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Press Release Source: Pacific Internet Limited
PacNet Reports 67% Growth in Full-Year Net Income
Monday February 9, 5:00 pm ET
* Fourth-Quarter 2003 (Year-on-year): Revenues up 9.8%, Net income up more than 300%, Broadband revenue increases 50%.
* Full-Year 2003: Revenue rises 6.7% to US$98.6 million, Net income up 67%, Broadband revenue increases 61%.
SINGAPORE, Feb. 9 /PRNewswire-FirstCall/ -- Pacific Internet Limited, or PacNet (Nasdaq: PCNTF - News), today announced its financial results for the fourth- quarter and full-year ended December 31, 2003, posting its eighth consecutive quarter of profit, with full-year revenues rising 6.7% and net income growing 67% from 2002. PacNet is Asia's largest telco-independent Internet Communications Service Provider by geographic reach with direct presence in Singapore, Hong Kong, the Philippines, Australia, India, Thailand and Malaysia.
Highlights of Full-Year 2003 Results
* Revenues grew to US$98.6 million, a 6.7% increase over 2002.
* Broadband revenues grew to US$39.4 million, a 60.7% increase over 2002.
* Net income grew to US$2.8 million, a 67% increase over 2002.
* Net income before stock-based compensation cost and cumulative effect
adjustment pertaining to asset retirement obligation charge grew to
US$4.4 million, more than doubled compared with US$1.9 million in 2002.
* Cash and cash equivalents grew to US$24.7 million from US$20.7 million
one year ago, despite the repayment of loans from shareholders and bank
amounting to US$6.2 million.
Highlights of Fourth-Quarter 2003 Results
* Revenues grew to US$25.8 million, a 9.8% increase over the same
quarter of 2002.
* Broadband revenues grew to US$11.2 million, a 49.7% increase over the
same quarter of 2002.
* Net income grew to US$1.9 million, compared with US$0.5 million, in the
fourth quarter of 2002, a nearly four-times increase.
* Net income before stock-based compensation cost and cumulative effect
adjustment pertaining to asset retirement obligation charge grew to
US$2.2 million, compared with US$0.8 million in the third quarter of
2003.
Ko Kheng Hwa, Chairman of PacNet, said, ''PacNet continued to deliver higher revenue and net income in 2003, achieving eight consecutive quarters of net profits. We have also exceeded our net income targets from the third quarter of 2003, growing it by almost four-times. Moving forward, PacNet will continue to leverage its broadband customer base and corporate clients that were built up over the years to extend and strengthen its regional presence.''
Fourth-Quarter 2003 Financial Results
Table 1: Summary of Quarterly Financial Results
Group (in US$ millions) 4Q 2003 3Q 2003 4Q 2002
Revenues 25.8 25.2 23.5
Operating Costs and Expenses 23.0 24.1 22.1
Operating Income 2.8 1.1 1.4
Net Income 1.9 0.78 0.48
Stock-based compensation cost and cumulative
effect adjustment pertaining to asset
retirement obligation charge 0.3 (0.02) 0.04
Net income before the above stock-based
compensation cost and cumulative effect
adjustment pertaining to asset
retirement obligation charge 2.2 0.76 0.52
Table 2: Summary of Full-Year Financial Results
Group (in US$ millions) 2003 2002
Revenues 98.6 92.4
Total Operating Expenses 93.8 87.7
Operating Income 4.8 4.7
Net Income 2.8 1.7
Net Income before stock-based compensation cost
and cumulative effect adjustment pertaining to
asset retirement obligation charge 4.4 1.9
Table 3: Subscriber Statistics by Products
Country Dial-up Leased Broadband Hosting Total
lines Consumer Corporate
Singapore and
Malaysia* 138,100 670 29,600 4,700 600 173,700
Hong Kong 88,700 260 4,000 9,200 1,000 103,200
Australia 37,300 100 5,700 4,600 9,000 56,700
Philippines 92,900 160 -- 100 -- 93,200
Thailand
and India ** 20,700 320 -- 100 200 21,300
Total
(as at Dec 2003) 377,700 1,510 39,300 18,700 10,800 448,100
Total
(as at Sep 2003) 366,600 1,440 37,200 16,300 10,600 432,100
Total
(as at Dec 2002) 359,200 1,390 26,100 11,000 10,900 408,600
All numbers rounded to the nearest 100 except for leased lines rounded
to the nearest 10.
* The subscriber base for Malaysia is relatively small and hence grouped
together with Singapore for presentation purpose.
** The subscriber base in Thailand and India is relatively small and hence
combined for presentation purpose.
Revenues
Full-year revenues grew 6.7% to US$98.6 million, up from US$92.4 million a year ago. Revenues in the fourth quarter grew 9.8% over the same quarter of 2002 to US$25.8 million.
Full-year broadband revenue grew 60.7% to US$39.4 million, making it the largest revenue contributor at 40.0% of the group's total revenue. Broadband revenue in the fourth quarter grew 49.7% over the same quarter last year to US$11.2 million, and grew 8.2% over the previous quarter.
With the expected migration to broadband access, dial-up revenues continued on a downtrend. For the full-year of 2003, dial-up revenues declined 18.2% from 2002. However, quarter-to-quarter comparison showed that the decline in dial-up revenues has slowed to 3.6% from the third quarter of 2003. In terms of subscriber base, a 3.0% increase was registered over the previous quarter, largely due to the increase in the pre-paid subscriber base in the Philippines. This increase in the Philippines is offset by the declines in Singapore and Australia where dial-up subscribers continue to migrate to broadband access. The average revenue per user, or ARPU, of pre- paid subscribers is normally lower than that of post-paid subscribers.
The declining trend observed in leased line revenues in the past quarters had also stabilized to about US$3.4 million in both the third and fourth quarter of 2003. On a full-year basis, the decline in leased line revenues was 9.9% from year-ago level.
Revenues from value added services for the year grew significantly by 20.7% from 2002, driven primarily by the antivirus service launched in Singapore in July 2003. Commission revenues in the travel business for the year decreased 24.7% from a year ago due to the SARS outbreak in the first half of 2003. There was healthy recovery in the second half of the year with quarterly revenues almost back to pre-SARS level.
Operating Costs and Expenses
For the full-year, there was an increase in cost of sales attributed to a shift in revenue mix from the higher yield dial-up and leased line to lower yield broadband products. This resulted in a reduction in gross margins from 58.8% in 2002 to 55.9% in 2003. However, compared with the third quarter of 2003, there was an improvement in the gross margin to 58.0% in the fourth quarter from 54.1%, contributed largely by bandwidth cost savings and the increase in revenue from higher margin value-added services in Singapore.
Staff costs for the full-year 2003 increased 9.2%, largely due to annual salary revision and higher stock-based compensation costs registered in 2003 for the variable accounted options issued in 2001. Excluding the impact of the stock-based compensation cost, as a percentage of revenues, staff costs would have been 27.8% in the fourth quarter of 2003 versus 28.3% the same quarter one year ago. Staff productivity (revenue per staff per quarter) improved from US$22,000 in the fourth quarter of last year to US$25,000 this year.
Sales and marketing expenses for the year increased 7.5% in 2003 over that in 2002 as the Group increased its marketing efforts, particularly in Australia, to capitalize on this growth market. As a percentage of total revenues, sales and marketing expenses were maintained at 3.6% at 2003.
Other general and administrative expenses were lower by 11.2% in 2003 from 2002 as part of the ongoing effort to reduce back-office expenses across the Group.
Net Income
Full-year net income was US$2.8 million, or 21 US cents per diluted share. From Table 1, net income before the two non-cash charges was US$2.2 million in the fourth-quarter of 2003, representing almost three times that in the third- quarter. On a full-year basis, net income before the non-cash charges was US$4.4 million in 2003, up from US$1.9 million in 2002.
The unconsolidated affiliates in India and Thailand also continued to improve on their operating results. The full-year loss from the unconsolidated affiliates has significantly narrowed from US$1.0 million in 2002 to US$0.1 million in 2003. Besides better performance by these unconsolidated affiliates, the Group registered a net gain on foreign currency in 2003, compared with a net loss registered in 2002.
Cash Flow and Cash Balance
As of December 31, 2003, the Group held cash and cash equivalents of US$24.7 million. The Group increased its cash balance by US$4.0 million despite repayment of loans from shareholders and bank amounting to US$6.2 million.
Internet Communications Service Provider (ICSP)
The Group's effort in expanding broadband and corporate businesses across the seven countries has laid the foundation to fuel its growth as a regional service provider for Internet communications services. The corporate customer wins across the Group demonstrated the unique advantage of a regional telco- independent service provider. De La Salle University in the Philippines valued PacNet's 'Always On' reliability proposition and appointed PacNet to deploy a high-speed Internet connection by leveraging its unique telco-neutral position to bundle together services from a combination of local telcos. Positioned as the partner-of-choice for regional corporations and Asian businesses, PacNet continues to build its promise on the strength of its regional network, coverage and services. This is evidenced by the increase in regional corporate wins in the year, including a leading regional logistics company that chose PacNet's regional connectivity services to link its regional operations in six Asian countries.
Tan Tong Hai, President and CEO of PacNet, said, ''We have delivered our promise to better our performance in 2002. We will continue to focus on the corporate segment to fuel our growth. Our value proposition as an ICSP will help to deepen our relationship with our customers and grow together with them.''
Business Outlook
As PacNet has stated in previous quarterly releases, the company has been executing the following strategies:
1. Focus on broadband
2. Grow the corporate market
3. Expand the regional businesses
4. Introduce innovative services and solutions
5. Leverage international partnerships
Moving forward, the economic outlook of the markets that PacNet operates in is expected to improve in the coming year although it expects strong pricing pressure to remain as the competition in the Internet services markets in Asia continues to heat up.
Mr Ko added, ''PacNet will take advantage of the new market opportunities by aggressively pursuing our proven strategies for long term growth. Barring any unexpected adverse developments, we expect to better our 2003 performance in the New Year.''
Conference Call and WebCast
Management will host a conference call to discuss the quarter's results:
Singapore Time: Tuesday, February 10, 2004 @ 0700 hrs
US Eastern Time: Monday, February 9, 2004 @ 1800 hrs
Dial-in number: Within US: +1-800-915-4836 (toll free)
International: +1-973-317-5319
The call will also be webcast ''live'' via the Internet at the following website: www.pacnet.com/investor/.
Detailed financial statements together with management's discussion and analysis are available on the Investor Relations website at www.pacnet.com/investor/.
The financial statements in this report are in conformity with US GAAP.
For convenience, Singapore dollar amounts have been translated into US dollar amounts at the exchange rate of S$1.699 to US$1.00. (Conversion rate as at December 31, 2003 from the Federal Reserve Bank of New York)
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