 26,153 20,514
Miscellaneous 1,059 291 3,273 901
33,783 29,320 121,275 104,177
Operating Expenses:
Sales (Note 2) 12,330 10,675 41,132 34,929
Event production 163 129 10,240 9,245
Community (Note 2) 5,051 4,423 17,759 16,654
General and administrative
(Note 2) 10,484 9,133 31,929 28,340
Online services development
(Note 2) 1,614 1,232 4,200 3,354
Amortization of software
costs 38 315 118 922
Total Operating Expenses 29,680 25,907 105,378 93,444
Income from Operations 4,103 3,413 15,897 10,733
Interest and dividend income 1,758 1,426 4,874 3,774
Gain on sale of
available-for-sale securities -- 9 -- 309
Loss on investment, net -- -- (1,846) --
Foreign exchange gains
(losses), net (294) (228) (758) (456)
Income before Income Taxes 5,567 4,620 18,167 14,360
Income Tax Expense (89) (153) (646) (576)
Net Income before Minority
Interest $5,478 $4,467 $17,521 $13,784
Minority interest (345) $(332) (1,670) $(1,465)
Net Income before cumulative
effect of change in
accounting principle $5,133 $4,135 $15,851 $12,319
Cumulative effect of change
in accounting principle(Note3) -- -- -- 251
Net Income $5,133 $4,135 $15,851 $12,570
Diluted net income per share $0.12 $0.10 $0.37 $0.30
Total shares used in
diluted net income
per share calculations 42,877,889 42,329,083 42,713,973 42,310,217
Note: 1. Online and other media services consists of:
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Online services $19,656 $16,690 $55,418 $47,469
Print services 12,614 11,904 36,431 35,293
$32,270 $28,594 $91,849 $82,762
Note: 2. 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 Nine months ended
September 30 September 30
2007 2006 2007 2006
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Sales $483 $701 $1,869 $1,084
Community 55 27 157 80
General administrative 311 746 1,956 1,567
Online services development 65 44 225 142
$914 $1,518 $4,207 $2,873
Note: 3. 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)
Nine months ended September 30
2007 2006
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $15,851 $12,570
Adjustments to reconcile net income
to net cash provided by
operating activities
Depreciation and amortization 3,354 3,370
Accretion of U.S. Treasury strips
zero % coupons (12) (21)
Unrealised dividend income on
available-for-sale securities -- (19)
Unrealised interest income on
available-for-sale securities (961) (762)
Impairment of investment 2,301 --
Profit on sale of equipment -- (30)
Bad debt expense 293 131
Non-cash compensation expense 4,207 2,873
Income attributable to minority
shareholder 1,670 1,465
Equipment written off 264 1
Cumulative effect of change in
accounting principle -- (251)
26,967 19,327
Changes in assets and liabilities:
Accounts receivables (187) (114)
Receivables from sales representatives 3,496 (5,107)
Inventory (49) (85)
Prepaid expenses and other current assets (6,259) (8,882)
Long term assets (2,020) (1,006)
Accounts payable (304) 1,525
Accrued liabilities and liabilities for
incentive and bonus plans (1,014) 4,506
Deferred income and customer prepayments 24,261 15,721
Tax liability 98 204
Net cash provided by operating activities 44,989 26,089
Cash flows from investing activities:
Purchase of property and equipment (10,537) (2,307)
Proceeds from sale of equipment -- 30
Purchase of intangible assets (3,000) --
Purchase of available-for-sale securities (365,535) (403,751)
Proceeds from sale of available-for-sale
securities 339,862 311,412
Net cash used in investing activities (39,210) (94,616)
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 6,201 (68,168)
Cash and cash equivalents, beginning of the
period 25,192 94,321
Cash and cash equivalents, end of the period $31,393 $26,153
Supplemental cash flow disclosures:
Income tax paid $548 $372
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 Nine months ended
September 30 September 30
2007 2006 2007 2006
Net Income $5,133 $4,135 $15,851 $12,570
Less:
Loss on investment, net 0 0 1,846 0
Non-GAAP Net Income $5,133 $4,135 $17,697 $12,570
Non-GAAP diluted net
income per share $0.12 $0.10 $0.41 $0.30
Total shares used in
non-GAAP diluted net
income per share
calculations 42,877,889 42,329,083 42,713,973 42,310,217
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.
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 Year ended
December 31 December 31
2006 2006
Net Income $15,310 $27,880
Less:
Gain on sale of
shares to minority
Shareholder and interest
income thereon (7,906) (7,906)
Loss on investment 743 743
Non-GAAP Net Income $8,147 $20,717
Non-GAAP diluted net income
per share $0.19 $0.49
Total shares used in
non-GAAP diluted net income
per share calculations 42,375,913 42,326,365
Non-GAAP Net Income:
Non-GAAP net income is defined as Net Income adjusted for the following:
(i) A gain of $7.9 million related to the sale 199 shares of its
subsidiary eMedia Asia Ltd. minority shareholder and interest income
thereon;
(ii) An impairment charge of approximately $743,000 on the company’s HC
International investment.
For financial matrix, please visit:
http://xprnnews.xfn.info/GSOL/20071115/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 Contact in U.S.:
Moriah Shilton & Christiane Pelz
Lippert/Heilshorn & Associates, Inc.
Tel: +1-415-433-3777
Email: cpelz@lhai.com
