This summary is based on the fourth quarter fiscal 2005 earnings call conducted by AsiaInfo Holdings, Inc. (ASIA: chart) on January 25, 2006.
Key Investors Issues
- EPS net loss from continuing operations was 61cents per basic share compared to profit of 3 cents per basic share last year.
- Net loss from continuing operations was $28.1 million compared to income of $1.2 million in the year-ago period.
- Net revenue was $16.5 million, a decrease of 20% year-over-year and an 18% decrease sequentially.
Fourth Quarter Highlights
Net revenue (total revenues net of third party hardware cost) was $16.5 million, a decrease of 20% year-over-year and an 18% decrease sequentially.
- The shortfall in net revenue was the result of lower than expected shipment volume for the Lenovo-AsiaInfo business unit’s security products.
- Gross revenues were $19.8 million, representing a decrease of 31% year-over-year and a decrease of 15% sequentially.
- Gross margins declined to 24% compared to 39% in the year-ago period and 47% in the previous quarter.
- Revenue from software products and solutions was $12.7 million, a decrease of 17% from the year-ago period and a decrease of 15% sequentially.
- Service revenue was $3.7 million, a 24% decrease year-over-year and a 25% sequential decrease. Third-party hardware revenue in the quarter fell to $3.5 million as the company continued its focus on high margin software products and solutions.
- The Lenovo-AsiaInfo business unit’s contribution to the company’s net revenue was nominal due to the business unit’s revenue shortfall. Lenovo-AsiaInfo contributed 26% to the company’s net revenue in the previous quarter.
Due to the disappointing performance of the Lenovo-AsiaInfo business unit, AsiaInfo recorded a $21.2 million non-cash charge for impairment of goodwill and acquired intangible assets.
Reflecting this charge, operating loss was $29.5 million, compared to an operating profit of $0.6 million in the year-ago period and an operating loss of $0.8 million in the previous quarter.
- Net loss from continuing operations was $28.1 million, or 61cents1 per basic share. Net income in the year-ago period was $1.2 million or 3 cents per basic share, and $1.5 million or 3 cents per basic share in the previous quarter.
- In line with AsiaInfo’s previously announced strategy of focusing on high margin core business lines, the company discontinued certain non-core businesses including its Han Management Consulting, Enterprise Information Systems and e-government businesses. Due to the disposal of these discontinued operations, the company recorded a net loss from discontinued operations of $11.7 million, or 25 cents per basic share. This compares to $0.4 million or 1 cent per basic share in the year-ago period, and $1.1 million or 2 cents in the previous quarter.
- AsiaInfo recorded a total net loss of $39.8 million, compared to net income of $0.8 million in the year-ago period and net income of $0.4 million in the previous quarter. Operating cash flow for the quarter was $1.3 million.
- The company strengthened its leading position in the telecom software solutions market through the strategic acquisitions of Changjiang Technology''s telecom operation support business group and Zheda Lande’s telecom operation support business group.
Fiscal 2005 Highlights
- The company reported net revenue of $77.9 million, representing a 22% increase over 2004 net revenue of $63.9 million.
- Gross revenue was $93.9 million, down from $101.7 million in 2004.
- Gross margins were 40% versus last year’s 36%, as the company continued to focus on its high margin software business and to reduce hardware passthrough.
- The Lenovo-AsiaInfo business unit’s results contributed 14.0% and 7.8% to the full year gross revenue and gross profit, respectively, and 15.5% to 2005 total net revenue.
- Reflecting AsiaInfo’s strategic focus on software products and solutions, revenue from this area grew 38% for the year to $58.4 million.
- Service revenue was $18.6 million, a 5% decrease from $19.7 million in 2004, and third party hardware revenue fell 58% to $16.9 million from $39.7 million in 2004.
- Reflecting the large one-time non-cash impairment charge incurred in the fourth quarter, operating loss for the full year 2005 was $27.1 million, compared to last year’s operating profit of $5.3 million. Accordingly, net loss from continued operations for 2005 was $23.7 million, or 53 cents per basic share as compared to net income of $10.7 million, or 23 cents per basic share, for 2004. Net loss from discontinued operations for 2005 was $13.5 million or 30 cents per basic share while it was $1 million or 2 cents per basic share in 2004.
AsiaInfo''s full year net operating cash flow was $9.6 million.
