Jingwei International (NASDAQ:JNGW)
F4Q09 Earnings Call
April 1, 2010
Rick Luk - Chief Executive Officer
Good Morning everyone and welcome to the Jingwei International fourth quarter and full year 2009 conference call. Today’s call is being recorded.
Before we continue, please bear with me as I take you through the Company’s Safe Harbor policy. Certain of the statements made in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks and uncertainties, all of of which are described in the Company's filings with the SEC.
Jingwei does not undertake any obligation to update forward-looking statements, except as required by applicable law.
Today on the call, Rick Luk, CEO, and Yong Yu, CFO of Jingwei, will review key highlights from fourth quarter and for the full year of 2009 and provide a business update of the Company.
Now, allow me to turn the call over to Mr. Rick Luk. Mr. Luk?
Ladies and gentlemen, thank you for dialing into our fourth quarter and full year 2009 results conference call.
First, I'd like to take a moment to thank all of our colleagues for their hard work and commitment this year. I'd also like to thank our advisors and investors for their ongoing enthusiasm and support. We look forward to working with all of you as we move forward.
All in all, 2009 has been a difficult and trying year for Jingwei as we suffered from some very disappointing results in the first two quarters - largely as result of the general slow down in global economy following the financial tsunami that took the world by surprise in late 2008; and China, as you know, was no exception in the aftermath of the seriousness of its impact to the macro economy.
Like many others in the industry, weathering through the rough ride from the fourth quarter of 2008 into 2009, the management team faced numerous challenges, but was able to keep the right focus by taking appropriate actions to contain costs and re-vector investment priorities to insure the Company maintained a healthy balance sheet and was able to regain growth momentum as the economy recovered.
As you might recall from our quarterly reported revenue and earnings profile last year, third quarter marked the turning point of our business performance in 2009 as the Chinese government continued to roll out stimulus programs to increase consumer spending and the long-awaited 3G was formally launched in China in the beginning of the year; while the general economy also began to show signs of recovery. These factors have created opportunities for Jingwei as many of the businesses in China increased their focus again on effective ways to increase sales and maximizing profits by understanding and targeting the right customers. In the case of the telecom industry, in which Jingwei has been a strong player, the broad adoption of mobile advertising and marketing targeting the consumers, the rollout of 3G and the need for new infrastructure to support logically created significant new opportunities for our data mining, interactive marketing and our software services business.
Capitalizing on these opportunities, fourth quarter of 2009 was both exciting and stimulating for the Company; as we continued to build on the momentum established in the third quarter and were pleased to end the quarter with revenue increase of 54% to $13.5 million from $8.8 million in the third quarter; while net income increased 112% sequentially to $3.1 million from $1.5 million.
Compared to the same quarter last year, fourth quarter revenue increased 182% to $13.5 million from $4.8 million; while net income increased 138% to 3.1 million from $1.3 million and, Gross Margin was $5 million, or 37% compared to $1.8 million, or 39% in 2008. Diluted earnings per share was $0.18 vs. $0.08 last year.
For the full year, revenue increased 9% to $30.3 million compared to $27.9 million despite a significant drop in the first two quarters. Net income, however, decreased 34% to $6.0 million from $9.0 million and Gross margin was $11.4 million, or 38% compared to $13.9 million, or 50% for the same period last year.
Our press release is available on our website and includes our financial tables and the key facts about our fourth quarter and full year financial performance in 2009. Our 10-K was filed yesterday with the SEC.
Instead of going through our results line by line, I’d like to use this time to give you a brief overview of our business in the fourth quarter and what our plan is going forward and why, I believe, our Company is well positioned to capitalize on the new opportunities presented to us during this challenging economic environment.
Going forward, we believe there are three primary drivers behind our business growth: (First) is the growth of consumer spending and the broad adoption of data mining and interactive marketing services for business enterprises targeting the consumers across a broad sector of industries, (second) is the growth in the use of mobile Internet in e-Commerce propelled by the full deployment of 3G in China; and (thirdly) there are major telecom and government sponsored power industry infrastructure upgrade programs that require new billing, OSS, BSS and software system solutions.
Our strategy so far, has been to focus and capitalize on these primary drivers to grow our business. However, due to uncertain and poor economic conditions in late 2008 which also seriously impacted 2009, we made a conscious decision to contain costs and prudently manage our capital expenditure. Hence, last year, we took a conservative approach in our investment and spending programs to focus only on critical programs to maintain our competitive advantage, and on activities that are clearly accretive to earnings in the short term, while staying in line with the strategic growth direction of the Company.
Going into 2010, with the improving economic conditions and the market momentum we have established in the last two quarters, we are optimistic about the business outlook and will be making further investment to execute on our growth strategy in a more aggressive but disciplined manner
The following are highlights of some of the major events and results achieved in 2009:
Manage profitable growth and improve on operating cash in the midst of an economic downturn was our number one priority – For the year, we are pleased to report that we achieved a 9% growth in revenue to reach $30.3 million, with net income of $6.0 million and earnings per diluted share of $0.35. We also improved our operating cash flow by generating $8.8 million cash from operations, compared with $1.5 million cash used in operating activities. We finished the year with $10.2 million cash on hand.
We continued to refresh and grow our consumer database to increase its accuracy and reach out to more consumers to enhance our competitive advantage in the market – At the end of 2009, our database reached 400 million consumer profiles, and we expect the size to grow to 500 million by the end of this year.
While we took a conservative approach last year to manage our cost spending and our capital expenditure program, we focused on cost effective way to build strategic relationship with partners to broaden our services portfolio and extend our market reach – In the third quarter, we completed acquisition of the mobile value-added-services (MVAS) and channel sales assets from Newway Technology. The scope and terms of this acquisition were previously announced and filed with the SEC. To-date, this initiative has proved to bring high value to the Company as it not only has contributed significantly to our revenue and earnings growth in the second half of the year, the partnership with Newway and the intangible assets we acquired are fully complementary to our growth strategy and will help to enhance and strengthen our capabilities to offer a more complete set of marketing services and mobile marketing solutions to the business enterprises. For instance, by incorporating the acquired MVAS to our offerings, we have enhanced our services and strengthened our offerings to the carriers which resulted in higher sales volume for us; and, through the strategic partnership established with Newway, we have extended our geographic reach and opened up more channels to leverage our consumer database to cross sell these bundled mobile solutions to the consumers through the carriers and the resellers network that we both have relationship with.
Apart from the above, as a means to grow our interactive marketing service business, in the fourth quarter, we signed a framework agreement with Jiangsu Province to jointly invest, to build and operate an outsourced call center in Suqian Industrial Park to leverage our consumer database and our core competence to provide a powerful web-enabled interactive marketing services platform with multi-channel delivering capabilities for the telecom operators. Initial deployment of this project is for 100 seats; and, based on current demand forecast, our plan is to expand this capability to 2000 seats in several locations across the nation by the end of this year. This will give us a fully networked web-enabled call center which will be an integral part of our powerful interactive marketing services platform to service the needs of the telecom operators and the business enterprises.
As of today, we have already signed contracts with China Unicom in Jiangsu province and Guangxi province for implementation in the first quarter of 2010. In these agreements, Jingwei is not only the provider of a powerful marketing services platform to China Unicom, we are also their sales and services partner to deliver sales and marketing campaigns with agreement to share revenue derived from successful sales through these campaigns.
In the software services segment, operation analysis, support and billing software tools continued to enjoy moderate growth in the year. For example, in support of the 3G infrastructure rollout across the nation, Jingwei has developed and delivered major application services solutions to the telecom operators. In one case we provided a total system solution to the Henan Telecom Bureau of China Telecom for their security and environmental monitoring and control system in their switching centers across the province. Another major win was to provide an Inter-connect Monitor and Billing Analysis solution to the Mongolia branch of China Mobile.
Exploring new services initiatives – With the formal launch of 3G, and as the world of mobile Internet and mobile marketing are gaining momentum to become the norm of e-Commerce in China, we have seized an opportunity to leverage our core competence in software services and the strategic relationship we have with our partners and customers to develop a powerful “Mobile SuperMart” platform for use by the telecom operators. In essence, this is like the Apple App Store designed for and expected to be deployed and operated jointly with the major telecom operators in China. So far, I am pleased to report that progress of this initiative has been promising and that we have already secured commitment from two major carriers to deploy this for use and for trial in two major cities in China
Building management competence and strengthening finance, accounting and compliance management capability was a critical priority in 2009 – In the 2nd half of last year, the Board of Jingwei has made several executive appointment changes including the CEO, CTO and CFO positions; and I was appointed as the Chief Executive Officer and Director in September last year to lead the team to take on the challenges. Early this year, Mr. Yong Xu joined the team as CFO of the Company. Mr. Xu is a CPA and a CFA charter holder in the US. He is a seasoned finance executive with extensive experience in the capital markets, working with public companies in the US and in China. I am confident his diverse background in finance, accounting, audit and equity analysis will be an asset to the Company as we continue to evolve and grow the Company to bring values to our shareholders.
The above is a brief recap of what we have accomplished in 2009 and what we have planned for this year. Before we conclude today’s call. I’d like to share with you that in our earnings release yesterday, we provided guidance for 2010 to the investment community, to the effect that, for this year, we plan to grow our business an average of 30%, to achieve revenue growth in the range of $37.5 million to $42.0 million, net income of between $7.3 million and $8.2 million, and diluted earnings per share of between $0.43 and $0.48.
We recognize there are significant challenges ahead of us, as we compare these figures to our 2009 results of revenue at $30.3 million, net income at $6.0 million and diluted earnings per share at 0.35; however, based on current outlook within the context of current economic conditions, we are confident these targets can be achieved through a combination of organic growth and the possibility for disciplined acquisitions that are accretive to the growth of our revenue and earnings in 2010..
Thanks for listening to today’s business review. We are now taking questions.
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