SOURCE: Orsus Xelent Technologies, Inc.
August 20, 2007 08:00 ET
Orsus Xelent Reports 2007 First Half Results
New Higher Margin Specialized Application Mobile Sales Contributed to a 26% Increase in Second Quarter Net Profit on Slightly Lower Overall Sales, as the Contribution From Traditional Mobile Phone Sales Declined as Anticipated; Through First Six Months Revenues Grew 43% and Net Profit Increased 18%; Company Reiterates Full Year Revenue Growth Expectation of at Least 30% Based on Expanding Specialized Application Sales
NEW YORK, NY--(Marketwire - August 20, 2007) - Orsus Xelent Technologies, Inc. (AMEX: ORS), a
designer and manufacturer of award-winning mobile phones for the Asian
market, today announced results for its second quarter and first half ended
June 30, 2007.
For the second quarter ended June 30, 2007, the Company said net income
grew 26.55% to $ 1,449,000, or $0.05 per share, on a 3.84% decrease in
revenues to $16,356,000. In the prior year period, the Company reported net
income of $1,145,000, or $0.04 per share, on revenues of $17,009,000.
For the first six months of 2007, net income rose 18.14% to $2,696,000,
compared to $2,282,000 in the same period last year, on first half revenues
in 2007 of $36,365,000, up 43.30% from $25,376,000 in the same period in
2006. Earnings per share in the first half of 2007 were $0.09 compared with
$0.08 per share in the same period last year.
Mr. Xavier Xin Wang, president and CEO of the Company stated, "In our 2007
second quarter, we continued to see the payoff for management initiatives
in 2006 to reposition the Company and achieve cooperation with the major
telecom companies, in particular, in the sales and build up in expected
orders for our higher margin specialized application phones." He noted that
"together with the cost reductions achieved, this led to improved profit
margins and against expected slightly lower sales in the quarter -- ahead
of planned second half increases in specialized application sales -- a
26.55% net profit increase."
Discussion of Results
In the face of the anticipated declining profitability in "traditional"
mobile phones, the Company pursued its strategy to develop and market
specialized application terminals to meet specific applications in the
market. Revenue from traditional GSM cellular phones accounted for 8.63% of
sales in the second quarter while CDMA mid-level and high-end product sales
grew to account for 91.37% of the quarterly total with sales of
$14,945,000, up from $8,362,000 in the same period last year and nearly 10%
higher than in the first quarter of 2007. Significantly, within the CDMA
category, the Company's X180 specialized application terminal was launched
during the quarter with a sale of 10,000 units for $3,914,000, with a
gross profit of about 38%.
Higher Profits
The higher gross profit generated by the Company's X180 specialized
application phones was the principal reason for the 10.15% decline in the
cost of sales achieved in the quarter and the reported 2.22% decline
through the first half.
Additionally, sales and marketing expense in the first half was 68.58%
lower than in the same period last year. This was a consequence of steps
taken last year by the Company to reduce personnel costs, most
significantly in the area of after-sale maintenance, where these costs were
shifted to the Company's partner.
Increased spending for promising development of the Company's specialized
applications terminals raised R&D costs in the second quarter, which also
saw an increase in G&A expenses, which included a $1,409,000 inefficient
payment receivable.
Gross profit in the second quarter was $3,175,000, reflecting a gross
margin of 19.41%, an increase of 35.74% over the same period last year.
For the first half, the gross margin improved 2.22% to 18.82% for the
reasons described above.
The Company noted that it paid income tax in the first half of 2007 at a
ratio of 12% of aggregated profit versus its exempt status in 2006. In the
period it also developed an allowance for obsolete inventories and doubtful
accounts. Excluding these factors, it said that profitability increased
more substantially than reported.
Other Developments in the Quarter
The key event announced in the quarter was ORS' first order with China
Unicom, the second largest telecom operator in China, for 15,000 units of
its new X180, part of an anticipated 50,000 unit order with an estimated
value of $20 million. Significantly, the phones also offer the potential
to Orsus for recurring revenues from anticipated monthly access charges.
During the quarter, as the Company developed its relationship with China
Unicom, it also engaged in discussions with China Mobile aimed at
developing cooperation and expects to finalize an agreement with them. At
the appropriate time it will provide details on the mode and status of the
cooperation.
Additionally, the Company continued to take steps to prepare for the
anticipated advent of 3G mobile technologies in China. In this context, it
has been in negotiations with a number of 3G design houses and expects to
provide a sample to China Mobile for testing and also continued to work on
the granting of 3G cellular phone manufacturing licenses from the PRC
government.
In May, having completed all the necessary requirements, ORS shares were
listed on The American Stock Exchange (AMEX), which the Company believes
will benefit current and potential investors.
Post Quarter Events
-- In July, the Company announced that initial deliveries of its Unicom
Huasheng X180 order were made, and involved orders from two cities --
Beijing and Shanghai -- and five provinces.
-- At the same time, the Company announced the launch of two new high-end
specialized application phone lines, the Proxlink X688 and the Proxlink
X388, which are expected to sell at prices not less than its Proxlink X180.
-- The Company said it expects to sell 20,000 units each of the new
phones in 2007, and raised its estimate of the number of specialized
application units it expects to sell in 2007 from 70,000 units to 90,000
units.
-- The Company also announced that it signed two new strategic
cooperation agreements to further broaden its penetration of the special
application mobile devices market.
Looking Ahead
Mr. Xavier Wang commented: "We are entering the second half of 2007 in an
excellent position, with an expectation of a continuing surge in orders for
our growing range of high margin specialized application mobile units, and
believe we are moving closer to our goal of becoming the industry leader.
By continuing to diversify our markets and products we also diversify our
sources of profits and greatly strengthen the Company."
He added, "With a current expectation of sales in 2007 of at least 90,000
specialized application units, we continue to expect full year profitable
sales growth of at least 30%."
About Orsus Xelent Technologies, Inc.
Incorporated in the State of Delaware and headquartered in Beijing, China,
Orsus Xelent Technologies, Inc. is an emerging designer and manufacturer of
award-winning mobile phones for the Asian market, primarily the People's
Republic of China (PRC). The Company's business encompasses the design of
mobile phones, related digital circuits, and software development, and it
is a recognized pioneer in mobile phone integration technology. It
introduced the region's first wristwatch-style cellular phone, and it
continues to break new ground with state-of-the-art phones that include
advanced features such as finger print recognition and touch-screen
displays. Increasingly, the Company is focused on developing and marketing,
under its Proxlink trademark, special application mobile phones for
specialized users in a wide variety of professions in business and
government. Since the Company's launch in 2004, it has established "Orsus"
as a popular brand and achieved a significant share of the world's largest
mobile phone market. It maintains more than 179 service call centers across
the PRC, with additional offices in New York, Shanghai, Hong Kong,
Shenzhen, and Tianjin. For more information, please visit the Company's web
site: www.orsus-xelent.com.
Information Regarding Forward-Looking Statements
Except for historical information contained herein, the statements in this
Press Release are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve known and unknown risks and
uncertainties, which may cause our actual results in future periods to
differ materially from forecasted results. These risks and uncertainties
include, among other things, product demand, market competition, and risks
inherent in our operations. These and other risks are described in our
filings with the Securities and Exchange Commission.
ORSUS XELENT First Half 2007 Results of Operations
For The Six
months Ended Six months ended
June 30, 2007 June 30, 2006 Comparison
================= ================ =============
% of % of
$' 000 revenue $' 000 revenue $'000 %
======== ======= ====== ======== ====== ======
Revenue 36,365 - 25,376 - 10,989 43.30%
======== ======= ====== ======== ====== ======
Cost of sales 29,522 81.18% 21,163 83.40% 8,359 39.50%
======== ======= ====== ======== ====== ======
Sales & marketing
expenses 247 0.68% 786 3.10% -539 -68.58%
======== ======= ====== ======== ====== ======
General & admin. expenses 579 1.59% 379 1.49% 200 52.77%
======== ======= ====== ======== ====== ======
R&D expenses 296 0.81% 147 0.58% 149 101.36%
======== ======= ====== ======== ====== ======
Depreciation 87 0.24% 125 0.49% -38 -30.40%
======== ======= ====== ======== ====== ======
Allowance for obsolete
inventories 592 1.63% - - 592 100.00%
======== ======= ====== ======== ====== ======
Allowance for trading
deposit receivable 1,409 3.87% 310 1.22% 1,099 354.52%
======== ======= ====== ======== ====== ======
Interest expenses 304 0.84% 29 0.11% 275 948.28%
======== ======= ====== ======== ====== ======
Other net income 7 0.02% 5 0.02% 2 40.00%
======== ======= ====== ======== ====== ======
Pre-tax profit 3,336 9.17% 2,442 9.62% 894 36.61%
======== ======= ====== ======== ====== ======
Income tax 640 1.76% 160 0.63% 480 300.00%
======== ======= ====== ======== ====== ======
Profit(Loss) 2,696 7.41% 2,282 8.99% 414 18.14%
Diluted Shares
Outstanding 29.76mil -- 29.76mil -- --
EPS $ 0.09 -- $ 0.08 -- $ 0.01 12.50%
======== ======= ====== ======== ====== ======
ORSUS XELENT Second Quarter 2007 Results of Operations
For The Three Three months
months ended ended
June 30, 2007 June 30, 2006 Comparison
================= ================ =============
% of % of
$' 000 revenue $' 000 revenue $'000 %
======== ======= ====== ======== ====== ======
Revenue 16,356 17,009 -653 -3.84%
======== ======= ====== ======== ====== ======
Cost of sales 13,181 80.59% 14,670 86.25% -1,489 -10.15%
======== ======= ====== ======== ====== ======
Sales & marketing
expenses 134 0.82% 342 2.01% -208 -60.81%
======== ======= ====== ======== ====== ======
General & admin. expenses 420 2.57% 190 1.12% 230 121.05%
======== ======= ====== ======== ====== ======
R&D expenses 243 1.49% 66 0.39% 177 268.18%
======== ======= ====== ======== ====== ======
Depreciation 35 0.21% 100 0.59% -65 -65.00%
======== ======= ====== ======== ====== ======
Allowance for obsolete
inventories 272 1.66% - - 272 100.00%
======== ======= ====== ======== ====== ======
Allowance for trading
deposit receivable 194 1.19% 310 1.82% -116 -37.42%
======== ======= ====== ======== ====== ======
Interest expenses 177 1.08% 29 0.17% 148 510.34%
======== ======= ====== ======== ====== ======
Other net income 5 0.03% 3 0.02% 2 66.67%
======== ======= ====== ======== ====== ======
Pre-tax profit 1,705 10.42% 1,305 7.67% 400 30.65%
======== ======= ====== ======== ====== ======
Income tax 256 1.57% 160 0.94% 96 60.00%
======== ======= ====== ======== ====== ======
Profit(Loss) 1,449 8.86% 1,145 6.73% 304 26.55%
Diluted Shares
Outstanding 29.76mil -- 29.76mil -- --
EPS $ 0.05 -- $ 0.04 -- $ 0.01 25.00%
======== ======= ====== ======== ====== ======
ORSUS XELENT BALANCE SHEET HIGHLIGHTS JUNE 30, 2007
$' 000
------
Total Cash 2,315
------
Net Receivables 36,365
------
Accounts Payable 11,937
------
Short Term Debt 8,571
------
Long Term Debt -
------
Gearing Ratio 54.52%
------