SHENZHEN, China, March 23 /PRNewswire-Asia-FirstCall/ -- Jingwei International Limited (BULLETIN BOARD: JNGW) ("Jingwei") today announced financial results for the three months and full year ended December 31, 2008. The Company plans to file its Annual Report on Form 10-K by March 31, 2009.
Recent Financial Highlights Include: -- Revenue in 2008 increased 14% to $27.9 million from $24.4 million in 2007 -- Operating income in 2008 increased 6% to $8.8 million from $8.3 million in 2007 -- Net income in 2008 increased 17% to $9.0 million from $7.7 million in 2007 -- Fourth quarter 2008 revenue decreased 48% to $4.8 million in 2008 from $9.3 million in the fourth quarter of 2007, and down 44% from $8.6 million in the third quarter of 2008 -- Fourth quarter 2008 operating income decreased 88% to $0.4 million in 2008 from $3,2 million in the fourth quarter of 2007, and compared to $2.0 million in the third quarter of 2008 -- Fourth quarter 2008 net income decreased 59% to $1.3 million from $3.2 million in the fourth quarter of 2007, and down 31% from $1.9 million from the third quarter of 2008
Regis Kwong, Chief Executive Officer of Jingwei International, stated, "Although the 4th quarter in 2008 has been a very challenging time due to the financial crisis and the delayed issuance of 3G licenses issued to the telecom operators in China, Jingwei was still able to increase its revenue and net profit for the year. With our investment in new products and services in both software and data mining, we are confident that we will continue to grow in 2009 with the anticipated 3G network roll out and increase in domestic consumer spending."
Full Year Ended December 31, 2008
For the year ended December 31, 2008, revenue increased 14% to $27.9 million from $24.4 million in 2007. During this same time period, gross profit improved 26% to $13.9 million from $11.0 million. For the full year 2008, gross margin related to data mining revenue was approximately 47% and gross margin related to software services revenue was approximately 56%.
The Data Mining sector experienced a 143% increase in revenue year over year, accounting for 66% of total revenue in 2008. The significant growth in the Data Mining sector was the primary contributor to Jingwei's overall performance in 2008 and offset the seasonal fluctuations in the Consumer Electronic Sales sector. Continuously strong demand in telecom carriers such as China Mobile and China Telecom, along with newly-promoted data-base marketing projects in the retail industry, supported the significant growth of Jingwei's data mining business in the year of 2008. Because of the global economic downturn, we foresee that in 2009 growth in the retail industry may decrease significantly, which would negatively impact to our future growth in that area. However, the deployment of 3G infrastructure in China national wide to expect to result in increased demand for data mining services, Our software business maintained stable growth in 2008, and accounted to $9.4 million in revenue and accounting for 34% of our total revenue of 2008. We believe that the upgrade in telecom carriers billing and operational analysis systems will result in strong growth in the Software Services sector in 2009.
Overall gross margin is increased by 5% compared to 2007, reaching 50% in 2008. Because of a change in our business strategy during 2008 resulting in the elimination of our low-margin Consumer Electronic Sales business, we have decided to concentrate our resources in the Data Mining and Software business sectors in order to improve our gross profit margin Thus, the low margin business sector has been cut off and overall gross profit margin is improved. The gross margin of the Data Mining sector is decreased by 26% compared to 2007, reaching 46% in 2008, while revenue in this sector is increased 143% year over year. While the decrease in margin resulted from the change in product mix, we believe that the overall significant increase in revenues more than compensated for this. Going forward, while we recognize the challenges of operating in this environment, we have established a priority of maintaining control over our costs. The gross margin of software services in 2008 decreased by 16% compared to the prior year, reaching 56% with stable growth of revenue of 47% year over year. The recurring revenue generated by software services business moderate the premium, which in turn brings us stable and predictable gross margin of approximately 50%.
Please refer to the table below for a breakdown of gross margin performance for the full year 2008.
Data Software Total mining Services Revenue ($million) 18.5 9.4 27.9 Cost of Sales ($million) 9.9 4.1 14.0 Gross Profit ($million) 8.6 5.3 13.9 Gross margin 46% 56% 50%
Income from operations increased 6% to $8.8 million from $8.3 million in 2007, and net income improved 17% to $9.0 million, or $0.53 per diluted share, from $7.7 million, or $0.48 per diluted share in the prior year.
Balance Sheet
As of December 31, 2008, Jingwei had a cash balance of $5.5 million and working capital of approximately $26.9 million as of December 31, 2008. The Company had no long term debt as of December 31, 2008.
Three Months Ended December 31, 2008
Fourth quarter 2008 revenue decreased 48% to $4.8 million from $9.3 million in the fourth quarter of 2007, and decreased 44% from $8.6 million in the third quarter of 2008. Revenue from software services decreased 53% to $1.9 million from the prior year's period, and 27% from $2.6 million in the previous quarter. Revenue from data mining services increased 21% in the fourth quarter of 2008 to $2.9 million, from $2.4 million in the prior year's period and compared to $6.0 million in the third quarter of 2008. The decrease in revenue is mainly contributed by the downturn of the economy and the negative impact of decreased spending on marketing by the financial, real estate and retail industries.
Gross profit decreased 59% to $1.9 million in the fourth quarter of 2008 from $4.6 million in the fourth quarter of 2007. Gross margins were 40% compared to 50% in the prior year's period, and compared to 40% in the third quarter of the year. As a result of experiencing pricing pressure, we provided additional functionality to our customers and rendered additional add-ons to our products. Consequently, our production costs could not be reduced in such a highly competitive environment.
For the three months ended December 31, 2008, gross margin related to data mining revenue was approximately 31%, and gross margin related to software services was approximately 53%.
Data Software Total mining Services Revenue ($million) 2.9 1.9 4.8 Cost of Sales ($million) 2.0 0.9 2.9 Gross Profit ($million) 0.9 1.0 1.9 Gross margin 31% 53% 40%
Income from operations decreased to $0.4 million from $3.2 million in the fourth quarter of 2007, and decreased 88% compared to the third quarter of 2008. Operating margin was 8%, compared to 32% in the fourth quarter of 2007 and 23% in the previous quarter. To retain existing customers and gain potential 3G projects, we traveled frequently travels to visit customers and to collect newly-developed requirements, thereby increasing our operating costs. Our entertaining expenses have been significantly reduced, while depreciation and amortization diminishes our operational profit.
In the fourth quarter of 2008, Jingwei realized tax savings of $382,998 as a result of the government's preferential tax policy as a high-technology company.
Net income decreased $1.9 million to $1.3 million compared to $3.2 million in the fourth quarter of 2007. Earnings per share for the fourth quarter of 2008 was $0.08, compared to $0.20 in the prior year's period.
Business Update -- During the 4th quarter of 2008, Jingwei's joint venture with Tsinghua University yielded positive results with the successfully implementation of web harvesting technology used for automatic updating and refreshing of our database. -- Successfully secured trial contracts for billing software and Business Intelligent (BI) services with China Unicom and China Mobile for value added services for 3G users. We are well positioned to provide larger billing software systems for full 3G roll out in several network areas. Conference Call
The Company will hold a conference call March 24th ,2009 at 10:00 am ET to review current business initiatives. To access the conference call within the U.S., dial 800.860.2442 . For international/toll access, dial +1.412.858.4600 . The conference ID is Jingwei. Please dial in a few minutes before the conference call is scheduled to begin.
About Jingwei International
Jingwei International ("Jingwei") is one of the leading providers of data mining and software services in China. With a customer database of over 300 million Chinese consumers, Jingwei enables leading Chinese companies to reach their target audience. The Company's services include market segmentation, customer trend and churn analysis, fraud detection and direct marketing services such as telemarketing and WVAS. The Company also operates a software services business, which provides a broad range of billing systems, provisioning solutions, decision support and customer relationship management systems for China's leading mobile telecommunication carriers. The software services business strengthens sales opportunities for Jingwei's higher margin data mining platform, and allows the Company to enhance its customer database. Jingwei plans to evolve into an integrated marketing platform with targeted outbound sales campaigns via mobile phone advertising, and customer service/order fulfillment at call centers throughout the country.
Safe Harbor Statement
Certain of the statements made in the press release 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. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. 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 associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
Consolidated Balance Sheets (Unaudited) (Stated in US Dollars) December 31 December 31 2008 2007 ASSETS Current assets Cash and equivalents $5,472,408 10,760,020 Inventories 2,802,037 1,051,866 Trade receivables (net of allowance of doubtful accounts of $135,422 and $176,808) 19,371,524 11,857,099 Other receivables, prepayments and deposits (net of allowance of doubtful accounts of $117,787 and $95,313) 3,749,169 7,299,973 Total Current Assets 31,395,138 30,968,958 Non-current assets Property, plant and equipment - Net 1,305,917 952,638 Acquired intangible assets 12,238,501 5,681,669 Long term investment 1,733,244 - Total Assets $46,672,800 37,603,265 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Trade payables $1,965,619 3,221,088 Accruals and other payables 1,465,571 2,480,449 Income tax payable 358,168 557,514 Deferred tax 192,930 270,707 Loan from a stockholder 559,286 543,597 Total Current Liabilities 4,541,574 7,073,355 Total Liabilities 4,541,574 7,073,355 Minority interest - variable interest entities 7,459,660 6,566,914 Stockholders' Equity Common stock, $.001 par value; 75,000,000 shares authorized, 17,049,000 shares issued and outstanding 17,049 17,049 Additional paid-in Capital 15,403,411 15,063,981 Statutory and other reserves 883,936 703,475 Accumulated other comprehensive income 2,564,066 1,223,373 Retained earnings 15,803,104 6,955,118 Total Stockholders' Equity 34,671,566 23,962,996 Total Liabilities and Stockholders' Equity $46,672,800 37,603,265 Jingwei International Limited And Subsidiaries Consolidated Statements of Operations (unaudited) (Stated in US Dollars) Year Ended Year Ended December 31, 2008 December 31, 2007 Sales $27,881,694 $24,432,172 Cost of sales (13,989,763) (13,420,986) Gross profit 13,891,931 11,011,186 Expenses Selling, general and administrative expenses (3,922,323) (1,802,747) Research and development costs (1,184,661) (907,281) Total Expenses (5,106,984) (2,710,028) Income from operations 8,784,947 8,301,158 Other expense Subsidy income 1,037,008 166,321 Interest income 237,017 159,437 Finance costs (15,918) (42,856) Other expense (51,751) (242,765) Total other income 1,206,356 40,137 Income before income taxes 9,991,303 8,341,295 Income taxes (962,856) (680,385) Net income $9,028,447 $7,660,910 Earnings Per Share (Basic) $0.53 $0.48 Earnings Per Share (Diluted) $0.53 $0.48 Weighted Average Common Shares Outstanding Basic 17,049,000 15,811,918 Diluted 17,049,000 15,972,335 Jingwei International Limited And Subsidiaries Consolidated Statements of Stockholders' Equity (Unaudited) (Stated in US Dollars) Number of Additional Shares of Common Stock Paid-In Statutory Common Capital and Other Stock Reserves Balance, December 31, 2006 11,554,000 $11,554 $(1,554) $- Issuance of common stock at merger 2,100,000 2,100 -2,100 - Issuance of common stock, private placement - net of offering costs 3,395,000 3,395 15,067,635 - Foreign Currency Translation adjustment - - - - Transfer to Statutory and Other Reserves - - - 703,475 Net income for 2007 - - - - Balance, December 31, 2007 17,049,000 $17,049 $15,063,981 $703,475 Foreign currency translation adjustment - - - - Share based compensation cost - - - 339,430 Transfer to Statutory and Other Reserves - - - 180,461 Net income for 2008 - - - - Balance, December 31, 2008 17,049,000 $17,049 $15,403,411 $883,936 Accumulated Retained Total Other Earnings Comprehensive income Balance, December 31, 2006 $- (2,317) $7,683 Issuance of common stock at merger - - - Issuance of common stock, private placement - net of offering costs - - 15,071,030 Foreign Currency Translation Adjustment 1,223,373 - 1,223,373 Transfer to Statutory and Other Reserves - (703,475) - Net income for 2007 - 7,660,910 7,660,910 Balance, December 31, 2007 $1,223,373 6,955,118 $23,962,996 Foreign currency translation adjustment 1,340,693 - 1,340,693 Share based compensation cost - - 339,430 Transfer to Statutory and Other Reserves - (180,461) Net income for 2008 - 9,028,447 9,028,447 Balance, December 31, 2008 $2,564,066 $15,803,104 $34,671,566 Jingwei International Limited And Subsidiaries Consolidated Statements of Comprehensive Income (Unaudited) (Stated in US Dollars) Year Ended Year Ended December 31, December 31, 2008 2007 Net Income $9,028,447 $7,660,910 Other Comprehensive Income Foreign currency translation adjustment 1,340,693 1,223,373 Comprehensive Income $10,369,140 $8,884,283 Jingwei International Limited And Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (Stated in US Dollars) Year Ended Year Ended December 31, December 31, 2008 2007 Cash flows from operating activities Net income $9,028,447 $7,660,910 Adjustments to reconcile snelling income to net cash(used in)provided by operating activities: Depreciation & amortisation 1,850,340 452,069 Allowance for snelling accounts (38,069) - Amortisation of stock options issued for services 339,430 - (Increase) Decrease in assets net of effect of variable interest entities: Trade receivables (6,552,284) (6,484,672) Other receivables, prepayments and deposits (2,992,392) (63,495) Inventories (739,649) (756,624) Increase (Decrease) in liabilities, net of variable interest entities: Trade payables (1,484,008) 2,776,885 Other payables and accrued expenses (1,005,514) 1,225,000 Amounts due to related parties - (1,113,585) Income tax payable 100,336 471,107 Net cash flows provided (used) in operating activities (1,493,986) 4,167,595 Cash flows from investing activities Cash from acquisition of variable interest entities - 528,492 Acquisition of property and equipment (574,336) (993,133) Acquisition of intangible assets (1,964,867) (9,420,276) Long term investment (1,733,492) - Net cash flows used in investing activities (4,251,071) (9,884,917) Cash flows from financing activities Net proceeds from private placement - 15,071,030 Loan from a stockholder 3,940 - Repayment of stockholder loan - -226,480 Net cash flows provided by financing activities 3,940 14,844,550 Effect of foreign currency translation on cash and cash equivalents 453,505 1,223,373 Net increase in cash and equivalents (5,287,612) 10,350,601 Cash and cash equivalents-beginning of period 10,760,020 409,419 Cash and cash equivalents-end of period 5,472,408 10,760,020 Supplemental Disclosure of Cash Flow Information Income tax paid 1,482,796 54,866 Interest paid - 44,703 Supplemental Disclosure of Non-cash Investing Activities Transfer of prepayment to acquired intangible assets 5,557,110 5,681,669
