Science & Technology
Science and Technology
Science and Technology
Tue, August 18, 2009
Mon, August 17, 2009
China Techfaith: TechFaith Reports Second Quarter 2009 Financial Results
BEIJING--(Marketwire - August 17, 2009) - China Techfaith Wireless Communication Technology Limited (
For the second quarter of 2009, TechFaith reported total net revenues of US$49.8 million, a 2.4% increase compared to US$48.7 million in the previous quarter. Gross profit for the second quarter of 2009 was US$9.5 million, a 7.6% increase compared to US$8.8 million in the previous quarter. Gross margin for the second quarter of 2009 was 19.0% compared to 18.1% in the previous quarter. Revenue from product sales remained the same as the previous quarter while revenue from handset design increased about US$1 million from the previous quarter. Operating expense for the quarter was US$7.3 million, a 29.4% increase compared to US$5.7 million in the previous quarter. The operating expenses for the quarter included bad debt provision of US$1.8 million compared to the reversal of bad debt provision of US$0.2 million in the previous quarter.
Net income attributable to Techfaith for the second quarter of 2009 was US$4.5 million, or US$0.10 per weighted average outstanding ADS (basic and diluted), an improvement of 112.4% compared to net income of US$2.1 million, or US$0.05 per weighted average outstanding ADS (basic and diluted) in the previous quarter.
The net income attributable to Techfaith for the second quarter of 2009 included a US$2.1 million gain as a result of change in fair value of the derivatives associated with the convertible debt that was issued to IDGVC Partners in June 2009.
Defu Dong, TechFaith's Chairman and CEO, said, "Results came at the high end of prior guidance in what is not typically a seasonally strong quarter. We continue to gain traction in our core business areas as we further improve and build on our long-term strategy by leveraging our Original Developed Product ("ODP") business. Demand in our core ODP cellphone business is being led by the domestic China 3G market, especially the EVDO and HSDPA data card business, and the WCDMA feature phone sales. While growth in the 3G rollout has been strong for the past few quarters, based on forecasts, we expect an easing in Q3, with a resumption of more stable growth in domestic China 3G market given the considerable pent-up demand in China and expected market growth worldwide."
Mr. Dong continued, "Separately, our design business improved led by the enterprise user's market. We are pleased with the commercialization of several promising products, including our dual-GSM SIM card G6. Our G6 is an exciting device that was designed to serve as a feature-rich mobile phone, and also as both an equally strong mobile gaming platform and a remote control for PC gaming, with advanced motion sensors. We also launched our HSUPA data modem card in the U.S. market in the second half of June. We continue to build up our foundation in the U.S. This is an important market for TechFaith for technology, distribution and network operator relationships. Given the large size and the sophisticated nature of the U.S. market and its demand for high value and performance, we are looking forward to further expanding our product offerings available in the U.S."
"We continue to make progress in developing our gaming business. Our team has completed pre-launch promotions for several of our pending title launches and is working very hard to finalize our initial titles. 16 mobile massive multiplayer online role-playing games (MMORPG) are now available on our Chinese mobile games website [ www.798uu.com ]. The MMORPG-"Fairy online" for PC online games is now in open BETA version on our website [ www.798game.com ]. We also set up another studio in Shanghai to accelerate development of games. With our successful third party funding a few months ago, we are focused on growing One Net Entertainment as a stand-alone business given its significant potential future upside."
Non-Binding Letter of Intent to Acquire QiGi
TechFaith has signed a non-binding letter of intent to acquire 100% of QiGi in a stock-plus-cash transaction valued at US$12.5 million, comprised of US$0.5 million in cash and 65,934,066 ordinary shares of TechFaith (note: one publicly traded ADS is equal to 15 ordinary shares). The number of ordinary shares to be issued to QiGi's existing shareholders is contingent on QiGi achieving a net income of over US$8.0 million for the fiscal year of 2010 and over US$10.0 million for the fiscal year of 2011 and will be adjusted if the targeted net incomes are not achieved.
Defu Dong, Chairman and CEO of TechFaith, said, "QiGi has grown very quickly to become a leading branded mobile phone company in the China market, especially in smartphones and for enterprise and operator-customized users, and in several important international markets. We believe this transaction will add significant value to TechFaith as we promote and launch TechFaith smartphones in China's domestic market and abroad, especially for enterprise users and operators. With 3G network available in China and future 4G network, there are big business potentials for enterprise solutions that provide smartphones for public security systems, banks, government departments, IT market and home security systems. We are also pleased to have reached agreements with several of QiGi's key managers, including Mr. Enhai Xu, who will continue to serve as President of QiGi, as it will operate largely independently after the acquisition is completed. We are very optimistic about the future of QiGi as an important TechFaith brand."
Management change
The Company announced the resignation of Mr. Wilson Cai from his position as Deputy CEO of TechFaith and from the Company's board of directors effective immediately. Mr. Cai cited personal health concerns for his resignation. Commenting on the resignation, Mr. Dong noted, "We respect his decision and wish Mr. Cai and his family all the best. He has been an active member of our team since 2002 and we will miss him and remember his significant contributions to Techfaith."
Mr. Cai will be replaced on the board of directors by Mr. Dong Deyou, who has served as an executive with TechFaith since 2007 in multiple roles, leveraging his experience in sales, supply chain sourcing and operations.
Third Quarter 2009 Outlook
TechFaith currently expects sequential growth in the second half of 2009 based on improvements in the domestic China and certain international markets. For the third quarter of 2009 the Company expects revenues to be in the range of US$47 million to US$52 million for the third quarter of 2009. The Company expects better performance from its ODP business due to long-term growth in China's 3G market and the recovery already underway in the global cellphone market. TechFaith also expects an acceleration in developing its gaming business in the second half year of 2009.
Conference Call
TechFaith will hold a call on Monday, August 17, 2009 at 7:00 p.m. U.S. Eastern Time (7:00 a.m. August 18, 2009 in Beijing), with dial in phone number +1-617-213-8834 and conference call passcode 95340243. A live webcast of the conference call will also be available on TechFaith's website at [ www.techfaithwireless.com ].
A replay of the call will be available approximately one hour after the conclusion of the live call through 12:00 p.m. on August 24, 2009, U.S. Eastern Time (12:00 a.m., August 25, 2009 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 88857248. A webcast replay will also be available at [ www.techfaithwireless.com ].
About TechFaith
TechFaith (
-- TechFaith engages in the development and production of middle to high end handsets and tailor made handsets. TechFaith's original developed products include: (1) multimedia phones and dual mode dual card handsets of multiple wireless technology combination such as GSM/GSM, GSM/CDMA, GSM/WCDMA, GSM/TD-SCDMA and UMTS/CDMA; (2) Windows-based smartphones and Pocket PC phones; and (3) handsets with interactive online gaming and professional game terminals with phone functionality. -- With the capability of developing Middleware Application MMI/UI software on 2G/2.5G(GSM/GPRS, CDMA1X), 3G(EV-DO, WCDMA/UMTS, TD-SCDMA) and 3.5G(HSDPA) communication technologies, TechFaith is able to provide Middleware Application MMI/UI software packages that fulfill the specifications of handset brand owners and carriers in the global market. For more information, please visit [ www.techfaithwireless.com ]. -- TechFaith is targeting both the mobile and online PC gaming markets through its websites [ www.798uu.com ] and [ www.798game.com ], respectively. Three massive multiplayer online role-playing games (MMORPGs) are planned to launch in 2009 for online PC users on [ www.798game.com ]. 16 titles are planned to launch for mobile gamers on the company's Chinese mobile games website [ www.798uu.com ].
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident," "outlook" and similar statements. Among other things, the business outlook and strategic and operational plans of TechFaith contain forward-looking statements. TechFaith may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on Forms 20-F and 6-K, etc., in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about TechFaith's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, those risks outlined in TechFaith's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. TechFaith does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands of U.S. Dollars, except share and per share/ADS data and unless otherwise stated) Three Months Ended Six Months Ended ------------------------------------- ------------------------ June 30 March 31 June 30 ------------------------ ----------- ------------------------ 2008 2008 2009 (As adjusted) 2009 2009 (As adjusted) (1) (2) (1) (1) (2) ----------- ----------- ----------- ----------- ----------- Revenues: Handset design $ 1,657 $ 5,617 $ 655 $ 2,312 $ 10,181 Product sales 48,036 50,973 48,015 96,051 96,004 Wireless software and applications 153 - - 153 - ----------- ----------- ----------- ----------- ----------- Total net revenues $ 49,846 $ 56,590 $ 48,670 $ 98,516 $ 106,185 Cost of revenues: Handset design $ 1,082 $ 2,657 $ 808 $ 1,890 $ 4,853 Product sales 39,284 39,998 39,048 78,332 77,676 Wireless software and applications - - - - - ----------- ----------- ----------- ----------- ----------- Total cost of revenues $ 40,366 $ 42,655 $ 39,856 $ 80,222 $ 82,529 Gross Profit $ 9,480 $ 13,935 $ 8,814 $ 18,294 $ 23,656 Operating expenses: General and admini- strative $ 3,479 $ 2,777 $ 1,740 $ 5,219 $ 5,978 Research and development 3,189 6,625 3,096 6,285 12,121 Selling and marketing 624 1,300 802 1,426 2,153 Exchange loss (gain) 21 (19) 14 35 515 ----------- ----------- ----------- ----------- ----------- Total operating expenses $ 7,313 $ 10,683 $ 5,652 $ 12,965 $ 20,767 Government subsidy income 12 22 5 17 2,563 Other operating income - - - - - Income from opera- tions $ 2,179 $ 3,274 $ 3,167 $ 5,346 $ 5,452 Interest expense (62) (7) (30) (92) (16) Interest income 156 499 177 333 916 Other income (expense), net 38 (18) - 38 (15) Change in fair value of derivatives associated with Convertible Debt 2,113 - - 2,113 - Change in fair value of put option - (6) (18) (18) 9 ----------- ----------- ----------- ----------- ----------- Income before income taxes $ 4,424 $ 3,742 $ 3,296 $ 7,720 $ 6,346 Income tax 106 - (1,219) (1,113) - ----------- ----------- ----------- ----------- ----------- Net (loss) income $ 4,530 $ 3,742 $ 2,077 $ 6,607 $ 6,346 Less: net income attributable to the noncontrolling interest(2) (26) 121 44 18 380 ----------- ----------- ----------- ----------- ----------- Net income attributable to Techfaith $ 4,504 $ 3,863 $ 2,121 $ 6,625 $ 6,726 =========== =========== =========== =========== =========== Net income per ordinary share Basic $ 0.01 $ 0.01 $ - $ 0.01 $ 0.01 =========== =========== =========== =========== =========== Diluted $ 0.01 $ 0.01 $ - $ 0.01 $ 0.01 =========== =========== =========== =========== =========== Net income per ADS* Basic $ 0.10 $ 0.09 $ 0.05 $ 0.15 $ 0.16 =========== =========== =========== =========== =========== Diluted $ 0.10 $ 0.09 $ 0.05 $ 0.15 $ 0.16 =========== =========== =========== =========== =========== Weighted average ordinary shares outstanding Basic 650,034,590 649,913,136 650,034,590 650,034,590 649,913,136 =========== =========== =========== =========== =========== Diluted 679,148,185 649,943,575 650,034,590 664,671,776 650,028,578 =========== =========== =========== =========== =========== Revenue Breakout 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 -------- -------- -------- -------- -------- -------- Handset design Design fees $ 3,264 $ 4,656 $ 1,051 $ 6,517 $ 186 $ 645 Royalty $ 534 $ 277 $ 166 $ 181 $ - $ 245 Components sales related to design $ 731 $ 520 $ 544 $ 465 $ 469 $ 745 Service income $ 35 $ 164 $ 13 $ 5 $ - $ 22 Product sales Smart Phone $ 18,123 $ 26,979 $ 29,367 $ 25,483 $ 27,186 $ 23,061 Feature phone $ 23,156 $ 22,774 $ 18,525 $ 17,880 $ 20,190 $ 16,038 Wireless module $ 3,752 $ 1,220 $ 1,035 $ 1,324 $ 639 $ 8,937 Other components $ - $ - $ 109 $ - $ - $ - Wireless software and applications $ - $ - $ - $ - $ - $ 153 -------- -------- -------- -------- -------- -------- Total net revenues $ 49,595 $ 56,590 $ 50,810 $ 51,855 $ 48,670 $ 49,846 ======== ======== ======== ======== ======== ======== CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of U.S. Dollars) June 30, June 30, 2008 March 31, 2009 (As adjusted) 2009 (1) (2) (1) ------------ ----------- ------------ Assets Current assets: Cash and cash equivalents $ 111,794 $ 72,163 $ 97,499 Restricted cash 81 417 80 Accounts receivable 24,376 36,996 29,812 Amount due from related parties 7,144 4,842 7,954 Notes receivable 693 1,706 443 Inventories 27,642 48,867 30,367 Prepaid expenses and other current assets 12,745 10,788 11,917 Deferred tax assets-current 96 - 78 ------------ ----------- ------------ Total current assets $ 184,571 $ 175,779 $ 178,150 ------------ ----------- ------------ Deposits for acquisition of plant, machinery and equipment, and acquisition of intangible assets $ - $ 15,436 $ - Plant, machinery and equipment, net 22,589 27,309 23,255 Construction in progress 23,498 - 23,521 Acquired intangible assets, net 758 1,919 838 Deferred tax assets-noncurrent 117 - 29 Goodwill 619 606 606 ------------ ----------- ------------ Total assets $ 232,152 $ 221,049 $ 226,399 ============ =========== ============ Liabilities and shareholders' equity Current liabilities: Current portion of Long term payable $ 1,028 $ 1,228 $ 1,211 Accounts payable 6,042 11,224 7,362 Amount due to related parties 297 224 438 Accrued expenses and other current liabilities 11,726 11,058 9,597 Advance from customers 6,771 5,804 11,839 Deferred revenue 773 1,164 1,431 Income tax payable 149 148 1,343 ------------ ----------- ------------ Total current liabilities $ 26,786 $ 30,850 $ 33,221 Convertible debt 7,529 - - Long-term payable - 125 - ------------ ----------- ------------ Total liabilities $ 34,315 $ 30,975 $ 33,221 ------------ ----------- ------------ Shareholders' equity Ordinary shares $ 13 $ 13 $ 13 Additional paid-in capital 105,848 110,441 105,847 Treasury stock - (4,628) - Accumulated other comprehensive income 23,838 23,721 23,711 Statutory reserve 8,542 6,813 8,542 Retained earnings 58,605 52,434 54,101 ------------ ----------- ------------ Total Techfaith shareholders' equity $ 196,846 $ 188,794 $ 192,214 ------------ ----------- ------------ Noncontrolling interest (2) $ 991 $ 1,280 $ 964 ------------ ----------- ------------ Total shareholders' equity $ 197,837 $ 190,074 $ 193,178 ------------ ----------- ------------ Total liabilities and shareholders' equity $ 232,152 $ 221,049 $ 226,399 ============ =========== ============ 1 Effective January 1, 2009, the Company adopted SFAS 160. SFAS 160, which was retrospectively applied, requires non-controlling interests to be separately presented as a component of stockholders’ equity on the unaudited condensed consolidated financial statements. 2 June 30, 2008 balances were extracted from the form 6-K for the quarters ended June 30, 2008, as adjusted resulting from the adoption of Statement of Financial Accounting Standards No. 160.
