Pacific Internet Posts the 14th Consecutive Quarter of Profits
The financial statement amounts in this report are in conformity with US GAAP.
For convenience, the company’s functional currency, the Singapore dollar, has been translated into US dollar amounts at the exchange rate of S$1.6868 to US$1.00. [Conversion rate as at 30 June 2005 from the Federal Reserve Bank of New York]
Financial Highlights for Second Quarter 2005
Net income of US$1.6 million (12 cents per diluted share), up 8.1% year-on-year; up 48.5% quarter-on-quarter.
Corporate business segment revenue of US$16.4 million, up 10.4% year-on-year and up 7.0% quarter-on-quarter, driven by the Group’s focus on the corporate business market.
Cash and cash equivalents grew to US$36.7 million.
SINGAPORE, 3 August 2005 --- Pacific Internet Limited or PacNet (NASDAQ: PCNTF), Asia Pacific’s largest telco-independent Internet Communications Service Provider by geographic reach, today announced its financial results for the second quarter that ended 30 June 2005. The Group posted its 14th consecutive quarter of profit, with net income rising 8.1% from the same quarter last year to US$1.6 million. This was also 48.5% higher than the previous quarter.
“Our positive financial results in the last 14 quarters have demonstrated Pacific Internet’s ability to perform strongly and consistently,” said Mr Tan Tong Hai, President and CEO of Pacific Internet. “We are pleased with the progress of our corporate business-focused strategy, which has gained momentum and contributed to our growth in the second quarter. Contribution from corporate business revenue this quarter was the highest in the last 14 quarters, driven by stronger corporate broadband and corporate value-added service performances.”
Second Quarter 2005 Financial Results
Table 1: Summary of Quarterly Financial Results
Group (in US$'000)
2Q 2005
2Q 2004
1Q 2005
Revenues
25,152
25,494 24,328
Total Operating Costs and Expenses
23,410 23,523 22,972
Operating Income
1,742 1,971 1,356
Net income
1,569 1,451 1,058
Table 2: Summary of Year-to-Date Financial Results
Group (in US$ millions)
Six months ended June 30
2005
2004
Revenues
49,480 50,424
Total Operating Costs and Expenses
46,382 47,615
Operating Income
3,098 2,809
Net Income
2,627 2,377
Table 3: Subscriber Statistics
Country Corporate Broadband
Leased lines
Corporate Dial-Up
Corporate Value Added Services Corporate
Business Total
Singapore
6,650 530 6,800 670 14,650
Australia 9,920 170 350 11,750 22,190
Hong Kong
12,250 200 51,430 2,120 66,000
Philippines
190 190 360 30 770
Malaysia
- 40 10 30 80
Thailand
380 450 180 130 1,140
India - 100 100 100 300
Total
(as at Jun 2005)
29,390 1,680 59,230 14,830 105,130
Total
(as at Jun 2004)
21,450 1,520 59,470 12,820 95,260
Consumer Total Broadband & Dial-Up
Grand Total
134,900 149,550
39,560 61,750
24,260 90,260
92,590 93,360
- 80
11,680 12,820
800 1,100
303,790 408,920
377,370 472,630
Note:
- All numbers rounded to the nearest 10.
- Total subscriber reduction was due to consumer subscriber decline. Corporate subscriber base continues to grow in line with the Group’s focus in the corporate business segment
Revenues
Revenue in the second quarter increased 3.4% to US$25.2 million quarter-on-quarter. It was level compared to the same quarter last year.
The Group continued to register growth as it shifts its focus towards the corporate business segment. Corporate business registered revenue of US$16.4 million, a 7.0% improvement quarter-on-quarter and 10.4% growth year-on-year. The Group is targeting for the higher-margin corporate business to outpace lowering contributions from the volume-based consumer segment.
From a product line perspective, broadband revenue grew 6.0% year-on-year to US$12.5 million. The increase was driven by the corporate broadband business which grew 17.5% year-on-year and contributed 68.9% of total broadband revenue. Corporate broadband growth was primarily from the small-and-medium sized business (SMBs) segment. SMBs are using more corporate broadband services in view of higher bandwidth and competitive pricing compared to other corporate connectivity offerings such as lower-end leased lines.
Along with the migration trend from lower-end leased line to corporate broadband, general pricing for leased lines have become more competitive. Leased lines revenue in the second quarter grew 2.7% to US$3.2 million year-on-year.
Value Added Services (VAS) sales continued to strengthen in the second quarter, posting a 14.8% growth year-on-year. In line with the focus in the corporate business segment, 86.8% of total VAS revenue was from corporate businesses. Corporate VAS grew by 19.5% year-on-year.
Net Income
Second quarter net income was US$1.6 million (or 12 cents per diluted share). This was an 8.1% growth year-on-year and a 48.5% growth quarter-on-quarter.
The higher net income was mainly due to stronger corporate business growth and lower operating expenses.
Operating Costs and Expenses
Gross margin was maintained at over 54% as the Group continues to effectively manage its telecommunications cost of sales.
There was no change in staff costs. Sales and marketing expenses were lower by 13.6%, which is in line with the Group’s corporate business-skewed customer mix. Other general-and-administrative expenses increased by 5.6% year-on-year primarily due to consultancy fees relating to Sarbanes-Oxley compliance and business development.
Cash Flow and Cash Balance
In the second quarter, the Group recorded a net cash deficit of about US$0.6 million. Although the Group generated cash of US$1.6 million from operating activities for the quarter, US$2.2 million was used on investing activities, mainly on acquisition of the wireless spectrum license in Singapore and fixed assets. Another US$0.1 million was used in financing activities primarily for repayment of capital leases in this quarter. As of June 30, 2005, the Group held cash and cash equivalents of US$36.7 million compared to US$31.3 million a year ago.
Additional Business Highlights
Securing of wireless spectrum rights from the Infocomm Development Authority of Singapore (IDA) to deploy wireless broadband and fixed wireless services in Singapore.
Collaboration with Sun Microsystems and the IDA to launch a groundbreaking games market access program, “Games MAP”, to international content providers seeking to deliver gaming content in Asia.
Partnership with the Australian Government Department of Health and Ageing to offer broadband services to the healthcare community as part of the country’s Broadband for Health Program.
Awarded the Australian Service Excellence Award in the category of ‘National Medium Business’ for the second consecutive year. The award is Australia’s highest recognition for customer service presented by the Customer Service Institute of Australia (CSIA).
Launch of a wireless hotspot service across Hong Kong for mobile workers and travelers.