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PacificNet (ticker: PACT), a provider of outsourcing and value-added services

in China, reported Q1 2005 earnings results last week. Here are management's prepared remarks in their entirety from PACT's earnings results conference call:

Executives

Chairman and CEO Tony Tong

President Victor Tong

IR Director Jacob Lakhany

Tony:

Good day. My name is Tony Tong, and I am PacificNet’s Chairman and CEO.

I am joined by Victor Tong, our President, and Jacob Lakhany, our

Director of Investor Relations. I would like to welcome you to our

first quarter 2005 earnings call for the period ended March 31, 2005.

Before we begin, I have asked Jacob to read the following statement.

Jacob: Statements included in this conference call

may constitute forward-looking statements within the meaning of the

Private Securities Litigation Reform Act of 1995. Such statements

involve a number of risks and uncertainties such as competitive

factors, technological development, market demand and the company's

ability to accurately estimate revenues due to market factors beyond

its control. The actual results may differ materially from any

financial outlooks stated herein. Further information on potential

factors that could affect the company's financial results can be found

in the company's Reports on Form 10-Q filed with the Securities and

Exchange Commission. PacificNet shall have no obligation to update the

information provided on this call to reflect subsequent events. Now, I

would like to turn the call over to Victor to go over the financial

results.

Victor: I am very pleased to announce first quarter 2005 financial results, for what was a great quarter for the company.

The following are First Quarter 2005 Highlights, all in US dollars :

• Quarterly

revenues of $9,133,000 represented an increase of 161% as compared to

$3,502,000 from Q1 2004. This exceeded the Company's revenue projection

of between $8.5 and $9 million.

• Quarterly net earnings of

$415,000, or $0.042 per share, represented an increase of 194% as

compared to net income of $141,000, from Q1 2004. This exceeded the

Company's earnings projection of between $300,000 and $400,000, or

about $0.03 to $0.04 per share.

• Quarterly operating profit of $797,000 increased 97% as compared to operating profit of $405,000 from Q1 2004.

• Quarterly gross profit was $1,650,000, an increase of 32% as compared to $1,249,000 from Q1 2004.

• Revenues

of $3,064,000, $1,330,000, and $4,676,000; and Operating profit of

$239,000, $580,000, and $129,000 were generated from the Company's

three business units: (1) Outsourcing Business, (2) VAS Business, and

(3) Communications Distribution Business, respectively.

• Traditionally,

the first quarter from January to March is a low season due to the long

Lunar New Year holiday in China. Revenue and income from operations

tends to be higher in the fourth quarter due to year-end holiday

promotions.

• These results were consistent with the guidance the Company provided in a news release on April 19, 2005.

• Continued profitability in each of the acquired subsidiaries: YueShen, Epro, Linkhead, Smartime, and Clickcom.

Now, I would like to turn the call over to Tony to further discuss operations.

Tony: Thank you, Victor. Let me express my appreciation to all of the 1,200 employees at PACT for a great quarter.

Despite

a seasonally slow period, we were able to report another strong quarter

of results, which was our fifth consecutive profitable quarter. We

continue to win business from high-profile Chinese and multinational

companies conducting business in China. All of our business units

remain strong, and we continue to focus on penetrating the VAS and IVR

markets through organic growth and via acquisition.

After the

acquisition of Guangzhou 3G Information Technology Company Limited, we

have grown the company into a 1,200-employee organization with a

presence in the US, Hong Kong, Beijing, Shenzhen, Guangzhou, plus the

new additional operating offices of Guangzhou 3G Information Technology

in 26 provinces covering most of China, which includes: Guangdong,

Guangxi, Hubei, Hunan, Jiangsu, Zhejiang, Shanghai, Henan, Anhui,

Yunnan, Gansu, Ningxia, Inner Mongolia, Guizhou, Tianjin, Qinghai,

Hainan, Heilongjiang, Shanxi, Shandong, Chongqing, Jiangxi, Beijing,

Hebei, Liaoning, and Jilin. We continue to execute on our strategy of

capturing market share and revenue increases through organic growth,

accretive acquisitions, and synergistic value creation. With business

activity increasing across all of our units, we are excited about the

prospects for the Company in the coming quarters. We believe that our

fundamentals are stronger than ever and that market opportunities for

sustainable growth and profitability in China's CRM and VAS sector are

vast.As many of you know, our plans are to grow organically and through

acquisition.

To summarize, currently we have three (3) business

units. These include our (1) Outsourced Services through PacificNet

Epro, which is an ISO 9001 certified outsourcing contact center hosting

over 1,000 workstations staffed by 600 agents and providing

around-the-clock multi-lingual inbound and outbound services. Our

training and consulting services business operates through The Epro

Call Center Training Institute, which is a leading provider of contact

center management consulting and training services that help clients

maximize the return on investment in their CRM operations. Finally,

its Call Center Management Software Products and Solutions WISE-xb,

which offers Call Center agent performance, management, and reporting

software, and Automatic Call Distribution System.

Our Valuee-Added

Telecom Services (VAS) Group includes Interactive Voice Response (NYSE:IVR),

SMS and related VAS. Finally, Communication Products Distribution

Services Group: including calling cards, GSM/ CDMA/ XiaoLingTong

products and multimedia self-service Kiosks.

Recently, the Company expanded its operations by acquiring entities

that operate as service providers in the VAS & IVR industries,

which have grown rapidly in China in recent years.

On March 30th

2005, we announced that we had entered into a definitive agreement to

acquire a 51% controlling interest in Guangzhou 3G Information

Technology Co., Ltd.), a leading value-added services internet company

in China serving China's four leading telecom operators which includes

China Mobile, China Unicom, China Telecom, and China Netcom. Guangzhou

3G will become a majority-owned subsidiary of PacificNet. Guangzhou 3G

is one of the largest value-added telecom and information services

providers in China with both voice (IVR and call center) and data (SMS,

MMS, WAP, JAVA, GPRS) connection to the four major telecom operators.

With a strong balance sheet we have the ability to make even larger and

more attractive acquisitions in the future.

Now, I would like to turn the call over to Victor to discuss our 2005 outlook.

Victor: Thank you, Tony. I would like to discuss financial expectations for 2005.

The

first quarter results were consistent with the guidance the Company

provided in a news release on April 19, 2005. As for the remaining of

the year, we reiterate our previously announced full-year and Q2

guidance. We expect:

• For fiscal year 2005, the Company expects that total revenues will be between $45 and $50 million.

• For

fiscal year 2005, the Company expects that net income will be between

$2.8 and $4.2 million, or about $0.25 to $0.38 per share.

• For Q2 2005, the Company expects that total revenues will be between $10.5 and $12 million.

• For Q2 2005, the Company expects that net income will be between $550,000 and $700,000, or about $0.05 to $0.06 per share.

• PacificNet's

strategy in 2005 is to capture market share and top-line growth in the

VAS and IVR market in China while enhancing profit margins.

• The

Company expects continued revenue and profit growth in 2005 through

organic growth and accretive acquisitions in the VAS and IVR market in

China.

The above forecast excludes any future acquisitions. Currently,

we are pursuing several attractive candidates that would be immediately

accretive to earnings.

Now, I would like to open the call up for questions.

Question-and-Answer Session

After questions:

Tony: I would like to thank

everybody for their support and interest in the company. We look

forward to speaking with you in August when we announce our second

quarter results. Have a good morning.

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Source: PacificNet (PACT) re-iterates Q2 and FY 2005 guidance (1Q05 conf call)
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