Science & Technology
Science and Technology
Science and Technology
Tue, November 24, 2009
Mon, November 23, 2009 TechFaith Reports Third Quarter 2009 Financial Results
BEIJING--(Marketwire - November 23, 2009) -
Revenue Beats Prior Guidance; Gross Margin Improves to 19.5% Operating Profit Increases by 156.4% Compared with the Previous Quarter Company Expects Continued Sequential Growth in the Fourth Quarter Led by Robust Feature Phone, Smartphone and Wireless Data Card Sales
China Techfaith Wireless Communication Technology Limited (
For the third quarter of 2009, TechFaith reported net revenues of US$52.8 million, a 5.9% increase compared to US$49.8 million in the previous quarter. This is above the high end of the Company's prior guidance for third quarter of 2009 revenues, which was in the range of US$47 million to US$52 million. Gross profit for the third quarter of 2009 was US$10.3 million, an 8.4% increase compared to US$9.5 million in the previous quarter. Gross margin for the third quarter of 2009 was 19.5% compared to 19.0% in the previous quarter.
Operating expense for the quarter was US$5.0 million, a 32.3% decrease compared to US$7.3 million in the previous quarter and a 55.7% decrease compared to US$11.2 million in the third quarter of 2008.
Operating income for the third quarter of 2009 was US$5.6 million, a 156.4% increase compared to US$2.2 million in the second quarter of 2009 and an even larger increase over US$0.28 million in the third quarter of 2008.
Net loss attributable to TechFaith for the third quarter of 2009 was US$3.4 million. This compares to net income of US$4.5 million attributable to Techfaith in the second quarter of 2009, and compares to net income of US$0.45 million in the third quarter of 2008. The net loss attributable to TechFaith for the third quarter of 2009 included a US$9.2 million non-cash charge as a result of change in fair value of the derivatives associated with a convertible debt.
Defu Dong, TechFaith's Chairman and CEO, said, "In the third quarter we achieved better than expected results due to our team's execution on opportunities in our core original developed product business. Revenue growth in our smartphone business was led by our high-end models, which carry a higher average selling price in the domestic China market. Feature phone sales increased significantly due to the increased sales of our high-end GSM phones and dual mode WCDMA plus GSM phones and the continued sales of our 3G data cards in China. In the international market, we made further progress in selling our high-end GSM phones into Latin America and South East Asia, selling our dual-mode phones into Europe, and selling our 3G phones and data cards into South East Asia. We continue to expect even better performance from our original developed product business moving forward based on anticipated longer-term growth in China's 3G market and certain international markets, combined with the recovery already underway in the global mobile phone market."
"We continue to make considerable progress in our branded phone strategy, under which we will launch tailored models into specific market segments using our subsidiary's brand or a relevant licensed brand name. In line with our strategy, we announced at the end of Q3 2009 that TechFaith would set up a new company to license well-known international brands for high-end, brand-name mobile phones that target fashion-conscious and high-end mobile phone users, teenagers and sports fans. TechFaith also expects to close its acquisition of QiGi by early 2010. This is an important transaction for us in our efforts to target enterprise users and operator tailored customers. We believe the branding business will lead to other business opportunities for TechFaith over the long term with higher gross margins."
"TechFaith continues to make significant progress in its mobile and PC online gaming business. We continue to develop our own proprietary content for both mobile and PC online gamers, while also working with third party developers. Our approach has led to some very encouraging initial achievements, from securing investment backing earlier this year to the recently announced agreement with several Chinese mobile phone companies to build in our games with the service fee payments for the mobile phone games. As a result, we expect our mobile phone gaming business to realize initial revenues in the fourth quarter this year."
Fourth Quarter 2009 Outlook
TechFaith currently expects revenues to be in the range of US$52 million to US$55 million for the fourth quarter of 2009, including incremental revenues from the Company's mobile gaming business. The Company is targeting initial profitability of its mobile gaming business in the fourth quarter of 2009. This forecast reflects TechFaith's current and preliminary view, which is subject to change.
Conference Call
TechFaith will hold a call on Monday, November 23, 2009 at 7:00 p.m. U.S. Eastern Time (8:00 a.m. November 24, 2009 in Beijing), with dial in phone number +1-617-213-3523 and conference call passcode 97135492. 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 November 30, 2009, U.S. Eastern Time (1:00 a.m. December 1, 2009 in Beijing) by telephone at +1-617-801-6888. To access the replay, use passcode 76917985. 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 ] with gaming content developed internally, co-developed and licensed from third parties.
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 and management quotations 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 Nine Months Ended September 30 June 30 September 30 ------------------------ ----------- ------------------------ 2009 2008 2009 2009 2008 (As (As (1) adjusted)(2) (1) (1) adjusted)(2) ----------- ----------- ----------- ----------- ----------- Revenues: Handset design $ 998 $ 1,774 $ 1,657 $ 3,310 $ 11,955 Product sales 51,801 49,036 48,036 147,852 145,040 Wireless software and applications - - 153 153 - ----------- ----------- ----------- ----------- ----------- Total net revenues $ 52,799 $ 50,810 $ 49,846 $ 151,315 $ 156,995 Cost of revenues: Handset design $ 942 $ 1,908 $ 1,082 $ 2,832 $ 6,761 Product sales 41,577 39,576 39,284 119,909 117,252 Total cost of revenues $ 42,519 $ 41,484 $ 40,366 $ 122,741 $ 124,013 Gross Profit $ 10,280 $ 9,326 $ 9,480 $ 28,574 $ 32,982 Operating expenses: General and administ- rative $ 1,459 $ 6,143 $ 3,479 $ 6,678 $ 12,121 Research and development 2,556 3,462 3,189 8,841 15,583 Selling and marketing 987 1,676 624 2,413 3,829 Exchange loss (gain) (52) (100) 21 (17) 415 ----------- ----------- ----------- ----------- ----------- Total operating expenses $ 4,950 $ 11,181 $ 7,313 $ 17,915 $ 31,948 Government subsidy income 257 2,136 12 274 4,699 Income from operations $ 5,587 $ 281 $ 2,179 $ 10,933 $ 5,733 Interest expense (165) (5) (62) (257) (21) Interest income 165 405 156 498 1,321 Other income (expense), net (94) (196) 38 (56) (211) Change in fair value of derivatives associated with Convertible Debt (9,214) - 2,113 (7,101) - Change in fair value of put option (39) (201) - (57) (192) ----------- ----------- ----------- ----------- ----------- Income (Loss) before income taxes $ (3,760) $ 284 $ 4,424 $ 3,960 $ 6,630 Income tax benefit (expenses) (1,314) (21) 106 (2,427) (21) ----------- ----------- ----------- ----------- ----------- Net (loss) income $ (5,074) $ 263 $ 4,530 $ 1,533 $ 6,609 Less: net income (loss) attributable to the noncontrolling interest(2) 1,674 188 (26) 1,692 568 ----------- ----------- ----------- ----------- ----------- Net income (loss) attributable to Techfaith $ (3,400) $ 451 $ 4,504 $ 3,225 $ 7,177 =========== =========== =========== =========== =========== Net income (loss) attributable to Techfaith per share Basic $ (0.01) $ 0.00 $ 0.01 $ 0.01 $ 0.01 =========== =========== =========== =========== =========== Diluted $ (0.01) $ 0.00 $ 0.01 $ 0.01 $ 0.01 =========== =========== =========== =========== =========== Net income (loss) attributable to Techfaith per ADS* Basic $ (0.08) $ 0.01 $ 0.10 $ 0.07 $ 0.17 =========== =========== =========== =========== =========== Diluted $ (0.08) $ 0.01 $ 0.10 $ 0.07 $ 0.17 =========== =========== =========== =========== =========== Weighted average shares outstanding Basic 650,116,398 650,027,078 650,034,590 650,062,159 649,951,394 =========== =========== =========== =========== =========== Diluted 650,116,398 650,055,184 679,148,185 650,066,429 650,037,724 =========== =========== =========== =========== =========== Revenue Breakout 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 ------- ------- ------- ------- ------- ------- ------- Handset design Design fees $ 3,264 $ 4,656 $ 1,051 $ 6,517 $ 186 $ 645 $ 449 Royalty $ 534 $ 277 $ 166 $ 181 $ - $ 245 $ 102 Components sales related to design $ 731 $ 520 $ 544 $ 465 $ 469 $ 745 $ 446 Service income $ 35 $ 164 $ 13 $ 5 $ - $ 22 $ 1 Product sales Smart Phone $18,123 $26,979 $29,367 $25,483 $27,186 $23,061 $23,750 Feature phone $23,156 $22,774 $18,525 $17,880 $20,190 $16,038 $22,442 Wireless module $ 3,752 $ 1,220 $ 1,035 $ 1,324 $ 639 $ 8,937 $ 5,497 Other components $ - $ - $ 109 $ - $ - $ - $ 112 Wireless software and applications $ - $ - $ - $ - $ - $ 153 $ - ------- ------- ------- ------- ------- ------- ------- Total net revenues $49,595 $56,590 $50,810 $51,855 $48,670 $49,846 $52,799 ======= ======= ======= ======= ======= ======= ======= CHINA TECHFAITH WIRELESS COMMUNICATION TECHNOLOGY LIMITED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands of U.S. Dollars) September 30, September 30, 2009 2008 June 30, 2009 (As (1) adjusted)(2) (1) ------------- ------------ ------------- Assets Current assets: Cash and cash equivalents $ 128,937 $ 103,578 $ 111,794 Restricted cash 81 80 81 Accounts receivable 24,175 40,447 24,376 Amount due from related parties 7,041 5,609 7,144 Notes receivable - 101 693 Inventories 26,192 43,022 27,642 Prepaid expenses and other current assets 15,292 12,804 12,745 Deferred tax assets-current 127 - 96 ------------- ------------ ------------- Total current assets $ 201,845 $ 205,641 $ 184,571 ------------- ------------ ------------- Plant, machinery and equipment, net $ 21,616 $ 26,345 $ 22,589 Construction in progress 23,548 15,655 23,498 Acquired intangible assets, net 665 1,747 758 Deferred tax assets-noncurrent 75 - 117 Goodwill 619 606 619 ------------- ------------ ------------- Total assets $ 248,368 $ 249,994 $ 232,152 ============= ============ ============= Liabilities and shareholders' equity Current liabilities: Current portion of Long term payable $ 916 $ 1,185 $ 1,028 Accounts payable 5,817 40,569 6,042 Amount due to related parties 153 475 297 Accrued expenses and other current liabilities 9,409 8,874 11,726 Advance from customers 9,977 5,941 6,771 Deferred revenue 945 1,372 773 Income tax payable 1,453 171 149 ------------- ------------ ------------- Total current liabilities $ 28,670 $ 58,587 $ 26,786 Convertible debt 16,907 - 7,529 Total liabilities $ 45,577 $ 58,587 $ 34,315 ------------- ------------ ------------- Shareholders' equity Ordinary shares $ 13 $ 13 $ 13 Additional paid-in capital 114,275 110,513 105,848 Treasury stock - (4,628) - Accumulated other comprehensive income 23,881 24,719 23,838 Statutory reserve 8,542 6,813 8,542 Retained earnings 55,205 52,885 58,605 ------------- ------------ ------------- Total CNTF shareholders' equity $ 201,916 $ 190,315 $ 196,846 ------------- ------------ ------------- Noncontrolling interest (2) $ 875 $ 1,092 $ 991 ------------- ------------ ------------- Total shareholders' equity $ 202,791 $ 191,407 $ 197,837 ------------- ------------ ------------- Total liabilities and shareholders' equity $ 248,368 $ 249,994 $ 232,152 ============= ============ ============= (1) Effective January 1, 2009, the Company adopted the authoritative guidance issued by the FASB that changes the accounting and reporting for non-controlling interests, which was retrospectively applied. This guidance requires non-controlling interests to be separately presented as a component of stockholders' equity on the unaudited condensed consolidated financial statements (2) September 30, 2008 balances were extracted from the form 6-K for the quarters ended September 30, 2008, as adjusted resulting from the adoption of the authoritative guidance issued by the FASB that changes the accounting and reporting for non-controlling interests. * ADS: American depositary shares. 1 ADS is equal to 15 ordinary shares.
