This is a summary of the third quarter fiscal 2007 earnings call conducted by AsiaInfo Holdings, Inc. (ASIA) on October 25, 2007.
Management:
Chief Executive Officer, President, Director - Steve Zhang
Chief Financial Officer, Vice President - Eileen Chu
Manager, Investor Relations - Charles Zhang
Key Investor Issues:
- Non-GAAP net income was $4.8 million or 11 cents per basic share vs. non-GAAP net income of $2.5 million or 6 cents per basic share a year ago.
- Exceeding guidance, net revenue was $29.6 million, an increase of 26% year-over-year, and an increase of 11% sequentially.
- Total revenue for the third quarter of 2007 was US$32.4 million, 17% higher than the year ago period and up 9% sequentially.
- Gross margin was 50% in the third quarter of 2007 compared to 43% in the year-ago period and 49% in the previous quarter.
Third Quarter Highlights
Net revenue grew 26% and net income grew over 200% year over year.
In the third quarter, the company signed a number of contracts for its industry-leading business and operation support systems, i.e. BOSS solution. This included the first international contract for China Mobile Pakistan, a high quarter level CRM and PRM contract with China Unicom, and a contract with China Telecom’s Zhejiang subsidiary to deploy and integrate account inquiries listing.
These deals represent significant achievement in diversifying the company’s customer base, both geographically and among China Telecom’s operators. AsiaInfo also signed several important contracts to upgrade its existing deployments. This included a contract with Zhejiang Mobile to optimize their BOSS system, which is the single largest in China; and a contract with Sutran Mobile.
All of those deals extend the company’s long-term strategic partnerships with Chinese telecom operators in the billing CRM field.
As the competition for users between China’s carriers continues to pick up, the company is seeing more and more opportunities for providing innovative, value-added services. In the quarter, AsiaInfo signed an agreement with China Unicom to deploy their online short message mailbox system, which will enable collaboration between the short message services and the Internet-based mailboxes.
Another result of this increased competition in the telecom service area is the continued demand for business intelligence solutions and the related consulting services. This past quarter, the company signed an agreement to expand China Mobile’s headquarters business intelligence system and the management expects to see similar agreements in the quarters ahead and a strong market potential from other operators in China.
The deal with China Mobile to build an over-the-air billing solution for Jiangxi Mobile is another example of the company’s innovative telecom offerings.
This product is designed to help operators penetrate China’s WAP telecom market by providing selectable payment options for users who may not live near a China Mobile retail center. And the preparation for the issuance of 3G license resulted in a contract with China Telecom to provide billing solutions for their extended TD-SCDMA trial.
With strong management and a solid strategy in place, the Lenovo-AsiaInfo business turned a profit for the quarter.
China’s telecom industry is changing rapidly, with new developments every day and the management is excited by the many opportunities ahead.
First quarter telecom software products and solutions revenue rose 31% year over year and 12% sequentially, thanks to the strong demand for AsiaInfo''s telecom software solution.
- Telecom service revenues increased 3% year over year and 6% sequentially.
- Total net revenue for the telecom business rose 19% from a year ago and 7% sequentially.
- Lenovo-AsiaInfo''s net revenue increased 76% year over year and 42% sequentially.
The large increase reflects continuous improvement of operation in this division. Sequentially, it also reflects the seasonality of China’s IT security market, which is typically stronger in the second half of the year.
Gross margin of net revenue was 55% compared to 51% in the year-ago period, and 54% in the period previous quarter.
The improvement in gross margin is the result of the long-term strategy to focus on high margin software solutions, as well as improving operating results of the Lenovo-AsiaInfo division.
