Net income excluding share-based compensation expenses, amortization and impairment charges, after tax division income and gain on discontinued operation, was $8.1 million in the fourth quarter of 2007, or 18 cents per basic share.
Non-GAAP net income in the year-ago period was $2.8 million, or 7 cents per basic share. Non-GAAP net income in the previous quarter was $4.6 million, or 10 cents per basic share.
Operating cash flow for the quarter was approximately $33 million, reflecting strong year-end collection efforts.
The total cash position, including cash and cash equivalents, restricted cash and short-term investments increased to $215 million from $175 million, reflecting the large positive cash flow during the quarter.
In the fourth quarter, the firm also announced several significant contracts for its flagship BOSS and BI solutions.
These included agreements to expand China Mobile''s Business Operation Support Systems in Zhejiang, Gansu and Shanghai; expand and upgrade Business Intelligence systems for China Mobile in Qinghai and Beijing; and expand China Netcom''s CRM system in Jiangsu.
The firm also continued to sign contracts that allow firm to capitalize on new opportunities. During the fourth quarter, the firm signed its first CRM contract with the world’s largest fixed line operator, China Telecom in Xinjiang Province. In fact, 2007 was a year of new geographical markets with new projects for China Mobile subsidiaries in Hunan and Tibet, as well as the China Mobile subsidiary in Pakistan, our first international assignment.
Disciplined investment in R&D resulted in innovative, dependable products is one of the cornerstones of AsiaInfo''s success is commitment in the telecom software area, coupled with the understanding of China’s leading telecom operators that the firm has gained over many years. This is what allows the firm to develop leading solutions that best anticipates and satisfy the needs of the world’s largest telecom market. The firm launched its mobile e-commerce solution in the fourth quarter and signed a contract with China Mobile. The firm is the first mover in China in this area.
Fiscal 2007 Financial Analysis
- Net income for 2007 was $23.6 million, an increase of 307% from $5.8 million in 2006. Non-GAAP net income was $20 million for 2007, an increase of 186% from $7 million in 2006.
- The net revenue was $115 million, an increase of 32% year over year, reflecting continuous steady growth in the telecom business and improvement in the Lenovo-AsiaInfo business.
- The revenue from telecom software products and solutions grew by 26% from 2006, leading to a 24% increase in telecom net revenue for the year.
- Lenovo-AsiaInfo contributed 16% to net revenue for 2007 as compared with 10% for 2006, reflecting the higher growth of the division from a lower base.
- Gross margin for the full year 2007 was 47% compared to 40% for the full year 2006. The improvement in gross margins reflects execution of the company’s long-term strategy to focus on high margin software solutions, as well as the improving operating results of the company’s Lenovo-AsiaInfo business unit.
- Gross profit as a percentage of net revenue for full year 2007 was 55% compared to 51% in 2006. The increase was mainly due to the improving operating results of the company’s Lenovo-AsiaInfo business unit.
- Operating income for 2007 was $12.9 million, with an increase of 585% from 2006. The increase was driven by revenue growth and improving operating margins in both telecom and IT security division.
- Operating margin of net revenue for the telecom division was 11% for 2007 as compared to 8% in 2006. Operating margin of net revenue for Lenovo-AsiaInfo division also increased to 13% from minus 50% in 2006.
- DSO for full year 2007 was 108 days versus 120 days for 2006.
- Operating cash flow for full year 2007 was approximately $28 million, driven by strong year-end collection efforts.
First Quarter Fiscal 2008 Guidance
- Net revenue for the first quarter of 2007 is expected to be $29 million to $31 million, representing 23% to 32% year-over-year growth.
- The firm expects first quarter earnings per basic share from continuing operations to be 7 cents to 8 cents.
- Net income from continuing operations per basic share in the first quarter of 2007 was 12 cents, which included a positive impact of 7 cents from other operating income. Excluding this impact, the company’s first quarter 2008 EPS guidance would represent 40% to 60% year-over-year increase.
Key questions and answers from the fourth quarter fiscal 2007 earnings call conducted by AsiaInfo Holdings Inc. on February 14, 2008.
Brendan Barnicle (Pacific Crest Securities): On the CRM contract with China Telecom this past quarter, is that likely to roll out to other provinces like you’ve seen with your other China Telecom transactions?
Steve Zhang: Our effort for China Telecom account is to looking ahead to focus on the wireless side. That particular CRM contract, we went into Xinjiang and that’s supporting for both fixed line and broadband access. Probably our target for this year in 2008 is to expand into other two provinces in China Telecom. But our other main effort for this particular customer account is to work with them for their future wireless billing and CRM deployment when they get their mobile license.
Brendan Barnicle (Pacific Crest Securities): What are the prospects for international expansion in 2008?
Steve Zhang: We are still cautious with our international expansion because it requires a lot of marketing and sales dollars. For 2008, we are focusing on two international markets. One is in Southeast Asia. Right now, we are participating in several billing contracts in the process in Vietnam and we are also focusing on work with China Mobile when they making further international expansion, we’ll go with them. That’s a much low-risk approach for us.
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