Asia-Info Linkage Q2 Profit Dips to $6.2MAsia-Info Linkage Q2 Profit Dips to $6.2M

BEIJING -- AsiaInfo-Linkage, Inc. (ASIA), a leading provider of telecommunication software solutions and services in China, today announced financial results for the quarter ended June 30, 2012.

"Our business continued to grow in the second quarter, despite challenging market conditions, as we strengthened our competitive positioning, and saw healthy demand from China's three telecommunications carriers," said AsiaInfo-Linkage President and Chief Executive Officer Steve Zhang. "In the second quarter of 2012, we signed seven additional NG-BOSS 3.5 upgrade contracts with China Mobile, and began work on NG-BOSS 4.0 functional specifications, which we expect will result in additional upgrade and implementation work starting in the second half of this year. We are also in a good position to win additional work related to China Mobile's OSS functional needs."

"We have completed convergent software implementation for four of the six northern provinces in our long-term project with China Unicom and plan to complete implementation for the remaining two provinces in the third quarter of 2012. For China Telecom, we recently won a contract to develop and implement an intelligent cloud management project for Jiangsu Telecom. Additionally, in the cable television market, we have successfully provided BOSS software system implementation to Gehua Cable and have migrated over five million users to this new system and plan to leverage this achievement to gain greater market share."

Mr. Zhang added, "We continue to believe that our future work with China's three carriers will hinge on our strengths in assisting them to gather insights regarding their users and monetize their vast data traffic. In the second quarter of 2012, we won data traffic monetization contracts with three provincial subsidiaries of China Mobile and expect to win additional projects. We anticipate data traffic monetization will drive carrier spending as we couple this work with our core IT solutions and services."

Second Quarter 2012 Financial Results

Total revenues for the second quarter of 2012 were US$126.3 million, an increase of 8.7% year-over-year and an increase of 2.1% sequentially. Net revenue (non-GAAP) for the second quarter of 2012 was US$124.4 million, an increase of 12.8% year-over-year and an increase of 2.7% sequentially. The year-over-year increase was primarily the result of continued investment in IT software from China's telecom carriers and the sequential increase was mainly due to the on-time delivery of China Mobile's previously signed projects and the phase-one delivery of an international project.

Gross margin for the quarter was 38.5%, compared to 42.2% in the year-ago period and 39.2% in the previous quarter. Gross margin of net revenue (non-GAAP)[3] was 43.8% in the second quarter of 2012, compared to 49.5% in the year-ago period and 44.8% in the previous quarter. The year-over-year decrease in gross margin was primarily attributable to an increase in employee compensation, which was mainly due to increased headcount of implementation engineers and increased share-based compensation expenses. The slight sequential decrease in gross margin was primarily due to the increase in implementation incurred in the second quarter after the end of the Chinese Lunar New Year holiday in the first quarter.

AsiaInfo Inc. (Nasdaq: ASIA)