BEIJING and SANTA CLARA, Calif., Aug. 7, 2013 /PRNewswire-FirstCall/
-- AsiaInfo-Linkage, Inc. (NASDAQ: ASIA) ("AsiaInfo-Linkage,"
the "Company," "we," "us" or "our"), a leading provider of
telecommunication software solutions and services in China, today announced financial results for
the second quarter ended June 30,
2013.
"The second quarter was another solid performance for
AsiaInfo-Linkage as China's three
telecommunications carriers continued to focus on monetization of
their data traffic," said Steve
Zhang, the Company's president and chief executive officer.
"The growth in the number of mobile users and the increase in
related data traffic continue to define much of our current project
work. We are well positioned to help the carriers adapt as
China's telecommunications
industry evolves."
AsiaInfo-Linkage chief financial officer Michael Wu said, "In the second quarter, as a
result of our periodic goodwill impairment review, which considers
a number of factors and market conditions, the Company determined
that an impairment loss of US$286.8
million should be recognized in the period."
Second Quarter 2013 Financial
Results
Total revenues for the second quarter of 2013 were US$140.2 million, an increase of 11.0%
year-over-year and a decrease of 2.0% sequentially. Meeting
guidance, net revenue (non-GAAP) for the second quarter of 2013 was
US$136.7 million, an increase of 9.8%
year-over-year and 0.7% sequentially. The year-over-year and
sequential increases were mainly due to growth in demand from
China's telecommunication
carriers.
Gross margin for the quarter was 37.4%, compared to 38.5% in the
year-ago period and 34.7% in the previous quarter. Gross margin of
net revenue (non-GAAP)[3] was 42.7% in the second quarter of 2013,
compared to 43.8% in the year-ago period and 40.9% in the previous
quarter. The year-over-year decrease in gross margin was mainly
attributable to an increase in approximately 975 delivery
engineers. The sequential increase was mainly due to a reduction in
domestic delivery costs and the reclassification of a number of
delivery engineers as R&D engineers.
Total operating expenses for the second quarter of 2013
increased 619.6% year-over-year and 619.1% sequentially to
US$335.8 million. Excluding the
effects of the impairment of goodwill, total operating expenses for
the second quarter of 2013 increased 5.0% year-over-year and 4.9%
sequentially to US$49.0 million,
mainly due to increases in sales and marketing expenses and
research and development ("R&D") expenses.
Sales and marketing expenses for the second quarter of 2013
increased 10.1% year-over-year and increased 9.1% sequentially to
US$20.3 million. Both the
year-over-year and sequential increases were mainly attributable to
a combination of an increase in employee welfare and benefits and
third-party professional fees of approximately US$2.1 million. General and administrative
("G&A") expenses for the second quarter of 2013 decreased 14.6%
year-over-year and decreased 19.0% sequentially to US$6.7 million. The year-over-year decrease was
mainly due to a US$1.1 million
decrease in bad debt expenses in the second quarter of 2013
compared to the year-ago period. The sequential decrease was mainly
due to a US$1.5 million decrease of
bad debt expenses in the second quarter of 2013 compared to the
first quarter of 2013. R&D expenses for the second quarter of
2013 increased 9.2% year-over-year and 12.3% sequentially to
US$22.3 million. The year-over-year
change reflected the Company's strategy regarding product
development. The sequential change reflects the reclassification of
a number of delivery engineers as R&D engineers. In the second
quarter of 2013, the Company received government subsidies of
US$0.3 million. The Company did not
receive government subsidies in the first quarter of 2013 or in the
year-ago period.
In the second quarter of 2013, the Company recognized a
US$286.8 million impairment of
goodwill, which was the result of the Company's periodic impairment
review based on a number of factors and market conditions,
including changing conditions in the IT services sector in
China and projections regarding
the country's gross domestic product growth.
Income from operations for the second quarter of 2013 was
negative US$283.3 million. Excluding
the effects of the impairment of goodwill, income from operations
was US$3.4 million, which represented
a year-over-year increase of 74.1% and a sequential increase of
16.9%. The year-over-year and sequential increases were mainly due
to enhanced cost controls along with growth in revenue. Operating
margin of total revenue was negative 202.1% for the second quarter
of 2013, compared to 1.6% in the year-ago period and 2.1% in the
previous quarter. Operating margin of net revenue (non-GAAP)[4] for
the second quarter of 2013 was 11.7%, compared to 12.0% in the
year-ago period and 11.4% in the previous quarter.
Other income for the second quarter of 2013 was US$2.7 million compared to US$4.0 million in the year-ago period and
US$2.2 million in the previous
quarter. The year-over-year decrease primarily related to a
decrease in dividend income of US$0.5
million in the second quarter of 2013.
In the second quarter of 2013, the Company recorded net income
attributable to AsiaInfo-Linkage, Inc. of negative US$281.5 million, or negative US$3.87 per basic share, compared to US$6.2 million, or US$0.09 per basic share, in the year-ago period
and US$14.1 million, or US$0.19 per basic share, in the previous quarter.
Other than the effects of impairment of goodwill, the sequential
decrease was primarily due to the recognition of Key Software
Enterprise tax status for two of the Company's Chinese
subsidiaries, retroactively granted for the years 2011 and 2012,
which resulted in a positive impact of US$9.0 million, or US$0.12 per basic share, and led to a tax benefit
of US$6.6 million, or US$0.09 per basic share, which was recognized in
the first quarter of 2013.
In the second quarter of 2013, net income attributable to
AsiaInfo-Linkage, Inc. (non-GAAP) was US$17.7 million, or US$0.24 per basic share. Net income attributable
to AsiaInfo-Linkage, Inc. (non-GAAP) in the year-ago period was
US$18.6 million, or US$0.26 per basic share. Net income attributable
to AsiaInfo-Linkage, Inc. (non-GAAP) in the previous quarter was
US$26.6 million, or US$0.37 per basic share. The year-over-year and
sequential decreases were mainly due to the same factors impacting
net income attributable to AsiaInfo-Linkage, Inc.
As of June 30, 2013,
AsiaInfo-Linkage had cash and cash equivalents and restricted cash
totaling US$296.1 million and
short-term investments totaling US$35.3
million. Operating cash outflow in the second quarter of
2013 was US$2.9 million.
As of June 30, 2013,
AsiaInfo-Linkage had gross accounts receivable ("AR") of
US$341.9 million, compared to
US$292.3 million as of March 31, 2013 and US$307.3 million as of June 30, 2012. Gross AR includes agent
arrangements with International Business Machines Corporation
("IBM") or its distributors and a number of other hardware
companies ("IBM-Type Arrangements"). Since these arrangements
typically consist of back-to-back payment terms for certain
products sold to AsiaInfo-Linkage customers, there is no impact on
the Company's cash flow or days of sales outstanding ("DSO"). Net
AR, which excludes IBM-Type Arrangements, was US$259.0 million as of June 30, 2013, compared to US$256.2 million as of March 31, 2013 and US$222.9 million as of June 30, 2012. The combined effect of revenue and
the AR trend resulted in the Company's DSO being 156 days as of
June 30, 2013 compared to 154 days as
of March 31, 2013 and 154 days as of
June 30, 2012. A table presenting
further information regarding the Company's gross AR, AR relating
to IBM-Type Arrangements ("IBM-Related AR"), net AR, revenues and
DSO is provided at the end of this press release.
First Half 2013 Financial Results
Total revenue for the first half of 2013 was US$283.2 million, an increase of 13.3%
year-over-year. Net revenue (non-GAAP) for the first half of 2013
was US$272.4 million, an increase of
10.9% year-over-year.
In the first half of 2013, gross margin was 36.0%, compared to
38.8% in the year-ago period. Gross margin of net revenue
(non-GAAP) was 41.7% in the first half of 2013, compared to 44.3%
in the year-ago period.
Income from operations for the first half of 2013 was negative
US$280.4 million, compared to
US$4.5 million in the year-ago
period.
In the first half of 2013, AsiaInfo-Linkage recorded net income
attributable to AsiaInfo-Linkage, Inc. of negative US$267.4 million, or negative US$3.67 per basic share, compared to US$12.6 million, or US$0.17 per basic share, in the year-ago
period.
Net income attributable to AsiaInfo-Linkage, Inc. (non-GAAP) was
US$44.3 million or US$0.61 per basic share, in the first half of
2013, compared to US$38.0 million, or
US$0.52 per basic share, in the
year-ago period.
[1]
|
Net revenue (non-GAAP) represents total revenue net
of third-party hardware costs that are passed through to our
customers. A reconciliation of all non-GAAP measures used in this
press release to the most directly comparable GAAP measures is
provided at the end of this press release.
|
[2]
|
Net income attributable to AsiaInfo-Linkage, Inc.
(non-GAAP) and net income attributable to AsiaInfo-Linkage, Inc.
(non-GAAP) per basic share measures exclude stock-based
compensation expenses, amortization of acquired intangible assets,
impairment of goodwill, non-recurring consulting related expenses,
and dividend income, net of tax.
|
[3]
|
Gross margin of net revenue (non-GAAP) is calculated
by dividing gross profit, excluding third-party hardware costs,
amortization of acquired intangible assets and stock-based
compensation expenses, by net revenue (non-GAAP).
|
[4]
|
Operating margin of net revenue (non-GAAP) is
calculated by dividing income from operations, excluding
third-party hardware costs, amortization of acquired intangible
assets, stock-based compensation expenses, impairment of goodwill
and non-recurring consulting related expenses, by net revenue
(non-GAAP).
|
Recent Developments
Upon the unanimous recommendation of the Special Committee of
the Company's board of directors and the approval of the Company's
board of directors, on May 12, 2013,
the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Skipper Limited ("Parent") and Skipper
Acquisition Corporation ("Merger Sub"), which are owned indirectly
by CITIC Capital Partners, the private equity arm of CITIC Capital
Holdings Ltd. ("CITIC Capital Partners"). The Merger Agreement
provides that Merger Sub will merge with and into the Company, with
the Company continuing as the surviving corporation and a wholly
owned subsidiary of Parent, and each share of the Company's
outstanding common stock will convert automatically into the right
to receive US$12.00 in cash without
interest, except for dissenting shares, shares of treasury stock,
and shares held by members of the buyer group that will own all of
Parent following the transaction (collectively, the "Merger"). If
the Merger closes pursuant to the Merger Agreement, the Company
would cease to be listed on the NASDAQ Global Market or a public
reporting company in the United
States. The Merger Agreement is subject to closing
conditions, including stockholder approval, and there can be no
assurance that the Merger or any other transaction will be approved
or consummated.
In connection with the Merger, certain subsidiaries and
employees of the Company entered into a number of agreements with
two unaffiliated individuals pursuant to which such individuals
purchased the Company's interests in Beijing Zhongxinjia Sci-Tech
Development Co., Ltd. ("ZXJ") and Beijing Star VATS Technologies
Co., Inc. ("Star VATS"). ZXJ and Star VATS were previously
controlled by the Company through a series of contractual
arrangements. The transfer of the Company's interests in ZXJ and
Star VATS has been completed and the Company no longer has any
legal right to control ZXJ and Star VATS. The consideration payable
to the Company for its interests in ZXJ and Star VATS is the fair
market value of such interests as determined on the basis of an
appraisal undertaken by an independent asset appraisal firm.
Business Outlook
The Company expects third quarter 2013 net revenue (non-GAAP) to
be in the range of US$137 million to US$141
million. The Company expects third quarter 2013 net income
attributable to AsiaInfo-Linkage per basic share (non-GAAP) to be
in the range of US$0.22 to
US$0.25.
ASIAINFO-LINKAGE,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
(U.S. dollars in
thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
Three Months
Ended June 30,
|
|
Six Months
Ended June 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Revenues:
|
|
|
|
|
|
|
|
Software products and solutions
|
$127,554
|
|
$116,772
|
|
$257,027
|
|
$230,834
|
Service
|
8,909
|
|
7,553
|
|
14,775
|
|
14,507
|
Third-party hardware
|
3,745
|
|
1,946
|
|
11,431
|
|
4,627
|
Total
revenues
|
140,208
|
|
126,271
|
|
283,233
|
|
249,968
|
Cost of
revenues:
|
|
|
|
|
|
|
|
Software products and solutions
|
79,469
|
|
71,801
|
|
160,644
|
|
140,340
|
Service
|
4,764
|
|
3,985
|
|
9,676
|
|
8,162
|
Third-party hardware
|
3,557
|
|
1,848
|
|
10,859
|
|
4,395
|
Total cost of
revenues
|
87,790
|
|
77,634
|
|
181,179
|
|
152,897
|
Gross
profit
|
52,418
|
|
48,637
|
|
102,054
|
|
97,071
|
Operating expenses
(income):
|
|
|
|
|
|
|
|
Sales and marketing
|
20,301
|
|
18,440
|
|
38,912
|
|
38,788
|
General and administrative
|
6,685
|
|
7,826
|
|
14,933
|
|
15,304
|
Research and development
|
22,264
|
|
20,394
|
|
42,098
|
|
38,491
|
Government subsidies
|
(273)
|
|
0
|
|
(273)
|
|
0
|
Impairment of goodwill
|
286,782
|
|
0
|
|
286,782
|
|
0
|
Total operating
expenses
|
335,759
|
|
46,660
|
|
382,452
|
|
92,583
|
(Loss) income from
operations
|
(283,341)
|
|
1,977
|
|
(280,398)
|
|
4,488
|
Other income
(expenses), net
|
|
|
|
|
|
|
|
Interest income
|
1,836
|
|
2,032
|
|
3,992
|
|
4,429
|
Dividend income
|
103
|
|
604
|
|
201
|
|
604
|
Gain from sales of short-term investments
|
1,105
|
|
1,245
|
|
1,153
|
|
3,272
|
Loss on disposal of variable interest entities
|
(186)
|
|
0
|
|
(186)
|
|
0
|
Other (expenses) income, net
|
(174)
|
|
136
|
|
(229)
|
|
(29)
|
Total other
income, net
|
2,684
|
|
4,017
|
|
4,931
|
|
8,276
|
(Loss) income
before income tax expense (benefit), loss on equity method
investment and (loss) income from discontinued operations, net of
income tax
|
(280,657)
|
|
5,994
|
|
(275,467)
|
|
12,764
|
Income tax expense
(benefit)
|
1,304
|
|
669
|
|
(5,299)
|
|
2,013
|
(Loss) income
after income tax expense (benefit) before loss on equity method
investment and (loss) income from discontinued operations, net of
income tax
|
(281,961)
|
|
5,325
|
|
(270,168)
|
|
10,751
|
Loss on equity method
investment, net of income tax
|
(190)
|
|
0
|
|
(461)
|
|
0
|
(Loss) income from
continuing operations
|
(282,151)
|
|
5,325
|
|
(270,629)
|
|
10,751
|
Discontinued
operations:
|
|
|
|
|
|
|
|
Loss from operations of discontinued operations
|
0
|
|
(1)
|
|
0
|
|
0
|
Gain on sales of discontinued operations
|
0
|
|
0
|
|
1,153
|
|
0
|
Income tax expense for discontinued operations
|
0
|
|
0
|
|
0
|
|
8
|
(Loss) income from
discontinued operations, net of income tax
|
0
|
|
(1)
|
|
1,153
|
|
(8)
|
Net (loss)
income
|
(282,151)
|
|
5,324
|
|
(269,476)
|
|
10,743
|
Less: Net loss attributable to noncontrolling interest
|
(652)
|
|
(901)
|
|
(2,078)
|
|
(1,844)
|
Net (loss) income
attributable to AsiaInfo-Linkage, Inc.
|
$(281,499)
|
|
$6,225
|
|
$(267,398)
|
|
$12,587
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
Net (loss) income
from continuing operations attributable to AsiaInfo-Linkage, Inc.
common stockholders:
|
|
|
|
|
|
|
|
Basic
|
$(3.87)
|
|
$0.09
|
|
$(3.69)
|
|
$0.17
|
Diluted
|
$(3.87)
|
|
$0.09
|
|
$(3.69)
|
|
$0.17
|
Net (loss) income
from discontinued operations attributable to AsiaInfo-Linkage, Inc.
common stockholders:
|
|
|
|
|
|
|
|
Basic
|
$0.00
|
|
$0.00
|
|
$0.02
|
|
$0.00
|
Diluted
|
$0.00
|
|
$0.00
|
|
$0.02
|
|
$0.00
|
Net (loss) income
attributable to AsiaInfo-Linkage, Inc. common
stockholders:
|
|
|
|
|
|
|
|
Basic
|
$(3.87)
|
|
$0.09
|
|
$(3.67)
|
|
$0.17
|
Diluted
|
$(3.87)
|
|
$0.09
|
|
$(3.67)
|
|
$0.17
|
|
|
|
|
|
|
|
|
Weighted average
shares used in computation:
|
|
|
|
|
|
|
|
Basic
|
72,819,969
|
|
72,508,556
|
|
72,781,310
|
|
72,491,005
|
Diluted
|
72,819,969
|
|
72,763,879
|
|
72,781,310
|
|
72,744,716
|
ASIAINFO-LINKAGE,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(U.S. dollars in thousands)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
Net (loss)
income
|
$
|
(282,151)
|
|
$
|
5,324
|
|
$
|
(269,476)
|
|
$
|
10,743
|
Other comprehensive
income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
Change
in cumulative foreign currency translation
adjustment
|
|
6,656
|
|
|
(1,922)
|
|
|
7,709
|
|
|
(1,377)
|
Transfer to statements of operations of realized
gain on
available-for-sale securities, net of tax effects of $166
and $311,
$173 and $615 for the three months and six
months ended
June 30, 2013 and 2012, respectively
|
(939)
|
|
|
(934)
|
|
|
(980)
|
|
|
(2,657)
|
Net unrealized gain
on available-for-sale securities, net
of
tax effects of ($41) and ($133), ($153) and ($233)
for the three months and six months ended June 30,
2013 and 2012, respectively
|
|
251
|
|
|
474
|
|
|
774
|
|
|
768
|
Other comprehensive
income (loss)
|
|
5,968
|
|
|
(2,382)
|
|
|
7,503
|
|
|
(3,266)
|
Comprehensive
(loss) income
|
|
(276,183)
|
|
|
2,942
|
|
|
(261,973)
|
|
|
7,477
|
Less: Comprehensive
loss attributable to noncontrolling interest
|
|
(652)
|
|
|
(901)
|
|
|
(2,078)
|
|
|
(1,844)
|
Comprehensive (loss)
income attributable to AsiaInfo-Linkage, Inc.
|
$
|
(275,531)
|
|
$
|
3,843
|
|
$
|
(259,895)
|
|
$
|
9,321
|
ASIAINFO-LINKAGE,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
(U.S. dollars in
thousands, except share and per share amounts)
|
|
June 30,
2013
|
|
December 31,
2012
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
256,704
|
|
$
|
273,520
|
|
Restricted
cash
|
|
39,435
|
|
|
39,639
|
|
Short-term
investments – available-for-sale securities
|
|
9,384
|
|
|
27,928
|
|
Short-term
investments – held-to-maturity securities
|
|
25,896
|
|
|
12,728
|
|
Accounts receivable
(net of allowances of $4,168 and $2,999 as of June 30, 2013
and
December 31, 2012,
respectively)
|
|
341,861
|
|
|
285,695
|
|
Inventories,
net
|
|
31,600
|
|
|
24,107
|
|
Other
receivables
|
|
6,270
|
|
|
6,504
|
|
Deferred income tax
assets – current
|
|
5,644
|
|
|
5,559
|
|
Income taxes
recoverable
|
|
2,496
|
|
|
0
|
|
Prepaid expenses and
other current assets
|
|
12,695
|
|
|
8,311
|
|
Total current assets
|
|
731,985
|
|
|
683,991
|
Long-term
investments
|
|
7,372
|
|
|
5,936
|
Property and
equipment, net
|
|
24,756
|
|
|
19,104
|
Other acquired
intangible assets, net
|
|
101,882
|
|
|
121,529
|
Deferred income tax
assets – non-current
|
|
2,560
|
|
|
2,560
|
Goodwill
|
|
145,453
|
|
|
433,545
|
Land use right,
net
|
|
14,380
|
|
|
14,326
|
Other non-current
assets
|
|
1,356
|
|
|
1,332
|
|
Total
assets
|
$
|
1,029,744
|
|
$
|
1,282,323
|
LIABILITIES,
REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
112,550
|
|
$
|
78,079
|
|
Accrued
expenses
|
|
22,735
|
|
|
28,065
|
|
Deferred
revenue
|
|
37,639
|
|
|
40,491
|
|
Accrued employee
benefits
|
|
57,304
|
|
|
76,803
|
|
Other
payables
|
|
4,736
|
|
|
5,270
|
|
Income taxes
payable
|
|
5,426
|
|
|
6,875
|
|
Other taxes
payable
|
|
7,852
|
|
|
10,305
|
|
Deferred income tax
liabilities – current
|
|
1,674
|
|
|
1,565
|
|
Total current liabilities
|
|
249,916
|
|
|
247,453
|
Unrecognized tax
benefits
|
|
2,477
|
|
|
1,703
|
Deferred income tax
liabilities – non-current
|
|
17,928
|
|
|
17,928
|
Other long term
liabilities
|
|
387
|
|
|
387
|
|
Total
liabilities
|
$
|
270,708
|
|
$
|
267,471
|
Redeemable
noncontrolling interest
|
|
(4,885)
|
|
|
(3,488)
|
Equity:
|
|
|
|
|
|
AsiaInfo-Linkage,
Inc. stockholders' equity:
|
|
|
|
|
|
|
Common stock
(100,000,000 shares authorized; $0.01 par value; 79,030,247
shares and
78,865,818 shares issued as of June 30, 2013 and
December 31, 2012, respectively;
72,863,747 shares and 72,699,318 shares
outstanding as of June 30, 2013 and
December 31, 2012, respectively)
|
|
790
|
|
|
789
|
|
Additional paid-in
capital
|
|
864,371
|
|
|
858,711
|
|
Treasury stock, at
cost (6,166,500 shares as of June 30, 2013 and December 31,
2012,respectively)
|
|
|
|
|
(87,746)
|
|
(87,746)
|
|
|
|
|
(Accumulated deficit)
retained earnings
|
|
(88,340)
|
|
|
179,058
|
|
Statutory
reserve
|
|
22,050
|
|
|
22,050
|
|
Accumulated other
comprehensive income
|
|
52,653
|
|
|
45,150
|
|
Total AsiaInfo-Linkage, Inc. stockholders' equity
|
$
|
763,778
|
|
$
|
1,018,012
|
Noncontrolling
interest
|
|
143
|
|
|
328
|
|
Total
equity
|
|
763,921
|
|
|
1,018,340
|
|
Total liabilities,
redeemable noncontrolling interest and equity
|
$
|
1,029,744
|
|
$
|
1,282,323
|
Second Quarter 2013 Conference Call Details
AsiaInfo-Linkage's senior management will hold an earnings
conference call at 5:00 p.m. Pacific
Time / 8:00 p.m. Eastern Time
on August 7, 2013 (8:00 a.m. Beijing/Hong Kong Time on August 8, 2013). Management will discuss results
and highlights of the quarter as well as answer questions from
investors.
The conference call webcast URL is
http://www.media-server.com/m/p/z9v9tnbc
The dial-in numbers for the conference call are as follows:
Local:
|
New York:
|
1-845-675-0437
|
Hong Kong:
|
852-2475-0994
|
China, Domestic Mobile:
|
400-620-8038
|
China, Domestic:
|
800-819-0121
|
|
|
International Toll Free:
|
United States:
|
1-866-519-4004
|
Hong Kong:
|
800-930-346
|
International Toll:
|
65-6723-9381
|
|
|
The conference ID # is
|
16362833
|
A replay of the call will be available until 9:59 a.m. Eastern Time on August 15, 2013 by dialing one of the following
numbers:
U.S Toll Free:
|
+1-855-452-5696
|
International:
|
+61-2-8199-0299
|
The replay ID # is
|
16362833
|
Additionally, a live and archived webcast of this call will be
available on the Investor Relations section of the AsiaInfo-Linkage
website at www.asiainfo-linkage.com
About AsiaInfo-Linkage, Inc.
AsiaInfo-Linkage, Inc. (NASDAQ: ASIA) is a leading provider of
high-quality software solutions and IT services to the
telecommunications industry. Headquartered in Beijing, we employ more than 11,000
professionals worldwide. We provide a full suite of business and
operational support solutions (BSS/OSS) and associated professional
services. Our core Veris product line includes billing and customer
care systems that serve nearly a billion subscribers globally –
almost one seventh of the world's population – plus business
intelligence, network management and solutions.
Our customers work with us to converge large scale pre- and
post-paid mobile operations; improve time to market for new
products and services; and develop cost-effective new business
models. In China, we have more
than 50% market share in billing, CRM and business intelligence
through our longstanding partnerships with China Mobile, China
Unicom and China Telecom. We aim to be the leading IT solutions
provider to the global telecommunications industry, enabling the
Connected Digital Lifestyle, and helping our customers build,
maintain, operate and constantly improve their network
infrastructure and IT environment.
For more information about AsiaInfo-Linkage, please visit
www.asiainfo-linkage.com.
Reconciliation of non-GAAP Measures
This earnings release presents the following "non-GAAP financial
measures" as defined by applicable U.S. securities regulations. The
presentation of these non-GAAP financial measures is not meant to
be considered in isolation or as a substitute for our financial
results prepared in accordance with GAAP. The non-GAAP financial
measures are provided as additional information to help both
management and investors compare business trends among different
reporting periods on a consistent and more meaningful basis and
enhance investors' overall understanding of the Company's current
financial performance and prospects for the future. These
non-GAAP measures have limitations, however, because they do not
include all items of income and expenses that impact the Company's
operations. Management compensates for these limitations by
also considering the Company's GAAP results. The non-GAAP
financial measures the Company uses are not prepared in accordance
with, and should not be considered an alternative to measurements
required by GAAP and should not be considered measures of the
Company's liquidity. Pursuant to relevant regulatory
requirements, we are providing the following reconciliations of the
non-GAAP financial measures to the most directly comparable GAAP
measures.
(1) Net revenue (non-GAAP)
AsiaInfo-Linkage's net revenue (non-GAAP) represents total
revenue net of third-party hardware costs that are passed through
to our customers. We believe total revenues net of third-party
hardware costs more accurately reflects our core business, which is
the provision of software solutions and services, and provides
transparency to our investors. It is also the same measure used by
our management to evaluate the competitiveness and development of
our business.
Reconciliation of net revenue (non-GAAP) to GAAP
total revenues
|
Three Months Ended Jun 30
|
Six Months Ended Jun 30
|
2013 Q1
|
|
2013
|
2012
|
2013
|
2012
|
|
(in US dollar thousands)
|
Total
Revenues
|
140,208
|
126,271
|
283,233
|
249,968
|
143,025
|
Third-Party
Hardware
Costs
|
3,557
|
1,848
|
10,859
|
4,395
|
7,302
|
Net Revenue
(non-GAAP)
|
136,651
|
124,423
|
272,374
|
245,573
|
135,723
|
(2) Gross margin of net revenue (non-GAAP)
Gross margin of net revenue (non-GAAP) is calculated by dividing
gross profit, excluding third-party hardware costs, amortization of
acquired intangible assets and stock-based compensation expenses,
by net revenue (non-GAAP). We believe that this non-GAAP financial
measure provides meaningful supplemental information regarding our
performance by excluding certain expenses and income that may not
be indicative of our operating performance. Management uses the
gross margin of net revenue (non-GAAP) measure to gain a better
understanding of the Company's comparative operating performance
from period-to-period and as a basis of planning and forecasting
future periods. Management believes this non-GAAP measure, when
read in conjunction with the Company's GAAP gross margin and other
GAAP financial metrics, provides useful information to investors by
offering: a) the ability to make more meaningful period-to-period
comparisons of the Company's on-going operating results; b) the
ability to better identify trends in the Company's underlying
business and perform related trend analysis; c) a better
understanding of how management plans and measures the Company's
underlying business; and d) an easier way to compare the Company's
most recent results of operations against investor and analyst
financial models.
Reconciliation of gross margin of net revenue
(non-GAAP) to GAAP gross margin
|
Three Months Ended Jun 30
|
Six Months Ended Jun 30
|
2013 Q1
|
|
2013
|
2012
|
2013
|
2012
|
Gross margin (GAAP)
|
37.4%
|
38.5%
|
36.0%
|
38.8%
|
34.7%
|
Third-party hardware costs[1]
|
1.0%
|
0.6%
|
1.4%
|
0.7%
|
1.9%
|
Amortization of acquired intangible
assets[2]
|
3.7%
|
4.0%
|
3.7%
|
4.1%
|
3.7%
|
Stock-based compensation
expenses[2]
|
0.6%
|
0.7%
|
0.6%
|
0.7%
|
0.6%
|
Gross margin of net revenue (non-
GAAP)
|
42.7%
|
43.8%
|
41.7%
|
44.3%
|
40.9%
|
[1]
|
Percentages represent the difference between GAAP
gross profit divided by GAAP revenue and GAAP gross profit divided
by net revenue (non-GAAP).
|
[2]
|
Percentages represent the result of dividing the
amounts of amortization of acquired intangible assets or
stock-based compensation expenses by net revenue
(non-GAAP).
|
(3) Operating margin of net revenue (non-GAAP)
Operating margin of net revenue (non-GAAP) is calculated by
dividing income from operations, excluding third-party hardware
costs, amortization of acquired intangible assets, stock-based
compensation expenses, impairment of goodwill and non-recurring
consulting related expenses, by net revenue (non-GAAP). We believe
that this non-GAAP financial measure provides meaningful
supplemental information regarding our performance by excluding
certain expenses and income that may not be indicative of our
operating performance. Management uses the operating margin of net
revenue (non-GAAP) measure to gain a better understanding of the
Company's comparative operating performance from period-to-period
and as a basis of planning and forecasting future periods.
Management believes this non-GAAP measure, when read in conjunction
with the Company's GAAP operating margin and other GAAP financial
metrics, provides useful information to investors by offering: a)
the ability to make more meaningful period-to-period comparisons of
the Company's on-going operating results; b) the ability to better
identify trends in the Company's underlying business and perform
related trend analysis; c) a better understanding of how management
plans and measures the Company's underlying business; and d) an
easier way to compare the Company's most recent results of
operations against investor and analyst financial models.
Reconciliation of operating margin of net revenue
(non-GAAP) to GAAP operating margin
|
Three Months Ended Jun 30
|
Six Months Ended Jun 30
|
2013 Q1
|
|
2013
|
2012
|
2013
|
2012
|
Operating margin (GAAP)
|
(202.1)%
|
1.6%
|
(99.0)%
|
1.8%
|
2.1%
|
Third-party hardware costs[1]
|
(5.3)%
|
0.0%
|
(3.9)%
|
0.0%
|
0.1%
|
Amortization of acquired intangible
assets[2]
|
7.2%
|
8.3%
|
7.2%
|
8.4%
|
7.2%
|
Stock-based compensation
expenses[2]
|
1.8%
|
2.0%
|
1.8%
|
2.0%
|
1.8%
|
Impairment of goodwill[2]
|
209.9%
|
0.0%
|
105.3%
|
0.0%
|
0.0%
|
Non-recurring consulting related
expenses[2]
|
0.2%
|
0.1%
|
0.2%
|
0.1%
|
0.2%
|
Operating margin of net revenue
(non-GAAP)
|
11.7%
|
12.0%
|
11.6%
|
12.3%
|
11.4%
|
[1]
|
Percentages represent the difference between GAAP
income from operations divided by GAAP revenue and GAAP income from
operations divided by net revenue
(non-GAAP).
|
[2]
|
Percentages represent the result of dividing the
amounts of amortization of acquired intangible assets, stock-based
compensation, impairment of goodwill or non-recurring consulting
related expenses by net revenue (non-GAAP).
|
(4) Net income attributable to AsiaInfo-Linkage, Inc.
(non-GAAP)
Net income attributable to AsiaInfo-Linkage, Inc. (non-GAAP)
excludes stock-based compensation expenses, amortization of
acquired intangible assets, impairment of goodwill, non-recurring
consulting related expenses, and dividend income, net of tax. We
believe that this non-GAAP financial measure provides meaningful
supplemental information regarding our performance by excluding
certain expenses and income that may not be indicative of our
operating performance. Management uses the net income attributable
to AsiaInfo-Linkage, Inc. (non-GAAP) measure to gain a better
understanding of the Company's comparative operating performance
from period-to-period and as a basis of planning and forecasting
future periods. Management believes the Company's net income
attributable to AsiaInfo-Linkage, Inc. (non-GAAP) measure, when
read in conjunction with the Company's GAAP net income measure and
other GAAP financial metrics, provides useful information to
investors by offering: a) the ability to make more meaningful
period-to-period comparisons of the Company's on-going operating
results; b) the ability to better identify trends in the Company's
underlying business and perform related trend analysis; c) a better
understanding of how management plans and measures the Company's
underlying business; and d) an easier way to compare the Company's
most recent results of operations against investor and analyst
financial models.
Reconciliation of net income attributable to
AsiaInfo-Linkage, Inc. (non-GAAP) to GAAP
net income (loss) attributable to AsiaInfo-Linkage,
Inc.
|
Three Months Ended Jun 30
|
Six Months Ended Jun 30
|
2013 Q1
|
|
2013
|
2012
|
2013
|
2012
|
|
(in US dollar thousands)
|
Net (loss) income attributable to
AsiaInfo-Linkage, Inc. (GAAP)
|
(281,499)
|
6,225
|
(267,398)
|
12,587
|
14,101
|
Adjustments:
|
|
|
|
|
|
- Stock-based compensation
expenses
|
2,440
|
2,454
|
4,884
|
4,879
|
2,444
|
- Amortization of acquired
intangible assets
|
9,778
|
10,375
|
19,573
|
20,750
|
9,795
|
- Impairment of goodwill
|
286,782
|
0
|
286,782
|
0
|
0
|
- Non-recurring consulting
related expenses
|
237
|
165
|
486
|
364
|
249
|
- Dividend income, net of tax
|
0
|
(604)
|
0
|
(604)
|
0
|
Net income attributable to
AsiaInfo-Linkage, Inc. (non-
GAAP)
|
17,738
|
18,615
|
44,327
|
37,976
|
26,589
|
(5) Net income attributable to AsiaInfo-Linkage, Inc.
(non-GAAP) per basic share
Net income attributable to AsiaInfo-Linkage, Inc. (non-GAAP) per
basic share is calculated by dividing net income attributable to
AsiaInfo-Linkage, Inc. (non-GAAP) (which as discussed above
excludes stock-based compensation expenses, amortization of
acquired intangible assets, impairment of goodwill, non-recurring
consulting related expenses, and dividend income, net of tax) by
the same number of weighted average shares outstanding used in the
computation of net income per basic share. Management believes that
net income attributable to AsiaInfo-Linkage, Inc. (non-GAAP) per
basic share, when used in conjunction with the Company's GAAP net
income attributable to AsiaInfo-Linkage, Inc. per basic share,
provides useful information to investors for the same reasons
discussed above regarding net income attributable to
AsiaInfo-Linkage, Inc (non-GAAP). In addition, net income
attributable to AsiaInfo-Linkage, Inc. (non-GAAP) per basic share
allows investors to evaluate the Company's operating performance
from period to period on a per share basis, thus providing a useful
basis for assessing the Company's value on a per share basis.
Reconciliation of net income attributable to
AsiaInfo-Linkage, Inc. (non-GAAP) per basic share
to GAAP net
(loss) income attributable to AsiaInfo-Linkage, Inc. per basic
share
|
Three Months Ended Jun 30
|
Six Months Ended Jun 30
|
2013 Q1
|
|
2013
|
2012
|
2013
|
2012
|
|
(in US dollar)
|
Net (loss) income attributable to
AsiaInfo-
Linkage, Inc. (GAAP) per
basic share
|
(3.87)
|
0.09
|
(3.67)
|
0.17
|
0.19
|
Adjustments:
|
|
|
|
|
|
- Stock-based
compensation expenses
|
0.03
|
0.04
|
0.07
|
0.07
|
0.04
|
- Amortization of acquired
intangible assets
|
0.14
|
0.14
|
0.27
|
0.29
|
0.14
|
- Impairment of goodwill
|
3.94
|
0.00
|
3.94
|
0.00
|
0.00
|
- Dividend income, net of
tax
|
0.00
|
(0.01)
|
0.00
|
(0.01)
|
0.00
|
Net income attributable to
AsiaInfo-Linkage, Inc.
(non-GAAP) per basic
share
|
0.24
|
0.26
|
0.61
|
0.52
|
0.37
|
AR, IBM-Related AR, Revenue and DSO
AR balances included both billed and unbilled amounts. Revenue
recognized in excess of billings is recorded as unbilled
receivable. In addition to revenues from the sales of its goods and
services and from hardware procured on behalf of customers, the
Company generated service revenues by acting as a sales agent
pursuant to the IBM-Type Arrangements. The Company's DSO
calculations are as follows as of the last day of the respective
periods indicated, with net AR excluding the receivables
attributable to the IBM-Type Arrangements:
- Q1 2012 DSO = (Q4 2011 net AR + Q1 2012 net AR)/2/Q1 revenue x
90
- Q2 2012 DSO = (Q4 2011 net AR + Q2 2012 net AR)/2/Q2 cumulative
revenue x 180
- Q3 2012 DSO = (Q4 2011 net AR + Q3 2012 net AR)/2/Q3 cumulative
revenue x 270
- Q4 2012 DSO = (Q4 2011 net AR + Q4 2012 net AR)/2/Q4 cumulative
revenue x 360
- Q1 2013 DSO = (Q4 2012 net AR + Q1 2013 net AR)/2/Q1 revenue x
90
- Q2 2013 DSO = (Q4 2012 net AR + Q2 2013 net AR)/2/Q2 cumulative
revenue x 180
The following table presents further information regarding the
Company's gross AR, net AR, revenues, and DSO.
|
2012-Q1
|
2012-Q2
|
2012-Q3
|
2012-Q4
|
2013-Q1
|
2013-Q2
|
|
(in US dollar thousands, except DSO)
|
Gross AR
|
301,333
|
307,261
|
282,424
|
285,695
|
292,293
|
341,861
|
- IBM-Related AR
|
79,345
|
84,357
|
60,354
|
52,717
|
36,103
|
82,839
|
Net AR
|
221,988
|
222,904
|
222,070
|
232,978
|
256,190
|
259,022
|
|
|
|
|
|
|
|
Revenues
|
123,697
|
126,271
|
132,221
|
165,683
|
143,025
|
140,208
|
|
|
|
|
|
|
|
DSO (in days)
|
155
|
154
|
151
|
144
|
154
|
156
|
Cautionary Note Regarding Forward-Looking Statements
The information contained in this document is as of
August 7, 2013. AsiaInfo-Linkage
assumes no obligation to update any forward-looking statements
contained in this document as a result of new information or future
events or developments.
This document contains forward-looking information about
AsiaInfo-Linkage's operating results and business prospects that
involve substantial risks and uncertainties. You can identify these
statements by the fact that they use words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe,"
"will" and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance.
Among the factors that could cause actual results to differ
materially are the following: government telecommunications
infrastructure and budgetary policy in China; our ability to maintain our
concentrated customer base; the long and variable billing cycles
for our products and services that can cause our revenues and
operating results to vary significantly from period to period; our
ability to meet our working capital requirements; our ability to
retain our executive officers; our ability to attract and retain
skilled personnel; potential liabilities we are exposed to because
we extend warranties to our customers; risks associated with cost
overruns and delays; impairments of our assets and corresponding
charges to earnings; our ability to develop or acquire new products
or enhancements to our software products that are marketable on a
timely and cost-effective basis; our ability to adequately protect
our proprietary rights; the competitive nature of the markets we
operate in; political and economic policies of the Chinese
government; and whether our stockholders approve the Merger
Agreement and we are otherwise able to consummate the merger or any
other strategic alternative. A further list and description of
these risks, uncertainties, and other matters can be found in our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2012, and in our reports on Forms 10-Q and 8-K
filed with the United States Securities and Exchange Commission and
available at www.sec.gov.
For more information about AsiaInfo-Linkage, please visit
www.asiainfo-linkage.com.
For investor and media inquiries, please contact:
In China:
Mr. Jimmy Xia
AsiaInfo-Linkage, Inc.
Tel: +86-10-8216-6039
Email: ir@asiainfo-linkage.com
In the United
States:
Mr. Justin Knapp
Ogilvy Financial
Tel: +1-646-460-9989
Email: asia@ogilvy.com
SOURCE AsiaInfo-Linkage, Inc.